[Joint House and Senate Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-104

                ``BUILDING BACK BETTER: RAISING REVENUE
                    TO INVEST IN SHARED PROSPERITY''

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

                            VIRTUAL HEARING

                               BEFORE THE

                        JOINT ECONOMIC COMMITTEE

                                 OF THE

                     CONGRESS OF THE UNITED STATES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 6, 2021

                               __________

          Printed for the use of the Joint Economic Committee
          
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        Available via the World Wide Web: http://www.govinfo.gov
        
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                    U.S. GOVERNMENT PUBLISHING OFFICE                    
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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES             SENATE
Donald S. Beyer Jr., Virginia,       Martin Heinrich, New Mexico, Vice 
    Chairman                             Chairman
David Trone, Maryland                Amy Klobuchar, Minnesota
Joyce Beatty, Ohio                   Margaret Wood Hassan, New 
Mark Pocan, Wisconsin                    Hampshire
Scott Peters, California             Mark Kelly, Arizona
Sharice L. Davids, Kansas            Raphael G. Warnock, Georgia
David Schweikert, Arizona            Mike Lee, Utah, Ranking Member
Jaime Herrera Beutler, Washington    Tom Cotton, Arkansas
Jodey C. Arrington, Texas            Rob Portman, Ohio
Ron Estes, Kansas                    Bill Cassidy, M.D., Louisiana
                                     Ted Cruz, Texas

                  Tamara L. Fucile, Executive Director
            Vanessa Brown Calder, Republican Staff Director
                  Colleen J. Healy, Financial Director
                           
                           C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Donald Beyer Jr., Chairman, a U.S. Representative from the 
  Commonwealth of Virginia.......................................     1
Hon. Mike Lee, Ranking Member, a U.S. Senator from Utah..........     4

                               Witnesses

Dr. Kimberly Clausing, Deputy Assistant Secretary for Tax 
  Analysis, U.S. Department of the Treasury, Washington, DC......     6
Ms. Chye-Ching Huang, Executive Director of the Tax Law Center, 
  New York University Law, New York, NY..........................     8
Dr. Wendy Edelberg, Director of the Hamilton Project and Senior 
  Fellow for Economic Studies at the Brookings Institution, 
  Washington, DC.................................................     9
Dr. William McBride, Vice President of Federal Tax and Economic 
  Policy, Tax Foundation, Washington, DC.........................    11

                       Submissions for the Record

Prepared statement of Hon. Donald Beyer Jr., Chairman, a U.S. 
  Representative from the Commonwealth of Virginia...............    28
Prepared statement of Hon. Mike Lee, Ranking Member, a U.S. 
  Senator from Utah..............................................    29
Prepared statement of Dr. Kimberly Clausing, Deputy Assistant 
  Secretary for Tax Analysis, U.S. Department of the Treasury, 
  Washington, DC.................................................    31
Prepared statement of Ms. Chye-Ching Huang, Executive Director of 
  the Tax Law Center, New York University Law, New York, NY......    38
Prepared statement of Dr. Wendy Edelberg, Director of the 
  Hamilton Project and Senior Fellow for Economic Studies at the 
  Brookings Institution, Washington, DC..........................    51
Prepared statement of Dr. William McBride, Vice President of 
  Federal Tax and Economic Policy, Tax Foundation, Washington, DC    70
Articles for the Record Submitted by Representative Schweikert...    84
Response from Dr. Clausing to Question for the Record Submitted 
  by Senator Lee.................................................    84
Response from Ms. Huang to Question for the Record Submitted by 
  Senator Lee....................................................    84
Response from Dr. Edelberg to Question for the Record Submitted 
  by Senator Lee.................................................    85
Response from Dr. McBride to Question for the Record Submitted by 
  Senator Lee....................................................    86
Response from Dr. Clausing to Questions for the Record Submitted 
  by Senator Warnock.............................................    87
Response from Ms. Huang to Questions for the Record Submitted by 
  Senator Warnock................................................    87
Response from Dr. Edelberg to Questions for the Record Submitted 
  by Senator Warnock.............................................    88

 
                ``BUILDING BACK BETTER: RAISING REVENUE
                    TO INVEST IN SHARED PROSPERITY''

                              ----------                              


                       WEDNESDAY, OCTOBER 6, 2021

                    United States Congress,
                          Joint Economic Committee,
                                                    Washington, DC.
    The WebEx virtual hearing was convened, pursuant to notice, 
at 2:30 p.m., before the Joint Economic Committee, Hon. Donald 
S. Beyer Jr., Chairman, presiding.
    Representatives present: Schweikert, Pocan, Davids, Estes, 
Beyer, Peters, and Arrington.
    Senators present: Cruz, Hassan, Cassidy, and Lee.
    Staff: Vanessa Brown Calder, Hugo Dante Jr., Ron Donado, 
Ryan Ethington, Tamara Fucile, Devin Gould, Owen Haaga, Colleen 
Healy, Jeremy Johnson, Adam Michel, Kole Nichols, Michael 
Pearson, Alexander Schunk, Nita Somasundaram, Sydney Thomas, 
Emily Volk, and Brian Wemple.

 OPENING STATEMENT OF HON. DONALD BEYER JR., CHAIRMAN, A U.S. 
        REPRESENTATIVE FROM THE COMMONWEALTH OF VIRGINIA

    Chairman Beyer. This hearing will come to order. And I 
would like to welcome everyone to the Joint Economic 
Committee's Hearing entitled ``Building Back Better: Raising 
Revenue to Invest in Shared Prosperity.'' I want to thank each 
of our truly distinguished witnesses for sharing their 
expertise today, and now let me offer my opening statement.
    The Biden Administration Build Back Better Plan will cut 
taxes for working families, help small businesses, and invest 
in America's long-term economic prosperity, all while asking 
the wealthy and big corporations to pay their fair share. 
Today, Federal revenue is just 16.4 percent of the economy, and 
asking the wealthy and big corporations to contribute more 
Federal revenue is consistent with supporting long-term 
economic growth.
    The Build Back Better Plan will help provide American small 
businesses with a level playing field to compete with 
multinational corporations. The Treasury Department projects 
that 97 percent of small businesses will be protected from 
increased taxes, and many will get a tax cut from reducing the 
corporate tax rate to 18 percent for incomes under $400,000.00.
    The Build Back Better Plan promotes global competitiveness 
by working to end the race to the bottom on corporate taxes, 
letting American businesses compete on the basis of bringing 
the best products to market at the lowest price, instead of 
competing on who can avoid paying taxes.
    As a small businessman for almost five decades I know that 
paid family leave will help small businesses retain workers. 
When I had workers who got sick, or needed to care for a sick 
child, we provided paid leave to our employees because we would 
never want to leave our workers to choose between a paycheck or 
taking care of themselves or a loved one.
    At some point during their lives all workers are going to 
need to take time away from work. By establishing a Federal 
paid leave program, Build Back Better helps small businesses 
cover those inevitabilities and reduces the cost of turnover, 
which is why so many small businesses have come out in support 
if it.
    Small businesses will also benefit from expanding the work 
opportunity tax credit, which would give businesses up to 
$5,000.00 to hire qualified individuals, including eligible 
veterans. Asking the wealthy and big corporation to pay their 
fair share is consistent with supporting long-term economic 
growth.
    After the Obama-Biden Administration allowed the Bush tax 
cuts for the very wealthy to expire in 2013, the economy added 
8 million jobs in President Obama's second term. Job growth 
slowed under President Trump as the Trump taxes delivered a 
windfall for the wealthy, creating record stock buybacks, and 
adding hundreds of billions to the deficit.
    Although friends across the aisle will likely claim that 
asking the wealthy and big corporations to pay their fair share 
will hurt economic growth, the evidence just doesn't back them 
up. A congressional research service report found that ``both 
labor supply and savings and investment are relatively 
insensitive to tax rates.'' In addition, improving IRS 
enforcement will increase revenue without raising rates, while 
ensuring that businesses cannot gain advantages over their 
competitors by cheating on their taxes.
    We know that investing in working families, communities and 
innovation is the key to broadly shared economic growth, and 
that's exactly what the Build Back Better Plan would do. An 
analysis by the Tax Policy Center shows that the Build Back 
Better Revenue provisions passed out of the House Ways and 
Means Committee would abide by President Biden's pledge not to 
raise taxes on those making under $400,000.00 a year.
    So in 2022, households making under $500,000.00 will get 
their direct taxes cut on average. Middle income parents will 
get a tax cut of about $3,000.00 on average. Extending the 
enhanced child tax credit, and expanded child and dependent 
care tax credit that is proposed under Build Back Better, would 
help families to access affordable childcare and paid family 
leave.
    These two supports are both critical to helping parents, 
particularly mothers, remain engaged in the labor market. And 
we know that increased labor force participation is key, 
driving long-term and sustainable economic growth.
    Under President Biden, almost four and a half million 
people have returned to work, and unemployment has dropped to 
5.2 percent. In the first few quarters of 2021, real GDP grew 
at over 6 percent. In fact, the second quarter was just revised 
upward again, and the Federal Reserve projects 5.9 percent real 
GDP growth this year. Core CPI inflation grew just 0.1 percent. 
That's 1 over 1,000 in August, even as real wages grew at .4 
percent--four times faster.
    So passage of Build Back Better and the bipartisan 
infrastructure bill will cement these economic gains, improved 
productivity, lower inflationary pressures and create long-term 
growth. Louisiana Analytics projected that passing both bills 
will increase GDP growth in 2022 to 5.3 percent.
    Similarly, the Economic Policy Institute projects that the 
two bills would support 4 million jobs per year, including 
556,000 manufacturing jobs and 312,000 construction jobs. For 
too long the wealthy and big corporations have avoided paying 
their fair share. You have an opportunity now to rebalance the 
scale and invest in America's future to create long-term 
broadly shared economic growth.
    We have been waiting for our Vice Chair, Senator Lee to 
show up, but while he's not here yet let me go ahead with the 
introductions of our speakers, and then we will slot Senator 
Lee as soon as he shows up.
    So in the order of their witness testimony our four 
distinguished witnesses. Dr. Kimberly Clausing. Dr. Kimberly 
Clausing is the Deputy Assistant Secretary for Tax Analysis in 
the Office of Tax Policy at the U.S. Department of the 
Treasury. Prior to that Dr. Clausing was the Eric M. Zolt 
Professor of Tax Law and Policy at UCLA School of Law. And 
before that, she joined UCLA from Reed College where she worked 
as the Thormund Miller and Walter Mintz Professor of Economics.
    Dr. Clausing has published numerous articles on taxation 
with a particular emphasis on the taxation of multinational 
companies, and she is the author of an amazing, excellent book 
called Open: The Progressive Case for Free Trade Immigration 
and Global Capital. She's a long-time friend of many of us and 
advisor.
    She received her BA in Economics from Carleton College, and 
an MA and PhD in Economics from Harvard University.
    Ms. Chye-Ching Huang is the Executive Director of the Tax 
Law Center at NYU Law. Before joining the Tax Law Center Ms. 
Huang was Senior Director of Economic Policy at the Center on 
Budget and Policy Priorities where she worked on the analysis 
and design of a wide range of Federal tax fiscal and economic 
policy proposals in collaboration with tax academics, 
practitioners, analysts and advocates.
    Previously Ms. Huang was a Tax Academic at the University 
of Auckland in New Zealand, where she published research in tax 
law, policy and regulation, and taught graduate and under-
graduate tax law. Ms. Huang holds an LLM from Columbia Law 
School where she was a Sir Wallace Rowling/Fullbright and James 
Kent Scholar, and a Bachelor of Law and a Bachelor of Commerce 
in Economics from the University of Auckland in New Zealand.
    Dr. Wendy Edelberg is the Director of the Hamilton Project 
and a Senior Fellow for Economic Studies at the Brookings 
Institution. She's also a Principal at WestExec Advisors, and 
prior to Brookings, Dr. Edelberg was Chief Economist at the 
Congressional Budget Office, something near and dear to all of 
us.
    Previously Dr. Edelberg was the Executive Director of the 
Financial Crisis Inquiry Commission which reported on the 
causes of the 2008 Financial Crisis. Dr. Edelberg also worked 
on issues related to macroeconomics, housing, and consumer 
spending at the White House Council of Economic Advisers and 
the Federal Reserve Board.
    Dr. Edelberg received a BA in Economics from Columbia, and 
MBA from the University of Chicago, and a PhD in Economics from 
the University of Chicago.
    Finally, Dr. William McBride is the Vice President of 
Federal Tax and Economic Policy at the Tax Foundation. Dr. 
McBride previously served as a Manager in the National Economic 
and Statistics Group at PricewaterhouseCoopers. Dr. McBride has 
experience researching and modeling the economics of taxation 
and issues related to tax reform at the State, Federal and 
international levels.
    From 2011 to 2014 Dr. McBride served as the Chief Economist 
at the Tax Foundation. Dr. McBride holds a BS in Physics from 
the University of the South, a BS in Electrical Engineering 
from Washington University in St. Louis, and a PhD in Economics 
from George Mason University.
    And with that, let me turn the floor over to the Vice Chair 
of the Full Committee and the distinguished senator from Utah, 
Senator Michael Lee.
    [The prepared statement of Chairman Beyer appears in the 
Submissions for the Record on page 28.]

