[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]





                    HOW TAX REFORM WILL SIMPLIFY OUR 
                 BROKEN TAX CODE AND HELP INDIVIDUALS  
                              AND FAMILIES

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON TAX POLICY

                                 of the

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 19, 2017

                               __________

                          Serial No. 115-TP02

                               __________

         Printed for the use of the Committee on Ways and Means







[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]









                                
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
33-482                    WASHINGTON : 2019                 






















                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California              SANDER M. LEVIN, Michigan
PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
LYNN JENKINS, Kansas                 RON KIND, Wisconsin
ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
KENNY MARCHANT, Texas                JOSEPH CROWLEY, New York
DIANE BLACK, Tennessee               DANNY DAVIS, Illinois
TOM REED, New York                   LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania             BRIAN HIGGINS, New York
JIM RENACCI, Ohio                    TERRI SEWELL, Alabama
PAT MEEHAN, Pennsylvania             SUZAN DELBENE, Washington
KRISTI NOEM, South Dakota            JUDY CHU, California
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
TOM RICE, South Carolina
DAVID SCHWEIKERT, Arizona
JACKIE WALORSKI, Indiana
CARLOS CURBELO, Florida
MIKE BISHOP, Michigan

                     David Stewart, Staff Director

                 Brandon Casey, Minority Chief Counsel

                                 ______

                       SUBCOMMITTEE ON TAX POLICY

                  PETER J. ROSKAM, Illinois, Chairman

DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
PATRICK J. TIBERI, Ohio              JOHN B. LARSON, Connecticut
MIKE KELLY, Pennsylvania             LINDA SANCHEZ, California
JIM RENACCI, Ohio                    MIKE THOMPSON, California
KRISTI NOEM, South Dakota            SUZAN DELBENE, Washington
GEORGE HOLDING, North Carolina       EARL BLUMENAUER, Oregon
KENNY MARCHANT, Texas
PAT MEEHAN, Pennsylvania

































                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 19, 2017, announcing the hearing................     2

                               WITNESSES

The Honorable Bill Archer, Former Chairman, Committee on Ways and 
  Means..........................................................    10
Bernard F. McKay, Chairman of the Board of Directors, Council for 
  Electronic Revenue Communication Advancement...................    15
Jania Stout, Practice Leader and Co-Founder, Fiduciary Plan 
  Advisors at HighTower..........................................    25
Eric Rodriguez, Vice President, Office of Research, Advocacy, and 
  Legislation, UnidosUS..........................................    35

                        QUESTIONS FOR THE RECORD

Question submitted by The Honorable Patrick J. Tiberi, of Ohio, 
  to Bernard F. McKay, Chairman of the Board of Directors, 
  Council for Electronic Revenue Communication Advancement.......    72
Questions submitted by The Honorable Peter J. Roskam, of 
  Illinois, to Bernard F. McKay, Chairman of the Board of 
  Directors, Council for Electronic Revenue Communication 
  Advancement....................................................    72

                       SUBMISSIONS FOR THE RECORD

Americans for Prosperity (AFP)...................................    78
The American Institute of Architects (AIA).......................    79
The American Institute of Certified Public Accountants (AICPA)...    84
Church Alliance..................................................    95
Coalition to Preserve Cash Accounting............................   103
Insured Retirement Institute (IRI)...............................   108
GradFin..........................................................   115
American Citizens Abroad, Incorporated (ACA) and American 
  Citizens Abroad Global Foundation..............................   125
National Low Income Housing Coalition (NLIHC)....................   130
National Retail Federation (NRF).................................   140
Retail Industry Leaders Association (RILA).......................   141
The Christian Science Church.....................................   144
Center for Fiscal Equity.........................................   147
Precious Metals Association of North America (PMANA).............   156 

 
                    HOW TAX REFORM WILL SIMPLIFY OUR 
                  BROKEN TAX CODE AND HELP INDIVIDUALS 
                              AND FAMILIES

                              ----------                              


                        WEDNESDAY, JULY 19, 2017

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

    The Subcommittee met, pursuant to call, at 2:31 p.m., in 
Room 1100, Longworth House Office Building, Hon. Peter J. 
Roskam [Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                       SUBCOMMITTEE ON TAX POLICY

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
Wednesday, July 19, 2017
TP-02

                Tax Policy Subcommittee Chairman Roskam

                Announces Hearing on How Tax Reform Will

                 Simplify Our Broken Tax Code and Help

                        Individuals and Families

    House Committee on Ways and Means Tax Policy Subcommittee Chairman 
Peter J. Roskam (R-IL), announced today that the Subcommittee will hold 
a hearing on tax reform ideas that simplify our broken tax code, reduce 
the burdens on American families and individuals, and deliver economic 
growth that creates jobs and improves the quality of life of all 
Americans. The hearing will take place on Wednesday, July 19, 2017, in 
room 1100 of the Longworth House Office Building, beginning at 2:00 
p.m.
      
    In view of the limited time to hear witnesses, oral testimony at 
this hearing will be from invited witnesses only. However, any 
individual or organization may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
written comments for the hearing record must follow the appropriate 
link on the hearing page of the Committee website and complete the 
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for 
which you would like to make a submission, and click on the link 
entitled, ``Click here to provide a submission for the record.'' Once 
you have followed the online instructions, submit all requested 
information. ATTACH your submission as a Word document, in compliance 
with the formatting requirements listed below, by the close of business 
on Wednesday, August 2, 2017. For questions, or if you encounter 
technical problems, please call (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
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and any written comments in response to a request for written comments 
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maintained in the Committee files for review and use by the Committee.
      
    All submissions and supplementary materials must be submitted in a 
single document via email, provided in Word format and must not exceed 
a total of 10 pages. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
    All submissions must include a list of all clients, persons and/or 
organizations on whose behalf the witness appears. The name, company, 
address, telephone, and fax numbers of each witness must be included in 
the body of the email. Please exclude any personal identifiable 
information in the attached submission.

    Failure to follow the formatting requirements may result in the 
exclusion of a submission. All submissions for the record are final.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available at
    http://www.waysandmeans.house.gov/

                                 

    Chairman ROSKAM. The Subcommittee will come to order.
    Welcome to the Ways and Means Subcommittee on Tax Policy, 
our hearing on ``How Tax Reform Will Simplify Our Broken Tax 
Code and Help Individuals and Families.''
    Before we get started with opening statements and so forth, 
I would like to yield to the Chairman of the Ways and Means 
Committee, Congressman Kevin Brady, for the purposes of 
introducing a distinguished witness who is before us today. Mr. 
Chairman.
    Chairman BRADY. Thank you, Chairman Roskam. First, thank 
you for your leadership of the Tax Policy Subcommittee at such 
an important time in America's history. And thank you for 
leading hearings like this that allow America to have the 
conversation about creating a bolder, fairer, flatter, and more 
pro-growth Tax Code.
    I want to thank all our witnesses for being here today. And 
I want to give a special welcome to our friend, my friend, 
Chairman Bill Archer, former leader of this Committee and a 
longtime mentor to me personally. Chairman Archer, thank you 
for being here to share your insights and your experience on 
tax reform.
    I know everyone on our Committee is familiar with Chairman 
Archer, but I would like to take a moment to talk about him and 
his legacy here at the Ways and Means Committee.
    Chairman Archer served on the Committee for 28 years and 
was Chairman from 1995 to 2001. During his service, Chairman 
Archer was closely involved in several historic efforts to make 
our Tax Code simpler and fairer for all Americans.
    Prior to becoming Chairman, he was a strong voice in 
developing the Tax Reform Act of 1986, fighting throughout the 
process to lower rates for Americans and eliminate complexity 
for taxpayers.
    And when he took the gavel in 1995, he brought that same 
passion and determination and insight, always striving to 
ensure that our Tax Code worked for the American people, not 
against them.
    And he was a Chairman long before software that did his own 
taxes year after year. So he knew intimately the complexity and 
the cost of this complicated Code. So, in many ways, Chairman 
Archer's leadership helped lay the foundation for the kind of 
pro-growth, bold tax reform we are pursuing today. And for me, 
his leadership often serves as a source of inspiration as we 
work to fix our broken Tax Code for families and individuals.
    When Chairman Archer retired from Congress, I had the honor 
of being selected to his seat on Ways and Means. Now it is my 
great honor as Chairman to welcome you back to the Committee.
    Chairman Archer, thank you for your decades of public 
service and thank you again for joining us today. We have so 
much to learn from you, and we are excited for your testimony.
    Mr. ARCHER. Thank you for that welcome, Mr. Chairman. And 
thank you for the job you are doing on tax reform.
    Chairman BRADY. Thanks, Chairman.
    I yield back, Chairman Roskam.
    Chairman ROSKAM. Thank you, Chairman Brady.
    Think about it. Right now, on this iPhone, I can pull up an 
airline app. I can click a flight tool, O'Hare Airport. I can 
choose a seat. I can get an e-ticket mailed to me on my iPhone. 
I can have it charged to my credit card, and I can get a 
boarding pass all within the twinkling of an eye.
    And if I have 10 seconds of that little loading thing 
spinning around, my attitude is, you know, what loser made 
this? Now, it is ridiculous. And, yet, we have an expectation 
of ease and simplicity that is basically the norm right now.
    Now, contrast that with our Tax Code, which is so 
complicated that, every year, the majority of taxpayers can't 
figure out how much money they owe by themselves. Our Tax Code 
has grown so bloated over the past 30 years, to the point that 
it is draining our productivity and producing a headache for 
nearly every taxpayer.
    Now, there is good news: Nobody likes it, and nobody 
defends it. There is nobody in this country that says: Oh, the 
Internal Revenue Code, I love that. Don't make any changes to 
that. Nobody likes it.
    Now, people like certain elements of it, and we have deep 
divisions among us about the directions that we should go, but 
it is so interesting that nobody is defending the status quo.
    Now, there is better news: We have a solution that will 
grow the economy, dramatically simplify the Code, and lower our 
tax bills every year. Last week, we discussed the importance of 
growth. Taxpayers, according to the proposal that we have set 
forth, would see growth from tax reform in the form of an 
estimated 1.7 million more jobs and 7.7 percent higher wages.
    But today we will focus on the burden of filing taxes as an 
individual. Every year, millions of Americans spend hours 
trying to figure out what they owe. In fact, combined, 
Americans spend 2.6 billion hours trying to calculate what they 
need to pay Uncle Sam, and this translates into over $400 
billion in lost activity.
    What should be a simple calculation is so complicated that 
9 out of 10 people either pay a professional or have to buy 
software just to figure out how much they owe the government.
    When I think about a household filing their taxes, I think 
about a family in my own constituency in Palatine, Illinois, 
sitting at their kitchen table with a box full of receipts 
trying to figure out what they owe. They are looking at the 
1040, and they are trying to figure out what deductions they 
can take. Can they deduct enough for them to itemize, or do 
they want to take the standard deduction? Do they qualify for 
the additional standard deduction? Can they take both the 
personal exemptions for their children and the child tax 
credit? And when they really get confused about how much they 
need to pay the government, they can read the helpful IRS guide 
for individuals, and by page 206--no lie--it starts out with 
how to figure your tax.
    The whole time they are thinking in the back of their minds 
that, if they had enough money to hire somebody to do it for 
them, they would be paying less in taxes. That is because, for 
more than 30 years, the Tax Code has not been updated and it 
has ballooned with special interest.
    The standard tax form, the 1040, now contains more than 80 
different items, and the additional complexity is a cost for 
everybody. Clearly, something is inherently unfair when the 
family from Palatine perceives that they pay more to the 
government because they don't know more about the Tax Code.
    What we propose for individuals filing is something as 
simple as a postcard. Now, if you can add and multiply, you can 
do your own taxes. No more uncertainty, no more worrying that 
the government will come after you. We will have this postcard 
available in an online form and a hard copy form for every 
taxpayer to use.
    Why did we make it this simple? And how did we make it this 
simple? First, we proposed to eliminate all but two deductions, 
and we took the seven brackets and reduced them to three, 
lowering the tax rate for all Americans in the process.
    Then we paired together the standard deduction, the 
additional standard deduction, and the personal exemption for 
taxpayer and spouse, and we used the savings from eliminating 
deductions to double the standard deduction--and we expect that 
95 percent of Americans will use that.
    Finally, we combined the child tax credit with the personal 
exemption for children and dependents into one larger credit. 
With these changes, Americans will no longer have to worry if 
they are wealthy enough to get a better deal on taxes. It will 
be laid out in plain English for all to see.
    Now, as a Committee, we have a choice. We can accept high 
rates and a confusing Code, or we can grow the economy, lower 
rates, and create a fairer system that Americans can trust. And 
I think the choice is clear.
    With this in mind, I am pleased to welcome our witnesses, 
and I look forward to hearing all of your testimony and to 
working with my colleagues on both sides of the aisle to 
determine how we can create the best Tax Code that helps all 
Americans, including my constituents in Palatine and elsewhere.
    Now, for the purpose of his opening statement, I would like 
to recognize my distinguished friend, the Ranking Member, Mr. 
Doggett, from Texas.
    Mr. DOGGETT. Thank you, Mr. Chairman, for your courtesy.
    And welcome to all of our witnesses.
    Today, we do finally consider the impact of proposed tax 
reform on individual taxpayers. This is the first consideration 
of this matter in the 13 months that have passed since the 
House Republican blueprint was announced.
    Our hearing coincides with what appears to be the demise of 
the first Republican tax cut this year, which largely 
masqueraded as a health reform bill. It is instructive to 
consider how that bill proposed to assist individual taxpayers.
    From the more than $400 billion in tax breaks for 
individuals that is proposed in that bill, those making more 
than $1 million each year would have pocketed an average of 
$57,000 apiece. Any small tax cuts for middle class families 
would have been mostly wiped out by increased healthcare cost.
    It is also instructive to look at how that bill was 
presented and to hope that lessons have been learned from the 
approach of putting the bill under lock and key in the Capitol, 
denying even some Republicans an opportunity to see the bill, 
then rushing it through without a single administrative 
official or expert coming forward to testify about the bill or 
be held accountable for it, all in an all-night session where 
all Democratic amendments were denied.
    One would hope that experience, given the failure of the 
bill, would not be repeated. However, there is some concern in 
questions that have been raised in the Senate Finance Committee 
this same week as to whether any tax reform legislation will be 
presented for a hearing.
    Senator McCaskill asks Chairman Orrin Hatch to commit that 
there would be a hearing on tax legislation and that it would 
not all be written behind closed doors. I will submit for the 
record an exchange about that with Senator McCaskill, and I 
hope that we will not see the same thing happen here in the 
House and that Senator Hatch will reconsider and make this a 
more open process.
    [The submission of The Honorable Lloyd Doggett follows:]


