[Senate Hearing 118-562]
[From the U.S. Government Publishing Office]
S. Hrg. 118-562
THE MACROECONOMIC IMPACTS OF POTENTIAL
TAX REFORM IN 2025
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HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC POLICY
OF THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE MACROECONOMIC IMPACTS OF POTENTIAL TAX
REFORM IN 2025
__________
SEPTEMBER 18, 2024
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov /
__________
U.S. GOVERNMENT PUBLISHING OFFICE
58-692 PDF WASHINGTON : 2025
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chair
JACK REED, Rhode Island TIM SCOTT, South Carolina
ROBERT MENENDEZ, New Jersey MIKE CRAPO, Idaho
JON TESTER, Montana MIKE ROUNDS, South Dakota
MARK R. WARNER, Virginia THOM TILLIS, North Carolina
ELIZABETH WARREN, Massachusetts JOHN KENNEDY, Louisiana
CHRIS VAN HOLLEN, Maryland BILL HAGERTY, Tennessee
CATHERINE CORTEZ MASTO, Nevada CYNTHIA M. LUMMIS, Wyoming
TINA SMITH, Minnesota J.D. VANCE, Ohio
RAPHAEL G. WARNOCK, Georgia KATIE BOYD BRITT, Alabama
JOHN FETTERMAN, Pennsylvania KEVIN CRAMER, North Dakota
LAPHONZA R. BUTLER, California STEVE DAINES, Montana
Laura Swanson, Staff Director
Lila Nieves-Lee, Republican Staff Director
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Pat Lally, Assistant Clerk
______
Subcommittee on Economic Policy
ELIZABETH WARREN, Massachusetts, Chair
JOHN KENNEDY, Louisiana, Ranking Member
JACK REED, Rhode Island MIKE ROUNDS, South Dakota
ROBERT MENENDEZ, New Jersey THOM TILLIS, North Carolina
CHRIS VAN HOLLEN, Maryland CYNTHIA M. LUMMIS, Wyoming
TINA SMITH, Minnesota STEVE DAINES, Montana
JOHN FETTERMAN, Pennsylvania
Gabrielle Elul, Subcommittee Staff Director
Jennifer Newman, Republican Subcommittee Staff Director
(ii)
C O N T E N T S
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WEDNESDAY, SEPTEMBER 18, 2024
Page
Opening statement of Chair Warren................................ 1
Opening statements, comments, or prepared statements of:
WITNESSES
Ai-jen Poo, President, National Domestic Workers Alliance;
Executive Director, Caring Across Generations.................. 3
Prepared statement........................................... 16
Kitty Richards, Senior Fellow, Groundwork Collaborative and
Economic Policy Think Tank..................................... 4
Prepared statement........................................... 23
(iii)
THE MACROECONOMIC IMPACTS OF POTENTIAL TAX REFORM IN 2025
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WEDNESDAY, SEPTEMBER 18, 2024
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Subcommittee on Economic Policy,
Washington, DC.
The Committee met at 2 p.m., via Webex and in room 538,
Dirksen Senate Office Building, Hon. Elizabeth Warren, Chair of
the Subcommittee, presiding.
OPENING STATEMENT OF CHAIR ELIZABETH WARREN
Chair Warren. This hearing will come to order. Good
afternoon. I want to thank Ranking Member Kennedy, our other
colleagues, and our witnesses, who will be joining us today for
this hearing.
Today we are 48 days away from the election. That is just
48 days until voters decide the direction our country will take
next year on abortion, housing, and taxes.
So today's Economic Policy Subcommittee hearing on the
macroeconomic impact of potential tax reform in 2025 may sound
a little wonky, but the reality is Congress is going to
confront huge decisions on tax policy next year.
Whether we want to rewrite the Tax Code or not, 2025 will
be a crucial year for setting tax policy because in 2017,
Donald Trump and congressional Republicans passed a $2 trillion
tax giveaway to the wealthy and big businesses. The Republican
tax giveaway was so big that they tried to hide the full cost
so they set up a bunch of pieces to expire at the end of 2025
and hoped that a subsequent Congress would just rubberstamp an
extension without noticing how much money rich people and giant
corporations would be getting.
Next year, Congress will answer the questions we are
discussing today about what the Tax Code should look like. What
we decide will affect every American and every part of the
economy and every part of the country over the next few
decades.
Whatever you care about, taxes matter. The Tax Code
determines how much money our Nation has for programs like
Social Security, Medicare, roads and housing, health care, and
childcare. And the fine print of the Tax Code shapes our
economy.
Will the Tax Code incentivize billionaires to hoard their
money, corporations to grow into titanic monopolies, and
multinationals to shift jobs overseas or will it create good
jobs and new opportunities for small businesses and
entrepreneurs right here in the United States?
Taxes reflect our values. They show us what and who we
value enough to collectively invest in. For decades,
particularly since the days of Ronald Reagan and his corporate
friendly advisors, the tax system has reflected the values of
well-connected billionaires.
