[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
         
         
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                              ___________

                    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
   
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    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:]
    
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    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:]
    
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    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:]

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    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:]
    
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    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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