    [House Hearing, 116 Congress]
    [From the U.S. Government Publishing Office]

                    THE 2017 TAX LAW AND WHO IT LEFT BEHIND

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

                                    HEARING

                                   BEFORE THE

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

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION
                                   __________

                                 MARCH 27, 2019
                                   __________

                               Serial No. 116-15
                                   __________

             Printed for the use of the Committee on Ways and Means

                      [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                  ___________

                        U.S. GOVERNMENT PUBLISHING OFFICE

    36-241                    WASHINGTON : 2020

                          COMMITTEE ON WAYS AND MEANS

                    RICHARD E. NEAL, Massachusetts, Chairman

    JOHN LEWIS, Georgia                  KEVIN BRADY, Texas, Ranking Member
    LLOYD DOGGETT, Texas                 DEVIN NUNES, California
    MIKE THOMPSON, California            VERN BUCHANAN, Florida
    JOHN B. LARSON, Connecticut          ADRIAN SMITH, Nebraska
    EARL BLUMENAUER, Oregon              KENNY MARCHANT, Texas
    RON KIND, Wisconsin                  TOM REED, New York
    BILL PASCRELL, JR., New Jersey       MIKE KELLY, Pennsylvania
    JOSEPH CROWLEY, New York             GEORGE HOLDING, North Carolina
    DANNY K. DAVIS, Illinois             JASON SMITH, Missouri
    LINDA SANCHEZ, California            TOM RICE, South Carolina
    BRIAN HIGGINS, New York              DAVID SCHWEIKERT, Arizona
    TERRI A. SEWELL, Alabama             JACKIE WALORSKI, Indiana
    SUZAN DELBENE, Washington            DARIN LAHOOD, Illinois
    JUDY CHU, California                 BRAD R. WENSTRUP, Ohio
    GWEN MOORE, Wisconsin                JODEY ARRINGTON, Texas
    DAN KILDEE, Michigan                 DREW FERGUSON, Georgia
    BRENDAN BOYLE, Pennsylvania          RON ESTES, Kansas
    DON BEYER, Virginia
    DWIGHT EVANS, Pennsylvania
    BRAD SCHNEIDER, Illinois
    TOM SUOZZI, New York
    JIMMY PANETTA, California
    STEPHANIE MURPHY, Florida
    JIMMY GOMEZ, California
    STEVEN HORSFORD, Nevada

                         Brandon Casey, Staff Director

                     Gary J. Andres, Minority Chief Counsel

                               C O N T E N T S

                                   __________

                                                                       Page

    Advisory of March 20, 2019, announcing the hearing...............     2

                                   WITNESSES

    Elise Gould, Ph.D, Senior Economist, Economic Policy Institute...    13
    Jason Oh, Professor of Law, University of California Los Angeles
      School of Law..................................................    29
    Christopher M. Shelton, President, Communication Workers of
      America........................................................    39
    Nancy Abramowitz, Professor of Law and Director of the Janet R.
      Spragens Federal Tax Clinic, American University Washington
      College of Law.................................................    50
    Douglas Holtz-Eakin, Ph.D, President, American Action Forum......    59

                        MEMBER QUESTIONS FOR THE RECORD

    Rep. Kevin Brady to Douglas Holtz-Eakin, Ph.D....................   179
    Rep. Stephanie Murphy to Professor Jason Oh......................   180

                       PUBLIC SUBMISSIONS FOR THE RECORD

    Minnesota Council of Foundations.................................   182
    Ms. Tara Register................................................   183
    Michigan Nonprofit Association...................................   184
    Coalition for a Prosperous America...............................   186
    American Citizens Abroad Inc.....................................   190
    Center for Association Leadership................................   196
    Bond Dealers of America..........................................   198
    Professor Caroline Bruckner, American University.................   204
    Church Alliance..................................................   213
    Council on Foundations...........................................   216
    LPL Financial LLC................................................   220
    Philanthropy Massachusetts.......................................   223
    Libin Zhang......................................................   227
    Actors' Equity Association.......................................   230
    Mazars USA.......................................................   232
    Center for Fiscal Equality.......................................   234
    NFIB.............................................................   243
    Public Citizen...................................................   249
    Association of Art Museum Directors..............................   253
    United Philanthropy Forum........................................   256
    Economic Policy Institute........................................   258
    Credit Union National Association................................   297

                    THE 2017 TAX LAW AND WHO IT LEFT BEHIND

                                  ----------

                           WEDNESDAY, MARCH 27, 2019

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

        The Committee met, pursuant to call, at 10:00 a.m., in Room
    1100, Longworth House Office Building, the Honorable Richard E.
    Neal [Chairman of the Committee] presiding.
        [The advisory announcing the hearing follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman NEAL. The Committee will come to order. Good
    morning, and I want to welcome our witnesses and the audience
    members, and I want to thank everyone for being here today.
    Today, the Committee begins its long overdue examination of the
    2017 tax law that passed in a mere 51 days without any hearings
    or expert witness testimony.
        More than a year after passage of a $2.3 trillion tax
    giveaway, this will be the first time we will have a thorough
    review of the new law and its impact on American families and
    the economy.
        So today we begin with some big picture questions about
    fairness and who the tax law left behind. We already know it
    does not treat all taxpayers alike. Instead, the law's
    proponents made choices about what and whom to prioritize and
    what and whom, unfortunately, to leave out. They chose to
    increase the deficit by $1.5 trillion, which turned out to be
    $2.3 trillion, and they decided that the most urgent national
    priorities were to provide a massive tax cut for corporations,
    business owners, and those who have inherited large sums of
    money.
        For years they have touted the agenda of opportunity,
    including an increase in the earned income tax credit,
    especially for those workers without children, but when it came
    time to pass their tax bills Republicans actually shrank the
    EITC by slowing its growth rate over time. In fact, the 2017
    tax law missed every significant opportunity to make a
    difference in the lives of working people. It did nothing to
    help working people and families afford childcare, pay for
    their child's education, or pay down their student loan debt.
        Perhaps the most devastating impact in our Nation's memory
    is what they attempt to do now to our healthcare system. The
    tax bill amounted to backdoor effort to drive up health
    insurance costs, resulting in the loss of coverage for millions
    of Americans, and the petition in the District Court of New
    Orleans over the last 48 hours is consistent with the argument
    I just made.
        We will hear from some today that the economy is booming, a
    reminder that we are now more than 100 straight months into
    economic growth. To some extent, it is true about recent
    growth, and investors are surely doing very well. And many
    corporate CEOs right now can proclaim that they have had it
    pretty well, as well. Wealthy heirs couldn't be doing any
    better.
        But in truth we have two economies, and let's not pretend
    that stock market gains and corporate profits tell the whole
    story of today's economy. This country also includes many
    middle class and lower income people who are working hard and
    struggling to get by. Wages have been more or less flat for the
    middle class since the late seventies, while housing,
    healthcare, and higher education get more expensive. We need a
    healthy middle class in this country, one that people can stay
    in and one that people can climb to. We expect people to earn
    their way, but we should also expect hard work to translate
    into financial dignity. A massive tax overhaul should have
    created a Tax Code that rewards effort, not simply the good
    fortune of those who are already at the top.
        And, with that, let me recognize the Ranking Member Mr.
    Brady for an opening statement.
        [The prepared statement of Chairman Neal follows:]

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        Mr. BRADY. Thank you, Chairman Neal.
        Thanks to tax reform and pro-growth policies, vulnerable
    Americans left behind during the Obama administration are
    finding jobs with growing paychecks, experiencing less poverty,
    and expressing new optimism about their future. Repealing the
    Tax Cuts and Jobs Act, as our Democrats have pledged, not only
    will damage the U.S. economy, kill jobs, reduce paychecks and
    send American jobs overseas, it will most hurt women,
    minorities, individuals with disabilities, and workers without
    a high school education.
        It is still relatively early to judge the full impact of
    tax reform--that will take years--but the early signs are
    extremely encouraging, ones that both parties should welcome.
    We care about poverty. Today Latino and African American
    poverty is at the lowest recorded. We care about folks with
    disabilities, about women, about teenagers, and workers who
    didn't complete high school. The unemployment rates for these
    crucial Americans are at the best in decades. And it is even
    better for Hispanics and African Americans. We care about
    single moms. That is why a single mom with two kids won't pay
    any taxes on her first $53,000 of income. Millions of
    hardworking Americans will no longer have to figure their taxes
    twice with the AMT gone for all but millionaire households.
        With 3 out of every 4 dollars in tax cuts going to
    individuals and small businesses, we care about middle-class
    families. That is why millions of parents now enjoy a child tax
    credit twice its earlier size. More of the credit is refundable
    to the low income, and 8 million more middle-class families can
    actually use the credit.
        Main Street America is back hiring more, paying more, and
    expanding more because the new 20-percent small business
    deduction.
        U.S. manufacturing is back. After losing thousands of jobs
    during the Obama years, today 450,000 manufacturing jobs have
    been created under the Trump White House. That is why blue-
    collar jobs are surging, good news for workers who were told by
    the previous President their jobs were never coming back.
        Paychecks are rising at the fastest rate in the decade, and
    workers with the lowest incomes are seeing the greatest
    increases. There is a reason for that wage growth. With lower
    business rates, a modern international system, historic
    incentives to invest in new technology, new equipment and
    research, many American businesses are hiring more, paying
    more, and making the long-term investment in innovation that
    drives productivity and wages over the long term.
        Some try to claim that all this is the result of Obama
    policies, but that is silly. After a decade, did some growth
    fairy suddenly wake up in 2017, 2018? Business investment grew
    six times faster than the last year of President Obama.
    Manufacturing awoke. New business startups are skyrocketing. In
    just the first year, American businesses brought back $700
    billion from overseas to invest in jobs, buildings, research,
    and, yes, in their own shareholders when smart investments
    weren't readily available.
        Can we do more to help grow the economy and fine tune the
    Tax Code so it achieves even more? Absolutely. And we welcome
    constructive bipartisan ideas on how to grow more jobs and
    provide more opportunities for Americans willing to work. I
    suspect today though we may be doing a lot of fact checking:
    Claims, for example, that $1.3 trillion of tax breaks went to
    corporations, factcheck.org called that claim misleading; or
    Senator Schumer's assertion that companies are laying off
    workers because of tax reform, PolitiFact labeled that mostly
    false; or the claim that 83 percent of all tax breaks go to the
    top 1 percent, factcheck.org rated that misleading as well; or
    PolitiFact, which gave their embarrassing Pants on Fire rating
    to Democratic claims that tax cuts are only for billionaires
    and corporations.
        So far, what tax reform has left behind are the gloomy
    predictions of a new normal for America where economic growth
    was disappointing for decades, where paychecks would stay flat,
    and we could do nothing about American jobs going overseas. The
    American economy has a new trajectory and a new optimism. My
    prediction is the best benefits of a new modern Tax Code are
    yet to come because we changed the location and investment
    decisions of job creators for the long term. As a result,
    America has moved to the top as the most competitive economy in
    the world. That is where we want to stay: the best.
        With that, Mr. Chairman, I yield.
        [The prepared statement of Mr. Brady follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman NEAL. Thank you, Mr. Brady.
        And, without objection, all members' openings statements
    will be made part of the record. We have a distinguished panel
    of witnesses here with us today, and first I want to welcome
    Dr. Elise Gould. Dr. Gould is a senior economist at the
    Economic Policy Institute, where her research focuses on wages,
    poverty, inequality, economic mobility, and healthcare.
        Next I would like to welcome Professor Jason Oh. His work
    at UCLA law school focuses in particular on political economy
    as it relates to taxation and how institutions shape tax and
    budgetary policy.
        Christopher Shelton, President of the Communication Workers
    of America. Prior to his election as CWA president in 2015, Mr.
    Shelton served as vice president of CWA District 1, which
    represented 300 CWA locals, including New England.
        And next we have Professor Nancy Abramowitz, a professor of
    practice and director of the Janet Spragens Tax Clinic at
    American University Washington College of Law. Professor
    Abramowitz specializes in taxation, employee benefits, general
    business law, and dispute resolution. And finally, no stranger
    to this Committee, I would like to introduce Douglas Holtz-
    Eakin, President of the American Action Forum. He has
    previously served in a number of policy positions, including as
    chief economist for the President's Council of Economic
    Advisers and Director of the Congressional Budget Office.
        Each of your statements will be made part of the record in
    its entirety, and I would ask that you summarize your testimony
    in 5 minutes or less. And to help with that time there is a
    timing light at your table. When you have one minute left the
    light will switch from green to yellow and then finally to red
    when 5 minutes are up.
        Dr. Gould, would you please begin.

      STATEMENT OF ELISE GOULD, PH.D., SENIOR ECONOMIST, ECONOMIC
                            POLICY INSTITUTE

        Ms. GOULD. Chairman Neal, Ranking Member Brady, and Members
    of the Committee, thank you for the opportunity to testify
    today on rising inequality in the United States. My name is
    Elise Gould, and I am a senior economist at the Economic Policy
    Institute, a nonprofit, nonpartisan think tank in Washington,
    D.C.
        My testimony establishes that the poor performance of
    American workers' wages in recent decades is one of the
    country's central economic challenges. A range of other
    economic challenges--reducing poverty, increasing economic
    mobility, and closing racial and gender wage gaps--rely largely
    on boosting wage growth for the vast majority.
        I have four main points to share with you this morning. The
    first, income inequality is the primary reason why most
    Americans experienced disappointing growth in their living
    standards over the last four decades. Secondly, because labor
    market income represents the largest source of income for most
    Americans, the divergence between pay and productivity is at
    the root of slow growing income. Thirdly, recent wage gains for
    the lowest wage workers can be explained by a tight labor
    market and state level minimum wage increases. Fourthly,
    policymakers should prioritize keeping labor markets tight
    while also strengthening institutions and policies that provide
    workers the leverage they need to achieve decent wage growth
    even when the economy is not at full employment.
        So, first, and I have some slides here to share with you,
    in recent decades, most Americans have experienced
    disappointing growth in their living stands, despite economic
    growth that could have easily generated faster gains had it
    been broadly shared. Here I am showing CBO's measure of
    comprehensive income that includes cash, market-based income,
    such as wages and capital gains and other market-based incomes;
    noncash income, such as employer contributions to health
    insurance; and government transfers, such as the importance of
    Social Security and Medicare.
        Over the last four decades, the top 1 percent of household
    income has grown 229 percent, more than four times as fast as
    the bottom 90 percent of households. The rise of American
    inequality is extreme even when using these comprehensive
    income measures, which include these important taxes and
    transfers.
        My second point, the divergence between pay and
    productivity is at the root of slow-growing incomes. Among the
    bottom 90 percent of American households, labor income
    represents the vast majority of their income. Contributions of
    labor income for the top 1 percent were about 40 percent, while
    its over 80 percent about 86 percent for the bottom 90 percent
    of households, so they depend on labor income about twice as
    much as those at the top. Therefore, the rise in income
    inequality that has blocked living standards growth since 1979
    has been driven by a pronounced reduction in the collective and
    individual bargaining power of most workers. As a result, their
    wages have grown agonizingly slow over the past generation
    diverging from economic growth and growing productivity, as you
    can see on the slide here.
        So who won? The excess went to higher wages at the top as
    well as high corporate profits and increased income accruing to
    capital and business owners. When policymakers consider
    policies to improve productivity growth, they also should
    consider ways that rising productivity could better translate
    into wage growth for most workers and not just those at the
    very top.
        My third point is that, after years of wage losses, low-
    wage workers are finally exceeding their 1979 wage levels, and
    these recent wage gains can be explained by tight labor markets
    and state level minimum wage increases.
        Low-wage workers are among the most vulnerable in economic
    downturns, and it often takes them longer to recover in
    economic expansions. Using policy levers to achieve genuine
    full employment is one way that these workers gain enough
    bargaining power to increase their wages. Employers have to pay
    more to attract and retain the workers they need when idle
    workers are scarce.
        What this shows is that while workers do relatively worse--
    while low-wage workers do relatively worse in bad times, they
    also see a relatively larger boost in good times. That helps
    explain the recent rise in wages for low-wage workers over the
    last few years.
        But there is another policy lever that was recently pulled
    that happened at the State level. In 2018, the minimum wage was
    increased in 22 States and D.C. These changes came on the heels
    of other increases to the minimum wage. When we compare States
    that had any minimum wage increase in the last 5 years with
    States that did not, we see wage growth among low-wage workers
    in those States with at least one increase was more than 50
    percent faster than in States without any.
        Going forward, policymakers should, one, prioritize keeping
    labor markets tight and, two, strengthen institutions and
    policies that provide workers the leverage they will need to
    achieve decent wage growth even when the economy is not at full
    employment. Some of these policies are things like raising the
    Federal minimum wage, expanding eligibility for overtime pay,
    addressing gender and racial pay disparities, and protecting
    and strengthening workers' right to bargain collectively for
    higher wages and benefits. Thank you.
        [The prepared statement of Ms. Gould follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman NEAL. Thank you, Dr. Gould.
        Professor Oh, would you please begin.

        STATEMENT OF JASON OH, PROFESSOR OF LAW, UNIVERSITY OF
                  CALIFORNIA LOS ANGELES SCHOOL OF LAW

        Mr. OH. Chairman Neal, Ranking Member Brady, and Members of
    the Committee, thank you for inviting me to testify on the Tax
    Cuts and Jobs Act. My name is Jason Oh. I am a tax law
    professor at the UCLA School of Law, and my primary areas of
    research are tax law and policy and the political economy of
    taxation. The Tax Cuts and Jobs Act was the most significant
    overhaul of the tax system in over three decades. It is
    commendable that this Committee is already taking a hard look
    at this piece of legislation and how it affects the American
    public. I have been asked to focus my remarks on its
    distributional consequences and planning opportunities. We are
    fortunate to have the projections of the Joint Committee on
    Taxation and various think tanks, but the sheer amount of data
    can be overwhelming.
        What I want to do with my short time is to crystallize that
    data into five major takeaways: Who received tax cuts and how
    much? How will that change over time? How will we as the
    American public pay for the deficits created? How does the new
    law create new avenues for tax avoidance? And what can history
    tell us about how tax laws change in the aftermath of major
    legislation?
        First, the Tax Cuts and Jobs Act disproportionately
    benefits the rich. For comparison purposes, let's just focus on
    households that earn less than $50,000 and those that earn more
    than a million dollars. In 2019, low-income households are
    projected to save roughly $200 in taxes. That is, you know,
    five or six trips to the gas station. Millionaire households
    are scheduled to save over $64,000 on average. That is either a
    lot of gas or a brandnew BMW X5. Of course, richer households
    paid more in taxes before the tax law change, so it is somewhat
    unsurprising that they are saving more after.
        However, the same pattern emerges if we consider the
    percent increase in after-tax income. How much more do
    households have to spend or save after taxes? Using those same
    comparison groups, the low-income households see their after-
    tax income go up roughly half a percent. Wealthier groups enjoy
    a much more significant increase of 3 or even 4 percent. The
    Tax Cuts and Jobs Act makes the tax system less progressive.
        The second takeaway is that, over time, the distribution of
    tax cuts will become even more unequal. In 2025, the majority
    of the individual income tax provisions sunset. The remaining
    tax cuts will be concentrated among the wealthy. For the
    poorest households, the tax cuts disappear after 2025. In 2027,
    low-income households will actually owe on average $250 more.
        The third takeaway is that these tax cuts have to be paid
    for eventually, and when they do, the overall effect may be
    even more unequal. Most projections estimate that this
    legislation will add over a trillion dollars to the deficit
    even accounting for increased economic growth. Eventually those
    deficits will have to be funded either through spending
    decreases or tax increases. To the extent we cut mandatory
    spending programs, the overall effect will be to make the Tax
    Cuts and Jobs Act even more regressive since most spending
    programs predominantly help low-income Americans. If we instead
    increase future taxes, we are shifting a major fiscal burden on
    to our children and grandchildren. None of these choices seems
    particularly appetizing.
        Fourth, while the Tax Cuts and Jobs Act has improved the
    international tax regime and brought our corporate rate in line
    with our peers, the law also introduces a new avenue for
    business tax avoidance. The new passthrough rule provides a 20-
    percent deduction for income earned by sole proprietors,
    partnerships, and LLCs. This provision is a maze of complexity,
    which creates arbitrary distinctions between different types of
    economic activity. Why should engineers and architects pay
    lower taxes than doctors and consultants? It is an expensive
    provision projected to cost over $400 billion in the budgetary
    window, and even though this deduction will provide some tax
    cuts to small businesses, the primary beneficiaries are again
    the rich. JCT predicts that roughly half of the benefits of the
    passthrough deduction will go to households that earn over a
    million dollars.
        Finally, my research finds that tax legislation is
    fundamentally unstable. This is true even when a law has strong
    bipartisan support as was the case with the Tax Reform Act of
    1986. Although the Tax Reform Act of 1986 gets all the
    attention, people often forget that Congress passed major
    legislation in 1987, 1990, and 1993 to make important changes
    in the aftermath of reform. In particular, the changes in 1990
    and 1993 substantially increased the revenue raised by the tax
    system and changed the distribution of the tax burden. A lot of
    the hard work comes after major legislation has passed.
        I applaud this Committee for examining the effects of the
    Tax Cuts and Jobs Act. You as a Committee have a real
    opportunity to improve on pieces of the law that work while
    reconsidering others that don't. Thank you so much.
        [The statement of Mr. Oh follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman NEAL. Thank you, Professor Oh.
        Mr. Shelton, please begin.

     STATEMENT OF CHRISTOPHER M. SHELTON, PRESIDENT, COMMUNICATION
                           WORKERS OF AMERICA

        Mr. SHELTON. Thank you, Chairman Neal, Ranking Member
    Brady, and Members of the Committee for inviting me to testify
    today. During the debate on the Tax Cuts and Jobs Act, the
    President and his administration made three key promises, which
    were echoed over and over again by Members of Congress and
    corporate executives. They promised it would lead to, one, a
    minimum increase of $4,000 in annual American household wages;
    two, an end to the incentives for corporations to offshore
    American jobs; and, three, an explosion of corporate investment
    and job growth in the United States.
        I am here to tell you that these three promises just were
    not kept. I would like to use the company where the largest
    number of CWA members work, AT&T, as a case study. Are the tax
    cuts delivering robust job creation? At AT&T, the answer is an
    emphatic no. Instead of the 7,000 new jobs AT&T's Randall
    Stephenson promised if the bill passed, AT&T has actually
    eliminated over 12,000 union jobs: 7,000 new jobs promised;
    over 12,000 jobs actually eliminated.
        Has offshoring jobs stopped? From 2011 to 2018, AT&T closed
    44 call centers in the United States. Nothing has stemmed that
    tide. AT&T has announced closures of seven call centers in just
    the past 4 months. Meanwhile, AT&T has opened two of its own
    call centers in Mexico. These centers currently employ 2,475
    people and continue to grow every day.
        What about more investment? Despite promises to invest
    more, AT&T's capital expenditures declined by $300 million year
    over year. This is all very troubling to us. AT&T publicly
    reported an expected $21 billion windfall from the tax cuts.
    You may ask, what is AT&T doing with this money if it is not
    being used to create jobs and invest in the U.S.? We would like
    to know that as well.
        Here are some of the things we do know AT&T is using its
    profit for. AT&T's top five executives received compensation of
    $89 million in 2018. During 2018, AT&T distributed $14 billion
    to shareholders in dividends and stock buybacks. That is right:
    more money for executives and Wall Street.
        Unfortunately, AT&T is not unique. American Airlines has
    carried out $837 million in stock buybacks in the last year yet
    pays wages as low as $9.50 an hour, forcing workers to rely on
    public assistance to survive. General Motors reported net
    income of over $8 billion for fiscal year 2018 but has
    announced plans to shutter four U.S. plants while also laying
    off 8,000 white-collar workers in the U.S. The lives of nearly
    12,000 American workers will be directly harmed while GM
    continues to manufacture some of its most popular and
    profitable products in Mexico.
        Wells Fargo is predicted to benefit from the tax cut more
    than any other bank, and their annual profits were over $6
    billion last year while laying off 26,500 employees and sending
    those U.S. jobs overseas. Investment didn't soar, but stock
    buybacks did to the tune of a record $1 trillion last year. We
    are grateful that you have called this hearing, but executives
    like AT&T's Randall Stephenson, GM's Mary Barra, Tim Sloan of
    Wells Fargo, and others should be brought before this Committee
    to explain why the predictions made were so incorrect.
        Thousands of CWA members have already written Congress
    demanding such a hearing. I have brought with me today hundreds
    of those letters from your constituents. In closing, I would
    like to quote two of the letters. One is from Joseph in Kent,
    Ohio: Without these jobs, the middle class is disappearing at
    an alarming rate. Our communities suffer, our families are
    faced with insurmountable obstacles every day, and we continue
    to scramble in the face of exponential increases in healthcare
    costs, housing costs, and fewer employment options that offer a
    living wage. It is truly a race to the bottom.
        And from Betsy in Oshkosh, Wisconsin, whose call center has
    recently shut down: AT&T will not commit to growing and
    creating jobs. What are they doing instead? You need to support
    your working class base vigorously and demand a congressional
    hearing to make CEO Randall Stephenson answer to this. Can we
    count on your support?
        Again, thank you for giving me the opportunity to testify
    today, and I look forward to answering any questions that you
    may have.
        [The prepared statement of Mr. Shelton follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman NEAL. Thank you, Mr. Shelton.
        Let me proceed to recognize Professor Abramowitz. Please
    begin.