  OPENING STATEMENT OF HON. MIKE LEE, RANKING MEMBER, A U.S. 
                       SENATOR FROM UTAH

    Senator Lee. Thank you so much, Mr. Chairman. I really 
appreciate it. Before the pandemic disrupted American's work 
lives and social connections, tax cuts and deregulation 
supported a thriving economy that delivered broad benefits to 
families and workers.
    The Tax Cuts and Jobs Act of 2017, which provided historic 
relief to working and middle class American families, and led 
to higher wages, better benefits, and new employment 
opportunities across the country, was crucial to that 
prosperity.
    Our booming economy provided some of the largest benefits 
to those Americans who needed it most. Unemployment for 
Hispanic Americans, Black Americans, and Asian Americans fell 
to the lowest rates on record. Unemployment for women dropped 
to a near 65 year low, and low income workers saw their wages 
rise at some of the fastest rates.
    All told the wealth of the bottom 50 percent of all 
Americans increased by over 70 percent in the three years prior 
to the pandemic. In early 2020, more than 80 percent of working 
age Americans were employed, and wages continued to rise. Pro-
growth policy reform brought the economy roaring to life in a 
way that few forecasters thought might be possible.
    That success demonstrates an important truth. Americans 
benefit from lower taxes, less regulation, and more freedom. 
Unfortunately, we've come here today because the Biden 
Administration and Democrats in Congress want to squeeze the 
American people with higher taxes and more regulation.
    They've proposed a 3.5 trillion dollar tax and spend 
blowout, one that would increase American's taxes by over 2 
trillion dollars. It would be the largest tax increase in my 
lifetime, and it would substantially expand the Federal 
Government's footprint into our homes, our businesses, and 
across our economy.
    Now let's be clear the major winners from the Democrat's 
plan are special interests and beltway bureaucrats. Our economy 
is still recovering from the pandemic. Now is one of the worst 
times to saddle our economy with higher taxes. The recovery has 
stopped accelerating and American families are being hit by 
higher prices for essential goods.
    Things like everything from groceries to housing to 
gasoline keep getting more expensive. Inflation is rising at 
its fastest pace in three decades, and it's making it harder to 
make ends meet. Wage increases are being swamped by higher 
prices and job growth is stalling. Democrats reckless tax and 
spend boondoggle will only make things worse.
    Here's what we know this tax plan would do to American 
families and workers and businesses. It would raise taxes on 
American families despite President Biden's pledge to the 
contrary. The non-partisan Joint Committee on Taxation, and the 
left leaning Tax Policy Center both agree that the plan would 
hike taxes on low and middle income families making less than 
$400,000.00 a year.
    The Democrats tax plan would also drive jobs for American 
workers overseas. It would raise the Federal corporate tax rate 
to 26.5 percent, making the cost of doing business in the U.S. 
higher than in Canada, Mexico, Japan, the United Kingdom, 
Germany, France and China.
    American workers would pay the price. They'd pay for it in 
lost jobs and slower wage growth and less investment in things 
like domestic manufacturing and innovative research and 
development. In 10 years two-thirds of the tax burden from this 
corporate tax increase would be shouldered by low and middle 
income workers, and perhaps worst of all the Democrats tax plan 
would embolden Washington to pick winners and losers, rather 
than allowing entrepreneurs to meet the needs of American 
consumers.
    This is about so much more than penalizing successful 
Americans with even higher taxes. This is about putting more of 
American's resources under the control of Washington 
politicians. Democrats tax plan would cost American families 
and workers and businesses. It would mean less innovation, 
lower wages, and fewer jobs.
    It would increase the size and scope of the Federal 
Government. It would make our country less prosperous, less 
fair, and less free. We know what works--keeping taxes low 
helps to support a thriving economy. It benefits all Americans. 
We should return to the policies that made the pre-pandemic 
economy so successful for so many Americans.
    Congress should keep taxes low and predictable by making 
the reforms in the Tax Cuts and Jobs Act permanent. And then we 
should restrain government spending. It's on a runaway path 
right now, by setting clear and enforceable rules for fiscal 
discipline.
    Look, we simply can't, as in it simply won't work. We can't 
succeed at taxing and spending our way into shared prosperity. 
Instead, we need to stop spending indiscriminately and make 
America the best place in the world to do business, pursue 
happiness and earn success. Thank you.
    [The prepared statement of Senator Lee appears in the 
Submissions for the Record on page 29.]
    Chairman Beyer. Senator Lee thank you very much. Now we 
will recognize Dr. Clausing for your testimony.

STATEMENT OF DR. KIMBERLY CLAUSING, DEPUTY ASSISTANT SECRETARY 
FOR TAX ANALYSIS, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, 
                               DC

    Dr. Clausing. Thank you Chairman Beyer. Chairman Beyer, 
Ranking Member and members of the committee. Thank you so much 
for inviting me to share my views on the relationship between 
tax policy and the economy.
    The present moment is a very consequential one for the 
future of tax policy. We have an opportunity in front of us to 
create a modern, efficient, and fair tax system, capable of 
funding investments that are essential to the creation of 
prosperous U.S. business environment, and to the sort of 
inclusive economic growth that can benefit all Americans.
    First off, raising adequate government revenue is important 
for funding the Nation's priorities, and for shoring up the 
fundamental economic strengths that are central to job 
creation. We need revenue to build roads and bridges, to fund 
education, training and research, to mitigate climate change, 
and to support families from tackling child poverty to 
maintaining support to the elderly.
    These investments are important to all of us, including 
those in the business community. Right now however, the United 
States raises less revenue than we need. We are in the bottom 
fifth of all OECD countries in terms of revenue raised relative 
to the size of our economy across all levels of government.
    We raise particularly low levels of revenue taxing of 
capital and corporations. The Joint Committee on Tax reports 
that U.S. multinationals pay an average tax rate of only 8 
percent on their income. In contrast, companies located in our 
top trading partners pay 18 percent.
    We collect far less corporate income tax revenue than our 
trading partners, and we only collect about half what we 
collected before the Tax Cut and Jobs Act, when we collected 2 
percent of GDP. Our corporate tax revenues are low despite the 
fact that U.S. companies show very high corporate profits, both 
in historic and comparative terms.
    Indeed, the United States' corporate sector is the most 
profitable in the world, dominating every measure of corporate 
success. Beyond revenue, tax reform is also essential to 
address the offshoring and profit shifting incentives that are 
embedded in current law.
    Under current, law foreign income is sometimes tax exempt, 
and sometimes taxed at half the rate of domestic income, 
providing very strong incentives to locate both activity and 
profit offshore. Although the Tax Cuts and Jobs Act included a 
global minimum tax called GILTI, it did not stop profit 
shifting. Indeed, the very large share of U.S. multinational 
income in very low tax jurisdictions did not change after 2015.
    Unfortunately, current law creates an America last tax 
system. Even high- or medium-taxed foreign income is preferred 
to U.S. income because it can be blended with low--tax income 
and taxed at a 50 percent discount. This is why a country by 
country minimum tax system is so crucial.
    These reforms will also create a fairer tax system. The 
past four decades can be characterized by three related 
trends--large, troubling increases in income and inequality, 
multiple reductions in tax rates for those at the top, and 
difficulty making ends meet for many lower and middle income 
families.
    Under current proposals, large expansions in the child tax 
credit, the earned income tax credit and the child dependent 
care tax credit will help address the needs of typical 
Americans. In short, asking for somewhat larger tax 
contributions from the country's wealthiest households, and 
from the most profitable corporations will help us raise the 
revenue that is needed to support the long-term competitiveness 
of the U.S. economy and the well-being of American families.
    Finally, there are many ways that our tax system needs to 
be modernized to suit the 21st century. The mobility of capital 
means that the taxation of multinational companies is subject 
to large tax competition pressures.
    The existential threat posed by climate change makes it 
critical to make changes in the tax code that incentivize clean 
energy. In both areas, cooperation with other countries 
pursuing the same goals yields double dividends, encouraging 
them to take firm actions of their own in solving long-standing 
collective action problems.
    A crucial way to modernize our tax system is to also ensure 
that we collect the tax that is due. The tax gap, which is 
forecast to total about 7 trillion over the coming decade, 
creates both inefficiencies and inequities. Honest businesses 
who pay their tax obligations in full compete with businesses 
whose owners shirk their tax responsibilities.
    Workers who earn solely wage or salary income fully report 
their income accurately, but face higher tax burdens than 
taxpayers using evasion to hide opaque sources of income. Those 
at the top of the income distribution are disproportionately 
responsible for the tax gap. Providing the IRS with the 
resources and information they need will give us a more 
progressive tax system.
    American taxpayers will benefit across many dimensions: 
improved taxpayer service, better targeted audits toward those 
that evade, and hundreds of billions of dollars of revenue that 
allow lower taxes elsewhere, less debt, and better government.
    In conclusion, the tax reforms that we will discuss today 
are essential for encouraging U.S. job creation, economic 
growth and inclusive prosperity. Thank you for inviting me.
    [The prepared statement of Dr. Clausing appears in the 
Submissions for the Record on page 31.]
    Chairman Beyer. Thank you, Dr. Clausing very much. We'll 
next hear from Ms. Chye-Ching Huang for your testimony.

 STATEMENT OF MS. CHYE-CHING HUANG, EXECUTIVE DIRECTOR OF THE 
     TAX LAW CENTER, NEW YORK UNIVERSITY LAW, NEW YORK, NY

    Ms. Huang. Chairman Beyer, Ranking Member Lee and members 
of the committee. I am honored to testify about an opportunity 
to meet the Nation's most pressing economic needs. Sound tax 
policy can lift the living standards of low and moderate income 
Americans, and support economic growth with shared benefits for 
workers, families and businesses.
    And that is because it can raise revenues to support 
investments in areas like infrastructure, education, scientific 
research and worker training that are known to deliver long-
term benefits. And this can also reduce the costs of challenges 
like climate change.
    Further, lawmakers are considering proposals, including a 
stronger child tax credit, and those are also true in these 
folks because they deliver longer benefits for the trajectories 
of children and the broader economy.
    Research shows that such credits increase the likelihood 
that children grow up healthier, do better in school, attend 
college, and earn more as adults. And these long-term benefits 
can be large. Nobel research also suggests that financial 
stability can help more children develop and apply their 
talents for research, innovation, and entrepreneurship and the 
country is currently losing out on so much of their potential.
    Seventeen Nobel Laureate economists have explained that the 
package that lawmakers are considering will ease long-term 
inflationary pressures, and that's because it combines 
investments that improve growth with revenues to financial 
those investments without adding to long-term deficits.
    Furthermore, sound tax policy can scale back on inefficient 
tax breaks, and can help it slow to where it's most productive, 
rather than where the tax savings are the most lucrative. It 
can also reduce complex and wasteful tax planning games. And in 
doing so tax policy can level the playing field for small, 
domestic and honest businesses so they can fairly compete with 
businesses that use tax avoidance, profit shifting to tax 
havens, or even outright tax evasion is a business strategy.
    The revenue raising proposals before Congress meet those 
goals. They would first ensure that companies of wealthy filers 
pay what they already are. Second, they would reverse some of 
the 2017 tax law's corporate rate cuts that would even cover 
what businesses asked for, and also address subsidies for 
locating profits and investments offshore.
    Third, they would scale back tax breaks that allow some of 
the wealthiest people in the country to pay a little or no 
income tax on very large sources of income. Such tax policies 
are far more likely to strengthen the economy than tax cuts 
concentrated at the top of the income distribution.
    Careful research finds no evidence that the 2017 tax law 
increased investment or wages above trends already in place. In 
the fact of that disappointing track record, some proponents of 
the tax cut strategy have instead cited predictions from paid 
studies that are deeply flawed, or inaccurately described 
current proposals.
    Another response has been to promote a view of 
competitiveness that misattributes America's economic success 
very narrowly to its willingness to subsidize multinationals 
tax avoidance, rather than the quality of American ideas, 
people and infrastructure.
    Those have already accumulated large profits and are 
seeking to protect their tax preferences, can afford to push 
this short-sighted view of American's competitive potential. An 
investment supported by good tax policy can ensure that more 
children can be part of the next generation of innovators who 
may generate new breakthroughs in businesses with widely shared 
benefits.
    And of course successful business and individuals will 
continue to benefit from American's infrastructure. Finally, 
some may try to frame the tradeoffs that will make us now face, 
as requiring them to choose between areas of deep need, 
including reducing child poverty, broadening access to 
community college and paid leave, addressing climate change, 
filling homes with Medicaid and more.
    But the actual tradeoff is much broader. It's between those 
investments and to what extent policy maintains the status quo 
of very wealthy taxpayers and corporations not paying taxes 
that they owe, and keeping provisions of law that allow them to 
pay very low tax rates. Thank you for inviting me, and I would 
be glad to take your questions.
    [The prepared statement of Ms. Huang appears in the 
Submissions for the Record on page 38.]
    Chairman Beyer. Ms. Huang, thank you very much. We'll now 
hear from Dr. Edelberg. Dr. Edelberg the floor is yours.

