This is an hour and a half. Good afternoon, everybody. Welcome. My name is maureen conway. Vice president at the Aspen Institute and executive director. I am delighted to welcome you to todays conversation in our working in america series. At the Economic Opportunities program we do a lot a variety of work to advance ideas that will help low and moderate income americans connect to Economic Opportunity and thrive in a changing economy. In the working in america series in particular, we look at a variety of issues that affect the shape of opportunity that working americans face and consider ideas that could make things better for working people. Were extremely grateful to the ford foundation, to the prudential foundation, and the Walmart Foundation for their support of the working in america series. In todays conversation, as you have seen, well talk taxes and what tax reform could mean for low and moderate income workers in the United States. If you think about taxes, you probably try not to, but if you think about taxes, one of the things you think about is the complexity of the american tax system. And this is not surprising because we have come to rely on the tax code to do a lot of policymaking and to incentivize a variety of economic behaviors. When we think about low income workers in particular, probably one of the first things we think of is the earned income tax credit. In 2015, roughly 27 million workers earned the earned income tax credit. So that came to nearly one in five working people. So the tax system is a big deal for working people. But the tax code offers a variety of other incentives. Saving vehicles for college, retirement. Home mortgage deduction to encourage home ownership. There are incentives to businesses, investors to encourage job creation. Preferential treatment for capital gains. There are targeted tax credits. You have like the work opportunity tax credit to encourage employers to hire veterans or other groups that are seen as facing barriers to employment. So in short, we do quite a lot of Economic Policy making through the tax code. So as the talk of tax reform comes along its important to think about the tax system not just for the economy broadly but in particular how it affects working people in the United States. So, today we go super wonk and talk taxes. I have a couple things to say before we get started. First of all, please do silence your phones. Were very thrilled to be Live Streaming as well as recording. We are glad to have cspan here today. So please do silence your phone. But please do tweet. Our hash tag is talk good jobs. Lets see if i need to no, i dont need to do any of those things. Ill introduce the panelists. I am thrilled to introduce the panelists. I will start from my far left and work this way for your far right. We have frank clemente, executive director of americans for tax fairness. Next to frank we have mireya eavey at united way sun coast florida. Alex brill. Research fellow at the American Enterprise institute and i am delighted to have next to me. Jean sahadi Senior Writer for cnnmoney. Com who will be our moderator for todays conversation. Jeanne, thank you and i turn it over to you. Thank you for having me. A little bit of table setting on tax reform for low and middle income workers. Right now what we are hearing from politicians is a lot about Business Tax Reform. You have a lot of support from the republicans, you have a lot of support even among business friendly democrats who really think the business side of the tax code needs a lot of reform, more urgently even than the individual side. There is also a sense in fact, to me, as i cover this, it sounds more like lip service to how will this affect the middle class and financially strapped workers. It will be hard for them to just do Business Tax Reform without addressing the larger population. I am glad to be doing this panel because i think well talk about issues that should be discussed in the context of overhauling the code that is not currently being discussed. It seems to me that there are four ways that tax reform can affect low and middle income workers positively or negatively, you could talk about giving them new or expanded tax breaks that already exist, but the other side to that is, if other changes that are proposed undercut the value of those new or expanded breaks, that may or may not change their Tax Liability at all. Another way is through Economic Growth. Republicans are making the case that if you lower business tax rates and you reduce their tax sorry, lower the business tax rates and lower their breaks that that will encourage investment, investment will create jobs, jobs will more jobs and higher wages. So hopefully that would work. If it doesnt, weve just blown through the deficit. A third way is to frank, youll speak to this point, i think, is there is a lot of people who think, well, you should raise the rates on highincome individuals, make the tax code less beneficial to them and raise more revenue to support programs that help low and middle income families. There is sort of an underside to all those arguments. Right now we have a pretty progressive federal income tax code. 40 of filers end up owing nothing in federal income taxes. Its unclear if some of the proposed changes would help them at all because their tax bill is zero to begin with. As i said, if Economic Growth does not work out all weve done is reduce the amount of revenue available to us. So, i am going to turn it over to these guys who bring excellent perspectives, all of them, very different perspectives, to lay out what they think is working today about the tax code for low and middle income workers and whats not and then well go from there. Afterwards well toss to you guys for your questions. Alex, whats working