[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                      EXPANDING ON THE SUCCESS OF
                      THE 2017 TAX RELIEF TO HELP
                         HARDWORKING AMERICANS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 11, 2024

                               __________

                          Serial No. 118-FC24

                               __________

         Printed for the use of the Committee on Ways and Means
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
56-532                      WASHINGTON : 2024                    
          
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                      COMMITTEE ON WAYS AND MEANS

                    JASON SMITH, Missouri, Chairman
                    
VERN BUCHANAN, Florida               RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska               LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania             MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona            JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois               EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio                  BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas               DANNY DAVIS, Illinois
DREW FERGUSON, Georgia               LINDA SANCHEZ, California
RON ESTES, Kansas                    TERRI SEWELL, Alabama
LLOYD SMUCKER, Pennsylvania          SUZAN DelBENE, Washington
KEVIN HERN, Oklahoma                 JUDY CHU, California
CAROL MILLER, West Virginia          GWEN MOORE, Wisconsin
GREG MURPHY, North Carolina          DAN KILDEE, Michigan
DAVID KUSTOFF, Tennessee             DON BEYER, Virginia
BRIAN FITZPATRICK, Pennsylvania      DWIGHT EVANS, Pennsylvania
GREG STEUBE, Florida                 BRAD SCHNEIDER, Illinois
CLAUDIA TENNEY, New York             JIMMY PANETTA, California
MICHELLE FISCHBACH, Minnesota        JIMMY GOMEZ, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio

                       Mark Roman, Staff Director
                 Brandon Casey, Minority Chief Counsel
                         
                         C  O  N  T  E  N  T  S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Jason Smith, Missouri, Chairman.............................     1
Hon. Richard Neal, Massachusetts, Ranking Member.................     2
Advisory of April 11, 2024 announcing the hearing................     V

                               WITNESSES

Senator Phil Gramm, Former Chairman, Committee on Banking, 
  Housing, and Urban Affairs, United States Senate...............     4
Dr. Paul Winfree, President and CEO, Economic Policy Innovation 
  Center.........................................................     9
Michael Ervin, Founder, Coal River Coffee Company................    19
Austin Ramirez, CEO, Husco International Inc.....................    24
Kathryn Anne Edwards, Ph.D., Labor Economist.....................    32

                    MEMBER QUESTIONS FOR THE RECORD

Member Questions for the Record to and Responses from, Austin 
  Ramirez, CEO, Husco International Inc..........................   138

                   PUBLIC SUBMISSIONS FOR THE RECORD

Public Submissions...............................................   141

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                      EXPANDING ON THE SUCCESS OF
                      THE 2017 TAX RELIEF TO HELP
                         HARDWORKING AMERICANS

                              ----------                              


                        THURSDAY, APRIL 11, 2024

                          House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:05 p.m., in Room 
1100, Longworth House Office Building, Hon. Jason T. Smith 
[Chairman of the Committee] presiding.
    Chairman SMITH. The committee will come to order.
    Seven years ago, Republicans passed the Tax Cut and Jobs 
Act under President Trump, delivering relief to millions of 
families and small businesses, and creating the best economy in 
our lifetime. In the first two years after passage of that tax 
relief, real wages grew nearly five percent, the fastest growth 
in 20 years; real median household income increased by $5,000, 
a bigger gain than the prior eight years combined; the 
officially-reported poverty rate dropped to its lowest level in 
U.S. history; and Black and Hispanic unemployment reached 
historic lows.
    I expect my colleagues will use the same talking points 
about that bill being all about tax breaks for the wealthy. But 
the truth is the Congressional Budget Office found that the 
2017 tax law increased the share of taxes paid by the top one 
percent of households, while reducing the burden paid by lower-
income earners. As a result of the Tax Cut and Jobs Act, 
Americans earning under $100,000 received an average tax cut of 
16 percent. Facts are clearly facts.
    On the other hand, President Biden's so-called Inflation 
Reduction Act forced taxpayers to subsidize big banks and 
corporations. More than 90 percent of that bill's special 
interest tax subsidies for electricity go to companies with 
over $1 billion in sales. They also included $7,500 tax credits 
to purchase luxury EVs. More than 80 percent of those credits 
are claimed by households earning six figures.
    Democrats want to blame the 2017 tax cuts for adding to the 
debt, while ignoring the $10 trillion they and President Biden 
spent during just the first 2 years of total Democrat control 
of Congress. Under the Republicans' tax law, revenues reached a 
record high of $4.9 trillion in 2022, nearly $1 trillion more 
than CBO's projections. Corporate tax revenues were 17 percent 
above projections. In fact, in the four years following 
enactment of the tax law, revenues averaged an increase of $205 
billion per year above what was estimated.
    The 2017 Trump tax cuts provided a critical blueprint that 
Congress can build upon to make lasting improvements to our tax 
code. The House has already shown strong bipartisan support for 
key provisions of the 2017 law by passing the Tax Relief for 
American Families and Workers Act earlier this year. But there 
is still much work to be done. Unfortunately, President Biden 
has shown he is willing to throw away these hard-won gains.
    The President has repeatedly said that a budget is a 
statement of values. His most recent budget shows that he 
clearly values higher taxes and more inflationary spending over 
the well-being of the American people. The current price tag on 
Biden's tax hikes is five trillion, exploding to seven trillion 
with his suggestion to fill the gap if middle class tax cuts 
are extended.
    Here is the bottom line: Congress must act soon to prevent 
what will be the largest tax hike in history on workers, 
families, farmers, and small businesses. If the 2017 tax cuts 
expire, the average family of four earning $75,000 will see 
their taxes increase by $1,500 a year starting in 2026. A 
family of five with two earners making around $100,000, would 
see a tax increase of nearly $7,500 a year.
    President Biden and many other Democrats have called for 
repeal of the Trump tax cuts. Republicans won't let that happen 
because middle-income earners will be hit the hardest by the 
coming tax hikes. Small businesses will also face massive 
hardship with the expiration of the 199A small business 
deduction. We will see even more closed-for-business signs up 
and down Main Street when their Federal tax rate jumps to over 
40 percent.
    The hard work this committee put into doubling the Child 
Tax Credit, which we reaffirmed just a couple months ago in the 
Tax Relief for American Families and Workers Act, will be 
slashed in half after 2025. The safeguards we put in place to 
make it harder for the IRS to go after family farms and ranches 
will sunset after 2025. Democrats continue to rave about the 
economy, but they are forgetting one thing: you can't pay your 
mortgage, feed your family, or put gasoline in your car with a 
jobs report.
    We need pro-growth solutions that will restore the economy 
we had under President Trump. Our committee has already made 
progress on pro-growth and pro-family tax policies this 
Congress. Now we need to come together and look at other ways 
we can strengthen our competitive edge against China and ensure 
our tax code is a help, not a hindrance to workers, families, 
farmers, and small businesses just trying to get by.
    Chairman SMITH. I am pleased to recognize Ranking Member 
Neal for his opening statement.
    Mr. NEAL. Thank you, Mr. Chairman. So we don't want to 
disappoint you, Mr. Chairman, in terms of the script. 
[Laughter.]
    Republicans have now wasted the last 16 months on chaos, 
conspiracies, and, of course, talk of more tax cuts, only to 
end up back where they always do, proposing to cut taxes for 
wealthy and well-connected people. I have been around long 
enough to know that the life cycle of this governing goes as 
follows: cut taxes for special interests, the top one percent, 
and then take away basic benefits for middle-income Americans 
and those at the lower end of the economic spectrum, complain 
about debt, complain about costs, and then demand, when there 
is a Democratic president, that we should balance the budget.
    I was here long enough to see the Bush tax cuts in 2001 and 
2003, $2.3 trillion worth of tax cuts, while we simultaneously 
fought 2 wars and witnessed the collapse of Wall Street.
    In the last three decades our Republican colleagues have 
skyrocketed the deficit with trillions of dollars in tax cuts, 
largely for people who don't need them and, in my memory, for 
people who weren't even asking for them, but always with the 
same result: the top one percent will benefit, with very little 
for the American worker.
    The American economy right now is humming along. Three 
straight years of unemployment under four percent. Even 
productivity is up during the Biden Administration. I call 
attention to that because the simplicity of always arguing for 
tax cuts takes away from the complexity of trying to govern 
beyond that.
    In 2017 Ways and Means Democrats, we saw the corporate tax 
cut give away for what it was, a scam. We knew that this plan 
would disproportionately benefit the wealthy and the well-
connected. We knew it wouldn't pay for itself, which I hope we 
will have a thorough opportunity to discuss this afternoon. We 
also knew that there were large corporations and that were not 
workers who would not benefit.
    Six years since that tax plan was signed into law, we have 
been proven right on every single count. It didn't pay for 
itself, it didn't increase revenue, and it certainly did not 
increase wages. A recent study, whose authors included the JCT, 
a well-regarded group in this town, let this idea I am about to 
offer sink in. They found that all of the corporate tax gains 
from TCJA went to shareholders and high-paid executives.
    If you wonder what is driving the political debate in 
America right now and the populism that has engulfed the left 
and the right in the base, this has been a big contributor. 
There is very little that is really flowed to average workers 
from those tax cuts: 56 percent of the tax cuts enriched 
shareholders, the remaining 44 percent lined the pockets of 
many executives, 0 percent went to workers. I repeat, zero.
    Democrats took a different path, and now our economy is the 
strongest in the world. And think of the recovery that we have 
witnessed compared to the rest of the world. America's economic 
boom continues to defy expectations. Fifteen million jobs 
created during the presidency of Joe Biden. That might even get 
close to the 22 million jobs that were created during Bill 
Clinton's presidency. Wages and wealth are on the rise, and 
consumer confidence is reaching new highs. This is no accident. 
Our investments in American workers and families have powered 
this record growth.
    New jobs in clean energy, manufacturing, lower health care 
and energy costs, and holding wealthy tax evaders accountable. 
We have proof that when you use the tax code to invest in those 
who need it most, we all benefit. Workers, families, and our 
communities should come first. In the words of Joe Biden, 
``Grow the economy because that hurts nobody.''
    And our workers aren't asking for much, just a fair shot to 
unlock the fullest potential of that worker. They need basic 
workplace supports because it is the road that gets you not 
just to work, but to success in American life. It is child care 
that helps to keep you there, and it is paid leave that will 
keep you employed. What if we invested in our children the way 
that many on this panel would invest in the corporate salaries 
of top executives?
    There are 20 years of data showing trickle-down economics 
doesn't work. And yet today we will see again a revisionist 
history of wishful thinking on a large failure of fiscal policy 
in decades. If workers and middle class are actually your 
priorities, let's put them ahead of big corporations and 
billionaires as we proceed.
    Mr. NEAL. And with that I yield back the balance of my 
time.
    Chairman SMITH. Thank you, Ranking Member Neal. I will now 
introduce our witnesses.
    Senator Phil Gramm is senior advisor to U.S. Policy 
Metrics, and former chairman of the Committee on Banking, 
Housing, and Urban Affairs in the United States Senate.
    We have Dr. Paul Winfree as president and CEO of the 
Economic Policy Innovation Center, and the former Deputy 
Assistant to the President for Domestic Policy.
    We have Michael Ervin as the founder and co-owner of Coal 
River Coffee Company in Saint Albans, West Virginia.
    We have Austin Ramirez as the president and CEO of Husco 
International, based in Waukesha, Wisconsin.
    And then Dr. Kathryn Anne Edwards is a Ph.D. labor 
economist and public policy consultant.
    Thank you all for joining us today. Your written statements 
will be made part of the hearing record, and you each have five 
minutes to deliver remarks.
    Senator Gramm, you may begin when you are ready.