  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
          

                                 
    Mr. DOGGETT. Certainly, there is a need to simplify our Tax 
Code. Many of the additions to the Code have, in fact, been 
made in recent years in this very Committee, as loopholes and 
special advantages were offered to some that added complexity 
to the system.
    I have authored legislation that is designed to consolidate 
existing credits for higher education into an expanded American 
opportunity tax credit to make it easier for more young people 
and not so young to access college and to use the same credit 
for job training, as so many Americans are trying to seek new 
opportunities that will make it possible for them to provide 
for their family in a more adequate way.
    This bill would also ensure that students receiving Pell 
grants can get the full benefit of the American opportunity tax 
credit. That is important because, at this very time, the House 
Budget Committee is considering a budget that makes incredible 
cuts to education and social services, including the funds that 
are available for Pell grants.
    Our Ranking Member, Mr. Neal, has advanced legislation to 
make the earned income tax credit available to the working poor 
who have no dependent children, an idea Speaker Ryan has 
endorsed, though not with sufficient enthusiasm to get it 
passed when it was considered in 2015.
    Ms. DeLauro, our colleague, has offered a bill to expand 
the child tax credit.
    I think each of these offer a potential for discussion but 
not if they are only to be crumbs off the table that has been 
set like the last tax cut bill for those earning more than $1 
million a year.
    I think as we look at individuals, it is very important to 
apply the Mnuchin rule. That would be the rule named after 
President Trump's appointee, Secretary of the Treasury, Mr. 
Mnuchin, who has said he was not seeking any net tax breaks for 
the wealthiest few, that he would ensure that, while we 
simplified and added fairness to the Code, that there would not 
be a net tax cut for those at the top, actually as Mr. Trump 
had originally proposed and is proposed in the blueprint.
    I would like to see us follow that rule as we consider 
simplicity and fairness. And I think that any action we take 
does have to be balanced against the many wrongs that are being 
committed as we meet in the Budget Committee to cut back on job 
training and educational opportunities.
    Thank you, Mr. Chairman. I look forward to hearing our 
witnesses.
    Chairman ROSKAM. Thank you, Mr. Doggett.
    I think you make a couple of interesting points. Let me 
just comment briefly before I introduce the witnesses.
    I think the admonition about process is a good one. We know 
what failure looks like. We know when Nancy Pelosi, as Speaker 
of the House, said, ``We have got to pass this bill so that you 
know what is in it,'' that creates confusion and failure and a 
lack of cohesiveness.
    I was on this Committee sitting right down there when we 
were considering the healthcare bill when Charlie Rangel, 
former Chairman, was sitting in this very chair. And when he 
was asked, I think it was either by Dave Camp or one of the 
other senior Republicans of the Ways and Means Committee at the 
time, ``When are we going to hear about the Republican 
amendments,'' Charlie Rangel said, soon, and very soon. It is a 
line from a gospel song that I remember as a child. That is why 
I have an independent recollection of it. And, of course, we 
never got to those points.
    Now, we are having our fourth hearing on the blueprint. 
There has been a lot of discussion, a lot of discussion on the 
Camp draft as a prelude, a lot of discussion about the 
blueprint. And I think now is the perfect time to transition to 
having more insight on this by introducing our panel.
    First of all, we have the Honorable Bill Archer, who 
Chairman Brady already introduced as the former Chairman of the 
Committee on Ways and Means and is here as an example of 
somebody who knows how to craft legislation and bring something 
to fruition.
    And, Mr. Chairman, we welcome your testimony.
    Next is Bernard McKay. He is the Chairman of the Board of 
Directors at the Council for Electronic Revenue Communication 
Advancement.
    Next is Jania Stout, Practice Leader and Co-Founder of the 
Fiduciary Plan Advisors at HighTower.
    And, finally, Eric Rodriguez, Vice President for the Office 
of Research, Advocacy, and Legislation at UnidosUS.
    So I thank all four witnesses. You each have 5 minutes. If 
you go over the time, I will be gentle and then increasingly 
harsh to get you to have some tight corners, and then we will 
inquire of you.
    So we will hear from you in order. Chairman Archer.

            STATEMENT OF THE HONORABLE BILL ARCHER, 
          FORMER CHAIRMAN, COMMITTEE ON WAYS AND MEANS

    Mr. ARCHER. Thank you, Mr. Chairman.
    It is truly an honor to be in this room again.
    Chairman ROSKAM. Chairman, can you make sure that mic is 
on?
    Mr. ARCHER. I pressed the top button, but it doesn't seem 
to be----
    Chairman ROSKAM. Scooch closer.
    Mr. ARCHER. How is that? I don't know what else to do, Mr. 
Chairman.
    Chairman ROSKAM. I think that is better. Just lean forward 
when in doubt.
    Mr. ARCHER. All right. I will get as close as I can.
    As Chairman Brady said, I have spent many years of my life 
in this room, and I have a great respect for it and great 
admiration to each of you who serves today.
    When I was on this Committee, there were many challenges 
and many opportunities, and they exist today, and they probably 
will exist 25 years from now. But I think the Congress has 
perhaps a unique capability to alter the course of our country 
in a positive and a momentous way.
    I pray that you will be allowed to rise to the occasion and 
complete the long-delayed goal of fundamental tax reform, which 
would simplify and rationalize our Tax Code.
    The world has changed dramatically since my congressional 
service ended in the year 2001. For Americans to compete in the 
world as both individuals and businesses is in many ways much 
more difficult and certainly more challenging than it was.
    Tax rates have risen and complications have increased. I 
understand that there have been over 15,000 changes in the Tax 
Code since the 1986 tax reform. That is very difficult for 
individuals to cope with. And, frankly, that figure is probably 
out of date. It is probably much greater today.
    I commend the efforts of the Committee and particularly 
Chairman Brady for taking the lead to advance the indisputable 
goal of simplifying the Code and helping to make the United 
States a leader in the world in terms of having a Tax Code that 
gives our country a competitive advantage in the marketplaces 
of the world.
    I count myself as being a fair individual, and all I ever 
want for this country is a fair advantage. And hopefully--that 
is what we had in our Tax Code 30 years ago, but we have lost 
it. In my opinion, it is not enough to achieve tax parity with 
the rest of the world. As I said, we need to work to develop a 
clear and competitive lead.
    The blueprint that was released last year as a starting 
point for the Committee's discussion is a truly comprehensive 
document and a courageous one as well. It was built in many 
respects on the actual bill introduced several years ago by 
former Chairman Dave Camp.
    Foundations have been laid for a debate that is long 
overdue. I know well of vagaries and the twists and turns of 
the legislative process, but I urge you to plow ahead to 
develop a comprehensive document that clearly will be the new 
starting point for this effort.
    Not only did I do my own Federal tax return, as Chairman 
Brady mentioned, but I did it with a pencil and a yellow 
writing tablet and not a computer. Believe me; it took a lot of 
my time. It was very frustrating, but I at least had the help 
of the staff of the Joint Committee and the Ways and Means 
Committee to help me when I got into real difficulty.
    And I did that particularly on one part of the Code that 
related to the tax deductions for Members of Congress. There 
was no form. And so I contacted the Joint Committee and was 
told: Well, we can't give you a form. But I think we can tell 
you how to prepare one by hand, and I believe the IRS will take 
it.
    Well, that is a terrible Tax Code. I hope that has been 
corrected since then, but I doubt that it has.
    I do not in any way belittle the political effort needed to 
achieve the goal which you seek. But there is a support group 
of many, many Americans who may not be heard to offset the 
support group for every special provision that is in the Code 
that you must counteract in order to be able to finally reach 
your goal.
    Until recently, one of the real problems has been expiring 
tax provisions, which required almost annual legislation and 
whose costs would have to be incorporated into any major bill. 
I commend the Committee and the Congress for having so 
aggressively addressed this problem in 2015.
    It was clearly a master stroke to make tax reform possible. 
Inherent in this effort was the concept of permanence in the 
Tax Code. I urge you to make this the hallmark of any tax 
legislation. The American public needs to be able to plan and 
make their financial decisions in an environment where the tax 
provisions do not change every year.
    That makes it extremely difficult. I have always described 
our Tax Code as an attractive nuisance, and to me, that is what 
an income tax is. And for those of you who are not lawyers, an 
attractive nuisance means that whatever you provide is going 
to, like a magnet, draw in all kinds of complications that are 
going to be very difficult to resist.
    And that is what we have today. Sadly, I think every income 
tax does that. And I am going to ad lib just very quickly and 
tell you that I lost confidence in being able to really have an 
effective and a simple income tax at the end of the 1986 
deliberations.
    I personally said, and it is a matter of record, I think we 
should abolish the entire Code and replace it with a 
consumption tax to where the individuals in this country do not 
have to deal at all with the IRS.
    To me, that would be very, very attractive. But that is a 
big step, and it is a step that is beyond where you can go. I 
couldn't make it happen. So I am sure you are not going to be 
able to make it happen. But, certainly, we need to find a 
better way than the current income tax.
    I appreciate the unique opportunity to return to this 
hallowed environment, the most beautiful room in the Capitol of 
the United States, and to be able to address you. I don't have 
a magic answer for you. I wish I did. I think it is extremely 
complicated, and I am glad, frankly, that you are up there 
today and I am not.
    Chairman ROSKAM. Thank you, Mr. Chairman.
    Mr. ARCHER. But in any way that I can be helpful, please 
call on me.
    [The prepared statement of Mr. Archer follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

