    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                    PERSPECTIVES ON THE NEED FOR TAX REFORM

    =======================================================================

                                    HEARING

                                   before the

                           SUBCOMMITTEE ON TAX POLICY

                                     of the

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 25, 2016

                                   __________

                              Serial No. 114-TP08

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                             U.S. GOVERNMENT PUBLISHING OFFICE

    22-371                         WASHINGTON : 2017
    -----------------------------------------------------------------------
      For sale by the Superintendent of Documents, U.S. Government Publishing
      Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
             DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
                              Washington, DC 20402-0001

                          COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
    DEVIN NUNES, California              CHARLES B. RANGEL, New York
    PATRICK J. TIBERI, Ohio              JIM MCDERMOTT, Washington
    DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
    CHARLES W. BOUSTANY, JR., Louisiana  RICHARD E. NEAL, Massachusetts
    PETER J. ROSKAM, Illinois            XAVIER BECERRA, California
    TOM PRICE, Georgia                   LLOYD DOGGETT, Texas
    VERN BUCHANAN, Florida               MIKE THOMPSON, California
    ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
    LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
    ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
    KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
    DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
    TOM REED, New York                   DANNY DAVIS, Illinois
    TODD YOUNG, Indiana                  LINDA SANCHEZ, California
    MIKE KELLY, Pennsylvania
    JIM RENACCI, Ohio
    PAT MEEHAN, Pennsylvania
    KRISTI NOEM, South Dakota
    GEORGE HOLDING, North Carolina
    JASON SMITH, Missouri
    ROBERT J. DOLD, Illinois
    TOM RICE, South Carolina

                         David Stewart, Staff Director

             Janice Mays, Minority Chief Counsel and Staff Director

                                     ______

                           SUBCOMMITTEE ON TAX POLICY

                 CHARLES W. BOUSTANY, JR., Louisiana, Chairman

    DAVID G. REICHERT, Washington        RICHARD E. NEAL, Massachusetts
    PATRICK J. TIBERI, Ohio              JOHN B. LARSON, Connecticut
    TOM REED, New York                   LINDA SANCHEZ, California
    TODD YOUNG, Indiana                  MIKE THOMPSON, California
    MIKE KELLY, Pennsylvania             LLOYD DOGGETT, Texas
    JIM RENACCI, Ohio
    KRISTI NOEM, South Dakota
    GEORGE HOLDING, North Carolina

                                C O N T E N T S

                                   __________

                                                                       Page

    Advisory of May 25, 2016 announcing the hearing..................     2

                                   WITNESSES

    Dr. J.D. Foster, Vice President, Economic Policy Division, and
      Deputy Chief Economist, U.S. Chamber of Commerce...............    15
    Dr. Scott Hodge, President, Tax Foundation.......................    23
    Dr. Douglas Holtz-Eakin, President, American Action Forum........     5
    Dr. Martin Sullivan, Chief Economist, Tax Analysts...............    35

                           SUBMISSIONS FOR THE RECORD

    AdvaMed..........................................................    66
    American Innovation at a Crossroads..............................    71
    Association of Equipment Manufacturers...........................    94
    American Farm Bureau Federation..................................    97
    Bond Dealers of America..........................................   100
    Center for Fiscal Equity.........................................   102
    Coalition for Fair Effective Tax Rates...........................   106
    CompTIA..........................................................   111
    Citizenship Based Taxation.......................................   114
    New Markets Tax Credit Coalition.................................   118
    National Rural Electric Cooperative Association..................   125
    Master Limited Partnerships......................................   129

                    PERSPECTIVES ON THE NEED FOR TAX REFORM

                                  ----------

                            WEDNESDAY, MAY 25, 2016

                 U.S. House of Representatives,
                           Committee on Ways and Means,
                                    Subcommittee on Tax Policy,
                                                        Washington, DC.

        The Subcommittee met, pursuant to call, at 2:18 p.m., in
    Room 1100, Longworth House Office Building, the Honorable
    Charles Boustany [Chairman of the Subcommittee] presiding.
        [The advisory announcing the hearing follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BOUSTANY. The subcommittee will come to order.
    Welcome to the Committee on Ways and Means, Subcommittee on Tax
    Policy's hearing on perspectives on the need for tax reform.
    Today, the subcommittee will hold a hearing to explore the
    drivers that are motivating the persistent calls for the reform
    of our broken Tax Code.
        At the highest level, that need can be seen in our
    lackluster economy over the last 8 years in the absence of
    robust projections for economic growth looking forward. Since
    the recovery began in 2009, real GDP growth has averaged just
    1.8 percent, far below the pre-recession average of 3.5
    percent.
        Going forward, CBO projects potential growth of just 2
    percent. While these shortfalls may seem small, they result in
    trillions of dollars of lost output and thousands of dollars of
    lost income for families. Slow growth is a choice, but it is an
    unacceptable choice, and our bleak economic future demands tax
    reform.
        Tax reform also is an imperative for small and large
    businesses alike. Our Tax Code simply isn't competitive
    anymore. We have the highest corporate tax rate in the
    industrialized world, and a 50-year old international tax
    approach.
        While the U.S. tax rules become more and more outdated, our
    international partners are moving full steam ahead to become
    even more competitive. And our inaction is costing us. American
    businesses are losing ground. American companies are getting
    acquired by foreign companies. New business startups are
    lagging. Companies can't expand as rapidly as they should, and
    capital investment is restrained.
        The need for tax reform is further evident in the mind-
    numbing complexities of the Tax Code and the enormous
    compliance burdens it imposes on families and businesses in
    this country. Today's Tax Code consists of about 2.4 million
    words, and roughly 7.7 million words of regulations and
    countless more pages of case law, publications, and other
    guidance.
        Is it any wonder that taxpayers are frustrated, especially
    when they are paying more than $31 billion annually on software
    and professional tax preparation services just to figure out
    their taxes? Americans deserve a simple straightforward tax
    system that does not waste their valuable time or their money.
        Today, we have a very impressive panel of witnesses who
    will share their perspectives on the need for comprehensive tax
    reform. With the input the committee receives from today's
    witnesses and from stakeholders across the board, the committee
    has a responsibility to respond with a strong tax reform plan
    that is built for growth. We must harness these motivators for
    reform in order to advance the work to develop a new Tax Code
    that is ready for the next President to sign in 2017.
        To accomplish that goal, we should also consider ways to
    motivate tax reform from within Congress, approaches like the
    Tax Code Termination Act introduced by our colleague, Chairman
    Goodlatte. In the words of Grover Norquist, president of
    Americans for Tax Reform, quote, ``The idea here is simple.
    Unite the proponents of many competing replacement tax schemes
    to support legislation terminating the existing Tax Code by a
    certain time period to force action,'' end quote.
        Mr. Norquist and Chairman Goodlatte are right about this.
    We need to look at every avenue to catalyze the process within
    Congress and get a tax reform bill over the finish line.
        Without objection, Mr. Norquist's full statement will be
    made part of the record.
        Chairman BOUSTANY. Before I turn to Mr. Neal for his
    opening remarks, let me thank our witnesses for taking time
    today from your busy schedules to be with us. We really
    appreciate it. We certainly look forward to hearing your
    testimony.
        I am now pleased to yield to the distinguished ranking
    Member, Mr. Neal, for purposes of an open statement.
        Mr. NEAL. Thank you, Dr. Boustany.
        Mr. Chairman, I want to thank you for calling this hearing
    on Perspectives on the Need For Tax Reform. As you stated in
    your opening comments, the focus of this hearing is on the need
    for tax reform, but in particular, for economic growth.
        None of us can be encouraged by the Federal Reserve's
    recent suggestion that economic growth is going to be in the
    vicinity of 2 percent for perhaps the next decade. I agree with
    the whole notion of business expansion, job creation, and
    investment, and we all agree, certainly, on the challenges of
    the current Code. Where we tend to disagree is on the road
    forward.
        One of things that is nice about the panelists we have
    selected, they have been here many times in the past, and they
    are all of first class thinking.
        I agree with the goals that you have stated, and clearly
    applaud your commitment to hearing from these individuals in
    search of the best tax policies. These esteemed witnesses will
    testify on the need for tax reform, and I do not doubt the
    ferocity of their testimony. However, we should note that we
    have heard from them many times in the past on the same issue--
    issues. And we have had a chance, I think, beginning with at
    least the piece that Chairman Camp put out to discuss it in
    more detail.
        We almost know what these witnesses are going to say, and I
    fear that we need to help them help us to break out of the
    impasse in which we find ourselves. I hold to the position that
    tax policy cannot be done on the basis of political philosophy
    and needs to be based upon policy philosophy.
        Mr. Chairman, I believe that we must expand our gaze going
    forward. We also should hear from the American public. And to
    your point, which I think is entirely correct, we should hear
    what the presidential aspirants have to say now, not just after
    that individual takes the oath of office. We need to hear from
    middle class families. We need to talk about expanding the
    child credit. We need to talk about how individuals qualify for
    EITC. The Tax Code's expansive reach touches everyone across
    this great county. As such, it demands a thorough examination
    to ensure when we fix it, we are doing our best job.
        If I might say, I think we have examined it in great detail
    time and again. But this will also include listening to the
    very people that the Code touches. Reforming our Tax Code
    remains of the utmost importance. I look forward to working
    with you to ensure that the Code will create jobs, promote
    economic growth, and once again help to grow the middle class.
    Thank you, Mr. Chairman.
        Mr. BOUSTANY. I thank the gentleman. Today's witness panel
    includes a number of leading experts on the conditions driving
    the urgent need to reform our broken Tax Code. We have Douglas
    Holtz-Eakin, president of the American Action Forum. From 2001
    through 2002, Dr. Holtz-Eakin was chief economist on President
    Bush's Council of Economic Advisers. From 2003 to 2005, he
    served as director of the Congressional Budget Office.
        Next, we have J.D. Foster, vice president of economic
    policy division and deputy chief economist at the U.S. Chamber
    of Commerce. Dr. Foster has previously served as economic
    counsel on the U.S. Department of Treasury, Office of Tax
    Policy, and as chief economist at the Office of Management and
    Budget for President Bush.
        Scott Hodge is the current president of the Tax Foundation.
    Prior to joining the Tax Foundation, Mr. Hodge served as
    director of tax and budget policy at Citizens for a Sound
    Economy. He also spent 10 years as a fellow at the Heritage
    Foundation.
        And Martin Sullivan is the chief economist and contributing
    editor for Tax Analysts, daily and weekly publications.
    Previously, Dr. Sullivan has served as a tax economist at both
    the U.S. Department of Treasury, and Joint Committee on
    Taxation.
        Gentlemen, we really appreciate you being here. I know this
    is one of many times that you have appeared before the full
    committee and subcommittees, and we certainly appreciate you
    being here today. And we will begin with Dr. Holtz-Eakin. You
    may begin, sir.