The 2017 Republican tax cuts centered on a $1.3 trillion
tax cut for giant corporations. In the years since then,
corporations have raked in record profits, including by price
gouging consumers, but they have paid less in taxes. In fact,
over the past half century, giant corporations have begun to
dominate our economy. Corporate profits, as a share of the
economy, have doubled since the 1950s. Meanwhile, corporate
Federal income taxes as a share of GDP have fallen by half.
Under President Biden and Vice President Harris, things
have gotten a little better. We raised taxes on billion dollar
corporations for the first time in 30 years thanks to my 15
percent corporate minimum tax.
We funded the IRS, which has since clawed back over a
billion dollars and counting from wealthy tax cheats. But it
has been an uphill battle. These improvements to the tax system
came with the slimmest of majorities and were opposed by every
single Republican Member of Congress, House and Senate.
And believe me, billionaires and big corporations have
fought like hell to beat back bigger reforms. Now next year,
they will fight even harder. Lobbyists have already started
calling 2025 the year of Tax Super Bowl.
These lobbyists are salivating over the hours they can bill
their corporate clients and the goodies they can win. But it's
not a game and the outcome is not a foregone conclusion. In
fact, I see 2025 as a big opportunity to fix our Tax Code.
So here is the choice that Congress will face and that this
Subcommittee meets to discuss today. Will we allow Donald Trump
and the Republicans to implement their Project 2025 plan to cut
taxes even more for billionaires and giant corporations while
raising taxes on everyone else or will we move the corporate
tax rate back up, stitch up the tax loopholes that billionaires
wiggle through, and then use that revenue to lower costs for
ordinary Americans from housing to childcare?
And just as important, will we finally say enough is
enough? That the rich and the powerful have already fed at the
trough long enough and that it is time for them to pay a fair
share?
Will we have the courage to say that it is better to let
the Trump tax cuts expire than to sign on to another
multitrillion dollar giveaway to America's billionaires?
I appreciate our panelists joining us for this hearing and
sharing their expertise. We have big questions that will come
before the Senate and the American public in the coming months.
And I am pleased to have the chance to start that conversation
today.
At this point, I would ordinarily turn to Ranking Member
Kennedy, who was right behind you. He's voting and then he will
be here for his opening remarks.
So how about instead of doing that, we start with our
witnesses. We have two great witnesses to share their views on
the impact of tax reform on our economy. And I appreciate both
of you being here today.
First we have Ai-jen Poo, who is the President of the
National Domestic Workers Alliance and the Executive Director
of Caring Across Generations.
Ms. Poo is a tireless advocate for caregivers and a
nationally recognized expert on elder and family care, the
future of work, gender equality, and grassroots organizing.
And second, we have Kitty Richards, who is an expert in tax
and fiscal policy with groundwork collaborative. She also
served in the Treasury Department during the Biden-Harris
administration, and as an economic policy advisor in the White
House to then Vice President Biden.
So thank you both for being here today, and I look forward
to hearing your testimony. Ms. Poo, how about if we start with
you?
STATEMENT OF AI-JEN POO, PRESIDENT, NATIONAL DOMESTIC WORKERS
ALLIANCE; EXECUTIVE DIRECTOR, CARING ACROSS GENERATIONS
Ms. Poo. Thank you, Madam Chair. I am so honored to be here
to speak with you today and also grateful to Ranking Member
Kennedy and Members of the Committee for the opportunity to
testify to the economic impacts of potential tax reform.
Again, my name is Ai-jen Poo, and I am the President of the
National Domestic Workers Alliance and Executive Director of
Caring Across Generations.
We are part of Care Can't Wait, a national coalition
working to lower the cost of caring for families and improve
the quality of work for our Nation's care workforce.
Every day in America 10,000 babies are born, and 10,000 of
us turn 65. More of us are living longer, which means the
number of older adults in America, over the age of 85, is
expected to more than double by the year 2040. And this is a
beautiful thing because it means more time to live and to learn
and to contribute, to watch our children and our grandchildren
grow. But it also means that we are a Nation in need of more
care, more than ever before.
And in America today, only the wealthy can afford it. We
live in one of the only countries in the world without
guaranteed paid family medical leave, which means that one in
four moms returns to work within 2 weeks of giving birth.
In every State in America, center-based childcare for two
kids costs more than rent. A room in a nursing home will run
you $100,000 per year. And then if you want to receive aging
and disability care in the home, where most people want to
receive it, it can cost anywhere from $60,000 to $288,000 per
year. Meanwhile, the median income of a home care worker in
America is less than $22,000 per year.
The workers whose profession it is to help care for us
can't care for their own families on the wages they earn. They
also happen to be the fastest growing occupation in our entire
workforce because of the tremendous need.
Deciding how we spend public dollars, using the Federal Tax
Code is one of the most powerful tools we have to lower costs
for everyday middle class families. It reflects what we
understand to be shared priorities and essential infrastructure
for a strong economy.
Just as we must invest in physical infrastructure like
bridges and tunnels, we need care infrastructure. As Senator
Bob Casey famously said, some people need a bridge or a tunnel
to get to work and others need childcare, others need home
care.