STATEMENT OF PHIL GRAMM, FORMER CHAIRMAN, COMMITTEE ON BANKING, 
        HOUSING, AND URBAN AFFAIRS, UNITED STATES SENATE

    Mr. GRAMM. Thank you, Mr. Chairman and Ranking Member Neal. 
I appreciate having an opportunity to be here today. I am 
afraid I talk slow, so I better get moving.
    Any discussion of the merits of the 2017 tax cut has got to 
begin with talking about the corporate tax cut which took 
America from the highest corporate rate in the world to a 21 
percent rate, which was roughly the average rate of all 
developed countries in the world. All available evidence 
suggests that the tax cut and reductions in regulatory burden 
that occurred at the same time that the tax cut was implemented 
caused real gross national product to rise by three percent in 
2018, the highest growth rate in 13 years.
    Now, there was no big deal about a three percent rate of 
growth since it had been the average prior to 2008. What was an 
extraordinarily big deal, and one that I hope this committee 
will recognize, is that there was a dramatic change in median 
household income, which soared, and the poverty rate, which 
plummeted.
    As a longtime student of tax policy and a former member of 
the Senate Finance Committee, I was astonished at the 
unexpected depth and breadth of the benefits that flowed from 
the 2017 tax cut.
    According to the Census Bureau--and I want to put this 
information in the record so people have it--real median 
household income surged the year after the tax cut by $5,220. 
That is almost 50 percent larger in inflation-adjusted dollars 
than the next highest income gain, and 11 times the average 
annual gain since 1967. Every quintile of earners saw their 
income go up by a record amount in the last 50 years. The 
bottom quintile saw their income rise by 9.4 percent in real 
dollars. The second quintile saw their income rise by 7.4 
percent, the third quintile 6.9 percent, the fourth quintile 
7.8 percent, and the top quintile by 7.2 percent. And those 
figures are from the Census Bureau.
    The poverty rate plummeted by the most in half a century, 
hitting a new low. Now, this is a startling statement, and I 
would appreciate it if everybody listened to it: No tax change 
or spending increase in over 50 years by the United States 
Government delivered so great an impact on median income and 
poverty.
    Now, how did that happen? Obviously, owners of public 
companies benefited. Stock markets soared in 2017 in 
anticipation of the tax cut and in 2018 and 2019 in response to 
it.
    But who owns these stocks? According to the Tax Notes, 72 
percent of the value of all domestically held stocks are owned 
by pension plans, 401(k)s, IRAs, and charitable organizations, 
or held by life insurance companies to fund annuities and 
benefits.
    Corporate tax rates receive less attention than personal 
income tax rates only because Americans don't understand that 
corporations pay no taxes. A corporation is just a pass-through 
legal structure, a piece of paper generally filed in a filing 
cabinet in Delaware. That is what a corporation is. When the 
corporate tax rate is increased, corporations try to pass the 
cost onto the consumer. To the degree that the entire cost is 
not passed to the consumer, the tax increase is then passed to 
workers and investors.
    Now, economists have studied this in great detail, and most 
economic studies suggest that 50 to 70 percent of the corporate 
tax increase is borne by workers, and 30 to 50 percent is borne 
by investors. If you consume, the corporate tax rate hits you 
at least once. If you consume and work for a corporation, it 
hits you twice. If you consume, work, and invest your 
retirement funds in corporate equities, it hits you three 
times.
    Many Americans don't pay individual income taxes, but all 
Americans pay corporate taxes. In fact, a recent Treasury study 
done by the Obama--I mean by the Biden Treasury confirms that 
92.6 million families, 49.5 percent of all families in this 
country, pay more corporate taxes than they pay individual 
income taxes. All this suggests to me is that Congress 
consistently under-appreciates the burden of the corporate tax 
rate, and doesn't pay enough attention to it.
    Now, let me sum up since I am running out of time.
    Chairman SMITH. Senator Gramm, we are over a minute, almost 
a minute-and-a-half over.
    Mr. GRAMM. Oh, I am sorry. Well, I will stop, then.
    Chairman SMITH. We will get to you in questions.
    [The statement of Mr. Gramm follows:]
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    Chairman SMITH. Dr. Winfree.
    Mr. WINFREE. Thank you so much. I was thinking about 
yielding some time there to Gramm, because he was on a roll. 
[Laughter.]

 STATEMENT OF PAUL WINFREE, PRESIDENT AND CEO, ECONOMIC POLICY 
                       INNOVATION CENTER

    Mr. WINFREE. Chairman Smith, Ranking Member Neal, members 
of the committee, thanks for having us to testify today. 
Wonderful opening remarks, and very interesting comments, 
Senator Gramm.
    In 2017 Congress and President Trump enacted monumental tax 
legislation that reduced the tax burden on Americans and 
American businesses. At the time of enactment, the Tax Cuts and 
Jobs Act was estimated by a wide range of economists to 
increase investment by reducing the cost of capital while also 
lowering marginal tax rates. These effects were estimated to 
increase the size of the economy, generate additional 
opportunities, and increase disposable incomes for Americans at 
every level of the income distribution.
    Estimates of the TCJA's effects on economic growth range 
from about 0.3 percent of GDP on the low end to over 2 percent 
of GDP on the high end. Any extent to which the TCJA was 
anticipated to depress output was associated with the fiscal 
effects of deficit financing, and could have--that could have 
triggered higher interest rates, and thus created a drag on the 
economy.
    One of the issues that limited the growth potential of the 
TCJA was the expiration of provisions that reduce taxes on 
investment. Under current law, many of the components of the 
TCJA will expire at the end of 2025. That is what we are 
talking about today. However, we cannot view the expiration of 
these provisions without also considering what has changed 
about the broader economy, as well as the nation's fiscal 
position since 2017.
    The nation's fiscal position has deteriorated over the past 
several years. Since 2020, debt held by the public has 
increased by $9.1 trillion. This year, roughly $8.9 trillion in 
Treasury bonds will mature, and the deficit is projected to be 
about $1.5 trillion. Between the beginning of 2020 and the end 
of 2023, new bonds paid for 76 percent of all new spending, 
money creation paid for 14 percent, and tax revenues paid for 
about 7 percent. The Federal Government has not relied so 
heavily on debt and money creation to finance new spending 
since the Civil War.
    The increase in debt associated with the pandemic-era 
spending means that the Department of Treasury will need 
roughly $10 trillion in additional borrowing authority in 2024 
alone to roll over existing debt and to pay for new debt during 
a period when the Federal Reserve is reducing the size of its 
balance sheet to reduce inflation.
    Under CBO's baseline--that assumes no new wars, recessions, 
pandemics, relatively high potential growth, and relatively low 
interest rates--the rate at which debt is expected to grow will 
soon become so significant that it could cause the U.S. 
Government to enter what is called a debt spiral. At that 
point, interest rates will increase, fiscal space will 
evaporate, and it will become necessary to reduce the deficit 
to achieve a primary surplus. In a recent paper I estimate that 
this could begin happening around 2035 under current law, or 
2032 under current policy.
    In other words, extending the current policy baseline, 
including tax cuts, only pulls the debt spiral forward by three 
years. This highlights the underlying problem of the Federal 
budget being spending growth, or the unsustainable growth in 
spending. My estimate suggests that to delay the debt spiral 
from happening over the next 20 years, the Federal Government 
would need to implement a primary deficit reduction--that is 
not including interest--of about $2.1 trillion before 2035 
without compromising economic growth, and that is an important 
point.
    These broader fiscal challenges also have effects on 
American households. Given the reliance on debt and money 
creation, it is no wonder that the hidden tax of inflation has 
put pressure on American budgets. Between June of 2021 and May 
of 2023, inflation grew considerably faster than average 
earnings. That difference, or the wedge between the cost of 
living and earnings, remains a significant economic challenge.
    Households have lost real purchasing power, even as 
inflation has slowed down. Therefore, any policy that puts 
additional pressure on household budgets or small businesses 
would be unwarranted. This includes allowing the tax cuts to 
expire, which would reduce take-home pay and investment.
    Policymakers are going to face a number of challenges over 
the next several years. It will be necessary to implement a 
balanced approach that does not raise taxes on the middle class 
and does not put additional pressure on the debt. Congress can 
accomplish this by pairing legislation to prevent tax increases 
with provisions that broaden and correct the tax base, 
reductions in the growth in spending, and other policies such 
as removing regulatory burdens that grow the economy.
    In essence, you cannot look at the tax question in a silo. 
You have to look at it with everything else that the Federal 
Government is doing.
    With that, I will yield back the remainder of my time and 
look forward to your questions.
    [The statement of Mr. Winfree follows:]
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    Chairman SMITH. Thank you.
    Mr. Ervin, you may proceed.

              STATEMENT OF MICHAEL ERVIN, FOUNDER,
                   COAL RIVER COFFEE COMPANY

    Mr. ERVIN. Good afternoon, Chairman Smith, Ranking Member 
Neal, and members of the House Committee on Ways and Means. My 
name is Michael Ervin. I am the founder of Coal River Coffee 
Company in Saint Albans, West Virginia. Thank you for having me 
here today.
    Less than 10 years ago I was, like many average Americans, 
a man with a dream to start a small business. I started 
roasting coffee as a hobby in my garage, and my wife thought it 
was really delicious, and thought maybe someday someone might 
want to buy it. So we took a chance and founded Coal River 
Coffee Company in 2018 not only to make money, but also to 
hopefully spark a revitalization, an economic revitalization in 
small town America, in particular Appalachia, and to prove that 
a thriving Main Street business is possible.
    Currently, we are accomplishing this goal and hope to see 
more growth in the future. Right now we employ over a dozen 
people in our community. Additionally, I coach and train other 
Main Street business owners throughout my region.
    Twenty-eighteen was a landmark year not only for small 
business, but also for the tax code. After the passage of the 
Tax Cuts and Jobs Act, LLCs and other pass-through businesses 
like mine were able to benefit from the newly-minted small 
business deduction, also known as 199A deduction. This 
provision has allowed me to deduct up to 20 percent of my 
business income, which has let me invest in my business, my 
employees, and in my community. We have been able to increase 
my employees' hourly wages, invest in equipment, grow from a 
single location to four iterations, create a mobile location, 
and sell my Main Street roasted coffee internationally.
    However, in less than two years our business will be facing 
a huge, significant tax hike unless Congress acts to extend and 
make permanent the small business deduction. Not only will my 
20 percent small business deduction go away, but my marginal 
tax rates will increase if Congress fails to act.
    These tax increases do not exist in a vacuum. My larger 
competitors, like Starbucks and Tim Hortons, are organized as C 
corporations and pay a rate of 21 percent Federal corporate 
rate, which is permanent. If small business deduction lapses 
and the marginal rates increase, I could be staring at an 
effective tax rate of nearly 45 percent when you combine 
Federal and state income taxes.
    This 45 percent tax is not on my take-home pay like high-
wage W-2 employees. This is the tax on my business income. With 
a pass-through business like mine, I am taxed on business 
income whether I reinvest that money in my business and create 
new jobs or take it home as profits.
    Down the street from my location is a larger competitor, 
Tim Hortons. In 2 years, if my taxes go up, the corporate rate 
will remain 21 percent. Tim Hortons will be paying a 21 percent 
Federal rate and a 6.5 percent state corporate rate, for a 
total combined of 27.5 percent, while my total combined rate 
will be closer to 45 percent. This disparity will make it 
extremely difficult for me to complete our mission.
    I am not asking for special treatment, but I am asking that 
small businesses get treated equally with big businesses, and 
not be placed at a competitive disadvantage by the tax code. 
The tax code was meant to incentivize the economy, incentivize 
entrepreneurs like myself and other like-minded small business 
owners in America, not to penalize us. And in two years we are 
looking at a major penalty. We won't be able to reinvest in our 
community and create a thriving, revitalized Main Street.
    How many of you want to see a Main Street with more 
``closed'' signs on their doors? We all love our hometowns. We 
all love our home states, and every one of our little small 
towns are struggling. And what we have been able to prove since 
2018 because of this deduction is that it is possible to have a 
thriving mom-and-pop shop that not only is successful 
financially, but can inspire other entrepreneurs to do the same 
thing right where they are from.
    Congress still has time to act and help small businesses 
like mine. The small business deduction does not expire until 
the end of 2025. Bipartisan legislation introduced by 
Representative Smucker on this committee exists to make this 
legislation permanent. His legislation is appropriately titled 
the Main Street Tax Certainty Act. While the end of 2025 sounds 
far away, I will soon have to make long-term decisions based on 
the future expectations.
    Thank you for allowing me the opportunity to share my story 
with you guys today. I look forward to answering any questions 
that you might have.
    I yield the rest of my time.
    [The statement of Mr. Ervin follows:]
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    Chairman SMITH. Thank you.
    Mr. Ramirez.

               STATEMENT OF AUSTIN RAMIREZ, CEO,
                   HUSCO INTERNATIONAL, INC.