    STATEMENT OF NANCY ABRAMOWITZ, PROFESSOR OF LAW AND DIRECTOR OF
     THE JANET R. SPRAGENS FEDERAL TAX CLINIC, AMERICAN UNIVERSITY
                       WASHINGTON COLLEGE OF LAW

        Ms. ABRAMOWITZ. Good morning, Chairman Neal, Ranking Member
    Brady----
        Chairman NEAL. Put your microphone on, please.
        Ms. ABRAMOWITZ [continuing]. Members of the Committee.
    Thank you for the invitation to appear today to share some
    experiences about the new tax law and the working poor. I am
    Nancy Abramowitz, and I direct the Spragens Tax Clinic at
    American University Law School. I speak for myself, but my
    views are the result of the last 22 years I have spent
    supervising hundreds of students handling thousands of tax
    controversies for low-income taxpayers.
        Our tax clinic was founded by my colleague--my late
    colleague, Janet Spragens, and was among the earliest of its
    kind. A bit more than 20 years ago, it was Janet's testimony
    before the IRS restructuring commission about our clinic that
    prompted Congress to provide grant funding for the now more
    than 130 clinics nationwide.
        The cases we handle are essentially controversy work,
    liability cases, and collections cases where people are unable
    to pay amounts they may otherwise agree they pay. Our students,
    not as part of clinic, but all participate in the Volunteer
    Income Tax Assistance Program, and through our work we have
    developed what we believe is a pretty good understanding of the
    working poor.
        It would appear that the 2017 tax law's promise of reduced
    taxes, greater simplicity, and new jobs has fallen flat insofar
    as the working poor are concerned. I leave it to the economists
    and others to explain the allocation or misallocation of the
    law's tax expenditures by income class as well as the use of
    tax windfalls by businesses and higher income taxpayers who
    were expected to expand jobs. Suffice it to say, the working
    poor seem to derive little, if any, benefit, and, in fact,
    depending upon certain factors, such as the configuration of
    family or immigration status, there may actually be an increase
    in tax or a reduction in tax benefits.
        As for simplicity, neither the law nor return preparation
    seems to have gotten much simpler. Returns--as for returns, the
    front page of the Form 1040 does achieve aspirational postcard
    size but only by adding six new schedules containing
    essentially the balance of the old 1040.
        As for the low-income population more generally, I would
    point out that the law continues and expands the practice of
    singling out the working poor and their issues for special due
    diligence and special penalties for misclaims. These provisions
    are only remarkable in that they do not apply in a host of
    other potential revenue loss situations involving taxpayers in
    other income classes. The law's section 199A deduction, as
    Professor Oh has noted, which provides benefits for the self-
    employed, may have the ironic effect of promoting further
    misclassification of workers as contractors rather than
    employees. We have seen articles suggesting that the new law
    provides the opportunity for payors to sell contractor status,
    and at the lowest income levels, the 199A deduction against
    income tax is useless if you are not earning enough to pay
    income tax.
        In addition, people who may fall into contractor status
    additional misclassification suffer the regressivity of the
    self-employment tax, which falls with undue harshness on the
    working poor.
        We think that other provisions in the law may affect people
    indirectly, such as reduced charitable giving, the SALT
    deduction, as well as opportunities on legislation, all of
    which may have negative impacts on services intended or
    previously provided to the poor.
        Finally Congress' reduction in appropriations for the IRS
    over the past several years has hit the poor the hardest in
    terms of tax administration and enforcement. They get the short
    end of the stick. They find themselves in court without any
    administrative process, and they find that they are unable to
    have meaningful dialogues with the IRS. The lack of resources
    undoubtedly contributed to the IRS' treatment of low-income
    taxpayers or low-hanging fruit this way.
        The 2017 law did not address any of these issues. It
    exacerbated some, and we could do so much more to lift people
    out of poverty, make childcare better and more affordable, and
    to even out unfair differences in our tax system and its
    administration.
        [The prepared statement of Ms. Abramowitz follows:]

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        Chairman NEAL. I thank the gentlelady.
        With that, let me recognize Dr. Holtz-Eakin, a familiar
    face here at the Committee. Dr. Holtz-Eakin.