Without these investments, tens of millions of working
family caregivers and parents are making impossible choices
between caring for their loved ones and working to pay the
bills. Untold numbers of us are pushed into debt and poverty
while the majority of our 9 million professional care workers
are trapped in working poverty.
The 2017 tax law decreased Federal revenue by trillions
while doing almost nothing to address the fundamental needs of
working and middle class families.
Under the law, the wealthiest 1 percent of households can
expect an average benefit of $60,000 in 2025 while the
majority, including most family caregivers, disabled people,
seniors, and parents, will receive less than $500. That is $40
a month, and care workers will average even less, $70 per year.
These tax cuts benefited the people with the least need the
most while the vast majority of us continue to struggle.
I recently traveled across the country to meet caregivers.
And in Atlanta, I met Martresa, a sandwich generation caregiver
caring for her chronically ill mother at home and a young
daughter at the same time.
She found a strange spot on her skin, but because she
couldn't afford care assistance, she prioritized care for her
family over her own. And the day before I met with her in
Atlanta she was diagnosed with advanced stage cancer.
Our tax policy cannot continue to deepen the inequality of
care in America rather it should help address it, and it can.
We must raise revenue and make investments in our care
systems from childcare to paid family and medical leave to
senior and disability care. I urge you to let the 2017 tax cuts
for the wealthiest expire and use additional revenue to invest
in the care we all need.
2025 is our once in a generation moment to ensure that the
wealthy pay their fair share so that we can all contribute to a
strong economy and care for our families, too. I look forward
to your questions. Thank you.
Chair Warren. Thank you, Ms. Poo. Ms. Richards.
STATEMENT OF KITTY RICHARDS, SENIOR FELLOW, GROUNDWORK
COLLABORATIVE AND ECONOMIC POLICY THINK TANK
Ms. Richards. Thank you, Chair Warren and Members of the
Committee. Thank you for inviting me to testify today. Again,
my name is Kitty Richards. I am a senior fellow at the
Groundwork Collaborative and Economic Policy Think Tank based
here in Washington, DC. And I am grateful to the Committee for
holding this hearing about the really important macroeconomic
impacts of tax reform in 2025.
As you know, next year is going to be a big year for tax
policymaking as the individual income tax provisions of the
2017 tax law expire, but I want to talk about more than the
TCJA and especially more than just its expiring provisions. I
want to talk about how to support a thriving economy through
tax reform. And to do that, we really need to do three things.
First, tax reform must raise substantial new revenue, well
above the revenue lost to the failed 2017 Tax Act. Before the
Bush tax cuts and then their extension and then the 2017 law,
the U.S. had a tax system that was not perfect, but raised
enough revenue to support a fully functioning Government and
did it progressively.
We need revenue to support a 21st century Government that
can restore a strong, secure middle class, build our clean
energy future, and ensure that every American can participate
in the economy and reach their full potential.
I am honored to be sitting next to Ai-jen Poo, who can
speak to the importance of investments and care infrastructure
much more eloquently than I can and just did.
Second, tax reform must directly redress the skyrocketing
inequality that has characterized the American economic
experience over the past 50 years. And we have to pay special
attention to the persistent racial and gender disparities in
wages, wealth, and opportunity that not only harm those
communities, but really hold our economy back.
This inequality is not just profoundly unfair and damaging
to the welfare of the large majority of Americans who have been
left behind, it also has a negative impact on economic growth
through multiple channels.
Third, tax reform must rebalance economic power away from
the wealthy and corporations, putting a break on extractive
practices at the high end that weaken economic performance
while enriching shareholders, executives, and highly
compensated professionals at the expense of everyone else and
enhancing the economic power and participation of low and
middle income workers, especially those who currently provide
the more than $1 trillion in unpaid care work each year that
allows all other work to happen.
My written testimony outlines a number of ways that tax
reform in 2025 can accomplish these goals, and I would like to
just go through a few of them here.
Congress should restore the corporate tax to a major source
of progressive revenue for the U.S. Government and ensure that
it functions as a break on corporate power and corporate
profiteering, not an accelerant.
This can be accomplished by raising the corporate tax rate,
including raising it back to 35 percent, where it was before
the 2017 tax law, for the most profitable corporations, closing
corporate loopholes and eliminating current preferences for
foreign source income over American source income.
The U.S. should also move swiftly to implement the once in
a century agreement among more than 130 countries across the
world to prevent corporations from forcing a global race to the
bottom in corporate taxation. Doing so will increase U.S. tax
revenues and reduce large multinational's ability to syphon
profits offshore.
Congress should restore the top tax rates on high incomes
and address the many special tax giveaways that provide outsize
benefits to the richest taxpayers, including some introduced in
the TCJA, like the Section 199A deduction.
On the other end of the individual tax, Congress should
restore the enhanced child tax credit from the American Rescue
Plan, which cut child poverty in half before it was allowed to
expire and expand on the success of the earned income tax
credit by making more workers eligible for a larger sum.
