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tv   Ways and Means Subcommittee Considers Tax Reform  CSPAN  July 21, 2017 10:05am-12:01pm EDT

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and scores of people in illinois who had known him in years earlier who were deeply disappointed with the trajectory of the obama presidency. two ways.ointed in number one, disappointed that barack forgot the people, many of the people, most of the to hiswho were essential political rise. >> sunday night at 8:00 eastern on c-span's q&a. >> the house ways and means subcommittee heard recommendations for civil fine the tax code. congressman bill archer, who wants chaired the tax committee was talking about proposals on updatingt income and to electronic filing systems. this is about two hours.
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>> the subcommittee 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 individuals and families. before we get started i'd like , to yield to the chairman of the ways and means committee , congressman kevin brady to , introduce a distinguished witness who's before us today. mr. chairman? >> thank you for your leadership of the tax policy. the sub committee is such a important
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time in america's history. and 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
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our tax code more simple 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. and individuals. when chairman archer retired, i of takingthe honor his seat on ways and means.
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and it is my honor as chairman to welcome you back to the committee. thank you for your decades of service and for joining us today. we have so much to learn from you and we are excited for your test money. >> thank you for that welcome -- testimony. >> thank you for that welcome , mr. chairman and thank you for , the job you're doing on tax reform. >> thanks 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 all within the twinkling of an i. if i have 10 seconds of that thing spinning around, my attitude is what loser made this? it is ridiculous. and yet we have a expectation of ease and simplicity that is the
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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. there is good news. nobody likes it or defends it. there is nobody in this country who says oh, the internal revenue code? i love that. do not make any changes. 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. there is better news. we have a solution that will grow the economy, lower our tax year, andy dramatically simple five the code. last week we discussed the important ans of growth.
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-- importance of growth. taxpayers 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 are. combined, americans spend 2.6 billion hours to figure out what they pay to uncle sam. this is 2.6 billion hours in lost activity. what should be a simple calculation is so complicated , that 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 and my own constituency sitting at their kitchen table with a box full of receipts trying to figure out what they owe. they're looking at the 1040, can we deduct enough to itemize, or
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should we take the standard deduction? the qualify for the additional standard deductions, and take the personal exemption for the children and the tax credit. when they really get confused about what they have to pay 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. it is ballooned with special interest. the standard tax form, the now 1040, contains more than 80 different items and the additional complexity is a cost for everybody. 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
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y 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. why did we make it the simple, and how did we make it this simple? we proposed to deeliminate all first, but two deductions and took the seven brackets and reduced them to lowering the tax three, rate for every american, and we paired together the standard deduction, traditional deduction, and the personal exemption for taxpayer and spouse and used the savings from eliminating deductions to double the standard induction 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 -- one larger credit. with these changes americans , won't have to worry if their -- they are wealthy enough to get a better deal on taxes. will be laid out in plain english for all to see. as a committee we have a choice, we can accept high rates and a
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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 to determine how we can create the best tax code that helps all americans, including my constituents. now, for the purpose of his opening statement, i'd like to recognize my distinguished friend, the ranking member, mr. doget. >> >> thank you mr. chairman for your courtesy and a welcome to all 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 thi year, which largely
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masqueraded 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 is also instructed 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 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
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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 mccaskill asked chairman orrin hatch 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 n exchange about that with senator mccaskill 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
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recent years in this very committee, as loopholes 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 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. 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
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that are available for pell grants. our ranking member mr. neil has advanced legislation to make tax credits available to the working poor who have no dependent children, a idea speaker ryan has endorsed though not with significant push to get it passed. we have offered a bill to 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 t individuals it is important to rule --the menu general rule, named for the
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president's secretary of the treasury who said he is not 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 simply and fairness. we takethat any action does have to be balanced against to the many wrongs that are being submitted as we meet in the budget committee to cut back on job training and all educational opportunities. thank you, mr. chairman. i look forward to hearing our witnesses. >> thank you, mr. doget. i think you have some excellent points. let me comment briefly. i think the admonition about process is a good we know what one. 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 and a lack of cohesiveness. i was on this committee sitting right down there when we were considering the health care bill when charlie rankle, former
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chairman, was sitting in this very 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? charlie wrangle 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. of course we never got to those , we're having our fourth points. we're having our fourth hearing on the blueprint. there's been a lot of discussion on the camp draft as a prelude. a lot of discussion about the blueprint. i think this is the time to transition to having more insight on this 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 is here as an example of somebody who knows how to craft legislation and bring it to
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fruition. mr. chairman, we welcome your testimony. mckay, chair of the council for a light tronic revenue communication advancement -- the council for electronic revenue communication advancement. is johnny asked out -- jonia stout. a practice leader and could -- cofounder of the fiduciary plan advisers at hightower. eric rodriguez. thank you to all of our 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.
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>> chairman can you make sure the mic is on? >> i pressed the talk button, but it does not seem to -- >> skooch closer. >> how's that? i don't know what else to do, mr. chairman. >> i think that is better. just lean 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 pressed a unique capability to alter the course of our country in a positive and a momentous way. allowedhat you will be to rise to the occasion and complete the long-delayed goal
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of fundamental tax reform. this would simplify and rationalize our tax code. changed -- the world has trained dramatically -- changed dramatically since for americans to compete in the 2001. 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 in the tax changes code since the 1986 tax reform. that is very difficult for individuals who are trying to cope with it. probablythat figure is out of date, much greater today. of thend the efforts
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committee, and 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 competitive advantage in the -- 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 work 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
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years ago by former chairman dave camp. the foundations have been laid for a debate that is long overdue. know well the vagaries 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. only did i do my own federal tax return, as chairman brady it with a but i did 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
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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 the little -- belittle-- th 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
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group for every special provision that's in the code , that you must counteract 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 -- for having 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.