today and whats not for low and middle income workers . Thank you. Thanks for having me. One of the things i note when i think about the federal income tax with respect to low and moderate income workers is the disparity to which the tax code affects different people within that population differently. Thats always true across the income spectrum but its particularly true among low and middle income families and households. For example, as was mentioned, the earned income tax credit, one of the largest welfare programs, one of the largest at the federal level is a very effective program, helps to raise people out of poverty, encourages work and labor Market Participation. But not everyone who is lower and middle income is eligible for the program. There are both people who are eligible and not getting the benefit. There are some amount of improper payments in the program. But its also a lot about family size and composition. Within the structure many people are ineligible for the program. So the amount of taxes that are paid either when you ask when you say taxes, meaning federal income taxes or all which include payroll and excise taxes varies widely. That creates complexity and uncertainty for taxpayers. A taxpayer may have one Tax Liability one year and a different liability the next year, making it difficult to plan and prepare for their taxes. All of those things are inefficiencies, in my view, in the system. When we think about what we could do to the tax code, and when we talk about tax reform in washington, that discussion is about federal income tax, both federal individual income tax and federal correspondent incpo tax. We are not having a conversation in washington about changes to the payroll tax system. Someone could introduce that topic. And we are not having a conversation about changes to federal excise taxes and washington is not having a conversation about how the states should change their tax systems. So for the individual, low and moderate income household, theyre facing all sorts of taxes but the tax reform debate is primarily related to income tax. Ill just say two specific things about how i think about how they how those two taxes affect workers. With respect to the individual income tax, i think about tax policy in two ways. One is the average and the other is the marginal. On average, what are people paying, what is their Tax Liability . For people who are low and moderate income, on average their federal income Tax Liability, not their total Tax Liability. The federal income tax is negative. Were using taxes to redistribute income to low and moderate income households generally speaking. The other way i think about taxes is on the margin. Individual taxes on the margin. What happens when they earn one more dollar. Here we see, again, wide disparity across the among individuals who are low and moderate income. On average we see taxpayers facing marginal rate of 20 on the federal level and higher when we start to bring in the effects of other programs. And that can create in some cases disincentives for labor Market Participation or additional hours of work. The other way i think about the tax code with respect to these individuals is the effect of indirect taxes, taxes that they dont pay that might affect their well being for livelihood. There is an emerging economic literature on the Corporate Income tax that finds that Corporate Taxes paid have an adverse impact on the wages that workers earn. One of the reasons, i think, that policy makers are so motivated to pursue Corporate Tax reform is out of an understanding that those taxes will affect the wages across the income spectrum. I meant to mention the other way that middle income workers could be helped by tax reform is simplification. Some of the things you told me before the meeting are stunning. At united way are helping with tax preparation. We believe the Program Provides families the mechanism to, because the tax code is so complicated that families struggle and sometimes dont understand their tax returns. The volunteers are trained individuals who have to go through an irs certification to be able to help the families with their tax returns. And a lot of times folks say, well, is it just that theyre not paying a fee to have their tax returns prepared . And at our united way we filled out around 19,000 returns for families that brought 25 million back in tax credit for our families. If the preparers tax preparers charged lets say 200 for those individuals to have their tax returns prepared, that we saved those families of the 19,000 returns around 3. 8 million. And we have to think about that because one of the reasons that vita is so important is that we are not only helping the individuals who are filling out a tax return, we are also helping them understand their tax return, we are talking to them about how to build assets, how to save, you know, what should you do with your tax return, because if you think about it, families in florida, 44 of the families that live in florida just make enough for the base basic expenses for child care, rent, and just having 400 in their savings account could help that one individual make it to work because maybe their car breaks down. So we have to think its beyond saving them on the 400 filing fee that they may be charged but we are providing assistance and advice on how to spend the refund that you are receiving. But we also show them, teach them, this is what your tax return this is what you are paying for, a better understanding. Because i think the confusion and why we want tax reform to be simplified is so its easier for families to understand. You know. We are asked a lot of times, well, if its simplified, do we still need vita . Yes, we do. Because many families need to have a place to go to