tv Ways and Means Subcommittee Considers Tax Reform CSPAN July 19, 2017 8:13pm-10:11pm EDT
there are two things that are very important that will have long lasting good consequences for the united states that can be summarized in four words. his two nominees to the supreme court. >> the second part of our interview with david glaro he stalks about his book rising star, the making of obama. >> i think the point to emphasize here is that over the course of bauk's presidency there were scores and scores of people in illinois who knew him earlier who were deeply disappointed with the trajectory of the obama presidency. disappointed that obama forgot the people, most of the people
that were essential to his political rice. >> nizsunday night 8:00 eastern >> next a house ways and means sub committee here's recommendations for simplifying the tax code. witnesses include -- a key player in the 1986 tax reform act. he was joined by analysts to talk about proposals for retirement income and updating the nation's electronic filing system. this is about two hours. sub committee will come to order. welcome to the ways and means sub committee on tax policy our hearing on how tax reform will simplify our broken tax code and
help families. i'd like to yield to the chairman of the ways and means committee congressman brady to introduce a distinguished witness who's before us today. >> thank you for your leadership of the tax policy. the sub committee is such a important time in america's history. thank you for leading hearings like this that allow america to have the conversation about creating a bolder, fairer, flatter and pro growth tax code. i want to thank all our witnesses for being here today. i want to give a special welcome to our friend chairman bill archer, former leader of this committee and a long-time mentor to me personally. chairman archer thank you for being here to share your insights and experience on tax reform. i know everyone on our committee is familiar with chairman archer but i'd like to talk about him
and his legacy. he's served on the committee for 28 years. he was chairman from 1995 to 2001. during his service, chairman archer was closely involved in several historic efforts to make our tax code similarler and fair to all americans. he was a strong voice in dealing the tax reform act in 1986 to lower rates for americans, eliminate complexity for taxpayers. when he took the gavel in 1995, he brought the same passion and determination and insight, always striving to make the tax code work for the american people not against him. he was the chairman long before software 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 archer's leadership helped lay the foundation for the kind of
pro growth, bold tax reform we are pursuing today. to me his leadership often serves as a source of inspiration as we strive to fix the tax code for families. when chairman archer retired, i was collected to take his seat on ways and means. it's by pleasure to welcome you back. thank you for your decades of service and for joining us today. >> thank you for that welcome mr. chairman. and thank you for the job you're doing on tax reform. >> thanks chairman. i yield back. >> thank you chairman brady. >> think about it, right now on iphone, i can bull up a airline flight, i can get a eticket mailed to me on my iphone, i can
have it charged to my credit card and get a boarding pass within a twink ling of a eye. if i have 10 seconds of that thing spinning around, my attitude is what loser made this. it's ridiculous. and yet we have a expectation of ease and simplicity that is the norm right now. contrast that with our tax code which is so complicated that every year the majority of taxpayers can't figure out how much money they owe by themselves. our tax code is so bloated it's draining our productivity and a headache for nearly every taxpayer. nobody likes it or defendeds it. the nobody likes it. now people like certain elements of it and we have deep divisions among us about the directions we
want to go. but it's so interesting nobody's defending the status quo. we have a solution that will grow the economy, lower our tax bills every year. last week we discussed the important ans of growth. we would see tax growth in the estimate of 1.7 million jobs and 7.7% higher wages. today we'll focus on the burden of filing taxes as a individual. every year millions of americans spend hours trying to figure out what they owe. americans spend 2.6 million hours to figure out what they oe uncle sam. what should be a simple calculation is so complicated nine out of ten people either pay a professional or have to buy software 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 con stitch wentsy sitting at their kitchen table with a box full of receipts trying to figure out what they oe owe. they're looking at the 1040, can we duct enoueduct to itemize, d qualify for the -- can they take the personal exemption for the children and the tax credit. when they get confused what had he owe the government, they can read the helpful irs guide for individuals and by page 206, no lie, it starts out with how to figure your tax. the whole time they're thinking in the back of their heads if they had enough money to hire somebody to do it for them they'd be paying less in taxes. that's because for more than 30 years, the tax code has not been updated. the standard tax form now contains more than 80 different
items and the additional complexity is a cost for everyone. clearly something's inherently unfair when the family perceives they pay more to the government because they don't know more about the tax code. what we propose for individuals filing is something as simple as a post card. now, if you can add and multiple you can do your own taxes. no more uncertainty. we'll have this post card available in a hard line form and online form for every taxpayer to use. first we proposed to deeliminate all but two deductions and took the seven brackets and reduced to three, lowering the tax rate for every american, we compared the personal exemption for taxpayer and spouse and used the savings from eliminating deductions to double the standard deduction which we expect that 95% of americans will use that.
finally, we combined the child tax credit with the personal exemption for children and dependents into what larger credit. with these changes, americans won't have to worry if their wealthy enough to get a better deal on taxes. as a committee we have a choice, we can accept high rates and a confusing code or grow the economy, lower rates and create a fairer system that americans can trust. i think the choice is clear. with this in mind, i'm pleased to welcome our witnesses and i look forward to listening to all your testimony and working with colleagues on both sides of the aisle and create a tax code that benefits all americans. now, for the purpose of his opening statement, i'd like to recognize my distinguished friend the ranking member. >> thank you mr. chairman for your courtesy and a welcome to all of our witnesses. today we consider the impact of
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 this massacre aided as a health reform bill. it's constructive to consider how that bill proposed to assist individual taxpayers from the more than $400 billion in tax breaks for individuals that is proposed in that bill, those making more than $1 million each year would have pocketed a average of $57,000 a piece. any small tax cuts for middle class families would have been mostly wiped out by increased health care costs. it's inzrukt i have to look 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 a opportunity to see the bill, and rushing it through without a single administrative official or expert coming forward to testify about the bill or be held accountable for it, all in a all-night 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 any tax reform legislation will be presented for hearing. senator mccast kell asked chairman or inhatch to commit that there would be a hearing on tax legislation and it would not all be written behind closed doors. i will submit for the record a
exchange about that with senator mccast kell and i hope 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 loop holes and special advantages 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 a expanded american 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 add dwit way.
this bill would also ensure that students receiving pel grants can get the full benefit of the american opportunity tax credit. that's 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 pel grants. our ranking member mr. neal has advanced -- available to the working more who have no dependent children, a idea speaker ryan has endorsed though not with sufficient thumb to hu to get it passed. expand the child tax credit. i think each of those 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 $1
million a year. i think as we look as individuals it is important to provide the mr. mnuchin who said he is not speak seeking any net tax breaks for the wealthiest few. while we simplify and add fairness to the code, there would not be a net tax cut for those at the top, actually as mr. trump had originally proposed and has 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 submitted as we meet in the budget committee to cut back on job training and education al opportunities. thank you for chairman. i look forward. >> thank you i think you make a couple interesting points. let me comment briefly. i think the admonition about
process is a good one. we know what failure looks like. we know when nancy pelosi says we have to pass the bill so you know what's in it, it creates confusion and failure. i was on this committee sitting right down there when we were considering the health care bill when charlie rankle, former chairman was sitting in this chair. he was asked by dave camp or one of the other senior republicans of the ways and means committee at the time, when are we going to hear about the republican amendments, he said soon and very soon. it's a line from a gospel song i remember as a child. that's why i have a independent recollection of it. we never got to those points. we're having our fourth hearing on the blueprint. there's been a lot of discussion on the camp draft as a -- i think this is the time to
transition to more insights by introducing our panel. first of all, we've got the honorable bill archer who chairman brady already introduced as the former chairman of ways and means and here is a example of somebody who knows how to craft legislation and bring it to fruition. mr. chairman we welcome your testimony. next is stout, a practice leader and could founder of the fiduciary plan -- advocate of legs and mune he'd yos u.s. thank you all four witnesses. you have five minutes. if you go over the time, i'll be gentle and increasingly harsh to have some tight corners. we'll hear from you in order.