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that makes it extremely difficult. i have always described our tax code as a attractive nuisance , and to me that is what an income tax is. 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 1986 a liberations. i personally said, and it's a matter of record, i think we should abolish the entire code
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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.
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ms. stout:-- mr. archer: but in any way that i can be helpful, please call on me. >> thank you. mr. mckay? mr. mckay: thank you mr. chairman and ranking member doggett. i'm honored today to testify on behalf of the council for electronic communication advancements association. in 1984, as ad means for coordination, cooperation across the tax ecosystem for advancing electronic tax filing and electronic tax administration. circa members represent a kied members ander of participants from tax software to the largest tax store front chains, to payroll houses and financial services companies. we're proud to have been a part of leading the national adoption
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of electronic tax filing for more than two decades. 1998 irs restructuring and reform act government , adopted a government policy objective of achieving 80% e-file adoption by american taxpayers because electronic filing was more efficient speeds , return submission proceeding, reduces government operating 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 -- changed over 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
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and evolved in many ways. modern modern ways 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 of tax compliance for average americans, while bringing accurate preparation and speedy filing of returns with an economical reach for all, whether taxpayers prepare their own returns or are assisted by professional tax practitioners. 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
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financial data into tax returns at the taxpayer's direction, drawn directly from the original financial data sources. these kinds of technology and technological innovation have made tax compliance faster , easier, and more accurate. however, tax simplification reform streamlining the tax , itself could accelerate greater simplicity and ease of compliance. it would benefit every taxpayer. it would be the right policy for the nation. we believe simply kay tags -- simple policy reform strategy could begin with application of common sense solutions. within 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
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taxpayer ease and understanding. , the taxes over retirement and education can leave taxpayers uncertain over what choices are best for them and their individual financial future. the commercial sector knows that the natural behavior response to a consumer being faced with a multiplicity of options can lead to doing nothing at all. industry works to simplify this and has done so for a 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 that electronic filing was a public-private partnership, in 2002 president bush wanted to ensure that free tax services were available to low and middle income taxpayers to reduce compliancy discretion.
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that led to the irs free pile free file program, provided at no cost to the government or the taxpayers 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 requirements and consumer protections covered by the irs, competition and consumer choice. that, public-private partnership has saved look funds -- public funds and taxpayer compliance charges. more recently, a public-private partnership between the irs, the state department of revenue was -- and the private sector was instituted to cite -- fight cyber fraud being launched against the american tax system internationally. that effort, the irs security
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some, has now been underway for more than two years and iris has reported it has slashed cases of reported identity theft reef run for odd -- refund fraud by more than 50%. to go to the next level the , summit has created a information sharing and analysis financial in the services and aviation sectors as the next phase of the what-private partnership to -- public-private partnership to ensure a strategic defense in the long term. it will be important that public-private partnership and these divisions of labor be preserved and strengthened. over the last several years there's been discussion about creating a simple fight hard tax return. simplified postcard tax return. we would observe that in today's environment, we're really talking about a electronic
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postcard as the american tax , system has moved well beyond paper. would benefit from the an electronic postcard would benefit from the security safe guards adopted by the irs. >> lets do this. we can continue to inquire and were going to be able to get to the rest of your testimony. missed out? stout? ms. stout: thank you chairman, ranking members 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 danielle stout. i am the practice leader and could founder or fiduciary plan advisers. we are an independently owned proprietor of fiduciary advice to plan sponsors and their hard i bring 20 years of experience working employees. i bring 20 years of experienceof
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plan i advise 140 retirement consulting for plans of all sizes. i advise 140 retirementplans, covering approximately 50,000 and 2.4- employees billion dollars in retirement savings. i also served as vice president of the national association plan advisors. 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 tens of millions of american workers. 75% of households have access to a workplace retirement plan, and 82 of them are participating. the most important factor of determining whether workers say access to ant and workplace retirement plan. moderate income workers are 15 times more likely to save if they have a plan at work. versus less than 5% save in an
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ira if left on their own. that freesproposals retirement contribution limits and cap exclusion for retirement contribution will discourage a small businesses from offering retirement plans. clientsend to all of my that they offer both a roth and pretax 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 even started discussing with our clients the options of doing an automatic enrollment into a roth source. however, any policy moves toward more reliance on roth considerations must be accompanied by other changes to the tax incentives to expand coverage and benefits security. expanding workplace plan coverage is critical to building retirement security for the
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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. -- enrollment. in addition i support the , pooling of unrelated employers into a single plan. this is an idea proposed by , radial,an buchanan nay ac, and kind. 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 an old employer into their new employer's plan. to a dress this challenge, i support recommendations regarding authorization of a national retirement clearinghouse, which would
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facilitate consolidation of retirement accounts when employees change jobs. in addition, the committee should consider congressman allows's seal act, which individuals to continue to a plan loans if they become unemployed or their retirement plan is terminated. a medicare eligible couple at age 65 will need at least $260,000 in savings for health care and retirement. health savings counts -- savings accounts are the best way to save for this expense. to this end we propose providing sponsors, withng the option of adding a hsa feature to their 401(k) as allowedss did when they payers to add in ira plan to their 401(k) into thousand one. this has the benefit of
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providing access to lower-cost investments offered into the 401(k), and holistic financial advice for savings for health and retirement needs. i applaud this committee's work to make tax rates on small businesses more embedded by reducing the rates on half their income. i want to highlight a technical issue related to small business retirement plans. it is critical that retirement plan contribution by bereholders or partners deducted only against the income that is classified as reasonable compensation. 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.