   STATEMENT OF DR. WENDY EDELBERG, DIRECTOR OF THE HAMILTON 
PROJECT AND SENIOR FELLOW FOR ECONOMIC STUDIES AT THE BROOKINGS 
                  INSTITUTION, WASHINGTON, DC

    Dr. Edelberg. Chairman Beyer, Ranking Member Lee, and 
members of the committee. My name is Wendy Edelberg, and I am 
the Director of the Hamilton Project and the Senior Fellow at 
the Brookings Institution. Before coming to Brookings I was 
Chief Economist at the Congressional Budget Office.
    As we discuss the tax provisions contained in the 
reconciliation package, and other ambitious policy proposals, 
I'd like to focus on three points. First, investments in the 
social insurance system are vital for ensuring broad access to 
opportunities in advancement, and for making our economy more 
resilient.
    There's extensive evidence demonstrating how effectively 
these programs work and why they should be expanded. Second, 
adopting the ambitious policies included in these packages 
would not create worrying inflation risk, and those packages 
effect on the long-term fiscal trajectory would be modest.
    Finally, although the contemplated tax increases would have 
a small negative effect on incentives to work and invest, other 
policies in the package would increase incentives to work and 
invest. You know everyone in the United States directly 
benefits from the social insurance system at some point in 
their lives.
    Moreover, everyone indirectly benefits from it, either from 
knowing the system would be there during some time of 
unexpected hardship, or simply because it helps to support the 
overall economy. During the pandemic-induced economic downturn, 
some of these programs have proven particularly effective.
    As a result of the enormous fiscal support provided to 
households in 2020, the percentage of the U.S. population in 
poverty fell from 12 percent to 9 percent. There is more to do. 
Implementing new policies with regard to childcare and paid 
leave would lower barriers to work among parents and those with 
caregiving responsibilities, and those policies would improve 
outcomes for children.
    Making permanent the full refundability of the child tax 
credit would lock in place reductions in child poverty. Making 
permanent the recent expansion of the EITC for adults without 
children would reduce poverty and income and equality, and 
increase labor force participation.
    Permanent expansions to health insurance premium tax 
credits and cost-sharing subsidies would decrease uninsured 
rates by potentially 14 percent. These are not the only 
improvements to the social insurance system included in the 
reconciliation package, but they are illustrated examples of 
how strengthening this system would improve well-being, and 
make our economy more resilient.
    At the same time the ambitious policies included in the 
packages being considered would not creating a worrying 
inflation risk and their effect in the long-term fiscal 
trajectory would be modest.
    Policymakers have stated their goal is to include increases 
in tax revenues and decreases in spending that would fully 
offset policies that would decrease revenues and increase 
spending. If something close to a full offset is achieved, the 
reconciliation package would do little to the project debt 
trajectory.
    To be clear, policymakers still have long-term challenges 
with regards to the Federal budget, however this reconciliation 
package even if the estimates end up showing it would modestly 
increase the cumulative deficit over the next decade would not 
worsen those challenges in a notable way.
    Although many of the changes being considered would 
increase people's incentives to work and invest, the revenue 
raising policies would have muted negative effects. For 
example, the reconciliation package undoes some of the 
reduction the corporate tax rate put in place in the 2017 Tax 
Act.
    Consensus projections were that the large reduction in 2017 
only boosted the level of investment modestly. Inversely, 
reversing some of that reduction would have only small, 
negative effects on investment even as it raised substantial 
revenue. In addition, the package increases the effect of 
marginal tax rates on labor income, but only for a small 
portion of the labor force comprised of the highest income 
people.
    Any negative effect on the aggregate labor supply would 
likely be hard to identify after the fact. The policies that 
would increase recipient's incentives to work, save and invest, 
could have large positive effects.
    For example, access to high-quality and affordable 
childcare could be a game changer for labor force participation 
among mothers of young children. With a larger and more 
productive workforce firms would have greater incentives to 
work and invest in the United States.
    To wrap up, despite headwinds created by the Delta Variant, 
the economy is recovering. This is the moment to strengthen the 
social insurance system, and to enact an ambitious Federal 
investment package. Together those policy changes would make 
the U.S. economy more resilient and productive over the longer 
term, and it would broaden the degree to which prosperity in 
the United States is shared across workers and families, thank 
you.
    [The prepared statement of Dr. Edelberg appears in the 
Submissions for the Record on page 51.]
    Chairman Beyer. Dr. Edelberg, thank you very much. And 
finally, we will hear from Dr. McBride.

STATEMENT OF DR. WILLIAM MCBRIDE, VICE PRESIDENT OF FEDERAL TAX 
      AND ECONOMIC POLICY, TAX FOUNDATION, WASHINGTON, DC