>> thank you mr. chairman it is a honor to be in this room again. >> chairman can you make sure the mike is on. >> i pressed the talk button, but it doesn't seem to -- >> skooch closer. >> how's that? i don't know what else to do, mr. chairman. >> i think that's better. just lien forward when in doubt. >> i'll get closer as i can. as chairman brady said, i've spent many years of my life in this room. and i have a great respect for it. and great admiration to 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 the congress has
prepares 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 long-delayed goal of funtment al tax reform which would simplify and rationalize our tax code. the world has changed dramatically since 2001. for americans to compete in the world as both individuals and businesses is in many ways much more difficult and certainly more challenging than it was. tax rates have risen and complications have increased. understand that there have been over 15,000 changes in the tax code since the '86 tax reform.
that's very difficult for individuals to cope with. and frankly, that figure's probably out of date, it's probably much greater today. i commend the efforts of the committee, particularly chairman brady for taking the lead to advance the indisputable goal of simplifying the code and helping make the u.s. a leader of 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, that's what we had in our tax code 30 years ago. but we have lost it. in my opinion, it's not enough to achieve taxpayer parody with
the rest of the world, we need to develop a clear and competitive lead. the blueprint that was released last year as a starting point for the committee's discussion is a truly comprehensive document and a courageous one, as well. it was built in many respects on the actual bill introduced many years ago by former chairman dave camp. the foundations have been laid for a debate that is long overdue. i know well the vague ar is and twists and turns, but i urge you to plow ahead and develop a comprehensive document that will be the new starting point for this effort. not only did -- did i do my own federal tax return, as chairman brady mentioned, but i did it
with a -- 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 i 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. and so i contacted the joint committee and was told, well, we can't 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. that's a terrible tax code. i hope that's been corrected since then, but i doubt that it
has. i did not in any way bee little 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 that's in the code that you must count act in order 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 whose costs would have to be incorporated into any major bill. i commend the committee and the congress to have so aggressively addressed this problem in 2015. it was clearly a massive stroke to make tax reform possible.
and here in this effort was a concept of permanence in the tax code. i urge you to make this the hallmark of any tax legislation. the american public needs to be able to plan and make their financial decisions in a environment where the tax provisions do not change every year. that makes it extremely difficult. i have always described our tax code as a attractive nuisance and to me that's what a income tax, and for those of you who are not lawyers, a attractive nuisance means that whatever you provide is going to, like a magnet, draw in all kinds of complications that are going to be very difficult to resist. and that's what we have today. sadly, i think every income tax does that. and i'm going to ad-lib just
very quickly and tell you that i lost confidence in being able to really have a effective and simple income tax at the end of the '86 deliberations. i personally said, and it's a matter of record, i think we should abottlish the entire code and replace it in a consumption tax to where the individuals in this country do not have to deal at all with the irs. to me, that would be very, very attractive. but that's a big step. and it's a step that is beyond where you can go. i couldn't make it happen. so, i'm sure you're not going to be able to make it happen. but certainly we need to find a better way than the current income tax. i appreciate the unique opportunity to return to this
hallowed environment, the most beautiful room in the capital of the united states and be able to address you. i don't have a magic answer for you. i wish i did. i think it's extremely complicated, and i'm glad, frankly, that you're up there today and i'm not. >> thank you mr. chairman. >> but in any way that i can be helpful, please call on me. >> thaunk. >> mr. mckay? >> thank you mr. chairman and i'm honored today to testify on behalf of the council for electronic communication advancement, circa, the electronic filing. it was 19 -- coordination, cooperation across the tax ecosystem for advancing electronic tax filing and
electronic tax administration. sir cau members represent a kied members from tax software to the largest tax store front exchanges, to financial services companies. we're proud to have been a part of leading the national adoption of leak tronnic tax filing for more than two decades. in the 1988 reform act, government adopted a government policy objective of achieving 80% e file adoption by american taxpayers was it's more efficient, speeds return submission proceeding, reduces government cost and improves accuracy. and today, almost 90% of all individual tax returns are electronically filed. that accomplishment is a direct
outcome of public private partnership and technology innovation. but innovation in the tax compliance process is not the only thing that change in the last 30 years. since the tax code was last comprehensively changed. the makeup of the american family and characteristics of small business have changed. and evolved in many ways. modern sayings and simplification of the faction code would empower individuals and small businesses to more easily understand their own taxation and knowledgeable citizen engagement in their financial affairs, like tax, leads to better financial decisions for themselves and their families. the private sector's development of tax preparation software over the last 30 years has sharply reduced the pain and complexity for tax compliance for
americans. whether taxpayers prepare thir own returns or sifted by professional tax -- private sector innovation has taken complexity of the tax code and simplified it for the taxpayer. industries driven data driven innovation and simplified it for the taxpayer by allowing, for example, direct importation of financial data into tax returns at the taxpayer's direction, drawn directly from the original data sources. these kinds of technology logical innovation have made tax compliance faster easier and more accurate. however, tax simplification reform, stream lining the tax itself could accelerate greater simplicity and ease of compliance, it would be the right policy for the nation. we believe simply kay tags reform strategy could begin with application of common sense
solutions. win of the code there are unique terms like adjusted gross income as well as common terms like dependent and income, all of which have different and sometimes conflicting and certainly unique definitions to the code. using universal definitions and commonly understood language would go a long way toward taxpayer ease and understanding, the for retirement and education can leave taxpayers uncertain over what choices are best for them and their individual financial future. the commercial sector knows the behavior al -- can lead to doing nothing at all. industry works to simplify this and has done so for decade. but actually simplifying the underlying tax code would make a big difference in help taxpayers make better decisions for their
financial future. in the same way electronic filing was a public/private part shn in 2002 president bush want today make sure tax preparation was tafbl -- that policy directive led to the irs free file program which is provided at no cost to the government or the taxpayer using the services the result over the last 15 years has been a donation of 50 million free tax returns and electronic filings to american taxpayers of modest means. it is operated under standard governed by the irs while insuring competition and customer choice. that kind of public/private partnership has saved funds.
