Having an adequate revenue base is important. You are recognized. I think we all agree we have a tax cut that is 30 years old and despite having an economy that is vastly different than it was 30 years ago, i think we all probably agree we need to undertake a comprehensive tax reform. My concern, the concern of a lot of us here, for eight years we had ballooning just, well over 20 trillion. We need to put in place a tax code that promotes growth and is in a position to reduce the debt. I worry when i hear from this testimony where she states when trade deficits turn into surpluses the border adjustments will lose revenue. Mister lindsey, do you agree with the statement and can you walk us through the impact the assessments will have on the deficit long and shortterm . I will take 30 seconds to say what congressman sanchez said, this was a new idea that sprung out of some talking points, this was a tax structure that was discussed when i was in graduate school and considered i was not in graduate school yesterday. As to your particular question, i am sorry. The particular question has to do with the border adjustment. Being permanent. I wasnt in school yesterday. We had a trade deficit now for 50 years, trade deficits turn into surplus, new meaning to the word theoretical. How we finance that trade deficit and what we do now is basically put it on our credit card. We sell our debt overseas. That is the main way we finance it. This is called the capital account. What this bill will do instead is finance it by encouraging direct investment into america and i think that is a much better way to finance trade deficits than simply selling treasury bonds. Another function, the goal we are trying to reach is protecting our national tax base, base erosion, whether it is from erosion of the Corporate Tax base, we also need to be worried about the erosion of Human Capital base. A stunning fact that the number of expatriations from the United States has been rising at a tremendous rate. In 2016, we had 5400 people expatriate from the United States compared to 2008 when you had 231 people expatriate. Mister chairman, i would like to introduce into the record a recent article regarding expatriation rates. Back to the tax base on corporate wealth. Is there any other plan that achieves other than border adjustment what we are trying to achieve with protecting the national tax base . A lot has been discussed and some comments came out today, the committee considered a number of options a few years ago to try to crack down on the ability of firms to go overseas. There is an old saying that the beatings will stop once morale groups which is backward. What i think we need to focus on is all of those other plans punish American Companies by putting more on American Companies but do not touch Foreign Companies and i think that is simply the wrong way to go about it. We need to start thinking why it should be attractive to be headquartered in america and why it should be attractive to move our production facilities here. I yields back. Mister higgins, you are recognized. Thank you, mister chairman. The border assessment adjustment tax is a poorly conceived tax because it will be adjusted a second time. Domestically, internally in higher Consumer Prices for every american. Target and walmart dont make things, they sell to americans what other countries make particularly china. America, 5 of the worlds population, 12 of the worlds economy, the United States is the Worlds Largest economy, 70 , we consume much more than we make. China is 20 of the worlds population, 9 of the worlds economy. Americas largest goods trading partner is china. Last year we sold to china 115 billion worth of goods and they sold to us 462 billion. We had a good trade deficit with china last year of 347 billion. The border adjustment tax will hit china mostly which i would be okay with but we know that the border adjustment tax will result in higher Consumer Prices and heard american retailers. There is lots of tough talk in washington about challenging chinas ambitions to become the worlds economic leader but that tough talk lacks backbone. Washington wines while chinas currency manipulation, chinas poor quality of air and water and land, how poorly they treat their own people. You know what china just did, china announced a 1 trillion investment to open up china, to connect to 47 other asian countries, sell the stuff they make to 47 brandnew markets, much more efficiently. The United States under this administration is looking inward. The United States wants to build a 38 billion wall along its southern border. The United States has responded to 2 trillion in infrastructure needs with a pathetically weak 200 billion investment in american infrastructure may be. I think you get the point. China is making an aggressive challenge to United States leadership in the world, china knows infrastructure is how you dominate. Chinas peaceful rise is driven by Economic Growth rather than military force. The United States under this administration wants to spend 50 billion on war. Wants to take healthcare from those who need it most and has a tax scheme to take away money from those who need it to give it to people who dont. Im not quite sure what im missing here but a tax policy that doesnt put money into the hands of people that will spend its in the Worlds Largest economy that is 70 consumption is a policy of cans work. I often hear that these tax cuts will pay for themselves. There is not a tax cut in Human History that has paid for itself. The most conservative economic estimates are that may be a third of tax