System. This is about two hours. Subcommittee will come to order. Welcome to the ways and means subcommittee on tax policy, our hearing on how tax reform will simplify our broken tax code and help individuals and families. Before we get started with Opening Statements and so forth, id like to yield to the chairman of the ways and Means Committee, congressman kevin brady for the purposes of introducing a distinguished witness who is before us today. Mr. Chairman. Thank you. Chairman rossman, thank you for your leadership of the tax committee. Thank you for leading hearings like this that allow america to have the conversation about creating a bolder, fair, flatter and more pro growth tax code. I want to thank all our witnesses for being here today, but i want to give a special welcome to our friend, my friend, chairman bill archer, former leader of this committee and a longtime mentor of me personally. Chairman archer, thank you for being here to share your insight and your experience on tax reform. I know everyone on our committee is familiar with chairman archer but id like to take a moment to talk about him and his legacy here at the ways and Means Committee. Chairman archer served on the committee for 28 years and was chairman from 1995 to 2001. During his Service Chairman archer was closely involved in several historic efforts to make our tax code simpler and fair for all americans. Prior to becoming chairman he was a strong voice in developing the Tax Reform Act of 1986 fighting throughout the process to lower rates for americans, eliminate complexity for taxpayers, and when he took the gavel in 1995 he brought that same passion and determination and insight, always striving to ensure that our tax code worked for the American People, not against them. And he was a chairman long before software that did his own taxes year after year. So he knew intimately the complexity and the cost of this complicated code. So in many ways chairman archers leadership helped lay the foundation for the kind of pro growth bold tax reform we are pursuing today. For me his leadership often serves as the source of inspiration as we work to fix our broken tax code for families and individuals. When chairman archer retired from congress i had the honor of being selected to his seat on ways and means, now its migrate honor as chairman to welcome you back to the committee. Chairman archer, thank you. Your decades of Public Service and thank you again for joining us today. We have so much to learn from you and were excited for your testimony. Thank you for that welcome, mr. Chairman. Thank you. And thank you for the job youre doing on tax reform. Thanks, chairman. I field back. Thank you, chairman brady. Think about it, right now on this iphone i can pull up an airline app, i can click a flight to ohare airport, i can choose a seat, i can get an e ticket mailed to me on my iphone, i can have it charged to my credit card and i can get a boarding pass all within the twinkling of an eye. If i have ten seconds of that little loading thing spinning around my attitude is, you know, what loser made this. Now, its ridiculous and yet we have an expectation of ease and simplicity that is basically the norm right now. Now, contrast that with our tax code, which is so complicated that every year the majority of taxpayers cant figure out how much money they owe by themselves. Our tax code has grown so bloated over the past 30 years to the point that its draining our productivity and producing a headache for nearly every taxpayer. Now, there is good news. Nobody likes it and nobody defends it. There is nobody in this country that says, oh, the Internal Revenue code, i love that. Dont make any changes to that. Nobody likes it. Now, people like certain elements of it and we have deep divisions among us about the directions we should go, but its so interesting that nobody is defending the status quo. Now, theres better news. We have a solution that will grow the economy, dramatically simplify the code and lower our tax bills every year. Last week we discussed the importance of growth, taxpayers according to the proposal that weve set forth would see growth from tax reform in the form of an estimated 1. 7 million more jobs and 7. 7 higher wages, but today we will focus on the burden of filing taxes as an individual. Every year millions of americans spend hours trying to figure out what they owe, in fact, combined americans spend 2. 6 billion hours trying to calculate what they need to pay uncle sam and this translates into over 400 billion in lost activity. And what should be a simple calculation is so complicated that nine out of ten people either pay a professional or have to buy Software Just to figure out how much they owe the government. When i think about a household filing their taxes i think about a family in my own constituency in palatine, illinois, sitting at their Kitchen Table with a box full of receipts trying to figure out what they owe. Theyre looking at the 1040 and theyre trying to figure out what deductions they can take and they can they deduct enough to itemize or will they take the standard deduction, do they qualify for the additional standard deduction, can they take both the personal exception for their children and the Child Tax Credit. When they really get confused they can read the helpful irs guide for individuals and by page 206, no lie, it starts out with how to figure your taxes. The whole time theyre thinking in the back of their heads that if they had enough money to hire somebody to do it for them they would be paying less in taxes. Thats because for the more than 30 years the tax code has not been updated and it is ballooned with special interests. The standard tax form, the 1040, now contains more than 80 different items and the additional complexity is a cost for everybody. Clearly something is inherently unfair when the family from palatine perceives