                                 
    Chairman ROSKAM. Thank you.
    Mr. McKay.

    STATEMENT OF BERNARD F. MCKAY, CHAIRMAN OF THE BOARD OF 
    DIRECTORS, COUNCIL FOR ELECTRONIC REVENUE COMMUNICATION 
                          ADVANCEMENT

    Mr. MCKAY. Thank you, Mr. Chairman and Ranking Member 
Doggett. I am honored today to testify on behalf of the Council 
for Electronic Revenue Communication Advancement, CERCA, the 
electronic tax filing association.
    CERCA was launched in 1994 at the request of the IRS to 
provide a means of collective communication and coordination 
and cooperation across the tax ecosystem for advancing 
electronic tax filing and electronic tax administration.
    CERCA members represent a wide diversity of industry 
participants and innovators from tax software and technology 
firms to the largest national tax storefront chains to systems 
integrators, payroll houses, and financial services companies.
    We are proud to have been a part of leading the national 
adoption of electronic tax filing for more than two decades. In 
the 1998 IRS Restructuring and Reform Act, government adopted a 
public policy objective of achieving 80 percent e-file adoption 
by American taxpayers because electronic filing is more 
efficient, speeds return submission processing, reduces 
government operating costs, and improves accuracy.
    And, today, almost 90 percent of all individual tax returns 
are electronically filed. That accomplishment is a direct 
outcome of public/private partnership and technology 
innovation. But innovation in the tax compliance process is not 
the only thing that has changed over the last 30 years since 
the Tax Code was last comprehensively changed.
    The makeup of the American family and characteristics of 
small business have changed and evolved in many ways. 
Modernization and simplification of the Tax Code would empower 
individuals and small businesses to more easily understand 
their own taxation, and knowledgeable citizen engagement in 
their financial affairs, like tax, leads to better financial 
decisions for themselves and their families.
    The private sector's development of tax preparation 
software over the last 30 years has sharply reduced the pain 
and complexity of tax compliance for average Americans while 
bringing accurate preparation and speedy filing of returns 
within economical reach for all, whether taxpayers prepare 
their own returns or are assisted by professional tax 
practitioners.
    Private sector innovation has taken complexity of the Tax 
Code and simplified it for the taxpayer. Industry has driven 
data-driven innovation and simplified it for the taxpayer by 
allowing, for example, direct importation of financial data 
into tax returns at the taxpayer's direction, drawn directly 
from the original financial data sources.
    These kinds of technological innovations have made tax 
compliance faster, easier, and more accurate. However, tax 
simplification reforms, streamlining the Tax Code itself, could 
accelerate greater simplicity and ease of compliance, 
benefiting every taxpayer. It would be the right policy 
direction for the Nation.
    We believe simplification reform strategy could begin with 
thoughtful application of commonsense solutions. Within the 
Code, there are unique terms like ``adjusted gross income'' as 
well as common terms like ``dependent'' and ``income,'' all of 
which have different and sometimes conflicting and certainly 
unique definitions to the Code.
    Using universal definitions and commonly understood 
language would go a long way toward taxpayer ease and 
understanding. Similarly, the multiplicity of different tax 
provisions for retirement and education can leave taxpayers 
uncertain over what choices are best for them and their 
individual financial future.
    The commercial sector knows that the natural behavioral 
response of a consumer to a multiplicity of options and 
complexity of choices can lead to doing nothing at all. 
Industry works to simplify this and has done so for decades, 
but actually simplifying the underlying Tax Code would make a 
big difference and help taxpayers make better decisions for 
their financial future.
    In the same way that electronic filing was a public/private 
partnership, in 2002, President Bush wanted to ensure free tax 
services were available to low- and middle-income taxpayers to 
reduce compliance burden. That policy objective led to creation 
in 2003 of the IRS Free File program, which is provided at no 
cost to either the government or the taxpayer using the 
services. The result over the last 15 years has been a donation 
of more than 50 million free tax returns and electronic filings 
to American taxpayers of modest means. It is operated under 
standards, requirements, and consumer protections, governed by 
the IRS while ensuring competition and consumer choice.
    That kind of public/private partnership has saved public 
funds and saved taxpayer compliance costs. More recently, a 
public/private partnership between the IRS, the State 
departments of revenue and the private sector was instituted to 
fight cyber fraud being launched against the American tax 
system internationally. That effort, the IRS Security Summit, 
has now been underway for more than 2 years, and IRS has 
reported that it has slashed cases of reported identity theft 
refund fraud by more than 50 percent.
    And to take the fight to the next level, the summit has 
created an Information Sharing and Analysis Center, a tax ISAC, 
as exists in the financial services sector and the aviation 
sector, as the next phase of the public/private partnership to 
ensure a proactive strategic defense long term.
    As policymakers contemplate tax simplification reform, it 
will be important that public/private partnership and these 
divisions of labors be preserved and strengthened.
    Over the last several years there has been much discussion 
about creating a simplified postcard tax return. We would 
observe that, in today's environment, we are really talking 
about an electronic postcard, as the American tax system has 
moved well beyond paper.
    Moreover, an electronic postcard would fully benefit from 
the essential security safeguards already adopted by the IRS 
security summit process, which protects both the taxpayer and 
the integrity of the tax system.
    [The prepared statement of Mr. McKay follows:]

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    Chairman ROSKAM. Mr. McKay, let's do this, we can continue 
to inquire and we are going to be able to get to, I think, the 
rest of the basis of your testimony.
    So Ms. Stout.

         STATEMENT OF JANIA STOUT, PRACTICE LEADER AND 
        CO-FOUNDER, FIDUCIARY PLAN ADVISORS AT HIGHTOWER

    Ms. STOUT. Thank you, Chairman Roskam, Ranking Member 
Doggett, and Members of the Tax Policy Subcommittee for the 
opportunity to speak with you about the importance of tax 
incentives for retirement savings.
    My name is Jania Stout. I'm the Practice Leader and Co-
Founder of Fiduciary Plan Advisors. Fiduciary Plan Advisors is 
an independently owned provider of fiduciary advice to 
retirement plan sponsors and their hard-working employees.
    I bring more than 20 years of experience in retirement plan 
consulting for plans of all sizes. I advise 140 retirement 
plans, covering approximately 50,000 employees and $2.4 billion 
in retirement savings.
    I also serve as Vice President of the National Association 
of Plan Advisors. NAPA is the voice of the retirement plan 
advisory community and is part of the American Retirement 
Association.
    The message I want to convey today is that the current tax 
incentives are working very well to promote good savings 
behavior for tens of millions of American workers. Seventy-five 
percent of households have access to a workplace retirement 
plan, and 82 percent of them are participating.
    The most important factor in determining whether workers 
save for retirement is access to a workplace retirement plan. 
Moderate-income workers are 15 times more likely to save if 
they have a plan at work versus less than 5 percent save in an 
IRA if left on their own.
    Tax reform proposals that freeze retirement contribution 
limits and cap the exclusion for retirement contributions will 
discourage small businesses from offering retirement plans. I 
recommend to all my clients that they offer both a Roth and a 
pretax contribution option in their plan design. A Roth option 
can be beneficial for millennials and lower wage earners.
    Having the choice is important. We have even started 
discussing with our clients the option of doing an automatic 
enrollment into a Roth source. However, any policy move toward 
more reliance on Roth contributions must be accompanied by 
other changes to the tax incentives to expand coverage and 
benefit security.
    Expanding workplace plan coverage is critical to building 
retirement security for the middle class. To this end, I 
support proposals, such as increasing the retirement plan 
startup tax credit and adding a credit to encourage automatic 
enrollment.
    In addition, I support the pooling of unrelated employers 
into a single plan, an idea proposed by Congressman Buchanan, 
Neal, Renacci, and Kind. Pooling plans will produce economies 
of scale by lowering both employer and plan participant cost, 
which will boost retirement plan coverage.
    The most significant reduction in retirement security is 
associated with the cash-outs that often occur during a job 
change. I have helped hundreds of participants figure out how 
to roll over their retirement savings from an old employer into 
their new employer's plan.
    To address this challenge, I support recommendations 
regarding authorization of a national retirement clearinghouse 
which would facilitate consolidation of retirement accounts 
when employees change jobs.
    In addition, the Committee should consider Congressmen 
Johnson and Neal's SEAL Act, which permits individuals to 
continue to repay plan loans if a participant becomes 
unemployed or their retirement plan is terminated.
    A Medicare-eligible couple at age 65 will need at least 
$260,000 in savings for healthcare in retirement. Health 
savings accounts are the best way to save for this expense. To 
this end, we propose providing plan sponsors the option of 
adding an HSA feature to their 401(k), as Congress did when it 
allowed 401(k) providers to add an IRA to their plan in 2001. 
Integrating HSAs into the 401(k) in this fashion has the 
benefit of providing participants with access to lower cost 
investments offered in the 401(k) and holistic financial advice 
for savings for both health and retirement needs.
    I applaud this Committee's work to make tax rates on small 
businesses more competitive by reducing the tax on pass-through 
income. In that spirit, I want to highlight a technical issue 
related to small business retirement plans. It is critical that 
retirement plan contributions by shareholders or partners of 
pass-through entities be deducted only against the income that 
is classified as reasonable compensation. The value of offering 
a retirement plan to employees is preserved when the tax rate 
related to the deduction matches the tax rate the employee will 
pay when they retire.
    Thank you again for the opportunity to participate in this 
important discussion. I would be pleased to discuss these 
issues further with the Committee and answer any questions you 
may have.
    [The prepared statement of Ms. Stout follows:]

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    Chairman ROSKAM. Thank you, Ms. Stout.
    Mr. Rodriguez, I let the majority witnesses go over a 
little bit, so feel free to stretch your legs. You know what I 
am saying.