cut will be paid for by ensuing Economic Growth. What you have to do to grow the economy is invest in it. Your infrastructure which based on any objective analysis puts the quality of our infrastructure at a very poor rate as it relates to the rest of the world. You can talk about tax policy unless we are going to back it up with serious investment to compete on a global scale with places like china. Clinic to about where it will take us will never take us there. Pretty much used all the time and i apologize for that. It is a statement that needed to be made and it is important relative to this debate and i yields back. This is one of those hearings we all go back and actually read the transcript, it will be absolutely fascinating trying to follow the intellectual consistency on the line, many of our brothers on the left are now supporting much more trade and a lot of other things. I cannot wait to grab my highlighter and go over this. You have one of the most unique work experiences in history and that was a Massive Company trying to restructure parts of your supply chain. Can you put a little more detail on that experience because a moment ago, a company i love in my neighborhood, we grow vegetables in arizona and the winter, we supply the nations lettuce crop and we can do a lot more but the rest of the world has financial arbitrage. Tell us about rebuilding supply chains that became domestic from products that were formed before. 97 of apparel is made outside the us today. Good percentage of it is made with american cotton. Cotton grown in the us 12 million bales a year exported, much of it to asia where it is reimported into the us. It makes no sense, the labor component isnt the driver of that. Transportation and two directions and all the things that go with it. The product migrated because initially labor but eventually tax and infrastructure eroded. In order for it to come back it needs, we need to change the puzzle pieces, we need incentives like the things that have been discussed today that will allow that to happen. It wont happen on its own, we cant survive as a service economy, the gentleman mentioned 70 of our economy is consumption, it is but i cant go to the movies and you cant go to a restaurant every day and have the economy be buoyant, we have to make things. Did you have that experience where a product where as walmart had been an International Supply chain with skepticism and a couple years later you found a way to domestically sourced . Every product at walmart has been able to repatriate and the list is quite long now, has taken an incredible amount of effort from both supplier and the company. They sit down and analyze the cost components of every leg along the way and we are overcoming 30 years of muscle memory where we have done things, the way we have accounted for costs that are in the system, costs like currency and we had the discussion earlier. Currency in most companies is a footnote on their earnings statement, up or down versus last year because of currency and wall street usually doesnt reward or penalize a currency adjustment so our whole thinking is and around currency adjustments but how much earningspershare can we deliver and we find out the transportation costs and the time value of money from paying in shanghai versus delivery at the dock in delaware is 3 months and that 3 months on 1 billion of influx is a significant amount of money so as you restructure your supply chain you have to restructure your practice and the way you look at your business. Everything from Currency Exposure to environmental costs. Hopefully we have a universal agreement of all members on the right and left, we actually have a wealth gap issue, we actually have income Worker Mobility issue, yet i keep hearing because taking a little shots at each other, almost defense of the status quo which is absurd and we walk through this im fixated on some of the technology, we are talking about apparels and articles that are not coming up at last year we know how to laser cut cloth where before that was always the excuse for whitehead to be done with labor, now we have a technology that can change that capacity. There are Technological Solutions that actually will make repatriation of some of these supply chains possible. There are so many things. Can you help because you said a couple things that are fascinating. And i must give you a compliment. I have been reading the things you have done. Thank you for being a person on the left but also caring about what happened with the destruction for our next generation, why we must step up and deal with it. You are recognized. Thank you for being here today, i want to start with a question for you, concerned about border adjustment proposal because they rely on importing ingredients to produce specialty beers and often they only sell domestically so despite the fact they are supporting jobs and Economic Activity at home they would be hit by border adjustment with no offset and i wondered if you agree with that how would you concern the 2 that . Substantial risks, because of the Exchange Rate wont exchange, one thing this testimony has reminded me of is we cant do everything in one country. We have International Trade for a reason. We dont want everything to be done in the United States. It might make more sense to do the apparel abroad but that doesnt mean we cant be sensitive and thinking about how trade has affected American Workers and one way to help workers who have been hurt by the downside of International Trade is a tax system that favors income tax credits at the low middle income as well and there