    Mr. RAMIREZ. Good afternoon, Chairman Smith, Ranking Member 
Neal, and members of the committee. My name is Austin Ramirez, 
and I am the president and CEO of Husco, a privately held, 
family-owned business located in Waukesha, Wisconsin.
    At Husco we produce critical hydraulic components for both 
passenger cars and off-highway vehicles. Husco is a uniquely 
American success story. My dad came to the States from Puerto 
Rico as a six-year-old, and grew up to earn a master's degree 
in aerospace engineering and an MBA from Harvard. He started 
working at the Husco division of a larger conglomerate in the 
1980s before eventually leading a management buyout to 
establish Husco as a standalone business. At the time, my mom 
complained to the neighbors that he had mortgaged the house and 
burned through our college funds to make his vision for Husco a 
reality.
    I took on the mantle of CEO in 2011 after 26 years of his 
leadership. Since my dad founded Husco in 1985, our revenues 
have increased from 20 million to over 500 million. This 
success has allowed us to give back to the community. We 
provide family-supporting careers for hundreds of workers. We 
found it K-through-12 school on the south side of Milwaukee 
that is now the top-rated school in the state. And we are the 
top corporate philanthropic donor in all of Wisconsin.
    In short, our story is the embodiment of the American 
dream. But it was made possible by American reality. The laws 
that all of you write in this very room have a direct, concrete 
impact on our ability to succeed. This is especially true when 
it comes to the tax code. Pro-growth tax policy allows Husco to 
create jobs, invest in R&D, and compete globally.
    In 2017 the Tax Cuts and Jobs Act reduced taxes for job 
creators throughout the economy. At Husco the new pass-through 
deduction and the reduced individual tax rates allowed us to 
invest nearly $50 million in the most significant renovation of 
our headquarters in 70 years. Tax reform was unquestionably a 
success, dramatically increasing the capital that manufacturers 
had available to invest in growth and job creation.
    But passing the 2017 tax reform was only the first part of 
the story. Now critical tax reform provisions have begun to 
expire. Husco now has to amortize our R&D expenses, making it 
far more costly for us to design customized proprietary 
products for our customers. Debt financing is now more 
expensive for companies like many manufacturers that have 
significant depreciable assets, and we can no longer 
immediately expense the full cost of our capital equipment 
purchases, forcing Husco to make smaller investments spread out 
over many years.
    Fortunately, the Ways and Means Committee is leading the 
effort to reverse these damaging changes. I want to thank each 
of you for passing the Tax Relief for American Families and 
Workers Act, and I hope the Senate will soon follow your lead.
    But your work is not yet done. We are rapidly approaching 
the final act of the tax reform story. In just 20 months, small 
manufacturers in America will experience a series of damaging 
tax increases. At the end of 2025 individual tax rates will 
increase and individual tax brackets will decrease. These 
changes mean that pass-through businesses like Husco will have 
more of our income subject to a higher rate of tax.
    At the same time, the pass-through deduction will expire 
completely, doubling down on the tax hikes that we face. We 
will also see an increase in the estate tax, making it more 
difficult for family-owned manufacturers to pass their business 
on to the next generation, and R&D expensing, interest 
deductibility, and accelerated depreciation will be back on the 
chopping block.
    Twenty-twenty-five will be nothing short of a tax 
reckoning, as Congress decides how to end the tax reform story. 
And the stakes are high. Allowing tax reform to sunset will 
undermine much of the progress we have made since 2017. At 
Husco, tax hikes will slow our growth and prevent us from 
investing in job-creating projects that support our community 
and our economy.
    Tax reform was a historic step towards a competitive tax 
code for manufacturers in America, but it was only the first 
step. Congress must act now to restore expired provisions and 
be prepared to act in 2025 to forestall even more damaging tax 
increases. Only by preserving the Tax Cuts and Jobs Act can 
Congress ensure that uniquely American stories like Husco 
remain possible, and that companies like ours can prosper here 
at home and compete on the world stage.
    Thank you for having me today, and I look forward to your 
questions.
    [The statement of Mr. Ramirez follows:]
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    Chairman SMITH. Thank you.
    Dr. Edwards.