    Dr. McBride. Thank you Chairman Beyer, Ranking Member Lee 
and members of the Joint Economic Committee. I appreciate the 
opportunity to speak with you. Today I'll share the key 
findings of our analysis about the economic impacts, the 
revenue provisions of the most recent version of the 
President's Build Back Better agenda, the House Ways and Means 
Committee reconciliation bill.
    The House bill relies heavily on corporate tax increases, 
would raise the corporate tax rate 5 percentage points to 26 1/
2 percent, which would be the largest increase in the rate in 
more than 70 years.
    Including the average State corporate tax, combined Federal 
State corporate tax rate will be almost 31 percent, the third 
highest corporate tax rate in the OECD. A similar ranking would 
result in looking at effective corporate tax rates which 
account for various deductions and other tax preferences.
    The bill also raises or introduces several other taxes on 
U.S. multinationals. Taxes that do not exist in other 
countries, including the GILTI tax. The result would be to 
disadvantage U.S. companies and their workers, in favor of 
companies based in lower tax countries such as Canada, the UK, 
or just about anywhere in Europe.
    It's important to remember that corporate taxes are not 
just paid by corporate shareholders. By reducing investment and 
productivity growth, higher corporate taxes lead to lower wages 
across the board. This is why the OECD finds that corporate 
taxes are the most economically damaging way to raise revenue, 
followed by individual income taxes, consumption taxes and 
property taxes.
    Several studies demonstrate that corporate taxes are borne 
in part by workers. For example, a recent study found that 
workers bear about half of the tax burden in the form of lower 
wages, with low-skilled young and female employees 
disproportionately harmed.
    Our modeling of the House bill indicates that the corporate 
tax increases alone would reduce long range GDP by about 0.6 
percent, shrink the capital stock by 1.2 percent, cut wages by 
0.5 percent and eliminate about 120,000 jobs.
    The House bill also levies several tax increases on high 
earning individuals, especially pass-through business owners, 
causing the top combined tax rate on ordinary and pass-through 
business income to exceed 52 percent on average. The top 
combined tax rate on capital gains and qualifying dividends 
would reach 37 percent on average.
    These higher tax rates come with a cost. They will reduce 
incentives to work, save and invest broadly reducing employment 
opportunities throughout the economy. In total we estimate that 
the House plan, including the corporate and individual income 
tax increases would reduce the size of the economy by about 1 
percent in the long run, shrink the capital stock by 1.8 
percent, cut wages by 0.7 percent and cost more than 300,000 
jobs.
    While the plan would raise more than $2 trillion in tax 
revenue over the next decade on a gross basis, it would give 
away about half of it in the form of dozens of tax credits, 
leaving just over $1 trillion in net revenue. After accounting 
for the smaller economy, the plan raises even less revenue, 
about $800 billion over the next decade on net.
    In other words, the House plan would reduce long-run GDP by 
more than $2 for every $1 raised, meaning the costs in terms of 
GDP loss far outweigh the benefits in terms of tax revenue. 
This occurs for two reasons: the revenue is raised in 
economically destructive ways, and a large part of that revenue 
is spent in the form of tax credits with little to no benefits 
for long-term economic growth.
    The tax credits are aimed at a variety of issues that 
deserve attention, including childcare, clean energy, housing 
and broadband development. However, cluttering up the tax code 
with more tax credits comes with many downsides, including 
increased complexity and compliance costs for taxpayers as well 
as additional administrative burden for the IRS, which is ill-
equipped to take on so many extra duties unrelated to tax 
collection.
    The bulk of the tax credits are aimed at providing 
temporary relief to families with children--a worthy goal, but 
likely better administered by a spending agency such as the 
Social Security Administration. In general, tax policy should 
be focused on how to raise revenue in the least economically 
harmful manner, and other goals should be handled as public 
spending subject to the appropriations process.
    It is important to address the escalating costs of 
childcare, healthcare, housing and other concerns, but it 
should be done in a sustainable way that does not greatly add 
to the deficit or reduce job opportunities, wage growth, or 
people's ability to succeed and attain a higher standard of 
living. Thank you for your time and attention.
    [The prepared statement of Dr. McBride appears in the 
Submissions for the Record on page 70.]
    Chairman Beyer. Dr. McBride, thank you very much. We will 
now begin the round of questions. I will begin followed by 
Senator Lee. So let me start. Dr. Clausing companies often 
worry that tax increases will make them less competitive. In 
fact, I've been on many Zooms in the last couple months with 
corporations complaining about this.
    In your judgment, how will reforming the international tax 
system affect competitiveness?
    Dr. Clausing. I've got mute button problems, but thank you 
for that question. There are three really important ways to 
think about competitiveness, and in my view all three of them 
are much improved because of this set of proposals.
    So first if we think about economic fundamentals, like what 
makes the U.S. economically strong right? These are things like 
our infrastructure, our workers, our institutions, our business 
environment of entrepreneurship. Those fundamentals will be 
strengthened if we have adequate revenue to invest in things 
like climate change mitigation, like research and education and 
training.
    So in that definition of competitiveness this is definitely 
helpful. The second definition of competitiveness thinks about 
the competitiveness of the U.S. location as a place to do 
things in comparison to offshore locations. Under current law 
there's a tax preference for the offshore locations relative to 
the U.S. locations because offshore income is either exempt 
from U.S. tax, or taxed at a 50 percent discount.
    Under these proposals the tilt in the playing field in 
favor of foreign income, and away from U.S. income would be 
dramatically reduced, and that would reduce the incentive--the 
tax incentive to locate offshore. So this is a very important 
way that we can improve the attractiveness of the U.S. location 
for job creation and U.S. activity, as well as buttress the 
U.S. tax base.
    A final notion of competitiveness concerns the 
competitiveness of U.S. companies when they're operating 
offshore relative to their foreign counterparts right, so you 
could imagine a U.S. company and a foreign company both 
competing in a low tax rate country.
    That type of competitiveness is also improved under the tax 
policy environment that we see in front of us because there is 
a historic opportunity to increase tax rates on companies based 
abroad, and continue ongoing negotiations to end the race to 
the bottom in corporate taxation.
    So when we look at the typical tax burden faced by U.S. 
companies, relative to the typical tax burden faced by foreign 
companies that will be narrowing rather than widening. And I 
should point out that even if we ignore changes in foreign laws 
and if we assume that there are none of them, a recent Reuter's 
study found that even if you adopted the full-fledged Biden 
proposals on corporate and international tax, that U.S. 
companies would still have a tax advantage relative to their 
peers.
    They looked at the 52 largest multinational companies, and 
they found that our current tax advantage is about 8 percentage 
points relative to their own competitors cited in financial 
statements, and that that advantage would still be at least 3 
percentage points. And that's ignoring all of these investments 
in things like clean energy and also ignoring any possible 
changes to our foreign tax laws.
    So we think that this set of proposals enhances every type 
of competitiveness.
    Chairman Beyer. Thank you very much. Dr. Edelberg as the 
former Chief Economist of the Congressional Budget Office 
you're probably better equipped to understand than anyone the 
impact of this legislation on our fiscal health, so do you 
worry about the long-term fiscal trajectory of the Nation if we 
pass any of this reconciliation in the Infrastructure Bill, and 
specifically do you worry about inflation?
    Dr. Edelberg. I don't think that the packages that are 
currently being contemplated would have a notable effect on the 
fiscal trajectory over the next decade. Policymakers have 
stated that their goal is to fully offset any tax decreases or 
spending increases with when you have tax increases and 
spending decreases.
    But even if those weren't fully offset, I don't see that 
this would notably increase the fiscal trajectory in a worrying 
way. Financial markets have made it very clear that they are 
not perturbed by the level of fiscal debt, with the level of 
Federal debt. I mean they're not perturbed by the projection of 
Federal debt over the next decade under current law, and this 
wouldn't do much to that projection over time.
    And so you also asked about inflation. I don't see that the 
packages currently being considered would have notable--would 
create notable, in any kind of worrying inflation risk, and 
that's for two main reasons. One, the Committee Commission on 
Taxation estimates in their score that the policies would 
essentially be deficit neutral over the next two years, which 
is to say that all of any spending increases would be offset by 
spending decreases or tax increases.
    So we would see a little economic effect from those 
policies over the next two years, and other policies would take 
years to stand up. So inflation risk is a thing that we should 
be worried about, but it has nothing to do with the policy 
discussions at hand. The Chairman. Thank you Dr. Edelberg very 
much. My time is up. I'll recognize my friend from Arizona, Mr. 
Schweikert, with the shout out that the President appointed an 
Arizonan to be the new Chair of the National Endowment of the 
Humanities, and an Arizonan to be the new Chair of the National 
Endowment of the Arts. Dave you were left out, but you get to 
ask questions now.
    Representative Schweikert. And a Native American from our 
State, so it's wonderful. Mr. Chairman and just as an aside, 
but an incredibly important one, as you've heard the democrat, 
the left's witnesses all throw the caveat that the democrats 
have a stated commitment. Majority Leader Steny Hoyer even, 
after I gave a floor speech came and reaffirmed right after my 
discussion that the left has made a commitment. They will pay 
for every dime of the spending in this package, whether it be 
the transfer payments, whether it be the subsidies to the rich, 
and so we look forward to the left keeping their commitment 
that this will be fully paid for.
    Because without doing that much of the economic discussion 
we're having here is intellectually vacuous and dishonest. So 
Mr. McBride I want to first thank you, Tax Foundation, for 
doing the only intellectually credible analysis of the 
proposals we've seen so far, but I wanted to go a bit further.
    I'm one of those that has a fixation on how you make the 
working poor less poor, and we've seen some of the success of 
economic expansion providing resources and ability and making 
labor wages more robust. When Tax Foundation did their modeling 
I know you worked through the capital stock, the actual 
revenues, those things you came up with what was it 880 billion 
dollars of probably true, actual increase in revenues.
    Was there any attempt to model a society that moves to 
almost a social welfare transfer payment model, and what that 
will actually do to labor stock and labor participation 
incentives?
    Mr. McBride. Well we follow the empirical literature on the 
well run impacts of transfer payments, and you know studies 
from the IMF for instance, and other major organizations 
indicate that it's very small, it's close to zero. Some studies 
indicate it's actually it has a negative impact on long-term 
economic growth. And so we've adopted the assumption of a zero 
impact at those type of transfer payments.
    Representative Schweikert. Okay. And my reason Dr. McBride 
for the discussion is we have a couple articles and Chairman 
Beyer we're going to submit them for the record that basically 
focus on social stratification and freezing of social mobility 
in the societies that do almost the identical model to the 
Left's proposal that people find themselves trapped in their 
quartiles.
    And we were struggling, to figure out how you would even 
model such a thing.
    Dr. McBride. Well it's interesting. I mean the idea of 
mobility and movement you know from one income quintile to the 
next over one's lifetime, or you know from one generation to 
the next, is a very interesting topic.
    Representative Schweikert. Yes.
    Dr. McBride. That's no doubt that there's actually a great 
deal of movement across income quintiles within ones lifetime, 
an average person's lifetime that the millionaires, or the top 
1 percent are not monolithic. They are actually changing from 
year-to-year. You can look at the list of the richest people in 
the U.S. or any other list.
    It's changing. It changes quite a lot over the course of 
you know 10 or 20 years, and you know essentially that's 
because wealth is episodic, and you know someone can really hit 
it big with a very successful business, and that doesn't last 
forever. Very often the good times lasts only a few years and 
then end.
    Representative Schweikert. Dr. McBride, and the tyranny of 
the clock because some of this would be actually very 
interesting, if our ultimate goal was we wished to deal with 
child poverty, but we also want a society that closes income 
inequality. There's good literature that shows transfer 
payments give you a nice pop, and then freeze your society.
    And I have a fixation of how do we help with child poverty, 
but then also maximize economic expansion? And even some of the 
details in everything--even from some of the other witnesses, 
that looks like long-term capital stock economic growth 
opportunity, particularly for the working poor will be actually 
fairly severely damaged by the end of the decade by the 
democrat proposal. And with that Mr. Beyer I yield back.
    [The articles referred to by Representative Schweikert 
appear in the Submissions for the Record on page 84.]
    Chairman Beyer. Thank you Congressman Schweikert very much. 
I now recognize the Congressman from Madison, Wisconsin Mr. 
Pocan.
    Representative Pocan. Thank you very much Mr. Chairman. I 
appreciate it and thanks to all the witnesses. Ms. Huang, I 
hope I'm saying it right, Huang.
    Ms. Huang. Huang, thank you.
    Representative Pocan. Thank you. Let me ask you this 
question because I think there's a lot of Halloween-like 
behavior going out, people trying to scare the average person 
about taxes, scare small businesses. I'm a 33 year's small 
business owner, over half of my lifetime.
    I'm curious when you said this is about leveling the 
playing field between small business and big business. And I 
know there's some provisions in particular I think, you know 
for example, about corporation's first five million et cetera. 
Can you just talk a little bit about what you meant in a little 
more detail as if you were explaining it to a local Wisconsin 
chamber group?
    Ms. Huang. Yeah. Well when I talk to small business people, 
I really prefer not to think that much about taxes. They'd 
rather be thinking about their products, their customers, their 
supply chains, or the real world things that really sort of 
drive business growth and productivity.
    But that sort of falls down when they have to compete with 
big businesses that are shifting profits offshore and using 
complex tax havens to undercut them, or they have another 
person that's down the street, that they know is kind of taking 
in cash and not reporting it to the IRS.
    So there are a range of proposals that would help these 
other productive small businesses by leveling the playing field 
for them, and allow really both them and other businesses to 
focus more on the core things that make American productive as 
opposed to playing games with taxes. And I think that's one of 
the biggest things.
    The other part of course is the investment part. Small 
businesses, I think would also like to not have to think about 
potholes in the roads that they are using to get their product 
to market or other sort of relaxed infrastructure skilled 
workforce that make it hard to run a business.
    Representative Pocan. And I agree with you on the supply 
chain issues. If you ask my husband who's spending many extra 
hours every night trying to find the same stuff that he used to 
be able to find, he would vote for whoever figured that issue 
out. That's absolutely a huge issue in the small business side.
    You know another question is you know we talk about how I 
think it was referred to as you know the average person is 
going to pay more in taxes. Again, I like to do it with you 
know people I might run into. So the median income in Wisconsin 
for a family is $81,829.00. If they have two children, let's 
say one's at childcare age, and one's in elementary school.
    You know I looked at what the child tax credit does for 
that family, and that's going to be $3,600.00 a year for one of 
their kids and $3,000.00 for another kid they're going to 
benefit from. The childcare provisions, if they're paying 7 
percent of their income, that's going to be $5,700.00 instead 
of the median $12,597.00--again I'm only counting one child.
    You know I'm already up to $13,500.00 savings, I'm not even 
counting the prescription drug savings, I'm not counting the 
paid leave if they need that. Can you just address that as well 
a little bit about the reality is for that median family in 
Wisconsin, are they paying more like it's been inferred by some 
of the crypt keepers--I'm trying talk about Halloween, and 
scare people, or are they actually going to be benefiting 
pretty well.
    Ms. Huang. Yeah. They will be benefiting. And to your point 
I've seen some numbers that sort of average out the tax 
increase that a hedge fund manager will pay with the tax cut 
that a teacher or one of the small business people would get. 
And in fact, the vast majority of working families and small 
businesses will be benefiting from these costs and tax cuts, 
that's really only the very top of the income scale that faces 
those tax increases.
    Representative Pocan. Great thank you. And then one last 
one. I'm going to throw out a little wild ball here, hopefully 
our Chairman doesn't care. I find it amazing that Jeff Bezos 
pays virtually nothing in taxes, that between 2006 and 2018 his 
wealth grew by 127 billion, and he only paid 1.1 percent of his 
income, or 1.1 percent of that in Federal taxes.
    That year he claimed--one year he claimed a $4,000.00 child 
tax credit. In 2018 he paid no Federal income taxes. You know 
for a guy who has his employees having to carry bottles with 
them when they're on the road to urinate in, tell me what do I 
say to that average person in my district who is saying why is 
it our tax code rewards someone like him?
    What can we do to go after someone with that kind of wealth 
in the long-term?
    Ms. Huang. There's a major hole in the tax code that is 
real income and that is income that just Bezos or anyone else 
that's making 100 billion dollars in gains in their stock 
prices can use to fund a pretty Huxtable lifestyle, and it 
doesn't make sense that they face a lower tax rate their 
income, but a teacher or a professional that's earning a 
salary. So I completely agree we should be addressing that, and 
that is one of the things a number of the proposals would do.
    Representative Pocan. Thank you. I'm out of time. I 
appreciate Mr. Chairman.
    Chairman Beyer. Mr. Pocan thank you very much. We'll now 
turn to a professional tax collector, the former Treasurer of 
Kansas Mr. Estes.
    Representative Estes. Well thank you Mr. Chairman. And 
thank you for all of our witnesses for being here today. 
Congress should be concerned more with the economic crisis 
that's unfolding before us, an unprecedented worker shortage, 
coupled with rising inflation and energy prices.
    But still this bill forces through trillions of new 
spending and is fixated on raising taxes. So much so that 
President Biden will break his promise and raise taxes on those 
who make less than $400,000.00. The Joint Committee on Taxation 
found that two-thirds of Biden's corporate tax hike will be 
felt by middle income taxpayers, including small businesses 
that file taxes as individuals.
    It's not honest to say this legislation, which the New York 
Times describes as touching virtually every American at every 
point in life from conception to old age, won't cost a dime. 
That's clearly not true.
    The many new social spending programs in this plan won't 
create economic growth. The Joint Committee on Taxation 
estimates it will actually lower Federal revenues by around 1.2 
trillion dollars over the next decade. The administration's 
budget even acknowledges that growth isn't a priority for them 
in an ideal world.
    It only forecasts a meager 2 percent GDP growth by 2023 
with it dropping even lower until 2029. Any inside Washington 
seem to think that just because a bill spends lots of money 
it's automatically a good investment, but Washington has a 
lousy track record of spending taxpayer money.
    Out in the real world spending money doesn't magically make 
money. A so-called good investment gets worse when you dig into 
the actual details under the hood. Much of it will go to force 
Americans to do what a bureaucrat in Washington decides to do 
for them, like what car to drive.
    The Green New Deal provisions would make working class 
families across the U.S. pay more in taxes so the millionaires 
in California can write off a new electric vehicle. The bottom 
line of the agenda is not based on reality. It's going to crush 
small businesses, even though it's got a pull tested slogan 
like Build Back Better.
    I hope that we get serious about the dire financial 