    STATEMENT OF ERIC RODRIGUEZ, VICE PRESIDENT, OFFICE OF 
         RESEARCH, ADVOCACY, AND LEGISLATION, UNIDOSUS

    Mr. RODRIGUEZ. Well, I appreciate that. Thank you very 
much.
    Mr. Chairman, Congressman Doggett, and, of course, I want 
to acknowledge our champion of our community, Congresswoman 
Sanchez for providing a lot of leadership on these issues and 
connecting it to the real lives of all Americans but certainly 
Latino Americans.
    Thank you for inviting me today to appear this afternoon on 
behalf of UnidosUS. For those of you who don't know, UnidosUS, 
it is formally the National Council of La Raza. That is our new 
name. So I appreciate the opportunity to be here.
    For over 2 decades, I have worked on economic security, 
poverty issues in the Latino community, and this particular 
topic is very important and, of course, very timely. As you 
know, the Tax Code has considerable influence over the economic 
security and mobility of workers. And a lot has changed since 
1986.
    For instance, at that time, Latinos represented just 8 
percent of the total U.S. population. Today, Latinos represent 
17 percent of the U.S. population. Today, Latinos are at 56 
million strong and growing throughout the country. But at the 
same time, Latinos are twice as likely to be in poverty than 
their white peers, and income and wealth gaps remain quite 
wide.
    For instance, in 2013, the average Latino family had just 
$1 for every $10 in the average white person's household. A 
congressional rewrite of the Tax Code stands to either improve 
or worsen economic and wealth disparities for these households.
    Moreover, as a previous witness has mentioned, millennials 
are very important as we look out to the future. Sixty percent 
of Latinos are millennials or younger. And how tax policy 
affects them and influences their economic behavior will have 
complicated implications for the long-term viability and 
prosperity of the Nation.
    For these reasons, I am very pleased to be here and 
represent our perspective on tax reform proposals currently 
under debate.
    As you know, the Federal income tax is intended to collect 
revenue to fund important public goods and services. These 
include defense, veterans affairs, healthcare, public 
education, infrastructure, and safety net, and environmental 
protections, among many other public goods that we all enjoy.
    The Tax Code can also raise incomes of working-class 
Americans while delivering economic growth, but only if 
lawmakers are intentional about centering the benefits of 
reforms on middle class working families and individuals.
    Over 90 percent of Latino voters we recently polled favor 
tax incentives to help them buy homes, go to college, save for 
retirement, or just make ends meet. Whatever we do in tax 
reform ought to start with ensuring that revenue is adequate to 
meet these needs and that tax reforms are equitable for all 
taxpayers.
    Recent tax proposals from the Administration and House 
Republicans threaten to weaken the government's ability to 
protect and serve taxpayers and will unfairly benefit the 
wealthiest.
    As it stands, too much of the roughly $700 billion in tax 
expenditures the government currently spends help the rich get 
richer, through targeted deductions, preferential tax rates, 
and other tax breaks.
    Proposals that aim to inflate those benefits at the cost of 
workers are very concerning to us. Specifically, the Trump 
administration intends to pay for proposed tax breaks through 
budget cuts on programs that help American taxpayers. The Trump 
plan would result in over $5 trillion, at least, in lost 
revenues in the first decade.
    In the absence of credible ways to pay for these breaks, 
the Administration's budget framework funds these at least in 
part by cutting funding for crucial programs that support 
families.
    Both the Trump and House tax proposals would accelerate the 
growing wealth divide. These tax plans would provide massive 
tax breaks to the wealthiest at the expense of middle class and 
working families. They have no inheritance tax, no alternative 
minimum tax, generous pass-through rates, and a list of tax 
breaks for a small number of ultra wealthy individuals while 
few benefits go to the middle class and working families.
    There is no question that tax reform is overdue and that 
plans for a reform should do more for working class taxpayers. 
To make sure we arrive at that system, deliberations must be 
transparent, have to be bipartisan, and include a broad range 
of perspectives and voices.
    Inclusivity is more important than ever as the face of 
America changes. In 2044, 14 States across the Nation will be 
majority minority. An American consensus on tax reform that 
includes the perspectives of diverse stakeholders and reflects 
shared values about tax and spending policies is our best 
chance at establishing a modernized system that will stand the 
test of time.
    Accordingly, tax reform proposals ought to raise sufficient 
revenue to build a strong economy and invest in our future, are 
progressive and ensure that everyone, including the wealthy and 
corporations, pay their fair share; support working families 
and children; and reduce poverty; and promote economic mobility 
and asset building among middle class and working families.
    In sum, tax reform is needed and important to all middle 
class and working Americans, including Latinos. But no tax 
reform plan should make our government weaker or worsen the 
economic and wealth divide among American taxpayers.
    The path to reform ought to be a transparent and bipartisan 
process, a process that incorporates the views of taxpayers of 
all walks of life. Thank you for the opportunity to share these 
views. I look forward to your questions.
    [The prepared statement of Mr. Rodriguez follows:]