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

        Mr. HOLTZ-EAKIN. Thank you, Mr. Chairman, Ranking Member
    Brady, and Members of the Committee. It is a privilege to be
    here today. Let me make three points at the outset, and then I
    look forward to answering your questions.
        Point number one is that going into the deliberations over
    the Tax Cuts and Jobs Act, the U.S. had severe problems in
    growth and in competitiveness.
        Point number two is that the TCJA targeted the incentives
    at the core of those growth and competitiveness problems.
        And point number three is that recent economic performance
    has been markedly improved, and that is good news for everyone,
    but it is especially good news for those Americans who are part
    of the 44 to 45 percent who are not affected by the U.S.
    individual income tax, do not pay income taxes but benefit from
    improved economic performance.
        Let me talk about those in turn.
        In the post-war period from the end of World War II to
    2007, the U.S. experienced rapid productivity growth above 2
    percent per year, rising labor force participation, and the
    upshot was a top line growth in the economy at about 3.2
    percent annually and growth in income per capita that was above
    2 percent. What that meant for the average American was that,
    every 35 years on average, the standard of living doubled. So,
    in one working career, Americans had a chance to access their
    version of the American dream.
        After the Great Recession and the financial crisis, we saw
    a diminished product growth under 1 percent, declining labor
    force participation, top line economic growth of under 2
    percent, and per capita income growth of 1 percent or less.
    What that meant was that access to the American dream was
    disappearing over the horizon. The standard of living was on
    track to double only every 70 years, two working lifetimes.
        To adding to these growth problems were severe problems in
    international competitiveness. U.S. multinational firms faced
    the highest statutory tax rate on the globe, 35 percent, and
    were subjected to the last worldwide income tax system in the
    developed world. The result of that was that when competing in
    neutral countries, a German firm and a U.S. firm competing in
    Brazil, the German firm paid the Brazilian tax and was done.
    U.S. firms paid the Brazilian tax and owed a second layer of
    tax up to the highest rate in the United States. That put us,
    our firms and our workers, at an immediate disadvantage.
        On top of that, we saw marked declines in the headquarters
    in the United States. This Committee is familiar with the
    terrible rash of inversions and mergers and acquisitions that
    led to loss of headquarters, and overall, the Tax Code was
    complex and not conducive to growth and competitiveness.
        The TCJA addressed these core issues. The international tax
    regime has been markedly improved, moved toward a territorial
    system. The top rate has been moved to an internationally
    competitive 21 percent rate. If one does that as matter of tax
    policy, you have to recognize that over half of business income
    is not corporate income, not C corporation. It is taxed as
    passthrough income on individual income tax returns. The TCJA
    instituted a regime of a 20-percent deduction to address the
    imbalance in the taxation of business income and had numerous
    other individual provisions that I am sure we will have time to
    talk about.
        All of this sent the following message to the American
    business community: Invest in the United States, not abroad;
    invest more; raise capital per worker; raise the technological
    sophistication of that capital; raise productivity; and, thus,
    ultimately raise wages.
        More recent economic performance has in fact markedly
    improved. After a recent low of 1.3 over year growth in 2016,
    growth has improved every quarter since reaching a 3.1 percent
    rate year over year at the end of 2018. Where did that growth
    come from? Improved business investment. Nonresidential fixed
    investment rose rapidly in 2017 and especially 2018. It is the
    source of this recent growth spurt. That has carried along with
    it the things one would expect. We saw 223,000 jobs on average
    created every month in 2018. That is an astonishing
    performance. Normal demographics would have predicted about
    90,000 jobs. We drew into the labor market and employed people
    who had not been familiar with work for years. It is the single
    most important thing that happened in 2018. And underneath
    that, we saw increasing wages. Wages are rising at over 3
    percent up 50 percent from 2016, and as I show in my written
    testimony, if you look at the wage distribution at the low end,
    the 10th percentile, the median and the high end, the fastest
    growth rate in 2018 was at the low end at the 10th percentile.
    These are the people who most needed a raise, and they are now
    starting to see their wages rise.
        Is this all because of the TCJA? No. There was an enormous
    change in the regulatory environment. There was some bad news
    in my personal opinion on the trade policy front, which hurt
    economic performance. And it is simply too soon to make
    definitive statements about how much is due to the TCJA. But
    the timing and the location of the improvement in the
    investment world really does suggest that it has had a marked
    impact, and our hope is that will continue in the future.
        [The prepared statement of Mr. Holtz-Eakin follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman NEAL. I thank the gentleman. We will now proceed
    to questioning under the 5-minute rule. Consistent with
    Committee practice, I will first recognize those members
    present at the time of the gavel--in terms of the gavel having
    come down, recognizing seniority.
        Let me begin by recognizing myself. Dr. Gould, everyone
    here agrees that it is good news that the unemployment rate is
    below 4 percent, but that is a lone data point that can't begin
    to describe economic well-being alone in this country. Here are
    some other statistics that also describe our economy. According
    to the Federal Reserve, over a fifth of American adults can't
    pay their current month's bills in full. Given that backdrop,
    if you were to prescribe economic policies to stimulate the
    economy and elevate economic well-being to all Americans, would
    you have aimed to benefit those at the bottom or those at the
    top?
        Ms. GOULD. You are absolutely right. Americans across the
    country are feeling financially insecure. I would absolutely
    prescribe economic policies that are targeted to benefit the
    vast majority of Americans. As I stated previously in my
    testimony, this slow growth in the economic well-being of
    Americans has been driven by a pronounced reduction in the
    collective individual bargaining power of most workers, and I
    would do whatever it is that I can to strengthen that.
        Chairman NEAL. So you would suggest that collective
    bargaining would be an important part of that?
        Ms. GOULD. Yes, absolutely. I can't overstate the
    importance of workers being able to come together and
    collectively bargain for higher wages. When unions are weak,
    the highest incomes go up even more, but when unions are
    strong, the bottom 90 percent enjoy more income growth. We know
    that a big force for equality--we would know how much of a big
    force for equality unions are by looking at how much their
    decline is contributed to inequality. Union decline in the U.S.
    can explain one-third of the rise in wage inequality among men
    and one-fifth of the rise in wage inequality among women from
    1973 to 2007. Among men, the erosion of collective bargaining
    has been the largest single factor driving a wedge between
    middle- and high-wage workers.
        Chairman NEAL. Thank you.
        Professor Oh, the Tax Policy Center ran an analysis of
    alternative tax reform bills that Republicans could have
    considered back in 2017. This analysis looked at over 9,000
    hypothetical tax reform bills, each of which tweaked TCJA
    provisions related to individuals without decreasing overall
    revenue. What the analysis shows is disturbing. Over 99 percent
    of the hypothetical tax reform bills provide a larger benefit
    for taxpayers earning less than $153,000 in the Republican tax
    law.
        Professor Oh, you have spent a lot of time thinking about
    the distributional impact of the Republican tax law. Do you
    find this result surprising?
        Mr. OH. I think the most interesting thing about that Tax
    Policy Center report is how there were slight changes one could
    make due to the Tax Cuts and Jobs Act that would result in a
    much more equal distribution of tax cuts.
        So, for example, they run a bunch of alternative tax cut
    plans that result in between 1 percent and 2 percent after-tax
    income increases for all income households. And so some of the
    changes that they test are increasing the child tax credit,
    making it fully refundable, and removing the income threshold.
    It turns out that those three changes make a huge difference
    for income at the very lowest level.
        Chairman NEAL. Thank you.
        And, Ms. Abramowitz, in your testimony, you have stated
    that, quote, to the extent that the TCJA dangled the prospects
    of eased tax liability, tax simplicity, and improved job
    prospects, we have not seen any real evidence of that helping
    the working poor.
        Can you explain how that statement relates to your
    experience in working with low-income taxpayers in the Janet
    Spragens Federal Tax Clinic?
        Ms. ABRAMOWITZ. Thank you.
        Chairman NEAL. Put your microphone on, please.
        Ms. ABRAMOWITZ. Thank you. With respect to the jobs issue I
    can only say anecdotally, we don't--and we see hundreds of
    people coming through the clinic each year. Again, they are all
    low income. We don't see any meaningful change. We see job
    loss. We don't see people getting better jobs. We see people
    working in the gig economy as contractors at the edges of the
    economy and just trying to make a living that way.
        With respect to the actual tax liability, I think we have
    said that some low-income taxpayers may experience a small
    perhaps $100 or $200 benefit this year. Others will receive
    actually a tax increase by virtue of their status. It may be
    having to do with their number of dependents, their immigration
    status, and what have you. As you may know, the child tax
    credit now requires children to have Social Security numbers in
    order to get a tax credit, and that will eliminate the credit
    for a number of people.
        Finally, with respect to simplicity, I know we all talk
    about, first of all, just the filing obligation, and I did
    bring with me a sample of the 1040, and you can see, if you
    can, that the front page does look like the postcard, but you
    can't really just fill out the front page. There are numerous
    schedules you are required to fill out. Some precede the tax
    law, but there are an additional six schedules that came by
    virtue of the tax law.
        Chairman NEAL. Mr. Shelton, as you know, the cost of living
    continues to go up, and most of those costs for families are
    related to childcare. Affordable, good, reliable childcare is a
    major struggle for many working families. The average cost of
    enrolling a child in a childcare center in Massachusetts is
    almost $19,000 a year, one of the highest in the country.
    Republicans predicted that their tax law would boost household
    income by $4,000 to $9,000 a year. Are your members finding it
    any easier to afford childcare?
        Mr. SHELTON. Absolutely not, Mr. Chairman. You know, all
    the cost-of-living normal costs--going to work, buying gas,
    whatever--are going up, and there have been no real wage
    increases since the tax law. So my members have been in a
    downward spiral since the tax law has happened.
        Chairman NEAL. Thank you. And, with that, let me recognize
    Mr. Brady for 5 minutes.
        Mr. BRADY. Thank you, Mr. Chairman.
        A couple quick things. First, without objection, I would
    like to enter for the record a paper by Lawrence Lindsey
    showing that income inequality rose more under Bill Clinton
    than under Ronald Reagan, rose more under Barack Obama than
    under George Bush, and began to decline, get better, starting
    in 2018.
        Chairman NEAL. So ordered.
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. BRADY. Secondly, Mr. Shelton, I don't follow individual
    businesses very closely, but I think I could swear AT&T has
    hired 20,000 more workers, substantially increased their
    business investment--infrastructure investment in the U.S. I
    know they paid $1,000 per person bonuses, and I think maybe the
    call centers in Mexico were related to their expansion into
    Mexico, part of which is part of what we are reinforcing in the
    new U.S.-Mexico-Canada trade agreement. And GM, again, I don't
    follow these companies individually, but I could swear when
    they made the announcement on layoffs, there were 4,000
    layoffs, mainly executive white-collar workers, and the plants
    that were closed related to cars that just aren't selling.
    Nothing in the Tax Code requires businesses to keep producing
    cars the American people don't want. So I don't think any of
    those examples frankly are tied to tax reform.
        Thirdly, we are told our Democrat colleagues would like to
    fully repeal the entire Tax Code, every word and provision in
    it. Let me ask you about an easy one. We simplified the Tax
    Code for Main Street businesses, small businesses. One, we made
    it significantly bigger for them and better for them to be able
    to write off from their taxes their purchase of new equipment,
    technology, things really important to staying competitive. We
    also allowed many more small businesses to qualify for cash
    method of accounting, which dramatically simplified the tax and
    accounting system for them. Can I see a show of hands of the
    panelists who believe we should repeal those two small business
    simplification provisions making it harder for local businesses
    to buy new equipment and making their accounting more
    complicated? How many recommend we do that? So, for the record,
    I think clearly those are provisions that need to stay.
        Mr. Holtz-Eakin, for too long--you referenced this--the old
    Tax Code really disincentivized companies, made it harder for
    them to grow here at home. Really sort of pushed investment to
    other countries and, when they did compete and win, made it
    very difficult for them to bring those profits back home to
    invest here in the U.S. That has all changed. And for the first
    time in memory, more foreign direct investment is coming into
    the U.S. than outbound. We want that giant sucking sound coming
    this direction. Jobs, research, and production are starting now
    to come back from overseas, and many of these positive
    decisions will take some years to manifest in the economy. My
    question for you is so how would repealing the reforms we made
    to the international side of the Tax Code, how does that help
    growth in the U.S. and how does that help workers in America if
    we--if Democrats repeal those provisions?
        Mr. HOLTZ-EAKIN. I think it would be unwise to go back to
    the previous regime. There was, quite frankly, agreement across
    the ideological spectrum that the U.S. had to do something with
    its business tax system. As I explained very quickly, we got
    into situations where U.S. firms competing, in my example in
    Brazil, with German firms were at an immediate tax
    disadvantage. The only way they could fix that was to not bring
    the money back. So lock all the U.S. earnings offshore. If it
    stays offshore long enough, it must stay offshore. Those are
    the rules. So it doesn't get invested in the United States. And
    any time there was a crossborder merger acquisition initiated
    by any party, if you ran the numbers, the headquarters were
    going to end up outside the United States. And for that reason,
    the New York Stock Exchange, the iconic symbol of American
    capitalism, is headquartered in Europe for tax purposes. That
    is a problem, and this attempts to fix that problem. It is not
    perfect, but to go back I think would be a dramatic mistake.
        Mr. BRADY. And you strongly recommend not going back to the
    bad old Tax Code?
        Mr. HOLTZ-EAKIN. I strongly recommend that.
        Mr. BRADY. Thank you.
        Mr. HOLTZ-EAKIN. And if I could add one thing.
        Mr. BRADY. Yes, sir.
        Mr. HOLTZ-EAKIN. There was a built in test, which is the
    moment the law was signed there was a deemed repatriation of
    overseas earnings. If the U.S. was not a better place to do
    business, those earnings would have stayed overseas. It was no
    longer any tax consequence to where you located them. They came
    back. And so we have made improvements, and that is an
    important thing.
        Mr. BRADY. All right. Thank you.
        I yield back, Mr. Chairman.
        Chairman NEAL. Thank you, Mr. Brady.
        And, with that, let me recognize the gentleman from
    Georgia, Mr. Lewis, to inquire.
        Mr. LEWIS. Thank you very much, Mr. Chairman, for holding
    this hearing. I think it is good and necessary that we do it,
    that we put the cards on the table face up. I want the record
    to be crystal clear about the true cost of the tax law. I think
    every single warning has come true. This law did not make the
    Tax Code any simpler. It did not balance the budget. It does
    not ease the burden on working families. Instead, this law put
    politics before the people. It continues to be a shame and a
    disgrace. I appreciate that each and every one of you would
    come to testify today. It is true that you cannot get blood
    from a turnip, and you cannot justify robbing poor Peter to pay
    visionary Paul. You cannot do it. It is crystal true.
        Professor, I know you have been working at American
    University, teaching, educating brilliant young minds. Do you
    have any suggestion how to improve the tax administration to
    ease the burden on low-income taxpayers?
        Ms. ABRAMOWITZ. Yes, Mr. Lewis. I think that it is time
    that we actually spend a greater portion of our studies
    thinking about what our objectives are and thinking about
    looking at some of the existing provisions whether we can do
    better, whether we can increase the earned income tax credit to
    help bring more people up into a livable income zone, whether
    we can improve childcare, make employment a better reality for
    people through better childcare incentives, and as I said, in
    addition to direct benefits for the working poor, and again, I
    want to emphasize here the Tax Cuts and Jobs Act at $1.5
    trillion or whatever the number was, we are talking about tax
    expenditures, tax expenditures are the same whether you are
    foregoing income you otherwise would have collected or whether
    you are giving out tax benefits out-of-pocket. So, again,
    giving attention to the working poor and what we would like to
    see.
        Secondly, I think that we need to think about
    appropriations to the Internal Revenue Service and directions
    to think about the rights of the working poor who very often
    get short shrift in the administrative process by the IRS
    largely because of recent cuts to their budget and the
    inability to pay attention, to educate, and to listen when
    disputes arise.
        Mr. LEWIS. Thank you very much.
        President Shelton, I know that a number of workers in metro
    Atlanta are upset with the burden promises of the Republican
    tax bill. May you speak more about what they are experiencing--
    of what people are experiencing in other parts of America?
        Mr. SHELTON. What my members saw from the tax cut basically
    is maybe a $4 or a $5 a week increase in their take-home pay
    because of the tax cut, which could buy them a cup of coffee at
    Starbucks, but they have also seen, as I said before, prices
    for commuting and childcare and other things go up. But what
    they are really worried about because a lot of the companies
    that we represent are laying people off every day and sending a
    lot of the jobs overseas, what they are really worried about is
    their job security because if you don't have a job, you don't
    have to worry about what the tax rate is because it doesn't
    matter what the tax rate is because you don't pay taxes.
        So, you know, this is just--the tax bill from what I know
    of it cut the tax rate on profits made overseas to half of what
    it is in the United States so that a 21 percent corporate tax
    rate in the United States becomes a 10.5 percent corporate tax
    rate in Mexico or in whatever country you want to, the
    Philippines or India, which is causing these companies to send
    more and more jobs overseas. So that is what my members are
    mainly worried about.
        Mr. LEWIS. Thank you very much.
        Thank you, Mr. Chairman.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentleman from California to inquire,
    Mr. Nunes.
        Mr. NUNES. Thank you, Mr. Chairman.
        Mr. Holtz-Eakin, Ranking Member Brady was talking to you
    just briefly about and you mentioned the inversions that were
    happening. So before the tax bill passed, it was every day we
    had someone in our office visiting us saying that they were
    preparing to sell their company, move their company overseas. I
    don't take those meetings anymore. You started to get into why
    that happened. Can you just explain a little further why that
    stopped happening?
        Mr. HOLTZ-EAKIN. Prior to the passage of the law, the U.S.
    had the highest statutory rate, 35 percent, and it taxed the
    worldwide income of all of the U.S. headquartered firms. Our
    developed country competitors had steadily moved toward more
    territorial systems, basically one a year in the OECD, which
    taxed only the earnings within the nation itself in Britain or
    France, whatever it might be.
        What they meant was if you were looking at any kind of
    merger or acquisition and you started running the numbers, if
    you put the headquarters in the U.S., you are going to tax the
    whole world's income at the highest rate, or you can put it in
    the other company's country and tax it at a lower rate on a
    territorial basis. It would be financial malpractice to put the
    headquarters in the U.S. in those circumstances. So we lost
    headquarter after headquarter. There were a variety of attempts
    to remedy this through regulation at the Treasury. It simply
    wasn't going to work, and that had, you know, the potential to
    be damaging to the U.S. economy. And so this is a much more
    internationally competitive approach to taxation.
        Mr. NUNES. So now you don't see companies leaving the
    United States to headquarter overseas. You actually see--we are
    seeing some come back, but you also mentioned the repatriation
    money, and I am going to--you may not know this off the top of
    your head, but what was the--do you recall the number that was
    estimated that was going to return to the U.S., and so far, how
    much has returned to the U.S.?
        Mr. HOLTZ-EAKIN. I am not going to get those right, but we
    have had a little under a trillion dollars come back in the
    first year.
        Mr. NUNES. Say that again.
        Mr. HOLTZ-EAKIN. A little under a trillion. You know, I can
    get you numbers with more precision. I would have guessed
    something like 2.5 trillion would have been overseas available
    to come back. There are bigger numbers out there, but I think
    they are misleading and that some of those things are reserves
    and financial services companies that can't come back. So, of
    the available amount, some has come back relatively quickly.
        I would, you know, emphasize that the Treasury just
    finished really writing the rules that the large global
    companies will have to obey underneath the Tax Cuts and Jobs
    Act, and it will be in 2019 and 2020 that we genuinely see its
    impact on that part of the economy.
        Mr. NUNES. So we are just starting now just to see the real
    results of the certainty now that companies have in order to
    either locate in the United States or to stop shipping their
    headquarters overseas.
        Mr. HOLTZ-EAKIN. And to me, the most important thing is not
    the label on the headquarters, U.S. versus others, but the fact
    that the factories will be in the U.S., the improved
    technologies will be in the U.S., the productivity growth and
    wages will be in the U.S. It is that aspect, regardless of
    whether it is foreign inbound investment or a U.S. domestic
    firm electing to stay here. That is what you want to look at,
    the impact on the ground.
        Mr. NUNES. Let me yield quickly to Mr. Brady.
        Mr. BRADY. Well, if I may, Mr. Nunes, just to follow up, I
    was in New England last year with a company, a medical company
    working on their fourth breakthrough drug, and their point to
    me was because of the new Tax Code, their new research won't be
    done in London; it will be done here in New England. Their
    patents are not remaining in Ireland; they now fit better here
    in the United States. And if they can find the workers, key
    phrase, they will be doing their advanced manufacturing in New
    England rather than overseas, all because the new Tax Code
    allows them to actually make those decisions for here in the
    United States.
        I yield back, Mr. Nunes.
        Mr. NUNES. I thank the gentleman. And I also want to talk
    about wage growth because a lot of the other witnesses said
    that, you know, America is not growing, that the middle class
    is not growing, and I will tell you that--and I just took a
    meeting outside from businesses from California--their number
    one problem is that they cannot find workers. They can't find a
    trained workforce. So wage growth is up. It continues to go up.
    Did that even surprise you as quickly as the wage growth has
    grown in the last couple years, Dr. Holtz-Eakin?
        Mr. HOLTZ-EAKIN. I think I have emphasized that I want to
    agree with most of the witnesses on the fact that we have had a
    wage growth problem. A lot of people remained employed
    throughout the recovery from the Great Recession and didn't get
    a raise. It is encouraging to me that, in the more recent data,
    from 2016 on, we have seen wages ramp up across the spectrum
    and, especially in 2018, the low end of the wage distribution
    rise rapidly. That is important.
        Mr. NUNES. Thank you, Doctor.
        Thank you, Mr. Chairman.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from Texas to
    inquire, Mr. Doggett.
        Mr. DOGGETT. Well, thank you very much. There have been so
    many false claims made about this Trump tax law. It is hard to
    know where to begin, but just to perhaps provide Dr. Holtz-
    Eakin the number he couldn't come up with, President Trump
    promised $4 trillion would be coming back in repatriation if we
    gave this huge discount on international money abroad or really
    across the street in a different Wall Street account, and so we
    have gotten back a little less than a fourth of what was
    promised.
        Mr. Shelton, you talked about what the impact is as far as
    outsourcing, and I appreciate the support that you have offered
    for the legislation that I have to try to stop outsourcing by
    eliminating not the reform of corporate taxation but the
    specific provisions that Republicans added in the bill to
    encourage outsourcing, like letting someone who chooses instead
    of investing here in the United States, wants to invest abroad,
    they can pay at most half the rate that they would be paying
    here. Isn't that true?
        Mr. SHELTON. That is absolutely true, and that is why these
    companies are moving jobs overseas in wheelbarrows.
        Mr. DOGGETT. So the claims that outsourcing would be
    stopped, just like the claims that all this repatriated money
    would come back and we would see the spurt in investment, they
    just have proven to be false, in fact, haven't they?
        Mr. SHELTON. Yes, they have. Just the companies that I
    mentioned, you take AT&T, which, by the way, the two call
    centers in Mexico, one is for the U.S. market, and one is for
    the Mexican market. The one for the U.S. market is a 5,000-seat
    call center in Mexico City. You take Wells Fargo, who moves
    26,500 jobs overseas, it is because of the tax cut. It has got
    to be because of the tax cut. And you take General Motors
    moving their plants to Mexico.
        Mr. DOGGETT. Thank you very much. And, Professor Oh, let me
    move then to small business. Of course, we heard all kinds of
    claims about how much small business would be helped by this
    tax law recognizing that I believe about 90 percent of small
    businesses earn less than $150,000 a year. Hasn't the analysis
    of the passthrough provisions, $400 billion of passthrough
    changes that Republicans made in their tax law, shown that
    about half of all that went to those who were making over a
    million dollars a year?
        Mr. OH. That is correct. It is one of the most complicated
    tax provisions I have ever seen, and there are some relatively
    easy fixes one can envision for making the passthrough
    deduction help small businesses specifically, but the way it is
    drafted now--you are right--about half of the benefits go to
    households earning more than a million dollars.
        Mr. DOGGETT. And, Professor Abramowitz, I represent a
    number of pockets of poverty from the west side of San Antonio
    to the north end of Austin, and I am eager to see relief that
    helps those neighborhoods. We have already had this morning
    more testimony and inquiry about the tax law than we had during
    all the time on the bill itself because the Republicans were
    afraid to bring any administration witness to answer questions.
    They didn't want academics. They didn't want businesses, unless
    they were meeting back in their offices, to come here and be
    questioned about this.
        And so one of the provisions that was buried in the law was
    something called the opportunity zone. And it does offer some
    opportunity, but you make reference in your testimony to some
    of the challenges. Given the lack of any really specific
    guidelines about opportunity zones, what do you think the
    challenges are for that legislation?
        Ms. ABRAMOWITZ. If the goal of the opportunity zone was to
    encourage investment in order to provide benefits for the
    lowest income categories, I think it is difficult to evaluate
    yet, but the only thing I can say is early reports in the news
    and in industry suggest that some investment in opportunity
    zones is going into areas that are already gentrified, areas
    that may not benefit those who we would like to see benefited,
    and it may be a real challenge trying to target that investment
    properly.
        Mr. DOGGETT. Lastly, one of the other false claims was
    about all you need was a stamp and a postcard to file your tax
    returns. In fact, and you referenced this, we have actually
    made the filing season more complicated. A teacher, for
    example, who was able to claim on Form 1040 a small deduction
    that the Republicans wanted to eliminate--but we were able to
    prevent that--they now can no longer claim on their basic form.
    They have got to go and file a schedule before they can claim
    that modest deduction for the money that they put into their
    classroom. Isn't that right?
        Ms. ABRAMOWITZ. That is correct.
        Mr. DOGGETT. Thank you all very much for your testimony.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from Florida to
    inquire, Mr. Buchanan.
        Mr. BUCHANAN. Thank you, Mr. Chairman. I appreciate the
    opportunity.
        I want to take my time--we all have limited time--to focus
    on primarily small business passthroughs. I mean, there is a
    lot of discussion about corporations that separate passthroughs
    in terms of subchapter S and LLCs. What I am seeing from
    Florida is that if you look at it from a jury standpoint, where
    we are at, we have had 3 percent growth. For the first 10 years
    I was here, we had 1 percent growth, 1.5 percent growth. We had
    a record 3.1 percent growth. Many people didn't think we could
    get there. Lowest unemployment in a long time, which also is
    making a big difference, at least in Florida, on paychecks,
    bigger paychecks, not only in terms of the refunds they are
    getting, but employers and supply and demand, they are having
    to pay more, and that is a big factor there. Optimism is at an
    all-time high. And, also, I can just tell you, people in
    general are very bullish.
        Let me ask the panelists today just--this isn't good or
    bad; I just want to get your opinion. How many of you have ever
    been in business where you owned or operated your own business,
    signed the front of a paycheck? Can you raise your hand? Okay.
    Thank you.
        My background: I was chairman of the Florida chamber for
    many years. We have 137,000 small businesses; 95 percent are
    small businesses. We are not talking about AT&T and others, but
    small businesses. And I want to say something. They are the job
    creators. They create over 50, 60 percent of the jobs. We
    should be in the business here doing everything we can to help
    startups and help them be more successful and help
    entrepreneurs.
        I did a forum with 10 women, CEOs in my area, a couple of
    years back, and people say, why just women? Because, I said, 57
    percent of the startups going forward are going to be women-
    led. So that is who we are as America, in my opinion. Apple
    started out in California in a garage, and we know where they
    are at today. But they are the job creators.
        Let me just remind you, before tax reform, in terms of
    small businesses, the rate was 39.6. You had Obamacare was--or
    the ACA--was probably 3, 3.5 percent. I am just taking it from
    memory, and then I know you are from California. My friends in
    California, they had another 10, 15 percent; 13 percent I think
    was the rate. You are at 55 percent, the rate for taxes on
    small businesses, medium-size businesses.
        So the question I would have for the panelists, and I would
    like kind of a yes or no: Would you, in your opinion, repeal
    the 20-percent deduction part of this tax reform we made
    available to small business? Doctor? Why don't we start on the
    left and go over? Would you repeal the 20 percent for small
    business?
        Ms. GOULD. I am sorry. I would have to say I am not an
    expert on that issue.
        Mr. BUCHANAN. Pardon?
        Ms. GOULD. I am not an expert on that issue.
        Mr. BUCHANAN. Okay. It is just a yes or no, just kind of
    want to get your opinion.
        Mr. OH. I could imagine keeping it with some changes.
        Mr. BUCHANAN. Okay.
        Mr. Shelton.
        Mr. SHELTON. I am also not an expert on that, but I don't
    repeal anything, so----
        Mr. BUCHANAN. Okay.
        Ms. ABRAMOWITZ. With respect to the lowest income folks, I
    would just hope that the provision doesn't have unintended
    consequences for the poorest----
        Mr. BUCHANAN. But would you, yes or no, cut--would you not
    repeal the tax or----
        Ms. ABRAMOWITZ. I would certainly study it very carefully.
        Mr. HOLTZ-EAKIN. No.
        Mr. BUCHANAN. Dr. Holtz-Eakin, let me ask you, the impact
    that the 20-percent reduction has had for small business, in
    your opinion, how big of an impact has that been as a result to
    our growth and our country?
        Mr. HOLTZ-EAKIN. Well, as I mentioned briefly in my
    opening, passthrough businesses have more than one half the
    business income. We have seen a dramatic improvement in the
    business climate measured by confidence, intention to invest.
    So, if you look at, for example, the NFIB, small business
    confidence indices and their planned capital investment, in the
    immediate aftermath of the passage of the law, both spiked
    sharply.
        And then, in the data, we see improved investment and
    faster growth, and that has to be in substantial part due to
    the passthrough community because the large C corporations are
    still waiting for the regs to get written throughout 2018.
        Mr. BUCHANAN. What I am seeing, you know, in Florida,
    anyway, it is an explosion. People are bullish. It is a
    combination of the leadership here and this tax reform and also
    I think the leadership in Florida, that dual combination.
    People are very bullish about where we are at but, more
    importantly, where we are going.
        Thank you, and I yield back.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentleman from California, Mr.
    Thompson, to inquire.
        Mr. THOMPSON. Thank you, Mr. Chairman, for holding this
    hearing.
        And thanks to all the witnesses.
        Mr. Chairman, we have heard time and time again over the
    years from expert witnesses that tax cuts don't pay for
    themselves. As a matter of fact, Mr. Holtz-Eakin, Dr. Holtz-
    Eakin, you said that yourself on this panel. And we know that
    this bill cost $2.3 trillion, $2.3 trillion in unpaid-for tax
    cuts.
        I would like to ask unanimous consent to read into the
    record this news article that says, ``It's Official: The Trump
    Tax Cuts Didn't Pay for Themselves in Year One.''
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman NEAL. Will the gentleman yield?
        Mr. THOMPSON. I will.
        Chairman NEAL. Mr. Eakin, you nodded in the affirmative.
    Would you say yes or no to Mr. Thompson's question?
        Mr. HOLTZ-EAKIN. I have said many times at this table that
    tax cuts do not pay for themselves.
        Chairman NEAL. I have tortured you with that question.
        Mr. HOLTZ-EAKIN. I believe that is correct, sir.
        Chairman NEAL. Thank you.
        Mr. THOMPSON. Mr. Chairman, thanks for holding the hearing,
    the first hearing we have had on this tax bill. And as you can
    expect, when you pass a major tax rewrite in 51 days without
    holding a single hearing to receive expert input, the
    Republican tax plan has seen one problematic surprise after
    another for taxpayers. Last Congress, we saw one rewrite have
    to take place to fix a policy that was grossly distorting the
    marketplace by incentivizing farmers to sell their products to
    agricultural co-ops over other businesses.
        Now, in addition to just outright drafting errors in the
    bill that are causing real harm to businesses, the true impacts
    are being felt of unvetted policy hastily passed into law. This
    includes churches and other nonprofits who may, for the first
    time, be forced to pay taxes due to a change in the tax bill to
    the treatment of some types of fringe benefits they provide
    their employees. We have seen small wineries paying more to
    house their wine in warehouses, impractical depreciation
    schedules for restaurant construction.
        Professor Oh, what are some of the other problems with this
    tax bill that might have been avoided had the Republicans held
    hearings and consulted with experts before ramming this
    through?
        Mr. OH. I think we would have had a better handle on the
    distributional issues that are created by this legislation, the
    fact that the progressivity of the tax cuts as measured by
    increases in after-tax income are heavily tilted towards the
    rich.
        I also think that we would have had an opportunity to more
    closely examine the passthrough deduction. I agree with the
    Congressman from Florida that small businesses are very
    important and that the passthrough deduction does help some
    small businesses, but it helps a lot of very, very wealthy
    people as well. And I think that is the type of thing that
    comes out when you have hearings and expert testimony at some
    time.
        Mr. THOMPSON. And despite the Republicans and the
    President's promise of 6 percent economic growth and repeated
    claims by Members of the administration and my colleagues
    across the aisle that the bill would pay for itself, already we
    know these promises were empty. What is more, the Republican
    tax bill increased Federal borrowing, not to expand programs
    aimed at the struggling low and middle class, the working
    people of this country, but to provide handouts to the richest
    1 percent. The bill is expected to increase deficits by $2.3
    trillion over 10 years and by over $5 trillion if Congress
    extends and delays the time bombs that the Republicans built
    into this bill.
        The rising deficits aren't a surprise, and they aren't an
    accident. The Republicans will turn around and use them as an
    excuse to call for cutting essential social safety net programs
    like Social Security, Medicare, and Medicaid.
        Dr. Gould, how will the coming deficits affect spending on
    important programs such as Social Security, Medicare, and
    Medicaid?
        Ms. GOULD. Absolutely. I think that we have demonstrated
    here that the tax cut has been a wasteful use of fiscal
    resources. We should also be clear that any argument that it
    must be paid for by cutting spending is based on politics, not
    economics. There is no evidence right now that deficits are
    doing economic harm to the U.S. economy, but if tax cut
    supporters manage to politically leverage the deficit they
    created to cut spending, it would, indeed, do harm to working
    families. Cuts to programs that you mentioned, Social Security,
    Medicare, Medicaid, would do measurable harm.
        Mr. THOMPSON. Thank you.
        Dr. Oh, who will be left behind if the tax cuts are
    eventually funded by cutting Social Security, Medicare, and
    Medicaid?
        Mr. OH. Those programs predominantly help low-income
    Americans, and so if the Tax Cuts and Jobs Act is funded
    through a cut to mandatory spending programs, that makes the
    distributional effect much, much worse.
        Mr. THOMPSON. Thank you.