       STATEMENT OF DR. DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN
                              ACTION FORUM

        Mr. HOLTZ-EAKIN. Thank you, Chairman Boustany, Ranking
    Member Neal, and Members of the Committee. I appreciate the
    opportunity to be here today. You have a written statement. Let
    me simply emphasize three main points, and I look forward to
    your questions.
        Those points are that tax reform is an opportunity to
    improve the long-term trend for economic growth, that it is an
    opportunity to improve our international competitiveness and
    affect headquarter's decisions, and finally, it is an
    opportunity to restore lost faith in the Tax Code, and I want
    to say a little bit about each.
        The challenge of economic growth, I think, is the paramount
    challenge at this time. And to frame it, remember that from the
    end of World War II to 2007, the U.S. economy grew rapidly
    enough, 3.2 percent a year on average, that even with
    population growth, GDP per capita, roughly measured the
    standard of living, doubled roughly every 35 years. So in one
    working career, you could see a doubling of the standard of
    living, and that put American dream within the reach of many
    Americans, whatever it was to them.
        If we have 2 percent trend of economic growth, and you roll
    in projected population growth, you double the income per
    capita every 75 years. And I think that just puts the American
    dream too far over the horizon and that we have to focus on
    improving growth.
        There is great potential to do that. We know from some of
    the studies cited in my written testimony that the Tax Reform
    Act of 1986 contributed to better economic growth. That is
    looking at a real world effort. We know from work of Allen
    Auerbach and many of his colleagues, that if you were to do an
    income-style tax reform, you could raise GDP by something like
    a little under 5 percent. If you did a consumed income tax with
    a great deal of clarity and discipline, you could raise it by
    as much as 9 percent.
        So there is an opportunity there to contribute to better
    economic growth, which I believe is the top issue, and you
    ought to focus on it.
        The second is the international competitiveness, with which
    you are very familiar. The U.S. has a very high statutory rate,
    highest in the developed world. It also has a very high
    effective rate. If you look at the computations, it looks like
    the U.S. is about 28 percent versus 19 or 20 percent for our
    competitors. And our effective tax rate is higher than 53 out
    of 58 competitor countries, and it puts us at a tremendous
    disadvantage. That is compounded by our cling to worldwide base
    for our international tax system.
        Our competitor countries in the OECD have been moving from
    a worldwide to something more like a territorial, roughly one
    country per year. We remain the last country clinging to
    worldwide system, and it has produced a competitive
    disadvantage. It has produced an incentive to defer funds and
    keep them locked offshore, and it has produced this terrible
    situation where when any two companies merge or acquire across
    borders, when you run the numbers, the headquarters end up
    outside the United States. And the only way to fix that is to
    fix the Tax Code and do tax reform.
        The Section 385 rulemaking by the Treasury is not a
    solution. It is making things worse. And indeed, we want to
    make this a place where people want to locate their investment.
    Inbound investment is good for the United States. It is not
    something we should fear. We should have a tax system that
    incentivizes it.
        And then, the last issue is the issue of lost faith in the
    Tax Code. The U.S. has relied, from its inception, on voluntary
    compliance with the Tax Code. But as the complexity has risen,
    as the administrative costs have risen, and as the tails of
    people paying zero taxes have sort of proliferated, there is a
    real sense that I don't know if everyone is playing fair, why
    should I play fair? Tax reform is a chance to clear that out,
    and to restore faith in the tax system is something that
    Americans comply with and that they used to support public
    policy goals.
        I think those three things should be the focus. You have
    lots of criteria for tax reform. They can be growth, they can
    be income distribution, they can be complexity, simplicity,
    administrative and compliance costs. I think you should focus
    on growth competitiveness and restoring that faith. You can't
    do everything. You have other policy tools on the spending side
    to do deal with other issues. I think those are things to focus
    on, and I hope that this is the last time I testify on the need
    for tax reform, and I thank you for the chance to do it.
        Chairman BOUSTANY. We thank you.
        [The prepared statement of Dr. Holtz-Eakin follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BOUSTANY. Dr. Foster, you may proceed.

     STATEMENT OF DR. J.D. FOSTER, VICE PRESIDENT, ECONOMIC POLICY
     DIVISION AND DEPUTY CHIEF ECONOMIST, U.S. CHAMBER OF COMMERCE

        Mr. FOSTER. Thank you, Mr. Chairman, Ranking Member Neal,
    Members of the Committee. My name is J.D. Foster. I am the Vice
    President in Economic Policy and Deputy Chief Economist at the
    U.S. Chamber of Commerce.
        I would venture to say that in the decade since the last
    major tax reform was enacted, the Ways and Means Committee has
    held scores of hearings and had thousands of hours of testimony
    and debate on the need for comprehensive tax reform. In
    retrospect, it is a daunting task to think that one could add
    to that mountain of evidence. I am sure my co-panelists will
    equip themselves well in trying to do so.
        Little has really changed over the course of these many
    years relevant to comprehensive tax reform, little except the
    urgency for tax reform has itself grown, and the price of
    inaction has grown higher, as the relative economic strength of
    other nations and their businesses has grown rapidly.
        A related difference from the past is the apparent dimming
    of America's economic future to which you alluded. The weakest
    economic recovery in the modern era continues but just barely,
    and it is now showing distinct signs of slowing further. In the
    most recent quarters, the economy has slipped from a pedestrian
    2 percent growth to 1.4 percent, and the most recently, to 0.5
    percent. This is not a good sign.
        This comprehensive tax reform moves forward in fits and
    starts. It should always move forward with improving economic
    growth as the primary focus, not the simplification or
    improving transparency, or these other issues commonly raised
    are unimportant, they are important. But as the saying goes,
    they don't feed the bulldog. The only thing that really drives
    tax reform making the whole effort worthwhile is economic
    growth.
        The concept of economic growth is something of an
    abstraction. Gross domestic product is something we commonly
    cite, and the reality is few people really know what it means,
    and in any event, it is an imperfect measure of the economy.
    More critically, businesses, American businesses, workers, and
    families don't live in a world of abstractions. They deal with
    real issues day to day.
        In communicating the need for comprehensive tax reform
    then, the choices made in developing legislation something more
    real is needed, something which regular people can relate to.
        What does ``grow the economy'' really mean in simple
    English? Well, in simple English, it means more small
    businesses, more medium-sized businesses, more big businesses
    all doing more business. It is as simple as that. The U.S.
    economy doesn't grow until businesses are growing in number and
    size. Washington policies would result in more jobs, higher
    wages, and more opportunities if the frame of reference
    involved a stronger focus on the business environment.
        We would do better if Congress stopped believing its wisdom
    superior to that of individuals and businesses participating in
    markets channeling those actions.
        Comprehensive tax reform can play a very constructive role.
    What do businesses do to grow the economy? Very simply, they
    make more stuff people want. They hire more workers to make
    more stuff. They pay their workers better because they can and
    because they must to have a quality and quantity of workers
    needed to make more stuff. Businesses invest in new technology
    so they can have--do a better job of making stuff and making
    better stuff. They invest in new machines and facilities so
    they can make more stuff in the future, and to incorporate the
    new make-better-stuff technology in their production today.
    Businesses want a return for their investors, so the investors
    are willing to continue to invest, so businesses can make more
    stuff. You will notice a trend here. And yes, along the way,
    businesses collect a lot of tax.
        The businesses play a central role in the symphony of
    commerce. They raise capital, pay owners, buy stuff from other
    businesses, hire and pay workers, and the income paid out is
    the income that is then used by consumers to buy the stuff
    businesses make. It is a system where everybody contributes
    something, and everybody who contributes, gets something. It is
    a system of coordination guided by markets and prices and a
    system where competition drives everyone to do better in some
    way or another.
        Why, then, if a growing economy is all about growing
    businesses, is the economy not growing as it should? Have
    American businesses lost their edge? Has the American
    entrepreneurial spirit dimmed? No, it has not. The economy
    isn't growing as it should because for businesses to grow
    normally, they need government policies, including tax policy
    that are at least benign for the economic environment.
    Businesses generally don't need government to be their partner
    or to help. They mostly just need government to get the basics
    right and then get out of the way.
        And this is where comprehensive tax reform comes in with an
    unwavering focus on creating a better business environment.
    That means an unwavering focus on improving economic growth.
    Now, economists have a lot of fancy theories and ideas about
    how economies grow and don't grow. At some point in time, it is
    important to take a step back from all the fancy theories to
    consider basic realties. The basic reality is that a growing
    economy results from businesses doing well what businesses do
    naturally, and that depends on the government creating an
    environment where businesses can flourish.
        Comprehensive tax reform focused squarely on improving
    economic performance would go a long way toward creating that
    environment. Thank you, Mr. Chairman.
        Chairman BOUSTANY. Thank you, Dr. Foster.
        [The prepared statement of Dr. Foster follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BOUSTANY. Dr. Hodge, you may proceed.