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    Chairman ROSKAM. Thank you, Mr. Rodriguez, and to all the 
witnesses.
    Now, I will invite Mr. Reichert to inquire.
    Mr. REICHERT. Thank you, Mr. Chairman.
    The Chairman is very gracious in allowing Members of the 
panel to go before he asks his questions, and I appreciate that 
consideration.
    Thanks to all the witnesses for being here and especially 
thank you to the Chairman. Mr. Chairman, you worked with my 
predecessor--we didn't get a chance to talk about this 
earlier--but Jennifer Dunn was a Member of Congress prior to my 
arrival. And I was honored to follow in her footsteps, as I am 
sure you were honored to work with her.
    Mr. ARCHER. Yes.
    Mr. REICHERT. And she, I know, would agree with you and I 
that we are at a time in history where we have the opportunity 
to really make a difference here in the lives of American 
people, all American people, all taxpaying citizens in this 
country, hard-working Americans.
    And just as the Chairman has pointed out, the complexity of 
the Tax Code and, of course, your recognition and all the 
people on the panel's recognition of how complex the Tax Code 
is and at least 15,000 changes since 1986. I think your words 
``simplify'' and ``rationalize''--``rationalize'' is the word 
that really caught me. We are looking for a rational approach 
to this, and ``simplify.''
    This certainty--because I think it would provide 
certainty--would help Americans invest, grow, and hire across 
this country and provide for their families. And I am just 
interested in hearing from you, Mr. Chairman. What do you think 
permanence means for the average American worker?
    So they don't really--you know, they look at the Tax Code. 
It is so complicated. If we can just explain permanence, 
because they haven't seen it for so many years. They see 15,000 
additions, tax extenders, and all this other stuff going on. 
What does that really mean for the American people, do you 
think?
    Mr. ARCHER. Well, I think it would depend on the economic 
status of each of the Americans. The more that an American has 
to rely or depend upon special provisions in the Code and watch 
them change, it is very, very bad, because, to me, you should 
be able to plan your life without having dramatic changes occur 
that are going to change everything for you and you can't 
anticipate it. So it depends on the condition of the individual 
as to the impact.
    But, Congressman Reichert, one thing I intended to say in 
my remarks, which I ran over and I did not get to do, is that 
the real failing, the major failing of the effort in 1986 was 
the fact that there were major changes that were retroactive. 
And if I were to give you one caution: Do not include any 
retroactive provision in your tax reform. The retroactivity--
and it is one of the major reasons that I led the opposition to 
the 1986 Tax Reform Act--undermines the value of real estate in 
the country and brought about the demise of thousands and 
thousands of savings and loans, which cost the Federal 
Government well over $125 billion to correct. And that was 
avoidable if you simply make your changes prospective.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Ms. Stout, quickly, Mr. Kind and I have included a related 
provision in our Small Businesses Add Value for Employees Act. 
I am referring to your testimony, the SAVE Act. How could 
allowing private employees to pool together to provide multiple 
employer private sector 401(k)s benefit both American workers 
seeking retirement security and small business owners hoping to 
provide this for their workers?
    Ms. STOUT. Thank you.
    I think that pooling unrelated employers would help 
tremendously with the coverage issues that we have. I work 
around the Baltimore/DC area and work with lots of small 
employers, and they don't have the administrative staff to be 
able to handle the complexity of, you know--that happens when 
you go to put a plan in place.
    So pooling these plans together gives them the economies of 
scale to have lower cost so their working employees will have 
access to a plan, number one, but also a plan that they--that 
is reasonably priced, because you can pool these unrelated 
employers together. And I think it would make a big impact to 
the coverage issue we have.
    Mr. REICHERT. Thank you. I yield back.
    Chairman ROSKAM. Mr. Doggett.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    And thanks to each of our witnesses.
    Let me say to Chairman Archer, first, I agree with you 
completely about retroactive provisions, and it is unfortunate 
we had some included in the first tax bill we considered this 
year.
    While you and I may differ on some aspects of tax policy, I 
also want to take this opportunity to thank you for your 
leadership in creating the Archer fellowships at the University 
of Texas. There is hardly a semester that goes by that I don't 
have one of those young people in my office.
    And I know colleagues of both political parties and a 
number of governmental entities and nonprofit organizations 
have them here, and it is a great contribution to us and to 
each of those young people to be able to get engaged in public 
service. Thank you.
    Mr. ARCHER. Thank you. Thank you for that commendation. We 
are very proud of the Archer fellows. And one of them is 
actually sitting in the back of the room behind the Members 
today.
    Mr. DOGGETT. Great. Thank you.
    The importance of today's hearing should not be 
understated. We have gone some 13 months without any hearing 
anywhere in America, to my knowledge, on the impact of the 
proposed Republican tax reform on individual taxpayers. And 
there is a great deal that needs to be explored about that.
    We are about to leave in a few days until sometime after 
Labor Day, and in theory, we are about to have a tax reform 
bill that, as the Chairman indicates, could have far-reaching 
implications for individual taxpayers. I believe we need a 
thorough consideration of it with a wide range of opinion.
    I am disappointed that the testimony of Seth Hanlon, from 
the Center for American Progress--like a witness that I offered 
last week--was rejected for this hearing. I think we need to be 
hearing more not less.
    And, Ms. Stout, I think your testimony is a good example of 
that. Just the issue of retirement, you are the first person to 
testify this year before this Committee concerning retirement 
plans.
    We know that there are millions of our neighbors across 
America who do not have adequate savings for their retirement. 
And looking at how our Tax Code impacts that and what changes 
we need to make I think is very important. You have offered 
valuable perspective, but we could devote one or more hearings 
just to exploring that question.
    And, frankly, after looking at the Republican blueprint, I 
am not sure exactly what is being proposed on retirement, and I 
think that there are many people within the industry and the 
financial services industry that aren't sure either and have 
voiced some concern about the changes that may be contemplated 
by the very vague language of that provision.
    I will tell you, the reason to look at retirement plans is 
also--it is a significant reason because of what we learn about 
the way these systems are working today. Sixty percent of 
American households get 16 percent of the tax benefits today on 
retirement plans. And the 20 percent top income earners get 66 
percent of the retirement tax incentive benefits. So we have a 
system in which many working families are not adequately 
prepared for retirement. They have only a Social Security check 
and modest savings and maybe some ownership interest, some 
equity in their home.
    And we need to look at retirement savings in terms of how 
we will reach out and support more, how we can, as you said, 
involve more small businesses in being able to offer plans for 
their owners and their employees. And how this measure affects 
those individuals is very important.
    Mr. Rodriguez, I would ask you to comment about some of the 
challenges working families have in saving for retirement and 
to comment on what the impact on working families would be if 
we adopt another huge Bush-type tax cut that is not paid for.
    Mr. RODRIGUEZ. Thank you, Congressman, for the question.
    You know, it is a big problem certainly with low-income 
populations where retirement savings, opportunities at work 
just aren't there. And as you said, it is absolutely right: The 
Tax Code incentivizes the most retirement savings for those 
already doing it. And I think we have to find more ways to 
incentivize those at the lower end, those who are becoming more 
mobile, to be able to save for retirement.
    So moving around the incentives, as you were saying, is 
going to be an important fix. It is part of the reason why we 
have such an enormous and growing wealth gap across the 
country, is because of the way that the Tax Code incentivizes 
savings primarily accruing at the top versus in other areas.
    Now, we do have some great concerns about Rothification. I 
think we should proceed with some caution on that as we look at 
the entirety of the package, in part because those could be 
exploding tax expenditures in the outyears that really squeeze 
our budgets in ways that would make funding and revenue really 
inadequate for the things we care about.
    Mr. DOGGETT. Thank you. Thank you, all.
    Chairman ROSKAM. Mrs. Noem.
    Mrs. NOEM. Thank you, Mr. Chairman. I appreciate you 
holding this hearing today.
    Too often in the news we hear about multinational, 
international companies, and we know that all of these 
companies have tax departments that help them pay their taxes 
and figure out exactly what they owe.
    But in reality, most of this complexity falls on hard-
working taxpayers, people who struggle to pay their taxes 
correctly and try to navigate it around the kitchen table and 
get through the process and do it sometimes with the help of a 
CPA or a tax preparer but sometimes they don't have that 
advantage.
    We would all agree that everyone needs to pay what is owed, 
but the current Tax Code robs people of their most precious 
commodity, and that is their time. And so I would like to focus 
on that a little bit today. Time could be better spent with 
their families, making their business more productive, 
investing in new opportunities, local community groups.
    I talked to one CPA in South Dakota who told me this. He 
said: As a certified public accountant with 33 years of 
experience, I have watched the Tax Code become more complex, 
making it both costly and difficult to comply with. At the same 
time, the quality of customer service within the IRS has 
fallen. As a result, I see within my practice in clients a 
decrease in confidence in the tax system as a whole.
    Tax reform gives us the opportunity to address these 
matters, to ease frustrations, and to restore faith and 
confidence in our tax systems.
    So we need tax reform, not just for American businesses 
but, more importantly, for American families and individuals 
who are struggling with the burden that it places on them every 
day.
    Chairman Archer, I would like to visit with you a little 
bit. I want to thank you, first of all, for being here and 
making it a priority and then all of your years of service as 
well. But I wanted to ask you what you have seen over the years 
in an erosion in American confidence in the tax system.
    But then I want to focus in particular about your 
perspective on permanence in the Tax Code, because we have 
people propose to us constantly, and you have dealt with it 
over the years, of tax extenders or putting tax policy in place 
for a short period of time and what a disservice that does to a 
business or a family trying to plan for the future.
    Could you speak a little bit with your background knowledge 
about the importance of having permanence in the Tax Code when 
we look at reforms?
    Mr. ARCHER. Well, I am a strong believer in permanence, but 
I am not weighing everything in my life. I like things to be in 
a position and know that I can come back 5 years later and they 
will still be there. That is not life, unfortunately.
    Mrs. NOEM. Yeah.
    Mr. ARCHER. That is not the way things work. But there is 
no reason why the Tax Code cannot be one that is not forever 
changing because things are expiring. There are changes that 
will happen, and taxes will have to be changed at some point. 
We know that. That is a certainty in life, but not one where, 
every time you put something in, you have to say, for revenue 
purposes, it is going to expire at a certain time, and, 
therefore, we are going to change the revenue effects.
    Mrs. NOEM. You know, I think you make a valid point there. 
Because I have spent my life farming and ranching, and so we 
have seen in different policies, and when it has come to 
energy, short-term tax policies to maybe get an industry off 
the ground or something to get it started, knowing it is going 
to sunset when it gets its feet under it.
    I think we do see that at a period of time. But also I know 
from starting a business from scratch, from running a hunting 
lodge that I started from nothing and running a family 
restaurant and running an insurance agency too, that if I am 
going to go to the bank and ask for a loan, they are going to 
want to know what my liabilities are going to be and what my 
business plan is. It is hard to do that unless you have a 
permanent Tax Code. So there is a role maybe for both in 
different parts of the Tax Code. Is that maybe the point that 
you are making, that there is a role in certain times----
    Mr. ARCHER. Yes.
    Mrs. NOEM. Okay.
    Mr. ARCHER. Yes, absolutely. And in addition, it seems to 
me that taxes need to be as simple as possible. And I know that 
from doing my own tax return. I think your idea of trying to 
use a postcard for--I am not sure I would ever qualify to do 
that, but for the majority of Americans, if they could fill out 
on a postcard and send it in and say that is going to be it, 
that has a very attractive appeal. But whether you can do that, 
I don't know, because that means that you have to eliminate an 
awful lot of deductions.
    What I worried about from the beginning of my Chairmanship 
of the Committee was having a Tax Code that tried to do 
everything itself for the American people. I think tax credits 
are not good.
    And the idea that, ``Well, we can make things happen in our 
society by giving a tax credit,'' I don't agree with that. And 
I think that complicates the Code and makes it difficult for 
the American people to understand it.
    Mrs. NOEM. Thank you, Chairman.
    I yield back, Mr. Chairman.
    Chairman ROSKAM. Ms. Sanchez.
    Ms. SANCHEZ. Thank you, Mr. Chairman.
    And thank you to our witnesses for being here today.
    I am a little bit disappointed that it took more than half 
a year before we finally had our first hearing on how tax 
reform would impact families and individuals, but I am glad 
that day has arrived and we are here.
    It is impossible for me to address everything I feel should 
be a priority for individuals and families in just a few 
minutes, but I am going to just try to hit on a few key points 
before asking some questions.
    I believe, and I have said this many times, that a lasting 
tax reform needs to be bipartisan, and it needs to be 
comprehensive. And I would strongly caution against a go-it-
alone strategy that seems to have taken a hold of tax reform 
for the time being.
    Lasting tax reform must be bipartisan. History is not on 
the side of going it alone. Tax reform also cannot be balanced 
on the backs of the middle class who already feel like they are 
being squeezed from all directions.
    So far, the plans and tweets that I have seen from the 
House Republicans and the President would result in an 
astronomical tax cut to the tune of $1.3 million per wealthy 
household.
    The people that I represent in southern California, which 
the majority are hard-working middle class families and 
individuals, would receive roughly 70 cents per day under these 
plans. And I am sorry, but 70 cents a day is not going to help 
those families to better afford childcare, eldercare, plan for 
their retirement, or even take a small family vacation.
    Mr. Rodriguez, I would like to turn to some points you 
raised in your testimony. As we know, the young, growing Latino 
population in this country is going to make up roughly a third 
of the U.S. workforce in the next decade. This is a population 
that has unique concerns within our Tax Code, but they also 
face the exact same barriers as other working families across 
the country.
    Given the younger age of this population, many of them have 
not even entered the years when childcare and eldercare 
expenses are going to become some of the largest burdens and 
challenges that they face.
    One of the principles that you highlighted in your written 
testimony was the need to support working families and children 
while also reducing poverty. Can you elaborate a bit more on 
the need for the Tax Code to address child and family care 
expenses in a meaningful way?
    Mr. RODRIGUEZ. Sure. Thank you, Congresswoman.
    It is exactly right. I think that the most effective 
antipoverty program we have right now is the earned income tax 
credit and the child tax credit, the refundable portion, and I 
know that is a bad word before some in the Committee, but it is 
enormously important. And 20 million families receive these 
credits, and it helps to lift 9 million families above the 
poverty level every year. These are working families raising 
children, and so finding ways, looking at the population that 
is young, hard-working, raising families, and providing and 
targeting better benefits or incentives and tax incentives to 
this group, who is beginning to either save for retirement or 
buying homes or doing the kinds of things that are living the 
American Dream, but need more opportunities to do so, and the 
Tax Code can do that.
    So, if we can find more ways to do that, certainly some of 
the other elements--education is key. Childcare is also very, 
very key. There is a number of different ways that the Tax Code 
can assist these families directly.
    Ms. SANCHEZ. Thank you.
    With respect to the EITC--and I am glad that you mentioned 
it--that is a tax credit for middle and working class families. 
I feel like the rhetoric surrounding EITC paints it as just a 
handout, and can you explain why that is a wrong way to 
characterize the EITC?
    Mr. RODRIGUEZ. Yes. Absolutely. These are all working 
families, working very hard, but just happen to be working for 
low wages and, even in accumulated households, don't reach the 
threshold level to be able to pay Federal tax liability, but 
they pay payroll taxes. They pay into local and State taxes. 
They pay sales taxes in places. And they are burdened by these 