situation our country faces. The U.S. took in more than 3.4 
trillion dollars in revenue last fiscal year. If we took time 
to prioritize spending that could very well be more than enough 
to support the United States Government.
    Dr. McBride, as you know the evidence shows that higher tax 
rates do not always yield higher increases in revenue. For 
example, despite the wide variation in Federal marginal tax 
rates over the years in the `60s they were even as high as 90 
percent. The share of Federal revenues remained relatively 
steady in the post-World War II era, ranging between 15 and 20 
percent of GDP.
    Indeed, scholars at your organization have pointed out that 
many studies show income reported by taxpayers falls as 
marginal tax rate rise. Punitively high tax rates, not only 
increase the insidious to shift or underreport income, they 
also have a high economic cost. How should policymakers think 
about the tradeoff between high tax rates, raising revenue and 
economic performance?
    Dr. McBride. Thank you. That's certainly a very important 
thing to remember that it's like you said it's not that simply 
raising rates, it leads to more revenue in every case. 
Primarily the most extreme example demonstrating that is 
capital gains, and this is why they're recognized from the 
history of changing tax rates on capital gains that there's a 
sort of a revenue maximizing tax rate of about 28-29-30 percent 
in that range, and that's what the Joint Committee on Taxation 
assumes as well. And this is widely understood among revenue 
estimators.
    So for instance, that is well below the 37 percent average 
capital gains tax rate that would apply when factoring in the 
State capital gains rate under the House bill. So another 
example there is corporate taxes, and so here we can look at 
across the developed world, countries that have generally been 
lowering their corporate tax rates quite a lot in the last 40 
years roughly in half, have come down you know from around you 
know 40-50 percent corporate tax rates in most countries down 
to closer to 20 percent on average.
    And what has been the impact on revenue? You might think 
that revenues would have collapsed across all of these 
countries. In fact they have been fairly stable as a share of 
GDP, and actually increased moderately in many cases, and 
that's over this very long period of time.
    So there's something going on there along the lines of what 
you're talking about. Reported income goes down, the production 
of income and incentives to generate income go down as marginal 
tax rates increase. And it can be a very large effect.
    Representative Estes. Thank you. I wish I had more time 
because I want to talk a little bit about the budget deficit, 
and the increase there, but thank you for enlightening us on 
some of that, and Mr. Chairman I yield back.
    Chairman Beyer. Thank you Mr. Estes, and hang in there if 
we have time. It would be great to do a second round. But now 
let me recognize the gentleman from southern California 
Congressman Peters.
    Representative Peters. Thank you Mr. Chairman. First of all 
I just want to say when I was a student at NYU Law School, I 
took a couple tax classes. I thought it was so fascinating that 
I actually went into tax law while in practice, and that was a 
huge mistake. So I'm saying that the academics are a lot more 
fun than the practice, so my free advice is don't leave.
    But I had a question on this topic which is about taxing 
the wealthy. One of the objections I had to the Trump tax cuts, 
I didn't disagree with every part of it, because I thought the 
corporate rate needed to be adjusted, and I thought we had to 
fix some international tax things, but to give all that money 
to wealthy people who didn't need it.
    And we saw that it did not increase wealth according to the 
President's projections. We saw also that the inequality has 
continued to rise. And I just want to know what's your take on 
the long-term economic impact on economic growth or job 
creation if we were to increase taxes on capital gains for high 
income earners?
    It seems to be just to set that up is that wealthy people 
have all the stuff that they need to buy right? They got their 
fancy refrigerator, they got the cars that they need, they 
might have a second house. There's no stimulative effect to 
giving them money. How should we tax them, and what's wrong 
with raising the capital gains rate along the lines that the 
President suggested?
    Ms. Huang. It's a great question because it comes up over 
and over again the idea that this would damage investment which 
is just simply not worn out by the reality. But the model, the 
sort of trickle down idea that increasing taxes on very high 
end, high wealth people would somehow sort of make it square 
down to workers, that model can break down on each and every 
link.
    There's not that much that tax cuts are very effective at 
spurring private investment. Cutting taxes can increase tax 
opportunity for investment, but that can also mean that people 
need to save and invest less to sort of meet their savings 
goals. And also if the taxes are following on excess returns 
from market power rates, and other sort of special returns, 
there's not going to be a hit to the overall size of 
investment.
    So you see pretty small private investment changes in 
response to tax changes, and that can be overwhelmed by the 
effect on public saving and investment because there is a very 
large fiscal cost.
    Representative Peters. And I think also that the CBO does 
assess that even after all the growth projections haven't been 
met, the add to the deficit from that was 1.9 trillion dollars, 
which has a real drag effect on the investment as you know.
    Dr. Clausing, I want to just talk to you a little bit about 
corporate tax revenues. I would have definitely agreed with Mr. 
McBride that 35 percent was too high. I thought we were 
uncompetitive. At the time the business roundtable was asking 
for 25 percent, so was Dave Camp, who was then the Chairman of 
the Ways and Means Committee, and President Trump took it down 
to 21 percent.
    Now there's talk about raising it back up to 25 say, and 
business community is saying that the effective rate would be a 
lot higher because there's been base broadening. Can you tell 
me how we should analyze that? Is that true? And how should 
that matter as we analyze what the appropriate corporate tax 
treatment is?
    Dr. Clausing. Well I think there's a general principle, 
it's very useful to have a broad base in part because you don't 
need to raise the rate as high if you're taxing all the income. 
If you tax some of the income at a high rate and some of the 
income at a low rate, right, then the income kind of rushes 
over to the place where the rate is lower.
    So in several aspects of these tax proposals we've tried to 
even the tax treatment of different types of income. So whether 
it's for capital or labor; for a multinational company, whether 
it's foreign or domestic income; for a small business, whether 
they're paying their taxes, or whether they're evading taxes. 
And so I think that this is a very important feature.
    It's certainly the case that if the base is broader all 
things equal, at any particular tax rate that more tax will be 
paid. The question is whether that is a bad thing. You know I 
think that the corporate taxes----
    Representative Peters. Wouldn't it be just--I'm going to 
run out of time, so can you assess what the effective rate 
would be if we were looking at 25 percent before, now there's 
base broadening. What if we raise it up to nominally 25 
percent, what are we talking about for an effective rate?
    Dr. Clausing. Yes I think part of the difficulty there is 
that the actual statutory rates doesn't bear a lot of 
resemblance to the true tax rate paid by companies. So, for 
instance, the Joint Committee on Tax is telling you right now 
that U.S. companies are paying about 8 percent, the big 
multinationals right.
    If you ask them to pay more it will be more than 8 percent, 
but 8 doesn't really reflect current law which is 21 for 
domestic, and 10 and 1/2 for foreign right? So while the Biden 
proposals would certainly raise effective rates, they would 
still remain competitive with those of peer countries. Right 
now we're way below the effective rate in peer countries.
    Representative Peters. Thank you. My time has expired. I 
want to just commend your testimony from 2017 about carbon 
taxes, maybe we have time to do that later.
    Chairman Beyer. Thank you Congressman Peters very much. If 
the Senator Cruz is with us, you will be recognized next.
    Senator Cruz. Thank you Mr. Chairman. Thank you to the 
witnesses who are here. Dr. McBride, President Biden and the 
democrats so-called Build Back Better Act, as reported by Ways 
and Means is estimated to reduce long-run GDP by .98 percent, 
which in today's dollars amounts to about 332 billion dollars 
of lost output annually each and every year.
    It's also estimated that the plan would in the long run 
raise about 152 billion in new tax revenue. That being said for 
every dollar of revenue raised economic output would fall by 
$2.18. Your team has done extensive work analyzing these 
proposals. What are your thoughts on the potential impact of 
the democrat's plan on the U.S. budget deficit on America's 
long-term fiscal health?
    Dr. McBride. Thank you for that question. It's very 
difficult to pinpoint the impact on the deficit when we don't 
have estimates from the CBO or anyone else on all of the 
spending programs that are being discussed in this 
reconciliation bill.
    What we have assumed for our purposes of estimating the 
impact of the deficit is we have assumed the top line number of 
3 and       1/2 trillion, and there's actually deficits over 
the 10 year budget window, and in the out years no impact on 
the deficit based on compliance with the Byrd Rule of the 
Senate.
    And but event there due to the impacts on the economy, the 
reduction in wages, which is a major tax base for the Federal 
Government, and other tax bases, that so-called dynamic 
revenue, that accounts for all this reduction in the size of 
the economy, falls to only about 800 billion over the 10 year 
window.
    And so you can tell that is considerably lower than the top 
line spending numbers that are being discussed on the order of 
2 trillion plus. And so we do find it does increase deficits in 
the 10 year window, and those deficits do matter. In our 
modeling the deficits, the increasing deficits means that if we 
continue with a historical pattern of a lot of our national 
debt is bought up by foreigners, and assuming that continues to 
hold, that means foreigners own a larger and larger share of 
U.S. assets, and a larger amount of income in the form of 
interest payments goes to foreigners, as a result of the 
increase in the debt. There's a reduction in U.S. income that's 
measured by sort of gross national product.
    Senator Cruz. So Dr. McBride a minute ago you just 
described the cost of the Bernie Sanders socialist budget as 
3.5 trillion. President Biden rather remarkably has claimed the 
cost of it is zero dollars. I'm reminded of what Nobel Prize 
winning economist Milton Friedman said, which is ``there's no 
such thing as a free lunch.''
    How can you possibly reconcile this administration's claim 
that a 3.5 trillion dollar bill costs zero dollars?
    Dr. McBride. Right. I think that the charitable 
interpretation there is that it has no impact on the deficit, 
but as I've just discussed it does have an impact on the 
deficit when you account for the reduction in the size of the 
economy, the reduction of the tax bases--the big tax bases.
    Senator Cruz. But so you found that if I heard your number 
correctly a little bit over 2 trillion dollars of impact, is 
that right?
    Dr. McBride. Thereabouts.
    Senator Cruz. Okay. Let me ask you also President Biden has 
repeatedly pledged that the democrats would not increase taxes 
on anyone making less than $400,000.00 a year, and yet this 
Bernie Sanders socialist budget does exactly that, and in fact 
Congress's own Joint Committee on Taxation--so not a republican 
organization. The Joint Committee on Taxation shows that all 
these promises are unequivocally false, and that tax rates will 
increase on virtually every income level--taxpayers earning 
$40,000.00 a year, $50,000.00, $50,000.00 to $75,000.00, 
$100,000.00.
    Pretty much everyone earning $40,000.00 a year or more will 
see their taxes go up. Can you explain why that is, and we're 
talking about 85 percent of taxpayers that either see no 
impact, or see their taxes increase. Is that right?
    Dr. McBride. That's right. Right. In particular for 
instance, the group earning between $100,000.00 and 
$200,000.00, most of those taxpayers would see a tax increase 
over the course of the next decade as a result of this, that's 
according to----
    Senator Cruz. But how? Please explain how.
    Dr. McBride. The main reason is the corporate tax. While 
it's being depicted as paid only by the wealthy or 
shareholders, neither of those are completely true. First of 
all let's just stick to the idea that it's paid by 
shareholders. The first thing to know about that is not all 
shareholders are rich. Many of them are retirees earning 
considerable less than $400,000.
    So as a result the Joint Committee finds that even in 2023, 
very early in the budget window, although that year they assume 
that all of the corporate taxes are paid by shareholders, they 
find that even there in all income groups, all of those deciles 
all the way down the scale, there are shareholders that own 
U.S. equities, and they own them in all sorts of forms.
    But the fact is they are affected by those corporate taxes 
through that channel. And the second big channel is through 
worker's wages. And so that effect takes longer to happen, but 
it happens through reduced productivity as a result of 
corporate taxes.
    Reduced productivity means lower wages over time. And so 
that has an effect of further increasing the tax burden 
ultimately on workers all up and down the income scale.
    Senator Cruz. Thank you.
    Chairman Beyer. Senator, thank you very much. By the way 
``there's no such thing as a free lunch'' was actually used by 
Robert Heinlein in 1966, nine years before the Milton Friedman 
thing.
    Senator Cruz. I stand corrected Mr. Chairman.
    Chairman Beyer. In the first century, so pretty cool.
    And with that Senator thank you very much. Now recognize my 
friend from Texas Mr. Arrington for his questions.
    Representative Arrington. Thank you Chairman. Thank you 
witnesses, and I'm driving through God's country out here in 
West Texas, and so if I----
    Chairman Beyer. I think you just got muted there 
Congressman Arrington.
    Representative Arrington. Can you hear me now?
    Chairman Beyer. You're back.
    Representative Arrington. Okay. Look this notion of 
fairness in the tax code is intriguing to me, and I want to 
direct this to Dr. McBride to make sure that I'm using accurate 
numbers here. But I think some top 1 percent of the income 
earners who earn 20 percent of the total income in the country 
pay 40 percent of the taxes doesn't seem fair to me.
    I think some top 10 percent of the income earners pay 75 to 
85 percent of the taxes. I guess my point is the tax code is 
pretty darn progressive, and in fact even though the TCJA, the 
Tax Cuts and Jobs Act was disparaged for a giveaway to the 
rich, we actually have a more progressive tax code post 
Republican tax cuts.
    Dr. McBride could you confirm and shape up some of those 
numbers and percentages I was throwing out there? Do we have 
one of the most progressive tax systems in the developed world?
    Dr. McBride. That is correct. That was an assessment by the 
OECD a few years ago. I have not seen a new assessment as to 
how the U.S. compares to other countries, but safe to say the 
U.S. has not changed the progressivity of the tax code a great 
deal even after the Tax Cuts and Jobs Act, that's according to 
David Splinter at the Joint Committee on Taxation, and found 
that progressivity did not increase measurably, did not change 
measurably after the Tax Cuts and Jobs Act.
    Redistribution--a separate concept, did change. Taxes came 
down, it was a tax cut, and so redistribution in the tax code 
came down, but the actual progressivity as it is measured did 
not change appreciably as a result of the Tax Cuts and Jobs 
Act.
    Mr. Arrington. I don't know you know what the definition of 
fairness in a tax code vis-a-vis the democrat Reconciliation 
Tax and Spend Bill, but to have 10 percent of Americans paying 
80 percent of the freight in terms of the cost of our 
government doesn't sound very fair to me, especially if you 
have 40 percent roughly, or over 40 percent paying zero taxes.
    And I think that's bad policy, not just on the inequity of 
that ratio, but I want every American to have a stake in the 
future of our country. I want ownership. I think that's 
healthy, it's good, and I think you can make it so that it's 
reasonable to relative to their income.
    Same thing on the whole corporate tax rate. I don't know 
what the tax rate--I don't have a magic number. I'm not 
dogmatic about it. It's not the gospel to me. I'm not 
theological about, and religious about this. I just--one place 
I start is what's everybody else taxing their job creators and 
their risk takers, and their businesses?
    Because this is a global economy, and I don't want to 
hamstring the whole team while we're competing in away games 
for customers in markets around the world.
    And so that's kind of where I start. So it seemed pretty 
reasonable to me to go from the highest corporate tax rate in 
the free world, the developed world, to something more 
competitive, not the best. So when we did that we had 4,000 
inversions in the United States, the decade leading up to the 
tax cuts.
    We've had no inversion since then. If you talk to biotech 
it's just one sample of the economy. Three out of four biotech 
companies in acquisitions were being purchased by foreign 
biotech companies, or venture capital companies, and today that 
trend is completely reversed.
    So I don't think that's an accident that we're more 
competitive as a result of reducing the tax burden on our job 
creators. But here's my question on the corporate tax side 
because this is disconcerting to me, but it's also because of 
the effects, but it's also interesting that we can't all see 
this the same because the Tax Policy Center, which is more left 
leaning, and the Joint Committee on Taxation, which is supposed 
to be neutral arbiter of these things--tax policies, and you 
all have said that the tax increases on corporations, the vast 
majority--70 percent of it will be borne by working people with 
higher prices of goods and services in the form of lower wages 
and benefits.
    I mean every think tank, and every expert analyses of the 
policy left, and right is saying that same thing. Am I getting 
that right Mr. McBride? And I yield back, I probably went over 
my time, sorry Mr. Chairman.
    Chairman Beyer. I know you don't have the clock in the car, 
I understand Congressman.
    Dr. McBride. That's right. And that's essentially right 
that the Joint Committee on Taxation, the Treasury Department, 
all major scoring groups such as ours, the Tax Policy Center, 
Penn Wharton, they all assume that a significant portion of the 
corporate tax is borne by workers.
    And so that explains why the Joint Committee finds that so 
many households, some tens of millions of households earning 
less than $400,000.00 would ultimately bear the burden of 
corporate taxes.
    Chairman Beyer. Because we have gone so far over, let me go 
to Ms. Huang for her thoughts on this.
    Ms. Huang. Just to sort of effect a clarification, it is 
true that all of the major estimators do assume that ultimately 
some of the corporate tax is borne by non-shareholders. But 
mainstream estimates are roughly 20 to 25 percent, not 75 
percent. And that's what the JCT estimates.
    It's also really important to note that the intuition that 
sits behind the models that assumes that this happens. ASO 
assumes that the cost of any corporate tax cut is fully paid 
for because otherwise any private investment change that you 
see in those tables would get offset by the public debt going 
up, and interest rates going up, and therefore national saving 
and investment going down.
    So one of the things that's really important to know is 
that most tables don't show the ultimate cost of the corporate 
tax cuts even though they assume they'll be paid for. So when 
you try and figure out where the workers actually do benefit, 
you really need to check who ends up bearing the ultimate cost.
    And that means taking into account things like in the 2017 
tax law, the long-run costs of the permanent cuts was offset by 
tax changes that increased taxes for individuals across the 
board after the 10 year budget window, and that would have made 
more workers worse off as opposed to better off even in those 
models.
    Chairman Beyer. Thank you very much. I wish we could talk 
about this all afternoon, but many things are going on 
including missing our seven democrats. So I want to thank each 
of our witnesses for their expert contributions.
    I always marvel how beautifully trained economists with 
PhD's can so disagree on the same sets of statistics, but 
asking the wealthy and the big corporations to pay their fair 
share is an essential part of the broader package to help small 
business thrive, cut taxes for working parents and invest in 
education and healthcare, and policies for the workforce.
    So Congress has a real opportunity to level the playing 
field for American small businesses and workers while also 
supporting long-term economic growth, and promoting labor force 
participation. So thank you to each of our panelists for their 
contributions to this timely and important debate.
    This once in a generation investment in America's future 
will create long-term broadly shared economic growth, 
rebalancing the scale to Build Back Better. And as we do this 
important work, we're going to rely on your expertise and good 
faith. So thank you as well to all my colleagues for being a 
part of this discussion and sharing your wisdom.
    The record will remain open for 3 business days, and this 
hearing is now officially adjourned.
    [Whereupon, at 3:51 p.m., Wednesday, October 6, 2021, the 
hearing was adjourned.]