more recently a public/private partnership between the irs, the state department of revenue was institute today site -- to fight cyber fraud being launched against the american tax system internationally, that effort, the irs security sum it has been under way for two years and irs has reported it has slashed cases of reported identity i theft by 50%. the summit has created a information sharing and analysis -- as the next phase of the public/private partnership to ensure a process active strategic defense in the long term. it will be important that public/private partnership and
these divisions of labor be preserved and strengthed. over the last several years there's been discussion about creating a post card tax return. we would observe that in today's environment, we're really talking about a electronic postcard. as the american tax system has moved well beyond paper. more over, a electronic post card would benefit from the security safe guards adopted by the irs safety -- >> let's do this. we can continue to inquire and we're going to be able to get to, i think, the rest of the basis of your testimony. so, miss stout? >> thank you chairman, ranking member, and members of tax policy sub committee for the opportunity to speak with you about the importance of tax incentives for retirement savings.
my name is -- i am the practice leader and could founder or fiduciary plan advisers. we are a independently owned prior of fiduciary advice to plan sponsors and their hard working employees. i bring 20 years of experience of plan consulting. i advise 140 retirement plans covering protection 50,000 employees and 2.4 billion in retirement savings. i also serve as vice president of the national association of plan advisers. napa is the voice of the retirement plan advisory community and is part of the american retirement association. the message i wanted to convey today is that the current tax incentives are working very well to promote good savings behavior for tense of millions of american workers. house holds have -- 82 par% of
are participating. the most important factor of whether workers save for rear tiermt is access to a workplace retirement plan. moderate workers are 15 times more likely to save if they have a plan at work. versus less than five% save in a ira if theft on their own. tax proposals that freeze retirement plan limits and cap exclusion to retirement -- will discharge small businesses from offering retirement plans. i recommend to all my clients they offer both a roth and a present tax contribution option in their plan design. a roth option can can beneficial to millennials and lower wage earners. having a choice is important. we have discussed with our clients a option to doing a automatic enrollment in a roth
source. however, any policy move toward more reliance on roth considerations must be accompanied by -- expanding workplace plan coverage is critical to building retirement security for the middle class. to this end, i support proposals such as increasing the retirement plan start-up tax credit and adding a credit to encourage automatic enroll many. in addition i support the pooling of unrelated employers into a single plan. pooling plans will produce economies of scale by lowering both employer and plan participant costs which will boost retirement plan coverage. the most significant reduction in retirement security is associated with the cash outs
that often occur during a job change. i have helped hundreds of participants figure out how to roll over their retirement savings from a old employer to their new employer's plan. to address this challenge i support recommendations regarding authorization of a national retirement clearing house which would facilitate re -- in addition the committee should consider congressmanon's seal act which allows participant to at any time to repay plan loans if they are -- a medicare eligible couple at age 65 will need at least $260,000 in savings for health care in retirement. health savings counts -- savings accounts are the best way to save for this expense. to this end we propose providing
the value of offering a retirement plan to employees is preserved when the tax rate related to the deduction matches the tax rate the employee will pay when they retire. thank you again for the opportunity to participate in this important discussion. i would be pleased to discussion these issues further with the committee and answer any questions you may have. >> thank you, ms. stout. mr. rodriguez, i let the majority of witnesses go over a little bit. feel free to stretch your legs. do you know what i'm saying? >> i appreciate that. mr. chairman, i want to acknowledge our champion of our community, congresswoman sanchez for providing a lot of leadership with these issues and connecting it with all lives, especially latino americans. thank you for inviting me today to appear this afternoon. for those of you who don't know, it's formally the national council of larasa. our new name.
i appreciate the opportunity to be here. for over two decades, eve worked in poverty issues in the latino community. this particular topic is very important and very timely. as you know, the tax code has considerable influence over the economic security and mobility of workers. a lot has changed since 1986. for instance, at that time, latinos represented just 8% of the total u.s. population. today latinos represent 17% of the u.s. population. today latinos are 56 million strong and growing throughout the country. at the same time, latinos are twice and likely as being in pover poverty than their white peers and income gaps remain wide. in 2013, the average latino family had $1 for every 10 in the average white person's
household. a rewrite of the tax code tends to to make things worse. millennials are very important. 60% of latinos are millennials are younger, and how tax policy affects them and influences their economic behavior will have implications to the long-term liability and prosperity of the nation. for these reasons i'm happy to be here and represent our perspective on tax proposals currently under debate. the federal income is intended to fund public goods and services. defense, veteran affairs, health care, public education, infrastructure, and safety net and environmental protections among many other public goods that we all enjoy. the tax code can raise incomes of working class americans while delivering economic growth, but only if lawmakers are intentional about centering the benefits of reforms on middle class working families and
individuals. over 90% of latino voters favored tax incentives to help them buy homes, go to college, save for retirement or just make ends meet. whatever we do in tax reform or to start with insuring that revenue is adequate to meet these needs and that tax reforms are equitable for all taxpayer. recent tax proposals from the administration and house republicans threaten to weaken the government's ability to protect and serve taxpayer and will unfairly benefit the wealthiest. as it stands, too much of the roughly 700 billion in tax expenditures the government currently spends help the rich get richer through targeted deductions, preferential tax rates. inflating those rates at the cost of benefits is concerning.
the trump plan would result in over 5 trillion, at least, in lost revenues in the first decade. in the absence of credible ways to pay for these breaks, these are funded in part by cutting funding for crucial programs that support families. both the trump and house tax proposals would accelerate growing weather divide. these plans would provide tax rates to the wealthiest at the expense of working and middle class family. there's no inheritance tax, generous pass-through rates and breaks for a small number of wealthy individuals while few benefits go to the middle class and working families. there's no question that tax reform is overdue and that plans for reform should do more for working class taxpayer. to make sure we arrive at that
system, things have to be transparent and bipartisan. inclusivity is more important than ever as the face of america changes. in 2044, 14 states across the nation will be majority minority. an american consensus on tax reform that includes the perspectives of stakeholders and shared values about tax and spending policies is our best chance at establishing a modernized system that will stand the test of time. accordingly, tax reform proposals raise revenue to build a strong economy and invest in our future. they're progressive and ensure that everyone, including the wealthy and corporations pay their share. the poor working families and children tax reform is needed and important to all americans, including latinos. no tax reform plan should make our government weaker or worsen the economic and weather divide among taxpayer.