taxes. So the earned income credits are and the child 
refundable tax credit is an important way to assist these 
families.
    Refunds go to, you know, buying a car. It helps you go to 
work or, you know, paying off bills or doing very, very 
important things that also generate economic activity in all of 
the communities across the country that many of the Members of 
the Committee represent.
    Ms. SANCHEZ. And in the final seconds, can you please tell 
me what is the--what would be the outcome of our Tax Code and 
doing a tax reform that gives the majority of the tax cut 
benefit to the very wealthy? What will that mean to our 
country?
    Mr. RODRIGUEZ. My biggest concern--thank you, 
Congresswoman. I mentioned that the wealth gap right now 
between Latinos and non-Latinos, white households is 10 to 1 on 
the dollar. My worry is that grows to 15 to 1, to 20 to 1 with 
increasing incentives for those at the very top of the wealth 
scale. When we eliminate inheritance taxes, when we look at the 
pass-through taxes, and we are just giving those tax breaks to 
a very small number of very wealthy households getting large 
tax cuts, my worry is that increases those disparities when we 
are having conversations about narrowing and improving equality 
across the board.
    Ms. SANCHEZ. Thank you so much.
    Chairman ROSKAM. Mr. Holding.
    Mr. HOLDING. Thank you.
    I want to thank the panel for all of your testimony today. 
I am particularly pleased to see Chairman Archer. The Chairman 
served with my predecessor on this Committee, Jim Martin. Of 
course, there was a 30-year gap between his service and my 
service on the Committee, but I am pleased to be--I am pleased 
to see Chairman Archer, and when I see former Governor Martin 
in North Carolina next month, I will give him your regards.
    Mr. Chairman, thank you for having this hearing. Over the 
past number of hearings we have had, we have discussed in 
detail the importance of leveling the playing field and 
ensuring that businesses have a Tax Code that will allow them 
to compete here at home and around the globe, and I strongly 
believe that this fairness in the Tax Code is just as important 
to individuals, our citizens, as it is to our companies.
    Some examples of unfairnesses in the Code to individuals, I 
will illuminate two. First is the alternative minimum tax, 
which was implemented 50 years ago, was put in place to address 
a small number of people who were paying no Federal income tax 
due to certain tax-preferred vehicles, but, today, it is clear 
this provision no longer addresses the original intent of the 
law. It instead creates an unnecessary and costly burden that 
outweighs the benefit of the provision.
    Similarly, another provision, our current system of 
citizenship-based taxation, which was implemented during the 
Civil War as a means to discourage wealthy Americans from 
fleeing the country and, thus, depleting necessary wartime 
coffers, today, this burdensome regime of citizenship-based 
taxation has led to record high expatriations and hampered the 
ability of our citizens to compete for jobs across the globe. 
Amazingly, it costs up to 40 percent more to hire American 
citizens abroad in many foreign jurisdictions, and so this 
section unfairly disadvantages our citizens and discourages 
American multinational countries from hiring Americans to run 
their international operations and also discourages foreign 
multinationals from hiring Americans to run their operations.
    So, while moving to a territorial system for corporations 
is an integral part of our blueprint and a necessary part of 
tax reform, the competitive disadvantage will only become more 
apparent and grow if we fail to move to a residency-based 
taxation for individuals. So these are two examples that we 
have the opportunity to address on the individual level to have 
a fair tax reform plan for individuals as well as for 
corporations.
    You know, another element that maybe I can get some comment 
on has to do with compliance. You know, the United States has a 
relatively high rate of voluntary compliance when it comes to 
individuals filing their tax returns, but as the tax system has 
gotten more complex, more and more individuals have to turn to 
professionals, tax preparers to help with their returns, so, 
you know, I believe that simplifying the Tax Code will preserve 
our tradition of voluntary compliance.
    Chairman Archer do you have any comment on that, perhaps?
    Mr. ARCHER. Well, needless to say, for one who continued to 
do his own tax return, simplification has a lot of appeal to 
me, and I think that it probably for most individuals may be 
one of the major concerns that people have, but, again, 
politically, it is not simple to get simplification. It is 
something that has been out there looming as an attraction for 
Members of this Committee for as long as I can remember, but in 
the end, we always seem to make it more complicated because the 
Tax Code has been used by so many people on the outside as a 
means of making whatever they want to occur happen in the 
country. And it has been used, in my opinion, far too much. And 
I feel that way about tax credits. The use of tax credits to me 
is not the purpose of the Code. The Code is primarily designed 
to raise the money to pay the government's bills and not to 
create all of these complexities.
    Mr. HOLDING. Thank you. Thank you, Mr. Chairman.
    Chairman ROSKAM. Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman, and thanks for 
holding this hearing, and thank you to all the witnesses for 
being here.
    Chairman Archer, thank you, and thanks for your previous 
service to this institution, and I, too, want to thank you for 
bringing up the issue of retroactivity. And this Committee has 
talked a number of times over the years as to repealing of LIFO 
and doing that retroactively would just be a monster for people 
who have used that tax provision to deal with. I appreciate you 
bringing that up.
    And, Ms. Stout, I want to second Mr. Doggett's comments on 
your bringing up the issue of workplace savings and retirement 
accounts. If we did nothing else in this Congress but provided 
a means by which people could save while they are working for 
their retirement years, it would mean so much for retirement 
security. That would be an excellent outcome.
    When we are talking about tax reform, a couple of things 
that are really important to me: One is that whatever we do is 
paid for. I don't think we can afford to charge our kids and 
our grandkids with tax cuts that we give out today. And I think 
we have to insist on making sure that any reform that we do is, 
in fact, reform, not just an unpaid-for tax cut.
    And we also have to focus--I agree with some of my other 
colleagues have mentioned this--focus on middle and working 
class individuals. This is a group of people in this country 
who really been left behind, and we need to figure out how we 
can incentivize their being able to get ahead and make more 
money.
    And I think one area of doing that is to understand the 
importance of furthering education. Greater education--and all 
types of education, higher education, career training, low-tech 
training, whatever it might be--all of that is value added. The 
more that you have, the rule is the more that you make. And we 
need to figure out how to help people make more money and get 
better jobs and get the jobs that people want.
    So I would really hope that we are able to focus on those 
types of things in our effort. It needs to be about the 
American people, and the American people who don't have 
lobbyists working for them on a day-to-day basis and the 
American people who haven't been able to take advantage of this 
Tax Code that the Chairman referenced is being used to help 
everybody under the sun but them.
    Mr. Rodriguez, I want to follow up on what Ms. Sanchez 
talked about because it ties in with my concern about paying 
for whatever it is we do in this tax reform. In the past, you 
know, we have been down this road before. We have seen this 
movie before. We do big tax cuts, and then we just pass the 
bill on to somebody else. We have a budget that has been 
referenced already today that is focused on cutting important 
aspects of our healthcare in order to pay for or to eventually 
pay for tax cuts or tax reform.
    Can you tell me how cuts to Medicare or Medicaid will help 
working class people?
    Mr. RODRIGUEZ. They don't. We have a more recent example, 
too, in the Kansas experiments of how this really doesn't work 
and puts enormous pressure on States to be able to provide 
adequate funding for services like education and workforce and 
programs that you mentioned that are enormously important to 
growth and economic mobility in those communities. Look no 
further than that to show you how this kind of approach to our 
budget and taxing system is wrong-headed.
    Mr. THOMPSON. Kansas was so bad that they had to repeal 
what they had done.
    Mr. RODRIGUEZ. Correct.
    Mr. THOMPSON. And the Republican legislature recognized 
that to the point where they overrode the Republican Governor's 
veto of that repeal. It was devastating to people in that 
State.
    Mr. RODRIGUEZ. Absolutely. And if you look at the current 
budget resolution proposal, you will look at the Trump budget 
as an example, you can see massive amounts of cuts to programs 
assumed, $1.3 trillion in the nondefense discretionary 
programs. That will put enormous pressure on these program 
areas. And you are right: In the healthcare bill, we saw $500 
billion or so in tax cuts, and of course, $800 billion----
    Mr. THOMPSON. I am running out of time, but if you would, I 
would like to hear from you or you can submit it in writing, I 
would like to see a list of tax reform that you think would 
help middle and working class individuals.
    Mr. RODRIGUEZ. I would be happy to do that.
    Mr. THOMPSON. Thank you.
    I yield back. Thank you, Mr. Chairman.
    Chairman ROSKAM. Mr. Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman, for having this 
meeting.
    And, Mr. Archer, thank you for being here and your service 
to our country.
    The reason I love to be on this wonderful panel is because 
my colleagues always remind me why I became a Republican on my 
left. And they have heard this story before about my dad when I 
was 16 years old and took my first job at McDonald's, and my 
dad went through all the different taxes that got taken out of 
my check and said: Don't let the Tax Code change your behavior. 
You need to save money and you need to continue to work hard 
and make more money and get a good job.
    And, today, when I was a Realtor--and, Mr. Rodriguez, you 
mentioned this and kind of got me thinking again, because I am 
looking at your bio, and it was a very good bio--but what was 
amazing to me, I never realized this until I started my own 
business, the first time in my life that I had to send a check 
to the IRS every quarter, which is very different than being a 
Congressman or working for a Congresswoman or a Congressman or 
working in a think tank, because you put it all on the line, 
and you are actually sending that check to the IRS.
    Now, what is fascinating to me is today--you mentioned 
pass-throughs. Today, if you are a successful pass-through--and 
no one is going to guarantee that you are a successful business 
owner--in America, you are paying almost 45 percent of what you 
make at the top bracket just to the Federal Government. That 
doesn't include what you pay to the State in income taxes. That 
doesn't include what you pay your local government in income 
taxes. That doesn't include workers' comp. That doesn't include 
anything else that our three levels of government are requiring 
of you.
    So I take issue with the fact that, as a pass-through, 
getting a tax cut is not appropriate. And I learned that from 
my immigrant father who has worked hard his entire life, 
retired now, who always complained about the taxes he paid with 
a sixth grade education as a steel worker, never making a lot 
of money. What great street smarts, Mr. Chairman.
    Ms. Stout, your written testimony was fabulous when I read 
it. You wrote about simplification and consolidation, and you 
concluded that one does not necessarily equal the other, which 
I thought was really interesting. And you specifically 
mentioned the different kinds of employer savings plans, like 
401(k) and 403(b) and 457 plans, and I have heard from a number 
of participants, including teachers and firefighters from my 
district, and in my district, in Columbus, Ohio, Nationwide 
Insurance is the largest provider of 457 plans in the country. 
So can you provide some more detail on the different 
populations that these plans serve and why it is important for 
us to, in considering tax reform, to make sure that we don't 
throw the baby out with the bath water and continue to allow 
for the incentivizing of these plans for people to save?
    Ms. STOUT. Yes. Thank you, Congressman Tiberi. As far as 
the need--there is a need out there to have different types of 
plans, and we still have a need to keep them and simplify them. 
But as far as to answer your question directly as to the 
different employers that are served by the different plans, you 
know, it depends on what type of plan they want. You know, if 
it is a small employer, they might institute a simple 401(k) or 
a simple IRA versus, you know, the midsize companies might do a 
401(k). The nonprofit world has 403(b) plans, and then, on the 
governmental side, the 457.
    So, you know, there are different nuances to each of those 
plans that solve for the needs of those different industries 
and those different groups. I think that we still need to keep 
them, you know, work at simplifying things, but I don't think 
that, you know, one plan solves for everyone.
    Mr. TIBERI. Mr. Rodriguez mentioned in his testimony that 
we should better target middle and lower income folks for 
incentives, and I agree with that, but I found in your 
testimony what was fascinating is that--and let me get this 
right--that the largest groups benefitting from 401(k) plans 
are employees who earn less than $50,000 a year. In the last 
Administration, they worked to cap that amount of money that an 
employee could put in.
    Ms. STOUT. Right.
    Mr. TIBERI. Could that actually disincentivize employers 
from providing those plans and, thus, benefitting those workers 
that me and Mr. Rodriguez want to help?
    Ms. STOUT. Right. Yes. Absolutely. It would have a huge 
impact if we took away the incentives of, you know, small 
businesses offering these plans. They need those incentives to 
get them to the table to even put the plan in place. And we 
have a coverage issue. So we don't want to put anything in the 
way of getting the small business owner to put that plan out 
there to help their workers.
    Mr. TIBERI. Thank you.
    Chairman ROSKAM. Ms. DelBene.
    Ms. DELBENE. Thank you, Mr. Chair.
    And thanks to all of you for being with us here today.
    Mr. Rodriguez, I am coming here today from a Budget markup 
where we have been debating disastrous cuts to critical 
investments in education, in infrastructure, workforce training 
programs, and healthcare, and so I appreciate the reminder in 
your testimony that, when we talk about tax reform, we should 
remember that, first and foremost, we need to have the revenues 
to pay for these basic government functions that serve as the 
foundations for growing a strong and resilient middle class.
    Yet, somehow, over the years, we have moved away from this 
simple concept and the Code has morphed into something of a 
monstrosity with layers of complexity that always seem to 
benefit the wealthiest few while everyone else is left to 
wonder how they keep getting left behind here in Washington.
    Mr. Rodriguez, the Tax Policy Center has estimated that 
under the Republican blueprint the wealthiest taxpayers would 
see an average tax cut of over $1 million, while middle class 
families would get around $200, and the Trump plan offers 
middle class families a paltry one-tenth of 1 percent of the 
$1.4 million cut the richest Americans could expect to see. So, 
at a time when my colleagues on the other side of the aisle 
seem bent on gutting funding for education, healthcare, and 
other critical resources for working families, do you think 
that even $200 per family is anywhere near enough to make up 
for what Republicans want to take away in terms of healthcare 
or education resources?
    Mr. RODRIGUEZ. No, not at all. And it is a huge issue. We, 
of course, do a lot of work in all of those areas between job 
training, education, and healthcare. And we know there are 
great needs and resource needs that are there. So we are 
enormously concerned about that.
    Ms. DELBENE. Thank you.
    Chairman Archer, thank you so much for being with us today. 
I imagine you know firsthand how elusive comprehensive tax 
reform can be, and I agree with many of the things that you 
said in your testimony that tax reform should not be corporate 
only, that it should be permanent to give people some ability 
to plan for the future, and that progress is achievable this 
Congress.
    But there was one word that was conspicuously absent from 
your testimony, and that word was ``bipartisanship.'' And I 
believe, without bipartisanship, that this Committee will never 
achieve any of the laudable goals that you outlined, and I 
wonder, do you agree with that?
    Mr. ARCHER. I certainly believe that it is desirable to 
have bipartisanship, particularly on something that is as 
important as fundamental tax reform. It seems to me, as with 
healthcare reform, both parties should be a part of it. 
Otherwise, it seems to me that it is not going to be as long 
lasting as it should be.
    Ms. DELBENE. And as you know, I am new to the Committee, 
but I have done some homework, and the 1986 tax reform process 
was far more extensive than what the Committee has done this 
year. The Tax Reform Act of 1986 was preceded by 30 days of 
full Committee hearings on tax reform, five hearings on the 
Select Revenue Measures Subcommittee, and three hearings in the 
Oversight Subcommittee, and a full 26 days of markup between 
September 18, 1985, and December 3, 1985.
    And the Senate Finance Committee put in the hard work as 
well: 36 days of full Committee public hearings and 6 
Subcommittee hearings, and 17 days of markup. And that is a far 
cry from what we are hearing now from Finance Chairman Hatch, 
who just yesterday said that the Finance Committee may not have 
a single hearing on tax reform this year.
    So, Mr. Chairman, I would like to enter into the record the 
legislative history of the 1986 Tax Reform Act with your 
permission.
    Chairman ROSKAM. Without objection, so ordered.
    [The submission of The Honorable Suzan DelBene follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