        Thank you, Mr. Chairman.
        Chairman NEAL. I thank the gentleman.
        With that, we recognize the gentleman from Nebraska, Mr.
    Smith, to inquire.
        Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman.
        Thank you to our panel as well for your input today.
        President Obama in his budgets reflected a reduction in the
    corporate tax rate to be more competitive. He elaborated on
    that as well in moving to a territorial system for corporate
    taxation and obviously to be more competitive and to bring jobs
    and business back to America or prevent it from leaving. Just
    real quick, yes or no or a show of hands, could I see a show of
    hands of who would like to take us back to the 39.6-percent
    corporate tax structure and the taxes on the worldwide basis
    instead of a territorial basis like TCJA? Any hands that would
    want us to return to those levels? Okay. Just hopefully, the
    record will reflect that there were no hands that went up.
        And so I hope that we can work together as we do move
    forward. We shouldn't wait for tax changes to happen only once
    every 30 years. And as we do move forward, I think there are
    ways we can look to work together. In fact, when we finished
    our work on the TCJA, we just didn't sit back and relax; we
    asked ourselves what could we do to bring folks off the
    sidelines of our economy, and certainly that is why I worked on
    the Jobs for Success Act. This was a way to reform TANF, the
    Temporary Assistance for Needy Families, so we could reconnect
    them with work.
        Especially as I travel my district and I hear from
    colleagues across America that the tight labor market, as was
    indicated earlier today, is a major challenge that our country
    is facing. We have millions of Americans on the sidelines, and
    I hope we can pursue policies, whether it is our tax policy,
    whether it is other policies within this Committee, or even
    beyond, to bring folks off the sidelines of our economy. Job
    vacancies are out there. Help wanted signs are way more
    prevalent these days than they were not so long ago.
        And I hope that we can--I was shocked by the opposition to
    some of the changes that we would make to TANF because I think
    there was a large agreement that we wanted our safety net to be
    friendlier to taxpayers, workers who have childcare expenses,
    who have transportation needs. Our bill had that, and so I hope
    that we can resolve some of these issues because the opposition
    I think was very unfortunate.
        Ms. Abramowitz, I was wondering. You mentioned the Social
    Security number and the child tax credit. Can you elaborate?
    You would not want documentation for the child tax credit? Is
    that accurate?
        Ms. ABRAMOWITZ. I think previously an ITIN was required.
    The new bill requires a Social Security number. I would say
    that it is a misperception that immigrants don't pay their fair
    share of taxes. We know that immigrants do for a lot of
    reasons. In fact, not only do they pay, but they pay payroll
    taxes and FICA taxes and Social Security taxes which they may
    never see in terms of Social Security benefits.
        So, if we are trying to measure the income of people and
    trying to give benefits for childcare or for just the child tax
    credit for having a child in your home in lieu of a dependency,
    it seems to me that maybe we don't need a Social Security
    number in order to claim that child.
        Mr. SMITH OF NEBRASKA. Okay. Thank you.
        Dr. Holtz-Eakin, can you explain how the TCJA has helped
    lead to what we see as historically low unemployment rates, and
    does this create opportunities for those who have actually
    dropped out of the labor force, as I had mentioned earlier?
        Mr. HOLTZ-EAKIN. Yeah. Prior to the passage, we had seen
    declining labor force participation and in the aggregate, and
    had we had traditional labor force participation rates, had the
    unemployment rate stayed something like 4.8 or 5 percent, that
    would have been roughly 90,000 jobs a month in 2018. We got
    223,000 jobs a month. It kept labor force participation up,
    drew people in who might have otherwise exited, kept people
    from leaving. The unemployment rate fell to 3.8 percent.
        And if you look at the data on those people who report
    themselves as marginally attached to the labor force or a
    discouraged worker, those categories are dropping, and that is
    exactly the place where you would like to see improvement in
    the labor market.
        Mr. SMITH OF NEBRASKA. Very well. Thank you.
        Thank you, Mr. Chairman.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentleman from Connecticut, Mr.
    Larson, to inquire.
        Mr. LARSON. Thank you, Mr. Chairman, and thank you so much
    for this hearing.
        Thanks to our expert witnesses, et cetera. We are pleased
    that you are here so that we can have a hearing on tax cuts
    that never took place when they should have.
        And I think that that is the concern that a number of us
    have because both sides were in favor of a tax cut. Both sides
    recognized that there was inequality that existed. In fact,
    President Obama had proposed such a tax cut, 28 percent and
    then an incentive to 25. You would think that he never proposed
    it. Show of hands if any of you were invited to speak here at
    this Committee on President Obama's tax cuts. You were invited
    to this Committee to speak on the tax cut? Do you remember that
    hearing?
        Mr. HOLTZ-EAKIN. I could have the wrong hearing, but I was
    here.
        Mr. LARSON. I think you probably do, but in fairness to you
    because you have spoken so many times and you are held in such
    respect----
        Mr. BLUMENAUER. I will stipulate he was.
        Mr. LARSON. Yes. So the point is this. Dave Camp did a
    great job in terms of trying to hold hearings, et cetera, and
    bring everybody together, and then we have no hearings. And in
    51 days, as Mr. Thompson eloquently stated, all of a sudden,
    without the benefit of any give and take or back and forth, we
    get a bill dropped on us that was loaded with mistakes and
    inaccuracies. Now, that can happen. It is not that they
    intended it to happen that way, but that is what the results
    were. And so now we have to come together to change the
    results, and I think the galling thing for a number of us up
    here is that immediately after passage of the bill, they said:
    Well, what the problem is, is not the inequities.
        And if you live in Connecticut, and you are completing
    filling out your tax form this past month, and you find that
    you have been double taxed under the law because of the 750,000
    people in Connecticut who itemized deductions with an average
    of 19,000 per individual, when you are capped at 10, someone is
    making up that difference. So to know--it is somewhat not
    heartening to all of my constituents to know that they are
    subsidizing the tax cut of the wealthiest in this Nation.
        Having said that, I think the most galling thing is this
    shift towards entitlements. And all of you had something to say
    about that, the shift being that, ``Oh, no, what the real
    problem is in this country is what we need is entitlement
    reform.'' Social Security and Medicare are not entitlements.
    There are benefits that people paid for. They are earned
    benefits. Credit President Trump at least for standing up and
    saying that in a debate and saying it directly to the
    Republicans that were countering him and trying to say, ``Oh,
    no, Mr. President.''
        So, Mr. Oh, in your testimony, you eloquently described how
    the tax cuts went primarily to the wealthy. If the $2 trillion
    tax cut is offset by future cuts to programs like Social
    Security and Medicare, what would the impact be?
        Mr. OH. It would make the overall distributional effect of
    the Tax Cuts and Jobs Act much more unequal, particularly
    burdening the bottom 20 percent or 40 percent of the American
    public.
        Mr. LARSON. Dr. Gould, what do you think the impact would
    be?
        Ms. GOULD. Yeah. Absolutely right. We know that Social
    Security is the number one poverty reducer in this country. We
    make cuts to that, we increase poverty. That increases the
    inequality that we have in the country. Absolutely.
        Mr. LARSON. Mr. Shelton.
        Mr. SHELTON. We would be adding insult to injury. A tax cut
    that went mainly to the rich and corporations is now going to
    be paid for by everybody else who would take advantage of the
    Social Security and Medicare or Medicaid.
        Mr. LARSON. Ms. Abramowitz.
        Ms. ABRAMOWITZ. I would say not only would it have short-
    term, it would have long-term effects. Less than half of the
    people in this country have retirement savings and rely on
    Social Security. So, to the extent you are talking about
    reducing that, I think you are looking at a disaster in the
    future.
        Mr. LARSON. Dr. Holtz.
        Mr. HOLTZ-EAKIN. I would just stipulate that you can do
    progressive Social Security reform as well as for Medicare, you
    know. There would premiums for high-income individuals that are
    just----
        Mr. LARSON. I don't disagree with you, but I don't think it
    is an entitlement, either. I think it is an earned benefit that
    people paid for.
        Ms. Gould, the impact on women specifically with regard to
    Social Security. Currently, in our country, amidst all of this,
    and I would like to, Mr. Chairman, for the record, The FEDS
    Notes, ``A Wealthless Recovery? Asset Ownership and the Uneven
    Recovery from the Great Recession.'' I would like to institute
    that for the record.
        Chairman NEAL. So ordered.
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. LARSON. And the ``Distribution Analysis of the
    Conference Agreement for the Tax and Jobs Act'' by the Tax
    Policy----
        Chairman NEAL. So ordered.
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. LARSON. Thank you, Mr. Chairman.
        And, with that, I will yield back.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from Texas to
    inquire, Mr. Marchant.
        Mr. MARCHANT. Thank you, Mr. Chairman.
        I found that the best way to gauge a law that we have
    passed is to go back to the district and actually meet with the
    people that the bill that we passed affects. I had a great week
    last week. My regular drive every day goes by an aluminum
    factory that builds windows to my local Starbucks, and I saw as
    I drove there one day, it said, ``$11.50, now hiring.'' The
    next day, I went by, and it said--it struck out ``$11.50'' and
    said, ``$12.50,'' you know, ``need workers.'' About towards the
    end of the week, it said ``$15.50 to $18, please apply.'' So
    that particular company was saying tax reform is working; we
    need workers.
        I met with a mortgage company that was doubling the size of
    their company, moving from one side of my district to the other
    side. I met with their employees. We talked about the tax bill.
    I asked them, how is the tax bill affecting you? How many of
    you in this room are making less money now than you were a year
    ago or before? Tell me now. Complain now. Not a hand went up.
    All their questions were about workers: Where can we get more
    workers?
        A local city that I represent, Hurst, Texas, is building--
    has a gentrified area. Now, I thought that going into
    gentrified areas and revitalizing them, in my district, that is
    a really good thing. So they are going in there using the new
    market credits. They are using the opportunity zones, and they
    are building veterans housing and new development around those,
    and they are very excited about the tax bill and the
    opportunities that that city was given to go into their area
    and really do some good things.
        And then I went to another company that is headquartered in
    the district, and they put wind turbines up all over west
    Texas. And so I was kind of braced for that company. I thought,
    hey, I am going to walk in, and they are going to talk to me
    about extenders, and they are going to want their tax credits
    increased, and they are going to--you know, they are going to
    ask me for a bunch of stuff that I really am not sure that I
    can deliver. The first minute of the conversation, he said: You
    can just relax.
        He said: We are doing just fine. We appreciate the credits.
    We know they are phasing out. It is helping us. But our big
    problem is we can't find enough people to work, and we are
    raising our salaries, and we are improving the benefits of our
    company, and we are embracing the tax bill. Please tell us that
    this tax bill is not going to be changed. Let us have some--at
    least a year or two or three or four or five of this tax bill
    to sink our teeth into it and to really take advantage of it
    and employ more people.
        And so, Mr. Chairman and Members, this is how I experienced
    the tax bill back when I was in the district. I thought, well,
    people are starting to fill their taxes out. I might ought to
    wear a helmet to some of these meetings because, you know,
    people might not be very happy. They may have every question in
    the world to ask me, but it didn't happen that way. And I have
    got a wonderful district. It is growing, but even in the areas
    of my district that are gentrifying and need help, there are
    answers in this bill.
        I yield back.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentleman from Oregon to inquire, Mr.
    Blumenauer.
        Mr. BLUMENAUER. Thank you, Mr. Chairman, and thank you for
    having the long-awaited hearing that we should have had when
    the proposal was before us.
        You know, I hope we can explode some of the cartoon
    arguments about tax policy. I am looking forward to what my
    friend from Texas pointed out. I would like to have him
    interact with the policy questions we never had before this
    Committee about why architects and engineers pay a higher tax
    rate than doctors, lawyers, and CPAs. What is the policy
    rationale for that? How do you explain that to your
    constituents? Never heard from him.
        Professor Oh, you are going provide us with some
    suggestions about how to make the passthrough provisions work
    better. I don't want to take the time now. I would like to see
    it in writing, but you know, it would have been nice if this
    Committee actually had done that rather than ramming something
    through without benefit of a hearing, without benefit of going
    back and forth and resolving those questions.
        The GOP is going to give us a postcard size tax return, and
    it would be fun watching our Republican friends in a hearing
    trying to fill out the postcard size tax return with real life
    experience. And I appreciate Ms. Abramowitz having the rest of
    the story with the schedules that still have to be filled out.
    You didn't do away with them. You slid past it.
        Explain why you gave most of the help to people in America
    who need it the least. We never had a debate on that, and the
    distribution, we tried to get at it. We made the arguments. We
    gave based on the best information we had, the evidence is
    coming forward in terms of what that impact is going to be over
    time. We never had a robust discussion about the hundreds--the
    millions of people who are going to pay higher taxes because
    they are going to pay a tax on a tax, and it is not just blue
    States. You have got a lot of them in your district, Kenny, who
    are going to pay more because they can no longer deduct to the
    full extent of the law. We have never talked about that and
    what the impact is going to be. We never really delved into
    what the impact is going to be really in terms of corporations.
        My friend from Texas pointed out the problems of the
    incentive for outsourcing jobs because they have a lower tax
    rate. We never talked about that ever on this Committee. What
    is your policy rationale to incent more outsourcing? And I
    really appreciate our friends from CWA coming in with some real
    life examples, not hypothetical or a couple cherry picking here
    or there. You have talked about 5,000 call center jobs located
    to Mexico to serve America, and your tax bill provides
    incentives for that. We have never talked about what the costs
    are going to be for the benefits for people who don't need it.
        No doubt there are lots of people who made out like
    bandits. I know some of them. But we didn't talk about what the
    short-term and long-term costs are in terms of making a hash
    out of the Tax Code, making it more difficult to administer,
    problems for real live people.
        I have got some of the largest corporations in my State who
    still don't know what the Republican bill did to them. They
    know their executives are getting hammered and lots of people
    who aren't executives because we have property tax and income
    tax in Oregon. They are going to be paying a tax on a tax. But
    the corporations themselves almost 2 years later are clueless.
        I am hearing these questions about the opportunity zones.
    We didn't debate that in this Committee. We didn't get evidence
    on that, and now they are being dropped on us out of the sky.
    In some cases, they may be useful. In other cases, they are
    not. But we have created a cottage industry for lawyers and
    accountants. Oh. And by the way, they are going to pay higher
    rates than doctors who will treat the blood pressure for people
    who are trying to figure this out.
        Mr. Chairman, thank you for doing this. I look forward to
    Chairman Thompson being able to do a deeper dive on his
    subcommittee to ferret this out and get the information we
    should have had in the first place, not to blow this up and
    repeal it, but to make sense out of it and fix the stuff that
    doesn't. Thank you.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentleman from New York, Mr. Reed, to
    inquire.
        Mr. REED. Well, thank you, Mr. Chairman, and thank you to
    our panelists today.
        I just want to cut through a lot of the political rhetoric
    that you are hearing today from both sides of this aisle in
    regards to ``tax cuts, boo,'' ``tax cuts, yea,'' that type of
    debate because at the heart of what we have done in the tax cut
    bill is we have produced jobs. We have produced jobs. You
    cannot argue that fact: 493,000 manufacturing jobs added since
    the tax cut bill. We now have 7.3 million jobs available with
    only 6.2 million people on unemployment. We have more jobs than
    people looking for those jobs.
        What we did on our side in regards to focusing on and being
    the party of jobs is we recognize that a job is more than a
    paycheck as Republicans. Jobs bring to you--somebody who was
    raised by a single mother whose father passed when I was 2 and
    saw firsthand--a job brings dignity--dignity, pride, optimism.
    So that is when I see the numbers of 71 percent of Americans
    believing the economy is in a good shape and the consumer
    optimism is high, that is a good thing. We should both be
    celebrating these numbers, not chastising one side or the
    other.
        I want--oh. And one thing here from our panelists because
    we often hear the top 1 percent argument day in and day out. I
    come from New York. State and local taxes and that deduction in
    the cap of $10,000 is a very important issue to us in New York
    State. Now, I stand for repealing that provision and putting
    the full set of--the full SALT deduction back on the books, but
    I will tell you. I want to go into this eyes wide open and
    understand exactly what we are doing to my colleagues that
    advocate for the SALT and argue about the SALT cap in these
    high-tax States. If we did that, the beneficiaries of that move
    will be the 1 percent. Does any panelist on this dais today
    disagree with the conclusion?
        Chairman NEAL. Will the gentleman yield?
        Mr. REED. I will not. But if I have time, I will yield to
    my good friend----
        Chairman NEAL. Thank you.
        Mr. REED [continuing]. From New Jersey.
        Does any panelist on this dais today disagree with the
    assertions that have been concluded by the Tax Policy
    Foundation, by Bloomberg, by numerous organizations that have
    studied that if we repeal the $10,000 cap, that that is going
    to go primarily to the top 1 percent, and in the top fifth of
    income, those making more than $153,000, that would be 96
    percent of the people that benefit under that repeal? Does
    anybody disagree with the assertion that repealing the SALT cap
    will benefit the 1 percent?
        Mr. PASCRELL. Right here. I do.
        Mr. REED. I am asking the panelists, and then I will yield
    to my friend from New Jersey. Anyone disagree with that?
        Mr. PASCRELL. I am a panelist.
        Mr. REED. Mr. Oh, please. Do you disagree with that
    conclusion?
        Mr. OH. I can't speak to the exact numbers that you are
    giving because I don't have them available offhand, but I do
    agree with you with the general sentiment that the SALT
    deduction generally benefits the top in income distribution.
        Mr. REED. And I appreciate that. So, if we do this, to my
    colleagues, to my friend from New Jersey who I now yield to, if
    we do this together recognizing who we are going to benefit in
    regards to that repeal.
        Mr. PASCRELL. I want to do everything together, my friend.
        Mr. REED. I know we do.
        Mr. PASCRELL. And, you know, just use your imagination of
    all of the things----
        Mr. REED. You have got one minute.
        Mr. PASCRELL. But the point of the matter--thank you. The
    point of the matter is, in New Jersey, and in my Ninth
    District, the majority of those folks who use that deduction,
    the oldest deduction on the tax books--it goes back to the
    Civil War, and there was a reason----
        Mr. REED. I understand.
        Mr. PASCRELL. My minute is not up.
        Mr. REED. Well, it is my time. Hurry it up.
        Mr. PASCRELL. Well, you can take your time.
        The oldest deduction, and it was done for a very specific
    reason so that States and the Federal Government would not take
    resources away from local communities that they couldn't build
    roads and schools and hospitals. And you want to--before the
    Code even existed, before the Tax Code ever existed, and so I
    want to look at it that way.
        But in my district, the majority of people who use that
    deduction--and it changes every year, even in small States.
        Mr. REED. My time is expiring. What I would just--
    reclaiming my time, is I am willing to do this, but do not play
    politics with it. Go into this eyes wide open, and we will make
    sure, but nobody on this panel stood for the repeal because
    they understand that it impacts the top 1 percent.
        With that, I yield back.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentleman from Wisconsin, Mr. Kind, to
    inquire.
        Mr. KIND. Thank you, Mr. Chairman. Thank you for teeing up
    this very important hearing.
        And we are going to have to do a deep dive, as my friend
    from Oregon said, on the aspects of this tax bill.
        But to my good friend from New York, and he is my friend. I
    am glad he is asking for his eyes to be wide open because this
    fire-aim-ready legislative 51-day rush to pass the most
    significant reform in the Tax Code since 1986, this is
    predictable with the unintended consequences, the mistakes that
    were made, and the lack of economic punch that we are seeing
    right now, now that it has been in effect well over a year.
        Let me just strike down a couple of the straw men that we
    have heard here today. You know, the last 2 years of the Obama
    administration had stronger job growth numbers than the first 2
    years of the Trump administration, and that includes one full
    year of this new tax law. That is just a truism. And to my good
    friend from Texas, the Ranking Member, who is setting up the
    straw man that he is hearing all Democrats talk about
    completely repealing this bill, I haven't heard one Member on
    this dais talking about completely repealing this tax cut bill
    or anyone in the----
        Mr. BRADY. Will the gentleman yield?
        Mr. KIND. No. This is my time right now.
        Unlike the opposite side who had 68 votes to completely
    repeal the Affordable Care Act and now this President that is
    embracing a lawsuit in Texas that will completely repeal the
    Affordable Care Act and all the patient protections that come
    from it, on preexisting conditions, gives up to 26 staying on
    the parents' plan, getting rid of annual and lifetime payment
    caps; all of that would be repealed based on your votes and
    what this administration is calling for. So let's get serious
    about what we need to change with this Tax Code.
        Now, Dr. Gould, your testimony was talking about the danger
    of growing inequality in the wage gap in our country. In a
    moment, I am going to ask you to expound on that a little bit,
    but first, I want to pop up a chart that we asked the Joint
    Committee on Taxation to prepare for us for this Committee that
    shows the distributional effect of this tax cut. Many of us had
    a problem, not only the lack of incentives for the economic
    growth that we need as part of this tax cut but the fact that
    it wasn't paid for, which with interest payments now will
    explode our debt by $2.3 trillion over the next 10 years
    because of no offsets, but also because of the distributional
    effect. If you take a look at this chart, and, Mr. Chairman, I
    ask unanimous consent to have the chart included in the record
    at this time.
        Chairman NEAL. So ordered.
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. KIND. It shows that in 2019 alone, those making over a
    million dollars are getting a $64,000 tax cut under this bill,
    and those earning less than $100,000, on average, 464 bucks.
    And it is even worse than that. I mean, taxpayers in the bottom
    20 percent of the income distribution is projected to receive
    on average a tax cut of $60 under this.
        Now, Dr. Gould, I think one of the great threats that we
    face in regards to future economic growth and just the
    stability of our society is growing inequality and the growing
    wage gap that we have in our--does this tax bill help or hurt
    in that regard, policywise?
        Ms. GOULD. It hurts. Right. Absolutely. The data you are
    showing here and the Tax Policy Center has also shown that
    individual income tax provisions in the 2017 tax law were
    indeed skewed toward the top of the distribution with the top 5
    percent of households getting about 40 percent of the benefits,
    so it is exacerbating the inequality that we have seen over the
    last 40 years.
        Mr. KIND. Professor Oh, you too have done some research and
    looked into the implications of this tax law and the
    disproportionate benefit to the most wealthy, but you also
    indicated in your written testimony today that this is going to
    get worse in the outyears. How so?
        Mr. OH. Well, you take a look at the chart that you have
    helpfully provided here and compare 2019 to 2027, and I will
    just draw everyone's attention to that very small yellow bar,
    which indicates what the people earning less than $100,000 are
    going to get, and what they are getting is a tax increase
    relative to old law.
        Mr. KIND. Now, the other problem that we had--and this is
    something that was foreshadowed because they told us what they
    were going to do with the tax windfall, corporations, and what
    they used the tax cut for--we have seen huge share buybacks,
    dividend distributions, very little going into base wage
    increases. You have got some token bonuses that were given out,
    but even that was qualifying, so not all employees received
    that. This was exactly what corporate America said they were
    going to do with the tax cut when we were asking them. They
    were sitting on a pile of cash to begin with.
        Mr. Eakin, I agree, and there was consensus that something
    had to be done to make us more competitive in the international
    tax regime. In fact, the previous administration, Obama,
    recognized that too in their tax reform proposals. But what we
    have seen is this huge giveaway that has not gone to improve
    the wage disparity or the income inequality gap because of how
    corporations have chosen to use this huge windfall. And that is
    something I think this Committee is going to have to look at
    much deeper policywise as we move forward on it.
        And then, finally, let me just say that I am always struck
    by the attention that these tax cuts receive when it comes to
    growth. We know the two key factors with GDP growth is
    workforce participation and worker productivity. We have an
    administration in power now that is talking about reducing
    legal immigration in this country by 50 percent. If that
    happens, game over. There is no way we are going to meet GDP
    growth targets unless there is some baby boom that I am unaware
    of that is happening in this country today.
        Thank you, Mr. Chairman.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from
    Pennsylvania, Mr. Kelly, to inquire.
        Mr. KELLY. Thank you, Mr. Chairman. Thanks for having the
    hearing.
        So the title of the hearing is ``The 2017 Tax Law and Who
    It Left Behind.'' So thank you all for being here today to talk
    about that.
        One piece that hasn't been addressed yet when we talked
    about who it left behind, are any of you aware of opportunity
    zones that were included in the Tax Cuts and Jobs Act? Do you
    know what it is, Ms. Gould?
        Dr. Oh, do you know what that is? No? You are aware of it?
        Mr. OH. I am aware of it.
        Mr. KELLY. Okay. Not a bad provision.
        Mr. Shelton, do you know anything about it?
        Ms. Abramowitz.
        Ms. ABRAMOWITZ. I am aware.
        Mr. KELLY. I know you are, right. You know, all politics is
    local. Let me just go over something real quickly here. In the
    district that I represent, there are 16 opportunity zones.
    Opportunity zones are exactly what we are talking about. It is
    creating an opportunity in a zone that the rest of the world
    has left behind and doesn't even look at anymore because there
    is no reason to invest there.
        Part of the Tax Cuts and Jobs Act was to breathe life back
    into our economy, breathe life back into our communities. So,
    if I go to Erie, Pennsylvania, if I go to ZIP Code 16501, which
    is one of the poorest ZIP Codes in the world, there are eight
    opportunity zones. So who was left behind? I will tell you. I
    don't know who was left behind, but I sure as hell know who was
    put at the front of everything. And when I look at the numbers
    of this, I am completely confused. When I hear the rhetoric
    back and forth about, you know what? It just--you know, it was
    okay, but it wasn't good enough. Because the perfect is always
    the enemy of the good. So I am fascinated by some of these
    things.
        You know, if I could, Mr. Chairman, I would like to submit
    for the record ``The Distributional Effects of Public Law.''
        Chairman NEAL. So ordered.
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. KELLY. Okay.
        Mr. Eakin, now, if you really want to test whether people
    are better off or worse off, you have to kind of go to the
    numbers, right? So, when you look through this book--and I
    think you probably already looked through this report--one of
    the things I find interesting, the group that the taxes were
    really important for, and this is what we call the middle-
    income people, as a group, their taxes were cut by 8.7 percent,
    and the tax rate of this group dropped from 14.8 percent to
    13.5 percent. Does that make somebody better off?
        Mr. HOLTZ-EAKIN. Yes.
        Mr. KELLY. Yeah. It is pretty simple, right? When you look
    at all the numbers that we talk about with this--and we keep
    saying: Well, you know what? Again, pretty good but not really
    good enough.
        There was not one person on the other side of the dais that
    voted for the Tax Cuts and Jobs Act. So you want to come here
    today and say: You know what? It was really good, but you know
    what? It wasn't perfect.
        And when I look at the numbers--because the numbers don't
    lie. And, you know, the President talks about fake news; let's
    talk about real data. When you have economic growth that we
    have been seeing, when we see wages growing by 3.4 percent over
    the last year, when we see job openings at 7.6 million, and for
    anybody looking for a job, there are more jobs open right now
    in the United States of America than we have ever had before.
    They can't be filled because we don't have enough people to
    fill them.
        So to sit here today and say, ``Somehow this damn Tax Cuts
    and Jobs Act just didn't help every single American in the same
    way,'' no kidding. No kidding. In my lifetime, I have been so
    privileged and so--just able to do some things. I was in Paris
    one time, and I went to the Louvre. And one of the things that
    everybody goes to the Louvre to see is the Mona Lisa. I was
    standing there looking at this magnificent portrait by da
    Vinci, and I thought: This is absolutely gorgeous.
        A guy came up beside me. He says: What do you think of
    this?
        I said: I think it is absolutely gorgeous.
        He says: I don't think so. I think her mouth is kind of
    funny.
        We take a classic painting. We take a classic piece of
    legislation. We talk about the most important thing in economic
    growth that this country has seen, and we say: You know what?
    It just wasn't good enough. That is why we couldn't vote for
    it.
        Please. Please. Any of you that believe that somehow the
    passage of the Tax Cuts and Jobs Act hurt America, please raise
    your hand right now. I want to know. Did that hurt America, or
    did that help our economic growth? Not people from the other
    side of the aisle because I know none of you voted for it.
        You don't think it was good. You don't think it was good.
    None of you think it was good. Really. I am in the automobile
    business. You know what? You know when people buy cars? When
    they are working. You know when people buy cars? When their
    income goes up. You know when people buy a house or add on to
    their house or improve their house? When their income goes up.
    There is a little something called take-home pay that has
    worked for every single American, maybe not to the same level
    that everybody would like to see. I get that.
        I want to tell you something. You look at the Tax Cuts and
    Jobs Act, and if anybody can sit on that panel in front of me,
    and I know you are all--when it comes to academics, you know
    that inside out. But I want to tell you. People that work on
    blacktop and not on a laptop, what it means to them. It means
    they have more take-home pay. It means they have a better
    future. It means the future is better for their children and
    their grandchildren, and the country has become stronger. To
    that, there is absolutely no way you can deny that this wasn't
    effective and it didn't help every single American and make
    America great again.
        Thank you, and I yield back.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from New Jersey,
    Mr. Pascrell, to inquire.
        Mr. PASCRELL. Thank you, Mr. Chairman.
        Thank you to the great panel we have today. Thank you to
    both sides of the aisle for shedding some light sometimes on
    this bill.
        Mr. Chairman, we were promised higher wages from the
    Republican tax cuts, chapter and verse. Nobody has denied that.
    We were promised that the massive unpaid-for tax cuts for
    corporations and the wealthy would trickle down to the middle
    class and working families. Well, we have heard that before,
    and today, in America, you are less likely to reach the middle
    class if you are born poor than any time since World War II. I
    don't blame the Republicans for that. We participated in
    government too since World War II. But as many researchers have
    pointed out, the American dream is more likely to be found on
    the other side of the Atlantic Ocean right now.
        Economists have pointed out that the economic mobility in a
    country is strongly tied to the levels of income inequality. In
    the United States, income inequality has risen while economic
    mobility has declined. It didn't happen by accident. Too often,
    this Congress has given itself over to blind, free-market
    thinking that prioritized corporate profits over human being.
        How much revenue did reducing the SALT deduction, how much
    revenue did that bring in, projected to bring in over the next
    10 years to the government? You did this to raise $620 billion
    over 10 years to pay for everything else, and then here was the
    biggest insult of all: After you said in the very beginning
    that you weren't going to lower the income tax rate for those
    in the top, top tier, you reduced it from 39 to 37.5 percent at
    the end because you needed to pay for more of the fantasy that
    you had created. So you are here telling me that you can't
    touch the SALT deduction. You can't go back to it because it
    will, quote/unquote, primarily help those in the top 1 percent.
        Well, let me give you some facts. I have, you know, some
    politicians who will remain nameless right now said that
    restoring the full deduction would benefit the wealthy. The
    vast majority of those losing this break of the 860,000 New
    Jersey households with middle incomes, those between $75,000
    and close to $200,000, that is more than twice as many
    taxpayers than those in the higher income brackets. It is a
    phony excuse that you have used, but you have to do it. You
    have to do it because you put yourself in a box. You didn't
    even have the courage to run on this in the last election. In
    fact, I can point to certain people that lost because they took
    this position and voted for it. They had every right to do
    that, every right to do that.
        You can't say I didn't warn you on this floor. Here is what
    is going to happen, and I am not a good predictor. Certainly
    not in sports or in politics, but I nailed that one. There is a
    sensible fix to this terrible, terrible tax law. Every county
    in my State but one had an average SALT deduction in 2016 that
    was more than $10,000. That means average taxpayers are going
    to see their taxes go up, not just super wealthy but average
    taxpayers. We need to consider the cost of living, particularly
    housing, in New Jersey is much higher than it is in some of
    those other states. Nearly 40 percent of the taxpayers with
    incomes between $50,000 and $75,000 claimed the SALT deduction,
    and we are not only talking about 12 States. Every State in the
    union had those that deduct the SALT deduction, which has been
    in existence for long time. More than 70 percent of those
    making between $100,000 to $200,000 claim it as well.
        So we are a high-cost State. We are more densely populated.
    Our needs are different. And we are only getting back 73 cents
    on every dollar we sent to the Federal Government. This is the
    highest--next to the highest amount of dollars that you take
    from citizens of New Jersey, we do, to pay the bills. So we are
    not missing out on our responsibilities. We are addressing it,
    and we will continue to address it.
        Thank you.
        Chairman NEAL. I thank the gentleman.
        Mr. PASCRELL. Thank you.
        Chairman NEAL. Now let me recognize the gentleman from
    Missouri, Mr. Smith, to inquire.
        Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman.
        I want to thank all the witnesses for being here today.
        And I want to thank the former Republican Congress and
    President Trump for championing the Tax Cut and Jobs Act. I was
    someone who had reiterated support in southeast Missouri, and
    let me just tell you a little bit about my congressional
    district. Either myself or Terri Sewell on this Committee have
    the most impoverished congressional district of all Members of
    the Ways and Means Committee. The median household income in
    the Eighth District of Missouri is right at $40,000 a year for
    a family. $40,000 a year.
        And so, when we were looking at the effects of this Tax Cut
    and Jobs Act, in drafting the policies, we looked at various
    things that, from my perspective, would help lower income
    American workers because that is the people that I have the
    great opportunity to serve and to represent. And let me tell
    you what the Tax Cut and Jobs Act did for the people that I
    represent. And I am sure none of you live in a congressional
    district that has a median household income of $40,000 or less.
    You are from areas that have much higher.
        A family of four in southeast Missouri who makes $55,000 or
    less, their debt in Federal taxes is zero. So we actually
    increase the amount of people that don't have to pay Federal
    taxes in a family of four. We did that by doubling the child
    tax credit--it was very helpful--from $1,000 to $2000. We also
    did that by helping make the child tax credit refundable for
    those low income families that didn't receive it to begin with.
        So my question is of every individual on the panel, do you
    support repeal of the language that doubled the child tax
    credit and made it refundable in the Tax Cuts and Jobs Act? I
    would like just a yes-or-no answer. Do you support repealing
    it, or do you think it should stay in law? Just yes or no.
        Mr. OH. I do not support repealing it. In fact, I would
    support expanding its refundability.
        Mr. SMITH OF MISSOURI. Perfect.
        Ms. GOULD. Yeah, I would reiterate that as well.
        Mr. SMITH OF MISSOURI. Okay.
        Mr. SHELTON. No.
        Ms. ABRAMOWITZ. I agree. Keep and expand.
        Mr. HOLTZ-EAKIN. No.
        Mr. SMITH OF MISSOURI. I am glad we have all that. I would