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to discusspleased these issues further with the committee and answer any questions you may have. >> thank you, mrs. stout. mr. rodriguez, i let the majority of witnesses go over a totle bit, so feel free stretch her legs, you know what i am saying? [laughter] mr. rodriguez: 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 americans, specifically latino americans. thank you for inviting me today this afternoon. if you do not know unido's u.s., it's formally the national council of the ross up. i appreciate the opportunity to be here. for over two decades, we have worked on 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
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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. arehe same time, latinos twice as likely to be in poverty than their peers, and income and wealth gaps remain quite wide. for instance, in the average 2013 latino family had $1 for every $10 in the average white persons household. a congressional rewrite of the tends to improve or worsen the economic disparities for these households. as mentioned, millennials are very important. 60% of latinos are millennials or younger and how tax policy , affects them and influences their economic behavior will
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have implications to the long-term liability and prosperity of the nation. for -- for these reasons i'm happy to be here and represent our perspective on tax proposals currently under debate. as you know, the federal income tax is intended to fund public goods and services. this includes defense, veteran services, like affairs, -- public 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. voters% of latino recently pulled 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
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are equitable for all taxpayer. -- taxpayers. recent tax proposals from the administration and house republicans threaten to weaken the government's ability to protect and serve taxpayers 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, and other tax breaks. proposals that aim to inflate those benefits at the cost of workers are very concerning to us. specifically, the trump administration plans to pay for breaksd tax rates -- through budget cuts that help american tax players. -- taxpayers. the trump plan would result in over $5 trillion at least in lost revenues in the first decade. in part by are used
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cutting funding for crucial programs that support families. both the trump and house tax proposals would accelerate growing wealth divide. these tax plan would provide massive tax breaks to the wealthiest at the expense of there's no inheritance tax, working and middle-class families. there's no inheritance tax,no alternative minimum 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. that taxno question reform is overdue and that plans for reform should do more for working-class taxpayers. to make sure we arrive at that system, deliberations must be transparent and have to be bipartisan, and include a broad perspectives and voices. inclusive and is more important than ever as the face of america changes. in 14 states across the nation -- will be majority
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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 fair share, support for working families and children and reduce poverty. in sum, tax reform is needed and important to all middle-class working americans, including latinos. but no tax reform plan should make our government weaker or worsen the economic and wealth divide among the taxpayers. ae path to reform ought to be transparent and bipartisan process, a process that incorporates the views of taxpayers of all walks of life. thank you for the opportunity to share these views. i look forward to your questions. >> >> thank you, mr. rodriguez. thank you to all of the witnesses. i will invite mr. reicher to
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inquire. >> thank you, mr. chairman. the chairman is very gracious in allowing members of the panel to before he asks his questions, and i appreciate that consideration. witnessesall of the for being here, and thank you to the chairman. mr. chairman, you worked with my predecessor. we did not get a chance to talk about this earlier, but jennifer dunn was a member of congress prior to my arrival, and i was honored to follow in her footsteps, as i'm sure you are honored to work with her. and 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 all tax paying citizens in this country, hard-working americans.
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and just as the chairman has pointed out, the complexity of the tax code and of course your recognition of all the people on the panel and the complexity, had at least 50,000 changes since 1986. we were looking for a rational approach to this, and simplify. this certainty, because i think it would provide that certainty, for americans to invest, grow, and higher across this country -- hire across this country and provide from their families. i'm interested to hear from you, mr. chairman, what do you think that permanence means for the average american worker? , it isok at the tax code 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.
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what does that really mean for what does that really mean for the american people, do you think? mr. archer: i think it would depend on the economic status of each of the americans. the more that an american has to rely or depend upon special provisions in the code and watch them change, it is very, very bad. me, you should be able to plan your life without occur dramatic changes that are going to change everything for you and you cannot anticipate it. so it depends on the condition of the individual as to the impact. but congressman reichert, the
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one thing i intended to say in my remarks, which i ran over and did not get to do, is that the real failing, the major failing was theffort in 1986 fact that there were major retroactive.were if i were to give you one caution, do not include any retroactive provision in your tax reform. -- it is onevity of the major reasons that i led the opposition to the 1986 tax undermines the value of real estates in the country and brought about the demise of thousands of thousands of savings and loans, which cost overederal government well
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$125 billion to correct. and that was avoidable if you simply make your changes prospective. congressman reichert. reichert: 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 pull together to provide multiple 401(k) for business owners 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 do not have the administrative staff to be able to handle the complexity that
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happens when you go to put a plan in place. so pulling these plans together gives the economies of scale have lower cost, so that working employees can have access to a plan, number one, but also a plan that is reasonably priced because you can pool these unrelated employers together. i i think it would make a big impact to the coverage issue we have. >> mr. doggett? doggett: thanks to our chairman, and thank you 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
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those young people in my office. i know calling for both political parties, and a number of governmental entities and nonprofit organizations have them here. it is a great contribution to us and to each of those young engagedo be able to get in public service. thank you. mr. archer: thank you for the accommodation. we are very proud of the archer fellows, and what of them is actually sitting in the back of the room behind the members today. mr. doggett: 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 taxpayers. 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
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to have a tax reform bill that, as the chairman indicates, could have far reaching implications for individual taxpayers. i believe we need thorough consideration of it with a wide range of opinion. i'm disappointed that the testimony of seth hanlon from the center of american progress, like the witness i offered last week was rejected from this , hearing. i think we need to be hearing more, not less. stout, id out -- ms. 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. and looking at how our tax code impacts that and what changes we need to make, i think that is very important.