                                 
    Ms. DELBENE. Thank you.
    Chairman Archer, do you think that the Committee and 
Congress as a whole conducted a deliberative examination of 
revenue issues in the 1986 tax reform?
    Mr. ARCHER. Well, clearly the 1986 tax reform took a lot of 
time to put together, and in the end, it prevailed with some 
very hard-hitting pressures from the top on both sides, I must 
say. I was very concerned, as I mentioned earlier today, with 
the fact that there was retroactivity in there that was going 
to undermine the value of real estate, and it was put in there, 
of course, to get extra revenue. And it disturbed me enough 
that I wanted to offer a motion to recommit with instructions. 
And I am convinced that I had the votes to beat the bill if I 
had been permitted to offer that motion to recommit with 
instructions.
    Unfortunately, and I mentioned that there was a lot of 
pressure from the top, the ranking Republican in the House was 
called by the White House and told that he could not let me 
offer the motion to recommit with instructions and called me 
into his office and told me that he was going to have to 
personally take it away from me. There wasn't anything I could 
do. The power was there. It was unprecedented because the 
ranking Republican on the Committee was for the bill, so he had 
taken himself out of the process. I was the second ranking, and 
traditionally, I should have been given the motion to recommit.
    So those things were going on behind the scenes. And in 
addition, of course, you not only had the President who signed 
on, but you had the Chairman of the Committee, who was then a 
Democrat, who was totally committed to it. And the pressure 
that he put on in the Committee was pretty incredible, too. So 
you had bipartisanship, but bipartisanship, in my view, did not 
produce a bill that was in the best interests of the country.
    Ms. DELBENE. Thank you. My time is expired.
    Mr. ARCHER. But that was my own prejudice, you understand.
    Chairman ROSKAM. Mr. Marchant.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    As I go around my district and talk about tax reform, the 
thing that I hold up at most of the meetings is this postcard. 
And believe it or not, this postcard is much more popular than 
the IRS Code as it exists. People are intrigued by it. I can't 
say that they read every single line of it and make 
calculations in their head on the spot, but the biggest 
question that I do get in my district about this postcard is, 
can I fill the postcard out if I file the alternative minimum 
tax? And I say there is not going to be--in our plan, there is 
not going to be an alternative minimum tax. So, for a great 
percentage of people in my district, probably the most 
frustrating part of the Tax Code is, in fact, the fact that 
they have to figure their taxes twice. They figure the first go 
round, and then, of course, they have to go through it again to 
see if they owe this other tax. What kind of effect, Mr. 
Archer, Mr. McKay, what kind of effect does that have on 
taxpayers when they physically usually cannot fill it out 
simply for that reason?
    Mr. ARCHER. Congressman Marchant, I have always been in 
opposition to the alternative minimum tax. It made no sense. It 
was not good tax policy, and in the end, had it continued to be 
in place without change, it would have generated more income 
tax revenue than the regular income tax, and to me, 
that did not make any sense.
    So I think you are absolutely right. I hope you can do away 
with the alternative minimum tax, and if you do, you will do a 
service for the country.
    Mr. MARCHANT. Mr. McKay.
    Mr. MCKAY. Thank you, Congressman.
    Complexity in the Tax Code comes in many forms. I mentioned 
before there is a half a dozen different definitions of the 
term ``dependent.'' There are more opportunities for 
simplifying the Tax Code than there would probably be room for 
in the eventual tax bill that comes out of Congress whether--
whatever Congress decides about any particular provision like 
the alternative minimum tax or any other provision. Our point 
of view is we will, as an industry, both technology and 
professional practitioners, show up and serve to simplify 
people's experience. The postcard is something that this 
industry is well prepared to deliver for the taxpayer. We 
mentioned before it ought to be electronic, but an electronic 
postcard can be a vastly simplified way of complying. There is 
a security issue in terms of a piece of paper that goes into a 
mailbox and so on, but it is actually a more interesting issue, 
and that is--I mentioned before the 1998 act that led the way 
to converting the country to electronic filing. And in the 
course of all that, IRS eliminated from its budget the 
overwhelming number of paper processing plants, the system of 
the old days of how paper returns were processed. But there was 
a huge advantage for the country in it. Putting a paper return 
into that system--and the IRS employees would key in key fields 
from the return--produced about a 20-percent error rate, 
whether the error was the original taxpayer or in the keying in 
of abstracts, about a 20-percent rate, the study said back 
then. Moving to an electronic filing system, that dropped to a 
1- to 2-percent rate of error.
    So there is real advantage in electronic implementation, 
but whatever the provisions of the Code are that you all decide 
as our policymakers, the ability to simplify that, whether it 
is an electronic postcard or any of the other tools that are 
available, including for simple returns, people can do it now 
on a phone with an app and take a picture of a W-2 and very 
quickly have a return brought in. So the private sector will 
bring the tools of innovation to this so that this will have 
the vision--realize the vision that you on the Committee and in 
the Congress choose as tax policy.
    Mr. MARCHANT. Thank you, Mr. McKay.
    Chairman ROSKAM. Mr. Larson.
    Mr. LARSON. Thank you, Mr. Chairman, and thank you for 
holding this hearing.
    And I want to thank all the witnesses and join in the 
accolades for Chairman Archer for his service here. And I would 
like to say from the outset, Mr. Chairman, that I never tire of 
listening to the story by Pat Tiberi of his immigrant parents. 
And because, actually, you know, on this Committee, there are 
so many stories to be told that make up the fabric of this 
Nation and what we are all about. And I would like to say that, 
in echoing Mr. Doggett's comments, that we do need to have more 
hearings, and, frankly, we need more stories like Mr. Tiberi's 
so that we can actually get to the gut of what we need to do in 
terms of tax reform. And while we may have our disagreements 
and procedures, and that would allow me the opportunity to 
quote my Irish grandfather who would say, ``Well, you know, 
trust everyone, but cut the cards,'' because oftentimes you may 
need a reshuffle and, in some cases, as Mr. Roosevelt said, a 
new deal and oftentimes it is the vagaries of society that 
leave government in a position where we have to do things.
    Ms. Stout, I was specifically aligned with a lot of your 
comments because I do think we have to provide greater 
opportunities for people to save, and in doing so, I do support 
a number of the issues in and Mr. Tiberi talked about pass-
throughs, et cetera. I think the way we have to look at this 
is, where can we assist and help people save?
    We do have a prime sample of that. I ran an insurance 
agency. I know what it is like to meet a payroll. I was trained 
at an insurance school where we learned about investment and 
where we always said there were three legs on the stool, right? 
And one of those legs was Social Security. So, at the same time 
we are talking about enhancing benefits and the opportunity to 
save, shouldn't we be talking about something that hasn't been 
touched since Mr. Archer was the Chairman in terms of enhancing 
the opportunity for people to benefit from a system that has 
never missed a payment, but when is the last time there was 
actuarially an increase in the Social Security program? It was 
indexed back in 1983, and it hasn't been able to keep pace. It 
is an insurance program. It is not an entitlement. It is an 
insurance program. Have any of your premiums in insurance gone 
up since 1983? Yes, of course, they have, and everybody would 
acknowledge that.
    So I think we have to, because what we saw what can happen, 
as my grandfather was alluding to in ``trust everyone but cut 
the cards,'' all of the sudden, in 2008, your 401(k) became a 
101(k). And without having that counterbalance, which is why we 
need more hearings like this, the counterbalance of knowing 
that there is a safety net, that there is a floor, which you 
also have to contribute to and save for and participate in, but 
that in the event of taking risk, that your government stands 
behind you. That was the lesson of the Great Depression, and I 
believe the lesson of 2008 as well.
    What other plans would you recommend, Ms. Stout, that we 
could be using? And would you agree with that assessment about 
making sure that third leg on the stool is balanced as well as 
the others?
    Ms. STOUT. Thank you, Congressman Larson.
    I think absolutely both are important, Social Security as 
well as saving for yourself, whether--in an employer-sponsored 
plan. I think that, you know, working America is looking for 
ways to--whether it is incentives or education on how to save. 
So we have to make it simple for them.
    I work with thousands--I have worked in my 20 years with 
thousands of working Americans, and, you know, they are 
struggling with, you know, figuring out their finances and how 
to put away some extra money. So I think both programs are 
important. You have to have that three-legged stool.
    As far as other programs, I think a big focus should be on 
coverage and making it simple for employers to offer these 
plans.
    Mr. LARSON. Mr. Rodriguez.
    Mr. RODRIGUEZ. Absolutely. I think it is both a combination 
of greater access, also making it easier to save, but also 
improving the incentives for people to save as much as we 
possibly can for those target populations that are not saving 
but could do some more.
    Mr. LARSON. Well, I want to thank Mr. Johnson, the Chairman 
of the Social Security Committee, who has agreed to have 
hearings on this, where we can put these plans out there. And I 
think that will only enhance both opportunities, governmentally 
and also from the private sector. We need both.
    Chairman ROSKAM. Mr. Curbelo.
    Mr. CURBELO. Thank you very much, Mr. Chairman.
    And I thank the panel, and I especially want to thank 
Chairman Archer for his participation and for his service to 
our country. I also want to associate myself with some of my 
colleagues who have emphasized the importance that tax reform 
has for America's working families. There is obviously a great 
deal of frustration in this country. We see it play out in our 
politics. We see it play out on social media on an hourly 
basis. And I really think that tax reform is a solution, an 
instrument that can help address some of that economic 
insecurity that so many Americans feel. And I think we do have 
to put ourselves in the position of that family that maybe has 
two or three kids and has to pick them up from school, take 
them to school, take them to practice, and then, once a year, 
go through this difficult exercise of complying with the 
Federal Government and the IRS.
    So I want to focus briefly on the complexity of the Tax 
Code. And, Mr. Chairman, the Tax Foundation estimates that, in 
2016, Americans spent over 2.6 billion hours compiling tax 
returns, the cost of almost $100 billion. Again, that is time 
and money which could have been used for productive economic 
activity or, better yet, time spent with family.
    So, as we take on this task of comprehensive tax reform, 
Mr. McKay, I want to ask you the complexity of the tax system 
where a lot of Americans have to turn to professional tax 
preparers to file their returns. In recent years, preparer 
fraud is consistently listed among the IRS's dirty dozen of tax 
scams. I have been supportive of the Volunteer Income Tax 
Assistance Program, where those that make less than $54,000 a 
year can file their returns with the help of an IRS certified 
volunteer. Can you talk about how increasing the standard 
deduction will reduce the dependence that so many Americans 
have on professional tax preparers?
    Mr. MCKAY. Professional tax preparers provide a variety of 
functions. It is interesting. The National Taxpayer Advocate 
about a decade ago had a conference on tax reform, talked about 
exactly as you say, the one time a year when the average family 
takes stock of their financial situation, which is the moment 
of tax compliance. And she characterized it at the time as a 
national ritual that she felt that was actually some benefit 
from because, if people didn't take a hard look at their own 
finances then, most families would never look at them at all 
all year.
    And so then the question really becomes the simplification 
of the experience, that it is less painful, less burdensome, 
less costly. The industry has worked very hard to create 
options, and it is an intensely competitive industry with a lot 
of innovation. Tax service comes in a lot of forms, everything 
from professional tax practitioners to accountants to tax 
attorneys to do-it-yourself software. There is a growing sense, 
I think, not only in the industry but from the taxpayers we 
serve, that they need practical commonsense simplification so 
that they can make financial decisions about what to do in the 
coming year for their family, rather than come away confused 
and struggling.
    I would mention there is actually a couple of programs. The 
two largest ones, that are supported and sponsored by the 
government, are indeed the VITA centers all across this 
country. And there is somewhere in the area of about 2.5 
million or a little more of returns prepared for free there 
every year. There is also the IRS Free File program, which is 
service donation by a large number of different companies 
through the IRS website under IRS regulation and consumer 
protection rules. That also creates about 2.5 million returns. 
Between the two programs, somewhere between 5 million and 6 
million returns are generated for free: in one instance, in 
volunteer service centers within communities and neighbors; in 
the other, online, that you can access through your phone or 
through a computer. And between the two, you have significant 
help at no cost for lower and middle-income people. And it is a 
unique American invention. So many other countries, the 
government does the whole thing as a revenue-raising, revenue-
collection process with no involvement of the citizens.
    So the ideal situation would be to simplify to improve the 
taxpayers' understanding of their own taxation and enabling 
them to make better financial decisions for their future and, 
at the same time, take advantage of the capabilities of both 
tax professionals and tax technology innovations to make it 
simpler and easier for folks. That is why I said before, if you 
decide to have a postcard style tax return, that this industry 
will deliver that robustly so that it will be something that 
people have confidence in, and in all likelihood, having that 
electronic will also add security protections and easy access 
for people to use.
    Mr. CURBELO. Thank you very much, Mr. McKay.
    Chairman ROSKAM. Well, thank you.
    I want to thank the panel. Mr. Archer, Mr. McKay, Ms. 
Stout, Mr. Rodriguez, thank you all for your time and your 
insight. I know I have benefited from comments that each one of 
you have had, and you bring in expertise and a wealth of 
experience to the Subcommittee, and we really, really 
appreciate it.
    Let me try and just make some closing observations and 
comments if I could as a prerogative.
    First, on process, Ms. Sanchez says that history is not on 
the side of going it alone, and I wholeheartedly agree with 
that. I am not trying to pile on, but my view is the ACA was an 
example of how not to do things. And so I think we are going to 
be better off if we try and create a bipartisan approach to 
this, and there is probably no argument there.
    Another process point I think is important to make, and 
that is there is a temptation to evaluate tax reform 
discussions sort of in a very finite period of time, but I 
think the Committee should get credit for some of the hearings 
that took place on the Camp draft, similar themes that have 
come up, and there have been nearly 50 hearings in recent years 
on tax reform generally. And my assumption is now that you will 
see an increasing amount of activity the closer we get to a 
final product.
    I think that there has also been some discussion about 
Kansas. It came up last week, and it came up this week as well. 
And I think there is a lesson for us on Kansas. And that is 
this: Don't allow a special provision, you know, to create 
essentially a trapdoor for pass-throughs, essentially. So there 
was a pass-through exemption that was allowed, and it didn't 
happen on the corporate side. And so what happened? You have a 
system that gets gamed, and ultimate activity doesn't result, 
come out of that. What we are proposing is not to do that, and 
we are proposing to lower the rates similarly for pass-throughs 
and corporations, C corps at the same level.
    Speaking of States, I come from the State of what not to 
do. The State of Illinois has an underlying fiscal mess, a 
complete disaster. Rather than dealing with the underlying 
things that are driving it, my State legislature, over the 
Governor's objection, said: Hey, let's raise taxes.
    And here is the net effect: People are leaving Illinois. 
They are going to Wisconsin. They are going to Indiana. They 
are going to all of the other attractive Midwestern States, 
like Ohio, because they have done a better job. And so that is 
an example, but that is a cautionary tale for us on what not to 
do.
    The VITA centers that Mr. Curbelo mentioned I think provide 
real insight. I attended one--I visited a couple of them in my 
constituency most recently in west Chicago, Illinois, at a high 
school--or at a middle school there. Going in and talking to 
the volunteers, you gain real insight on this issue of 
complexity. So, if you are in a situation where you are 
visiting a VITA site, you are sitting down, and I was asking 
some of the volunteers: What is your average interview time for 
talking to someone?
    And these are very modestly, you know, situated people, and 
they said: Oh, about 90 minutes.
    Now imagine that. Going through the hassle of 90 minutes 
talking to some volunteer, backing and forthing, backing and 
forthing, and so forth, finally to come up with something and 
all this level of complexity that nobody up here interestingly 
is defending and nobody at the witness panel is defending, and 
yet that is what this very constituency is burdened with.
    I think that there is also an interesting observation that 
I would like to make. If this yielded 70 cents a day, if that 
was the bottom line, if that was really the number, I wouldn't 
defend it. Seventy cents a day per family? I don't think that 
is really where the action is.
    The Tax Foundation came up with a study, and I would ask 
unanimous consent to put this into the record.
    [The submission of The Honorable Peter J. Roskam follows:]