    love to get a Democrat colleague on the other side to cosponsor
    my legislation. I can't even find one Democrat to sponsor the
    legislation to make it permanent, and we know that this helps
    families. You all agree with me. So if anyone on this
    Committee----
        Yes, I do yield.
        Ms. MOORE. Did you hear the witnesses say that they want
    you to expand it because the refundable tax credit really
    doesn't help the poorest mothers?
        Mr. SMITH OF MISSOURI. It went up to $1,400 with
    refundability.
        Ms. MOORE. Like he said, they want it expanded, not made
    permanent the way it is.
        Mr. SMITH OF MISSOURI. I will reclaim my time. What I will
    do is that, under the law prior to our expansion, it is better
    and it helps the poor people more now than it did prior to the
    expanding, because it was never refundable. Is that correct?
    Anyone want to answer that there, was it refundable? Did we
    expand it?
        Ms. ABRAMOWITZ. There was, in fact, what was called an
    additional child tax credit that provided some refundability
    for people who couldn't use the----
        Mr. SMITH OF MISSOURI. Did our provision provide more low
    income to get it under refundability?
        Ms. ABRAMOWITZ. It did increase it, but you have to look at
    it also with the change in dependency exemptions, which were
    eliminated.
        Mr. SMITH OF MISSOURI. Thank you. And so my point is, to my
    colleagues on the other side of the aisle, is that something is
    always better than nothing. And I hope that you all will join
    with me to at least preserve the benefit that everyone has by
    doubling the child tax credit. If you want more and you can
    pass more, go for it, but let's at least preserve what we have
    and not let it expire.
        So I would welcome, welcome any Democrat brave enough to
    support and cosponsor my legislation to support working
    families. That is all I am asking. So I will be eyes and ears
    for anyone on this Committee that helps to support working
    families in doubling the child tax credit.
        With that, Mr. Chairman, I yield back.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from Illinois,
    Mr. Davis, to inquire.
        Mr. DAVIS. Thank you, Mr. Chairman. And I also want to
    thank all of the witnesses who have been with us all morning.
        I thought of Mr. Kelly talking about the Mona Lisa. You
    know, beauty is often described in the eyes of the beholder,
    and what one might see, another does not. What I see in the
    Trump tax law, a law that contains a substantial provision that
    will likely incentivize State and local governments to shift
    from progressive and real estate income taxes as a source of
    revenue and rely more heavily on fees and fines. Part of this
    has to do with generation of resources.
        The Tax Cuts and Jobs Act substantially takes away the
    ability to deduct one's State and local taxes from Federal
    taxable income. Shifting from progressive income and property
    taxes to regressive fines and fees is tantamount to shifting
    the tax burden from those with the most to those with the
    least.
        We know that we have fines and fees and that especially
    criminal justice fines and fees fall disproportionately on
    people of color, and especially on those who are poor, no
    matter what racial, ethnic, color group they come from. These
    are the individuals who receive these fines the most.
        Professor Abramowitz, and I am sure you know that the
    National Academies of Science recently released a roadmap to
    reducing child poverty. The academy presented four packages of
    policy solutions to significantly reduce child poverty. Each
    package contained one common proposal: making the child and
    dependent care tax credit fully refundable.
        I lead a bill with Senator Casey to do just that. Our bill
    is supported by at least 19 national child advocate
    organizations and makes the CDC fully refundable, increases the
    maximum credit to $6,000, and raises the phaseout to 120,000,
    and indexes it to inflation.
        Professor, could you help us to better understand how
    making childcare more affordable will affect parents' workforce
    participation, our economic growth, and our ability to generate
    tax revenue in an overall sense?
        Ms. ABRAMOWITZ. There is no doubt that making childcare
    more affordable is going to encourage better labor force
    participation, better education, better health for children. As
    it stands now, for a single working mom who might be earning
    $18,000 or some such number, they are not paying income taxes,
    and there is no incentive to a nonrefundable credit. They might
    rely a little bit on EITC or child tax credit, but there is no
    doubt that improving the refundable credits will make life a
    lot better.
        Mr. DAVIS. Well, let me ask you about EITC. Would expanding
    the earned income tax credit to include individuals who were
    homeless and now are working individuals who age out of being a
    dependent child, would that essentially do some of the same
    thing? It sounds like some of what Mr. Smith was talking about,
    and I would certainly work with him to increase those
    opportunities.
        Ms. ABRAMOWITZ. There is no doubt that the earned income
    credit, if expanded to lower ages, right now you can't get it
    at young adult ages, and to expand it for single taxpayers
    would certainly help, again, lifting people out of poverty.
        Mr. DAVIS. Thank you very much. I yield back, Mr. Chairman.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from South
    Carolina, Mr. Rice, to inquire.
        Mr. RICE. Thank you, Mr. Chairman.
        I have a couple questions for the panel, and I am going to
    want you to raise your hand if you disagree. But we raised the
    standard deduction, which is the amount you can take off your
    taxes even if you don't have itemized deductions, from $6,350
    for individuals to $12,000 for individuals. Wouldn't you all
    agree that helps primarily low- and moderate-income folks?
    Because they don't have many itemized deductions, right? Ms.
    Abramowitz, wouldn't you agree with that?
        Ms. ABRAMOWITZ. Well, I think you can't look at any one
    provision in a vacuum, and we have taken away dependency
    exemptions, which is about $4,000 per dependent.
        Mr. RICE. This is--I am talking about for a single
    individual and we doubled it for families too, from 12,000 to
    24,000.
        Ms. ABRAMOWITZ. That is correct.
        Mr. RICE. So doesn't that primarily help low-income folks?
        Ms. ABRAMOWITZ. Does it improve their tax picture over what
    it was? Not necessarily, and not by much.
        Mr. RICE. And when you combine it with the child tax
    credit, of course, it improves their tax liability.
        Ms. ABRAMOWITZ. Again it is the constellation that is
    involved.
        Mr. RICE. We lowered the tax liability from--we eliminated
    taxes on anybody--an individual who makes 12,000 or less. We
    lowered the tax rate from 15 to 12 percent on people making
    less than $40,000. Would you repeal that? Would you? Yes or no?
        Mr. OH. Mr. Rice, do you mind if I take 30 seconds?
        Mr. RICE. I can't. I only have very limited time, and I
    have got a lot----
        Mr. OH. Okay. I will try to do it as fast as possible. I
    think what Ms. Abramowitz says is correct, which is that you
    have to look at three things together, which is the increase in
    the standard deduction, the increase in the child tax credit,
    and the removal of the personal exemptions. And the way I
    explain it to my students is imagine you are a family of four,
    two parents, two children----
        Mr. RICE. I am sorry, I can't let you go on. I am a tax
    lawyer and a CPA too, and what I know is the effect of all
    those is a lower tax bracket on the average family that makes
    less than--on families across the board.
        So here is what I don't understand, here is what I struggle
    with, and that is we have partially--I won't say all, but
    partially as a result of this tax bill, we have below 4 percent
    national unemployment, record lows in African American and
    Hispanic unemployment, record highs in small business and
    consumer confidence. CNN poll last week, 71 percent of
    Americans think the economy is in good shape. That is a 20-year
    high. Gallup poll from last month, 69 percent of Americans say
    the economy is good and their financial condition is improving.
    That is almost a record high.
        When people feel good about their financial situation, they
    go on vacation. I live in Myrtle Beach, South Carolina. Tourism
    was up 7 percent last year. I have three of the poorest
    counties in South Carolina in my district: Marion and Dillon
    and Marlboro counties. In January of 2017, the year--the month
    that Donald Trump took office, the unemployment rate in Marion
    County, the poorest county in South Carolina, was 9.6 percent.
    It hit 4.8 percent last June. It was cut in half in 18 months,
    and this tax bill was a part of that. I mean, this county is 57
    percent African American, 30 percent of the people live in
    poverty.
        We are out there in the churches now. We are in the
    schools. We are talking to guidance counselors. We are trying
    to hook them up with tech schools to pull people who have never
    been in the workforce off the sidelines and into the workforce,
    and every one of those that we can do it is a win. And this tax
    bill is a huge part of that. Every person that we can pull into
    the workforce who has never been in it reduces--reduces
    poverty, reduces entitlements, reduces crime, reduces drugs,
    helps families, helps the communities, helps this country.
        I am so proud of the effect that this tax bill has had on
    my district. People are being uplifted. People who never
    thought, who never believed in the name of America's land of
    opportunity. They never believed that opportunity was for them.
    Well, they are seeing that opportunity right now.
        So what I struggle with is how we are not all celebrating
    this, because I know it affects everybody's district, not just
    mine. I know that all of you all are seeing these same effects
    on the people who need it the most back home in your districts.
    And yet we are trying to tear this down and somehow make it
    negative.
        I hope we can rise above this, and I hope we can look on
    how to improve it and make it even better and pull even more
    people off the sidelines because, my friends, it is working
    exactly the way that I had hoped it would work.
        I yield back.
        Chairman NEAL. I thank the gentleman.
        Now let me recognize the gentlelady from California, Ms.
    Sanchez, to inquire.
        Ms. SANCHEZ. Thank you, Mr. Chairman. And I want to thank
    our witnesses for joining us here today.
        I feel like a lot of my Republican colleagues like to
    defend their overall tax scam by focusing on the very small
    slice of people who benefited. Particularly, we have heard
    stories about some small businesses that benefited. And while
    some businesses saw some benefit, far more people were left
    behind than were actually helped. Not once did this Committee
    hold hearings to consider the impact of this tax law and the
    impact that it would have on women and minority-owned
    businesses who happen to be the fastest growing group of
    entrepreneurs in this country.
        So I am going to use part of my time today to ask questions
    that weren't given time before the 2017 bill passed. I would
    like to begin with Professor Oh, and although I would love to
    have you answer Mr. Rice's question because he didn't give you
    time to answer the question he posed to you, I want to talk to
    you specifically about Republicans who have touted the benefits
    of 199A. I would like you to shed some light on who this
    provision left behind.
        What do we know about how truly small women-and-minority-
    owned businesses are faring under the new tax law?
        Mr. OH. It is still very early, and we are waiting on the
    first tax returns that really claimed the 199A passthrough
    deduction. What I will say is that you can imagine
    restructuring the passthrough deduction in a way that helps
    small businesses, helps businesses owned by women and
    minorities without this huge windfall for households that earn
    over a million dollars.
        Ms. SANCHEZ. So this point that, oh, the tax bill is so
    good, and it is not perfect and so that is why Democrats are
    upset, I mean, it is actually that there would have been
    smarter ways to incentivize the right kind of behavior and to
    provide the right kind of relief, instead of this rushed bill
    that was written behind closed doors late at night that had all
    of these unintended consequences. Would you agree with that
    statement?
        Mr. OH. I would. And just going back to the chair's
    comments. If you look at the TPC projections, you can actually
    create tax cuts up and down the income distribution with a much
    smaller effect on the deficit by making a few small
    adjustments.
        Ms. SANCHEZ. So it is not that we are upset with tax cuts;
    we are just upset that the way that it pans out is that the
    people who need the help the most really truly aren't getting
    the most help. Is that correct?
        Mr. OH. I think that is right.
        Ms. SANCHEZ. I want to touch on another population that was
    left behind by the new tax law, and that is the low-wage
    immigrant workers. The Republicans eliminated personal
    exemptions saying that they were no longer necessary given the
    expanded standard deduction. However, nonresident aliens are
    not able to take the standard deduction. This means that
    thousands of low-wage earners who legally work here have lost
    their $4,000 personal exemption, making much, if not all, of
    their income fully taxable. Is that right, Ms. Abramowitz?
        Ms. ABRAMOWITZ. Yes.
        Ms. SANCHEZ. So Mr. Rice said that people who earn under
    $12,000 a year don't pay taxes. Is that a true statement?
        Ms. ABRAMOWITZ. Well, it is not, if you are----
        Ms. SANCHEZ. Mike, please.
        Ms. ABRAMOWITZ. Not necessarily if you are not getting the
    standard deduction. In addition, one area of concern that I
    have that actually intersects with 199A is if you take an
    immigrant worker who is paying into our Social Security system
    either through payroll tax or self-employment tax, the lower
    the income, the self-employment tax is essentially a much
    harsher hit because the self-employment tax you are entitled to
    a deduction against your income for a portion of it. The
    poorest of the poor pay a full 15.3 percent.
        Ms. SANCHEZ. The poorest of the poor pay a full 15.3
    percent.
        Ms. ABRAMOWITZ. And the immigrants get no benefits.
        Ms. SANCHEZ. And they get no benefits. Thank you.
        I would like to ask President Shelton, I want to talk some
    more about the broken promises to some of America's best
    trained workers that you discussed early in your testimony.
    Have the people that you have been elected to represent seen
    real wage growth from this TCJA?
        Mr. SHELTON. No, they haven't. The wage growth has--there
    just hasn't been much wage growth.
        Ms. SANCHEZ. But the Republicans will say, well, but they
    got bonuses, right?
        Mr. SHELTON. Yes. Actually, we tried--while the tax cut was
    being debated, we tried to get our major employers to sign
    something that said that they would give our members $4,000 in
    raises, because that is what everybody was touting and saying
    that that would happen. Well, we didn't get one employer to
    sign that pledge.
        Ms. SANCHEZ. So the employees got a one-time bonus, but
    they didn't get permanent wage increases. Is that correct?
        Mr. SHELTON. Right. Some of our members got a $1,000 bonus.
    It actually started with AT&T in a conversation that I had with
    the chairman of AT&T, but a one-time bonus is not a $4,000
    raise.
        Ms. SANCHEZ. Correct. And my last question, have you seen a
    great influx of new workers and increased membership, as the
    Republicans promised that there would be, because they promised
    that there would be massive domestic investment if this
    permanent tax cut passed for corporations? Have you seen that
    come to fruition?
        Mr. SHELTON. No, just the opposite. We have seen losing
    jobs everywhere. And in AT&T, someone said before that they
    said they have hired 20,000 people. Well, they conflate the
    hiring with the employment levels, and if you look at their own
    records, their employment levels, they have laid off 14,000
    people since the tax cut was passed.
        Ms. SANCHEZ. Thank you. You have indulged me with my time,
    Mr. Chairman, and I yield back.
        Chairman NEAL. I thank the gentlelady.
        And let me, with that, recognize the gentleman from
    Arizona, Mr. Schweikert, to inquire.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman.
        Dr. Holtz-Eakin, look, as we all know from the nature of
    this conversation, we are going to do our best to politicize
    something that we almost have no real data back yet, but could
    you and I--because this is a continuation of a previous
    conversation. I have a personal fixation on velocity of
    mobility, and the fact that we went, what, would you say the
    previous decade, 15 years, where mobility in income and the
    stride ahead had basically become very flat?
        Mr. HOLTZ-EAKIN. We saw very little real wage growth, very
    poor productivity growth, and those are the routes to a better
    standard of living.
        Mr. SCHWEIKERT. Now, I know it may be somewhat anecdotal,
    but we do have some early data from 2018. Are you seeing
    finally some movement that is breaking the last decade's trend?
        Mr. HOLTZ-EAKIN. So, again, I don't understand overstate
    the scientific firmness of this because it is very preliminary,
    but we have seen in the last couple productivity reports
    increases in productivity economywide. So it is now 1.8 percent
    annual growth in the fourth quarter of 2018 over 2017. That
    would be an enormous improvement, almost a full percentage
    point over the previous decade, if it is sustained.
        We have seen our best measures of wages, those in the
    employment cost index rising at over 3 percent up over 50
    percent in the past 2 years. That has been matched even more
    so, in some cases, by benefits, so total compensations also
    rising at about that rate. And if you look at the data we get
    monthly from the Current Population Survey, you can look at
    low-wage workers, those in the bottom, and that grew faster
    than anyone else in 2018.
        Mr. SCHWEIKERT. And that is actually where I want to go.
    And, look, I haven't read everyone's academic papers in the
    history, but we have a whole file back in our office talking
    about the permanent underclass, the populations from--who did
    not graduate high school, who had been in basic types of
    manufacturing. And we do see in some of the U6 data when you
    start to really drop down into the cross tabs the very
    populations that this Committee talked about for years that
    were going to be part of the permanent underclass, what did you
    see in some of the data over just this last year?
        Mr. HOLTZ-EAKIN. As I said before, the most important
    movement has been in categories like marginally attached to the
    labor force, discouraged worker, where we have seen those
    totals drop quite sharply, and that is tremendously good news,
    I think, from the point of view of people's attachment to work,
    right? Work is sticky. If people work, they will continue to
    work, and that benefits them both materially and otherwise. I
    think that is the most important thing that happened in 2018 is
    to see that improvement.
        It is mirrored in this decline in the unemployment rate
    because the college-age unemployment rate has been low for a
    long time. I mean, every month you get a 2 percent unemployment
    rate for college educated. It is the less educated, less
    skilled who have seen their work opportunities and actual
    employment improve in the past year.
        Mr. SCHWEIKERT. I guess for--you know, many of us talk, you
    know, we have a passion for the poor. I despise using the term
    ``underclass,'' but we are brothers and sisters who are having
    a really tough time in society, if you actually look
    particularly at some of those cross tabs. In the last 18
    months, 12 months, it is the first time you are starting to see
    the spiking of both income, labor force participation. Right
    now, we are, what, over--we finally broke through 63 on labor
    force participation.
        Mr. HOLTZ-EAKIN. We are about at 63. The most important
    thing about that is the aggregate labor force participation
    rate should be declining because of the aging of the
    generation----
        Mr. SCHWEIKERT. Demographic.
        Mr. HOLTZ-EAKIN [continuing]. And the normal exit from
    work. It is staying flat. That is actually a remarkable
    accomplishment.
        Mr. SCHWEIKERT. So if I keep turning and saying there is
    actually some really interesting conversation I wish we could
    have in almost the negative income tax models and those things
    of how you actually help make work very valuable for those
    who--and maybe it is time to take a sweep of all the different
    benefits packages and put them into something of that nature,
    but there is a fixation we need to have as a society of
    participation in the labor force.
        In the last couple seconds, just because we have all been
    talking one side of the book, I want to start with Mr. Holtz-
    Eakin and come back down. For the top 20 percent of income
    earners in our society, for just the income tax, how much of
    the Federal income tax take should the top 20 percent be
    paying?
        Mr. HOLTZ-EAKIN. Should they be paying?
        Mr. SCHWEIKERT. I mean, what would you say? Should they pay
    50 percent, 60 percent, 70 percent?
        Mr. HOLTZ-EAKIN. I will get back to you after I think about
    it.
        Mr. SCHWEIKERT. Doctor, the top 20 percent, what should
    they pay of the Federal income tax? My friend from----
        Ms. ABRAMOWITZ. It sounds like a political question.
        Mr. SCHWEIKERT. It is. It is. But because we have been
    talking on the other side.
        For my friend from AT&T, which I am panicked over your
    multiemployer pension system that you run while the union's
    pension system is incredibly well funded, would you work with
    us maybe to blend the two of those to protect those workers?
        Look, last thing, Mr. Chairman--thank you for your
    tolerance--I would like to actually submit this article that
    basically says the top 20 percent of income earners pay over 87
    percent of all Federal income taxes.
        Chairman NEAL. So ordered, and I thank the gentleman.
        [The information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman NEAL. And, with that, let me recognize the
    gentleman from New York to inquire, Mr. Higgins.
        Mr. HIGGINS. Thank you, Mr. Chairman.
        Dr. Eakin, you have said here today and previously and also
    in written testimony that tax cuts do not, in fact, pay for
    themselves. I just want to press you on that a little bit. I
    would like you to distill that down to, if you can, what is it
    that you think a tax cut does relative to economic input? In
    other words, for every dollar of tax cut that you would give
    away, what is a reasonable expectation in terms of return on
    that investment or loss of on the investment?
        Mr. HOLTZ-EAKIN. That is an enormous opening for a former
    professor in tax policy.
        Mr. HIGGINS. I see that.
        Mr. HOLTZ-EAKIN. So I will try to restrain myself. Let me
    just say, first and foremost, that not all taxes are created
    equal, and so you shouldn't expect to get the same response.
        Mr. HIGGINS. Corporate tax cut.
        Mr. HOLTZ-EAKIN. Most of the formal efforts at this yield
    something between 33 and 50 percent.
        Mr. HIGGINS. Thirty-three----
        Mr. HOLTZ-EAKIN. On the dollar.
        Mr. HIGGINS. Okay.
        Mr. HOLTZ-EAKIN. And that is in very pristine settings.
    Real tax laws, not as pristine. I will just say that.
        Mr. HIGGINS. So for every dollar that you give away in a
    tax cut, you could expect 30 to 50 cents back. So it is a 50
    percent loss on investment.
        Mr. HOLTZ-EAKIN. A 50 percent loss, that is for sure.
        Mr. HIGGINS. They don't pay for it. They don't pay for it,
    right?
        Mr. HOLTZ-EAKIN. Right.
        Mr. HIGGINS. Okay. All right. Is that established
    conservative economic orthodoxy? I mean, is that pretty much
    the view relative to tax cuts? There is a recognition that
    there may be some other benefits, but in terms--it doesn't pay
    for itself.
        Mr. HOLTZ-EAKIN. I learned a long time ago that I don't
    speak for conservative orthodoxies, so what I can say is that
    if you look at the Congressional Budget Office analysis of the
    Tax Cuts and Jobs Act, it shows about 30 to 35 percent feedback
    for every dollar lost. And if you look at what they essentially
    say it does is that the revenue baseline before and the revenue
    baseline after, they come back together within the 10-year
    window, but you have lost revenue for a while and you have more
    debt.
        Mr. HIGGINS. Well, let me just say this.
        Mr. HOLTZ-EAKIN. That is the definition of not paying for
    yourself.
        Mr. HIGGINS. Reclaiming back my time. Let me just say this.
    Unlike, for example, infrastructure that for every dollar you
    spend, you return anywhere between $1.75 and $2 in economic
    growth. So infrastructure would more than pay for itself.
        Mr. HOLTZ-EAKIN. I disagree.
        Mr. HIGGINS. Okay.
        Mr. HOLTZ-EAKIN. And I can get back to you the studies I
    have done on infrastructure that suggest that is too high.
        Mr. HIGGINS. Okay. So the tax cut of 2017 was sold as a tax
    cut that would be deficit financed because of the magic of
    supply side trickle down rebranded as dynamic scoring. You
    were--as you mentioned, you taught at Syracuse University in
    the economics department. You ran the Congressional Budget
    Office under George W. Bush. You were an economic adviser to
    John McCain. You are president of the American Action Forum, a
    conservative think tank, and you are the Republican witness
    today. You also, I read, were the chief economist for the White
    House Council of Economic Advisers under George W. Bush.
        Mr. HOLTZ-EAKIN. Correct.
        Mr. HIGGINS. Okay. In 2017, the Trump White House Council
    of Economic Advisers issued a statement about the economic
    impact on American household income in relation to the Trump--
    President Trump's tax cut, saying that each American household
    would see a $4- to $9,000 annual increase. If you were on the
    Council of Economic Advisers, would you have signed that
    letter?
        Mr. HOLTZ-EAKIN. That was based off of research that was
    done by the chairman of the Council of Economic Advisers.
        Mr. HIGGINS. What do you think of the research? You are a
    numbers guy.
        Mr. HOLTZ-EAKIN. I am not--I have not genuinely
    sufficiently scrubbed that for technical expertise to have an
    opinion one way or the other.
        Mr. HIGGINS. Well, here is what I would say. I mean, given
    the fact the one thing that we do agree on is that these tax
    cuts did not pay for themselves.
        Mr. HOLTZ-EAKIN. Correct.
        Mr. HIGGINS. And they never will, because there was never a
    tax cut in human history that paid for itself, at least in the
    short term, particularly when it is deficit financed. So, you
    know, this theory of dynamic scoring that my colleagues use to
    justify this, that the tax cuts would produce future growth
    that would offset the deficit that you incurred to fund the
    activity in the first place, so dynamic scoring isn't all that
    dynamic. And I think that when you look at, you know, trillion
    dollar deficits for each of the next 4 years, it is indicative
    of a very clear and indisputable fact, and that is, tax cuts do
    not and never have paid for themselves.
        With that, I will yield back.
        Mr. HOLTZ-EAKIN. If I could just in the interest of
    clarity, Mr. Chairman?
        Chairman NEAL. Yes, for sure.
        Mr. HOLTZ-EAKIN. Dynamic scoring does not mean things pay
    for themselves. It means there are beneficial growth
    consequences. I believe that the bill had the potential for
    that and is showing early signs of those beneficial, but that
    doesn't mean it is free.
        Chairman NEAL. I thank the gentleman.
        With that, let's recognize the gentlelady from Indiana,
    Mrs. Walorski.
        Mrs. WALORSKI. Thank you, Mr. Chairman. Thank you to the
    guests that are here today.
        I find it kind of interesting; ironic, actually. I feel
    like I kind of don't even belong in this hearing, because when
    I paint the picture to you all about what my district looks
    like in the State of Indiana in northern Indiana and what is
    really happening on the ground there, I feel like the gloom and
    doom that has been in conversation here, and my friends across
    the aisle are looking to spend all this time worrying about the
    1 percent earners and the cap and SALT and that whole thing,
    let me just take you quickly to what my district looks like.
        And I can tell you that the Tax Cuts and Jobs Act has been
    nothing but positive, and so I feel bad for my friends that
    haven't had that experience, but this is reality of what
    actually happens in the Indiana Second District.
        I would take to you a place where there is hardworking
    Hoosiers, middle-class families in Indiana, and this is what I
    see with them. Working families that really benefit from the
    double tax credit that we talked about earlier; a remarkable
    3\1/2\ percent unemployment rate, which is lower than the
    national average. A great American manufacturer in my district
    named Smoker Craft has raising wages. They have been awarding
    bonuses and reinvesting capital. I have got a community bank,
    not only raising wages, but increasing tuition reimbursement,
    awarding stock to its employees, and almost by far lower
    electricity prices across my whole district in the State of
    Indiana. All of this and more is what Tax Cuts and Jobs Act is
    about.
        And so I can proudly and boldly stand here today and talk
    about the fact that my constituents in my district have more
    money in their pocket. These are hardworking people,
    hardworking Hoosiers. They are not the 1 percent that you all
    have been arguing about. One employee at a company I was
    touring told me just recently that these aren't--the benefits
    that he has right now are not the crumbs as Speaker Pelosi told
    them and told the country. It is real money for him and it is
    real money for his family.
        And so, Dr. Eakin, I just wanted to ask you, given the
    dynamics of what you just heard about one place in this
    country, what do you believe could have been the primary
    drivers of what I am seeing as economic growth in the last 2
    years? Because surely what I am seeing can't be a nuance, and
    it can't just be coincidence, and it cannot have happened by
    accident.
        Mr. HOLTZ-EAKIN. I think there are a couple of things to
    point to. One that hasn't been talked about much today but is
    enormous has been the deregulatory efforts of the Trump
    administration. During the 8 years of the Obama administration,
    it enacted a costly regulation at an average rate of 1.1 per
    day. The total self-reported cumulative cost of those
    regulations was $890 billion, over $100 billion each year. And
    in the first 2 full years of the Trump administration, that
    regulatory burden has declined by $1 billion. So it essentially
    just stopped it in its tracks. In all of the business surveys,
    this is a key component of what they perceive is a better
    business climate, probably reflected in your district.
        The second, which I outline in much more detail in my
    testimony, was the sort of increase in business investment,
    more rapid economic growth, feedbacks to tentatively
    productivity, and certainly we have seen wages rising. The
    timing of that coincides with the Tax Cuts and Jobs Act. Some
    of that may diminish over time. It could be just short run. But
    the incentives on the business investment side are quite strong
    and I am hopeful will persist, but, you know, time will tell.
        Mrs. WALORSKI. And I am glad you brought that up, because I
    am very thankful to this President, to President Trump for
    coming in, and with the Republican majority at the time, one of
    our first priorities was repeal regs and set people free to do
    what they want to do, to hire. We are a very large
    manufacturing district, one of the largest in the country. We
    export, we are the fifth largest exporter. And I saw that in
    the State of Indiana as well when Mitch Daniels was our
    governor and we had an opportunity to come into our State, roll
    back those regs, investment boomed and skyrocketed. There was
    an uptick in employees as well, and I very much appreciate
    that. I appreciate this administration's effort on that as
    well. Thank you for your comments.
        And I yield back my time, Mr. Chairman. Thank you.
        Chairman NEAL. I thank the gentlelady.
        The rule 14 will be invoked now. We are going to move in
    the direction of two witnesses on the Democratic side, given
    who is still here, to one Republican. And, with that, I want to
    recognize the gentlelady from Alabama, Ms. Sewell, to inquire.
        Ms. SEWELL. Thank you, Mr. Chairman. I want to thank our
    witnesses for being here today. And I also just want to thank
    the chairman for having this hearing.
        You know, I joined the Ways and Means Committee last term
    and was excited as a bond lawyer/public finance lawyer to
    actually have an opportunity once in a lifetime generation to
    do something really positive on the Tax Code since the last
    time it was revised was in 1986. But I have to tell you, I was
    very disappointed that we didn't actually get witnesses to tell
    us what the impact would be, so that we could have all of this
    knowledge that we have heard today on the front end, and
    instead, we are having to sort of figure out whether or not
    this kind of, you know, tax cut really benefited folks.
        And I can tell you for a fact that our global
    competitiveness has been--we have leveled the playing field in
    a way because of the decrease in the corporate tax structure,
    but I also can tell you that I represent a very low-income
    district. I grew up in this district. My heart and soul know
    what is positive and what can happen when you have
    opportunities and resources from my district. I get to live it
    every day. The challenge is to try to find ways to help working
    families all across my district have those opportunities and
    those resources.
        And the Tax Code gives us a perfect opportunity to
    incentivize the world we want to see. And while we have lowered
    the corporate tax rate, I don't think that we have done enough
    to help working families. And so I would like to actually pose
    my questions to you, Professor Oh, with respect to earned
    income tax credits and new market tax credits that can help
    distressed communities. There are lots of ways that we could
    actually improve upon this bill or--I am sorry, the new GOP tax
    bill.
        And so will you talk to us a little bit about what those
    ways that we could have actually incentivized working families?
        Mr. OH. Of course. So I think one of the things that has
    come out through the testimony of everyone on the panel is just
    how much revenue is out there to be spent. The bill was a very
    expensive bill, yet----
        Ms. SEWELL. Not paid for.
        Mr. OH. And not paid for. And there was not a single change
    made to the EITC, the earned income tax credit. It is
    surprising, right? When you see the bill, it is hundreds of
    pages, costs lots and lots of money, no changes to the EITC.
        Ms. SEWELL. Right.
        Mr. OH. Which is probably one of the most important Federal
    tax provisions that lifts so many families out of poverty.
        Ms. SEWELL. Absolutely. What about the child tax credit?
        Mr. OH. So the child tax credit--and I am going to harken
    back to Chairman Neal's point. If you take a look at the Tax
    Policy Center simulations, the way to help the bottom quintile,
    the way to help the bottom 20 percent is to increase the child
    tax credit, make it fully refundable, and get rid of the income
    threshold. That does unbelievable amounts to help them increase
    their after-tax income.
        Ms. SEWELL. And then when you think about distressed
    communities that--what would incentivize investments in those
    communities. Because I am hearing my colleagues on the
    Republican side talk about their districts doing so well with
    this tax reform, and, you know, my thought is, I mean, couldn't
    we have done just as well if the corporate tax rate went down
    from 35 to 28 to 26, as far as this trickling down effect,
    which doesn't actually get to workers and doesn't get to those
    who are struggling in the--in my district?
        And so would love to hear your thoughts about other ways
    that we can incentivize the behavior we want to see, which is
    everybody benefiting, not just the 1 percent, but everybody
    benefiting.
        Mr. OH. So I agree with what has been said on this
    testimony. It seems like the labor market is very robust at the
    moment.
        Ms. SEWELL. But only in certain districts. I can tell you
    in my district, it has not been.
        Mr. OH. It is uneven, right, it is very uneven. And one of
    the things that I hope has been conveyed by this testimony is
    how geographically lumpy the Tax Cuts and Jobs Act is, right?
    There are some districts doing really well. I don't discount
    that testimony. There are also districts that are doing poorly.
        Ms. SEWELL. Right.
        Mr. OH. To speak to the special--the economic opportunity
    zones, we still haven't see how that is going to play out.
        Ms. SEWELL. Right. Well, we still need some regs, don't we?
    We need some rules of the road----
        Mr. OH. We need some rules.
        Ms. SEWELL [continuing]. To figure out how the people----
        Mr. OH. People are very--there are some people who are very
    excited about these rules because they create very generous tax
    incentives for investment in these areas, but it is just too
    early. I think that is one of the things that we need to keep
    in mind when it comes to allow the macroeconomic. It is early.
    We are going to be collecting data. We should be holding
    hearings to check in on these issues, and I am so glad that
    this Committee is proactively doing that.
        Ms. SEWELL. Same here. I just want to say, Mr. Chairman,
    that I think it is really important that we continue to check
    in with the American people as to this tax reform and how we
    could do a better job of incentivizing the behavior of everyone
    and uplifting all of us and not just the 1 percent. So thank
    you so much for having this hearing, and I look forward to more
    hearings like it.
        Chairman NEAL. I thank the gentlelady.
        And, with that, let me recognize the gentlelady from
    Washington State, Ms. DelBene, to inquire.
        Ms. DELBENE. Thank you, Mr. Chairman, and thank you to all
    our witnesses for being here. This is a very important issue as
    we work to make sure that everyone in our country has economic
    opportunity and that we are thoughtful about policy to do that.
    And we are having a hearing, which is a first step, because we
    didn't get to have any in the last Congress to have these
    discussions.
        I want to go back to the child tax credit. The Republicans
    failed to comprehensively address the child tax credit in their
    legislation and, instead, only amended one aspect of a complex
    policy, the nonrefundable side, leaving low-income Americans
    behind in the process. Republicans failed to address several
    aspects of the child tax credit that would have benefited the
    poorest Americans, including increasing the refundable credit,
    lowering the earned income threshold to zero, increasing the
    credit percentage, or eliminating the tide to earn income
    altogether.
        The Tax Cuts and Jobs Act ensured that the poorest
    Americans whose children arguably would benefit from the
    increase the most did not benefit. So this is yet another
    example of how the Republican tax bill benefited higher income
    Americans with a significant tax benefit for their children
    while leaving the poorest Americans behind.
        I recently introduced legislation with Congresswoman
    DeLauro that would meaningfully expand the child tax credit,
    making it fully refundable, to benefit lower income families
    and ensure that they have the ability to provide their children
    opportunities to succeed.
        Dr. Gould, can you give me your sense of would making the
    child tax credit fully refundable impact children whose parents
    are in the lowest income brackets, and other ideas you have
    about what we can do with the child tax credit to help the
    lowest income families?
        Ms. GOULD. Yes, absolutely, making it fully refundable
    would help, and expanding it. I think that those families that
    are hurting the most to pay for childcare, to pay for their
    child's needs, need to be helped. I mean, and you are a great
    body here to be able to help them.
        I think that there is another thing I just, if you don't
    mind, I just want to comment on. There has been a lot of talk
    about how, you know, all the jobs that have been added and all
    the wages that have grown for people over the last year, and
    attributing that to the tax cut, and I just want to say, just
    point out for the record, that we have seen job growth over the
    last several years before this President took office, before