                       SUBMISSIONS FOR THE RECORD

         Prepared Statement of Hon. Donald Beyer Jr., Chairman,
                        Joint Economic Committee
                              recognitions
    This hearing will come to order. I would like to welcome everyone 
to the Joint Economic Committee's hearing entitled ``Building Back 
Better: Raising Revenue to Invest in Shared Prosperity.''
    I want to thank each of our truly distinguished witnesses for 
sharing their expertise today. Now, I would like to turn to my opening 
statement.
                               statement
    The Biden Administration's Build Back Better plan will cut taxes 
for working families, help small businesses, and invest in America's 
long-term economic prosperity, while asking the wealthy and big 
corporations to pay their fair share. Today, Federal revenue is just 
16.8 percent of the economy, almost an all-time low, and asking the 
wealthy and big corporations to contribute more to public revenue is 
consistent with supporting long-term economic growth.
    The Build Back Better plan will help provide American small 
businesses with a level playing field to compete with multinational 
corporations. The Treasury Department projects that 97 percent of small 
businesses will be protected from increased taxes and many will get a 
tax cut from reducing the corporate tax to 18 percent for income under 
$400,000.
    The Build Back Better plan promotes global competitiveness by 
working to end the race to the bottom on corporate taxes, letting 
American businesses compete on the basis of bringing the best products 
to market at the lowest price, instead of competing on who can avoid 
paying taxes.
    As a small businessman for almost five decades, I know that paid 
family leave will help small businesses retain workers. When I had 
workers who got sick or needed to care for a sick child, we provided 
paid leave to our employees because we would never leave workers to 
choose between a paycheck or taking care of themselves or a loved one.
    At some point during their lives, all workers will need to take 
time away from work. By establishing a Federal paid leave program, 
Build Back Better helps small businesses cover those inevitabilities 
and reduces the cost of turnover, which is why so many small businesses 
have come out in support of it. Small businesses will also benefit from 
extending the Work Opportunity Tax Credit, which will give businesses 
up to $5,000 to hire qualifying individuals, including eligible 
veterans.
    Asking the wealthy and big corporation to pay their fair share is 
consistent with supporting long-term economic growth. After the Obama-
Biden Administration repealed the Bush tax cuts for the very wealthy in 
2013, the economy added 8 million jobs in President Obama's second 
term. Job growth slowed under President Trump, as the Trump tax cuts 
delivered a windfall for the wealthy, creating record stock buybacks 
and adding hundreds of billions to the deficit.
    While our friends across the aisle will likely claim that asking 
the wealthy and big corporations to pay their fair share will hurt 
economic growth, the evidence does not back them up. A congressional 
Research Service report found that ``both labor supply and savings and 
investment are relatively insensitive to tax rates.'' In addition, 
improving IRS enforcement will increase revenue without raising rates, 
while ensuring that businesses cannot gain advantages over their 
competitors by cheating on their taxes.
    We know that investing in working families, communities, and 
innovation is the key to broadly shared, long-term economic growth. And 
this is exactly what the Build Back Better plan would do.
    Analysis by the Tax Policy Center shows that the Build Back Better 
revenue provisions passed out of the House Ways and Means committee 
would abide by President Biden's pledge not to raise taxes on those 
making under $400,000 a year. In 2022, households making under $500,000 
would get their direct taxes cut, on average. Middle-income parents 
will get a tax cut of about $3,000 on average.
    Extending the enhanced Child Tax Credit and expanded Child and 
Dependent Care Tax Credit, as proposed under Build Back Better, would 
help families pay household expenses and generate long-term economic 
benefits. The Joint Economic Committee estimated that advance payments 
of the CTC will generate $19.3 billion in local economic activity each 
month, creating jobs in local communities.
    Using the revenue raised from making multinational corporations and 
the wealthiest pay their fair share, Build Back Better would help 
families access affordable childcare and paid family leave. These two 
supports are both critical to helping parents--and particularly 
mothers--remain engaged in the labor market--and we know that 
increasing labor force participation is key to driving long term and 
sustainable economic growth.
    Under President Biden, almost 4.5 million people have returned to 
work and unemployment has dropped to 5.2 percent. In the first two 
quarters of 2021, real GDP grew at over 6 percent, and the Federal 
Reserve projects 5.9 percent real GDP growth this year. Core CPI 
inflation was just 0.1 percent in August, even as real wages grew at 
0.4 percent.
    Passage of Build Back Better and the bipartisan infrastructure bill 
will cement these economic gains, improve productivity, lower 
inflationary pressures, and create long-term growth. Moody's Analytics 
projected that passing both bills will increase GDP growth in 2022 to 
5.3 percent. Similarly, the Economic Policy Institute projects that the 
two bills would add 4 million new jobs, including 556,000 manufacturing 
jobs and 312,000 construction jobs.
    For too long, the wealthy and big corporations have avoided paying 
their fair share. We have an opportunity now to rebalance the scale and 
invest in America's future to create long-term, broadly shared economic 
growth.
                               __________
          Prepared Statement of Hon. Mike Lee, Ranking Member,
                        Joint Economic Committee
    Before the pandemic disrupted Americans' work lives and social 
connections, tax cuts and deregulation supported a thriving economy 
that delivered broad benefits to families and workers. The Tax Cuts and 
Jobs Act of 2017--which provided historic relief to working and middle-
class American families and led to higher wages, better benefits, and 
new employment opportunities across the country--was crucial to that 
prosperity.
    Our booming economy provided some of the largest benefits to those 
Americans who needed it the most. Unemployment for Hispanic Americans, 
Black Americans, and Asian Americans fell to the lowest rates on 
record.\1\ Unemployment for women dropped to a near 65 year low. And 
low-income workers saw their wages rise at some of the fastest rates. 
All told, the wealth of the bottom 50 percent of Americans increased by 
over 70 percent in the three-years prior to the pandemic.\2\
---------------------------------------------------------------------------
    \1\ https://www.bls.gov/cps/
    \2\ https://www.federalreserve.gov/releases/z1/dataviz/dfa/
distribute/chart/#range:2006.1,2021.1
---------------------------------------------------------------------------
    In early 2020, more than 80 percent of working age Americans were 
employed and wages continued to rise.\3\ Pro-growth policy reform 
brought the economy roaring to life in a way that few forecasters 
thought possible. This success demonstrates an important truth--
Americans benefit from lower taxes, less regulation, and more freedom.
---------------------------------------------------------------------------
    \3\ https://fred.stlouisfed.org/series/LNS12300060
---------------------------------------------------------------------------
    Unfortunately, we have come here today because the Biden 
Administration and Democrats in Congress want to squeeze the American 
people with higher taxes and more regulation. They have proposed a $3.5 
trillion tax-and-spend blowout, one that would increase Americans' 
taxes by over $2 trillion. It would be the largest tax increase in my 
lifetime and would substantially expand the Federal Government's 
footprint into our homes, into our businesses, and across our 
economy.\4\
---------------------------------------------------------------------------
    \4\ https://www.heritage.org/taxes/commentary/8-things-you-need-
know-about-democrats-tax-increase-bill
---------------------------------------------------------------------------
    Let's be clear--the major winners from the Democrats' plan are 
special interests and beltway bureaucrats.
    Our economy is still recovering from the pandemic; now is one of 
the worst times to saddle our economy with higher taxes. The recovery 
has stopped accelerating and American families are being hit by higher 
prices for essential goods--things like groceries, housing, and 
gasoline keep getting more expensive.
    Inflation is rising at its fastest pace in three decades, and it is 
making it harder to make ends meet. Wage increases are being swamped by 
higher prices and job growth is stalling. Democrats' reckless tax-and-
spend boondoggle will only make things worse.
    Here's what we know this tax plan would do to America's families, 
workers, and businesses.
    It would raise taxes on American families--despite President 
Biden's pledge to the contrary. The nonpartisan Joint Committee on 
Taxation and left-leaning Tax Policy Center both agree the plan would 
hike taxes on low- and middle-income families making less than $400,000 
a year.
    The Democrats' tax plan would also drive jobs for American workers 
overseas. It would raise the Federal corporate tax rate to 26.5 
percent, making the cost of doing business in the U.S. higher than in 
Canada, Mexico, Japan, the United Kingdom, Germany, France, and China.
    American workers would pay the price--they would pay in lost jobs, 
slower wage growth, and less investment in things like domestic 
manufacturing, and innovative research and development. In 10 years, 
two-thirds of the tax burden from this corporate tax increase would be 
shouldered by low- and middle-income workers.\5\
---------------------------------------------------------------------------
    \5\ https://www.finance.senate.gov/ranking-members-news/analysis-
biden-tax-hikes-hit-middle
---------------------------------------------------------------------------
    Perhaps worst of all, the Democrats' tax plan would embolden 
Washington to pick winners and losers rather than allowing 
entrepreneurs to meet the needs of American consumers. This is about so 
much more than penalizing successful Americans with even higher taxes; 
this is about putting more of Americans' resources under the control of 
Washington politicians.
    Democrats' tax plan would cost American families, workers, and 
businesses. It would mean less innovation, lower wages, and fewer jobs. 
It would increase the size and scope of the Federal Government. It 
would make our country less prosperous, less fair, and less free.
    We know what works. Keeping taxes low helps to support a thriving 
economy that benefits all Americans. We should return to the policies 
that made the pre-pandemic economy so successful for so many Americans. 
Congress should keep taxes low and predictable by making the reforms in 
the Tax Cuts and Jobs Act permanent, and restrain runaway spending by 
setting clear and enforceable rules for fiscal discipline.
    We cannot tax and spend our way to shared prosperity. Instead, we 
need to stop spending indiscriminately and make America the best place 
in the world to do business, pursue happiness, and earn success.
    Thank you.
    