that they pay more to the government because they dont know more about the tax code. What we propose for individuals filing is something as simple as a postcard. Now, if you can add and multiply you can do your own faxes, no more uncertainty, no more worrying if the government will come after you, we will have this cost card available in an online and hard copy form for every tax pa i remember to use. How and why did we make it this simple . We propose to eliminate all but two reductions, we took the seven brackets and reduced them to three lowering the tax rate for all americans in the process. We paired together the standard deduction, additional standard deduction and personal and spouse and eliminating deductions to double the standard deduction and we expect that 95 of americans will use that. Finally, we combine the tax Child Tax Credit with the personal interpretation for children and dependents into one larger credit. With these changes americans will no longer have to worry if they are wealthy enough to get a better deal on taxes, it will be laid out in plain english for all to see. Now, as a committee we have a choice, we can accept high rates and a confusing code or we can grow the economy, lower rates and create a fairer system that americans can trust and i think the choice is clear. With this in mind im pleased to welcome our witnesses and i look forward to hearing all of your testimony and working with my colleagues on both sides of the aisle to determine how we can create the best tax code that helps all americans including my constituents in palatine and elsewhere. Now, for the purpose of his opening statement, id like to recognize my distinguished friend the Ranking Member mr. Dogget from texas. Thank you, mr. Chairman, for your courtesy and a welcome to all of our witnesses. Today we do final lly consider e impact of proposed tax reform on individual taxpayers. This is the first consideration of this matter in the 13 months that have passed since the House Republican blueprint was announced. Our hearing coincides with what appears to be the demise of the first republican tax cut this year which largely masqueraded as a Health Reform bill. Its instructive to consider how that bill proposed to assist individual taxpayers from the more than 400 billion in tax breaks for individuals that is pro proposed in that bill those making more than a Million Dollars each year will have pocketed an average of 57,000 apiece. Any small tax cuts for middle class families would have been mostly wiped up by increased healthcare costs. Its also instructive to look at how that bill was presented and to hope that lessons have been learned from the approach of putting the bill under lock and key in the capitol, denying even some republicans an opportunity to see the bill, then rushing it through without a single administrative official or expert coming forward to help about the bill or be held accountable for it, all in an allnight session where all democratic amendments were denied. One would hope that that experience given the failure of the bill would not be repeated. However, there is some concern in questions that have been raised in the Senate Finance committee this same week as to whether the any tax reform legislation will be presented for a hearing. Senator mccaskill asked senator orrin hatch to commit that there would be a hearing on tax legislation and that it would not all be written closed doors. I will submit for the record an exchange about that with senator mccaskill and i hope that we will not see the same thing happen here in the house and that senator hatch will reconsider and make this a more open process. Certainly there is a need to simplify our tax code. Many of the additions to the code have, in fact, been made in recent years in this very committee as loopholes and special advances were offered to some that added complexity to the system. I have authored legislation that is designed to consolidate existing credits for Higher Education into an expanded America Opportunity tax credit, to make it easier for more young people and not so young to Access College and to use the same credit for job training, as so Many Americans are trying to seek new opportunities that will make it possible for them to provide for their family in a more adequate way. This bill would also ensure that students receiving pell grants can get the full benefit of the American Opportunity tax credit. Thats important because at this very time the House Budget Committee is considering a budget that makes incredible cuts to education and social Services Including the funds that are available for pell grants. Our Ranking Member, mr. Neil, has advanced legislation to make the earned income tax credit available to the working poor who have no dependent children, an idea speaker ryan has endorsed, though not with sufficient enthusiasm to get it passed when it was considered in 2015. Dis deloro our colleague has offered a bill to expand the Child Tax Credit. I think each of these offer a potential for discussion but not if they are only to be crumbs off a table that has been set like the last tax cut bill for those earning more than a Million Dollars a year. I think as we look at individuals its very important to apply the mnuchin rule, that would be the rule named after secretary of the treasury mr. Mnuchin who has said he was not seeking any net tax breaks for the wealthiest few. That he would ensure that while we simplified it and added fairness to the code, that there would not be a net tax cut for those at the top, actually, as mr. Trump had originally proposed and as proposed in the blueprint. I would like to see us follow that rule as we consider simplicity and fairness. And i think that any action we take does have to be balanced against the many wrongs that are being committed as we meet in the Budget Committee to cut back on job training and educational