the path to reform ought to be a transparent and bipartisan process. a process that incorporates the views of taxpayer of all walks of life. thank you for the opportunity to share these views. i look forward to your questions. thank you. >> thank you, mr. rodriguez. i will invite mr. reicher to inquire. >> thank you, mr. chairman. the chairman is very gracious in allowing members of the panel to go before he asks his questions. i appreciate that consideration. thanks to all the witnesses for being here, and especially thank you to the chairman. you worked with my predecessor. we didn't get a chance to talk about this earlier, but jennifer dunn was a member of congress prior to my arrival. i was honored to follow in her footsteps as i'm sure you're honored to work with her. >> yes. >> and i know she would agree
with you and i that we are at a time in history where we have the opportunity to really make a difference here in the lives of american people, all american people, all tax paying citizens in this country, hardworking americans, and just as the chairman has pointed out, the complexity of the tax code and, of course, your recognition and all the people on the panels' recognition of how complex the tax code is, at least 15,000 changes since 1986. i think your words simplify and rationalize. that's the word that really caught me. we're looking for a rational approach to this and simplify this certainty. i think it would provide certainty. it would allow americans to invest, grow, hire across this country and provide for their families. i'm just interested in hearing from you, mr. chairman.
what do you think permanence means for the average american worker? they look at the tax code. it's so complicated. if we can just explain permanence because they haven't seen it for so many years. 15,000 additions, tax extenders, and all this stuff going on. what does that really mean for the american people, do you think? >> i think it would depend on the economic status of each of the americans. the more that has to be relied on the code and watch them change, it's very, very bad because to me, you should be able to plan your life without having dramatic changes occur
that are going to change everything for you, and you can't anticipate it. so it depends on the condition of the individual as to the impact. congressman reicher, the one thing i intended to say in my remarks, which i ran over and did not get to do, is the real failing, the major failing of the effort in 86 was the fact that there were major changes that were retroactive. if i were to give you one caution, do not include any retroactive provision in your tax reform. the retroactivity -- it's one of the major reasons that i led the opposition to the '86 tax reform
act -- undermine the real estate in the country and brought about the demise of thousands and thousands of savings and loans. it cost the federal government well over $125 billion to correct. and that was avoidable if you simply make your changes prospective. >> thank you, mr. chairman. mr. kind and i have included a related provision in our small business add values for employees act, referring to your testimony, the save act. how could allowing private employees to pool together to provide multiple 401(k) for businesses hoping to provide this for their workers? >> thank you. i think that pooling unrelated
employers would help tremendously with the coverage issues that we have. i work around the baltimore/d.c. area, and i work with a lot of small employers. they don't have the administrative staff to be able to handle the complexity that happens when you go to put a plan in place. so pooling these plans together gives them the lower cost. so the working employees will have access to a plan, number one, but also a plan that is reasonably priced because you can pool these unrelated employers together. i think it would make a big impact to the coverage we have. >> mr. doget. thanks to each of our witnesses. let me say to chairman archer, i agree with you completely about retroactive provisions. it's unfortunate we had some included in the first tax bill
we considered this year. while you and i may differ on some aspects of tax policy, i also want to take this opportunity to thank you for your leadership in creating the archer fellowships at the university of texas. there's hardly a semester that goes by that i don't have one of those people in my office. i know colleagues above political parties and a number of governmental entities and non-profit organizations have them here. it's a great contribution to us and to each of those young people to be able to get engaged in public service. thank you. >> thank you. thank you for that commendation. we're very proud of the archer fellows. one of them is actually sitting in the back of the room behindl the members today. >> great. thank you. >> the importance of today's hearing should not be understated. we have gone some 13 months
without any hearing, anywhere in america, to my knowledge, on the impact of the proposed republican tax reform on individual taxpayer. and there's a great deal that needs to be explored about that. we're about to leave in a few days until sometime after labor day, and in theory, we're about to have a tax reform bill that, as the chairman indicates, could have far reaching implications for individual taxpayer. i believe we need thorough consideration of it with a wide range of opinion. i'm disappointed that the testimony from seth hamlin, like the witness i offered last week, was rejected from this hearing. i think we need to be hearing more, not less. and, ms. dowd, i think your testimony is a good example of that. you're the first person to testify this year before this committee concerning retirement
plans. we know that there are millions of our neighbors across america who do not have adequate savings for their retirement. looking at how their tax code impacts that and what changes we need to make, i think it's very important. you've offered valuable perspective. we can devote one or more hearings just to exploring that question. frankly, after looking at the republican blueprint, i'm not sure exactly what is being proposed on retirement. i think that there are many people within the industry and the financial services industry that are not sure either and have voiced some concern about the changes that may be contemplated by the very vague language of that provision. i would say the reason to look at retirement plans is also a significant reason, but the way these systems are working today,
60% of american households get 16% of the tax benefits today on retirement plans. and the 20% top income earners get 66% of the retirement tax incentive benefits. so we have a system in which many working families are not adequately prepared for retirement. they have only a social security check and modest savings, and maybe some ownership interests, some equity in their home. we need to look at retirement savings in terms of how we'll reach out and support more and how we can involve more small businesses in being able to offer plans for their owners and employees and how this measure affects those individuals is very important. mr. rodriguez, i would ask you to comment about some of the challenges working families have in saving for retirement and to comment on what the impact on
working families would be if we adopt another huge bush-type tax cut that's not paid for. >> thank you, congressman, for the question. you know, it's a big problem certainly with low income populations where retirement savings opportunities at work just aren't there. as you said, it's absolutely right, the tax code is for those already doing it. we have to find a way to incentivize those at the lower end, those becoming more mobile, to be able to save for retirement. so moving around the incentives and, as you were saying, is going to be an important fix. it's part of the reason why we have such an enormous and growing weather cap, the way the tax code incentivizes savings primarily accruing at the top versus in other areas. we have great concerns about roth. i think we need to proceed with caution on that as we look at
the package. those could be exploding tax expenditures that really squeeze our budget in ways that would make funding and revenue really inadequate for the things we care about. >> thank you. thank you, all. >> i appreciate you holding this hearing today, mr. chairman. too often in the news we hear about multi-national/international companies, and we know that all of these companies have tax departments that help them pay their taxes and figure out exactly what they owe, but in reality, most of this complexity falls on hardworking taxpayer, people who struggle to pay their taxes correctly and try to navigate it around the kitchen table and get through the process and do it sometimes with the help of a cpa or tax preparer, but sometimes they don't have that advantage. we all agree everyone needs to pay what is owed, but the current tax code robs people of their most precious commodity, and that's their time. i would like to focus on that.
time that could be better spent with their families, making their business more productive, investing in local communities. i talked to one cpa in north dakota. he said, as a certified public accountant with 33 years of experience, i've watched the tax code become more complex, making it both costly and difficult to comply with. at the same time, the quality of customer service within the irs has fallen. as a result, i see within my clients a decreasing confidence in the tax system as a whole. it gives us the opportunity to address these matters, to ease frustrations and to restore faith and confidence in our tax systems. so we need tax reform, not just for american businesses, but more importantly for american families and individuals who are struggling with the burden that it places on them every day. chairman archer, i would like to visit with you a little bit. i want to thank you, first of all, for being here and making it a priority and then all of
your years of service as well, but i wanted to ask you what you've seen over the years, an erosion in american confidence in the tax system, but then i want to focus in particular about your perspective on permanence in the tax code. we have people propose to us constantly and you've dealt with it, about tax extenders, or putting policy in place for a short amount of time and what that does to a business or family trying to plan for the future. can you speak from your knowledge about having permanence in the tax code when we look at reforms. >> i'm a strong believer in permanence. i'm that way with everything in my life. i like things to be in a position and know that i can come back five years later, and they will still be there. that is not life, unfortunately. that's not the way things work. but there's no reason why the tax code cannot be one that is
not forever changing because things are expiring. there are changes that will happen, and taxes will have to be changed at some point. we know that. that's a certainty in life. not one where every time you put something in, you've got to say for revenue purposes it's going to expire at a certain time, and therefore we're going to change the revenue effects. >> you know, i think you make a valid point there because i've spent my life farming and ranching. so we've seen in different policies and when it's come to energy, short-term tax policies to maybe get an industry off the ground, knowing when it's going to sunset and get its feet under it. we see that from a provide.