And finally, Congress must reform the way that income from
wealth is taxed. Taxing wealth like work is more than a
fairness issue. It is absolutely crucial to ensuring that the
richest taxpayers pay any tax at all, let alone their fair
share, and to rebalancing power in the economy.
Proposals like Senator Wyden's Billionaires Income Tax or
the Biden-Harris administration's Billionaires Minimum Income
Tax are a hugely important part of building a tax system that
works for workers and builds our economy. Thank you.
Chair Warren. Thank you, Ms. Richards. And now we are going
to start our questions with the Senator from New Jersey,
Senator Helmy.
Senator Helmy. Thank you, Chair. Thank you for the
opportunity to participate in this hearing. And I know and
thank you for your long lasting and standing leadership on tax
policy issues that break apart what I call the consolidation of
opportunity in this Nation and invest in opportunities that
lift up low income and growing middle class.
Thank you both for being here. And Ms. Poo, I'm sorry I
missed your opening remarks, but I did have a chance to read
them and will hopefully give you an opportunity to build on
some of the interesting points I read.
Ms. Richards, if I can start with you. I would like to
discuss investments in education. And I would start by saying
the Pell grant has had a significant impact on low income and
middle income New Jersians.
In New Jersey, approximately 35 percent of undergraduate
students relied on Pell in 2021-22 academic year, as can be
expected most of those recipients coming from low income
households.
Would you mind speaking with some specificity to the return
on investment we see when we make investments in uplifting low
income families by investing in educational opportunities for
them and what that might mean for growing our U.S. economy?
Ms. Richards. Absolutely. Investing in the human capital of
future workers, current workers, and innovators in our economy
is one of the most important things that we can do to increase
productivity growth, increase wages, and build a really strong,
resilient economy that can work for, you know, the next 100
years. And Pell grants are such a great example of how we can
do that.
Researchers at the OACD have found that one of the major
mechanisms by which growing inequality is stifling growth
across the world, and especially in the United States, is the
failure of these economies to be able to invest in the bottom
half of the income distribution and in their human capital.
And when you give a Pell Grant to someone who otherwise
wouldn't be able to go to college, you are opening up a world
of possibility for them and for them to be able to participate
fully in the economy and become a future leader, a strong
worker, and also deliver for their family.
Senator Helmy. I would just note personally, Chair, my
wife, who emigrated from Egypt when she was 10 and was a
recipient of Federal dollars to go to her undergraduate at
Rutgers and my children have more opportunities than we had as
kids because, as you said Ms. Richards, that opportunity and
investment in low and middle income families like the ones we
came from.
If I can stay with you, Ms. Richard, you mentioned in your
written testimony the investments in childcare. And according
to census data over a million of our children in New Jersey
benefited from the expanded credit in 2021.
Under the current law, of course, an estimated 19 million
children under 17 receive less than a full credit or no credit
at all because the family's incomes are too low. If we were
able to restore the CTC to the restored amount of the American
Rescue Plan, how do you see that in also helping the economics,
broadly again, of the U.S. economy but specifically the
economics of low and middle income families?
Ms. Richards. The child tax credit expansion included in
the COVID recovery package was a phenomenal success. It drove
child poverty to a record low of 5.2 percent in 2021, which by
the way it is a shame that we live in the richest country on
earth, and 5.2 percent of our children living in poverty is a
record low, but it was incredibly successful.
If the program had been extended 3 million fewer children
would have been living in poverty in 2022. It really makes
clear that hungry children and families trapped in poverty,
those are policy choices.
But as you said, it also really stifles our economy. Those
children, we have reams of evidence to show that getting high
quality care, having a stable environment with a roof over your
head where you are not at risk of eviction or homelessness,
having food in your stomach when you go to school, these are
huge determinants of your future economic success and the
economic success of our society.
And I would also love to add the CTC is so important, but
investments in childcare have a return on investment as high as
12 to 1. And, you know, these things, I would love to turn it
over to my colleague because these things are about more than
just family economics today.
Senator Helmy. That is a perfect segue. And they don't
allow junior senators to go over their time. And this is a
great segue, Ms. Poo.
In 2022, a study by researchers at the Joint Committee of
Taxation on the Federal Reserve Board analyzed the impact of
the TCJA, the Trump tax bill, in corporate returns, shareholder
data, and worker earnings. And I quote, ``The earnings do not
change for workers in the bottom 90 percent of within firm
distribution.'' But as you would expect that's my ad lib. Back
to the quote, ``but do increase for workers in the top 10
percent, increase particularly sharply for firm managers and
executives.''
What I would ask if we were able to tick the corporate tax
rate back up to 28 percent, which is what is being proposed by
some on this side of the dais, how do you see that being
impactful to the care economy and, again to the same way I
phrased the question to Ms. Richards, how would we reinvest
that in the care economy and what would that mean to uplifting
low and middle income families, and, again, the broader
investment in the American economy?
Ms. Richards. Well, I think we are so--thank you for the
question, Senator. I think we are so underinvested in low
income and middle income families in our country that we can't
do enough at this point to support them.