    the tax cuts were enacted, and the job growth that we have seen
    over the last couple of years has been a continuation of those
    trends. The wage growth that we have seen for the lowest wage
    workers--I am sorry, the lowest grade we have seen can be
    attributed to those tight labor markets and to the State-level
    minimum wage increases.
        So I just wanted to get that on the record that we can't
    attribute this growth, we cannot say, research has not said
    that we can attribute those gains to the tax cuts.
        Ms. DELBENE. Thank you.
        Ms. Abramowitz, do you agree that the changes to the child
    tax credit in the Republican's tax bill didn't address the
    lowest income families and that we can do more by making it
    fully refundable?
        Ms. ABRAMOWITZ. Absolutely.
        Ms. DELBENE. Thank you very much.
        Mr. Shelton, during the Tax Cuts and Jobs Act markup, I
    introduced an amendment that would repeal the Cadillac tax,
    which would harm working families with employer-sponsored
    health benefits that exceed a specific threshold. Repealing the
    Cadillac tax has bipartisan support, and yet it was not
    included in the Republican's bill.
        Mr. Shelton, I wondered what workers would the Cadillac tax
    hurt the most?
        Mr. SHELTON. I would say teachers, public officials, and a
    lot of my members in telecom.
        Ms. DELBENE. Are these high income earners, middle class,
    lower income earners?
        Mr. SHELTON. I would say they are middle-class earners.
        Ms. DELBENE. Right. So these are middle-class families that
    would be hurt if this tax isn't repealed?
        Mr. SHELTON. Absolutely. And if there was bipartisan
    support, I hope somebody will do something about repealing it.
        Ms. DELBENE. And so it has bipartisan support, and yet
    Republicans weren't willing to consider it when we were talking
    about the Tax Cuts and Jobs Act last year, an important piece
    of legislation to help middle-class families; another place
    where we absolutely could have done better. So thank you for
    your testimony.
        And I yield back, Mr. Chairman.
        Chairman NEAL. I thank the gentlelady.
        And, with that, let me recognize the gentleman from Kansas,
    Mr. Estes, to inquire.
        Mr. ESTES. Thank you, Mr. Chairman, and thank you to our
    witnesses for joining us today.
        You know, as we meet today, our economy is going at
    historic levels, and, you know, this is directly attributable
    to the Tax Cuts and Jobs Act and some of the regulatory reform
    over the last couple of years.
        You know, the last four quarters, we have experienced the
    highest GDP growth in 14 years. Wages are growing at the
    fastest rate in a decade. Our unemployment rate is at a 50-year
    low, and for the first time in history, we have more job
    openings than we do job seekers.
        This growth is great for all Americans, and it didn't
    happen by accident. You know, when I go out in my district and
    I talk with businesses about finding employees to go to work,
    it is because of the growth that they are experiencing, and
    they are having a difficult time finding employees to come work
    for them.
        You know, the progress that we have made over the last 2
    years by the President and the Congress making sure that that
    deregulation and the tax cuts happened, I mean, it is just hard
    to deny that that is working. I know there has been some debate
    back and forth about where it helps and who it helps the most,
    but it is making a difference for millions of American workers
    and families. Thanks to those lower tax rates, to doubling of
    the child tax credit, to a nearly doubling of the standard
    deduction, you know, average, middle-class families in Kansas
    are seeing over $2,200 of their hard earned money that they are
    keeping in their pockets instead of paying in taxes. An
    additional hundreds of companies with thousands of employees
    have expanded and added to the savings for their employees.
        So it is really tough to say that we are not seeing a lot
    of positive growth out of this tax reform.
        Recently, I met with an accountant in my district and
    talking about some of the CPA work that he did for some of his
    constituents--some of his clients, and according to him, 94
    percent of the middle-class clients that he has benefited from
    the new tax law, including the lower rates, the doubling of the
    child tax credit, and the nearly doubling of the standard
    deduction.
        He also discussed about how people have seen in their
    paychecks be larger because of withholdings throughout the
    year. And depending on whether they had more withheld and the
    amount they had withheld, some saw larger refunds, some saw
    smaller refunds, depending on the amount that was withheld out
    of their check. And these people, these working class families
    aren't part of the 1 percent; they are average middle class
    Kansans. And thankfully, that observation is true across the
    country.
        You know, I want to talk a little bit about one of the
    benefits--one of the major benefits that I see out of this is
    just the nearly doubling of the standard deduction. And, you
    know, prior to the changes from the Tax Cuts and Jobs Act,
    roughly 30 percent of Americans, taxpayers, had to itemize,
    going through all their paperwork, filling out those extra
    forms, going through that process. I know it is a burden for
    me, a burden for others as well. Now, expectations are that
    roughly 10 percent of the people will only have to itemize
    because the other 20 percent will get more benefit out of that
    standard deduction.
        And I know there was some discussion earlier and some mixed
    communication back and forth about the value of the standard
    deduction versus the value of the child tax credit, but if we
    were to just hold everything else equal, if we weren't able to
    make the child credit more refundable, whether we weren't able
    to change the rates any, but just looking focused solely on
    that standard deduction, would any of you think we ought to
    lower that standard deduction back to the way it was? Maybe
    just a show of hands of anybody that thought we ought to lower
    that deduction back.
        Mr. OH. It is hard to hold everything else equal. I mean, I
    really do think that you need to think about the standard
    deduction, the personal exemptions, and the child tax credit
    together as a package.
        Mr. ESTES. And I think we do need to look--we probably--
    when we make changes, we need to look at all of them, but if
    everything else were being held equal and that is the only
    thing we could change, I would like to think that we would all
    be supportive of keeping it at the higher level and not
    reducing it.
        So in general, obviously we just talk about that as being a
    benefit and how do we help average taxpayers through this
    process.
        I have very little time left, but I want to get in one
    quick question for Dr. Holtz-Eakin. You know, one of the things
    that came up in another hearing, we talked a little bit about
    this digital tax that is being added by countries like France,
    and I wonder if you have any thoughts about that just as a
    direct issue and how that might affect companies and whether
    that is a good idea.
        Mr. HOLTZ-EAKIN. I have a low opinion of that as tax
    policy. Most of those taxes are designed to hit only U.S.
    firms, and they are revenue taxes. They are not income taxes
    anyways, they are just sales taxes. So it is just an attempt to
    take the U.S. tax base and grab it in other countries.
        Mr. ESTES. Thank you. I yield back.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentlelady from California to inquire,
    Ms. Chu.
        Ms. CHU. Well, first, let me say the thing that keeps me up
    at night is thinking about what would happen to the American
    family if a terrible emergency happened to them, like a serious
    illness, a disaster that would destroy their home, or the loss
    of a job. And the reason it keeps me up at night is, last year,
    I read about how much money the majority of Americans had to
    withstand an emergency. Fifty-seven percent of Americans have
    only $1,000 in savings to withstand an emergency.
        So how could we have gotten into this situation? How could
    the top 1 percent in this country have more wealth than the
    bottom 90 percent? And how could we be in a situation where the
    bottom 57 percent of Americans are only one emergency away from
    homelessness and utilizing food banks?
        Well, rather than solving this problem, the tax scam bill
    passed by Republicans last year made the situation drastically
    worse. And let me just use one example of a contrast between
    the benefits to corporations versus to workers, one of the
    biggest bank beneficiaries and that was Wells Fargo bank. In my
    research, I found that the size of Wells Fargo's tax cut in
    2018 was in the billions, $3.7 billion, but the benefit of a
    tax bill to Wells Fargo workers, due to an increase in the
    minimum wage from the Trump tax cut, was $78 million.
    Therefore, the benefit to the Wells Fargo corporation was 47
    times bigger than the wage increases to its workers.
        And then let me talk about the contrast in stock buybacks
    versus benefits to low-wage workers. If given the opportunity,
    so many corporations would use their extra capital to buy back
    its own stock because it pleases its wealthy corporate
    executives and shareholders. Wells Fargo is no exception. In
    2018, because of the tax bill, how much did Wells Fargo spend
    on stock buybacks? An astounding $22.6 billion. In contrast,
    how much did Wells Fargo spend on minimum wage increases last
    year due to the tax cut? $78 million. The stock buybacks were
    290 times bigger than the wage increases to its workers.
        And so, Mr. Shelton, you are the president of one of the
    largest unions in this country. Last year, the White House
    claimed that American workers would see a $4,000 increase in
    annual income as a result of this tax bill. Did they get it?
        Mr. SHELTON. Absolutely not. Not my members, anyway.
        Ms. CHU. Okay. Mr. Shelton, did the one-time thousand
    dollar bonuses given to workers have a long-term benefit for
    workers and their families?
        Mr. SHELTON. A $1,000 bonus doesn't even come close to a
    $4,000 annual wage increase. A $1,000 bonus, you know, after
    taxes, is not a whole lot of money.
        Ms. CHU. Mr. Shelton, can you tell us how this tax bill
    increased income inequality for workers in this country and how
    it did that?
        Mr. SHELTON. Well, you know, my members are--they are not
    seeing wage increases that everybody is talking about. They are
    not seeing--what they are seeing is jobs going overseas. And
    you talked about Wells Fargo, and Wells Fargo, besides
    everything else that they did with the tax cut, they decided to
    cut their workforce by 26,000 people and send the jobs to the
    Philippines.
        So, you know, if you don't have a job, you don't worry
    about tax cuts, you don't worry about taxes at all because you
    don't pay taxes if you don't have a job, and that is what we
    see. Everybody here has been talking about job creation, and,
    well, in the big companies that we represent, we see just the
    opposite. There is no job creation. There is continual layoffs
    every single day.
        Ms. CHU. And have they seen wage increases?
        Mr. SHELTON. Small, very small.
        Ms. CHU. So their quality of life has not improved?
        Mr. SHELTON. Absolutely not, no.
        Ms. CHU. Thank you. I yield back.
        Chairman NEAL. I thank the gentlelady.
        And, with that, let me recognize the gentlelady from
    Wisconsin, Ms. Moore, to inquire.
        Ms. MOORE. Thank you so much, Mr. Chairman. And just, good
    afternoon to all of our--my colleagues, and our witnesses,
    thank you so much for your patience here.
        I wanted to start with you, Dr. Oh, since you haven't been
    able to answer certain questions that I have been curious about
    as well. And so let me frame the question a little bit here.
    There is an assertion, apparently, that this Tax Cuts and Jobs
    Act is really helping lower income people, and so I am going to
    ask you to tell me, when you said that we needed to consider
    sort of the consortium of things--they talk about doubling the
    standard deduction--you said you needed to put that in context
    with the child tax credit and other things.
        So I am looking at my mother, single mom--because we have
    got to do some welfare reform around here--single mom, we
    finally found her a job, she is making $7.35 an hour. She is
    making $14,500 a year. Can you tell me how--and doubling, I
    guess, the standard deduction might get her $60 more, not the
    $4,000, and the child tax credit, she is going to get $75. So I
    am trying to figure out, unless you have some different
    numbers, how we have helped the most vulnerable and the poorest
    people with this bill.
        Mr. OH. So thank you so much for giving me a space to
    address this really important question. So one of the things we
    have been hearing today is how there are pieces of the bill
    that do help low-income families, yet we see the numbers and
    you look at the tax cuts for low-income people and they are
    very, very small. And the way I explain it is let's picture,
    you know, a family of four, two parents, two children. You used
    to get four personal exemptions. So in 2017, that was $4,050
    per person in your family. Well, what we have more or less done
    is taken two of those personal exemptions, the one for the
    kids, rolled them into expanding the child tax credit, and we
    have taken the two that were for the parents and rolled them
    into the standard deduction, right. And it is not a perfect
    offset. There are obviously some winners and losers, but I
    think it is indicative.
        If you take a look at the JCT projections on these three
    provisions, the amount of revenue raised by repealing the
    personal exemption is between $1.2- and $1.3 trillion.
        Ms. MOORE. That is right.
        Mr. OH. If you take the expansion of the child tax credit
    and the expanded standard deduction, also costs between $1.2-
    and $1.3 trillion. And so we moved around a lot of deck chairs.
    I am not sure we made a huge difference.
        Ms. MOORE. Okay. And so with the child tax credit, if you
    are a married couple with two children earning $400,000, you
    get a $4,000 tax credit versus the $75 for the single parent.
        Let me go on and ask some more questions here. We have
    heard a lot today about how this job cuts act has really
    improved employment, created jobs. We do know for a fact that
    we only added $20,000--20,000 jobs, and that trend is going
    down. So I guess my question is--I guess I have another nexus
    to that question. Can you give us the distinction between wage
    growth, which isn't happening, and the creation of jobs?
        Ms. GOULD. So you are right, we saw a little bit of a
    slowdown in job growth. I am not exactly sure what you are
    asking.
        Ms. MOORE. Okay. I am sorry. Let me be a little bit clear.
    I saw the clock winding down on me. Okay. We are--you know,
    Republicans promised a $4,000 wage increase, and I guess we got
    the tax cut bills, and we have not seen that employers have
    given them those wage increases. And I want you to give the
    distinction, because this hearing is about who is left behind.
    So people are left behind because we haven't seen any wage
    growth, and we are--and GDP is going down. That promise is not
    being met. And in addition to that, we are seeing jobs that are
    not necessarily good jobs. We are increasing jobs, but they
    don't necessarily have the wage structure to support a family.
    Am I correct?
        Ms. GOULD. That is right. That is right. We have been
    adding jobs for many years now, as I have said. Living
    standards have not been increasing because wage growth has
    really been lagging behind. We are finally seeing the tightness
    of the labor market translate into stronger wage growth, but
    families are still really digging themselves out of the Great
    Recession.
        Ms. MOORE. So we helped rich people, but we did not help
    the most vulnerable and the more poor. Wages are dropping. Our
    GDP is dropping. And the only thing we have done is benefited
    the wealthy corporations.
        Thank you. I yield back.
        Chairman NEAL. I thank the gentlelady.
        With that, let me recognize the gentleman from Ohio, Dr.
    Wenstrup.
        Mr. WENSTRUP. Thank you, Mr. Chairman. I thank you for
    having this hearing today.
        You know, we heard people talk about the Gallup poll and
    the optimism throughout America, what their future looks like.
    Sixty-nine percent are optimistic. And as I sit here today, I
    find that this is not a representation of America, as I feel
    that 80 percent of this panel is pessimistic about the future
    of America. And I hear people say things which I don't
    appreciate, because in the line of civility to call something a
    scam, I don't know what some people consider a scam, but we
    just endured 2 years in this country of being told that the
    President colluded with Russia. That was a scam, folks. This is
    not a scam. This is serious business, and we are trying to
    improve the lives of American people.
        That being said, the Affordable Care Act requires
    individuals to purchase a specific product, specifically, a
    government-blessed health plan, or they face a tax penalty.
    Now, disproportionately, those making less than $50,000 a year
    are the ones paying that in a large proportion. So the tax
    reform repealed this.
        This is helping those that couldn't afford the insurance to
    begin with, because those who couldn't afford the insurance
    that they were being told they had to buy, were also being
    penalized for that, the plan that the government supports. So
    raise your hand if you think the individual mandate helps lower
    income Americans?
        Okay. Well, that is very interesting, because what you are
    also telling me, those that raised their hands, and two people
    did, that our government is able then to penalize people simply
    for being alive. That is how the bill was written. It was a
    penalty simply for being alive. And if you don't purchase what
    we tell you to purchase, we are going to penalize you. Folks,
    that doesn't speak of freedom to me, because what you are
    telling me is you are okay with the government saying you have
    to buy and eat spinach, and if you don't, we are going to
    penalize you. You have to buy this government-made car or we
    are going to penalize you. Is that where we are headed?
        But you cannot convince me that that mandate was helping
    lower income Americans, because those same lower income
    Americans talked about, to me at home, how they couldn't afford
    the plan and they couldn't afford the penalty. That is where
    they are.
        You know, in medicine, I am a doctor, you know, I am always
    leery of studies and things that people put forward, because
    you have got to look at all things. If I have someone that
    tells me they have pain in their leg and I amputate it, did I
    do them good? I got rid of their pain, or could I have used a
    cortisone shot.
        Dr. Gould, you talked about wage increases in States that
    increased the minimum wages. Well, first, wages are going up
    anyway with the tax reform. In Ohio, if we increase the minimum
    wage to $50 an hour, I guarantee you the wages would go up. But
    what you didn't address is the effects of that, and that is the
    complete picture. Where did unemployment go? Maybe it got less,
    but did it drop like the other States are? And, you know, a
    complete study--we talk about those that lost jobs so, yes,
    wages may have gone up, but more people may have lost jobs.
        You know, there are tax--this tax reform has a lot of
    positives, and today, it is an employee's market out there.
    Employees can call the shots.
        Mr. Shelton, you should take note of that, because AT&T
    can't make money without those employees, and they need
    employees. Maybe you need to negotiate a little bit better. I
    had a man in my district who got out of prison and is now
    working, and we have programs to help with recidivism that we
    have put in locally. He said, I am a taxpayer for the first
    time in my life. You talk today about, well, it is going to
    come at the cost of social programs. Well, it depends on what
    you consider success. I love our social programs. I love that
    we are a country that cares enough about its people that we put
    safety nets in place, but the goal should be that fewer people
    need them. And when more people go to work, fewer people need
    them, and you have more resources for the most vulnerable
    Americans that truly do need them. More for the most
    vulnerable, because we are getting fewer people need these
    safety nets that we treasure in this country that cares about
    its people.
        So it takes every component you have to think about and
    what are the results of things that take place, and a better
    economy makes for a better America.
        I yield back.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from Michigan,
    Mr. Kildee, to inquire.
        Mr. KILDEE. Thank you, Chairman Neal, for holding this
    really important hearing. And I thank all the witnesses for
    their participation.
        Look, this tax bill picked a clear set of winners and
    losers, and I think today's testimony is helping to shine a
    bright light on just which groups and which industries in
    particular were deemed worthy of relief by this Republican tax
    bill. Here is a hint. It wasn't the middle class.
        So in all the lead-up to the so-called Tax Cuts and Jobs
    Act, we heard promises made by lots of companies about how this
    tax cut would allow them to create thousands of jobs for
    American workers. Republicans in the White House all pushed the
    idea with the promise that households would see their incomes
    rise, average Americans, rise by $4,000. But the reality has
    been different.
        I recently got a huge stack of letters from constituents
    whose company promised them that they would create jobs in the
    wake of the Republican tax bill, but instead have eliminated
    thousands of positions while reaping billions in savings. So to
    me, we can talk about anecdotes here and there. Thousands of
    people losing their jobs after promises that thousands of
    people would be hired by the same company.
        And, Mr. Shelton, you were referred to by the--by my friend
    on the other side of the aisle as indicating that maybe you
    should negotiate a little tougher. I find that a little ironic.
    AT&T laid off 12,000 people since this tax cut. Is that close
    to accurate?
        Mr. SHELTON. Yes.
        Mr. KILDEE. So I assume AT&T is a struggling company,
    working hard to make ends meet. They can't even keep these
    12,000 people employed. They have to open up call centers to
    serve the very same customers in Mexico paying subminimum
    wages. So I am assuming that they are hurting. Is that correct?
    Is AT&T in trouble?
        Mr. SHELTON. Absolutely not. As far from it as you can get.
        Mr. KILDEE. So all these promises that your employees got,
    I assume that they have not been able to initiate any stock
    repurchases or anything of that nature. They haven't been able
    to benefit their stockholders, I assume, by all this because
    they obviously are in big trouble. I mean, this is what we
    would have to conclude. Quite the contrary. AT&T was a big
    winner with this tax cut. Is that correct, Mr. Shelton?
        Mr. SHELTON. To the tune of about $3 billion.
        Mr. KILDEE. And so how is that being taken by the 12,000
    members that have lost their jobs? Are they feeling like they
    really benefited from the tax cut?
        Mr. SHELTON. That is an easy question to answer. When you
    have worked for a company for quite a while, as most of these
    folks have, and you suddenly lose your job, I don't think you
    think that that is a good deal for anybody.
        Mr. KILDEE. It has not been a good deal, and, of course, we
    have seen it not just with AT&T. You know, I am frustrated. You
    know, I come from Michigan, an auto community. In fact, General
    Motors was founded in my home town of Flint in 1908. And we
    have seen over 10,000 jobs being eliminated just in the last
    few months.
        So the point is this: Unless the focus is on how we
    strengthen the American worker and not how we reward those
    people at the top who are already doing quite well, we are
    going to see more of this. And this Tax Cuts and Jobs Act was a
    jobs cut and tax act. So I don't know if we want to call it a
    scam or whatever it is, but I am telling you, it wasn't what
    was promised, at least for the people I work for, your members,
    Mr. Shelton, that I met with in my hometown of Flint, who are
    trying to figure out what life is going to be like for them
    when they have lost everything that they worked for. And the
    idea that you should somehow negotiate harder I think is a bit
    of an insult to the collective bargaining process and to the
    work that the people you represent have done.
        Mr. SHELTON. Well, Congressman, I can't negotiate for jobs
    that are in Mexico or the Philippines or India. I can only
    negotiate for jobs that stay in the United States, and from
    what was told to us and everybody else, that is what this Tax
    Cuts and Jobs Act would do, and it did just the opposite.
        Mr. KILDEE. Thank you for your testimony.
        I yield back.
        Chairman NEAL. I thank the gentleman.
        As you know, there are two votes scheduled on the House
    floor. It is the chair's intention to proceed and move as far
    along as we can.
        And, with that, I recognize the gentleman from Virginia,
    Mr. Beyer, to inquire.
        Mr. BEYER. Mr. Chairman, thank you very much, and thank all
    of you for being with us.
        You know, I am still dismayed by the fiscal recklessness of
    the Tax Cuts and Jobs Act. Speaker Ryan promised early on that
    it would be revenue neutral, and, of course, it ended up being,
    you know, $1.5 trillion to $2.3 trillion upside down. And, you
    know, as a long-time business person, I was interested in the
    sugar high, because I don't think economies are largely driven
    just by tax cuts or by quantity of using.
        You just look, in the last 24 hours, we have heard the
    housing starts hit a 2-year low yesterday. Car sales are down
    2\1/2\ percent this year under last year. Consumer confidence
    fell another 7.3 points in March. Jay Powell, the head of the
    Fed, last week said that 2019 growth is going to be 2.1
    percent, 1.9 percent in 2020, 1.8 percent in 2021, and expect
    no more than 2 percent in the next decade. And this is with $1
    trillion deficits every single year.
        I mean, I think it is wonderful that my friends on the
    Republican side defend things like the doubling of the
    childcare tax credit. I think that is great. Maybe even
    doubling the standard deduction to the extent that is real is
    great, but there are large parts of this bill that need to be
    repealed. And clearly, we saw the American public say that in
    the voting booth this last November. None of my friends on the
    other side ran on this bill, and yet many of my Democratic
    friends who won ran specifically against this bill.
        You know, as a business owner of 45 years, I am really
    tired of hearing small business used as a shield for policies
    where the lion's share of the benefits accrue to those who need
    them the least. We know why this is done because the phrase
    ``small business'' implies that we are talking about the little
    guy. But to the extent that small business is used as a
    shorthand for passthroughs, which some say, like the Trump
    organization, fit nobody's definition of small. And protecting
    small businesses used to justify tax cuts on a tiny number of
    extraordinarily wealthy States, further cementing inequality in
    this country.
        Luckily, the American people weren't conned. I had a
    townhall meeting at Edison High School in Franconia, Virginia
    last night, and halfway through someone stood up to talk about
    how his tax bill had gone up $7,500, and all of a sudden every
    head in the room was nodding about how much their tax bill had
    gone up in this last year because of the SALT deduction.
        Dr. Gould, if you were asked to spend $1.5 trillion dollars
    over the next 10 years, or let's just say $2.3 trillion over
    the next 10 years, with the goal of raising wages on the middle
    class and working Americans, how would you do that? And would
    cutting taxes on high earners be first on your list or the
    beneficiaries of large estates or tax cuts for stockholders?
        Ms. GOULD. Yes. Certainly, I would think about the income
    distribution in a very different way than the tax cuts did. We
    talked earlier about what can help working families the most.
    Let's expand, make affordable childcare and high quality
    childcare for families. Start right there. Make those kind of
    investments that would really have a good return and help out
    families.
        Mr. BEYER. Dr. Oh, in your testimony, you touched on the
    opportunities for tax planning avoidance under the new 199A
    cap--or 199A deduction. And certainly, we saw in the failed
    Kansas experiment, which is sort of the intellectual front
    runner of the TCJA, which led to massive gaming the downfall of
    the Brownback Administration. What are the opportunities for
    business tax avoidance under the new tax law?
        Mr. OH. It is one of those provisions that is so
    complicated that people are salivating to try to take advantage
    of it. So you hear about businesses thinking about splitting
    up. There are some regs now out there that have been designed
    to combat this, but the amount of game playing, I think we are
    just seeing the beginning of it, right. You know, as clever tax
    planners get their hands on this provision, we are going to see
    maybe even larger revenue losses than were predicted by the
    JCT.
        Mr. BEYER. Thank you very much.
        Dr. Gould, you know, one of the things that we did is we
    doubled the exemption under the estate tax, you know, $22
    million for a couple. But one of the arguments there was that
    people would just figure out a ways around the estate tax,
    people have gamed it for years. Is this actually an argument
    for reducing the ability of aggressive tax planning to limit
    the estate tax liabilities?
        Ms. GOULD. I can't say I am an expert on estate taxes, but
    as I have said before, you know, wealth inequality has risen
    along with those income and wage trends I showed you earlier,
    and the estate tax is one vehicle that you have to have a mild
    pushback against that rise in wealth inequality. So weakening
    it would really exacerbate that increase in inequality, so I
    wouldn't recommend that.
        Mr. BEYER. Great. Mr. Chairman, I yield back.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentleman Mr. Ferguson, to, inquire,
    from Georgia.
        Mr. FERGUSON. Thank you, Mr. Chairman. And thank you to all
    the witnesses that are here.
        You know, as I have listened to you, I just find--I find
    some of the information that you are putting out to be very
    fascinating. One of the things that I hear is when I hear about
    this deal that jobs are being lost and the economy is not doing
    well and that the income gap is growing, it just doesn't jive
    with what I see back home.
        So I want to bring your attention to this graph that I
    found. These are Department of Labor statistics. If you look
    at--the blue line is the lower half of income earners, and
    the--I think that is--I am color blind, so bear with me, either
    the green or red line are the higher income earners. So if you
    look at--if you look at what happens in about late 2011, the
    two groups of wages are growing at about the same--roughly at
    about 2 percent. And then look what happens when we see a
    slowing of the economy and an expansion of government programs
    in the 2012 to roughly 2014 timeline, you see a tremendous
    spread in the wage gap. The higher earners are growing at about
    2.75 percent, but the lower earners are only growing at about 1
    percent.
        And fast forward. Look at what happens in 2018 with the Tax
    Cuts and Jobs Act. You see that they both are growing at about
    3.2 percent, and then all of a sudden, wages jump at about 4
    percent for the lower half of earners, and they are growing at
    a slower rate of just about 2.1 percent for the highest
    earners.
        Now, that is pretty fascinating to me. That tells me that
    folks at the bottom end of the spectrum, wages are going up at
    a faster rate than those at the higher end of the spectrum. Dr.
    Holtz, am I reading that graph right?
        Mr. HOLTZ-EAKIN. That is how I read it, yes.
        Mr. FERGUSON. No, hang on a second.
        Ms. GOULD. Sorry. I thought----
        Mr. FERGUSON. So I want to go back to the gentleman's
    slide, from Wisconsin, that he put up and showed the percentage
    of tax--yes, that one right there. I didn't know you had that
    one, but I am glad you do. So at less than $100,000, the
    average tax cut was--what was that--400 and some odd dollars?
        Mr. OH. $464.
        Mr. FERGUSON. $464. Not only am I color blind, I am blind
    in one eye, and I can't see out of the other, so I apologize
    for not being able to read that. But in that group, wouldn't
    you say that the average for folks, say, under $50,000, their
    Federal income tax bill is in the hundreds of dollars? Mr.
    Holtz, I mean, typically it is a fairly low number?
        Mr. HOLTZ-EAKIN. Under $50,000?
        Mr. FERGUSON. Yes.
        Mr. HOLTZ-EAKIN. They are probably not paying taxes.
        Mr. FERGUSON. Oh, okay. All right. And then you go to the
    highest earners, the ones that are paying--that got a cut of
    $64,000, but yet they are still paying hundreds of thousands of
    dollars in income tax.
        So the way that I read this is that what is happening is
    that wages are growing fastest for the lowest half of earners,
    they are growing slower for the higher earners. The Federal
    Government is not taking a whole lot out of the pockets of the
    lower earners, and yet they are into the higher earners for
    hundreds of thousands of dollars. Now, to me, that looks like
    that is closing that wage gap that everybody is so worried
    about. Dr. Holtz, does that appear to be the case?
        Mr. HOLTZ-EAKIN. That is a--and other things being the
    same, closing the after-tax incomes.
        Mr. FERGUSON. So I mean, it is shrinking. So here is the
    thing that I also look at when we kind of go through this. I
    lived in a town that lost its manufacturing base, and one of
    the things that I saw, no matter how many government programs
    our folks went on and no matter how much government money was
    thrown at their poverty, it really didn't change until they got
    a job. And what we had to do at the State and local level is
    what the Federal Government was unwilling to do, which is to
    get the right tax rate, the right regulatory environment, and
    the right education environment. And when we did that, we
    revitalized an entire region of the State in west Georgia.
    Brought in tens of thousands of new jobs, and lo and behold,
    look what is happening at the Federal level. We are seeing job
    growth. At least in my great State of Georgia, unemployment is
    at its lowest rate ever. It is unbelievable.
        And so all I can say on this is, is that what you are
    saying is in the statistics that seem to get thrown out here
    really don't gee haw with what I see at home, nor what the
    numbers show.
        And, with that, Mr. Chairman, I yield back.
        Chairman NEAL. I thank the gentleman.
        With that, certainly to acknowledge the patience of our
    witnesses, we will try to get this back in about 10 minutes or
    so. We are temporarily recessed.
        [Recess.]
        Chairman NEAL. Let me reconvene the Committee, and the
    witnesses please take their seats, and with that, let me
    recognize the gentleman from Pennsylvania to inquire, Mr.
    Evans.
        Mr. EVANS. Thank you, Mr. Chairman.
        Mr. Chairman, I, too, like other Members on the Committee
    like to thank you for having this open dialogue and discussion.
    I didn't have the pleasure of being on the Committee in the
    last 2 years, but I am certainly learning a lot. So much I want
    to ask the question. I am from the City of Philadelphia. We
    have 26 percent poverty, so it is a huge, you know, for the
    major city--and I joke with the chairman sometimes about that
    is where America started. We have a little running rivalry. He
    talks about Boston. But I had the pleasure of meeting with the
    Sunday Breakfast Rescue Mission, and the mission is a not-for-
    profit organization that helps hunger, homeless, and hurting by
    providing three meals a day to anyone in need and providing
    shelter and transitional programs for the homeless. The mission
    does not receive government funding but relies on charitable
    donations. So I want to go to something Mr. Oh talked a little
    bit about the Titanic and moving around deck chairs. Can you
    please explain the potential consequences of there being a
    reduction in the charitable donations to organizations like
    Sunday Breakfast Rescue Mission and the guests they serve? Can
    you speak a little bit to?
        Mr. OH. Sure. So one of the consequences of expanding the
    standard deduction is that fewer households are going to be
    itemizing, which means that they are not going to see any sort
    of Federal tax deduction, any benefit from the donations that
    they are making. What we know from some of the economic
    research out there is that the charitable deduction is a
    deduction that really does work. It encourages giving, and so I
    know that there were a lot of charities that were very
    concerned about the potential effects to their revenues and
    donations as a result of this change in law.
        Mr. EVANS. I would like to follow up with that. Can you
    please explain how the 2017 tax bill has added to the scrutiny
    of low-income individuals seeking to claim credit as well as
    what your thoughts on improving the earned income tax credit? I
    want to go to Dr. Gould on that issue also.
        Mr. OH. So I will just reiterate something I said earlier,
    which is it is surprising that no changes were made to make the
    earned income tax credit more generous in this current law. It
    is the most important social program arguably that we
    administer through our Tax Code. It does more to lift people
    out of poverty, like people in your district, than almost
    anything I can point to.
        Mr. EVANS. Dr. Gould, do you want speak on how you think
    the earned income tax credit in terms of how it could have been
    improved?
        Ms. GOULD. Absolutely. If we expand it, it would help more
    people. As Mr. Oh said, it is a very important poverty reducer,
    very important program for our low-income Americans.
        Mr. EVANS. I want to go to Ms. Abramowitz on that issue,
    too.
        Ms. ABRAMOWITZ. Same thing. It is staying the same. The
    earned income credit stayed the same. The amount did not
    change, and we still have large groups of individuals who are
    not entirely excluded but only claim a very little credit, and
    there has been some mention earlier today about not only
    expanding the credit for existing families but thinking about
    individuals who are not married, individuals who enter the
    workforce at age 18 or 19. So there is a lot more work to be
    thought about there. If I can----
        Mr. EVANS. Sure.
        Ms. ABRAMOWITZ. Can I just add one thing on the charitable
    piece?
        Mr. EVANS. Yes.
        Ms. ABRAMOWITZ. There is some speculation that there is a
    difference in the nature of giving and that large givers who
    may not be impacted by the standard deduction who will continue
    to give may tend to give more to certain kinds of charities,
    maybe museums, maybe universities and that the kinds of
    services you reference in the church are often the kinds of
    services that were funded by charity from lower income
    individuals or individuals who may no longer benefit by virtue
    of the increased standard deduction. So I think time will tell,
    and it certainly bears further investigation as to whether or
    not there is a change in the charitable sector as to where the
    dollars are being directed.
        Mr. EVANS. So the organization I described, the Sunday
    Breakfast Rescue, at this point could have a rather challenging
    time.
        Ms. ABRAMOWITZ. Possibly. It is something I think we ought
    to be paying attention to.
        Mr. EVANS. I thank you, Mr. Chairman, and I yield back the
    balance of my time.
        Chairman NEAL. I thank the gentleman.
        And, with that, let me recognize the gentleman from
    Pennsylvania, as well, Mr. Boyle to inquire.
        Mr. BOYLE. Yes, that is right, as the founding city of the
    country we have two Members on Ways and Means, the city of
    brotherly love. So thank you. I am so appreciative to the
    chairman of our Committee having this hearing that we should
    have had last Congress on what was the biggest change in our
    Tax Code since 1986. The process that was taken in the last
    Congress under different leadership was dramatically different
    than that bipartisan effort that happened in 1986 and was
    really the culmination of about 5 years' worth of work.
        Back then, in 1986, there was a reduction on the nominal
    rates and a broadening of the base, and the effort was
    bipartisan. What we saw last Congress with the GOP tax cut was
    none of that. It wasn't paid for. There was no broadening of