from running a hunting lodge that i started from nothing and running a family restaurant and running an insurance agency too, that if i'm going to go to the bank and ask for a loan, they're going to want to know what my liabilities are going to be and what my business plan is. it's hard to do that unless you've got a permanent tax code. so there's a role, maybe for both, in different parts of the tax code. is that maybe the point that you are making, that there is a role in certain times? >> yes. yes. absolutely. and in addition, it seems to me that taxes need to be as simple as possible. i know that from doing my own tax return. i think your idea of trying to use a postcard -- i'm not sure i would ever qualify to do that, but for the majority of americans, if they could fill
out on a postcard and send it in and say that's going to be it, that has a very attractive appeal, but whether you can do that, i don't know. that means you've got to eliminate an awful lot of deductions. >> uh-huh. >> what i worried about from the beginning of my chairmanship of the committee was having a tax code that tried to do everything itself for the american people. i think tax credits are not good, and the idea that, well, we can make things happen in our society by giving a tax credit, i don't agree with that. i think that complicates the code and makes it difficult for the american people to understand it. >> thank you, chairman. i yield back, mr. chairman. >> ms. sanchez?
>> thank you, mr. chairman and thank you to our witnesses who are here today. i'm a little bit disappointed that it took so long before we had our first hearing on how tax reform would impact families and individuals, but i'm glad that day as arrived and we're here. it's impossible for me to address everything that should be a priority for families in just a few minutes, but i'm going to try to hit on a few points before asking a few questions. i believe, and i've said this many times, that a lasting tax reform needs to be bipartisan, and it needs to be comprehensive. i would strongly caution against a go-it-alone strategy that seems to have taken ahold of tax reform for the time being. lasting tax reform must be bipartisan. history is not on the side of going it alone. tax reform also cannot be balanced to -- on the backs of the middle class who already feel like they're being squeezed from both directions. so far the plans and tweets i've
seen from the house republicans and the president would result in an astronomical tax cut to the tune of $1.3 million per wealthy household. the people that i represent in southern california, which the majority are hardworking middle class families and individuals, would receive roughly $0.70 per day under these plans. i'm sorry, but $0.70 a day is not going to help those families to better afford child care, elder care, plan for their retirement, or even take a small family vacation. mr. rodriguez, i would like to turn to some points you raised in your testimony. as we know, the young, growing latino population in this country is going to make up roughly a third of the u.s. workforce in the next decade. this is a population that has unique concerns within our tax code, but they also face the exact same barriers as other work ing families across the country. given the young age of this population, many of them have
not even entered the year where child care and elder care expenses are going to become some of the largest burdens they face. one of the principles you highlighted in your written testimony was the need to support working families and children while also reducing poverty. can you elaborate a bit more on the tax code to address child and family care expenses in a meaningful way? >> sure. thank you. that's exactly right. i think the most effective anti-poverty program we have is the child tax credit, refundable portion. i know that's bad word for some in the committee, but it's enormously important. 20 million families receive these credits, and it helps to lift 9 million families above the poverty level every year. these are working families raising children. so finding ways, looking at the population that is young, hardworking, raising families,
and providing and targeting a better benefit or incentives and tax incentives to this group who is beginning to either stay for retirements or buying homes or doing the kinds of things, living the american dream, but need more opportunities to do so, and the tax code can do that. if we can find more ways to de that, certainly the elements are key, child education, child care. there's a number of different ways that the tax code can assist these families directly. >> thank you. i'm glad you mentioned it, it's a tax credit for middle and working class families. i feel like the rhetoric surrounding it paints it as just a handout. can you explain why that's a wrong way to characterize the eitc? >> yeah. absolutely. these are all working families, working very hard but just happen to be working for low wages. even in an accumulated
household, they don't reach the threshold level to be able to pay federal tax liability, but they pay local and state taxes, sales taxes in places, and they're burdened by these taxes. so the earned income credits and child refundable tax credit is an important way to assist these families. refunds go to, you know, buying a car. it helps you go to work. or paying bills or doing very, very important things that generate economic activity in all of the communities across the country that many of the members of the committee represent. >> and in the final seconds, can you please tell me what would be the outcome of our tax code and doing a tax reform that gives the majority of the tax cut benefit to the very wealthy. what will that mean? >> thank you. i mentioned that the weather gap right now between latinos and non-latinos is 10 to 1 on the dollar. my worry is that that grows to
15 to 1, 20 to 1, with increasing incentives for those at the very top of the weather scale when we eliminate inheritance taxes, when we look at the past taxes, we're just giving those tax breaks to a very small number of very wealthy households getting very large tax cuts. my worry is those increase disparities. when we are having conversations about improving things across the board. >> thank you. i want to thank the panel for all of your testimony. i'm particularly pleased to see cameron archer. the chairman served with my predecessor on this committee, jim martin. of course there was a 30-year gap between his service and my service on the committee. i'm pleased to see chairman archer and when i see former governor martin in north carolina, i will give him your
regards. mr. chairman, thank you for having this hearing. over the past number of hearings we've had, we've discussed and detailed the importance of levelling the playing field and ensuring that businesses have a tax code that will allow them to compete here at home and around the globe. i strongly believe that this fairness in the tax code is just as important to individuals, our citizens, as it is to our companies. some examples of unfairness -- i will speak of two. put in place 50 years ago, this addresses people paying no federal income tax due to tax preferred vehicles, but it's clear this provision no longer addresses the original intention of the law and creates an unnecessary and costly burden
that outweighs the benefit of the provision. similarly, another provision, our citizenship based taxation that was implemented during the civil war as a means to discourage wealthy americans from fleeing, today this burdensome regime of taxation has led to record high expatiations and hampered the ability to compete across the globe. amazingly it cost up to 40% more to hire american citizens abroad in many foreign jurisdictions. so this section unfairly disadvantages our citizens and discourages multi-national companies from hiring americans to run their international operations. also, it discourages foreign
multi-nationals from having americans run their operations. while moving to a territorial system for corporations is an integral part of our blueprint and a necessary part of tax reform. the competitive disadvantage will only become more apparent if we fail to move to a residency based taxation for individuals. so these are two examples that we have the opportunity to address on the individual level to have a fair tax reform plan for individuals as well as corporations. another element that maybe i could get some comment on has to do with compliance. you know, the united states has a relatively high rate of volunteer and compliance when it comes to individuals filing their tax returns, but as the tax system has gotten more complex, more and more individuals have to turn to
professionals and tax preparers for their returns. i believe that simplifying the tax code will preserve our tradition of voluntary compliance. chairman archer, do you have any comment on that, perhaps? >> well, needless to say for one who continued to do his own tax return, simplification has a lot of appeal to me. i think that it probably for most individuals may be one of the major concerns that people have. again, politically, it is not simple to get simplification. it's something that has been out there looming as an attraction for members of this committee for as long as i can remember. but in the end, we always seem to make it more complicated
because the tax code has been used by so many people on the outside as a means of making whatever they want to occur happen in the country. it's been used, in my opinion, far too much. i feel that way about tax credits. the use of tax credits to me is not the purpose of the code. the code is primarily designed to raise the money to pay the government's bills. and not to create all of these complexities. >> thank you. thank you, mr. chairman. >> mr. thompson. >> thank you, mr. chairman. thanks for holding this hearing, and thank you to all the witnesses for being here. chairman archer, thank you. thanks for your previous service
to this institution. i, too, want to thank you for bringing up the issue of retroactivity. this committee has talked a number of times over the years as to repealing of lifo and doing that retroactively would just be a monster for people who have used that tax provision to deal with. i appreciate you bringing that up. and ms. dowd, i want to second comments on you bringing up the issue of workplace savings and retirement accounts. if we did nothing else in this congress but provided a means by which people could save while they're working for their retirement years, it would mean so much for retirement security. that would be an excellent outcome. when we're talking about tax reform, a couple of things that are really important to me.