I think that the child tax credit is incredibly important
as a way to offer relief for low income families in particular,
and we have seen the impact of that. And I think investments in
the care infrastructure are long overdue and essential.
And there is an economist at Harvard named Larry Katz who
calls investments in the care economy triple dignity
investments because if you think about our ability to
investment in say the childcare workforce and making those
poverty wage jobs better jobs, those wage increases not only
benefit those workers and their families and communities, but
then they enable through the services they provide to support
millions of other working families and caregivers and working
parents to go to work and participate in the economy. And then
they support the next generation of children to be able to have
access to quality care at these crucial years of their lifetime
and older adults, people with disabilities, having the ability
to live dignified full lives as they age.
This kind of return on investment is exponential. And these
investments are long overdue.
Senator Helmy. I appreciate both of you being here. I
appreciate your qualitative analysis and your written testimony
on the unpaid and uncredited work that comes out of the care
economy. And I turn it back to the Chair with tremendous
gratitude for her leadership on these issues.
Chair Warren. Well, thank you very much. Thank you for
those very thoughtful questions.
So let's talk more about the tax bill that passed in 2017.
Donald Trump signed into law in 2017 his only big legislative
accomplishment, a $2 trillion tax giveaway for the wealthy and
the well-connected. And now he is out there promising to shovel
even more tax breaks to, these are his words, his rich as hell
donors. But the American people want to move forward, not
backward. Eighty percent of voters want to raise taxes on the
rich and Democrats have a proposal to do exactly that.
Those higher taxes on the rich would give our Nation
revenue, money to build 3 million new homes and lower rents by
10 percent. Money to cut the cost of childcare to just $10 a
day for most families. Money to build a better future for
everyone.
So let's talk about the 2017 tax law and the choice that
the next President and the next Congress will face as a big
chunk of it starts to expire.
Ms. Poo, you worked on behalf of the 2\1/2\ million
nannies, house cleaners, and homecare workers who keep American
families going, keep them in the workplace. What was the impact
of the 2017 Trump tax cuts on the domestic workers that you
represent? How big a slice of that $2 trillion did they get?
Ms. Poo. Madam Chair, the short answer is next to nothing.
If the Trump era tax cuts were allowed to continue, the average
care worker, like our members, would receive $70 per year in
benefit, which is in contrast to the richest 1 percent, who
would receive $60,000 per year.
And by the way, a majority of American workers in this
country earn less than $60,000 per year. So talk about
exacerbating what is already brutal in equality in our economy
and feeding the epidemic of low wage work that we have to
address. We cannot allow for our tax policy to leave essential
workers like care workers and other low wage workers behind.
Chair Warren. All right. So that is the calculation based
on what we have seen. But Donald Trump is doubling down. He is
proposing $7 trillion in further tax cuts, including slashing
the corporate rate down to just 15 percent.
That is not all. In their Project 2025 playbook,
Republicans in Washington have laid out a scheme to further
shift the tax burden from the wealthy to the middle class and
working class in order to fund $1.5 to $2.4 million tax cut for
households making more than $10 million a year, the Republicans
have laid out their project 2025 plan to raise taxes by an
average of $3,000 for the median family of four.
Now, Ms. Richards, you are a former White House and
Treasury Department official. You are an expert in tax and
economic policy. So tell us what impact would these proposals
that Donald Trump and Project 2025 have already put on the
table, what impact would these proposals have overall on our
economy?
Ms. Richards. The impact would be higher inflation, higher
interest rates, weaker economic growth, and recession becomes a
serious threat again.
Those are direct quotes from an analysis put out last month
by Moody's analytics after reviewing GOP plans to extend the
expiring 2017 provisions throughout the individuals, further
cut the corporate tax rate, and impose tariffs that would drive
up costs for low and middle income families.
But as you noted in your remarks, many of former President
Trump's closest allies are envisioning an even more extreme tax
agenda.
Project 2025 would get rid of our current progressive
income tax system along with nearly all of the deductions and
credits that lower taxes for low and middle income families and
significantly increase the income tax rate that those families
pay. Then those savings would get funneled into cutting taxes
for the wealthiest households at the very top.
Experts ran the numbers recently and found that this would
increase taxes by $3,000 for the typical family of four while
giving between $1.5 and $2.4 million in annual tax cuts for
those wealthiest households with more than $10 million.
Chair Warren. So we are really talking about an income
redistribution scheme here, right, from the wealthiest 10,000
families in America that they get an average of how much more?
Ms. Richards. $1.5 to $2.4 million. It's hard to nail down.
Chair Warren. Per family?
Ms. Richards. Per family.
Chair Warren. For the wealthiest 10,000 and for middle
class, working class America, they lay out how much more?
Ms. Richards. $3,000 for the typical family of four.
Chair Warren. So this is amazing. You know, I listen to the
Republicans rail about wealth redistribution. Let's face it,
wealth redistribution is happening. And what Donald Trump wants
to see, along with his Republican friends, is let's
redistribute even more wealth from the tiny fraction of the
very richest Americans and let's make working families, let's
make middle class families, pay more.