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you offered valuable perspective. we can devote one or more hearings just to exploring that question. and frankly, after looking at the republican blueprint, i'm not sure exactly what is being proposed on retirement. i think -- 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 because of what we learn about 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
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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, as you said 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 is not good for? thank youuez: congressman, for the question. itit is a big problem, certainly with low income populations
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where retirement savings opportunities at work just aren't they are. as you said, the text incentivizes -- the tax code incentivizes. we have defined another way to incentivize those at the lower end for saving toward retirement. moving around the incentives is going to be an important fix. it is part of the reason we have such a growing wealth gap, because the savings primarily occurring at the top versus other areas. we have great concerns about roth-ification. ,e need to look at those they squeeze our budgets in way that make funding inadequate. >> thank you.
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misnomer. we her about international companies and we know they have tax apartments that figure out their taxes and what they owe. in the reality, most of the complexity falls on taxpayers folks who struggle to pay their taxes. they do it sometimes with the .elp of a cpa or tax preparer we would all agree that you have to pay what is owed. awould like to focus on that little bit today. time could be better spent with their families, making business more productive, new opportunities, community groups. said as to one cpa who a certified public accountant with a 33 years of experience, i
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have watched the tax code become more complex making it more difficult to comply with. at the same time, the quality of customer service in the irs has fallen. i see within my clients, a decreasing confidence in the tax system as a whole. this gives us the opportunity to address the matters, ease frustrations. reform, not just for businesses, but more importantly, families and individuals struggling with the burden it places on them every day. chairman archer, i would like to visit with you a little bit. being to thank you for here and making it a priority, and then all of your years as -- of service as well. i wanted to ask what you have seen as an erosion in american system,ce of the tax
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but i want to talk about the permanence of the tax code. you have dealt with tax extenders, putting a tax policy in place for a short. of time -- for a short period of time. could you speak a little bit with your background knowledge about the importance of permanence in the tax code. archer: i'm a big believer in permanence, but i like to know i can come back five years later and they will still be there. that is not life, unfortunately. that is not how it works. -- no reasonno way that the tax code can't be something that is ever-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 is a certainty in life.
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every time youre put something and, you got to say for revenue purposes, it is going to expire at a certain time and therefore were going to change the revenue effect. noem: i think you make a valid point. i have spent my life farming and ranching. we have seen when it comes to short-term tax policies to get an industry off the ground, to get it started. i think the -- i think we do see that at a period of time, but i also know starting a business aom scratch -- from running hunting lodge, restaurant, and insurance agency, if i go to the bank and ask for a loan, they want to know what my liabilities are going to be and what my is this plan is.
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it is hard to do that if you got a tax code -- there is a role for different parts in the tax code. is that the point you are making, that there is a role in tax -- archer: absolutely. in addition, it seems to me that taxes need to be as simple as possible, and i know that from doing my own tax returns. i think your idea of trying to use not sured -- i'm i'd qualify to do that, but for the majority of americans if they could fill out on it postcard and say that's going to be it, that has a very attractive appeal. but whether you can do that, i don't know, because that means you have to eliminate an awful lot of deductions. what i worried about from the
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beginning of my chairmanship of having a tax was code that tried to do everything itself for the american people. i think tax credits are not good. we can idea that well, 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. doggett: miss sanchez. sanchez: thank you mr. chairman. little disappointed that -- i'm glad the day has arrived and we are here.
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it is impossible for me to address everything that i feel should we a purple -- a priority for individuals and families, but i'm going to try to hit a few key points. i believe i have said this many a lasting tax reform needs to be bipartisan and comprehensive. i would strongly caution against a go it alone strategy that seems to take a hold of tax reform. it must be bipartisan, history is not on the side of going it alone. tax reform also cannot be balanced on the backs of the middle class who already feel like they are being squeezed from all directions. so far, the plans and tweets i've seen from the house republicans and president would result in an astronomical tax-cut to the tune of $1.3 million for wealthy household. the people i represent in southern california would receive roughly $.70 per day
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under these plans. i'm sorry, but $.70 a day is not going to help those families better afford childcare, 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 you know, the young, growing latino population in the country will make up one third of the workforce in the next decade. this is a population that has code,,concerns and tax but they also face of the exact same barriers as other families across the country. many of them have not entered the years when childcare 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 what the need to support working families and children while also reducing
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poverty. can you elaborate on addressing childcare and elder care expenses in a meaningful way? >> exactly right. i think the most effective anti-poverty program we have right now is the tax credit. word forat is a bad some in the committee, but it is enormously important. lift 9 million families above the poverty level . these are working families raising children. looking at ways -- the population that is young, hard-working, raising families, and providing, targeting better benefits or incentives to this group who is beginning to either save for retirement or buying thingsdoing the kind of -- living the american dream, but need more opportunities to
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do so here it and the tax code can do that. that,can find a way to do some of the other elements -- education, childcare is key, there are a number of ways the tax code can assist them directly. ms. sanchez: thank you. itc, iespect to the e feel like the rhetoric painted as a handout. can you explain why that is a wrong way to characterize the eitc? >> absolutely. they are all families working hard, but happen to be working .or the wages her sales taxes and places and are burdened by these taxes. the earned income credit and refundable child tax credit is an important way to help the
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families. a car thatto buying helped to go to work, paying off bills, doing important things that generate economic activity in all communities across the country that many members of the committee represent. the finalz: in seconds, can you tell me what would be the outcome of our tax code in doing a tax reform that only cuts -- that gives the majority of the tax cut to fit to the very wealthy, what will that mean? i mentioned the between latinos and non-latinos is 10 to one on the dollar. my worry is that grows, 15 to 1, 20 to one. at the very top of the wealth scale, when we look at inheritances, past taxes, just giving the tax breaks to a small number of the