to understand what their taxes are going to be. Many families, their average wage the families that come to our site make 22,000 a year. A lot of the families, they may not have a computer at home, and we currently have my free tax. Com through the irs that they can prepare their tax return but families like to come talk to a tax preparer just like all of us have the opportunity to go to our tax accountant and get financial advice. Our lowwage workers, they want the same opportunities. So we believe that the vita program is a very Important Program that we currently have and we provide to lowincome workers. Thank you. Frank. Happy to be here. Im going to take probably a bit more of a macro approach to the issue. We are actually in that kind of environment where were discussing whats tax reform going to look like in congress, President Trump has a proposal, the House Republicans have had a proposal. And the way we look at it, americans for tax fairness, which is an organization of about 400 national and state organizations, we are working for a what we call a fair tax system. We believe that the wealthy and big wealthy corporations ought to be paying quite a bit more in taxes than they are paying now. We are not asking the middle class to pay any more. What we want to do is basically raise a lot more revenue so that we can make the kinds of investments that we think are critical for an economy to create an economy thats going to work for all americans. Right now we think the economy is not working for everybody. There is a great deal of inequality in our country. The vast majority of the wealth of the country is controlled, owned by the top 1 . Very little is owned by folks at the bottom. And we need to change that dynamic. And part of it is to grow the economy and to grow the pie. We think the best way to grow the economy and grow the pie is to make investments. We actually think that we are we have what we call a revenue gap in this country. I will use a little bit of math, its not the easiest thing to understand, but revenue is about 18 of federal revenue is about 18 of our economy right now. Its but our spending is at 21. 5 . So that difference is whats thats the deficit. And thats what i call the revenue gap. The revenue gap will go up to 23. 5 versus 18 . Revenue will stay flat but the gap will go up spending will go up to 23. 5 . Why . Its going up because folks are retiring. We have a big baby boom generation thats going. And we have a choice. We can cut things, cut Retirement Security, cut medicare, cut Social Security in order to close the revenue gap or we can raise more revenue. I believe that the you ask the question of the public do we want to make more revenue to ensure Retirement Security, to ensure that we can afford to put our kids in college, to rebuild our roads and bridges, we all recognize what a critical need there is to rebuild our infrastructure, to do new medical research, all of these things cannot happen now unless we raise significantly more revenue. And the only place to get that revenue is from those who are benefiting from the economy currently. In fact, just one concrete example, the Affordable Care act is an example of what i am talking about. The legislation that president obama got passed that provided Health Insurance to 20 Million People. That was paid for by taxing the richest 2 of americans, putting a modest investment tax on them and by adding a. 9 to their medicare tax. Folks who make 250,000 and above, the top 2 . Also, Insurance Companies and Drug Companies were asked to pay a little bit more because they were going to get a lot more business. Those taxes is what enabled us to provide Health Care Coverage to 20 million americans. The problem right now is under the trumpcare legislation they want to wipe out those taxes which is why 20 Million People will lose their Health Insurance. Thats how we advocate using the tax system to create more opportunity for everybody. If i can play devils advocate to alex and frank. Both of you seem to agree that Corporate Taxes have a big impact on low and middle income families but for very different reasons. Frank, you believe that higher taxes to corporations provides more money, the federal government can spend for low and middle income workers. Alex, you believe, lower corporate rates, create more investment. Pay higher wages. Both seem completely reasonable, except as a cynic because i have covered this for so long, i firmly dont think my company will give me higher wages if their tax rates are cut. I am dubious. I also dont think, if you raise Corporate Taxes that companies will stay in the country. Thats the whole point of Corporate Taxes. So you two can go right at it. You can tell us how you come together on this point and make my life a little bit easier because i do not understand how the two of you will come together on this. Lets start with what are corporations paying now. There is the topline rate, which is 35 . Thats called the top tax rate on corporations. Then there are lots of studies that have said that tax rate is substantially less than that. Were talking federal taxes, were not talking the entire state, local and all of that. Just federal taxes. The Government Accountability office, which is a nonpartisan entity, they looked for five he years, 2008 to 2012. Profitable u. S. Corporations. The profitability corporations they said are paying a 14 tax rate, thats more than half under what the effective tax rate is. There are lots of studies that have shown that essentially what alex, you are talking really about trickledown. If you give more profits to corporations they will then spend the money to invest and that will create more jobs and grow the economy. First of all, most people most academics dont believe the studies dont show t