So this is going to be--did I say that as wealth leaves
them, it's more wealth for middle class America up to the
richest among us?
You know, and as you rightly say, this is what the
economists at Moody's are telling us, they have already taken a
look at this. You can exactly track. And Project 2025 has
actually laid out the numbers. We don't even have to sit here
and do the math ourselves. They are so extremist that they
think they can tell America what they plan to do. And that
somehow the United States is still going to go along with it,
the voters are going to go along with it.
I do understand why Donald Trump is trying to back off from
Project 2025. But these are his advisors. This is his
Republican party who is advancing this. And we are heading into
a big tax fight in which the Republicans are proposing to take
wealth away from working families and give more wealth to rich
families and to do it all through the tax cut.
So look, it is pretty outrageous. It is better to walk away
and let the Trump tax cuts expire than to sign our names to
that kind of a wealth transfer to help multimillionaires and
billionaires at the expense of working families.
But that doesn't have to be where our 2025 tax fight ends.
I believe we can do better than that. We can raise taxes on the
rich. We can invest in lowering costs for American families.
And that is exactly what Vice President Harris has proposed.
Raising revenue by taking the corporate tax rate--she is just
saying take it back up to 28 percent and impose a 25 percent
minimum tax on these megamillionaires and billionaires and use
that money to help families with the cost of housing and
childcare.
Now Ms. Richards, let's do the comparison here. We talked
about Donald Trump's plan is to take money away from middle
class and working families and give it to the very wealthy.
Vice President Harris' plan is take some of this money away
from wealthy and give it back to middle class and working
families in the form of providing the infrastructure for
childcare and housing and reduce those costs.
So can you describe overall what impact Vice President
Harris' proposals would have on our economy?
Ms. Richards. Sure. I think it is worth coming back to the
same Moody's analysis that I had spoke of earlier. Their
economists conclude that enacting Vice President Harris' policy
would lead to strong economic growth and lower----
Chair Warren. Strong growth.
Ms. Richards. ----lower inflation, full employment, and
critically Harris' policies would boost the finances of lower
and middle income Americans. Again, direct quotes. For the
record, Moody's also concludes that debt as a share of GDP
would be far better under Vice President Harris' proposals
because of how costly the GOP tax cuts are and because of the
revenue raising proposals you just mentioned. And you can also
think of that as an indication of how much more we could have
to invest in care economy and the workers that really power
economic growth in this country.
Chair Warren. So very interesting point because you are
really saying the effect overall on the economy of the Trump
tax cuts would be a disaster, like higher inflation, lower GDP
growth, lower job growth, but as a side benefit. The other
consequence of this would be to drive up the deficit and that
we see exactly the inverse in the way that Vice President
Harris wants to do this by saying higher taxes on those at the
top and more investment in bringing down costs for those in the
middle.
You know the next President and Congress will face huge
decisions on tax policy. Donald Trump wants to make an America
that works even better for those at the top. Kamala Harris and
congressional Democrats want to tax the rich so that we can
build a stronger, fairer America. An America where Jeff Bezos
doesn't pay a lower tax rate than a public school teacher. That
is the America we are working for, an America where everyone
can get ahead, where childcare costs and health care bills are
not crushing families, an America where every family can afford
a home.
That is an America worth fighting for and that is the
battle we will be in in 2025.
With that, I will call on the Senator from Maryland,
Senator Van Hollen for his questions.
Senator Van Hollen. Well, thank you, Senator Warren. And as
I said before the hearing, I had another briefing that I was at
so I am glad to make it. Thank you for pulling this great panel
together.
I thank both of you for being here. and I know Senator
Warren and others have laid out some of the Vice President's
plans, which would be to really invest in the middle class and
those working to become part of the middle class.
So I think as we listen to our Republican colleagues and we
get a preview of what Republican claims are about what their
tax policies would do, it is important to go back and rewind
the tape a little bit and see what claims were made about the
last round of Trump tax cuts which were really, as we all know,
for the very wealthy. But I think having two experts here, we
can dissect some of the claims they made and whether they ever
really came true.
As we know, the Trump tax cuts took the corporate rate from
35 percent to 21 percent. We now raise about 1.8 percent of our
GDP from big corporations and others, which is a very small
amount given the magnitude of those profits.
And now Republicans are planning to cut the corporate tax
even further, 18 percent says former President Trump--I'm
sorry, Project 2025. President Trump is saying in some
categories maybe even go to 15 percent.
So in 2017, we were told that these big corporate tax cuts
would cause such massive economic growth that they would pay
for themselves. So let me just start with a straightforward
question, did they pay for themselves?
Ms. Richards. No. That was laughable at the time, and it
has not worn well.
Senator Van Hollen. Ms. Poo.
Ms. Poo. Agree.
Senator Van Hollen. So one of the other things they claimed
was that those cuts were going to generate a big new wave of
investments, right? That corporations would take their tax
savings and invest them into growing their businesses. So Ms.