          STATEMENT OF SCOTT HODGE, PRESIDENT, TAX FOUNDATION

        Mr. HODGE. Thank you very much, Mr. Chairman, Mr. Neal,
    Members of the Committee. I want to focus my testimony today on
    the economic cost of tax complexity, which is a new topic for
    me today for this committee. I thought we would change it up a
    little bit this time around.
        In addition to robbing us of about 8.9 billion hours, and
    more than $400 billion in lost productivity, tax complexity
    punishes success and hard work, which robs the economy of its
    ability to create jobs and better living standards. Over the
    past few months, Tax Foundation economists have been measuring
    the cost of complex tax provisions using our taxes and growth
    macroeconomic model. And in 2 weeks, we will publish nearly 100
    of these case studies in a new book called, ``Options for
    Reforming America's Tax Code,'' and I hope that these case
    studies provide you some do's and don'ts as you think about how
    to reform the tax system.
        And we find that much of the tax complexity in, say, our
    individual Tax Code results from our attempts to make the
    system more progressive, either overtly through graduated tax
    brackets, or subtly through backdoor phaseouts and clawbacks.
    And high marginal tax rates matter to work incentives and
    dampen economic growth. Economists refer to these high marginal
    rates as success taxes.
        For example, we can make our current seven-bracket tax rate
    system simpler, more pro growth and still progressive, simply
    by reducing the number of brackets to 3, 10, 15 and 35 percent.
    And compared to that kind of an economic system, our model
    finds that the current Tax Code effectively reduces the long
    run level of GDP by 1.4 percent, lowers after tax incomes by an
    average of 3 percent, and costs the economy about 1 million
    jobs.
        You know, our policy's aim at helping the working poor can
    also have unintended consequences. The complex structure of the
    EITC has the ironic effect of encouraging more work as the
    subsidy phases in, but then discouraging work effort as the
    subsidy phases out as--because it penalizes workers for every
    dollar that they earn above the poverty line.
        However, we can reduce these tax penalties with a slower
    phaseout rate for the EITC. And compared to that kind of a,
    what I would call fairy EITC, our model finds that the current
    rules lower after tax incomes by more than 1 percent and costs
    the economy 164,000 jobs.
        I think we all want to simplify the number of itemized
    deductions and loopholes in the Tax Code, but we ought to use
    those savings to lower tax rates across the board. We found
    that if you were to eliminate most itemized deductions, except
    for the charitable deduction, home mortgage interest deduction,
    and use those revenues to lower tax rates across the board by
    10 percent, it would increase GDP by about 0.6 percent and
    create 577,000 jobs.
        On the business side, as we have already heard, everyone
    knows that the U.S. has the highest corporate tax rate in the
    industrialized world. Only Chad and the United Arab Emirates
    impose a higher corporate tax rate than we do, and we have an
    obsolete territorial system. So moving to a lower rate and--or
    we have an absolute worldwide, and moving to a territorial
    system would greatly simplify the tax system and make the U.S.
    more competitive.
        But just as importantly, we should replace our immensely
    complicated depreciation and cost recovery system with a much
    simpler system of full expensing of capital investments. Dollar
    for dollar, full expensing is one of the most pro-growth tax
    simplifications that Congress could enact.
        By our estimates, moving to a full expensing would boost
    GDP by over 5 percent, boost wages by over 4 percent, and
    increase the number of jobs by a million.
        Over the past year, Tax Foundation economists have gained
    special insights into what kind of tax policies boost economic
    growth, wages, jobs, and investment, and we have learned what
    not to do as well. We have scored the tax plans of every
    presidential candidate, as well as numerous tax plans proposed
    by Members of Congress, including some on this committee.
        And during this experience, we modeled every conceivable
    tax reform plan you can think of, flat tax, fair tax, Bradford
    X tax, value-added tax, and numerous plans that mix and match
    many of those features.
        And to one degree or another, these plans, the plans that
    produce the most economic growth tend to incorporate some of
    the lessons we have outlined here today. They simplify the Tax
    Code, they reduce marginal tax rates, they reduce taxes on
    capital, they reduce or eliminate the double taxation of
    savings and investment, and they move toward a neutral
    consumption tax base.
        So to wrap up, I hope that Members of this committee, as
    well as your fellow lawmakers, take some of these lessons at
    heart and move us down the road to fundamental tax reform as
    soon as possible. Thanks for your time. I welcome any questions
    you may have.
        Chairman BOUSTANY. Thank you, Dr. Hodge.
        [The prepared statement of Dr. Hodge follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BOUSTANY. Dr. Sullivan, you may proceed.