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    Chairman ROSKAM. The Tax Foundation has--their study shows 
that there is an increase in 1,687,000 jobs, full-time 
equivalence, and an estimated gain of, wait for it, $4,917 in 
after-tax income for median households throughout the U.S. In 
my home State: $5,256. In Ms. Sanchez' home State, who raised 
this question, even more than that: $5,536. So that will be 
part of the record.
    There is also an interesting thing as it relates to your 
testimony, Mr. Rodriguez, and I am not asking you to comment, 
but it is just an observation that I had, and it is this: A few 
years ago, I had a meeting with one of the presidents of one of 
the large Hispanic business organizations, and I think I 
remember the one it was. I don't want to say it out loud 
because, then, if I am wrong and so forth. But he came in and 
he said something to me, which is really interesting, and it 
made a big impact on me. He said: We are against the estate 
tax. We are against the death tax.
    I said: Really? That is not what I would have expected you 
to be talking to me about.
    And he said: Yeah, here's why. For the first time ever, 
Hispanic families are making serious money in this country--not 
all of them by any stretch of the imagination. But he said: Why 
is it that when Hispanic families are making money, there is an 
estate tax? Where was the estate tax 100 years ago when other 
families were making all their money?
    And I just leave it there. It is a very provocative 
question, particularly coming from somebody who has a business 
organization.
    In order for us to get to this bipartisan approach, we have 
to settle out an underlying tension. And it is a tension that 
surfaces occasionally, and you heard a little bit of it today. 
And the question is, do we view the economy as a zero-sum game? 
Do we view that pie as expanding, where people benefit, or do 
we view it as something that, if someone benefits, then that 
comes at someone else's expense? There was a subtext throughout 
a lot of the discussion, a lot of the questions and so forth.
    I personally reject the notion that it is a zero-sum game. 
And Mr. Tiberi, in his observation, was talking about, you 
know, the tax burden that is out there. We are not going to 
settle that today, but it is a question that really has to be 
wrestled with, and we have to come to essentially a worldview 
about it because if all this is, is a matter of redistribution, 
then that is one thing. But I think everybody is here saying: 
No, no, no, no, that is not what we want alone; we want to make 
sure that there is growth here. And growth comes if we do this 
the right way.
    I think we need to explore a great deal more, Ms. Stout, 
about what you were talking about, credits on encouraging auto 
enrollment for example. That would be something very, very 
interesting. And I think, to get back to one of Mr. Rodriguez' 
key points, this notion of savers getting tapped out at such a 
low level with very low headroom and very little capacity for 
them to save, that is something that I think we can vastly 
improve.
    And, look, when push comes to shove, this postcard is so 
attractive and so enticing, and I go back to this theme in many 
other discussions. Think about the premium that we put on 
simplicity in other elements of our lives. Just think about 
that for a second. We want to go through TSA PreCheck. We want 
to go through the E-ZPass lanes on the toll ways. We want to go 
through the 15 Items or Less lane, you know, at the grocery 
store. We want an expedited process. I mentioned this, my 
expectation of the airlines app and so forth. We expect this in 
all aspects of our lives, and yet the one thing that has an 
impact on every single bit of the economy, the Internal Revenue 
Code, is cumbersome to the point of absurdity.
    So I think what we have settled here today is nobody likes 
where we are. Everybody wants to move somewhere else, and what 
we have to do is sort out among us how it is that we do that.
    But on behalf of our entire Committee, I want to thank each 
one of you for your willingness to spend time with us this 
afternoon, and I thank my colleagues, particularly these two 
brothers, for sticking it out until the end. The Committee is 
adjourned.
    [Whereupon, at 4:23 p.m., the Subcommittee was adjourned.]
    [Questions for the Record follow:]


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