           STATEMENT OF KATHRYN ANNE EDWARDS, PH.D.,
                        LABOR ECONOMIST

    Ms. EDWARDS. Thank you, Mr. Smith and Mr. Neal, for having 
me.
    Policy evaluation comes down to three questions: What did 
the policy intend to do? What did it actually do? And what did 
it cost?
    So let's start with what the policy intended to do. The 
2017 tax law was billed as a way to increase wages, income, and 
the U.S. economy. It cannot be credited with achieving either 
of those things.
    What did it actually do? The primary achievement of the 
2017 tax law was that it was timed with full employment and 
economic recovery. Those statistics that you cite of a growing 
economy, of growing wages, and growing income are all on trend 
from where they had been growing from the 2008 recession 
recovery. Otherwise, it was a designed tax transfer to the 
richest. The Tax Policy Center estimates that, in absolute 
terms, the after-tax increase in income was 67 times larger for 
the top 1 percent than it was for the middle 20 percent, the 
difference between a lower tax bill of $61,000 for the top 1 
percent and $900 for the middle.
    That is not to say that taxes weren't court cut for 
everyone, but they weren't cut by the same amount or to the 
same degree. Even in percentage terms, the top 1 percent saw a 
3 percent raise from the tax cut, the middle saw a 1 percent 
raise, and the bottom 20 percent saw a 0.4 percent raise from 
the tax cut.
    It didn't spur economic growth by much. The Congressional 
Research Service concluded that the tax law increased output by 
0.2 percent in the year after enactment, the year in which the 
effect would be the largest. That was below expectations of 0.3 
to 0.8 percent, but was still a fraction of the over 7 percent 
needed to generate growth to pay for itself.
    It is not a mystery why it didn't increase growth the way 
that you perhaps wanted. Tax cuts are but an arrow in the 
economic policy quiver, a way to boost aggregate demand. To 
work effectively, they must be limited in scope, well targeted, 
and perfectly timed, short-term relief that goes to the people 
who are most likely to spend it at a time when demand is 
faltering, like during a recession. The law is off on all three 
marks.
    Corporate tax cuts are similarly an arrow in the quiver, 
one aimed at supply, increasing the after-tax income of 
businesses so that they can invest more in labor and capital. 
But unfortunately for workers, the labor investment that was 
made after the tax cut was concentrated amongst managers and 
executives, with no discernible wage increase for the bottom 90 
percent.
    And then there is the final question of what did it cost? 
The 10-year estimate for the 2017 tax law was between 1.9 and 
$2.25 trillion, according to the Congressional Budget Office. A 
quarter of that estimate was debt servicing. Even for the 
Federal Government, $2 trillion is a lot of money. For 
comparison, that is the equivalent of two-thirds of what 
Congress owes the Social Security Trust Fund. It is 25 percent 
higher than the fully refundable and expanded Child Tax Credit 
that halved child poverty in a year, and it is enough to create 
a universal child care and preschool program in the U.S. five 
times over. It is enough to have universal paid family leave 
and medical leave for every worker in the U.S. eight times 
over.
    In addition to the opportunity cost, there is the pattern 
of sacrificing fiscal health. In the last three years of the 
20th century, revenue as a share of GDP was over 19 percent. 
After the tax cuts in 2001, 2003, extensions in 2012, more cuts 
in 2017, CBO projected that revenue will be around 16 percent 
through 2026. To put that in comparison, had the Federal 
Government been collecting revenue at the rates that it had at 
the end of the 20th century, you would have $850 billion more 
each year. Bad policy, bad precedent with serious and 
accumulating consequences. There is no justification for 
extending it.
    I will end with the reminder that even bad policy creates 
winners. But that is not the job of policy. The job of policy 
to be effective at its aim and the barometer of success for 
economic policy is much higher. It has to be effective at 
addressing economic needs.
    So if I were to pretend for a moment that I was a nominee 
for the Federal Reserve Board of Governors, which is not 
something I am aspiring to do, and I told you that, no matter 
what, I was going to lower interest rates because people like 
paying less for houses and they like paying less for borrowing, 
you wouldn't let me have a seat at the table because that is 
not the job. The job is effective economic policy. And it is 
not your job, either. The Federal Government needs to raise 
revenue, and that is the most important conversation to have.
    [The statement of Ms. Edwards follows:]
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    Chairman SMITH. Thank you. We will now proceed to the 
question-and-answer session. Mr. Buchanan is recognized.
    Mr. BUCHANAN. Thank you, Mr. Chairman. I want to thank our 
committee folks being here today, especially the Senator. I 
followed his expertise over a lot of years. Let me start out 
quickly with Mr. Winfree.
    You touched on--I wasn't planning on going down this road, 
but you did touch on the debt and the deficit, about, you know, 
the problem, the challenge with that. Looking at a number today 
somebody put in front of me a couple of days ago, the spending 
this year in 6 months for the Department of Defense is $440 
billion, and the interest on the debt, I think, is $480 
billion. And I have seen a lot of balance sheets, I have been 
in business 30 years, built businesses from scratch, good-sized 
businesses, and I don't--you know, 35, 36 trillion, it 
doesn't--it is just a matter of time until it ends badly.
    So here we talk about all these other things, and I am glad 
I have got some things I want to talk about today, but I do 
want to put that back in your lap because you opened the door a 
little bit about what that looks like. If you can, take just a 
minute or so and tell us your thoughts on it.
    Mr. WINFREE. Sure, thanks so much.
    As I mentioned, I don't think that you can look at the 
expiration of the TCJA or any of the other fiscal inflection 
points that this committee and this Congress is going to have 
to deal with over the next 24 months in a silo. And you have to 
take the debt question at hand.
    I mean, one of the things that we have seen is rates on 
short-term treasuries increase by almost five percentage points 
just over the last four years, right? That is the market trying 
to tell us something, right? It is trying to tell us to get 
control of the debt question.
    And I--you know, I have to commend the committee on the 
bill that was passed earlier this year that my colleague, 
Austin, referred to earlier.
    Mr. BUCHANAN. Hey, Doctor, let me move on. I only got five 
minutes.
    Mr. WINFREE. Sorry, yes.
    Mr. BUCHANAN. Thank you.
    Mr. Erwin, I wanted to--explain a little bit more, just in 
a minute or so, the 199A, how important it is, that 20 percent 
reduction. We went--corporate rates 35 to 20, 21, and we are 
still looking at 39.6 percent, but there was a reduction of 
199A, which was 20 percent, which is huge. And it is not like 
you take all the money home, put it in your mattress. You use 
it to grow and expand your business. So take a second on that.
    Ms. EDWARDS. Thank you. So if we don't have that deduction, 
I will just go this direction, if we don't have that deduction, 
there are some things that I am personally going to lose as a 
business owner. One of those in particular is putting back into 
my community.
    We do a lot of philanthropic work, thankfully, and that was 
always one of the goals. One example is that we have a 
partnership with the West Virginia Collegiate Recovery Network, 
and with that partnership we have developed a coffee roast that 
we sell, and the profits go directly to a scholarship for 
people that have gone through recovery, are in college, and 
this will help them and reward them for their progress. That 
would be threatened in a major way. This is something that we 
are intrinsically changing lives for because of this deduction.
    Also, we have inspired organizations to begin. Just for 
one, there is an organization called the On Purpose Project. 
What it does is it exists to help our community--help 
communities, yes.
    Mr. BUCHANAN. I only got one more question.
    Ms. EDWARDS. Sure, go ahead.
    Mr. BUCHANAN. Mr. Ramirez, you are talking about full 
expensing, the power of that. For many years it was you write 
something off over five years, then we had bonus depreciation, 
you get 50 percent and 10 percent for 5 years. But now the full 
expensing--in my opinion, there is no more powerful tool, 
whether you are buying or selling, than full expensing. And it 
is a timing issue. But what are your thoughts?
    Mr. RAMIREZ. Yes, accelerated--thank you, Congressman. 
Accelerated depreciation does two things. One, it gives me more 
liquidity, more cash now to make more investments, and it 
improves the return on the investments that I make. So when you 
have accelerated depreciation I am going to make bigger, faster 
investments. When I don't have accelerated depreciation----
    Mr. BUCHANAN. You are going to get that depreciation, 
anyway, over five years. So why not create the incentive of 
getting it up front? That is my point.
    Mr. RAMIREZ. That is right. It creates--when you have 
accelerated depreciation, the cash cost to me in the year I 
make the investment is lower. So I have more cash to invest in 
more equipment.
    Mr. BUCHANAN. Do you find yourself either buying or selling 
more than maybe you would otherwise, ideally, because of the 
deduction for tax planning and other things?
    Mr. RAMIREZ. Absolutely. With accelerated depreciation we 
are going to pull investments forward. We are going to invest 
more now. And it also stimulates the broader economy. So not 
only does it impact us in a micro way, us making bigger 
investments, but throughout the supply chain that happens and 
that stimulates demand.
    Mr. BUCHANAN. Let me just say one thing, that when you are 
able to keep more money, people always say, why is that so 
important? Because you are the job creators in America. Most 
businesses are 50 employees or less, 90 percent of businesses 
that are organized are 50 employees or less.
    With that, I yield back, Mr. Chairman.
    Chairman SMITH. Mr. Neal.
    Mr. NEAL. Thank you, Mr. Chairman.
    Dr. Edwards, as you know, our colleagues often, in support 
and defense of the TCJA, they really distort and move away from 
the really important issue that distributional tables tell. 
They lump all taxpayers together into one undifferentiated 
group, and then claim that ``an average taxpayer'' receives a 
significant benefit from TCJA.
    Your research, however, into the law's distributional 
effects paints a very different picture for taxpayers who are 
in the lowest three quintiles of income distribution. Could you 
please reiterate for us how the 2017 tax cuts were distributed 
across income groups?
    Ms. EDWARDS. Yes. So the top 1 percent saw a reduction in 
taxes of $61,000, an increase of post-tax income of 3 percent. 
The middle 20 percent income quintile saw a reduction of taxes 
of $910. That is a difference of about 1.3 percent. The lowest 
20th--the lowest quintile, the bottom 20 percent, saw a 
reduction in taxes of $70, a difference of 0.4 percent.
    Mr. NEAL. So your testimony also states that taxpayers who 
received the largest tax cuts aren't necessarily the ones 
spending the extra cash. Why is that important?
    Ms. EDWARDS. Well, the mechanism by which we think a tax 
cut grows the economy is that when you give households money, 
they then go out and spend it. So for the tax cut to be most 
effective, it has to go to those most likely to spend it 
immediately.
    The problem with most tax cuts as they are legislated is 
that the people who pay the most in taxes and the people who 
receive the largest cuts are those also least likely to 
immediately spend it, right? If you have sufficient income, you 
don't have to run out to the grocery store if you got more 
money.
    This is a lesson that I think Congress knows very well 
because during recessions in 2008, or in 2008 and 2009 and 
during the pandemic, this stimulus checks were, in fact, tax 
rebates that were limited to which households received them and 
sent out as a one-time check. That is exactly how tax policy is 
meant to increase aggregate demand.
    Mr. NEAL. So in your testimony you also discussed how not 
all tax cuts are created equal. We know that to be true in both 
the nature of the tax cut and the timing of the tax cut. So I 
would like you to reflect on the latter part of this question.
    Ms. EDWARDS. The timing?
    Mr. NEAL. Yes.
    Ms. EDWARDS. You know, the 2007 to 2009 recession, I will 
always say, earned its title as being the Great Recession. And 
the hole that it left in the labor market took almost seven 
years to recover from. But when that recovery did occur, the 
U.S. economy was growing at a healthy clip, increasing income 
and wages every year.
    The tax cut essentially fell right in the middle of it, 
which is why it is really not credited with any of the growth 
that happened after the fact. It is--you know, happening at the 
same time doesn't mean one causing the other. The economy's 
tailwinds of a four percent unemployment rate just matters so 
much more than that tax policy.
    Mr. NEAL. So on the heels of the balanced budgets of Bill 
Clinton's administration, the next administration, President 
Bush, they enacted two tax cuts, $1.3 trillion in 2001 and 
another trillion in 2003, which we have never recovered from 
fiscally, including 2 wars. Then, of course, there were the 
irresponsible tax cuts in 2017.
    You outlined in your testimony that there is a time, in 
terms of perspective, to talk about tax cuts, and there is a 
time to suggest that those tax cuts as proposed don't make any 
sense. Do you want to elaborate?
    Ms. EDWARDS. I will give credit that the 2005 President's 
Commission on Bipartisan Tax Reform that made it--you know, 
with a mandate to make it simple, fair, and pro-growth, that 
Chairman Connie Mack said in his executive summary, ``We have 
lost sight of the fact that the fundamental purpose of our tax 
system is to raise revenue to fund government. Sometimes you 
need a tax cut. Sometimes you just need to pay the bills. This 
is a moment as many have been alarming. I was in the Joint 
Economic Committee three months ago, and they discussed the end 
of the Republic. You need to pay your bills. You must raise 
revenue.''
    Mr. NEAL. Sure. I am just going to finish with this, 
because frequently my experience here is the following. 
Republicans complain about government spending when there is a 
Democrat sitting in the White House. I have seen that through 
my career. Bill Clinton should balance the budget, Barack Obama 
should balance the budget, and now Joe Biden should balance the 
budget. Republican Presidents should cut taxes. And there is a 
huge differential there, but it has been part, I think, of the 
tension that exists as we talk about fiscal policy.
    Thank you for your testimony.
    Chairman SMITH. Mr. Smith.
    Mr. SMITH of Nebraska. Thank you, Mr. Chairman, and thank 
you to our panel. Great perspectives.
    Senator, welcome back to Capitol Hill. Your service and 
your priorities while you served and currently serving, as 
well, are certainly appreciated.
    We worked very hard on tax reform that culminated in 2017. 
It didn't start that year. It started, I would say, perhaps 
even before 2011. But that is when we started gathering in a 
bipartisan basis with working groups that I found to be very 
productive. And throughout that discussion, even President 
Obama acknowledged that we needed to be more competitive 
worldwide on the corporate tax side.
    Now, I don't think anyone would think it wise to just give 
corporations a tax cut and nothing on the personal side or the 
family side, and so that is why TCJA was a very well-thought-
out approach to tax reform, a broad-based tax reform, by the 
way. Both sides up here want to want to give tax relief, but 
very differently, I might add, and I don't have time to get 
into that.
    But we wanted to make sure that small businesses, as our 
witnesses pointed out here today, also benefited. And I think 
the numbers speak for themselves. And I am glad to say that we 
had a very bipartisan vote the other day to return us to a 2017 
policy that we found to be very productive. And when I say 