    STATEMENT OF DR. MARTIN SULLIVAN, CHIEF ECONOMIST, TAX ANALYSTS

        Mr. SULLIVAN. Good afternoon, Chairman Boustany, Ranking
    Member Neal, Members of the Committee, thank you for the
    privilege of appearing before you today.
        Tax reform presents many challenges for this subcommittee,
    but I believe in the current environment, the most critical of
    these challenges is reducing the harmful economic effects of
    the corporation tax, and doing so in a manner that is both
    fiscally responsible and does not reduce the progressivity of
    the tax system.
        Economists of all stripes have long recognized the
    shortcomings of the corporate tax, but in recent times, these
    problems have gotten much worse. In the olden days, these
    fellows will remember, the economic damage caused by the
    corporate tax was relatively small. The concern back then was
    that a U.S. corporation like GM or GE might reduce capital
    spending by a few percentage points if we raised the corporate
    tax. And in the olden days, most of the burden of the corporate
    tax was on shareholders who were at the top of the income
    scale.
        In our modern globalized economy, job-creating capital is
    highly mobile. Now, high corporate tax rates can induce both
    domestic and foreign multi-nationals to shift large chunks of
    their production and research out of the United States, and as
    a result, the burden of the corporate tax now falls
    increasingly on workers in the form of lost jobs and lower
    wages. And over time, these ill effects will only get worse.
        The rest of the world understands this. Every other major
    country has reduced its corporate tax rate. Most notably, in
    its latest budget, the United Kingdom has announced it will cut
    its corporate rate to 17 percent by 2020. In stark contrast,
    taking into effect State corporate taxes, the U.S. corporate
    tax rate is over 39 percent, the highest in the world.
        Criticizing the corporate tax is very easy. The hard part
    is figuring out how to pay for a lower corporate rate. The
    tepid response to Chairman Camp's tax reform plan pretty much
    proves that revenue neutrality within the corporate sector is
    not a useful guiding principle for 21st century tax reform. To
    promote long-term growth, we need to downsize our most
    economically damaging tax and substitute it with revenue from
    other sources.
        One option would be for the United States to follow the
    example of other nations and adopt a value-added tax. It would
    greatly enhance U.S. competitiveness if we could replace
    revenue from the capital-repelling corporate tax with a highly
    efficient consumption tax.
        Alternatively, replacing the corporate tax with a business
    cash flow tax with border tax adjustments, as proposed by
    President Bush's tax reform panel in 2005, would entirely
    eliminate the tax incentive to shift production out of the
    United States.
        Another job-creating approach would be to shift tax away
    from corporations and on to investors by increasing taxes on
    capital gains and dividends. The reason for doing this is
    simple. When you raise taxes on corporations, investments--
    investment moves to lower tax jurisdictions. When you raise
    taxes on investors, they could move, but they usually don't.
        Yet another approach for improving international
    competitiveness would be to raise taxes on immobile capital,
    such as real estate, to pay for reductions on mobile capital
    such as investment and manufacturing.
        On the international side, we need to banish the lockout
    effect from our international tax rules. To the extent we
    impose tax on foreign profits, we should levy that tax as
    profits are earned, not when they are distributed to the U.S.
    parent. We also need tough earning stripping rules. It makes no
    sense that foreign headquartered multinationals doing business
    in the United States should be tax advantaged over U.S.
    companies. We should also consider, as both President Obama and
    Donald Trump have proposed, limiting deductions on excessive
    corporate borrowing. This would equalize the treatment of
    corporate debt and equity, and provide revenue for reducing the
    corporate tax rate.
        In conclusion, I would like to stress, for the economy's
    sake, corporate tax reform should be both fiscally responsible
    and bipartisan. Corporate rate cuts should be fully paid for on
    a permanent basis without gimmicks or overly optimistic
    assumptions about growth and dynamic scoring.
        Reckless budgeting not only spooks the bond markets, it
    greatly dilutes the positive supply side effects of business
    tax cuts because there is a high probability those cuts will be
    rescinded when the rosy budget scenarios are not realized. And
    when it comes to corporate taxation, we don't need a seesaw
    battle between the political left and the political right. If
    one party is able to enact its tax agenda by a narrow margin,
    there is a high probability there will be a major change right
    after the next election.
        Corporate tax reform should be bipartisan, not simply
    because it is nice for both parties to get along, but because
    tax policy that is the outcome of bipartisan compromise reduces
    uncertainty, and uncertainty is a major impediment to
    investment and long-term economic growth.
        Thank you, Mr. Chairman. I will be glad to answer any
    questions.
        [The prepared statement of Dr. Sullivan follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BOUSTANY. I thank you all for your excellent
    testimony, and we will now proceed with a question and answer
    session, and I will start.
        I have long felt that as a country, we don't have a
    coherent foreign economic policy which looks at the strength of
    our own economy, domestically, and promotes growth here, and it
    also promotes top-of-the-line competitiveness abroad to put us
    in a strong economic position to lead. I just fundamentally
    believe that. And I have become increasingly concerned, over
    the last several years, that what we have as a Tax Code is a
    major contributor to that, and we have to start with
    fundamental tax reform.
        But--and I think all of you know, based on some of the work
    and things that I have written lately in a lot of my statement,
    I am really concerned about the competitive climate American
    companies here are facing, as well as abroad, and how this
    affects growth in the United States. And the recent global
    developments are very disturbing in my mind because if you look
    at OECD BEPS, State aid coming out of Europe, these
    investigations, they are clearly targeting American job
    creators overseas seeking to grab tax profits retroactively,
    increase the cost of doing business abroad. And our inertia in
    this, and Congress' inability or unwillingness to act rather
    than just simply talk about this is a problem.
        At home, I mean--and frankly, because of the inertia, the
    administration took it upon itself to issue the recent 385
    regulations, and I think these are punitive. They are actually,
    they are hurting American companies, and it is not just
    American companies that are large and trying to do business
    abroad, but it is also hurting companies and businesses here in
    the United States, making the United States less competitive,
    and a less attractive place to do business and invest.
        And I think, you know, yes, you guys have been in front of
    the committee for quite a while, numerous testimony--episodes
    of testimony. We have been just beating this dead horse. We
    have got to act and--but I wanted to at least have a clarifying
    moment, and this serves as that clarifying moment. In fact, my
    friend, the ranking Member and I joked a little bit about this
    earlier to the extent that we could probably have a unanimous
    consent agreement here let's just go reform the Tax Code and be
    done with it, but the fact is--you are there, right?
        Mr. NEAL. Yeah.
        Chairman BOUSTANY. There you go.
        So what--I mean, in light of what I just said about
    competitiveness and need for a coherent foreign economic policy
    for the United States to put us in a very competitive position,
    which encompasses not only growth here at home, but
    competitiveness abroad, would each of you just briefly comment
    on that in the time I have got left here?
        Mr. HODGE. Well, Mr. Chairman, I think we have reached a
    point in which either we define our tax base or the Europeans
    will. And right now----
        Chairman BOUSTANY. And they are doing it.
        Mr. HODGE [continuing]. Our major competitors are defining
    our tax base, and as you mentioned, they are trying to plunder
    it, and I think that is a real danger, not only to the economy,
    but also to the competitiveness of the United States. And the
    sooner that we move toward a competitive international tax
    system and lower the rate, as Mr. Sullivan has mentioned, as
    dramatically as possible, I would say around a 20--15 to 20
    percent in Federal corporate tax rate, the better. And the
    sooner that we will stop the hemorrhaging of profits abroad, we
    will stop the inversions, we will stop the plundering of our
    tax base, but it is up to us and we need to move quickly
    because they are not waiting for us.
        Chairman BOUSTANY. Thank you. Dr. Holtz-Eakin.
        Mr. HOLTZ-EAKIN. I think, you know, we need to recognize
    that. We have to stop playing defense. It is not a matter of
    just keeping the headquarters here or keeping our tax base or--
    we need to aggressively make this a place where people want to
    be, so that we attract global companies from abroad that are
    highly successful, and that we increase the pace of economic
    growth. And I think the challenge, frankly, is that when we did
    the Tax Reform Act in 1986, it began in the late 1970s with
    people like Dick Gephardt and Bill Bradley saying the Tax Code
    is hurting the average American. It is harming the economy, so
    that Joe, you know, Handyman is not getting what he should.
        We need the public education that says on a bipartisan
    basis, a better Tax Code contributes to a better standard of
    living in the United States, and we want to go get that for
    Americans. And if we just look we are playing defense to hold
    on to things for big corporations, I don't think we are going
    to make the sale.
        Chairman BOUSTANY. Thank you. Dr. Foster.
        Mr. FOSTER. Thank you, Mr. Chairman. One way to summarize a
    component of Dr. Sullivan's testimony is if you treat capital
    poorly, it is going to leave. Right now the Europeans are
    treating capital poorly. They are going to suffer a penalty for
    that. We need to treat capital better. We need to encourage it
    to come to this country.
        After the 1986 Tax Reform Act, the United States was the
    leader in tax policy worldwide. We, then, basically sat on our
    hands for three decades. We made a few changes at the margins,
    but didn't do very much. The rest of the world kept changing.
    They took the lead that we started with and kept doing it, and
    they continue to do it today with further rate reductions and
    so forth.
        As Dr. Holtz-Eakin said, we cannot play defense on this. We
    are already so far behind. It is more than just playing catch-
    up. If we have want to lead, if we want our economy to grow at
    faster than the 2 percent that Mr. Neal mentioned, we have to
    make this a place capital wants to come to and a place where we
    allocate capital wisely. So it is not just about making it a
    friendly place, but making it a rational place. We are not
    picking winners and losers. We are going to say we are going to
    have a neutral Tax Code, and we can all argue a little bit out
    on the margins what that means, but we understand the basic
    concept.