one is whatever we do is paid for. i don't think we can afford to charge our kids and our grandkids with tax cuts that we give out today. i think we have to insist on making sure that any reform that we do is, in fact, reform, not just an unpaid for tax cut. we also have to focus -- i agree with some of the other colleagues who have mentioned this -- focus on working and middle class individuals. there's a group of people in this country who have really been left behind. we have to figure out how we can incentivize their being able to get ahead and make more money. i think one area of doing that is to understand the importance of furthering education. greater education -- all types of education, higher education, career training, low-tech training, whatever it might be. all of that is value added.
the more that you have, the rule is, the more that you make. we need to figure out how to help people make more money and get better jobs and get the jobs that people want. so i would really hope that we are able to focus on those types of things in our effort. it needs to be about the american people, and the american people who don't have lobbyists working for them on a day-to-day basis, and the american people who have not been able to tax advantage of this tax code that the chairman referenced as being used to help everybody under the sun but them. mr. rodriguez, i want to follow up on what ms. sanchez talked about because it ties in with my concern about paying for whatever it is that we do in this tax reform. in the past, you know, we've been down this road before. we've seen this movie before. we do big tax cuts, and then we
just pass the bill on to somebody else. we have a budget that's been referenced already today that is focused on cutting important aspects of our health care in order to pay for tax cuts or tax reform. can you tell me how cuts to medicare or medicaid will help working class people? >> they don't. we have a more recent example too. it shows how this doesn't work and puts enormous pressure on states to be able to provide adequate funding for services like education and workforce and programs that you mentioned that are enormously important to growth and economic mobility in those communities. look no further than that to show you how this kind of approach to our budget and
taxing system is wrong headed. >> kansas was so bad that they had to repeal what they had done. >> correct. >> and the republican legislature recognized that to the point where they overrode the republican governor's veto of that bill. it was devastating to people in that state. >> absolutely. if you look at the trump budget, as an example, you can see massive amounts of cuts to programs. 1.3 trillion in the non-defense discretionary programs, that will put enormous pressure on these program areas. you're right. in the health care bill, we saw billions in tax cuts -- >> i'm running out of time, but if you would, i would like to hear from you if you could submit it in writing, i would like to see tax reform that you would think would help working
class middle class individuals. >> thank you very this meeting and thank you for your service to our country. the reason i love to be on this wonderful panel is because my colleagues always remind me on why i became a republican. they've heard this story about my dad when i was 16 years old and took my first job at mcdonald's. and my dad went through all the different taxes that got taken out of my check and said don't let the tax code change your behavior. you need to save money. and you need to continue to work hard and make more money and get a good job. and today, when i was a realtor -- mr. rodriguez, you mentioned this and kind of got me thinking again because i'm looking at you bio, a very good bio. but what was amazing to me -- i never realized this until i started my own business. the first time in my life i had
to send a check to the irs every quarter, which is very different than being a congressman or working for a congresswoman or a congressman or working at a think tank because you put it all on the line, and you're actually sending that check to the irs. now, what's fascinating to me is today, you mentioned pass-throughs. today, if you're a successful pass through and no one is going to guarantee that you're a successful business owner, in america, you're paying almost 45% of what you make in the top bracket to the federal government. that's not including what you pay the state and local government in income taxes. that doesn't include workers' comp. that doesn't include anything else that our three levels of government are requiring of you. so i take issue with the fact that as a pass-through, getting a tax cut is not appropriate.
i learned that from my immigrant father who's worked hard his entire life, retired now, who always complained about the taxes he paid. with a sixth grade education as a steelworker, never making a lot of money. what great street-smarts. ms. dowd, you wrote about simplification and consolidation. you concluded that one does not necessarily equal the other. i thought that was really interesting. you specifically mentioned the different kinds of employer saving plans like 401(k) and 403b and 457 plans. i've heard from a number of participants, including teachers and firefighters from my district. in my district in columbus, ohio, nationwide insurance is the largest provider of 457 plans in the country.