``productive,'' I mean in terms of revenue, but also our 
priority in 2017 with TCJA was to increase productivity across 
the economy.
    And I will tell you it is my speculation, but I think that 
we are in a much stronger place today because of the priorities 
of productivity in 2017 that increased wages and, like I said, 
increased that productivity that we can all benefit from. In 
fact, our supply chain would be far worse off now if we hadn't 
done that.
    So I am puzzled as to some of the comments. Of course, it 
is somewhat predictable. But, you know, around this town there 
is such demonization of prosperity, you would never know that 
our tax code depends very heavily on prosperity so that we can 
pay our bills, because I think paying our bills is important.
    Mr. Ramirez, I certainly appreciate your story, the 
personal story, certainly, of your father leading the way to 
buy a business that he was working in, employing local workers. 
Incredible story. I certainly appreciated that you called out 
the importance of the increased death tax exemption for helping 
keep family businesses local and family run, I think that is a 
good priority. The same is true, I would add, for farmers, 
ranchers, and family-owned manufacturers in my own district. I 
hear from them all of the time, especially as it relates to 
this.
    Now, a recurring tax proposal from the Biden Administration 
is the repeal of the stepped-up basis. It would be just as 
detrimental to family businesses, I might add, that taxing 
supposed gains on, for example, the value of your family 
business, which you have never actually realized.
    So could you discuss what the repeal of the stepped-up 
basis would look like as you think about the future of your 
business?
    Mr. RAMIREZ. Thank you, Congressman. I would just like to 
note I think family businesses are an indispensable part of the 
U.S. economic system. You know, we take long investment 
horizons. We invest in our communities. We have consistency of 
leadership. And, you know, you want policy that encourages 
multi-generational family businesses.
    And both stepped-up basis and the death tax do the 
opposite. They make it more difficult for families to maintain 
businesses and have, you know, these entities pass from one 
generation to the next.
    Mr. SMITH of Nebraska. Thank you.
    Does anyone else wish to comment on the impact of repealing 
the stepped-up basis?
    Dr. Edwards?
    Ms. EDWARDS. Thank you, Mr. Smith. I realize I am the bad 
guy at this end of the table, but I would like to point out 
that I do think family businesses are important, but not to the 
disadvantage of people who didn't have rich parents.
    You know, I have a friend who----
    Mr. SMITH of Nebraska. Would you believe the government is 
entitled to take a large chunk of the value of that family 
business?
    Ms. EDWARDS. We had the government taking a similar large 
chunk up until, you know, the law went into effect, and we 
still had many family businesses and small businesses and small 
proprietors----
    Mr. SMITH of Nebraska. Okay.
    Ms. EDWARDS. I just wonder if you would want to----
    Mr. SMITH of Nebraska. Reclaiming my time, I think it is 
important to note that a family business or a family would have 
to take out a loan. This is a fairly common situation, where a 
family would have to take out a loan in order to just maintain 
the family business. We used to have a member of this 
committee, now governor of South Dakota, who very articulately 
told her story. That, to me, is not what America should be 
about.
    Of course, we need modest tax policy so that we can pay our 
bills. Let's not penalize individuals.
    Senator, turn on your microphone.
    Mr. GRAMM. If you eliminate the step up in basis, you are 
going to pay a 20 percent tax on the gain of anything you ever 
own in your life. And then, when you die, you are going to pay 
a 40 percent death tax. You pay taxes on every penny you earn 
when you earned it. So when we are talking about taking 60 
percent of people's life's work, that is just not America. And 
maybe you want the money, maybe you think you could spend it 
better than your children and grandchildren.
    But the point is, the person who is paying that tax earned 
it. They created it, and they created jobs, growth, and 
opportunity in the process.
    Mr. SMITH of Nebraska. That sounds like a great conclusion.
    Thank you, I yield back.
    Chairman SMITH. Thank you.
    Mr. Doggett.
    Mr. DOGGETT. Thank you, Mr. Chairman. While I think this 
hearing certainly does illustrate that our committee and our 
country have two very distinct paths, one path follows Donald 
Trump, the clever genius, as he describes himself, the self-
styled king of debt, and the sorry legacy of the 2017 tax law 
and the estimated $2 trillion in red ink that it added to our 
nation's debt, and all the failed promises of trickle-down 
economics.
    Who benefited from this budget-busting king-of-debt effort? 
Well, the best place to look is Donald Trump himself. Just last 
weekend, in a $50 million fundraiser at a Palm Beach home of a 
billionaire hedge fund investor, Trump boasted about how much 
he had done to help the rich get richer, and that he would do 
the same once again.
    The heart of the Trump tax scam was a massive, budget-
busting 40 percent cut in the corporate tax rate because that 
was the top priority for Trump and Republicans. They made the 
corporate tax cut permanent and left everybody else hanging 
with temporary. In the first year after these tax cuts, the 
non-partisan Joint Committee on Taxation determined that the 
largest 88 American multi-nationals paid an average tax rate of 
7.8 percent.
    Indeed, the 55 large, profitable corporations--55 large 
corporations paid no tax whatsoever in 2018, and 23 have not 
paid any tax at all in the 5 years since the law was passed. 
Meanwhile, we know that a single mom with 2 children who earns 
the average wage pays an effective tax rate for all of her 
Federal taxes, including payroll, of 20 percent. It may be that 
corporations don't pay taxes, but you would never know it from 
the horde of corporate lobbyists that descend on this committee 
like a plague of locusts whenever a corporate tax bill is up.
    And Dr. Edwards, I would ask you, what evidence is there 
that these cuts for large corporations and the wealthiest few 
ever trickle down to help that single mother who is paying a 
higher tax rate than these big corporations?
    Ms. EDWARDS. I would say that a $2 trillion investment 
shouldn't be so hard to find the benefits of for the workers 
who it was intended for.
    There have been some academic debates of researchers 
looking for investment to trickle down to workers, and they 
haven't found it to a large degree. The best evidence was that 
the majority of pay raises that came after the corporate tax 
cuts were concentrated amongst managers and executives. Thank 
you.
    Mr. DOGGETT. Well, and if the tax cuts aren't trickling 
down to help the single mom, it is also important to realize 
that the same Republicans who boosted the debt with their tax 
breaks are the same ones who want to cut benefits when it comes 
to Social Security and Medicare.
    We haven't had a real balanced budget since President 
Clinton, and $10 trillion has been added in debt from a couple 
of rounds of Bush tax cuts and the Trump tax cuts. We have got 
a number of members of this committee, a significant number of 
Republicans in the House who have called for big changes in 
Social Security and Medicare because they say we can't afford 
to keep providing them in the current way.
    I think it is also significant--and Mr. Chairman, I would 
ask unanimous consent to put in the record--a new study from 
Steve Rosenthal and Olivia Muccio that show that foreign 
investors own 42 percent of all American corporate stock. They 
were among those who were the greatest beneficiaries of this 
massive 40 percent reduction in the corporate tax rate.
    Chairman SMITH. So ordered.
    [The information follows:]
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    Mr. DOGGETT. Meanwhile, the same tax law provides tax 
incentives--and I certainly agree with you, Mr. Ervin, that we 
do need our tax laws to treat small businesses the way that 
corporations are treated. Unfortunately, corporations are 
given, under the Trump tax law, an incentive to shift their 
factories abroad because they pay half of the corporate tax 
rate on their investments overseas as to what they do here.
    There is so much more that needs to be done. I think a 
trade war with our allies is the wrong way to go, and a global 
minimum tax that stops the race to the bottom is the right way 
to deal with our future.
    And I yield back.
    Chairman SMITH. Mr. Kelly.
    Mr. KELLY. Thank you, Chairman. I want to thank everybody 
for being here.
    Senator Gramm, I wanted to go to you because I think you 
had a lot more to say. I do talk faster than you, but I want 
you to go ahead and go through because you were leading into 
some questions we really have on jurisdictional rights and who 
has the right to enter into agreements, tax agreements around 
the world.
    If you could pick it up, because as you started talking 
about how if you consume, the corporate tax rate hits you. And 
then, if you would, go down through that because you only have 
a couple of paragraphs here. But I would really like you to 
dwell on that, because it seems to me, for a long time, before 
I ever got here, I listened to you because I thought everything 
you said was spot on.
    Mr. GRAMM. Thank you very much.
    First of all, if large corporations are not paying taxes, 
it is because you gave them deductions which they are using. So 
if you don't want them to have the deductions, take them back. 
But raising the rate is a wrong way to go about it.
    In my opinion, we have a lot of industrial policy in the 
tax code. I would love for it to be eliminated, and I would 
love for the rates to go down. In talking about who pays the 
tax, the bottom 30 percent of Americans pay 0 in income tax. 
The top one percent pay 45.5 percent of all the income taxes. 
So needless to say, when you are cutting taxes you affect 
taxpayers. The only way people get a tax cut when they are not 
paying taxes is welfare. Now, we call it a refundable tax 
credit, but you are giving people money they didn't earn to 
begin with.
    Now, let me address the issue, if I can, about what the tax 
bill actually did. The bottom 20 percent of income earners in 
America got the largest share of income growth from the 2017 
tax cut. Now, that is a Census number, and it doesn't even 
count refundable tax credits because the Census does not count 
any tax change as a change in income. So the largest 
beneficiary in percentage terms, no matter how you want to say 
it by distorting the figures in comparing tax cuts to people 
that pay taxes with tax cuts to people that don't pay taxes, 
the biggest beneficiary in terms of income was the bottom 20 
percent of income earners.
    And look, how did they get the benefit? They got jobs. A 
job is a better housing program, a better welfare program, a 
better food stamp program, a better childcare program than any 
program ever adopted by this Congress. In fact, of all the 
programs passed by Democrats and Republicans, no program, or at 
least for no year, has anything outdone your cut in the 
corporate tax rate.
    That is what is amazing to me. I never expected that to be 
the case. The tax cut was small, $160 billion a year, and yet 
it produced this extraordinary result. Why? Because everybody 
pays corporate taxes. Because when we cut corporate taxes, the 
two job creators sitting in the middle found it possible to 
expand their business. And that is the miracle of this tax cut 
you adopted.
    So in talking about the fact that the bottom 50 percent of 
income earners got no tax cut, the bottom 50 percent of income 
earners in America with refundable tax credits, for all 
practical purposes, pay no income taxes. So I don't understand 
this unhappiness that people who aren't paying taxes don't get 
tax cuts. Tax cuts are for taxpayers.
    Mr. KELLY. Just in the few seconds we have left, the global 
corporate minimum tax and how it circumvents the Constitution, 
just as quick as you can, because----
    Mr. GRAMM. Yes, I will tell you this----
    Mr. KELLY. Just as quickly as----
    Mr. GRAMM. The greatest abuse of the Constitution of the 
United States in my lifetime was President Biden going to 
Europe and negotiating a minimum corporate income tax, and 
giving them the power to tax corporate income in America, but 
you don't raise the tax rate. It was extortion committed 
against the Congress. And I can't imagine at any day that I 
served in the House and Senate, any President, Republican or 
Democrat, that I would not have opposed that circumvention of 
the Constitution.
    This global corporate minimum tax is an extraordinary abuse 
which every Member of Congress ought to be against.
    Mr. KELLY. I totally agree. Thank you.
    Chairman SMITH. Thank you.
    Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman, and thank you to all 
the witnesses for being here today.
    You know, over the years this committee has met many times 
to consider major reforms to our tax code. And I am struck 
today by how little the majority's arguments have changed over 
the past 40 years: tax reform in 1981, 1986, 2001, 2003, and 
2017. Every time the Republican message has been the same: 
slash taxes for rich people, and the benefits trickle down to 
everyday Americans.
    My Republican colleagues evidently still believe that tax 
cuts pay for themselves, cutting taxes on the wealthy is a good 
way to help the middle class, and that children's health 
programs add to the deficit but tax cuts for the wealthy don't. 
None of these things are borne out by any of the evidence, and 
that is what I would like to focus on today.
    So Dr. Edwards, I particularly appreciate the way you 
described how this committee should evaluate our policy 
decisions. What did the policy intend to do? What did it 
actually do? And what did it cost? Those are the key questions. 
And as you point out, it is not enough to just look at what the 
2017 tax cuts did. We have to also look at what they cost, 
particularly relative to other things we could have spent that 
money on.
    Given the TCJA cost, was it worth it? Has it paid for 
itself?
    Ms. EDWARDS. It hasn't paid for itself, but that is a very 
unreasonable bar for any piece of legislation. I mean, I don't 
think it is a productive part of conversation to say that one 
thing would pay for itself versus not. I don't think it was 
worth it, well short of not paying for itself.
    Mr. THOMPSON. I would also like to draw a contrast here in 
the terms of our priorities. Dr. Edwards, as you know, 
Democrats in this committee passed the enhanced Child Tax 
Credit in the American Rescue Plan. That credit lifted millions 
of children out of poverty. And while we have passed bipartisan 
legislation making improvements to the current CTC, my 
Democratic colleagues and I would like to fully restore the 
credit to the ARP levels.
    Dr. Edwards, which do you think would do more for low-
income children and families, reinstating the fully refundable, 
expanded CTC or extending tax cuts that primarily accrue to the 
one percent?
    Ms. EDWARDS. Well, that is a softball. It is going to be 
giving the kids----
    Mr. THOMPSON. Every once in a while you need a softball.
    Ms. EDWARDS. Yes, it is going to be--it is a lesson for 
policy design that you will hopefully hit where you are aiming. 
If you want to help children in low-income families, you should 
just direct policy right to them and not get an intermediary of 
their employer or their corporation.
    It is not to say that money can't be spent beneficially in 
the corporate side, but if you want to help workers, you should 
give money to workers.
    You know, one of the studies I cited showed that some 
workers did benefit in their capacity as shareholders of 
corporations that received more money, which is just very much 
not the same thing as a wage increase.
    Mr. THOMPSON. And Dr. Edwards, you highlighted here that 
what we face are trade-offs. Do we have to direct our Federal 
resources to the wealthiest in our society?
    But my colleagues across the aisle who are promoting the 
extension of the 2017 tax reforms are choosing to do just that, 
and we would be doing so at the expense of policies that would 
really help working families, as you just articulated, in every 
one of our districts. That is something that I think we should 
consider.