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
     Articles for the Record Submitted by Representative Schweikert
    1. Should the U.S. Copy Denmark's Social Welfare Policies?
    https://taxfoundation.org/denmark-social-welfare-policies/.

    2. The Anti-Poverty, Targeting, and Labor Supply Effects of the 
Proposed Child Tax Credit Expansion
    https://bfi.uchicago.edu/wp-content/uploads/2021/10/BFI--WP--2021-
115-1.pdf.
                               __________
  Response from Dr. Clausing to Question for the Record Submitted by 
                              Senator Lee
    Dr. Clausing:
    In your testimony, and in past work, you have each emphasized the 
importance of addressing income and wealth inequality. Yet, there is a 
contingent of lawmakers who are openly advocating for either lifting or 
repealing the $10,000 cap on the SALT deduction. Ironically, the 
success of the Build Back Better Act may hinge on whether changes to 
the cap are included.
    According to the Brookings institution, ``the SALT tax deduction is 
a handout to the rich.''\1\ Eliminating or raising the cap on this 
deduction is a policy change that would not meaningfully benefit 
middle-class households--or even upper-middle class households. 
Repealing the SALT cap would cost hundreds of billions of dollars in 
tax revenues and the top 5 percent of households would receive over 80 
percent of the benefit.\2\
---------------------------------------------------------------------------
    \1\ https://www.brookings.edu/blog/up-front/2020/09/04/the-salt-
tax-deduction-is-a-handout-to-the-rich-it-should-be-eliminated-not-
expanded/.
    \2\ https://www.cbpp.org/research/Federal-tax/repealing-salt-cap-
would-be-regressive-and-proposed-offset-would-use-up-needed.

      What is your perspective on lifting or repealing the SALT 
deduction cap? Would including this change improve inequality or make 
---------------------------------------------------------------------------
it worse?

    The Administration did not propose changes to the SALT deduction 
cap. However, any tax law changes should be evaluated on a holistic 
basis that considers the aggregate effects of all of the component 
parts. Although repealing the SALT deduction cap in insolation would 
reduce the progressiveness of the tax code between now and 2025 (the 
cap expires after 2025), any such repeal could be coupled with other 
reforms that make the tax system as a whole more progressive. As one 
exam pie, the SALT cap was implemented in the context of a tax law 
change (the Tax Cuts and Jobs Act of 2017) that made our overall tax 
system less progressive. Likewise, a repeal of the cap could easily 
occur in the context of a tax law change that makes our overall tax 
system more progressive.
                               __________
Response from Ms. Huang to Question for the Record Submitted by Senator 
                                  Lee
    Ms. Huang:
    In your testimony, and in past work, you have each emphasized the 
importance of addressing income and wealth inequality. Yet, there is a 
contingent of lawmakers who are openly advocating for either lifting or 
repealing the $10,000 cap on the SALT deduction. Ironically, the 
success of the Build Back Better Act may hinge on whether changes to 
the cap are included.
    According to the Brookings institution, ``the SALT tax deduction is 
a handout to the rich.'' \1\ Eliminating or raising the cap on this 
deduction is a policy change that would not meaningfully benefit 
middle-class households--or even upper-middle class households. 
Repealing the SALT cap would cost hundreds of billions of dollars in 
tax revenues and the top 5 percent of households would receive over 80 
percent of the benefit. \2\
---------------------------------------------------------------------------
    \1\ Christopher Pulliam and Richard Reeves, ``The SALT deduction is 
a handout to the rich. It should be eliminated not expanded,'' 
Brookings Institution, September 4, 2020, https://www.brookings.edu/
blog/up-front/2020/09/04/the-salt-tax-deduction-is-a-handout-to-the-
rich-it-should-be-eliminated-not-expanded/.
    \2\ Chuck Marr, Kathleen Bryant, and Michael Leachman, ``Repealing 
`SALT ' Cap Would Be Regressive and Proposed Offset Would Use up Needed 
Progressive Revenues,'' CBPP, December 10, 2019, https://www.cbpp.org/
research/Federal-tax/repealing-salt-cap-would-be-regressive-and-
proposed-offset-would-use-up-needed.

      What is your perspective on lifting or repealing the SALT 
deduction cap? Would including this change improve inequality or make 
---------------------------------------------------------------------------
it worse?

    Thank you for your question, Senator Lee.
    The Brookings estimate and Center on Budget analysis of the direct 
distribution and revenue impact of repealing the SALT cap are sound.
    In the 2017 tax law, however, capping the SALT deduction was used 
to help offset the cost of tax cuts that were, overall, even more 
tilted to the wealthiest filers than the benefits of the SALT 
deduction, so this was not a sound trade.
    However, repealing the SALT cap now in the context of a package 
with a limited size is likely to mean less robust investments in other 
policies like the Child Tax Credit that directly benefit low- and 
moderate-income families, so that, too would be an unsound trade. \3\
---------------------------------------------------------------------------
    \3\ Ibid.
---------------------------------------------------------------------------
    Some proponents of repealing the SALT cap are concerned that the 
cap constrains the ability of states to raise progressive revenues and 
fund State investments with widely shared benefits. That is a 
reasonable concern, especially because in 2017, some supporters of 
capping the SALT deduction explicitly hoped that it would limit State 
revenue collection and investments.
    However, the evidence on the SALT deduction's impact on State 
budgets is inconclusive.\4\ For example, since the 2017 tax law went 
into effect, New Jersey has raised income taxes for households with 
incomes over $1 million, New York has extended and increased an 
existing millionaires' tax, and three states (Connecticut, New York, 
and Washington state) have increased real estate transfer taxes on 
high-value homes.\5\ While it impossible to know precisely what states 
would have done without the cap in place, this does at least show that 
states can continue to raise progressive revenues and invest with the 
cap in effect.
---------------------------------------------------------------------------
    \4\ Congressional Research Service, ``Tax Expenditures: Compendium 
of Background Material on Individual Provisions,'' Senate Committee 
Print #116-53, December 2020, https://www.govinfo.gov/content/pkg/CPRT-
116SPRT42597/pdf/CPRT-116SPRT42597.pdf.
    \5\ Wesley Tharpe, ``New Jersey Budget Deal Advances Equity With 
Millionaires' Tax and More,'' CBPP, October 7, 2020, https://
www.cbpp.org/blog/new-jersey-budget-deal-advances-equity-with-
millionaires-tax-and-more; Ashlea Ebeling, ``New York's ` Temporary' 
Millionaire Tax Extended 5 More Years,'' Forbes, April 9, 2019, https:/
/www.forbes.com/sites/ashleaebeling/2019/04/09/new-yorks-temporary-
millionaire-tax-extended-5-more-years/?sh=53926abe59bd; Carmen 
Reinicke, ``New York is raising taxes for millionaires. Will other 
states follow?'', CNBC, April 8, 2021, https://www.cnbc.com/2021/04/08/
new-york-is-raising-taxes-for-millionaires-will-other-states-
follow.html; Michael Leachman and Samantha Waxman, ``State `Mansion 
Taxes' on Very Expensive Homes,'' CBPP, October 1, 2019, https://
www.cbpp.org/research/state-budget-and-tax/state-mansion-taxes-on-very-
expensive-homes.
---------------------------------------------------------------------------
    Further, even if repealing or weakening the SALT cap were to make 
it somewhat easier to raise revenues for investments at the State 
level, that is likely to be a far less effective and cost-efficient way 
of delivering economic and budgetary benefits to states than 
alternatives proposed in President Biden's Build Back Better agenda. 
For example, the proposed package makes critical investments in 
infrastructure, green jobs, community colleges and other areas of deep 
need.\6\ These investments would likely be far more effective, per 
dollar spent, at boosting strong and inclusive economic growth in 
states. Along with investments in areas like the CTC and child and 
elder care, these would be a far better use of the revenues raised by 
progressive tax changes.
---------------------------------------------------------------------------
    \6\ Adam S. Hersch, `` `Build Back Better' agenda will ensure 
strong, stable recovery in coming years,'' Economic Policy Institute, 
September 16, 2021, Elizabeth McNichol, ``It's Time for States to 
Invest in Infrastructure,'' CBPP, updated March 19, 2019, https://
www.cbpp.org/research/state-budget-and-tax/its-time-for-states-to-
invest-in-infrastructure.
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                               __________
  Response from Dr. Edelberg to Question for the Record Submitted by 
                              Senator Lee
    Dr. Edelberg:
    In your testimony, and in past work, you have each emphasized the 
importance of addressing income and wealth inequality. Yet, there is a 
contingent of lawmakers who are openly advocating for either lifting or 
repealing the $10,000 cap on the SALT deduction. Ironically, the 
success of the Build Back Better Act may hinge on whether changes to 
the cap are included.
    According to the Brookings institution, ``the SALT tax deduction is 
a handout to the rich.'' Eliminating or raising the cap on this 
deduction is a policy change that would not meaningfully benefit 
middle-class households--or even upper-middle class households. 
Repealing the SALT cap would cost hundreds of billions of dollars in 
tax revenues and the top 5 percent of households would receive over 80 
percent of the benefit.

      What is your perspective on lifting or repealing the SALT 
deduction cap? Would including this change improve inequality or make 
it worse?

    My colleagues at the Brookings Institution, Christopher Pullam and 
Richard Reeves,\1\ have examined the state and local tax (SALT) 
deduction cap and find that under the current SALT cap, over \3/4\ of 
the tax benefit goes to the top quintile of households by income.\2\
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    \1\ Pulliam, Christopher and Richard Reeves. 2020. ``The SALT tax 
deduction is a handout to the rich. It should be eliminated not 
expanded.'' Up Front (blog), Brookings Institution, Washington, DC, 
September 4, 2020.
    \2\ Urban-Brookings Tax Policy Center. 2018. ``Table T18-0143: 
Repeal $10,000 Limit on Deductible State and Local Taxes; Baseline: 
Current Law; Impact on Tax Revenue, Number of Itemizers, and Individual 
Alternative Minimum Tax (AMT), 2018-28.'' Urban-Brookings Tax Policy 
Center, Washington, DC.
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    Those authors point out that the main argument for the SALT 
deduction ``is that it encourages states to spend more by making it 
easier for them to tax more.'' Many of the State and local policies 
that are implicitly subsidized through the SALT deduction are 
progressively structured and aim to support disadvantaged households, 
despite the benefits of SALT tax relief disproportionately accruing to 
those with the highest incomes. However, repealing the SALT deduction 
cap is not the optimal policy approach if the goal is to provide fiscal 
support to fiscally active State and local governments. If the cap were 
raised or fully eliminated, the tax benefit would flow overwhelmingly 
to households at the top of the income distribution while providing 
little benefit to the after-tax incomes of middle-class households. 
Moreover, proposals to repeal the SALT cap that also include revenue 
raising offsets, such as increasing the top marginal income tax rate, 
risk exhausting a finite source of potential revenue while failing to 
address any of our Nation's critical priorities. A better approach 
would provide additional Federal aid directly to states and localities 
in the form of grants to better target funding toward key priorities 
like K-12 education, infrastructure, and health care.
                               __________
   Response from Dr. McBride to Question for the Record Submitted by 
                              Senator Lee
    Dr. McBride:
    We know that pro-growth policies, like tax cuts and deregulation 
benefit low-income and otherwise disadvantaged Americans by creating 
strong labor markets and a healthy economy. Americans experienced these 
benefits following the 2017 tax cuts. Unemployment was historically 
low, including for women, Black Americans, and Hispanics. In my home 
state of Utah, per capita income grew 17 percent in the 3-years before 
the pandemic and some of the largest wage gains benefited the lowest 
income Americans. This strong pre-COVID economy is a testament to the 
power of getting the government out of the way and unleashing American 
ingenuity.

      Key pieces of the Democrats' plan are targeted at 
reversing the very policy changes that helped support our strong 
economy. Can you speak briefly to the successes of the 2017 Tax Cuts 
and Jobs Act and then describe how these new tax increases might 
undermine some of the gains that Americans experienced?