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households getting tax cuts, my worries is that increases those disparities. when we are having conversations about nehring and improving equality across the board. ms. sanchez: thank you very much. mr. doggett: i want to thank the panel for your testimony today. see particularly pleased to chairman archer. and the general men who served with me, jim martin. gape was a 30 year between us. mr. chairman, thank you for having this hearing. over the past number of hearings we have had, we have discussed details ensuring businesses have a tax code that will allow them to compete here at home and
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around the globe. fairnessy believe the in the tax code is just as important to individuals, our citizens, as it is to our companies. some examples of unfairness is to illuminate, too versus alternative minimum tax implemented 50 years ago, addresses a small number of incomethey know federal tax due to tax preferred vehicles, but today it is clear it no longer addresses the original intent of the law. instead, it creates a burden. current system of citizenship based taxation, implemented during the civil war, as a means to discourage wealthy americans to
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flee the country. regime has partisan led to a record high x patriot and's, and hampered the ability of our citizens to compete for ex-pagerecord high triations. unfairlyion disadvantages are citizens and discourages companies from hiring americans to run their international operations. it also discourages foreign multinationals from hiring americans to run their operations weird to moving to a territorial system for corporations, which is an interval part in the blue print in tax reform, it will only grow
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if we fail to move to residency based taxation for individuals. these are two examples that we have the opportunity to address for an individual to have a fair tax reform plan for individuals as well as corporations. element that maybe i could get some comment on has to do with compliance. the united states has a ofatively high rate voluntary compliance when it comes to individuals filing their tax returns, but as the tax system has gotten more complex, more individuals have to turn to professionals and tax preparers to help with 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? needless toher:
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say, for one who continued to do his own tax return, simplification has a lot of appeal to me. and i think that it probably for most individuals may be one of the major concerns that people have. but again, politically, it is not simple to get simple getation -- to simplification. it has been looming as an attraction 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 summoning people in the outside as a means of making whatever they want to occur, happen in the country. used, in myeen
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opinion, far too much. feel that way about tax credits. tax credits to me is not the purpose of the code. designedis primarily to raise the money to pay the government to ills, and not to create all of these complexities. thank you. thank you, mr. chairman. mr. doggett: mr. thompson? forthompson: thank you holding the hearing and thanks to all the witnesses. chairman archer, thank you for service toous this institution. i too want to bring up the issue of retroactivity. this committee has talked a number of times over the years -- and doingng of
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just beroactively would a monster for people who have used that tax provision to deal with. i appreciate you bring that up. i want to second mr. doggett's retirementavings and accounts. if we did nothing else in this congress but provided a means by which people could save while they are working for their retirement years, it would mean though for retirement security, that would he an excellent outcome. while we are talking about tax reform, a couple of things important to me, one is that whatever we do is paid for. i don't think we can charge our kids and grandchildren with tax cuts we give out today. i think we have to insist on making sure that any reform we do is in fact reform, not just
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an unpaid for tax cut. agreeo have to focus -- i with my other colleagues who mentioned this -- focus on middle and working class individuals. this is a group of people who have really been left behind. we need to figure out how we can incentivize their being able to get ahead and make your money -- make more money. i think one area of doing that is to understand the importance of furthering education. all typesucation -- of education, higher education, career training, low training, whatever it may be, all of that is value-added. the more you have, the rule is, the more you make. we need to figure out how to help people make more money and get better jobs, get the jobs people want. i really hope that we would be
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able to focus on those types of things in our efforts. it needs to be about the american people, the american people who don't have lobbyists working for them on a day-to-day basis, and the american people who haven't been able to take advantage of the tax code that the chairman referenced as being used to help everybody on tour -- everybody under the sun, but them. i want to all up on what miss sanchez talked about, because it ngs in with my concern about for whatever we do in this tax reform. in the past -- we have 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 has been referenced already today that is focused on cutting important aspects of our health care in order to pay for -- to eventually pay for tax cuts or
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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 in the kansas example of how this really doesn't work and puts enormous pressure on states to provide adequate funding for theices like education in workforce and programs you mentioned that are enormously important to growth and economic mobility and those immunities . look no further than that to show you how this approach is wrongheaded. kansas was so bad, they had to repeal what they had done. and the republican legislature recognize that to the point where they overrode the republican governors' veto of
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that repeal. it was devastating to people in that state. : absolutely. if you look at the trump budget for example, you can see massive amounts of cuts to programs assumed -- 1.3 trillion dollars, the nondiscretionary programs. that will put enormous pressure on these -- but ifing out of time, you would, i would like to hear from you hear it if you can submit it in writing, i would like to see a list of tax reform you think would help middle and lower class individuals. eaberry.ett: mr. t be >> thank you. the reason why i love to be on this wonderful panel is my colleagues always remind me why i became a republican.
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and they have heard this story before about my dad when i was 16 years old and took my first job at mcdonald's and my dad went through all different taxes i got taken out of my check, and said, let the tax code change your behavior. you need to save money and continue to work hard and make more money, and get a good job. and today, as a realtor, mr. mentioned this and got me thinking. i look at your bio and it was very good. it 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. it is very different from being a congressman or working in a think tank, because you put it all on the line and you are actually sending the check to
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the irs. but is fascinating to me, you mentioned pass-throughs -- today if you are a successful pass through and no one will guarantee that. in america, you are almost bracket.% at the top that doesn't include what you pay to the state or local government, that doesn't include worker's comp. that doesn't include anything else that our three levels of government are requiring of you. i take issue with the fact that pass through, getting a tax cut is not appropriate. i learned that from my immigrant father who has worked hard his entire life, retired now, who always complained about the .axes he paid with a sixth grade education as
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a steelworker, never making a lot of money. what great street smarts. your test money was a fabulous when i read it, you concluded that one does not necessarily equal the other, which i thought was interesting. you specifically mentioned the different kinds of employer savings plans. i have heard, from a number of participants including teachers and firefighters from my district. in my district and columbus, ohio, nationwide insurance is 457 --gest fighter of largest provider of 457 plans. can you talk about what these plans serve and why it's important to make sure we don't throw the baby out with the bathwater and continue to allow for the incentivizing of these plans?