    And before I yield back, I just want to mention one thing. 
The conversation today got a little off topic regarding estate 
tax and estate tax reform, and it was mentioned that you 
shouldn't have to pay taxes after you die. And I just want to, 
for the record, point out once you die, you don't pay any 
taxes.
    I yield back.
    Chairman SMITH. No, but your family members do.
    Mr. Schweikert.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    Dr. Winfree, thank you. You actually had some very 
interesting things in the written portion of your testimony. I 
want to take you to something that is a little more difficult.
    And first off, in your opening testimony I actually think 
the most updated CBO numbers, OMB numbers are actually much 
darker. Yesterday's Treasury statement said just interest this 
year will be $1,146,000,000,100, I think, and that was before 
they calculated in the most recent inflation data with the new 
interest rate pops.
    So I come to you and say, okay, I appreciate a debate of 
relitigating, you know, their spending on Inflation Reduction 
Act and, you know, corporate welfare, and their attacks of us 
on trying to do a more progressive income tax system, which is 
what happened, you know, with our tax cuts. Fine.
    From today forward, you are the consultant for this 
committee. How do you walk us through to how do we maximize 
economic expansion? Because growth is moral. And at the same 
time stabilizing the fact that 2 days ago we broke through 
borrowing over $100,000 a second, a 365 average. We are now 
borrowing close to or over $100,000 a second.
    So walk us through the truth. What do we do to maximize 
economic growth and stabilize receipts?
    Mr. WINFREE. Again, it is a holistic approach. I think that 
it starts with the administration. There is a lot that can be 
done on regulatory reform to free up these guys to create more 
jobs, to create more growth. And there is a lot that you can do 
to oversee the regulation that is going on within the 
administrative branch.
    On the tax issue, really what we are talking about here--
and I think that, you know, I think we are missing something, 
and that is that we are talking about two different 
philosophies, right? Philosophy one is lower rates and fewer 
carve-outs, and philosophy number two is higher rates and more 
carve-outs.
    Mr. SCHWEIKERT. And I need you to back up and sort of----
    Mr. WINFREE. Sure.
    Mr. SCHWEIKERT. Let's make sure everyone understands. Let's 
use the firm base-broadening----
    Mr. WINFREE. Yes.
    Mr. SCHWEIKERT [continuing]. Instead of carve-outs, just so 
that we are all using the same lingo. Walk me through that.
    Mr. WINFREE. So sure. So you need more people with skin in 
the game, right? You need more people who are ultimately 
taxpayers and treat everybody, ultimately, the same. And with 
that, again, it frees up these guys, who know way more about 
payroll and creating wealth than a budget nerd in Washington, 
D.C. to go out and do what they do best, right?
    The American people are incredibly innovative. It is one of 
the things that has held us together for the last 250 years. 
And if we treat them fairly, and we treat the tax code fairly, 
then ultimately these guys can go out and create more growth.
    Mr. SCHWEIKERT. One of my concerns, and I have tried to do 
multiple presentations, is we have a demographic issue. A 
couple of days ago I think it was either OMB or one of the 
others updated that just Medicare spend will be up 10 percent 
this year.
    Mr. WINFREE. Sure.
    Mr. SCHWEIKERT. At our current burn rate, if you do just 
the true total debt, we are right now borrowing 9.6 percent of 
the economy in this year.
    Mr. WINFREE. Yes.
    Mr. SCHWEIKERT. So the model on all the tax hikes on 
$400,000 and up, when you adjust for economic impact, you get a 
point and a half of GDP. Most of us who want to cut things, I 
can find about a point and a half of GDP. I have got a math 
problem. The tax hikes and the cuts don't get me anywhere near 
when we are borrowing 9.6 percent of the economy in a single 
year. And if these interest rates continue to, you know, 
normalize, we are walking into a level of financial brutality.
    Okay, so you have regulatory. We got to change the cost of 
delivering health care. Walk me through one more time. What 
does your base broadening look like?
    Mr. WINFREE. One of the things that we have not talked 
about today is that the thing that is expiring next year are 
the individual rates, right?
    Mr. SCHWEIKERT. Mm-hmm.
    Mr. WINFREE. And one of the reasons why the 2017 tax bill 
was popular at the time, and I think still continues to be 
popular with the middle class, is that it lowers rates and it 
also increases the standard deduction, right, which decreases 
the number of itemizers in the tax code. And that itself, 
again, brings more people to the table.
    And I mean, I am not speaking just as a budget and tax 
policy guy here, I am speaking as an American. I think that if 
we allow those tax cuts to go away on the middle class next 
year, after we have seen again the hidden tax of inflation 
increase over the last few years, there will be political 
repercussions to that.
    Mr. SCHWEIKERT. Okay. But--thank you, Doctor.
    Mr. Chairman, one of these days we are going to have to do 
an economic roundtable and understand just the headwinds and 
the scale of it. I don't think it is completely understood by 
anyone. Thank you, Chairman.
    Chairman SMITH. Mr. Schweikert, you would be great to lead 
that roundtable.
    Mr. Larson.
    Mr. LARSON. Thank you, Mr. Chairman, and I want to thank 
all the witnesses, as well, for your testimony. And just a 
couple of quick questions.
    Senator Gramm, how effective is Social Security?
    Mr. GRAMM. Yes. How--what is----
    Mr. LARSON. How effective is Social Security as a 
governmental program?
    Mr. GRAMM. Well, I would say, if you depend on it, it is 
pretty effective. And you would have to rate it as one of the 
most successful programs in American history.
    Mr. LARSON. I totally agree.
    Mr. GRAMM. And by the way, we have done a fairly good job 
on a bipartisan basis when we have had to make tough decisions 
on Social Security in doing it.
    Mr. LARSON. Yes, that is a good point. But we haven't made 
any decision in terms of expanding Social Security in 51 years. 
And in fact, we are talking about tax cuts today, and 23 
million Americans pay taxes on their Social Security. That is 
never mentioned.
    What do you think about Social Security, Dr. Winfree?
    Mr. GRAMM. Well--no, I am sorry. Go ahead.
    Mr. WINFREE. I think Social Security is an important 
program.
    Mr. LARSON. We talk about revenues all the time. This 
doesn't have anything to do with the debt or deficit. It pays 
for itself.
    Mr. WINFREE. Well, right. So it doesn't pay for itself, 
right? Social Security is facing a massive shortfall within the 
next 10 years. It is----
    Mr. LARSON. Why?
    Mr. WINFREE [continuing]. On the order of about----
    Mr. LARSON. Why is it facing that shortfall?
    Mr. WINFREE. Because payroll taxes are not enough to keep 
pace with outlays.
    Mr. LARSON. Because there is 10,000 Baby Boomers a day who 
have become eligible to collect Social Security, and Congress 
hasn't done anything to adjust it since 1971. Is that why there 
is a problem?
    Mr. GRAMM. No----
    Mr. LARSON. If it is a payroll tax, and it is deducted to 
provide a benefit, isn't it a simple solution just to increase 
the payroll tax?
    Mr. WINFREE. If you increase the payroll tax, you also have 
to increase the benefits, which ultimately----
    Mr. LARSON. Well, so let me ask you something about those 
benefits.
    Mr. WINFREE. Sure.
    Mr. LARSON. You know, we have five million Americans who 
work all their lives and pay into the system and get below 
poverty-level checks from Social Security, most of them women, 
women of color, et cetera. And if we are going to build a 
system based on what the two entrepreneurs have done, and we 
want to encourage that, and we want to encourage risk, et 
cetera, then we also have to make sure that in that process we 
have a safety net, and that we just can't ignore it and pretend 
that--we say, oh, it is the probably the greatest government--
it is the number-one anti-poverty program for the elderly, it 
is the number-one anti-poverty program for children. And people 
pay into it. It doesn't contribute to the national debt. It is 
not part of our deficit.
    It is Congress's inability to take action and do the right 
thing, including tax cuts for 23 million Americans who have 
paid into the system. And now, because it is not enough money 
for them to survive, so they still get Social Security, and 
work, and yet pay taxes on their Social Security. Should that 
continue, Mr. Ervin?
    Mr. ERVIN. Thank you, Mr. Larson. When you brought up 
increasing payroll tax, that is directly affecting small 
business owners like myself, other Main Street employers.
    Mr. LARSON. Do you get a write-off for that?
    Mr. ERVIN. Well----
    Mr. LARSON. Your portion of Social Security?
    Mr. ERVIN. Do I get a write-off for my portion of Social 
Security? Let me ask my accountant real quick. I am just 
kidding.
    But no, but seriously, like----
    Mr. LARSON. That was pretty good.
    Mr. ERVIN. I love Social Security, I need it. It is a 
future program that I hope to benefit from myself, and my 
employees, too, you know, and I know that there is a problem 
that is--but, you know, my hope would be that we would find 
another avenue to help fund it, rather than coming after the 
people that are going to be affected the most, which are small 
businesses like mine.
    Mr. LARSON. Dr. Edwards, let me go to you.
    Ms. EDWARDS. Is the question whether or not Social Security 
benefits should be taxed?
    Mr. LARSON. Yes.
    Ms. EDWARDS. I think it was a very sneaky addition to the 
1983 reform that that was not inflation adjusted so as to hit 
more Social Security beneficiaries over time without forcing 
Congress to vote on it and have to look them in the eye and say 
we are taxing your benefits for revenue. So I think, on 
principle, it is not----
    Mr. LARSON. Amen.
    Ms. EDWARDS [continuing]. Part of our social--it is not 
worthy to be part of our social security system. That is a 
system built on compacts with taxpayers, with workers, and with 
retirees. So something like that just simply doesn't fit.
    Mr. LARSON. Thank you.
    Chairman SMITH. Thank you.
    Dr. Wenstrup.
    Mr. WENSTRUP. Thank you, Mr. Chairman. Thank you all for 
being here.
    You know, I love America. I think America is the place 
where there is more opportunity than anywhere else in the 
world, and it is the opportunity for people to come from 
nowhere and lift themselves out of poverty. But we don't do 
that by paying people to not work. That has no return on 
investment there. And we don't do it by increasing taxes so 
much that your business moves out of the country and all those 
employees are without a job. There is no return on investment 
there.
    When I see a family succeed in a business and hire people 
from your community, this is personal now, see? Washington 
doesn't see it. People that just look at numbers and hold up a 
piece of paper, that's different from actually talking to you, 
which is what we, as Members of Congress, try to do, is get out 
there and talk to you and what makes a difference.
    So you do that. You get a better life for your next 
generation, for your family. But at the end of that, let's put 
them back in poverty, where you started. Why do we want to do 
that? That makes no sense. Let's keep the business going. Let's 
keep hiring the next generation of people. You know, a rising 
tide lifts all boats unless you shoot holes in the bottom of 
the boat. And that is what I see ourselves doing too many 
times.
    Mr. Ervin, I love some of the work that you are doing. In 
Cincinnati we have Cincinnati Works. You have a record, you 
decide you are going to turn your life around, you go through 
the program at Cincinnati Works, you are a lifelong member of 
it, and we have companies that said, ``When they have gone 
through that, we will hire them.''
    We have a business called Nehemiah Manufacturing. They make 
Procter and Gamble products. Everyone there has a record. They 
have turned their life around, and now they are going to try 
and make things better for their next generation.
    You know, in the district we go around and we say, well, 
why were you able to hire more and to grow your business? What 
happened? Did Washington do anything? Well, we might also hear, 
well, why did you have to cut jobs? What happened? These are 
the things we listen to. We don't just look at things on a 
piece of paper. But when I think about making America the best 
place in the world to do business and to work, that is what I 
want us to be. That is what I want us to be.
    Since the Tax Cuts and Jobs Act, we have had zero corporate 
inversions. And instead we have seen American businesses 
bringing back their overseas earnings to fuel investment, to 
increase wage growth here in the United States. Maybe it is not 
perfect in some ways. Well, let's take a look at that. See what 
we can make better. That is okay. That is what we should do. 
Don't just look back and say, oh, it is terrible, it did this 
or that. No, it did a lot of good, and people know it. And I 
hear it from people in the district.
    I believe, though, as we go forward, for the sake of our 
nation--I am going to ask Senator Gramm about this--I think one 
of the next reforms of the tax code needs to be explicitly 
about our supply chain, and take into account our national 
security risks, our national health security risks. I think it 
is important.
    I have released the draft legislation that would secure our 
critical battlefield medicines. I am a soldier. Do this by 
providing powerful new incentives to locate manufacturing of 
these essential medical products here in the United States and 
in pharmacy, all the active ingredients. We rely on China for 
that, an adversary. Open up our eyes, folks. We have got to 
incentivize these things to be back in the United States, and 
increasing corporate taxes is not how we are going to get it 
done. No one can take that risk.
    Senator Gramm, your testimony, you said how important the 
2017 reforms were to the corporate tax code in making the 
country competitive again. This isn't 100 years ago. This isn't 
post-World War II. This is a different global economy today, 
and we need to think differently to be competitive. So besides 
protecting the 21 percent rate, what policies should Congress 
pursue as we approach 2025 that will build on that progress and 
make it more attractive to bring business back to the United 
States and make us a more secure nation?
    Mr. GRAMM. Well, you raised the point that we don't help 
America by paying people not to work. Let me back that point up 
with some statistics. In 1967, when we started to ramp up 
funding for the war on poverty, we were providing $9,700 worth 
of benefits to the average household in the bottom 20 percent 
of earners, and 67 percent of their prime work-age persons 
worked.
    That level of benefits has now grown from $9,700 to 
$45,400. And what did we get for it? The labor force 
participation rate among prime work-age persons in the bottom 
20 percent of income earners in America has fallen from 67 
percent to 36 percent. During the pandemic, when we provided 
benefits up to 400 percent of poverty, and we provided 
basically welfare to middle-income Americans, what happened? 
The labor force participation rate fell.
    We can't put middle America on welfare. Somebody has got to 
work.
    And I would have to say, going back to who benefited, the 
income of the bottom 20 percent of earners in this country rose 
by 9.4 percent in the year following this tax cut in 1997. That 
was the largest percentage benefit of any sector of the 
economy. And how did they benefit? This didn't count the Child 
Tax Credit you provided. They benefited by working.
    And again, a job is the best program. There is no 
substitute for it. And many of those people will never go back 
on welfare.
    Mr. WENSTRUP. Thank you, I yield back.
    Chairman SMITH. Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you, Mr. Chairman.
    Mr. Ervin, Mr. Ramirez, I am assuming your concern about 
tax increases does not extend to your responsibility to pay the 
taxes you owe. I am assuming that both of you are very careful 
to make sure that you meet your tax obligations.
    Mr. ERVIN. Yes.
    Mr. BLUMENAUER. Is that is safe assumption, Mr. Ramirez?
    Mr. RAMIREZ. Yes, sir.