Richards, did business investment shoot up in the 2 years
following the tax cuts when corporations first felt the effect
of those cuts and before COVID may have distorted the data?
Ms. Richards. Nope.
Senator Van Hollen. Right? It is again just no ambiguity
here. It just didn't happen. And in fact, what we saw was that
corporations spent $806 billion in stock buybacks in 2018,
paying off wealthy investors instead of growing their
businesses.
Another claim that was made was that corporations would use
some of that tax savings to increase the wages they paid to
their employees. In fact, Kevin Hassett, who was the head of
Trump's Council of Economic Advisors, said there would be, and
I quote, ``an immediate jump in wage growth''. And the former
President predicted an average wage increase of $4,000 tied
directly to those tax cuts.
So, Ms. Richards, did the average American get a $4,000
raise from the Trump tax cuts?
Ms. Richards. No. In fact median wage growth actually
slowed in 2018 and 2019 after the Trump tax cuts were enacted.
Senator Van Hollen. Right. And, you know, the only people
who saw raises were the very wealthy executives, who got about
$50,000 on average boost in their income.
So, Ms. Poo, did the people who were caring for our
children and aging members of our communities get a $50,000
raise?
Ms. Poo. No, Senator. The median annual income for a
homecare worker is $22,000 per year in the United States.
Senator Van Hollen. And when those companies were making
billions of dollars and more profits and using a lot of their
profits for stock buybacks, did they at least lower prices for
consumers?
Ms. Poo. No, Senator. Prices have gone up.
Senator Van Hollen. So prices went up. Wages did not go up.
Stock buybacks and executive compensation went up. The deficit
went up, and these guys want to run that movie again.
So I appreciate both of you being here just to refresh our
memories a little bit beyond the sloganeering as to what
actually happened in the real world. Thank you.
Chair Warren. Thank you very much, Senator Van Hollen. I
always appreciate your questions. But on this one just walking
through what were the promises made in 2017 and what did the
data show because that same set of promises will be made in
2025 as we go through these tax fights. And what's the old,
burn me once, shame on you, burn me twice, shame on me. We are
not falling for that again. So thank you. I really appreciate
the questions.
If you will bear with me, I have got another round of
questions I would like to be able to ask.
You know, for too long, Republicans have raced to cut taxes
for the wealthy and then they turn around and slash funding for
critical programs that many Americans rely on.
The tax fight next year will determine how much money we
have to help lower costs for families by making the investments
in childcare and housing and whether millionaires and
billionaires chip in like everyone else. So let's focus for a
minute on childcare.
While other Nations have invested in universal affordable
high quality care for their children, we have stayed stuck in a
debate over how much to cut taxes. The result, the United
States now ranks 31st out of 38 developed countries in terms of
tax revenue as a share of GDP and 33rd out of 37 of the richest
Nations for their spending on childcare.
Childcare, as you noted in your testimony, is more
expensive than rent for the average family in America. And I
just want to add a footnote to that, if they can find it at
all.
Ms. Poo. Correct.
Senator Van Hollen. Because part of what never goes into
that calculation are all the people who just give up, all the
people who can't find it at all or who are using under the
table ways of having their children taken care of that never
show up in these statistics.
So, Ms. Poo, why is it so difficult for families to find
affordable, high quality childcare? Why doesn't this market
work? Why don't we just put a little more money into people's
hands and suddenly we will have a functioning childcare market?
Ms. Poo. The system is broken because we have never
invested in building it. We don't have a functioning childcare
system in the United States.
Right now, there are fixed costs associated with delivering
safe, quality childcare. And childcare currently relies on a
patchwork system of Federal and State dollars that is anemic
and inconsistent at best.
And in that context, the cost gets passed on to individual
families who are struggling and also the care workforce. So you
have families paying enormous amounts, up to 30 percent of
their income, and workers earning poverty wages to stay in this
work, to keep the doors open of these facilities.
And it is unsustainable for everyone involved. The average
childcare worker earns less than $30,000 per year.
Chair Warren. You know, you caught me with the line, why is
the childcare system broken? Because we never built it. I am
reminded as you say this that I nearly got derailed from the
lack of available, affordable childcare not once, but twice.
Just almost got knocked completely off and was saved because I
had an elderly Aunt B who came to live with me for 16 years in
order to see me through all of my childcare needs for all those
years.
What is so frustrating to me is it was hard for me when
there were fewer women in the workforce when we kind of felt
like the first wave of mamas going into the workforce.
It was just as hard for my daughter. And now it appears
that it is going to be just as hard for my granddaughters
because we continue not to make this investment. The idea that
a family can take out of its own income to pay for an entire
childcare infrastructure is just nuts. We don't ask families to
go pay for all the costs of second grade.
We say that we all pitch in so that we can afford to build
an education system, K through 12, and make that available for
all of our kids, but we are not doing it on childcare and
families, babies, and childcare workers are the ones who are
paying the price for this.