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>> yes. thank you, congressman tiberi. there is a need for different types of plans and there is a need to keep them and simplify them. what to answer your question directly as to the different employers that are served by the different plans, it depends on what type of plan they want. and if it is a small employer, they might institute a simple 401(k) or simple ira versus the midsize companies might do a 401(k). the nonprofit world has for (b) plans ans and on the government side, the -- i think we need to still work at
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simplifying things, but i don't think one plan solves for everyone. mr. tiberi: mr. rodriguez said we need to test of -- we needed to work on tax reform for the middle class, and i agree. but what i got from your testimony, the largest group -- employers who learn -- employees who earn less than $50,000 per year. a --ast administrators our last administration created a cap on what people could contribute. does that this incentivize people? -- to take be a huge away the incentives.
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they need to get to the table to put the plan a place. we have a coverage issue, so we don't want to put anything away for the small business owners but that plan out to help their workers. thank you. thank you to all of us for being here today. i am coming from a place where a budget markup has been facing critical -- and education, infrastructure, training programs, and health care. reminder thathe when we talk about tax reform, we need to have the revenues to pay for the basic government functions that serve as foundations for growing a strong middle class, but somehow we have moved away from the concept. layers of complexity that always seem to benefit the wealthiest few while everyone
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else wonders how they keep getting left behind. under the republican blueprint, the wealthiest taxpayers would see the average tax cut of over $1 million while the middle class tammy's would get around to $200. at a time when my colleagues on the other side of the aisle seem bent on cutting funding for education, health care, and other goal resources for working families, do you think that even $200 per family is anywhere near enough to make up for what republicans want to take away in health care or education resources? >> not at all. it is a huge issue. we do a lot of work in all of those areas. we know there are great needs and resource needs that are there good we are enormously concerned about that. ms. delbene: thank you.
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chairman archer, thank you for being with us today. i imagine you know firsthand how elusive tax reform can be and i agree with many things you said in your testimony that tax reform should not be corporate only, that it should be permanent to give people an ability to plan for the future, and that progress is achievable this congress. that there was one word absent from your testimony, and that word was bipartisanship. i believe without bipartisanship that this committee will never achieve any of the goals you outlined. i wonder, do you agree with that ? >> i believe it is important to have a partisanship, particularly on something as important as tax reform. it was seem to me as with health care reform, both parties should be a part of it. otherwise,
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seems to me that it is not going to be as long-lasting as it should be. rep. delbene: as you know, i am new to the committee, but i have done homework. the 1986 tax reform process was far more extensive than the text reform act was preceded by 30 days on texture form and five hearings on the slight revenue hearing committee and a full 26 days of markup between december 18, 1985 and december 3 19 and five. meetingss of public and 17 days of markup.
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i would like to enter that. do you think the committee and congress as a whole conducted a delivered of examination of revenue issues and the 19 86 tax reform? clearly the 86 tax reform took a lot of time put together. 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 would undermine the value of real estate could it was put in there to get extra revenue.
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it disturbed me enough that i wanted to offer a motion to recommit with instructions and i am convinced that i had the if i hadbeat the bill been permitted to motion it with reconstructions. unfortunately and i mentioned that there was a lot of pressure from the top. the ranking republican in the and he was told that he was not offered to commit with instructions. he called me into his office and told me that he was going to have to personally taken away from me -- take it away from me. there wasn't anything i could do. and it wasas there
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unprecedented because the ranking republican on the committee was for the bill. she had taken himself out of the process. ranking and ind should've been given the motion to recommit. those things were going on behind the scenes. , you not only had the president who signed on, but you had the chairman of the democrat who was a is totally committed to it . the pressure that he put on in the committee was pretty incredible, too. you have bipartisanship, but bipartisanship in my view did not produce one of the best things for the country, but that was my own prejudice, you understand? chairman: mr. marchant?
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mr. marchant: 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. postcardt or not, this is much more popular than the irs code as the good people are intrigued by it. i cannot 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 my district about this postcard is -- can i fill the postcard out if i file an alternative minimum tax? i say there's not going to be in our plan and alternative minimum tax.