    Mr. BLUMENAUER. Are you concerned about people that you 
compete against who are not paying their fair share of the 
taxes they owe? Does that concern you? Is that a competitive 
advantage for them if they don't pay their taxes?
    Mr. RAMIREZ. You know, my biggest concern is state-
subsidized companies in China.
    Mr. BLUMENAUER. No, my question was, do you suffer a 
disadvantage if your competitors don't pay their taxes?
    Mr. RAMIREZ. Yes, my competitors are largely in China, and 
they get a 200 percent deduction on their R&D expenses, while I 
get a 20 percent deduction. And that is a major disadvantage.
    Mr. BLUMENAUER. I am talking about--you don't have any 
competitors in the United States?
    Mr. RAMIREZ. Our primary competitors are in China and 
Europe.
    Mr. BLUMENAUER. Do you have people you do business with in 
the United States?
    Mr. RAMIREZ. I am sorry, Congressman. Do I have business 
people I do business with in the United States? Yes.
    Mr. BLUMENAUER. No, never mind.
    Mr. Ervin, do you compete with anybody in the United 
States?
    Mr. ERVIN. Yes.
    Mr. BLUMENAUER. And if they don't pay their taxes and you 
do, does that pose a competitive disadvantage?
    Mr. ERVIN. Well, of course it would.
    Mr. BLUMENAUER. Okay, I am just wondering because we have 
these fascinating conversations and debate, dancing on the head 
of a pin, competing economists about the ins and outs of tax 
policy and fairness. But as a practical matter, we have $163 
billion a year that is not paid by the top 1 percent of 
American taxpayers. They forget to claim their income.
    And it is just mystifying to me that we don't focus on this 
tax gap. This is money every single year. And the evidence is 
the richer people are, the more they forget to claim on their 
taxes. Maybe they have got so much they can't keep track of it. 
But the evidence is clear. This tax gap is an ongoing expense 
every single year. And as we are talking about tax policy going 
forward, it would seem to me that the easiest area that we 
should focus on are the taxes that are already due and owing 
that people forget to pay.
    I don't want to engage you in that. I think it is 
interesting that people come in with their concerns about tax 
fairness, and what is going to happen, and how we are going to 
meet the deficit that is growing, and we are not focusing on 
collecting taxes that are already due and owing.
    This tax gap is something that we attempted recently to 
address. Strengthening the IRS's potential to actually collect 
taxes that are due and owing, it is interesting. One of the 
first things that passed from my colleagues on this committee 
was to take away money for enforcement from wealthy Americans. 
It was going to end up increasing the deficit $113 billion.
    I would hope that there would be some concern from the 
business community or academics or others to make sure that we 
have a level playing field, that people do what I assume you 
two do, which is pay the taxes that are due and owing. You can 
argue policy, but you comply with the tax law. And we have 
people who simply don't do that. And it adds remarkably to the 
deficit year after year after year. This seems to me to be the 
simplest adjustment we could make, that is make sure that we 
collect the taxes that are due and owing and have a level 
playing field for the remaining people in the business 
community.
    Thank you, I yield back.
    Chairman SMITH. Mr. Arrington.
    Mr. ARRINGTON. Thank you, Mr. Chairman. Thank you, 
witnesses, for your time and insights. A special thanks to my 
friend from Texas.
    Your exceptional service to the great State of Texas and, 
sir, Chairman Gramm, you represent the best of the character 
and common sense of Texas. So thank you for your years of 
contribution.
    Mr. GRAMM. [Inaudible.]
    Mr. ARRINGTON. Yes, yes. I read her memoirs, and that is 
where I am quoting your mother, actually.
    Look, we try really hard to simplify the contrast between 
our philosophy on the role of government and the lives of the 
citizens of this great country, our fiscal, budgetary and 
economic policies versus our Democrat colleagues, and the 
consequences and the experiences, the results of those two sets 
of policies derived by these distinct philosophies. And it is 
not always easy to cut through the smoke and mirrors and 
sleight of hand. But I think, because we had unified Republican 
leadership and then on the heels of that had unified Democrat 
leadership, I don't think there is a better picture of the two 
different philosophies, policies, and results.
    And TCJA is just one pro-growth policy on the economic 
agenda of my fellow Republicans. It is deregulation, it is 
America First trade. It is a number of things. But because of 
the agenda we advanced when I was a freshman in this 
institution in 2017, we got record investment, record growth, 
record jobs, millions of jobs, lowest poverty rates, highest 
increase in median income in 20-plus years. And the list of 
successes and achievements just goes on. And as my colleague 
said, all boats rose on the tide of prosperity that was 
unleashed because of economic freedom, quite frankly. Less 
government, more freedom, and America was doing much better.
    Now, contrast that with $6 trillion in additional deficit 
spending, $6 trillion added to the national debt, record 40-
year inflation, 20-year record interest rate hikes, people 
spending more--$14,000 more--to survive in some cases in this 
country as a result of inflation, people paying twice the 
amount for a mortgage, twice the amount for their car payment.
    And Dr. Gramm, and I say Dr. Gramm because I know you are 
an economist and you were a professor and you taught economics. 
And let me see if I understand supply and demand with respect 
to the contrast between the unleashing of prosperity through 
economic freedom and more government spending, borrowing, 
taxing, et cetera, and regulation, and what we are living with 
in terms of this cost of living crisis, not the least of which, 
in terms of concerns, is the slide to a sovereign debt crisis 
or some related crisis.
    You have got over-stimulated demand through trillions of 
dollars in Federal funds. You have got supply being squeezed by 
paying people not to work who are work-capable by regulating 
the lifeblood of our economy because if you tax and regulate 
energy you get less of it. Vis-a-vis demand, you are going to 
pay more for it. And we tax the competitiveness of American job 
creators.
    Now, is--when you do those things you get an imbalance in 
supply and demand, and you get this inflation tax, which is the 
worst and most regressive tax. Now, Dr. Gramm, grade my paper 
on that, and tell me where I got it right and where I got it 
wrong, because we have got two different worldviews, two 
different sets of policies.
    And by the way, we double down on economic freedom and our 
path to balancing the budget and beyond. And President Biden, 
got to respect him, put it all on the table, doubles down on 
$2.5 trillion more in mandatory spending, $5 trillion more in 
taxes, the highest level of sustained spending, taxing, and 
borrowing in the history of the United States of America.
    Mr. GRAMM. Well, let me say that the proof is in what 
happened. For the last 50 years we have increased social 
spending. We have instituted numerous policies. And yet the 
2017 tax cuts increased median income twice as much as any 
other action by any other government in the last 50 years.
    Now, you can distort the figures by talking about Warren 
Buffett's tax cut and some person that doesn't pay taxes, but 
you can't distort that figure. And the biggest beneficiary in 
percentage terms was the bottom 20 percent of income earners. 
And they didn't benefit by going on welfare. They benefited by 
going to work. And it seems to me that that is the greatest 
benefit.
    I wonder what the world of many people sitting up there 
would be if we had the welfare system when they were growing up 
that we have today. My guess is a lot of you wouldn't be there.
    Mr. ARRINGTON. My time has expired. Thank you.
    Chairman SMITH. Mr. Pascrell.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    If I can respond to a gentleman I have a great respect for, 
Senator Gramm, as I do each of the witnesses, but you really 
blew my mind in what you just said.
    It has been referred to by three of the panelists that what 
happened in 2017 was tax reform. We haven't had tax reform 
since the 1970s and 1980s. And you remember that, Senator 
Gramm. We haven't had it. We haven't had a change in how we 
look at the tax code itself. Not at all. Because you raise 
taxes or you decrease taxes does not mean it is reforming the 
system, because you can't deny that in the first quarter of 
this century, in 2024, it looks like in these 25 years we will 
have increased the gap between the rich and the poor, and that 
that income gap is something we have not addressed, Republicans 
or Democrats. And you can't do it until you have tax reform, 
and not just a five percent increase in wages. That does not 
help us reduce the gap. It does not.
    So, gentlemen, I think that this is another tax scam. I 
will be honest. I am not trying to be a wise guy. The chairman 
knows I am going to say what I think. It is also one of the 
most destructive laws--and from the 116th Congress--in 
generations.
    My colleagues on the other side said their tax scam would 
be the best thing since canned beer. That really got my 
interest, though.
    Let us look at what actually happened. They promised they 
would raise wages. It did not really raise wages. Many things 
affect how wages go up and go down.
    They vowed it would put America on stronger footing. 
Instead, it blew a Grand Canyon of debt, nearly $2 trillion, 
not a nickel of which was paid for. You folks always talk about 
paying for what you do. This was not paid for, and the people 
took it out on your hides in 2018 when we overcame a deficit in 
numbers of people sitting in the House of Representatives, a 
big deficit. They saw right through it.
    They said it would let Americans file their taxes on a 
postcard. Oh, how quickly we forget. They swore it would help 
middle class Americans, but nearly all the money went to people 
who have a lot of money. The cake went to big business, and we 
know where the crumbs went.
    They said out loud they did it to screw states like mine. 
They said it. I was there, I witnessed it. Republicans said 
that, particularly when you shafted us on the SALT plan and 
those poor 12 states. You know, Lincoln knew what he was doing, 
but I don't want to go back into history. Who cares about that?
    George Orwell said, ``To see what is in front of your nose 
requires constant struggle.'' I have a big nose. It is a 
constant struggle. That is true when you are told to ignore 
reality, like here today.
    Last week Donald Trump spoke to some members at his golf 
club, and he told them, ``We gave you the largest tax cuts in 
history.'' Here is a guy that just a month ago said he wanted 
to blow up the economy. Is that what the election is worth? In 
10 seconds he summarized their entire platform.
    The other side wants to give big business another giant tax 
cut. They do not want to pay for it, either. I don't see that. 
Oh, it will pay for itself because it will be so great. Then 
they want the IRS so the same people can cheat on their taxes. 
They want to cut billions of dollars from what was voted on by 
the Congress of the United States.
    So that is what is in front of our noses. This scam of 2017 
was a failure, and the citizens know more than we do, and they 
took it out on your hide in 2018, as they would have taken it 
out of our hide. The GOP tax scam of 2025 is worse.
    Ms. Edwards, you are familiar with the tax scam of 2017, 
the tax cuts of 2017. Did the law raise wages, reduce inequity, 
and help the middle class, as was promised? Three things.
    Ms. EDWARDS. The wage increases of 2018 were largely due to 
the economy hitting full employment after recovering from the 
2007 to 2009 Great Recession. The law's greatest strength was 
that it happened at a good time, not that it contributed to 
those directly.
    If you want to raise wages for people at the bottom, you 
can raise the minimum wage. If you rely on intermediary of 
their employer, you know, they are not going to get the full 
benefit.
    Mr. PASCRELL. Ms. Edwards, can you describe how making the 
tax scam permanent would harm American society of the middle 
class? We want to double here. We want to do a voodoo.
    Chairman SMITH. Mr. Pascrell.
    Mr. PASCRELL. Capital letters.
    Chairman SMITH. We are----
    Mr. PASCRELL. I will have her answer the question.
    Chairman SMITH. Okay, we are a minute and 25 seconds over, 
but let's do it.
    Ms. EDWARDS. The most expensive part of the tax cut is the 
investments that it didn't make.
    Mr. PASCRELL. Thank you, Mr. Chairman, and it is a 
wonderful day in the neighborhood again.
    Chairman SMITH. I am so shocked you didn't talk about SALT. 
[Laughter.]
    Chairman SMITH. But I will recognize myself for some 
questions right now.
    When you look at the 2017 Tax Cut and Jobs Act, you can't 
argue that the tax cuts created the best economy in my 
lifetime. I am only 43, but I can tell you in the 43 years I 
have been alive, it is the best economy we ever had. And it was 
because of the 2017 tax cuts, but also having President Trump 
leading this country and created the most reduction in 
regulations any sitting president has ever done. And those two 
things led to the best economy.
    In fact, it led to the best poverty rate, the lowest 
poverty rate dropped in history by recorded numbers. By what we 
measure poverty is, we had the lowest rate ever in history. 
Those are facts. I know facts sometimes hurts and gets people 
upset up here, but those are facts.
    I also want to give another fact.
    Mr. PASCRELL. I can't accept that as a fact.
    Chairman SMITH. It is documented information.
    Another fact is this billionaire tax that a lot of people--
you know, let's go after the wealthiest of the wealthy. The 
wealthiest of the wealthy. And guess what? Guess what? If you 
took every dollar of every billionaire in America, where they 
don't even have $0.01 to their name, you could fund government 
for almost eight months. Fund government for eight months if 
you took every penny of every billionaire in this world.
    Mr. PASCRELL. Mr. Chairman, I am not talking about----
    Chairman SMITH. Mr. Pascrell----
    Mr. PASCRELL [continuing]. The rich. I don't agree with----
    Chairman SMITH [continuing]. It is my time.
    Mr. PASCRELL. Unfair.
    Chairman SMITH. Mr. Pascrell, it is my time, and it is okay 
for you to disagree.
    Mr. PASCRELL. I will say that--who are you talking about?
    Chairman SMITH. I am not talking about you. So I will 
reclaim my time.
    Mr. Gramm, let's talk about this. In the years that 
followed enactment of the Trump tax cuts we saw lower-income 
earners have a huge reduction in their taxes. The bottom 20 
percent of earners, those with incomes up to $26,000, saw their 
Federal tax rate fall to its lowest level in 40 years, the 
lowest level in 40 years. Workers in the lowest 10 percent of 
the income saw 50 percent higher wage growth than those in the 
highest 10 percent. The economy, it grew by one percent faster 
than CBO had projected, and we saw record lows in unemployment, 
including for those without a high school degree.
    Why did the Trump tax cuts deliver so much for working 
families?
    Mr. GRAMM. Because it created an environment in which 
people invested more money and created more jobs.
    Now, it is true that rates were down. But what is far more 
important is the rise in the median income of the bottom two 
quintiles, who were very major beneficiaries of the tax cut and 
deregulation.
    And I don't think we advance debate by simply making up 
numbers that this tax cut went to billionaires. The evidence is 
so overwhelming, the data----
    Chairman SMITH. So in regards to that, when you talk about 
real wages, real wages increased by more than 5 percent after 
passage of this, which was the highest in 20 years. It was also 
more than the prior 8 years combined, which is pretty 
substantial because, since Joe Biden has taken the oath of 
office as President the last 3 years, real wages have declined 
3.9 percent. And so that does affect real, working-class 
Americans.
    Dr. Winfree, you were talking about the standard deduction. 
I want to ask you a question about the Child Tax Credit. Do you 
know how the Child Tax Credit affects families and their 
Federal tax rate?