    A central goal of the Tax Cuts and Jobs Act (TCJA) was to reduce 
the tax burden on business investment, which it did primarily by 
reducing the corporate tax rate as well as tax rates on pass-through 
business income among other measures. Basic economic theory and much 
empirical evidence predicts investment increases when the after-tax 
return on investment increases, leading to a larger capital stock, more 
productivity, higher wages, more jobs, and faster economic growth.
    Indeed, the Congressional Budget Office (CBO) projected that the 
effects of the TCJA would ``include higher levels of investment, 
employment, and gross domestic product (GDP).'' By most measures, the 
actual performance of the economy post-TCJA exceeded CBO's forecasts, 
until the pandemic hit two years later. CBO forecasted in June 2017, 
prior to enactment of the TCJA in December 2017, that business 
investment (i.e., real nonresidential fixed investment) would grow by 
4.8 percent from the fourth quarter of 2017 to the fourth quarter of 
2019, but it actually grew 9.4 percent--even exceeding the CBO's post-
TCJA forecast from April 2018 of a 9.2 percent increase. Employment 
grew about 3 percent over the two years following TCJA, roughly 
tripling CBO's pre-TCJA forecast and matching CBO's post-TCJA forecast. 
Growth in wages and GDP also exceeded CBO's pre-TCJA forecast, although 
not to the extent forecast post-TCJA.
    While there were certainly other non-tax factors in play--e.g., 
deregulation may have added to investment and the trade war may have 
subtracted from investment--tax reform should not be dismissed as a 
major factor driving the higher performance of the economy after TCJA. 
Proposals to unwind major pro-growth elements of TCJA, by raising tax 
rates on corporate and individual income, would push the economy in the 
other direction, reducing incentives to work, save, and invest, and 
leading to fewer jobs, lower wages, and a smaller economy than would 
otherwise exist.
                               __________
  Response from Dr. Clausing to Questions for the Record Submitted by 
                            Senator Warnock
    Small Businesses (Dr. Kimberly Clausing)
    According to polling done by the Small Business Majority, nearly 
three-quarters of small businesses say the current tax system favors 
big businesses over small businesses and that their business is harmed 
when big corporations use loopholes to avoid taxes. If you're a small 
business, such as those structured as a pass-through business, I am 
sure it can sometimes feel like you are swimming upstream.

    1.  What will it mean for the economy to enact policy that 
effectively raises the necessary revenue without raising taxes on small 
businesses?

    For pass-through businesses, no tax increases will occur if the 
owners are below the $400,000 threshold. Indeed, According to Treasury 
Department analysis, the President's Agenda will protect 97 percent of 
small business owners from income tax rate increases, while delivering 
tax cuts to more than 3.9 million entrepreneurs.

    2.  What benefits will small businesses have through the enacted of 
programs such as providing affordable childcare to working families, 
funding for workforce training programs, and lower higher education 
costs?

    The revenue raised from these tax proposals will help pay for 
investments that will grow our economy and create jobs, including 
investments in small business. These include investments in clean 
energy, research, technology, childcare, education, and workforce 
training. The Build Back Better Agenda will also increase access to 
contracting opportunities and provide financing and technical 
assistance programs for small businesses, including small 
manufacturers.
                               __________
   Response from Ms. Huang to Questions for the Record Submitted by 
                            Senator Warnock
    Child Tax Credit (Ms. Chye-Ching Huang)
    In the past, there has been discussions about the economic impact 
of corporations, but I think more about hard working Georgians, like 
the mother I met in Columbus, Georgia. She was laid off recently, but 
was able to use the money from the Child Tax Credit to pay for books 
for her little girl. I also think of the constituent who just last week 
sent me a note about how they've been able to use the credit to pay 
down debt incurred during the pandemic, afford teaching materials for 
their children participating in online learning, and told me that this 
money kept her family in their home and off the streets.

    1.  What kind of long term benefits to the economy will we see from 
reducing child poverty by implementing tax cuts, like the Child Tax 
Credit, that supports working families?

    2.  What benefits have we seen by having the Child Tax Credit paid 
monthly in advance to eligible taxpayers, instead of requiring 
Americans to file their taxes to receive the benefit?

    Thank you for your question, Senator Reverend Warnock.
    The experiences of these Georgian families are not unusual, which 
is why the CTC is so important for families and communities across the 
country.
    Monthly distribution of the Child Tax Credit has made it easier for 
families to pay for recurring expenses throughout the year.\1\ Research 
shows that parents with low incomes have, like your constituents, spent 
their monthly CTC on basic needs like food, rent, utilities, clothing, 
or school supplies--and shortly after the first monthly check was 
distributed, food insecurity and financial hardship fell dramatically 
among households with children.\2\
---------------------------------------------------------------------------
    \1\ Chuck Marr, ``The Expanded Child Tax Credit Must Be Permanent 
and Monthly,'' CBPP, April 15, 2021, https://www.cbpp.org/blog/the-
expanded-child-tax-credit-must-be-permanent-and-monthly.
    \2\ Claire Zippel, ``After Child Tax Credit Payments Begin, Many 
More Families Have Enough to Eat,'' CBPP, August 30, 2021, https://
www.cbpp.org/blog/after-child-tax-credit-payments-begin-many-more-
families-have-enough-to-eat; Daniel J. Perez-Lopez, ``Economic Hardship 
Declined in Households With Children as Child Tax Credit Payments 
Arrived,'' U.S. Census Bureau, August 11, 2021,  https://
www.census.gov/library/stories/2021/08/economic-hardship-declined-in-
households-with-children-as-child-tax-credit-payments-arrived.html.
---------------------------------------------------------------------------
    The monthly CTC has not only helped families make ends meet in the 
short-term, but a large body of research suggests that it is a true 
investment: it will also have positive effects on the life trajectories 
of children in the long run, and for the economy as a whole.
    Investments in families with low incomes have been shown to improve 
infant and child health, improve children's academic performance in 
schools, increase the likelihood that children attend college, and 
boost earnings once children ultimately reach adulthood.\3\
---------------------------------------------------------------------------
    \3\ Arloc Sherman and Tazra Mitchell, ``Economic Security Programs 
Help Low-Income Children Succeed Over Long Term, Many Studies Find,'' 
CBPP, July 17, 2017, https://www.cbpp.org/research/poverty-and-
inequality/economic-security-programs-help-low-income-children-succeed-
over.
---------------------------------------------------------------------------
    These long-term benefits for children and families can also mean 
broadly shared benefits for communities and the larger economy. They 
mean that children are more likely to be healthier as adults, attend 
college and have higher adult earnings. Boosting the health and 
earnings of the next generation also in turn reduces spending on health 
care costs and other macroeconomic costs associated with high child 
poverty rates over time.\4\
---------------------------------------------------------------------------
    \4\ Arloc Sherman, Ali Safawi, Zoe Neuberger, and Will Fischer, 
``Recovery Proposals Adopt Proven Approaches to Reducing Poverty, 
Increasing Social Mobility,'' CBPP, August 5, 2021, https://
www.cbpp.org/research/poverty-and-inequality/recovery-proposals-adopt-
proven-approaches-to-reducing-poverty.
---------------------------------------------------------------------------
    Further, novel research suggests that investments in children from 
low- and moderate-income families can help more children develop and 
apply their talents for innovation. If equally talented girls, children 
of color, and children from low- and middle-income families grew up to 
be inventors at the same rate as white boys from rich families, there 
would be four times as many inventors in America as there are today.\5\ 
The research suggests that a key reason why this potential is being 
lost is simply because many families lack basic financial resources. 
Sound investments in these families can ensure more children are able 
to be a part of the next generation of innovators who may generate new 
breakthroughs and businesses with widely shared benefits.
---------------------------------------------------------------------------
    \5\ Alex Bell et al., ``Who Becomes an Inventor in America? The 
Importance of Exposure to Innovation,'' Quarterly Journal of Economics, 
Vol. 134, Iss. 2, May 2019, https://opportunityinsights.org/paper/
losteinsteins/. Also see: Wesley Tharpe, Michael Leachman, and Matt 
Saenz, ``Tapping More People's Capacity to Innovate Can Help States 
Thrive,'' CBPP, December 9, 2020, https://www.cbpp.org/research/state-
budget-and-tax/tapping-more-peoples-capacity-to-innovate-can-help-
states-thrive.
---------------------------------------------------------------------------
                               __________
  Response from Dr. Edelberg to Questions for the Record Submitted by 
                            Senator Warnock
                           racial wealth gap
    In 2019, the median net worth for all American families was about 
$121,000 while the median net worth of Black families was about 
$24,000.

    1.  What can a strong social insurance system, like those in the 
Build Back Better plan, do to address historical inequities in our 
economy?

    2.  What do you believe their long-term effect will have on our 
economy?

    Improvements in the social insurance system can help to address 
historical inequities in household resources, including wealth, which 
act to cushion families against financial setbacks, enable individuals 
to take risks, and provide people with access to better neighborhoods. 
The racial wealth gap is the product of exclusionary and discriminatory 
practices dating back to the foundation of this country. As a result, 
the median Black household was left far more vulnerable to the 
devastating economic effects of the COVID-19 pandemic.
    Piling onto an already precarious situation for Black Americans, 
Black workers and Black owned businesses were disproportionately likely 
to be in the industries hardest hit by the pandemic [1]. As the economy 
recovers, a hot labor market will begin to close the racial and ethnic 
unemployment gap, but will not be enough to eliminate it [2]. Moreover, 
closing the unemployment gap does not close the racial wealth gap [1]. 
In fact, the racial wealth gap is observable even among households with 
similar incomes and at all levels of income, except for the bottom 
quintile in which median net worth is universally zero [3].
    A stronger social insurance system can alleviate the harsh impact 
of recessions by bolstering household savings, reducing poverty and 
food insecurity, and guaranteeing access to preschool programs. Black 
households have less in emergency savings than white households, with 
$1,500 in liquid assets in 2019 as compared to $8,100 among white 
households [4]. Such disparities in financial resources would be 
mitigated by making the full refundability of the Child Tax Credit 
(CTC) permanent [5]. Notably, the expansions to the CTC in 2021 will 
help cut child poverty by more 45 percent among all households, and 
more than 52 percent among Black households [6]. In addition, an 
improvement in access to childcare would lower the cost of working for 
parents of young children and, particularly, increase labor force 
participation among women [7]. An improved social insurance system 
would do more to curb the severity of economic crises and hasten 
recoveries, though it does not fundamentally address the racial wealth 
gap.
    As articulated in The Hamilton Project blog on this subject, as 
published in December 2020:

        ``Indeed, closing the Black-white wealth gap will require that 
        the deep and systemic economic disparities brought about by 
        centuries of discriminatory policies are addressed through 
        significant structural changes across a range of policy areas. 
        As discussed in a previous Hamilton Project analysis, these 
        policies range from redlining and the denial of financial 
        services to minority communities, to the Jim Crow Era's ``Black 
        Codes'' strictly limiting opportunities in many southern 
        states--all of which contributed to the disproportionate 
        accumulation of wealth held by white households while 
        exacerbating the economic fragility of many Black households. 
        Overcoming the effects of these policies will necessitate 
        substantive and systemic changes in education, small business, 
        healthcare, broadband access, tax reform, and broader place-
        based policies.

        The COVID-19 pandemic underscores the importance of the Black-
        White wealth gap and its impact on the ability of households to 
        weather the economic shocks caused by recessions. By expanding 
        policymakers' focus not only on strengthening the safety net 
        and income supports, but also on the inclusion of systemic and 
        structural public policy changes across a range of areas to 
        close the Black-White wealth gap, disparities in the ability of 
        Black and White households to weather the next economic storm 
        will be greatly reduced'' [2].

    References

        1. McIntosh, Kriston, Emily Moss, Wendy Edelberg, Kristen E. 
        Broady. 2020. ``The Black-White Wealth Gap Left Black 
        Households More Vulnerable.'' The Hamilton Project, Washington, 
        DC.
        2. Aaronson, Stephanie, Mitchell Barnes, Wendy Edelberg. 2021. 
        ``A Hot Labor Market Won't Eliminate Racial and Ethnic 
        Unemployment Gaps.'' The Hamilton Project, Washington, DC.
        3. McIntosh, Kriston, Emily Moss, Ryan Nunn, Jay Shambaugh. 
        2020. ``Examining the Black-White Wealth Gap.'' The Hamilton 
        Project, Washington, DC.
        4. Bhutta, Neil, Andrew C. Chang, Lisa J. Dettling, and Joanne 
        W. Hsu. 2020. ``Disparities in Wealth by Race and Ethnicity in 
        the 2019 Survey of Consumer Finances''. Board of Governors of 
        the Federal Reserve System, Washington, DC.
        5. Jabbari, Jason, Leah Hamilton, Stephen Roll, Michal 
        Grinstein-Weiss. 2021. ``The New Child Tax Credit Does More 
        Than Just Cut Poverty''.'' The Brookings Institution, 
        Washington, DC.
        6. Center on Poverty and Social Policy at Columbia University. 
        2021. ``A Poverty Reduction Analysis of the American Family 
        Act.'' Center on Poverty and Social Policy at Columbia 
        University, New York, New York.
        7. Betsey Stephenson. 2021. ``Women, Work and Families: 
        Recovering from the Pandemic-Induced Recession.'' The Hamilton 
        Project, Washington, DC.
  

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