can you provide detail on the different populations that these plans serve and why it's important for us in tax reform to make sure that we don't throw the baby out with the bath water and continue to allow for the incentivizing of these plans? >> yes. thank you, congressman tiberi. there's a need out there to have different types of plans, and we still have a need to keep them and simplify them. but as far as to answer your question directly as to the different employers that are served by the different plans, you know, it depends on what type of plan they want. you know, if it's a small employer, they might institute a simple 401(k) or a simple ira versus the companies that do a
401(k). the non-profit world has 403b plans and the governmental side, the 457. so, you know, there are different nuances to each of those plans that solve for the needs of those different industries and those different groups. i think that we still need to keep them -- you know, work at simplifying things, but i don't think that one plan solves for everyone. >> mr. rodriguez mentioned in his testimony that we should better target middle and lower income folks for incentives. i agree with that. but i found in your testimony what was fascinating is that -- and let me get this right, that the largest groups benefitting from 401(k) plans are employers who -- employees who earn less than $50,000 a year. in the last administration, they worked to cap that amount of money that an employee could put in. >> right. >> could that actually disincentivize employers from
providing those plans and thus benefitting the workers that me and mr. rodriguez want to help? >> right. absolutely. it would have a huge impact if we took away the incentives of small businesses offering these plans. they need those incentives to get to the table to even put the plan in place. we have a coverage issue. so we don't want to put anything in the way of getting the small business owner to put that plan out there to help their workers. >> thank you mr. chair and thanks to all of you for being here today. we've been debating disastrous cuts to education, infrastructure, workforce training programs and health care. so i appreciate the reminder in your testimony that when we talk about tax reform, we should remember that first and foremost, we need to have the revenues to pay for the basic functions that serve as the
foundation for growing us a strong and resilient middle class. but we've moved away from this simple concept and the code has morphed into a monstrosity that benefits the wealthiest few and others wonder how they got left behind in washington. under the republican blueprint the wealthiest taxpayer would see an average tax cut of over a million dollar while middle class families would get $200. and the trump plan offers a one tenth of 1% of the $1.4 million cut that the richest americans could expect to see. at a time when my colleagues on the other side of the aisle seem bent on cutting funding for education, health care, and other resources for working families, do you think even $200 per family is near enough to make up for what republicans want to take away in terms of health care and education
resources? >> not at all. it's a huge issue. we, of course, do a lot of work in all of those areas between job training, education, and health care. we know there are great needs and resource needs that are there. we're enormously concerned about that. >> thank you. >> chairman archer, thank you so much for being with us today. i imagine you know firsthand how elusive comprehensive tax reform can be. i agree with many of the things you said in your testimony, that tax reform should not be corporate only, that it should be permanent to give people some ability to plan for the future, and that progress is achievable, this congress, but there was one word absent. that word was bipartisanship. i believe without bipartisanship, that this committee will never achieve any of the goals that you outlined. i wonder, do you agree with that? >> i certainly believe that it's
desirable to have bipartisanship particularly on something that is as important as fundamental tax reform. it seems to me, as with health care reform, both parties the should be a part of it. otherwise it seems to me that it is not going to be as long lasting as it should be. >> and as you know, i'm new to the committee, but i've done some homework. the 1986 tax reform process was far more extensive than what the committee has done this year. the tax reform act of 1986 was preceded by full days of committee hearings on tax reform. five hearings on the measures subcommittee and a mark-up between september 18th, 1985,
and -- that's a far cry from what we're hearing now from finance chairman hatch who just yesterday said that the finance committee hey n -- may not havea single hearing this year. i would like to enter into the record the legislative history of the 1986 tax reform act, with your permission. >> so ordered. >> do you think as a whole they conducted an examination of revenue issues in the 1986 tax reform? >> well, clearly the '86 tax reform took a lot of time to put togeth together. and in the end, it prevailed with some very hard-hitting pressures from the top on both sides, i must say. i was very concerned, as i
mentioned earlier today with the fact that there was retroactivity in there that was going to undermine the value of real estate. it was put in there, of course, to get extra revenue. it disturbed me enough that i wanted to offer a motion to recommit with instructions. i am convinced that i had the votes to beat the bill, if i had been permitted to offer that motion to recommit with instructions. unfortunately -- and i mentioned there was a lot of pressure from the top -- the ranking republican in the house was called by the white house and told that he could not let me offer the motion to recommit with instructions.
he called me into his office and told me that he was going to have to personally take it away from me. there wasn't anything i could do. the power was there. it was unprecedented because the ranking republican on the committee was for the bill. so he had taken himself out of the process. i was the second ranking, and traditionally, i should have been given the recommit. so those things were going on behind the scenes, and in addition, of course, you not only had the person who signed on, but you had the chairman of the committee who was then a democrat who was totally committed to it. the pressure that he put on in
the committee was pretty incredible too. so you had bipartisan ship, but bipartisanship in my view did not represent the best interests of the country. >> thank you. my time has expired. >> that was my own prejudice, you understand. >> thank you, mr. chairman. as i go around my district and talk about tax reform, the thing that i hold up at most of the meetings is this postcard.é=z believe it or not, this postcard is much more popular than the irs code, as it exists. people are intrigued by it. i can't say that they read every single line of it and make calculations in their head on the spot, but the biggest question that i do get in my district about this postcard is,
can i fill the postcard out if i file the alternative minimum tax. so for the people in my district, probably the most frustrating part of the tax code is the fact that they have to figure their taxes twice. they figure the first go around, and then, of course, they have to go again to see if they owe this other tax. what kind of effect, mr. archer, mr. mckay, what kind of effect does that have on taxpayer when they physically usually cannot fill it out simply for that
reason? >> congressman, i have always been in opposition to the alternative minimum tax. it was not good policy. in the end, had it continued to be in place without change, it would have generated more income tax revenue than the regular income tax. to me, that did not make any sense. so i think you're absolutely right. i hope you can do away with the alternative minimum tax. and if you do, you will do a service for the country. >> mr. mckay? >> thank you, congressman. complexity in the tax code comes in many forms. i mentioned before half a dozen
different definitions of the term dependent. there are more opportunities for simplifying the tax code than would probably be room for in the eventual tax bill that comes out of congress. whatever congress decides about any particular provision, like the alternative minimum tax or any other provision, our point of view is we will, as an industry, both technology and professional practitioners, show up and serve to simplify people's experience. the postcard is something that this industry is well prepared to deliver for the taxpayer. we mentioned before it ought to be electronic, but an electronic postcard can be a vastly simplified way of complying. there's a security issue in terms of the piece of pap --
pap the -- paper that goes into mailbox. i mentioned converting the country to electronic filings. the irs eliminated from its budget the overwhelming number of paper processing plants, the system of the old days of how paper returns were processed, but there was a huge advantage for the country in it. putting a paper return into that system -- and the irs employees would key in key fields from the return -- produced about a 20% error rate, whether the error was the original taxpayer or the keying in of abstracts. about a 20% rate, studies said back then. moving to an electronic filing system, that dropped to a 1 to 2% rate of error. so there's a real advantage of
electronic implementation, but whatever the code is, that you all decide as our policy makers, the ability to simplify that, whether it's in an electronic postcard or any of the other tools that are available,en colluding for simple returns. people can do it now on the phone with an app. take a picture of a w2 and very quickly have a return brought in. so the private sector will bring the tools of innovation to this so that this will have the vision, realize the vision that you on the committee and in the congress choose as tax policy. >> thank you, mr. mckay. mr. larson? >> thank you, mr. chairman. thank you for holding this hearing. i join in the accolades for mr. archer. i never tire of listening to the story about pat and his