        We don't want to pick winners and losers. We are not going
    to do it through the Tax Code. We will let the markets figure
    out where the capital can go, but we want capital to
    understand, it is welcome here.
        Chairman BOUSTANY. Dr. Sullivan, you want to comment or----
        Mr. SULLIVAN. I would just add that I think the other
    panelists are absolutely correct. We want the United States to
    be a place that attracts capital, but we also have to be
    realistic about two impediments. Dr. Holtz-Eakin mentioned
    educating the American public. Look at what is going on now in
    this current election. Look at the economic populism. If
    anything, the American public will be less tolerant of business
    tax cuts now than they have ever been before, so we are
    actually moving in the wrong direction in that--unfortunately,
    in that dimension.
        And we have to think about the appearances of profit
    shifting, of tax shelters that are caught--whether they are
    just or unjust, how they are affecting the public's attitude
    towards business tax reduction. And the other thing we have to
    be very concerned about, and realistic about, is our budget
    deficits, which are going to be growing over the next decade.
    So it is one thing to want to lower the corporate tax rate. The
    hard part, of course, is finding out--is making the tough
    choices and finding the revenue to pay for that.
        Chairman BOUSTANY. Thank you. Mr. Neal.
        Mr. NEAL. Thank you, Mr. Chairman. To your point about the
    amount of time we have spent on this. I feel like I went to
    high school with all you guys. This is when the conversation
    started. But I also think it is a mindset that the four of you,
    given your institutional memories, would reinforce, and that
    is, Congress is made up more and more today of crusaders as
    opposed to legislators. I mean, the inability to hear what
    anybody else has to say about something that might work at any
    given time.
        So the ideology creates the intransigence. And so Dave Camp
    puts out a model, and that afternoon, 52 Members of his own
    side torpedo the model. You know, there was at least a time
    where we would have taken a look at that and said, well, maybe
    we can shape that part of it that they object to and that they
    might be more receptive to that down the road. But it is
    instant opposition. And we find ourselves back to the impasse
    on Tax Code where we, once again, all agree with the nature of
    the problem but none of us necessarily agree with the nature of
    what we need to do on the solution side.
        But let me speak to a moment on the issue of dynamic
    scoring. Really it was Dick Armey earlier in the 1990s who kind
    of hatched the idea in front of the Congress about dynamic
    scoring. One of the problems with dynamic scoring is it is
    always about tax cuts, where we find, again, the intransigence
    of trying to do a major highway bill.
        And I would submit that the way that the highway bill was
    done at the end of the session, not something that we ought to
    be crowing about, pretty poor way to do infrastructure. But at
    the same time, I have been pushing the idea, what about if we
    are going to exempt the notion of dynamic scoring as it relates
    to tax relief, what about the idea of using dynamic scoring for
    some investment in spending on long-held needs the America.
        And I would like the four of you to maybe speak to that
    directly, and then I am going to get around to the effective
    tax rate, because I think that bears consideration as well. So
    we can start from the--Mr. Holtz-Eakin, and move to the other
    side.
        Mr. HOLTZ-EAKIN. As you know, I am capable of going on at
    length about dynamic scoring. I will spare you.
        Mr. NEAL. Well, I didn't ask your favorite question today.
    I rehearsed it long and hard, but I didn't ask you because I
    knew what your answer was going to be.
        Mr. HOLTZ-EAKIN. Because tax cuts don't pay for themselves,
    and I knew you were going to ask that. You always ask me that.
        So I recently wrote a paper with Michael Mandel at
    Progressive Policy Institute on Dynamic Scoring of
    Infrastructure Spending, and there is no reason why dynamic
    scoring, which is simply good policy analysis, should apply to
    just one side of the budget. There are the usual implementation
    problems on the spending side as they are on the tax side, but
    I think it is something that has merit, and that certainly
    ought to be considered. And if you are going to have chairmen
    who have the power to say this is an economically significant
    piece of legislation, it should be dynamically scored, that
    should apply there as well.
        Mr. NEAL. Dr. Foster.
        Mr. FOSTER. Well, I think the first thing one has to note
    is, we talk about dynamic scoring and analysis, I have
    testified on it many times and studied it at great length, but
    the reality is we are in a very preliminary stage of
    understanding how to do dynamic analysis of tax policy. The Tax
    Foundation model is the state of the art, and they are in the
    process of learning how to do it.
        That said, there is no reason why the full range of
    policies--once the economic science can support the analysis,
    there is no reason for the full range of Federal policy not to
    be subject to that kind of analysis. When you are looking at
    legislation, if there is something a model can tell you about
    its economic consequences, you should have that information.
        Mr. NEAL. Mr. Hodge.
        Mr. HODGE. Well, as you know, Mr. Neal, the Tax Foundation
    does have a dynamic tax model. And one of the lessons that I
    try to teach people, and I do a lecture on it, we actually do
    public and private demonstrations, live demonstrations of the
    model so that people can see how it works. We pull back the
    curtain so that there is--it is not a black box. Well,
    actually, we can do--we would be delighted to do one here if
    you would like.
        But one of the things I try to point out to people is that
    the important element, or the important reason why you want to
    do dynamic scoring is because every tax change affects the
    economy differently. And what dynamic scoring does is it gives
    you an opportunity to understand the nuance differences between
    them.
        For instance, we took five different tax cuts that all had
    the same score of about $40 billion a year on a static basis,
    but doing it dynamically, you understand that a child tax
    credit has no impact on economic growth, but moving to full
    expensing actually has a substantially positive impact on our
    economic growth and can almost pay for itself over time. You
    want to understand those differences.
        We have also been responsive to folks who say, Well, you
    ought to do spending as well. And we are in the process of
    building out our tax model to what is known as a general
    equilibrium model so we can model the macroeconomic effects of
    spending as well, and we hope to have that portion of the model
    finished by the end of the year.
        Mr. NEAL. Would you let Mr. Sullivan answer the question as
    well?
        Mr. HODGE. My apologies for----
        Mr. NEAL. No, that is fine.
        Mr. SULLIVAN. Well, I would agree with Scott that the
    models are very good for educating Members on which policies
    some--you know, there is a whole range of economic policies,
    tax policies, some are better than others.
        But I think there are biases in the models. And it is not
    that the modelers are biased, but models that you can produce
    wide ranges of estimates. You can't emphasize enough the
    uncertainty. I could take you into a library and show you
    shelves of books that support high elasticity with lots of
    economic growth, and I can take you to another shelf of books
    that show you the exact opposite. So the uncertainty factor, I
    think, can't be emphasized enough.
        Chairman BOUSTANY. Mr. Hodge, you want to make--or Dr.
    Hodge, you want to make another comment?
        Mr. HODGE. Yeah. I want to point out that while there are
    differences among the models, they are all--they all tend to
    point in the same direction. So that our model, the JCT's
    model, you know, John Diamond's model at Rice University, all
    tend to point in the same direction, so they are not giving you
    competing estimates. They are all--they may be in a range, but
    if they all say that a policy promotes growth, it will promote
    growth. If they all say it has negative impact on growth, you
    can be sure of that. They may be a range, but at least you will
    have the confidence that all of these models are saying roughly
    the same thing.
        Chairman BOUSTANY. Thank you. Dr. Holtz-Eakin, briefly.
        Mr. HOLTZ-EAKIN. Real briefly, because I have said this to
    this group before. There is no more uncertainty in dynamic
    scoring than static scoring. And I can tell you all the
    terrible stories of my time in CBO scoring terrorism risk
    insurance, or death benefits for those killed in Iraq prior to
    the invasion, those things are fundamentally uncertain. There
    is nothing about this that should be considered different.
        Chairman BOUSTANY. Thank you. Mr. Reichert.
        Mr. REICHERT. Thank you, Mr. Chairman. So I really like the
    way, Dr. Foster, that you went into, you know, some language
    that people really understand, because you are talking to an
    old cop here. I am not a tax attorney or a CPA. I am just
    fortunate enough to be on this committee and learn from you and
    all these other smart people here.
        So you know, I think it is good that we put this in
    language where the average person can understand this and
    figure it out, because they do know, really, deep down what we
    need, and that is to simplify the Tax Code, right. They all
    feel, my constituents feel that--and I feel, over my career,
    that I have been working for the Tax Code. The Tax Code
    certainly is not working for me, and I think we need to turn
    that around so the Tax Code works for America, works for
    American workers, and American companies, and I think you have
    shared some ideas here that--and hopefully, we will get a
    chance to read the book coming out, Mr. Hodge, and get some--
    and get some further ideas.
        But you know, the whole--the whole idea of businesses--more
    businesses, growing businesses can make more stuff, to sell
    more stuff, to buy more stuff, to hire more people to make more
    stuff, people get, and I get that. What they don't get are
    terms like repatriation, inversion, innovation box, you know,
    dynamic scoring, none of that makes sense.
        Now, I have learned those, about those things over the past
    few years being on this committee, but if you had told me years
    ago as a cop driving around in my patrol car that I would have
    been going through the Tax Code line by line in my career some
    time, I would have shot myself in the foot, but I am happy to
    be here today.
        So I mean, it is complicated, and you all know that as
    well. Look how hard this has been for us to get to a point, you
    know, where we actually--I mean, we had this conversation
    yesterday in a hearing where we, as a panel, really need to
    come together, and this has got to be a bipartisan effort, like
    Dr. Sullivan has mentioned. Otherwise, it doesn't mean
    anything.
        Certainty is one of the things I hear back in my district
    all the time. If my business had certainty, if my family had
    certainty, and I could make these decisions and we can move
    forward and be productive and be, you know, optimistic about
    the future.
        So there is some things, too, that, you know, are occurring
    that are kind of out of Congress' hand, and you mentioned the
    competitiveness issue of the U.S. system and how, you know, and
    sort of following up on Dr. Boustany's, the chairman's