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for a great percentage of people in my district, probably the most frustrating part of the tax code is in fact the fact that they have to figure their taxes twice. aroundgure the first go and then they have to go through it again to see if they owe this other tax. effect, mr. archer, and mr. mckay, what kind of effect does that have on taxpayers when they usually cannot fill it out some plea for that reason -- simply for that reason? hon. archer: i have always been in opposition to the alternative minimum tax. it made no sense. it was not good tax policy. , had it continued to be in place without change, it
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would have generated more income tax revenue than the regular income tax. to me, that do not make any sense. i think you're absolutely right. i hope you can do away with the alternative minimum tax. if you do, you'll do a service for the country. chairman: mr. mckay? mr. mckay: thank you, congressman. complexity in the tax code comes in many forms. i mentioned before this happened up -- there's half a dozen different terms for dependent . there are more opportunities for simple find the tax code that would probably ruled for an in the eventual tax bill that comes out of congress. whatever congress decides about
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any particular provision like the alternative minimum tax or any other provision, our point of view is we will as an industry with both technology and professional practitioners show up and serve to simple five people's experience -- simplify peoples experience. a postcard is something people in this industry is well delivered to the taxpayer. , butght to be electronic in electronic postcard can be a vastly simplified way of complying. there's a security issue in terms of a piece of paper that goes into a mailbox, but it's actually more interesting issue. i mentioned before the 1998 act that led the way to convert in the country to electronic filing. the irs eliminated from its budget the overwhelming number , theper processing plants
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system of the old days of how paper returns were processed. there was a huge advantage for the country. putting a paper return into that employees the irs would key in key fields from the return produced about a 20% with the keying in of abstracts. moving to an electronic filing system, that dropped to a one or 2% rate. tore is real advantage electronic supplementation. but whatever you decide as policymakers, the ability to simple five that whether it's an electronic postcard or any other tools available, including for simple returns, people can do it -- on a phonewith
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with an apt and take a picture of a w-2 and quickly have a return brought in. the private sector will bring in tools of innovation to this so that this will have the vision that you on the committee and the congress choose as tax policy. chairman: mr. larson? thank you mr. chairman for holding this hearing and i want to thank all the witnesses and join in the acolytes for chairman archer for his service here. i would like to say from the outset that i never tire of listening to the story by pat tiberi of his immigrant parents. committee, there are so many stories to be told that make up the fabric of this nation and what we are all about. that inlike to say echoing mr. dockets
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comment that we need to have more hearings. frankly we need more stories iberi's so we can get to the gut of what we need to do in terms of tax reform. while we may have our disagreements and procedures and that will allow me the opportunity to quote my irish grandfather, who would say, "you know, trust everyone, but cut the cards because often times you may need a reshuffle." in some cases as mr. roosevelt said, a new deal. oftentimes it's the vagaries of government ineave a position where we have to do things. stout, i was miss aligned with a lot of your comments because i do think we have to provide greater opportunities for people to save .
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in doing so, i do support a number of issues. i think the way that we have to look at this is where can we assist in how people say. we do have a prime example of that. i ran an insurance agency. i know what it's like to meet a payroll. investment andt there were always the legs on the stool. one of those legs with social security. at the same time we are enhancing benefits and the opportunity to save. shouldn't we talk about mr.thing that archer was talking about in terms of enhancing and benefiting a system that has not missed a payment? thereen is the last time was actually an increase in the social security program.
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? it was indexed back in 1983 and is not been able to keep pace. it's an insurance program, not an entitlement. have any of your premiums gone up since 1983? of course they had and everybody whether college that. -- would acknowledge that. as my grandfather was alluding to with trust everyone but cut the cards, and 2008, your 401(k) became a 101 k. it is why we need more hearings like this. it's the counterbalance of knowing that there is a safety net and there is a floor, which you also have to contribute to in the event of taking risks that your government stands .ehind you
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what other plans would you recommend be used? would you agree with that in the third leg of the stool would be balanced as others? ms. stout: thank you, congressman larson. i think that working america is looking for ways, whether it's incentives or education on how to save, we have got to make it simple for them. years with in my 20 thousands of working americans. they are struggling with figuring out their finances and how to put away some extra money. i think those programs are important. you've got to have that three-legged stool. as far as other programs, i
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think the big focus should be on coverage and making it simple for employers to offer these plans. rep. larson: mr. rodriguez? mr. rodriguez: i think it's a common nation of greater access making it easier to save, but it's also improving the incentives for people to save as much as we possibly can for the target populations that are not saving but could do more. rep. larson: i want to thank mr. johnson. he has agreed to have hearings on this where we can put these plans out there. i think that will only enhance both opportunities governmentally and also from the private sector. we need both. mr. cabello? mr. cabello: thank you very much. i think the panel and i thank chairman archer for his participation and service to our country. i also want to associate myself with some of my colleagues who
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have emphasized the importance that tax reform has for america's working families. there is obviously a great deal of frustration in this country. we see it play out our politics. we see it play out on social media on an hourly basis. i really think that tax reform is a solution and an instrument that can help address economic insecurity that some of the americans feel and we do have to put ourselves in the position of that family that has two or .hree kids want to you're going through this difficult exercise of complying with the federal government and the irs. i want to focus briefly on the complexity of the tax code. mr. chairman, the tax foundation estimates that in 2016 americans
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spent 2.6 billion hours compiling tax or firms -- returns at a cost of almost $100 billion. it could've been used for economic activity and time that could be better spent with .amily for mr. mckay, i want to ask you the complexity of the tax system where a lot of americans have to turn to professional tax preparers to file their returns. fraudent years, prepare listed under the irs dirty dozen tax scans. i have been a volunteer of the income tax assistance program where those who make less than $50,000 a year can file their returns with the help of an irs certified volunteer. can you talk about how increasing the standard deduction will reduce the dependence that so many americans have on professional tax preparers?
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mr. mckay: professional tax preparers provide a variety of functions. about a decade ago at a conference on tax reform, they talked about exactly as you say the one time a year when the average family take stock of their financial situation, which is the moment of tax compliance. she characterized it at the time as a national ritual that she felt was actually some benefit from because if people did not take a hard look at their own , most families would never look at them at all all year. and so the question really becomes simplification of the experience that it is less painful, less burdensome, less
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costly. the industry has worked very it'sto create options and an intensely competitive industry with a lot of innovation. formsrvices, and a lot of -- come and a lot of forms from accountants to tax attorneys to do-it-yourself software. sense not growing only an industry but from the taxpayers we serve that we need comments and signification so that they can make decisions on what to do in the coming year for their family rather than come away confused. mention that there's a couple of programs -- the two largest ones that are supported and sponsored by the government sensors allhe vita sensor across this country. they are in the area of 2.5
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million returns prepared for free there every year. there's also the irs free file program, which is service donation by a large number of different companies through the irs website under irs regular since and protection rules -- regulations and protection rules. that also creates 2.5 million returns. between the two programs, somewhere between five or 6 million returns are generated for free. in one instance, and volunteer service centers and community's and neighborhoods, and other online. the other you can access through your phone or through a computer. between the two, you have significant health at no cost for lower or middle income people. it's a unique american invention. countries,the other the government is the whole thing as a revenue collection process with no involvement with
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the citizen. the ideal situation would be to simple five to improve the taxpayers understanding of their own taxation and the labeling them -- enabling them to make better decisions for the future and at the same time take advantage of the capabilities of both tax professionals and technology innovations to make it simpler and easier for folks. you decide to have a postcard stub tax return and this industry will deliver that robustly so that it will be something that people have confidence in that and all likelihood having that electronic will also at security protections and easy access for people to use. i want to thank the panel, mr. archer, mr. mckay, miss stout, mr. rodriguez. thank you for your time.