immigrant parents. actually, on this committee, there are so many stories to be told that make up the fabric of this nation and what they're all about. i would like to say, in echoing mr. doget's comments, we do need more hearings. we need for stories like mr. tiberi's so we can actually get to the gut of what we need to do in terms of tax reform. and while we may have our disagreements and procedures, that would allow me the opportunity to quote my irish grandfather who would say, well, you know, trust everyone but cut the cards. oftentimes you may need a reshuffle. in some cases, as mr. roosevelt
said, you may need a new deal. society is left in a government where we have to do things. i was specifically aligned by a lot of your comments because i think we have to provide greater opportunities for people to save. and in doing so, i do support a number of the issues. and mr. tiberi talked about it. i think the way we have to look at this is where can we assist and help people save? we do have a prime example of that. i ran an insurance agency. i know what it's like to meet a payroll. i was trained at a school where we learned about investment. we always said there was three lesio legs on a stool. and one of them was social security. we're talking the about the benefits and opportunities to save, shouldn't we be talking about something that hadn't been
i have been supportive of the program where those who make less than 54,000 can file with the help of an irs certified volunteer. can you talk about that? >> professional tax prepares provide -- it is interesting. about a decade ago, there was a conference on tax reform and they talked about the one-time a year when the average family takes stock of their financial situation which is the moment of compliance. she characterized it as a national ritual she felt there was some benefit from because if
people didn't take a hard look at their own finances then most families would never look at them at all all year. and so then the question really becomes the simplification of the process and the industry worked hard to create options. it is intensely competitive with a lot of innovation. tax services come in a lot of forms everything from professional tax practitioners to accountants to tax attorneys to do-it-yourself software. there is a growing sense, i think not only in the industry but from the taxpayers we serve, that they need practical commonsense simplification so they can make financial decisions about what to do in the coming year for their family rather than come away confused
and struggling. i would mention there is actually a couple programs -- the two largest ones that are supported and sponsored by the government are indeed the vita centers all across this country. it is somewhere in the area of about two and a half million or a little more returns prepared for free every year there. there is also the irs free file program which is service donation by a large number of different companies through the irs website under irs regulation and consumer protection rules. that also creates about two and a half million returns. somewhere between 5-6 million returns are generated for free. in one instance in volunteer service centers within communities and neighborhoods. in the other online that you can access through your phone or through a computer. between the two, you have
significant help at no cost for lower and middle income people. it is a unique american invention that so many other countries, government does the whole thing as a revenue raising collection process with no involvement of the citizen. so the ideal situation would be just simplify to improve the taxpayer's understanding of their own taxation and enabling them to make better financial decision take advantages of the capabilities of tax professionals and innovations to make it easier for folks. it is why i said if you decide to have a post card style tax return that this industry will deliver that robustly and it is something people have confidence in. in all likelihood having it
electronic will add security protections and ease of access for people to use. >> thank you very much, mr. mckay. >> i want to thank the panel. mr. archer, mr. mckay, and all of you. i benefited from the comments you have and you bring a wealth of experience to the subcommittee and we really appreciate it. let me try to make closing observations and comments if i could as a prerogative. first on process. ms. sanchez said history is not on the side of going alone. i wholeheartedly agree but my view is the aca was an example of how not to do things. i think we will be better off if we try to create a bipartisan approach to this. there is probably no argument there. another process point i think is important to make and that is there is a temptation to evaluate tax reform discussions sort of in a very finite period
of time. but i think the committee should get credit for the hearings that took place on the camp. there has been nearly 50 hears on tax reform generally and my assumption is we will see an increasing amount of activity the closer we get to the final product. i think there has been some discussion about kansas that came up last week and this week as well and i think there is a lesson for us on kansas. and that is this. don't allow a special provision, you know, to create essentially a trapped door for pass throughs. there was a passthrough exemption allowed that didn't happen on the corporate side so you have a system that is gamed and ultimate activity doesn't come out of that. what we are proposing is not to
dhoo do that and lower the rates at the same level. i come from the state of what not to do. the state of illinois has an underlying fiscal mess, a complete disaster. whether than dealing with the underlying things driving my state legislature over the governor's objection said let's raise taxes and people are leaving illinois to go to wisconsin, going to indiana and all the other attractive midwestern states like ohio b-- because they have done a better job. that is a cautionary tale for us on what not to do. the vita centers provide real insight. i visited a couple of them in west chicago, illinois at a middle school there most recently. going in and talking to the volunteers you gain real insight
on this issue of complexity. if you are in a situation where you are visiting a vita site you are sitting down and i was asking some of the volunteers what is your average interview time for talking to somebody and these are modestly situated people and they said about 90 minutes. imagine that. going through the hassle of 90 minutes talking to some volunteer back and forthing and finally coming up with something and all this level of complexity that nobody is defending and nobody at the witness panel is defending and that is what the constituents are burdened. if this yielded 70 cents a day, if that was really the number, i would not defend it. 70 cents a day per family? i don't think that is really where the action is.
the tax foundation came up with a study and i asked unanimous consent to put this into the record, the tax foundation has a study showing there is an increase in one million 687,000 jobs and an estimated gain of 4, 917 in after tax income for median households throughout the u.s. 5, 256 dollars in my home state and in ms. sanchez, $5,536 dollars. that is part of the record. there is an interesting thing as it relates to your testimony, mr. rodriguez, and i am not asking you to comment but this is just an observation i had and that is this. a few years ago i had a meeting with the presidents of one of
the large hispanic business organizations. i think i remember the one it was. i don't want to say it outloud in case i am wrong. but he came in and said something that was interesting and made a big impact. he said we are against the estate tax and the death tax. i said really? that is not what i would have expected you to be talking to me about and he said here is why. for the first time ever, hispanic families are making serious money in this country. not all of them by any stretch of the imagination but he said why is it when hispanic families are making money there is an estate tax. where was the estate tax a hundred years ago when other families were making all their money? i leave it there. it is a provocative question coming from somebody who had a business organization.
we have to settle out the tension that surfaces and you heard a bit of it today. do we view the economy as a zero sum game? do we view the pie as expanding where people benefit or do we view it as if someone benefits that comes at someone else's expense? there was a subtext throughout the discussion. i reject the notion it is a zero sum game. they were talking about the tax burden out there and we will not settle that today. it is a question that has to be wrestled with and we have to come to a world view about it. if all this is a matter of redistribution that is one thing. we want to make sure there is growth and growth comes if we do this the right way.
i think we need to explore a great more on what you were talking about. credited on auto enrollment. i think to get back to one of mr. rodriguez's key point the notion of getting tapped out at a low level with very little capacity for them to save that is something i think we can vastly improve. look, when push comes to shove, this post card is so attractive and so enticing and i go back to this theme in many other discussions. think about the premiums that we put on simplicity in other elements of your lives. we want to go through tsa pre-check, we want to go through the easy pass lanes on the tollways, we want to go through the 15 items or less lane at the grocery store. we want an expedited process.
we expect this in all aspect saaspects of our lives and the one thing that has an impact is cumbersome to the point of absurdity. nobody likes where we are and everybody wants to move and we have to sort out how we do that. on behalf of the entire committee, i want to thank you each of you for your willingness to spend time with us.
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business district but it was. there were stores owned by black, white, you name it. a lot of people did a lot of business here. they didn't have to leave the community. before you knew it a rock was thrown, looting occurred and fire started. it wasn't just black folks. it was integrated. >> join us for a live american history tv special on the 50th anniversary of the 1967 detroit riots live sunday starting at noon eastern on american history tv on c-span3. >> wednesday british prime minister fielded questions from members of the house of commons in the last question time before parliaments summer recess.