    comments, and encouraging capital in the U.S., I am curious
    what your thoughts are on the impact of some of the
    administration's recent decisions, especially the 385 guidance.
    And maybe, Dr. Holtz-Eakin, you can comment on that?
        Mr. HOLTZ-EAKIN. I think what the administration has done
    under Section 385 might best be characterized as desperate, but
    it is certainly not good tax policy, and is, in the long run,
    quite counterproductive. Their rulemaking has been predicated
    on the notion that they are going to stop deals that have been
    entered into in mergers and acquisitions. And if I am a foreign
    investor looking to locate someplace, the last place I want to
    go is a place where the rules change in midstream or after the
    fact. That is not good policymaking. And, you know, they can
    decide to defend why they did it, but I think it is a damaging
    step from the point of view of high quality tax policy.
        Mr. REICHERT. So your point is it is the uncertainty issue
    again and----
        Mr. HOLTZ-EAKIN. Or worse. They are certain that we are
    going to get them once they get here. That is not a good
    message to send.
        Mr. REICHERT. Yeah. Mr. Foster.
        Mr. FOSTER. Thank you, sir. I think the--something to keep
    in mind, at the U.S. Chamber, we--when this regulation came
    out, we quickly reached out to our Members to ask them what
    does this mean for you? Weeks and weeks later, they are still
    going through the process of trying to figure out what it means
    to them. These are the smartest people in the corporate tax
    world, and as you know, there is a lot of smart people in that
    world, and every day there is another, oh, my gosh, look what
    that does. Another transaction, another normal business
    relationship suddenly is exposed. Another ownership pattern
    that is perfectly normal, it has nothing to do with the kinds
    of loopholes or behaviors that one might associate with bad
    behavior, perfectly normal transactions and arrangements are
    now subject and questioned.
        The administration wants to move very quickly to finalize
    this regulation, as we understand. Well, they need to
    understand it will be many, many weeks before the people who
    are subject to this regulation know what it means, and many
    weeks more before they can formulate any kind of comment on
    what it would mean, and perhaps there are actually a few things
    that the wizards at the Treasury Department haven't quite
    thought of yet.
        Mr. REICHERT. Okay. I yield back. Thank you, Mr. Chairman.
        Chairman BOUSTANY. I thank the gentleman.
        Mr. Doggett, you are recognized.
        Mr. DOGGETT. Mr. Chairman, and thank you, Members. Thanks
    to each of our witnesses for your comments.
        Mr. Hodge, if I understand, you believe, on the business
    side, we should simplify our Code by permitting businesses to
    expense immediately all assets that they might acquire instead
    of depreciating them, regardless of the amount, or the useable
    life of the asset?
        Mr. HODGE. That is correct.
        Mr. DOGGETT. And on the individual side, you believe that
    we should replace deductions with a larger standard deduction
    but eliminate itemized deductions?
        Mr. HODGE. I think that would greatly simplify the Code.
    Yes, definitely.
        Mr. DOGGETT. So you oppose the home mortgage interest
    deduction?
        Mr. HODGE. We have looked at the economics of it.
    Economists are on different sides of that issue.
        Mr. DOGGETT. What side are you on?
        Mr. HODGE. I would trade that off for a lower rate. I think
    you would have better economic performance.
        Mr. DOGGETT. Is the same true of charitable deductions?
        Mr. HODGE. It would, yes.
        Mr. DOGGETT. And is the same true of a deduction for State
    and local income and sales tax?
        Mr. HODGE. That one especially, I think, should be
    eliminated for lower rates immediately.
        Mr. DOGGETT. Thank you. Dr. Sullivan, directing your
    attention, especially to one of your concluding realistic
    recommendations. If I understand it, if your favored approach
    of substituting a value-added tax for the corporate tax doesn't
    get adopted anytime soon, you have emphasized the importance of
    assuring that any changes in corporate rates are paid for on a
    permanent basis without gimmicks or overly optimistic
    assumptions.
        So you believe, to use the term we are most familiar with,
    that any changes in our corporate tax structure, be they
    limited to one type of business entity, or one type of business
    transaction, ought to be revenue neutral?
        Mr. SULLIVAN. Yes.
        Mr. DOGGETT. And Dr. Holtz-Eakin, do you believe the same
    that changes in corporate taxes should be revenue neutral?
        Mr. HOLTZ-EAKIN. No. I think they should be budget neutral,
    so you could do the offsets on the spending side. I think that
    would actually be quite desirable.
        Mr. DOGGETT. You would do it on the spending side, and I am
    sure I know the position of our other witnesses on that. With
    reference to how one achieves revenue neutrality, Mr. Camp was
    not richly rewarded for being willing to say how, but he did
    suggest on--as part of his proposal, tax pay-fors that included
    changing the way advertising expenses are charged, changing
    accelerated depreciation, a problem, I guess, Mr. Hodge would
    eliminate for us, and repealing last-in/first-out inventory.
    Are those changes that you think are pay-fors we should be
    adopting, Mr. Sullivan? Dr. Sullivan?
        Mr. SULLIVAN. I think that accelerated depreciation is
    something that does promote economic growth. If we moved
    towards expensing, that would help promote economic growth. So
    we--I think one thing we have learned from the recent debate on
    tax reform and from the dynamic scoring coming out of the joint
    committee is that we need lower rates that helps promote
    economic growth. Expensing helps promote economic growth.
        And so once you take out accelerated depreciation as a
    revenue raiser, you are really running out of base broadeners
    inside the corporate tax. So that is why we need to look
    outside the corporate tax for additional revenues. And one--I
    think one possibility that is getting a lot of attention is
    looking at raising the taxes on capital gains and dividends in
    order to pay for a lower corporate rate because that would
    maintain the progressivity of the tax system.
        Mr. DOGGETT. You also refer, perhaps in somewhat more
    neutral terms than the chairman, to the OECD-based erosion, the
    BEPS project. And again, from a realistic standpoint that
    substantial value creation, sales and other indicators in a
    country is becoming increasingly the worldwide standard among
    advanced economies. Is that your view, and what is your
    perspective on the base erosion project?
        Mr. SULLIVAN. Well, I think what we are seeing, the base--
    the fundamental--you know, it is very complicated, thousands of
    pages long. But I think the two things that you are seeing from
    the base erosion, the BEPS project is, one, we want to get rid
    of cash box, tax haven companies where there is no economic
    activity, but a lot of profits toward it, and I think the BEPS
    project is going to make a lot of progress along those lines.
        Mr. DOGGETT. You think it is positive?
        Mr. SULLIVAN. Yes, because of--that, in the long run, we--
    it is not helping U.S. businesses to have the terrible
    appearance of not--of stateless income and----
        Mr. DOGGETT. Stateless income.
        Mr. SULLIVAN [continuing]. Abusive tax planning.
        Mr. DOGGETT. Thank you. I certainly agree.
        Chairman BOUSTANY. We thank the gentleman. Mr. Kelly.
        Mr. KELLY. Thank you, Chairman. Thank you all for being
    here. But I do think this is kind of recurring, right. We just
    keep talking about this, and I don't know if it was the sheriff
    that said it was somebody that said there was an old saying you
    keep shooting yourself in the foot and wonder why you are
    limping.
        Look, we have been talking about this for so long. Maybe
    some of you that can go back in time, in 1986, it was really
    tax reform. What was the magic then? What was so obvious then
    that is so clouded now?
        Mr. HOLTZ-EAKIN. As I said earlier, the 1986 reform started
    in the late 1970s with people on both sides of the aisle, the
    Dick Gephardts, Bill Bradleys, the Democratic side, the Alvin
    Ross, Jack Kemps on the Republican side and others, Art
    Laffers, talking about the damaging impact of the U.S. tax
    system and how this was something that was hurting average
    Americans.
        It took a decade of public education, and then it took a
    sitting President to run for re-election on the promise of
    doing tax reform, as Ronald Reagan did, and it took probably
    three or four legislative deaths and a pretty good beer-infused
    break in an Irish pub to get it done. It is really hard, but I
    think the essential piece there was the bipartisan nature. I
    want to emphasize that. I think Mr. Sullivan is right about
    that. And the public education.
        Tax reform for the elites, businesses getting something for
    them that doesn't appear to be connected to the average
    American, is not going to fly.
        Mr. KELLY. Okay. So looking at Mr. Neal, the idea is to get
    more Irish legislators. Is that right?
        Mr. HOLTZ-EAKIN. We know that it is not just going to the
    pub, because they tried that.
        Chairman BOUSTANY. It is really about the beer.
        Mr. NEAL. Sure, we got that part of it down pretty good.
        Mr. KELLY. Mr. Foster. Anybody, because this is----
        Mr. FOSTER. Yes, sir.
        Mr. KELLY [continuing]. So reoccurring that----
        Mr. FOSTER. What Doug Holtz-Eakin said about the history is
    terribly important. I date the 1986 Act's birth with a hearing
    of the Joint Economic Committee chaired by then-Senator Lloyd
    Bentsen of Texas, who began an exploration of the question of
    the capital gains tax, and it was that discussion which then
    led to legislation, which then led to further discussion and so
    forth, culminating 8 years later in the 1986 Tax Reform Act,
    which was, in fact, a bipartisan process.
        One of the interesting aspects of that is they--the
    proponents on both sides that Doug mentioned, had to still live
    down to an essential. That is what I tried to do in my
    testimony. What is comprehensive tax reform about, and as I
    described it, it is more businesses doing more business. They
    had to still live down to lower rates, a broader base. It was
    something everyone could understand. And as long as you adhered
    to that mantra and the product reflected that, you were
    successful, and that was something that both sides could agree
    on. It is still the correct mantra.
        Mr. KELLY. Let me just ask it because we are going to run
    out of time here, but you know, if this was an athletic team or
    if this were a business, and you had an opportunity to look at
    everybody else that you compete against. I mean, really a deep
    dive into what it is that is allowing them to capture market,
    it would be hard to be sitting here today and saying we still
    don't quite understand why these people are leaving the United
    States. They just must be un-American or selfish or something.
        Do you remember the Pogo comic strip in the 1950s? Another
    Irishman, a guy named Walt Kelly, Pogo said we have met the
    enemy, he is us. But I look at you all, and you all can go real
    deep into--listen, I am just a guy that tried to find the best
    people to do the job and then stay out of their way and let
    them do it.
        I am not like Mr. Renacci who understands taxes or loves
    taxes. I never understood them. I never loved paying them, but