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i've benefited from comments each one of you have any bring a wealth of experience to the subcommittee and we appreciate it. levy just try to make some closing observations and comments as a prerogative. ms. sanchez said that history is not on the side of going it alone and eiffel heartedly agree with that. i'm not trying to pile on, but my view is that the aca was an example of how not to do things. there's probably no argument there. there is it in tatian -- a temp tatian to evaluate tax reform discussions in a finite time. the committee should get credit for some of the hearings that take place on the themes that have come up. there have been nearly 50 hearings in recent years on tax reform generally. now that wen is will see an increasing amount of activity the closer we get to
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the final product . there has been some discussion about kansas. they came up last week and it came up this week as well. there is a lesson for us on kansas and that is this. provisionow a special to create essentially a trap door for pass-throughs. there was a pass-through exemption that was allowed and it did not happen on the corporate side. what happened? there was a system that gets gamed and ultimate activity does not result out of that. what we are proposing is not to do that and we are proposing rates similarly through pass-throughs at the same level. speaking of states, i come from the state of what not to do. the state of illinois has an underlying fiscal mess, a complete disaster. rather than dealing with underlying things driving it, my
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state legislature over the governor's objections said let's raise taxes and here's the net effect. people are leaving illinois. they're going to wa wisconsin, indiana, all other attractive midwestern states like ohio because they've done a better job. that's an example. that's a cautionary tale for us on what not to do. the vita centers that mr. cabello mentioned provide real insight. i visited a couple of them in my .onstituency at a middle school going in and talking to the volunteers to gain real insight on this issue of complexity. situation where you are visiting a vita site, you are sitting down. i was asking volunteers, what is your average interview time for talking to someone? these are very modestly situated people and they said about 90
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minutes. imagine that. going through the hassle of 90 minutes talking to some volunteer backing and forthing and so forth to finally come up with something in all this level of complexity that nobody up here interestingly is defending and nobody in the witness panel is defending. yet that is what this very constituency is burdened with. interesting an observation that i would like to make. if this yielded $.70 a day, if that was the bottom line and really the number, i would not defend it. $.70 a day per family is not really where the action is. the tax foundation came up with a study and i ask unanimous consent to put this into the record. the tax foundation -- their study shows that there is an jobs,se in 1,687,000 full-time equivalents, and an estimated game of -- wait for it
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income for after-tax median households threat the u.s. state, 5000 t 5000 to $56. $5,256. in ms. sanchez state, even more than that, so that will be part of the record. there's an interesting thing that relates to testimony, mr. rodriguez, and i'm not asking you to comment, but it's just an observation i had and it's this. a few years ago i had a meeting with one of -- the president of one of the large hispanic business organizations. i think you remember the one it was. i don't want to say about loud but he if i'm wrong -- came in a said something to me which is really interesting. it made a big impact on me. he says we are against the state
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estate tax and the death tax. i said, really? that's not what i would expect you to be talking to me about. he said, yeah, here's what. ever,e first time hispanic families are making serious money in this country. not all of them by any stretch of the imagination, but why is it that when hispanic families are making money, there's an estate tax? where was the estate tax 100 years ago when other families were making all that money? i just leave it there coul it . it's a very provocative comment coming from somebody who has a business organization. for us to get to this bipartisan approach, we have to settle out an underlying tension. it's attention that surfaces occasionally and you have heard it a little today. do we view the economy as a zero-sum game? do we view that high as expanding where people benefit or do we view it as something that if someone benefits than that comes at someone else's expense?
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there was a subtext throughout a lot of the discussion and questions and so forth. i reject the notion that it's a zero-sum game. in his observation, he was talking about the tax burden that's out there. we are not going to settle that today, but it's a question that has to be wrestled with and we have to come to a worldview about it. if all this is is a matter of redistribution, then that's one thing. saying everybody else is , that's not what we want alone. we want to make sure that there is growth here. growth comes if we do this the right way. explore more on what you're talking about and credits on encouraging auto enrollment. that would be something very interesting. to get back to one of mr. rodriguez's key points, this notion of favors getting cut out with such a low level
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with very low capacity for them to save, that is something we can vastly improve. when push comes to shove, this postcard is so attractive and so enticing. i go back to this theme and many other discussions. think about the premium that we put on simplicity and other elements of our lives. think about that for a second. we want to go through tsa pre-check. they want to go through the easy pass lanes on the tollways. we want to go through the 15 items or less lan lane at the grocery store. an expeditedbut process. we expect this in all aspects of our lives. yet the one thing that has an impact on every single bit of the economy is cumbersome to the point of absurdity. i think what we have settled
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is that everyone wants to move somewhere else and we have to sort out among us how w it is we do that. on behalf of our entire committee, i think each one of you for your willingness to spend time with us this afternoon. and i think my colleagues for sticking it out to the end. the committee is adjourned. [captions copyright national cable satellite corp. 2017] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit]
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>> we are live this afternoon in the rayburn house office building with the georgetown center of business and public policy hosting a discussion on the future of u.s. trade policy with a special focus on trade protection measures proposed by president trump. we have been told that this is going to start f


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