    the base. So it really wasn't tax reform, it was just a
    dramatic tax cut, oh, by the way, coming in about the eighth or
    ninth year of an economic expansion.
        Besides the fact it was an awful process and rushed for
    political reasons mostly because Republicans had just spent the
    previous year attempting and failing to repeal and replace
    ObamaCare and needed a political win, but in addition to that,
    let's consider the consequences. And I ask; I am not sure which
    of these is the worst aspect of it. The fact that you had a 40-
    percent reduction in the corporate tax rate from 35 percent, a
    rate that I believe and other economists on both sides of
    economic spectrum that was a high rate that hurt our
    international competitiveness, however, the drop from 35 to 21
    percent was completely unwarranted, a 40-percent reduction in
    our corporate taxes. That is bad enough when you consider point
    number two, that it wasn't paid for. Then when you consider
    point number three, that the reduction in corporate taxes
    combined with other dramatic reductions means that, according
    to the CBO, within 10 years 83 percent of the benefit of this
    will go to the wealthiest 1 percent. And even within that
    wealthy 1 percent, there is quite a big difference between the
    just regular rich and the super rich with, most of the benefits
    being tilted towards those not just in the 1 percent but the
    top 10th of 1 percent.
        So, when we consider all of this already happening at a
    time of record income inequality, it is quite outrageous, and I
    will ask one of the economists, but I was thinking specifically
    Mr. Oh could talk about many aspects of this, but let me just
    talk about one. We are now, for the first time in an economic
    expansion, seeing a dramatic increase in the budget deficit
    approaching $1 trillion this year. What do you expect to happen
    if and when the next recession occurs, recognizing that, given
    historic precedent, we are probably at the tail end of this
    economic expansion, about 9 years into it by my estimates? Dr.
    Gould or Mr. Oh.
        Mr. OH. Yes, I will cede to Dr. Gould as I haven't received
    that promotion yet to becoming an economist.
        Mr. BOYLE. You speak to authoritatively on these issues.
        Mr. OH. I appreciate it.
        Ms. GOULD. I think that, you know, we definitely want to be
    prepared for the next recession. I am not a budget expert. So I
    don't want to speak too much on that. One thing, if you don't
    mind, I just want to point out that another thing that
    happened: We have been giving a lot of credit to the tax cuts
    for the economic growth we have seen such as it is over the
    last year, and I think one thing that has been forgotten is
    there was also a spending bill $300 billion spending bill that
    also came out last year that could have actually been the
    cause. So we are looking at this one tax cut. You have to look
    at it in the context of all the other legislation----
        Mr. BOYLE. And reclaiming my time, I should also point out
    that, of course, when President Obama came in and over 700,000
    jobs a month were being lost, turning that around to then
    having 7 straight years of job growth and economic growth, it
    is not as if this growth that has happened in the last 2 years
    suddenly came out of nowhere, that it is, in fact, the
    continuation of what had been happening already for the
    previous 7 years. Isn't that right?
        Ms. GOULD. Absolutely. If we had had an economy, let's say,
    on auto pilot, this is very much what we would have seen.
        Mr. BOYLE. Yes, and I believe the charts actually show
    that. Well, thank you very much.
        I yield back.
        Chairman NEAL. I thank the gentleman.
        With that, let me recognize the gentleman from North
    Carolina, Mr. Holding, to inquire.
        Mr. HOLDING. Thank you.
        And I thank the witnesses for enduring here for almost 4
    hours, and I certainly want to thank the chairman for giving me
    another opportunity to publicly discuss the economic growth,
    job creation, and the rising incomes that American families are
    seeing because of the Tax Cuts and Jobs Act. By taking money
    out of Washington and putting it back in the pockets of
    hardworking Americans, our historic tax cuts have sparked an
    economic surge. After years of stagnation, the Tax Cuts and
    Jobs Act finally provided American families and workers with
    some much needed relief.
        Our bill lowered tax rates, doubled both the child tax
    credit and standard deduction. Because of this, the average
    family of four living in my district in North Carolina saw
    their taxes cut by around $2,791 last year. So the Tax Cuts and
    Jobs Act also put in place into the Code an element that
    encourages business investment and growth here in the United
    States, and a key component of that was enactment of immediate
    expensing, which generally allows a company to write off
    business investments during the next 5 years. And that is the
    cost of equipment can be deducted immediately rather than
    deducted slowly over a long term of years, and this has not
    only increased investment, certainly in my district--as I have
    ridden around, I see what is going on and talked to the folks
    in those businesses, and they say this expensing provision, you
    know, has led to growth and is leading to increased employment.
        So a simple question on expensing to the panel, a simple
    yes or no. So, yes or no, would you like to eliminate the
    expensing provisions from the Tax Code? Dr. Gould.
        Ms. GOULD. I am sorry, I can't speak to that.
        Chairman NEAL. Would you please use the microphone?
        Ms. GOULD. Yes.
        Mr. HOLDING. Yes, you would like to see them leave. Dr. Oh.
        Mr. OH. It is such a complicated issue. I can't address it
    with a yes or no.
        Mr. HOLDING. All right. Mr. Shelton.
        Mr. SHELTON. There is no way I am going to----
        Mr. HOLDING. Expensing----
        Mr. SHELTON [continuing]. When an economist is not going
    to----
        Mr. HOLDING. Right, right, right. And Ms. Abramowitz.
        Ms. ABRAMOWITZ. My specialty is the working poor.
        Mr. HOLDING. Okay. And Dr. Holtz-Eakin.
        Mr. HOLTZ-EAKIN. Do not repeal it. Make it permanent.
        Mr. HOLDING. So I can take it from at least four members of
    the panel that you really have no business experience and have
    no comprehension of what expensing is actually doing for this
    economy because if you did have some business experience, if
    you did have some people in your orbit who had some business
    expense, you would have a different answer from what you had
    today. But thank you for answering the question.
        In fact, in 2018, the first year under the new Code, U.S.
    companies were the buyers of $1.26 trillion in domestic and
    international deals, which is an increase of 16 percent over
    2017. And, further, last year was the first time since 2011
    that U.S. acquisitions of foreign companies exceeded foreign
    acquisitions of U.S. companies. And why is that? Because we
    moved from a worldwide system of corporate taxation to a
    territorial system of corporate taxation, which, you know, from
    the numbers, you know the real data we can see, you know we
    have more work to do on that, and I will just lay this out
    there for the consideration of our panel and maybe for the
    witnesses to think about. Its citizens are still taxed based
    upon their citizenship rather than their residency. The United
    States is one of only two countries or three countries
    including North Korea and Eritrea that tax their citizens on
    their worldwide income rather than based on their residency.
    And we have done such a good job of addressing our corporate
    taxation, our corporate rate, and making a territorial system,
    so it is fair, I think we ought to address it for our citizens
    as well on a future tax package. Right now, it costs upwards of
    40 percent more to hire a U.S. citizen abroad. So you travel,
    you go to Singapore, and you go to the American Chamber of
    Commerce in Singapore, you meet no Americans there because it
    costs so much more to hire an American overseas. So I am really
    glad that we are seeing the impact of the territorial system on
    a corporate rate, and I look forward to working with my
    colleagues on addressing that for individuals so they can have
    a fair deal, as well.
        With that, Mr. Chairman, I yield back.
        Chairman NEAL. I thank the gentleman.
        And, with that, let me recognize the gentleman from
    Illinois, Mr. Schneider, to inquire.
        Mr. SCHNEIDER. Thank you, Mr. Chairman, and I want to thank
    you and the Ranking Member for holding this important hearing.
    This is exactly the type of hearing that did not take place in
    the last Congress, and as others have said, I will join in that
    it is better late than never, but if we had had these hearings,
    if we had these hearings last year, we would be in a much
    better place with this Tax Code.
        Earlier my colleague from New Jersey shared some thoughts
    on the impact of the State and local tax--cap on State and
    local tax deduction. I want to associate myself with Mr.
    Pascrell on this issue. I raised the issue when Secretary
    Mnuchin was here earlier, and it has an impact. Eleven of the
    counties in Illinois, my State, have an average SALT deduction
    that is higher than the $10,000. In my two counties, it is both
    much higher. In Lake County, which is three-quarters of my
    district, the average is $18,000. More than 42 percent of tax
    filers use that--claim that deduction. It is having a
    significant impact in our communities, and I do hope the
    Secretary was sincere when he said it is something that they
    were going to address, and I hope we address it in the
    Committee.
        My focus today is I would like to talk about the cost of
    childcare. As the SALT deduction is hurting families in my
    district, the cost of childcare is having a significant impact.
    It is something that we as policymakers, Republican and
    Democrats, should be able to agree on. How do we help families
    cover the costs so they can be involved in the economy? A
    survey conducted last year by Morning Consult for The New York
    Times explored why young Americans are having fewer children.
    And one of the primary reasons indicated is the cost of
    healthcare, that they just felt they could not provide for
    their kids in a way that will allow them to do it in the
    fashion they hoped to.
        According to the Economic Policy Institute, the average
    cost of daycare is nearly--in Illinois is nearly $13,000. That
    is more than $1,000 a month. Illinois is the eighth most
    expensive State, and to put this in perspective, we typically
    talk about the $1.5 trillion student loan debt that young
    people and people of all ages are facing. According to EPI, the
    yearly cost of infant care in Illinois is slightly more than
    the in-State tuition for a 4-year public college. Let me repeat
    that: The cost of infant care is more than tuition for a 4-year
    college. So, as young adults enter the workforce, carrying
    their student loan debt, worrying about maybe someday having a
    house, starting a family, they have to have to make difficult
    choices. But it doesn't need to be the case, and it doesn't
    need to be the reality that we live in. The Republican tax bill
    could have tackled this issue, but, unfortunately, it did
    nothing to help Americans gain access to higher quality and
    more affordable childcare.
        Professor Oh, I will start with you, but are you aware of
    any provisions in the tax bill, the Republican bill, that
    addresses the challenge of affordable childcare?
        Mr. OH. I mean, not head on. I mean, I think some might try
    to argue this the expansion of the child tax credit helps. I
    don't think that is the case because what I was explaining
    before in terms of just that replacing personal exemptions, so
    my answer to you is no.
        Mr. SCHNEIDER. Are there things we could be doing to help
    families with this?
        Mr. OH. Yes. So, right now, we kind of have a patchwork
    approach in the Federal tax system towards childcare. I am a
    new father. My son is turning one on Saturday.
        Mr. SCHNEIDER. Congratulations.
        Mr. OH. And I know how expensive childcare can be. So,
    right now, what we offer is a flexible savings account
    approach, which really only helps people that pay taxes at high
    marginal rates of tax. And then we have a very small dependent
    care credit, and one can imagine expanding both of these
    programs depending on which families we are trying to help
    more.
        Mr. SCHNEIDER. I know we talked about who is and who isn't
    an economist on the panel, but what impact would taking steps
    to make it more affordable for young families to afford
    childcare, what impact do you think that would have on the
    economy?
        Mr. OH. I can--I think it is one of those--childcare has
    gotten so expensive, and what generally happens is if there
    aren't--if there isn't access to informal care so extended
    family, grandparents and the like, it brings people out of the
    workforce. You know, it leads to one spouse, usually the woman,
    dropping out of the workforce to take care of their kids, and,
    you know, we can imagine doing better on this front.
        Dr. Gould.
        Ms. GOULD. Yes, absolutely I agree with everything he said,
    and it is absolutely the case that if we make childcare more
    affordable, provide high-quality options for parents, you are
    going to see an increase in labor force participation. You are
    going to see an increase in people's ability to work and, you
    know, provide more for their families.
        Mr. SCHNEIDER. And if I can add just in my last couple of
    seconds, when we do see people drop out of the workforce, even
    temporarily for a couple years, it is hard for those folks to
    get back on track. They never catch up in many respects. So
    there is an impact. My time has expired, and I yield back. I
    thank the Committee.
        Chairman NEAL. I thank the gentleman.
        I recognize the gentleman from New York, Mr. Suozzi, to
    inquire.
        Mr. SUOZZI. Thank you, Mr. Chairman, for holding this
    hearing.
        Thank you to the witnesses. You had a marathon session
    here, and thank you so much for being here for this long time
    and for preparing for today.
        Dr. Holtz-Eakin, earlier today you testified that tax cuts
    don't pay for themselves. Is that correct?
        Mr. HOLTZ-EAKIN. Yes.
        Mr. SUOZZI. And so there is going to be a projection of
    $2.3 billion increase, $2.3 trillion increase in the deficit
    because of these tax cuts and the way this tax bill was passed,
    $2.3 billion increase. And where does that money go? Last year,
    we saw a half a billion dollar increase in stock buybacks in
    the United States of America. Are you aware of that, Mr. Oh?
        Mr. OH. I have seen a lot of numbers, and they tend to
    range between $500 billion and a trillion dollars in buybacks.
        Mr. SUOZZI. Okay. A trillion dollars. Dividends are up. The
    wealthiest 10 percent of Americans got the largest percentage
    of the tax cut. This money--it is like spending $2.3 billion
    additional over the next 10 years--is going to these places.
    That is where it ends up going in the long run. So this hearing
    today is the 2017 tax law and who was left behind, and I am
    going to argue that the working people of America have been
    left behind for a long time, quite frankly. It is not new. It
    has been going on for a long time because, since 1982, the
    stock market has gone up 1,200 percent. Since 1982, the GDP has
    gone up 600 percent. And workers' real wages have gone up 20
    percent. So corporations and shareholders have been doing
    great, but working people have been left behind, and despite
    spending $2.3 billion in additional deficit spending, we are
    not doing anything to help the workers' wages real wages go up
    in any kind of significant way. So I would argue that the
    working people of America have been left behind.
        Ms. Abramowitz, you talked about the postcard form that is
    going to be used--is being used right now as part of this. And
    we saw pictures of it used by the GOP and the President even
    throughout the whole process last year, and it was this little
    nice little postcard. I thought it looked very attractive. But
    as you pointed out, there are six more forms.
        Ms. ABRAMOWITZ. Just the outer label.
        Mr. SUOZZI. And have you heard that errors have been going
    up at the IRS?
        Ms. ABRAMOWITZ. Errors in terms of processing returns? I
    think we are still early in the filing season.
        Mr. SUOZZI. Let me tell you the taxpayers advocate
    testified at another hearing we had in Oversight, and she said
    the errors by filers have gone up 200 percent so far with the
    new tax filings, 200 percent increase in errors. So there was
    no simplification. So that is just wrong. There has been a 200
    percent increase in errors. And just so everybody knows, so you
    are armed with these facts, is that when you call the IRS, only
    17 percent of the calls get answered. And people wait on the
    phone for 18 minutes before their phone call is answered.
        Ms. ABRAMOWITZ. I would suggest that the 18 minutes is a
    very optimistic number.
        Mr. SUOZZI. Well, most people drop off. They only answer 17
    percent of the calls. Most people drop off because they are
    waiting for so long to get their calls answered. So we hear all
    this railing about the IRS and the previous administration, but
    the new administration is making it worse. They didn't simplify
    things. They made things worse with this postcard and all the
    backup forms and the change in the process.
        People have been left behind are people in my district,
    which has one of the highest percentages of people using the
    State and local tax deduction. I am not going to go into the
    whole thing again here today, but I want you to know that 176
    counties in the United States of America have a State and local
    tax deduction higher than $10,000 per year. 176. And 49 of the
    50 highest State and local tax deduction utilizers are in New
    York, New Jersey, and California. Now do you think that is a
    coincidence, or do you think that was done on purpose? No
    answer. Okay. That is all right. You don't have to answer that
    particular question.
        One other group that has been left behind are charities and
    not-for-profits because as hard as it is to imagine, as part of
    this tax bill, there is a new tax on charities and not-for-
    profits. If you are a religious institution, you are a church,
    you are a synagogue, you are a mosque, and you give parking
    permits to your employees or if you give them transportation
    allowances, they have to pay taxes on it now, and not just the
    cost of the taxes, but now you have to hire an accountant who
    will help you fill out tax forms. That seems like they have
    been left behind, that they were really not considered during
    this process. Would you agree with that?
        Mr. Shelton, what do you think? You look like a church-
    going guy. Had you heard that before that not-for-profits are
    going to have to pay this additional tax?
        Mr. SHELTON. Yes, I have, and I come from New York, too, so
    I know what you are talking about when it comes to State and
    local tax deductions.
        Mr. SUOZZI. Well, Mr. Shelton, my time has expired, but I
    hope, in New York, we can get together some time and discuss
    this further. Thank you very much.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentleman from California, Mr.
    Panetta, to inquire.
        Mr. PANETTA. Thank you, Mr. Chairman. I appreciate this
    opportunity.
        And, Ranking Member Brady, ladies and gentlemen witnesses,
    thank you very much for being here. I appreciate your time. I
    appreciate your preparation for being here as well.
        I want to talk just a little bit right now with Mr. Oh in
    regards to your knowledge or process--in regards to the process
    of the tax bills that were done in 1986 and 2017. As you know,
    this recent tax bill in 2017 had zero hearings, correct?
        Mr. OH. That is my understanding.
        Mr. PANETTA. All right. And back in 1986, what was done is
    you had 30 hearings over 26 days just in the House of
    Representatives, correct?
        Mr. OH. Sounds correct.
        Mr. PANETTA. And then, in the United States Senate, there
    were 36 hearings in 45 days, correct?
        Mr. OH. I trust your numbers.
        Mr. PANETTA. Okay. All right. But those sound correct,
    though, right?
        Mr. OH. There were a lot of hearings around the 1986 act,
    that I can confirm.
        Mr. PANETTA. Yet, even then, they still had fixes to that
    bill, as you said in 1987, 1990 and 1993.
        Mr. OH. That is right.
        Mr. PANETTA. Do you foresee fixes being done to this bill?
        Mr. OH. I hope so, and it is part of the reason I agreed to
    come here is because I am hoping that this is the first step
    towards making some fixes to this bill.
        Mr. PANETTA. Thank you. Now, you testified that households,
    those earning less than $50,000 will save about $200, and those
    earning over a million will save about $64,000, correct?
        Mr. OH. That is right.
        Mr. PANETTA. And how many times more did you say that those
    millionaire households will have saved----
        Mr. OH. I round it to 300, but it is more like 320.
        Mr. PANETTA. 320 more.
        Mr. OH. Times more.
        Mr. PANETTA. Can you explain how that distribution will
    become even more unequal over time?
        Mr. OH. Sure. So there are a number of provisions in the
    tax bill that are scheduled to sunset in 2025, and I think your
    colleague, Mr. Boyle, mentioned the fact that, by 2027, which
    is the last year for which we have projections, something like
    83 percent of the tax benefits are going to the top 1 percent,
    yes.
        Mr. PANETTA. Moving on. Thank you, Mr. Oh.
        Ms. Abramowitz, you mentioned early on about how this is
    going to affect vulnerable immigrant populations. Can you
    elaborate on that?
        Ms. ABRAMOWITZ. Yes. I want to reiterate that many people
    believe immigrants are not taxpayers, and the truth is
    statistically they are. These are people who come to this
    country, they want to be a part of this country, and they
    eventually want to have the benefits of citizenship so they are
    paying tax, but they pay tax at much higher rates than the rest
    of us do.
        Mr. PANETTA. Why is that?
        Ms. ABRAMOWITZ. Because a lot of the benefits that are
    available to U.S. taxpayers are not available to them.
        Mr. PANETTA. And is that because--has that been a
    traditional thing, or is that just because of the 2017 tax
    bill?
        Ms. ABRAMOWITZ. 2017 just added another wrinkle. The EITC
    has not been available for--since the inception, but the child
    tax credit has now been changed and you now need a Social
    Security number for children. And you might say, well, that is
    just the child tax credit, but, of course, the child tax credit
    has been increased, and as we mentioned, you know, supplants to
    some extent the dependency exemption. So it has the effect of
    perhaps increasing the cost to the immigrant taxpayer. And I do
    want to reiterate here, also, that immigrants very often for a
    lot of reasons having to do with immigration law, are
    classified as contractors rather than as employees, and they
    are also paying this very steep Social Security tax as self-
    employed people.
        Mr. PANETTA. Look, I come from the central coast of
    California where there is lot of agriculture, a lot of
    specialty crop agriculture where we rely on immigrants not just
    for that industry, but in our community and in our culture, to
    be frank, and so I appreciate you bringing this up as a topic
    because I see it every day, how important it is to have
    immigrants continuing to be a part of our country, and,
    therefore, you know, these types of changes, especially with
    the child tax credit, only hurts our future and only hurts our
    communities, and so thank you very much. I yield back my time.
        Chairman NEAL. I thank the gentleman.
        Let me recognize the gentlelady from Florida, Mrs. Murphy,
    to inquire.
        Mrs. MURPHY. Thank you, Mr. Chairman, and thank you to all
    the witnesses for your testimony. By way of introduction I
    represent a district in central Florida where I don't think
    people think in partisan absolutes, especially on matters of
    tax. As you know, tax policy affects everyone regardless of
    political affiliation. I am also co-chair of the Blue Dog
    Coalition, where we prioritize fiscal discipline by both
    parties because of the threat that excessive debts and debt
    pose to our economy, our security, and our children's future.
        The CBO projected the 2017 Republican tax law will increase
    our national debt by $1.5 trillion over the next decade. And it
    was clear from the start that Republicans didn't want
    Democratic input and didn't really attempt a fiscally
    responsible approach to tax reform. I think that is a really
    missed opportunity. Instead, the Republicans hastily crafted
    and jammed through a partisan bill that primarily benefits the
    wealthiest in this country without doing enough to help working
    families and small businesses. And the result of this process
    and approach is a law that is filled with technical errors and
    an uncertain future because purely partisan laws tend to
    engender changes when there is a shift in political power.
        But here we are and we need to focus on the future and we
    need to understand what is in the bill and where improvements
    need to be made both large and small. And as Dr. Holtz-Eakin
    has testified, this bill sent a message to the American
    corporations. But I wonder what message it sent to working
    families? Instead of providing the full extent of these tax
    cuts to large corporations and the highest income earners,
    could Congress have done things differently to help working
    families? For example, could Congress have made the childcare
    more affordable by enhancing the child and dependent care tax
    credit and increasing the income exclusion? In full disclosure,
    I have a bill introduced both in the last Congress and this
    Congress to do just this.
        Professor Abramowitz, do you agree that this was a missed
    opportunity, and what are some other examples of ways Congress
    can do more to help working families through the Tax Code?
        Ms. ABRAMOWITZ. Again, absolutely. Currently, the childcare
    or dependent care tax credit is not refundable so it has no use
    to anybody who is in a--would only benefit from a refundable
    credit. Secondly, I think that anything we can do to enhance
    childcare to improve, again, the health, the education, and the
    safety of children, because we know a lot of children of the
    working poor are in questionable childcare circumstances, is
    something we ought to be doing as a society.
        I think, also, that we ought to think about income
    supplements generally. We are looking at the earned income tax
    credit, the child tax credit, the dependent care expense
    credit, and I think it sort of--individually, they all have
    merit, but I think we also ought to think about the whole
    package and how best we can, you know, use our resources to
    make life the way it can be--as best it could be for those who
    are struggling each day.
        Mrs. MURPHY. Thank you.
        And, Professor Oh, at first blush, the increase in the
    standard deduction does appear to benefit working families who
    don't itemize, but can you explain why these benefits are
    diminished by other provisions in the law, namely the repeal of
    personal exemptions?
        Mr. OH. I am happy to. So just to revisit my favorite
    example, we have, let's say, a family of four, and what we have
    basically done is taken the personal exemptions for the
    children and rolled them into something like the child tax
    credit and expansion of the child tax credit, and what we have
    done with the personal exemptions for the two parents is to
    roll them into the standard deduction. And this is the reason
    why, you know, even though we have expanded the child tax
    credit, even though we have expanded the standard deduction,
    when you look at the distributional charts, you see very little
    tax cuts going to low-income families.
        Mrs. MURPHY. Thank you.
        And, Dr. Gould, the tax law is one of the major reasons why
    annual deficits will soon top a trillion dollars. As the gap
    between revenues and spending continues to grow, there is going
    to be immense pressure on Congress to reduce critical
    investments in defense and domestic priorities like health and
    transportation and housing. Can you explain how those cuts
    would hurt working families?
        Ms. GOULD. Sure. If there is that building political
    pressure, as you say, to cut spending, it would indeed do harm
    to working families. Without programs--you know, if you have
    cuts to Social Security, Medicare, Medicaid, food stamps, and
    the ITC, those programs are vital to working families. And
    without them, American families would not be able to get the
    healthcare, food, or housing they require to take care of their
    health needs or feed and shelter themselves and their families,
    so it is critically important.
        Mrs. MURPHY. Thank you. And I yield back the remainder of
    my time.
        Chairman NEAL. I thank the gentlelady.
        Let me recognize the gentleman from Texas, Mr. Arrington,
    to inquire.
        Mr. ARRINGTON. Thank you, Mr. Chairman.
        I have heard, and thank you witnesses for hanging in there
    with us. I know it has been a long hearing. But real quick, I
    have been hearing about this sort of cuts to safety net
    programs like Medicare. Did you know that the ACA, ObamaCare,
    cut something like $800 billion from Medicare? Is that a
    problem for you as well, or is it--does that hurt poor people
    when you cut hundreds of billions of dollars, no? ACA?
        Ms. GOULD. I am not aware.
        Mr. ARRINGTON. Mr. Oh, did you know that Medicare was cut
    to fund ObamaCare?
        Mr. OH. I did not know that. I am not an expert----
        Mr. ARRINGTON. Did anybody on the panel know that? Nobody
    wants to answer that, and I can appreciate why. Do you all
    believe that this is the greatest, strongest, most prosperous,
    most dynamic economy in the world, maybe the history of the
    world? I am talking about the U.S. economy. Yes, no, go down
    the line. Dr. Gould, yes or no, the American economy.
        Ms. GOULD. We have certainly seen improvements in the
    economy in the last few years.
        Mr. ARRINGTON. In the history of the world, is this one of
    the greatest economies, Mr. Oh, yes or no?
        Mr. OH. I think I can agree with that statement.
        Mr. ARRINGTON. Okay. Mr. Shelton.
        Mr. SHELTON. It depends if you are sitting on Wall Street
    or Main Street.
        Mr. ARRINGTON. Well, tell me what it is like to be a worker
    as part of your union where you have a multiemployer pension
    program that is 45 percent funded. So when I think about the
    outlook on the worker, I think about the multiemployer pension
    programs. I know there are a couple that your organization has
    negotiated on behalf of your workers, and their unfunded
    liability--and I have got the data here--they are underfunded
    by 50 percent. Now you all aren't the only ones, but is that a
    problem to you when you think about the outlook and the future
    for the worker for the working person, the working family? Are
    you concerned about that?
        Mr. SHELTON. It is obviously a problem, but I have very
    few, if any, multiemployer pension plans.
        Mr. ARRINGTON. I have got two right here that CWA pension
    plan negotiated by your union, and they are underwater by over
    50 percent. That is they have an unfunded liability of greater
    than 50 percent, and it is thousands of employees who are
    counting on this for their retirement. That is a problem. Do
    you agree with that?
        Mr. SHELTON. Absolutely.
        Mr. ARRINGTON. Okay. So I am more concerned about that than
    I am about people keeping their own money that they worked hard
    for because fundamentally I don't see that as government's
    money; I see it as the American people's money. Now government
    cost something. We have to have revenue to run this government.
    It is not cheap. But I am concerned about that. Do you believe,
    Mr. Shelton, that the free enterprise system is the best
    economic system that at least we have seen thus far in our
    world's history?
        Mr. SHELTON. Yes.
        Mr. ARRINGTON. Do you believe that Ms.--and I am sorry if I
    can't pronounce your name.
        Ms. ABRAMOWITZ. Abramowitz. Yes, I do, but not completely--
    --
        Chairman NEAL. Turn your microphone on, please.
        Mr. ARRINGTON. Do you believe that in this free enterprise
    system and this wonderful economy, Mr. Oh, that you agreed is
    one of the most powerful, most dynamic, most prosperous
    economies in the world, what do you attribute that success to,
    do you attribute it to government, or do you attribute it to
    the American people? If you had two choices, A and B, multiple
    choice.
        Mr. OH. I would attribute them to both. You know, the
    American people are powerful force, but there is an important
    role for government in governing free markets.
        Mr. ARRINGTON. What about you, Mr. Shelton, do you think
    that the greatest economy in the world is attributed to
    government or to free people exchanging in an open market,
    their ideas, their products, their services? Here is what is
    what I am----
        Mr. SHELTON. Both.
        Mr. ARRINGTON [continuing]. Getting at. I am not trying to
    get cute or play games with you. We gave greater freedom into
    the marketplace. We limited the role of government, and we
    unleashed the unlimited potential of the American people. We
    unleashed the American spirit, and the response has been
    phenomenal. And it is inarguable. The economy is growing,
    millions of jobs, unemployment breaking every record,
    performing at the highest levels, and wages, wages are up. Mr.
    Holtz-Eakin, wages are up, and in 2018, and they are up the
    most on the sort of lowest spectrum of the income earners. Is
    that true?
        Mr. HOLTZ-EAKIN. That is the CPS data in my testimony.
        Mr. ARRINGTON. Is that a fact?
        Mr. HOLTZ-EAKIN. Yes.
        Mr. ARRINGTON. Ms. Abramowitz, do you think that is a good
    thing? Do you agree that that fact, that trajectory is good for
    this country, it is good for America, and we ought to cheer for
    our country and our families that are doing better because the
    boats are rising on this tide? Do you agree?
        Ms. ABRAMOWITZ. I can't disagree that rising wages are a
    good thing.
        Mr. ARRINGTON. Would you agree, Mr. Shelton?
        Mr. SHELTON. Rising wages are always a good thing.
        Mr. ARRINGTON. God bless America. Man, I am feeling better
    already.
        Mr. Oh, do you agree?
        Mr. OH. I do. I do.
        Mr. ARRINGTON. Dr. Gould, I am running out of time. Hey,
    thank you for your time.
        Mr. Chairman, thank you for this hearing. I think the
    future looks better and brighter in my mind after this hearing.
        Chairman NEAL. We thank the gentleman.
        With that, let me recognize the gentleman from California,
    Mr. Gomez, to inquire.
        Mr. GOMEZ. Thank you, Mr. Chairman.
        I have been sitting here--I get to listen to everything.
    That is one of the benefits of almost going last. I got to hear
    just a lot of the comments, and one of the things that I think
    is pretty obvious is that the benefits primarily of this tax
    bill went to the wealthiest individuals in the country and the
    largest corporations.
        Somebody--we are not saying that, you know, working class
    folks didn't benefit at all, but it is more of the attitude of
    the minority than the majority Republicans. Somebody--one of my
    colleagues said: Something is better than nothing.
        That is the point, that they just got something. They
    weren't the main beneficiaries of this tax plan, and I see it
    as the modern day version of ``Let them eat cake.'' You know,
    we will live wealthy and on the hog, and everybody else will
    get the crumbs whatever is left.
        So let me continue. The day the Republicans passed their
    tax plan, there was a televised celebration in the White House
    Rose Garden. Do you all remember that? I think we all remember
    that. And before the GOP took their victory lap around 1600
    Pennsylvania Avenue, they made the following promises about
    their tax bill, that it would reduce deficits, help the middle
    and working class, and pay for itself.
        Professor Oh, do you remember those promises?
        Mr. OH. I do remember them.
        Mr. GOMEZ. And in your professional opinion, were those
    promises kept?
        Mr. OH. Not yet.
        Mr. GOMEZ. Not yet. When I think back to those who
    celebrated the passage of the GOP's tax plan, I noticed that
    those who saw it as a victory were part of an elite class of
    Americans who represented the wealthiest in the country. And
    why wouldn't they celebrate? The benefits of the massive
    corporate tax cut passthrough deductions, reduction in estate
    and gift taxes, and cutting of the top marginal rate, they all
    flow primarily to the wealthy.
        Professor Oh, would you agree with that assertion?
        Mr. OH. I would.
        Mr. GOMEZ. In your professional opinion, are corporations
    using their tax benefits to help the middle and working class?
        Mr. OH. That is a complicated issue. We have seen a lot of
    stock buybacks, which is somewhat unsurprising given what most
    economists thought in terms of access to capital in the U.S.
    How those benefits actually inure to the American people I
    think depends on time. You know, going back to some of the
    testimony we heard earlier, we just need more time and more
    data to figure out exactly how those will play out.
        Mr. GOMEZ. Mr. Shelton, do you think those benefit the
    working and middle class?
        Mr. SHELTON. I haven't seen it. You know, all the employers
    that we deal with----
        Mr. GOMEZ. No, thank you, and I appreciate it.
        Mr. SHELTON [continuing]. Have a lot of stock buybacks, but
    that is about it.
        Mr. GOMEZ. You are seeing some go mainly to buy back
    stocks, some even leading to laying off workers, and then
    rewards wealthy shareholders. When I think about this tax
    plaque, the winners are clearly the haves, and the losers are
    the clearly the have-nots, and I think of people who can
    actually like afford to buy a yacht versus the people that
    clean the yachts. In your professional opinion, professor, who
    would be considered the primary beneficiary of the GOP tax
    bill, a constituent of mine who makes roughly $40,000 a year or
    let's say one of my Committee colleagues Rep. Vern Buchanan,
    whose net worth is roughly $73.9 million, and on the same day
    his party passed this bill and he voted for it, he bought a
    yacht similar to the one that is on the screen, similar to this
    one. Who would benefit?
        And before I move on, before I actually let you answer that
    question, Mr. Chairman, I ask for unanimous consent to enter
    into the record ``GOP lawmaker bought multimillion dollar yacht
    on the same day he voted for GOP tax bill.''
        Chairman NEAL. Yes.
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        Mr. GOMEZ. Thank you.
        Mr. Oh.
        Mr. OH. So I don't want to call out individual people, but
    I can say that the general beneficiaries of this tax bill on
    average were households that earn more than a million dollars
    per year. Actually, in general, wealthier households. So I mean
    I guess the cutoff you can use maybe is even $500,000, but
    those are the households that benefited most.
        Mr. GOMEZ. And I know that we have wealthy Democrats, as
    well, but I like to point for the record that 189 Democrats,
    every single Democrat, voted no on this Republican tax bill
    because they understood that the benefits would go mainly to
    the wealthiest individuals. Somebody--Gene Sperling actually
    said 60-plus percent would go to the top one-tenth of 1 percent
    in America, the wealthiest individuals and not the people that
    are struggling to make ends meet to pay their mortgage or put
    their kids through school. Thank you and I yield back.
        Chairman NEAL. I thank the gentleman.
        And Mr. Horsford is recognized to inquire.
        Mr. HORSFORD. Thank you, Mr. Chairman, and thank you for
    your patience here after more than 4 hours, actually about 4
    and a half hours. I really appreciate your time today.
        The GOP Congress passed corporate tax cuts and tax cuts for
    the wealthiest and the most well connected adding $1.8 trillion
    to the deficit over time. Now to pay for their tax cuts for the
    rich, they want to balance the budget on the backs of seniors,
    children, and the poor by proposing devastating cuts to
    Medicare, Social Security, the Affordable Care Act, and
    Medicaid.
        On top of that, the tax cuts for small businesses and the
    one-time bonuses for working people were temporary while the
    tax cuts for big corporations and the wealthy were permanent.
    Why?
        I want to use my time to share the story of one of my
    constituents who were directly impacted by the so-called Tax
    Cuts and Jobs Act and who are now having to navigate new tax
    forms and new tax law challenges.
        Mr. Chairman, I would like to ask unanimous consent to
    enter into the record an article titled ``I owe how much?
    Americans shocked by impact of new tax law.''
        Chairman NEAL. So ordered.
        [The information follows:]