    I did it anyways. The purpose of you being here today, though,
    is to, again, reiterate, this is like Captain Obvious, we are
    losing at the global level, and we can look around us about
    what everybody else is doing to capture our markets, and we are
    sitting here thinking what would it take for us to wake up?
        And so the question about 1986 was, a House working with
    the Senate working with the White House where everybody had the
    same goal, and that was to take advantage of all the things
    that we have, one-fifth to the world's fresh water, an ability
    to feed ourselves without having to rely on anybody else, more
    sources of energy that anybody in the world. We could build
    geopolitical relationships that would end some of this
    craziness that is going on, and we are sitting here and still
    trying to figure out what is the problem?
        I mean, isn't it so obvious? You guys must get to the point
    where you feel like you are hitting yourself in the head with a
    hammer, and the only reason you do it is because when you stop,
    it makes you feel better, but this is just insane.
        So I can't tell you how much I appreciate you being here.
    You don't need a lecture from me. Listen, you guys are deeper
    than the Pacific Ocean when it comes to tax policy. I am just a
    guy that is looking at it and thinking, I really do know what
    the problem is. It is people like us sitting here not able to
    get along with other people like us serving the American people
    and their best needs. It is pretty obvious.
        No response from everybody. I know you all are shaking your
    head. Yeah. Okay. All right. We are all together. Let's go.
    Let's go get them.
        Chairman BOUSTANY. Mr. Renacci. Follow that.
        Mr. RENACCI. Thank you, Mr. Chairman. Well, first, I am
    going to correct my colleague, Mr. Kelly. It is not that I like
    taxes. I had to live with taxes for 30 years, and because of
    that, I learned the system. And I have to say that I even went
    all the way back. I was thinking, I actually was involved in my
    first CPA firm prior to the 1985 and 1986 changes, so I got to
    see prior and I got to see the changes and had to live through
    all that as well.
        But I am going to ask you all some yes or no questions
    because I want to run through some things, and then I have got
    some questions that might take a little longer. But first
    question. I think it is important to understand who bears the
    burden of our high corporate rate. Isn't it true that the
    burden of the corporate income tax does not ultimately fall on
    corporations but, rather, on the people, the customers, the
    workers, the investors?
        And the reason I ask that question, I say that to people,
    they look at me, they don't understand what I am saying. But
    ultimately, I try and tell them, a business will not be in
    business if it doesn't pass on its corporate tax. So would you
    all agree, I take it, yes or no, across the panel?
        Mr. Eakin.
        Mr. HOLTZ-EAKIN. Yes.
        Mr. FOSTER. Yes.
        Mr. HODGE. Yes.
        Mr. SULLIVAN. Yes and then some.
        Mr. RENACCI. That was easy. It is clear that we have an
    outdated and anticompetitive Tax Code. And it is also clear how
    harmful corporate income taxes are to economic growth. Would
    moving to a consumption-based tax system be more pro-growth
    than a reform that sticks with the traditional income-based
    system?
        Mr. HOLTZ-EAKIN. Yes.
        Mr. FOSTER. Yes.
        Mr. HODGE. Yes.
        Mr. SULLIVAN. Yes.
        Mr. RENACCI. Wow. Okay. Next question. Would a zero
    corporate income tax with a single-digit consumption tax give
    us the most competitive tax system in the world?
        Mr. HOLTZ-EAKIN. Yes.
        Mr. FOSTER. That would depend on everything else going on.
    That's too general a question.
        Mr. RENACCI. That is all right. I don't expect all yeses.
        Mr. HODGE. Yes.
        Mr. SULLIVAN. Yes, if it is paid for.
        Mr. RENACCI. Okay. Over the last 3 decades, the average
    marginal corporate income tax rate among OECD countries has
    fallen from 48 percent to under 25 percent, and since 2000, we
    are one of only three of the 34 OECD countries that has not cut
    their corporate tax rate. Given that other OECD countries have
    a national level consumption tax, would other OECD countries
    have been able to cut their corporate income tax rates without
    increasing their VAT, value added tax, or the GST, goods and
    services tax? So would they have been able to cut their taxes
    without increasing the VAT or the GST tax?
        Mr. HODGE. Some have and some haven't. Canada, for
    instance, has cut their corporate tax rate without raising
    their GST. Some other countries, I think the U.K. may have
    ticked it up a little bit.
        Mr. RENACCI. How did they pay for it? I guess that is why I
    am asking the question.
        Mr. HODGE. Yeah, Marty?
        Mr. SULLIVAN. They raised a lot of other taxes. They have a
    bank tax. They reduced their depreciation allowances. They have
    a carbon tax. So they looked at other sources of revenue to pay
    for what is going to be a 17 percent rate.
        Mr. HODGE. But the Canadians, on the other hand, I have
    seen their corporate tax revenue's fairly stable, I would say.
        Mr. SULLIVAN. Yeah.
        Mr. HODGE. And a lot of it is because of profit shifting
    out of the United States to Canada. So they have been the
    beneficiary of our high tax rate by lowering theirs.
        Mr. RENACCI. Okay. I got to keep moving. Would raising the
    standard deduction and eliminating most itemized deductions
    provide a simple tax system for individuals without
    discouraging work and investment?
        Mr. HODGE. It depends.
        Mr. HOLTZ-EAKIN. Yeah. Depends how you do it.
        Mr. SULLIVAN. Yeah.
        Mr. RENACCI. Okay. Everybody is kind of shaking their head.
    Depends, yes. I mean, again, I am just trying to say----
        Mr. SULLIVAN. It would certainly simplify it.
        Mr. RENACCI [continuing]. Most people say if we simplify
    it----
        Mr. HODGE. I think that is one of the entries in our book,
    and you will know in 2 weeks when we release it.
        Mr. HOLTZ-EAKIN. So the mantra is low rate, broad base. You
    are keeping the same narrow base in a different form, or the
    raise.
        Mr. RENACCI. Okay. So let's go to this. So has the model of
    an entity-based tax with fully expensing been adopted by any
    other OECD country?
        Mr. HODGE. Say that again.
        Mr. RENACCI. A model of an entity-based tax with fully
    expensing been adopted by any OECD country?
        Mr. HOLTZ-EAKIN. I don't think so.
        Mr. FOSTER. I don't think so.
        Mr. HODGE. I don't think so.
        Mr. SULLIVAN. I don't think so, no.
        Mr. RENACCI. The answer is no. I just wanted to see if you
    would agree to it.
        Mr. HODGE. This is a test.
        Mr. RENACCI. So let me ask the question about fully
    expensing. I don't have a lot of time left on fully expensing.
    Because, look, I am a big believer in fully expensing, but here
    is the downside and this is from living in the real world. I
    always use Mr. Kelly as my example. He has a car dealership, I
    have a car dealership. I have cash, he has no cash. I can buy
    my dealership, he can't buy the dealership. He has to lease it,
    I can buy. I am going to fully expense my building. I am not
    going to pay any taxes. He is going to lease his building. He
    is going to pay taxes.
        Fully expensing is good in the sense if you have cash. It
    hurts the guy who doesn't have cash. That is coming from a guy
    who started his business with no cash. Tell me if you agree or
    disagree with that. This is when you stump the economists.
        Mr. FOSTER. I think I mostly disagree, because you leased
    it from a company that expensed it. So the savings from the
    leasing company expensing that building, then get passed
    through to you in a competitive market.
        Mr. HODGE. Right.
        Mr. RENACCI. But that is not the case, because I will pay--
    so I will give you a better example. And I know I am running
    out of time. I was in the industry. I was in the nursing home
    industry. I had 23 facilities. I had $120 million in assets. I
    would have expensed those fully and I wouldn't have paid a dime
    of tax over 20 years. The guy who had the lease and had no
    cash, he would have been paying taxes. Somebody has to pay
    taxes in the fully expensing model. It is the guy who can't
    fully expense. And----
        Mr. HOLTZ-EAKIN. That is right, because we want the people
    who are making the investment, even if it is the leasing
    company, to have the appropriate tax incentives.
        Mr. RENACCI. So the----
        Mr. HOLTZ-EAKIN. If you want a Tax Code designed for
    growth, you have to reward people generating growth. And the
    leasing company that builds the facility is doing it.
        Mr. RENACCI. The only issue there is that Mr. Kelly, if he
    had 12 to 23 dealerships and I had 23, he could not be able to
    compete with me. We will leave it there. I know I am running
    out of time.
        I yield back.
        Chairman BOUSTANY. I thank the gentleman.
        Mr. Reed.
        Mr. REED. Well, thank you, Mr. Chairman, and thank you to
    the panel for kind of taking up my counterpoint to Mr.
    Renacci's point that we had that conversation not too long ago.
    So I appreciate those comments.
        You know, we are talking a lot here today about business
    reform. I want to focus a little bit more maybe on the
    individual side too as we deal with this issue. Seems to be a
    broad agreement as where we need to go on the business side.
    But I want to really stand up for the folks back in my
    district, for example, Western New York, a rural district. I
    want to talk about the mom-and-pops. I want to talk about the
    individuals there that are struggling under this broken Tax
    Code.
        So could any of you, as we deal with the goals of tax
    reform, as we deal with that, why do the individuals back in my
    district need tax reform today? Can you give me examples of
    what they are dealing with that maybe we need to highlight and
    be aware of as we go forward in tax reform?
        Mr. Hodge, Mr. Sullivan. We will go with Mr. Sullivan.
        Mr. SULLIVAN. I think the most important thing for small
    business and the easy--is simplification. All the data show
    that, you know, we all want simplification. Large businesses
    want simplification, individuals want simplification. But for
    small businesses, it is very expensive for them, and I think
    the best thing we could do for small business is tax
    simplification.
        Mr. REED. Tax simplification. In order to achieve tax
    simplification for the small businesses or the individuals,
    where should the priority be focused? I mean, obviously, we are
    talking about raising the standard deduction, full expensing
    rather than keeping track of archaic depreciation schedules and
    everything else. Would you agree those are types of concepts we
    should be looking at in regards to individual and small
    business?
        Mr. Eakin.
        Mr. HOLTZ-EAKIN. I think those things are important. If you
    think about all the discussion of sort of base broadening on
    the corporate side, that is going to flow over to the
    passthrough entities who are, in the end, the moms-and-pops. If
    they are not worrying about a thousand special tax rules that
    deal with advertising and foreign sales and this and that, then
    they just have a nice simple base with low rates, cash
    accounting, it will be much easier for them to comply.
        Mr. REED. And so going along those lines, and especially
    since a lot of folks down here down in D.C. are struggling with
    the handcuffs of revenue neutral, distributionally neutral and
    those types of conversations, how do you quantify that