are Many Industries including brewing and winds of the makers of oregon and others that are worried about this because of the lack of Exchange Rate. Our tax system, things we generally talk about, the movement of something, nexus where something is located. I wonder if you can comment on Digital Goods and intangible goods and how they are treated under this proposal or do we have enough information to have a sense on how they are treated. One of the difficult things with Digital Goods is they are more difficult to observe so this has raised a huge issue with those that have that because they need to observe the passage of the good across the border, a digital good that is often difficult to observe and that generates possible avoidance opportunities. In general the economic literature suggests the more physical or real something is the less responsive it is to taxes so if you look at multinational firms where they have jobs abroad. Other countries that have high tax rates and high regulations but where they have their profits are in these low tax havens so you get this big difference in how responsive things are to tax based on how easy they are to move and Digital Goods are an example of things that are very easy to move. Do we have enough information in terms of how border adjustment in particular might impact this plan . It race enforcement concerns that this is one of several things that havent been fully worked out in the plan. Another big issue is finance because the Financial Sector would have to be treated differently under this plan and this creates huge headaches in terms of thinking about how to administer this tax respective to the Financial Sector. One other issue that was alluded to earlier is manufacturing is moving to more automation using technology, artificial intelligence, robots and may not use as many people for that work and if we look Going Forward the economist look at this as we estimate future impact and impact on families and workers. Is that part of the modeling . Technological change is a huge issue and one thing to think about when we think of what it means to bring Something Back to the United States. If we use robots to make it it is not clear that is generating a more american jobs than if we left it somewhere else. Adapting to technological change requires a tax policy that is sensitive to the needs of the middle class but also spending policy. We want workers who can use technology to their advantage, not be replaced by it. If you have an engineering degree or you write Software Technology is your friend but if you are a low skilled worker, the answer seems to be upgrading the skill level of the population and require investment in education and infrastructure, not just roads but other types like Internet Access and computing access and the like suspending priorities need to reflect that. I yield back. You are recognized. A question for you. If you have an American Company and an Irish Company and they both make the exact same product and both compete worldwide for the materials to make that product and they both compete worldwide for customers to sell the product, will the American Company pay 35 income tax, the Irish Company pays 13 income tax did you tell me the outcome of that the Irish Company is well advantaged. The American Company will end up bankrupt or bought by the Irish Company. Certainly will be less competitive. Do you agree with that . I think some of the competitiveness issues here are misunderstood. In particular, any company you disagree is what you are saying, you disagree. I ask that theoretical question all the time, youre the first person i have heard disagree with that but that point is a theoretical question. We have a real life instance of it right here. Mister luciano made a better case than i could when he says our american manufacturers are facing competition from ukraine and brazil on grain exports. And they have for what period of time . What period of time have we face this competition . For the last 50 years. I would say in the last five years we accelerated. Brazil and ukraine have these consumption taxes we are talking about, the border adjustment, is that correct . The effect of that as you said earlier is to sell to worldwide markets, their cost, the price they charge for their product is less by how much . Enough to make the us uncompetitive for a long period of time. Of china is one of the big markets for agricultural exports, the question is, i suppose, if our tax system creates a 15 higher costs on american farmers, are the chinese going to pay 15 more for american corn than they are for ukrainian corn or brazilian corn. Is that right . The actual price the us farmer will get in order to compete with those markets will be lower than the price of the brazilian farmer or ukrainian farmer but we have seen the effects over the last decade. What has been the effect . What has happened to our markets . We have been declining. Mister lindsey. Does that line of reasoning just applied to Agricultural Products or does it apply to any other products made in america with higher tax bracket do it applies to all products. I also point out how Many Companies switched and moved intellectual property from here to ireland versus the number of irish companies. I would point out to the Ranking Member how smart the irish are. And they are. They design a tax system, low income tax and hire at that. Why would they do such a thing . They are very clever people. They wanted to be competitive. They want to be competitive. It has worked beautifully. Irelands 30 years ago was not particularly prosperous pl