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        Mr. HORSFORD. Thank you.
        Jodie from Las Vegas, who is a retired military personnel
    and a former VA Federal worker wrote to me sharing his
    experience this filing season, and he told me I could share his
    story here today. Jodie went from receiving a small refund,
    generally about $350 on average in past years, to owing more
    than $3,600 this year. You see, in late 2017, Jodie was
    diagnosed with vascular disease, which forced him into a
    medical retirement from the VA. He has relied on Social
    Security disability insurance payments of $671 a month since.
    Because of this unforeseen circumstance, Jodie took two loans
    out on his thrift savings plan, a defined contribution plan for
    the United States Civil Service employees, which covered his
    family's expenses for a while.
        Unfortunately, Jodie's SSDI benefit is taxable because he
    has another source of income, retired military benefits. Those
    benefits coupled with his two TSP withdrawals resulted in a
    $3,600 tax bill. This is half of Jodie's family's monthly
    budget. Further, Jodie and his wife found out that the
    increased standard deduction in the Republican tax law
    eliminated the benefits they once received for their family's
    charitable donations to organizations like Goodwill or the
    Catholic Church. Is this who the GOP looked out for? I think
    not.
        The GOP tax scam helped the wealthy and well connected and
    stuck middle-class workers and families with the bill.
        Dr. Abramowitz, can you discuss how the tax bill could have
    been drafted to help a family like Jodie's instead of hurting
    it?
        Ms. ABRAMOWITZ. Yes.
        Chairman NEAL. Put your microphone on, please, Ms.
    Abramowitz.
        Ms. ABRAMOWITZ. Listening to the description of the family,
    it struck me, before we even think about what the tax bill did
    in 2017, if we were thinking about what we could do
    aspirationally, I am listening to this poor family; as a result
    of unemployment, they had to take first loans from their
    pension accounts, and I presume they were unable to pay them
    back, and, therefore, their loans became income for them in the
    year last year, this current year. And I also presume that they
    might have paid a penalty because they hadn't reached the age
    of 59 and a half. And I want to raise something that is not in
    the 2017 bill at all but something we see all the time that I
    think Congress should be aware of.
        We incentivize retirement savings, and we don't want people
    to take it out too early. So we impose this penalty tax. The
    exceptions to the penalty tax are for education, for buying a
    first home, for actual out-of-pocket medical expenses. But this
    family is so reminiscent of those that I see in my clinic all
    the time: people who are out of work and unable to buy the
    groceries, unable to pay the rent. If they take out loans for
    that purpose, I don't have a problem paying the basic income
    tax, but the notion of a penalty tax on top of that is
    something I think Congress ought to rethink. Is that a better
    place to provide relief, perhaps, than buying a new home?
        Mr. HORSFORD. Thank you.
        Thank you, Mr. Chairman. I yield back.
        Chairman NEAL. I thank the gentleman.
        Today's hearing has been the hearing that never took place.
    These are all issues that we should have thoroughly considered
    and heard expert witness on before Congress passed a $2.3
    trillion tax giveaway, not after. The Committee will continue
    to scrutinize the 2017 tax law and seek to better understand
    what these hastily made changes to our tax system meant for the
    American taxpayer.
        Please be advised that members have 2 weeks to submit
    written testimony to the Committee and to raise questions as
    well. Those questions and your answers will be part of the
    formal hearing accord.
        And, with that, the Committee stands adjourned.
        [Whereupon, at 2:32 p.m., the Committee was adjourned.]
        Member Questions for the Record

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