    simplification for--like when I had a small business, I will
    tell you one of the things that frustrated me, when I dealt
    with my accountant, he would say, hey, Tom, I need you to find
    XYZ. All right, hold on. I got to stop everything I am doing. I
    have to go over here. Two weeks later, I get him the stuff. And
    the one time he said, oh, I forgot to tell you, I already had
    that information. I almost fired him on the spot. But that was
    a whole other situation.
        But how do you quantify those hours that I spent in the
    basement looking for receipts for an accountant that were
    really it was just because he needed to comply with a complex
    Code? How do you quantify that? How do we do a better job of
    putting a number on that?
        Mr. Hodge.
        Mr. HODGE. Well, actually, I put a number on that in my
    testimony. New data has come out of Reginfo, it is out of OIRA,
    that calculates the time in which we comply with OIRA's
    paperwork. And they have an account of all the provisions of
    the Tax Code and how many hours that we take as a Nation to
    fill out those forms. It now adds up to $409 billion a year.
        Mr. REED. Amen. So in your experience dealing in, Mr.
    Holtz-Eakin, I know on the CBO side, and you guys dealing with
    joint tax, what has been your experience with joint tax and
    their score mechanisms and their rules on scoring? Have they
    been really good at quantifying the hundreds of billions of
    dollars in simplification benefit that we are going to be
    seeing?
        Mr. HOLTZ-EAKIN. I can't speak for the joint committee, but
    the CBO is not good at that, doesn't even try.
        Mr. REED. Thank you. I thought that was the case.
        Mr. HODGE. And they are not in our economic model. Those
    are a side calculation from our macroeconomic model.
        Mr. REED. And that is one of the things I think I have to
    wrestle with down here in Washington getting in my relatively
    short time here since 2010, is recognizing we need good policy
    to lead this conversation. And a lot of times we wrestle in
    D.C., in this Beltway bubble, with the handcuffs of the score
    as opposed to recognizing there are going to be these other
    consequences, positive consequences of tax reform that really
    should be brought into the debate and say, look, if you want to
    hit me with the score, let me just hit you with the
    commonsense. Let me just hit you with the benefit that I am
    going to hear from my residents of having a simpler, easier
    Code to deal with.
        Is that a fair--is that a fair commonsense position to be
    able to take back to the district and say, this is why we are
    doing what we are doing?
        Mr. HOLTZ-EAKIN. I think that is very important because in
    the end, scores are measures of the budget cost of policy.
        Mr. REED. Right.
        Mr. HOLTZ-EAKIN. They don't say anything about the
    benefits. You have to talk about the benefits because that is
    why you are doing it.
        Mr. REED. And in 1986, did they do a good job? Is that a
    lesson we can learn from the 1986 reform? Did they do a good
    job of getting that out there?
        Mr. HODGE. No.
        Mr. FOSTER. No.
        Mr. HOLTZ-EAKIN. No.
        Mr. SULLIVAN. No.
        Mr. REED. And how best can we get that information out
    there, other than through the organizations, various
    organizations you represent? How do we get that out there?
        Mr. HOLTZ-EAKIN. I would argue it is you and all of your
    colleagues talking it at home. You know, for example, the point
    Mr. Sullivan made about the fact that our corporation income
    tax is increasingly hurting the wages of workers. They have a
    stake in getting this done, but they don't know it. And you are
    the best way to educate them of that.
        Mr. REED. And I appreciate that and I exactly agree with
    you.
        So with that I yield back. Thank you, Mr. Chairman.
        Chairman BOUSTANY. I thank the gentleman.
        Mrs. Noem, you are recognized.
        Mrs. NOEM. Mr. Sullivan, I found your testimony
    interesting. It says: As difficult as it has been in the past
    to enact stand-alone business tax cuts, the political
    environment now is probably less favorable to business tax
    relief than at any other time in living memory. And then you go
    into talking about kind of the political environment that we
    are living in this year. And it makes me think about other
    countries because they have, obviously, enacted business tax
    reform. Do they not have a political environment in these
    countries that has demonized businesses?
        Mr. SULLIVAN. You know, it is a puzzling question, because
    on the one hand in other countries, the outrage over loopholes
    and profit shifting is even larger, like in the U.K.----
        Mrs. NOEM. Right.
        Mr. SULLIVAN [continuing]. It is a very, very big political
    issue. It is a front-burner issue. But on the other hand, the
    United Kingdom is able to have a 17 percent corporate tax rate.
        Mrs. NOEM. Right. Right.
        Mr. SULLIVAN. So it is a little bit puzzling. And the only
    thing, only suggestion I can make is, I think what the U.K.,
    and I was just in Ireland, what they have done is they have
    really focused on cracking down on loopholes, on what their
    voters perceive as being abuse. So they get that out of the way
    and then they can focus on providing tax benefits that really
    make a difference. So clearing, it is not just a matter of
    broadening the base and lowering the rates.
        Mrs. NOEM. Well, somebody said that earlier. I think it was
    Mr. Foster said the mantra is lower rates, broader base. And my
    question I wrote, does that still work? I mean, is that still
    enough?
        Mr. FOSTER. Enough as a way of communicating, yes. I think
    people can understand that. You have to elaborate a little bit,
    have a discussion. Okay, what does broadening the base really
    mean, because people will get a little nervous when you talk
    about that. So you explain what it means and what it doesn't
    mean. But then it is an expression they can sort of get and
    then you just say it again. And, oh, yeah, I remember, they
    were talking about that. That is a good concept.
        It does work because it is something that people can
    understand. And you can elaborate on it just a little bit
    without getting into a lot of detail to reassure them that it
    doesn't mean that they are going to lose something they really
    care about.
        Mrs. NOEM. Well, we use a lot of words when we talk about
    tax reform. We use simplicity, complexity, efficiency. Does
    growth still trump everything? Should we evaluate every single
    proposal that comes before this committee--and we have to keep
    our priorities straight. So should our number one priority be
    what gives you the most growth? You all agree with that?
        Mr. HODGE. I believe absolutely.
        Mr. FOSTER. Absolutely.
        Mr. SULLIVAN. Absolutely.
        Mr. HOLTZ-EAKIN. Absolutely. It is the paramount issue of
    the time.
        Mrs. NOEM. Mr. Hodge, you did your modeling that you talked
    about. You have run many of the candidate's plans through your
    modeling. What is the one thing that surprised you the most
    from watching all of those different plans? And I would be
    interested in seeing you run some of the plans that people have
    on this committee that have sponsored running through your
    modeling process too.
        What surprised you the most about the plans that you saw
    going through the modeling process, and what gave you great
    growth results when you ran them through the modeling process?
        Mr. HODGE. Well, here is the political irony, that the tax
    changes that produce the most economic growth, and that is
    really cutting the cost of capital, are the least politically
    popular that you can imagine, cutting the corporate tax rate,
    moving to full expensing, integrating the corporate or business
    income tax system. Whereas the tax cuts or tax changes that are
    most popular, cutting individual tax rates, child tax credits,
    education credits, have the least impact on economic growth.
        So that is the one challenge that you are going to have, is
    going out and trying to sell comprehensive tax reform in a way
    that is both politically popular but most pro-growth, and it is
    a real challenge.
        In 1986, they put an emphasis on cutting individual tax
    rates and, actually, it pushed some of the economic burden over
    on businesses. And I don't think it had quite the growth effect
    it could have had had they not done some of that shifting.
        Mrs. NOEM. Mr. Foster, you said in your testimony that tax
    reform should ensure industry-specific neutrality. What do you
    mean by that? Because there is no way to do tax reform--I don't
    agree that tax reform should be viewed through the lens of
    neutrality just because how much more complicated do we make
    the Tax Code in our provisions when we are constantly trying to
    keep everything equal for everybody? So tell me a little bit
    about what you mean. I know about not specifically hitting this
    industry hard because we hate this industry and the way it
    delivers energy or certain specifics, but what did you mean by
    putting that in your testimony?
        Mr. FOSTER. What I meant is a specific form of neutrality.
    So we are not talking about revenue nor distributional. We are
    talking about economic neutrality. What we have today is an
    economy that is incredibly complicated and a Tax Code that is
    incredibly complicated. The two intermixing in sometimes very
    unfortunate ways. We have a system now where the Tax Code is
    dictating where businesses should invest and how they should
    operate. That is the nonneutral.
        Mrs. NOEM. Okay.
        Mr. FOSTER. What I am talking about is getting rid of all
    of that.
        Mrs. NOEM. That is what I wanted to clarify. Is there
    anything new today that you guys have--I am out of time, I
    realize--but something from the last time you testified before
    this committee, is there something new that you have learned
    since then that you believe needs to be a part of our tax
    reform discussions? Or do you feel like you are just back here
    delivering the same message?
        Mr. HODGE. Well, the estimates on the hourly time that it
    takes to comply with the Tax Code has been increased by 50
    percent, according to the most recent estimates.
        Mrs. NOEM. Okay.
        Mr. HODGE. That is a shame. Time is the most precious thing
    that we have as human beings because we can't get it back. And
    the more time we comply with the Tax Code, I think is immoral.
        Mrs. NOEM. Okay.
        Mr. HODGE. And we can't get that time back. And I think you
    have an obligation to reduce the amount of time that we have
    complying with the tax system so that we can have more time for
    ourselves.
        Mrs. NOEM. As a mom who is in Washington, D.C. away from
    her children every single week hoping we can do tax reform,
    which is the reason I came here, I totally understand what you
    are saying. I am tired of wasting time too.
        I yield back, Mr. Chairman.
        Chairman BOUSTANY. Thank you.
        Gentlemen, we thank you for your testimony. It has been
    helpful. I hope we will now start the ball rolling on substance
    on tax reform. That is my hope. I think all of us share that
    goal. But we do thank you for being here to spur us on with the
    need for tax reform.
        Please be advised that Members will have 2 weeks to submit
    written questions to be answered later in writing. Those
    questions and your answers will be made part of the formal
    record.
        And with that, the subcommittee stands adjourned.
        [Whereupon, at 3:35 p.m., the subcommittee was adjourned.]

                           Submissions for the Record

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     [all]