opportunities. Thank you, mr. Chairman, i look forward to hearing our witnesses. I think you make a couple of interesting points. Let me just comment briefly before i introduce the witnesses. I think the admonition about process is a good one. We know what failure looks like, we know when nancy pelosi as speaker of the house said we have to pass this bill so that you know whats in it that that creates confusion and failure and a lack of cohesiveness. I was on this committee sitting right down right down there when we were considering the Health Care Bill when charlie wrangle, former chairman, was sitting in this very chair. When he was asked, i think it was either by dave camp or some of the one of the other Senior Republicans on the ways and Means Committee at the time, when are we going to hear about the republican amendments. Charlie wrangle said soon and very soon. Its a line from a gospel song that i remember as a child. Thats why i have an independent recollection of it. And of course we never got to those points. Now, with having our fourth hearing on the blueprint. Theres been a lot of discussion, a lot of discussion on the camp draft as a prelude. A lot of discussion about the blueprint. I think now is the perfect time to transition to having more insight on this by introducing our panel. First of all honorable bill archer, chairman brady introduced former chairman of the committee on ways and means and is here as an example of somebody who knows how to craft legislation and bring something to fruition. And mr. Chairman, we welcome your testimony. Next is bernard mckay, hes the chairman of the board of directors of the council for electronic revenue communication advancement. Next is jonya stout. And finally, eric rodriguez, Vice President for the office of research and advocacy and legislation. So thank all four witnesses. You each have five minutes. If you go over the time, ill be gentle and increasingly harsh to have you have some tight corners and then well inquire a view. Well hear from you in order, chairman archer. Thank you, mr. Chairman. It is truly an honor to be in this room again. Chairman, make sure that mikes on. I pressed the talk button, but it doesnt seem to scoot closer. How is that . I dont know what else to do, mr. Chairman. I think thats better. Just lean forward when in doubt. Ill get closer as i can. As chairman brady said ive spent many years of my life in this room. I have a Great Respect for it and great admiration for each of you who serves today. When i was on this committee, there were many challenges and many opportunities, and they exist today. And they probably will exist 25 years from now. But i think that congress has perhaps a unique capability to alter the course of our country in a positive and a momentous way. I pray that you will be allowed to rise to the occasion and complete the longdelayed goal of fundamental tax reform, which would simplify and rationalize our tax code. The world did change dramatically since my Congressional Service ended in the year 2001. For americans to compete in the world as both individuals and businesses it is in many ways much more difficult and certainly more challenging than it was. Tax rates have risen and complications have increased. I understand that thereve been over 15,000 changes in the tax code since the 86 tax reform. Thats very difficult for individuals who cope with. And, frankly, that figures out of date. Its probably much greater today. I commend the efforts of the committee and particularly chairman brady for taking the lead to advance the indisputable goal of simplifying the code. And helping to make the u. S. Leader in the world in terms of having a tax code that gives our country a competitive advantage in the marketplaces of the world. I count myself as being a fair individual. And all i ever want for this country is a fair advantage. And hopefully thats what we had in our tax code 30 years ago, but we have lost it. In my opinion its not enough to achieve tax parity with the rest of the world. As i said, we need to work to develop a clear and competitive lead. The blueprint that was released last year is a starting point for the committees discussion is a truly comprehensive document and a courageous one as well. It was built in many respects on the actual bill introduced several years ago by former chairman dave camp. Foundations have been laid for a debate that is long overdue. I know well the vagaries and the twists and turns of the legislative process, but i urge you to plow ahead to develop a comprehensive document that clearly will be the new starting point for this effort. Not only did i do my own federal tax return as chairman brady mentioned, but i did it with a pencil and a yellow writing tablet and not a computer. Believe me, it took a lot of my time. It was very frustrating, but id at least had the help of the staff of the joint committee and the ways and Means Committee to help me when i got into real difficulty. And i did that particularly on one part of the code that related to the Tax Deductions for members of congress. There was no form, so i contacted the joint committee and was told, well, we cant give you a form, but i think we can tell you how to prepare one by hand and i believe the irs will take it. Well, thats a terrible tax code. I hope thats been corrected since then, but i doubt that it has. I do not in any way belittle the political effort needed to achieve the goal which you seek, but there is a support group of many, Many Americans who may not be heard to offset the support group for every special provision thats in the code that you must counteract in order for you to be able to finally reach your goal. Until recently one of the real problems has been expiring tax provisions, which required almost annual legislation and this cost would have to be incorporated into any major bill. I commend the committee and the c