But it takes money to make the system work, and look at the
billionaires right now. They are just not paying taxes. Elon
Musk and Jeff Bezos want to keep sitting on their growing piles
of wealth protected by armies of lawyers and accountants and
wealth managers and lobbyists who ensure that the money they
make doesn't count as taxable income.
Ms. Poo, tell me, is that option of just deciding not to
pay taxes and build your wealth out and to live on it knowing
you will be protected by an army of accountants and lawyers and
lobbyists available for our childcare workers? Are they doing
the same thing there?
Ms. Poo. No, Madam Senator. If they were, I would not be
here testifying today.
Chair Warren. You know, is it available to middle class
families? You know, people who have got two folks in the
workforce. They are earning median wages. Is it available to
them?
Ms. Poo. It is not.
Chair Warren. You know, this is the part we have to
remember, the extraordinary inequality not just an outcome, but
inequality in opportunity to build something in this country.
The top 1 percent in this country just hit a record $44.6
trillion in wealth. That is almost as much as the bottom 90
percent of Americans have scraped together. But that top 1
percent is barely paying taxes.
And every year that goes by with the wealthiest Americans
paying so little is another year in which their grip over our
economy grows stronger while everyone else struggles to get by.
Donald Trump and congressional Republicans understand this
dynamic. And instead of working to reverse it, they are
tripping over themselves to promise their wealthy donors even
more tax giveaways next year.
But President Biden and Vice President Harris have a much
better idea. They have a plan to ensure that anyone who has
more than $100 million in assets--and just so you know, this is
the top 10,000 richest, megamillionaires and billionaires that
they pay at least 25 percent of all the income they make in
taxes. That is still far less than the top individual tax rate.
But for the first time, it would force the 10,000 richest
Americans in America to stop hoarding their wealth and hiding
it from the IRS. Now, Ms. Richards, if we pass the Biden-Harris
Billionaires Minimum Income Tax affecting just the top one-
tenth of 1 percent of all Americans and then invest that money
in affordable childcare for all Americans, what kind of return
on our investment would we get?
Ms. Richards. Investments in childcare have undeniable
payoffs. The return on investment can be as high as 12 to 1.
Meanwhile, billionaires sitting on stock for years and years
for tax purposes is actually bad for the economy. It makes it
less dynamic. It makes us less able to grow and innovate.
So the return on investment would be huge.
Chair Warren. So I think this is really an important point
to make. You know, you could be somebody who just doesn't care
about kids. Doesn't care about care. But just making a
hardnosed investment decision, investing in billionaires, which
is what a system does when it says you can sit on those piles
of wealth and not pay taxes on them. Doing that has the effect
of actually making the economy work less vigorously.
They hold on even when they should sell. They don't make
good investment decisions day-to-day. They make tax driven
decisions because we have privileged one form of wealth and
holding on to that wealth.
The difference, of course, is if we tax that wealth and
particularly decided to invest it in a care economy, I think
you described it as the consequence would be more mamas and
daddies can go to work, right, and be able to work more
productively. More care workers would be paid a wage that lets
them support themselves, their families and their economies,
and the third generation--the next generation payoff, and more
children would get a better start in life. And this is the
reason to say pay taxes here so we can make this investment
there is a payoff of about 12 to 1.
It makes no sense to pass that up. And that is what is
going to be in front of us in this tax fight in 2025. Taxing
the ultrawealthy is good for the economy. It is fair. And it is
popular. Four out of five Americans support raising taxes on
the richest Americans, Democrats, Republicans, and
independents. And next year Congress needs to listen to them,
not to the billionaires that are trying to fund political
campaigns right now.
2025 is an opportunity to reshape the Tax Code. And we need
to do more than just be on defense about the Trump tax
extensions for the billionaires. We need to be on offense by
looking at the whole tax system and saying we can make better
investments with our Federal dollars.
So thank you all for being here. I really appreciate this.
You know, thanks to decades of lobbying, the U.S. Tax Code
is stuck in a doom loop. It is rigged to benefit the richest
corporations and the richest people instead of designed to help
working families. We have a chance to change that in 2025 and a
chance to fight for a Tax Code that reflects our values. That
means investing in middle class and working people. It means
making billionaires and big businesses pay their fair share.
And it means rejecting bad deals that throw pennies to ordinary
Americans while showering the ultrawealthy with even more tax
giveaways.
Thank you to both of our witnesses for being here today and
for providing this testimony. For Senators who wish to submit
questions for the record, those questions are due 1 week from
today. That is Wednesday, September 25.
For our witnesses, you will then have 45 days to respond to
any question.
Thank you again. Thank you for being here. And with that,
this hearing is adjourned.
[Whereupon, at 3:15 p.m., the hearing was adjourned.]
[Prepared statements supplied for the record follow:]
PREPARED STATEMENT OF AI-JEN POO
President, National Domestic Workers Alliance; Executive Director,
Caring Across Generations
September 18, 2024
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
PREPARED STATEMENT OF KITTY RICHARDS
Senior Fellow, Groundwork Collaborative and Economic Policy Think Tank
September 18, 2024
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]