    Mr. WINFREE. It gives tax relief to families.
    Chairman SMITH. So my calculation shows that a family of 
four, a family of four, if they make $64,000 or less, they will 
pay zero dollars in Federal taxes. That is tax relief.
    I represent one of the poorest congressional districts in 
the nation. Our median household income is right around $40,000 
a year, right around 40,000. A family of four who makes $40,000 
benefited greatly from the doubling of the Child Tax Credit. It 
was from $1,000 to $2,000, and that was done with Republicans. 
Not one Democrat voted for that. Not one.
    But we got to move ahead and look at all of the taxes for 
2025, and the Child Tax Credit is something that we need to be 
looking at, but we need to make sure that work requirements are 
in it. The American Rescue Plan child tax credit did not have 
work requirements in it. And guess what? We saw the results of 
that in the economy.
    And so we know that, to have a good, workable child tax 
credit, we need work requirements.
    With that, Mr. Davis.
    Mr. DAVIS. Thank you, Mr. Chairman, and let me thank all of 
the witnesses.
    You know, I am always amazed at how we can accomplish so 
much, and yet things remain essentially the same. Amazing.
    Dr. Edwards, let me thank you for your testimony that 
clearly lays out the complete failure of the 2017 Republican 
tax law. It cost $2 trillion, but the only real deliverables 
were growing the bank accounts of the wealthy and well-
connected. I really appreciated your focus on the failed 
opportunity of the Republican law. That two trillion could have 
increased the security of older Americans, dramatically reduced 
child poverty, eased hunger, help working parents with 
childcare, paid family and medical leave, or it could have made 
housing affordable for millions.
    My Republican colleagues falsely claim that they want the 
Child Tax Credit to go only to working parents, when in reality 
it seems to me that they only want parents who make enough 
money to owe substantial taxes to benefit.
    Dr. Edwards, as a labor economist focused on women and 
security, can you speak about how tax policies that support 
low-income individuals, parents, and workers strengthen 
families and boost our economy?
    For example, if we were to help parents without tax 
liability get up to $8,000 of credit for their childcare, like 
we did in 2021, how could that credit help families and the 
economy?
    Ms. EDWARDS. Thank you, sir.
    The Senator from Texas misspoke earlier when he talked 
about the 1996 tax law. That was--the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 ended the cash 
entitlement for welfare in the United States. We don't have 
welfare as welfare. We have food stamps, but there is no, you 
know, no strings-attached-cash that go to the lowest-income 
households. And it has not been the case since I was 10.
    You know, I--what labor economics has taught us over that 
period in which there has been no cash benefits for low-income 
Americans, including without-strings-attached, especially for 
single mothers, you know, what we have learned is that the 
biggest boost to labor force participation comes from, one, a 
strong economy with low unemployment rate; and two, reducing 
the barriers to work that most workers face, barriers like not 
being able to afford child care, barriers like you have a 
felony on your record and so no one will hire you, barriers 
like you have a disability and you need to get to your job but 
you are one of the quarter of Americans that doesn't have paid 
sick days and so the first time you go to rehabilitation you 
get fired.
    I mean, there are basic structures that we do not have for 
labor force participation, and it is the number one barrier to 
having more workers in the United States. Childcare for women 
is right at the top. Families who currently purchase childcare, 
those that choose to do so, pay a quarter of their take-home 
income to child care benefits. That is more than mortgages in 
almost every state.
    Mr. DAVIS. And let me quickly ask you, you have done 
serious work on racial wealth disparities. Would you say that 
extension of the 2017 Republican tax law would help address 
racial wealth disparities?
    Ms. EDWARDS. No, there is--the racial divide gets larger 
the higher up the wealth distribution you get. So I--you know, 
I could see something like the pass-through deduction talking 
about small businesses and being directed towards businesses of 
color. But it is very important to remember all small 
businesses are pass-throughs; not all pass-throughs are small 
businesses.
    You know, nearly 70 percent of people who benefit from 
pass-throughs are in the top 1 percent of the income 
distribution. That is not to say small businesses don't 
benefit, but they are the minority beneficiary, relative to the 
other people who claim it.
    So when I say, what do you intend to do and what do you 
actually do, helping small business is great. You don't need to 
hit the top one percent on the way. If you have effectively 
designed tax relief, it doesn't have to kind of like miss on 
that margin.
    Mr. DAVIS. Thank you very much.
    Thank you, Mr. Chairman, I yield back.
    Chairman SMITH. Thank you.
    Dr. Ferguson.
    Mr. FERGUSON. Thank you, Mr. Chairman, and thanks to the 
witnesses for being here.
    I first just want to thank my dear friend from New Jersey, 
and mayor down there, who--we have a wonderful relationship. I 
believe you have gone from drinking that canned beer that you 
were so excited about to partaking of the Devil's lettuce with 
your rant. That was quite epic, and you were really far out 
there on a lot of these topics. So that was one of the better 
ones that we have experienced.
    So with that being said, again, let me thank each of you 
for being here. A couple of questions.
    Senator Gramm, I believe you said that, following the Tax 
Cuts and Jobs Act, families received--I think it was you that 
said this--received about a $5,200 increase in salary. Is 
that----
    Mr. GRAMM. $5,220 on average.
    Mr. FERGUSON. Okay. If you look at what inflation has done 
to American families, they have lost every single bit of that, 
haven't they?
    Mr. GRAMM. Well, they have lost part of it since President 
Biden took office.
    Again, you know, we can talk all you want to, and you 
certainly have the right to your own opinions, but you don't 
have the right to your own facts. The hard-core facts are that 
lower-income families were huge beneficiaries of this tax cut. 
Black Americans saw their income on a household level grow 
faster than any other year in over 50 years. Now, that is a 
fact. The Census data, and I have got it right here, shows it.
    So you can say it didn't happen all you want to say, but 
what we are doing is just simply talking past each other.
    Mr. FERGUSON. So if I could reclaim--and thank you for 
that----
    Mr. GRAMM. Yes, sir, I am sorry.
    Mr. FERGUSON [continuing]. Because it is important. When we 
look at what is the most important thing that should come from 
the tax code, it is really economic growth and economic 
development and creating jobs.
    Mr. Ramirez, how many new people have you hired since 2017?
    Mr. RAMIREZ. Oh, gosh, Congressman, thank you for the 
question. I don't know the exact number, probably 200 to 250 
people.
    Mr. FERGUSON. So this is a 250 people, 250 families that 
have benefited from your investment, your risk, your hard work, 
and also the fact that you have more in your pocket to expand 
and grow your business.
    Mr. RAMIREZ. Yes, sir.
    Mr. FERGUSON. Okay, Mr. Ervin, when you started your coffee 
company, okay, you said you started it as a hobby in your 
backyard, and now--or in your garage, I should say.
    Mr. ERVIN. In the garage.
    Mr. FERGUSON. In the garage. You now have, say it again, 12 
employees?
    Mr. ERVIN. I have 12 employees that we currently have. We 
have hired more than that over the years.
    Mr. FERGUSON. Again, families and individuals that have a 
job with you that otherwise would not have those jobs.
    Mr. ERVIN. Exactly.
    Mr. FERGUSON. Correct.
    Looking further down the line, Dr. Winfree, talk about how 
important it is with the Tax Cuts and Jobs Act when we created 
the environment for research and development not only to invent 
new products, improve on existing products, but then for 
businesses to be able to make the strategic capital 
investments, to turn those ideas into products, sell them, and 
make a profit. How important is that to the American economy?
    Mr. WINFREE. Thanks for that question. All of our progress 
over the last 250 years is a derivative of three things: one is 
culture, we have an extremely innovative culture and we should 
not be doing things to penalize that; two, our institutions, 
things like property rights. I can't believe I have to say this 
in 2024, but it seems like at the local level all the way up--
and you can talk about Chinese stealing IP and things like 
this, or you can talk about how property rights have to be 
defended in cities and towns in America----property rights are 
absolutely critical. And then the third piece of that pie is 
technology, right? We should be promoting investments in 
technology.
    And when you get all of those three things together, you 
get prosperity.
    Mr. FERGUSON. Okay, a final question. This will be a final 
couple of questions here.
    How many of you on the panel have borrowed money and put 
yourself at risk to either expand or start a business? Show of 
hands.
    Okay. How many of you have signed paychecks?
    Okay. I tend to trust that. You know how to run a business, 
you know what it takes. You have had to lay awake at night 
worrying about how to actually get from point A to point B in 
this process, and you have found a way through it. And for you 
to say that it makes a difference in the success of your 
business and your ability to make other families better, I am 
going to trust you all's judgment on this. So thank you so much 
for being here.
    Chairman SMITH. Mr. LaHood is recognized.
    Mr. LaHOOD. Thank you, Mr. Chairman. I want to thank all of 
our witnesses for your valuable testimony here today.
    Make no mistake about it, the Tax Cuts and Jobs Act jump-
started an economic boom in this country pre-COVID, across so 
many sectors that have been alluded to today and many of you 
have talked about, providing businesses with the means to 
invest more, raising wages, expanding their workforce. We moved 
almost six million people out of poverty during this period of 
time, directly related to the Tax Cuts and Jobs Act.
    And providing thoughtful tax incentives aimed at keeping 
more money in the hands of our workers and businesses can go a 
long way for our communities and our economy, and I saw that in 
my district in Illinois. And TCJA obviously serves as a great 
model and a starting point to do just that as we head into the 
rest of this year and going into next year. And in order to 
achieve those goals we are going to have to both protect much 
of what we did seven years ago, and also consider new policy 
proposals based on the world we live in today and our 
competition.
    And I look forward to working with my colleagues in this 
room to further promote U.S. business investment, address the 
affordable housing crisis and economic development needs 
through tools like the Low-Income Housing Tax Credit and 
support for our farms and ranches, and continuing to allow 
citizens at the lower level of our economy to live the American 
dream, which we expanded that American dream with the Tax Cuts 
and Jobs Act.
    One area, Dr. Winfree, that I wanted to talk to you about, 
as we built up to TCJA in 2017 we talked a lot about how do we, 
on the international level, allow our companies and businesses 
to be more competitive. And so we worked on what was the 
appropriate corporate tax level, but also how do we repatriate 
money back to the United States. And for too long, many of our 
companies and corporations were parking money overseas because 
of the tax code we had here and the restrictive measures we had 
in place that disincentivized having that money in the United 
States. And so we did that.
    And I am wondering if you can talk about post-Tax Cuts and 
Jobs Act, that repatriation that has come back, and where that 
money has gone.
    Mr. WINFREE. That is right. I mean, that money has come 
back, and it has gone back to Treasury.
    I think that one of the things that, you know, you 
highlighted here is that there was a lot of conversation around 
what that corporate tax rate needed to be in order to be 
competitive. And it is important to note that the corporate tax 
rate is not expiring at the end of next year. At the same time, 
we should still be thinking about what that tax rate should be 
in order to make it competitive.
    And to that point, when you add the 21 percent corporate 
tax rate alongside the state corporate tax rate in most states, 
you have got a combined tax rate at the Federal and the state 
level that is higher than the corporate tax rate that is 
applied to companies in China. And if China is a national 
security threat and an economic threat, then we need to be 
thinking about how all of that relates back to how we are 
making businesses like these guys--and in particular, Mr. 
Ramirez--more competitive. And--yes.
    Mr. LaHOOD. Thank you for that.
    Mr. WINFREE. Yes.
    Mr. LaHOOD. Senator Gramm, it is estimated we repatriated 
about $3 trillion back to the United States because of what we 
did there. I am wondering if you could comment on that, that 
reinvestment in the United States by companies here.
    And then, number two, as we think about how do we win the 
strategic competition against the CCP, the Communist Chinese 
Party, what we need to be doing from an economic standpoint to 
make sure we win that strategic competition.
    Mr. GRAMM. Well, first of all, don't imitate China, don't 
implement industrial policy here, where you assume government 
knows more about investment than people who are investing their 
own money. I have been stunned at the bipartisan support for 
trying to compete with China by doing what China does. You want 
to compete with China? Reduce regulatory burden. You want to 
compete with China? Reduce the tax rate. You want to compete 
with China? Deal with the explosion of programs that 
disincentivize people to work.
    Look, I am for tax credits. I want to make it possible for 
low-income people to benefit from working. But when you are 
giving tax credits to people that don't work, you are extending 
this whole welfare system into the middle class, and it is 
devastating to America's competitiveness, and we need to be 
worried about it.
    So I wouldn't give any tax credit to anybody who is not 
paying taxes. It is a simple principle. Taxes are about 
taxpayers. You don't pay taxes, you don't get tax credits. You 
want to give people welfare? Fund it. The biggest dispenser of 
welfare in America today is the Internal Revenue Service. Now, 
how did we possibly allow that to happen? That ought to be 
reversed wholesale, in my opinion. You want to start reforming? 
That is a very important reform.
    Mr. LaHOOD. Thank you----
    Mr. GRAMM. There are not many people in China that are 
getting paid not to work, I can assure you of that.
    Mr. LaHOOD. Well said. Thank you.
    Chairman SMITH. Ms. Sanchez.
    Ms. SANCHEZ. Thank you, Mr. Chairman. It is astonishing 
that today Republicans are attempting to resurrect Trump's 
signature tax bill that rewarded our nation's wealthiest 
families at the expense of our nation's working families.
    For decades now, Republican tax policy has reinforced a tax 
system that is very imbalanced, that favors the richest 
Americans and the largest corporations. In the six years since 
Trump signed the bill into law, its tax cuts have proven to be 
costly and ineffective. Republicans claim that the TCJA's 
windfall tax cuts to high earning households and large 
corporations pay for themselves through economic growth, yet 
they have never paid for their tax giveaways to the wealthy.
    Doubling down on the Tax Cuts and Jobs Act would allow 
mega-corporations to continue paying less in taxes than ever 
before, and they claim that those tax cuts are going to trickle 
down to everyone else. We know that they don't, but slashing 
the corporate income rate only lined the pockets of executives 
and shareholders. It didn't trickle down to workers and 
families because Republicans seem to be allergic to tax 
benefits for those who really are deserving of a break.
    I believe it is time to chart a new and fairer path in tax 
policy, because we know that investments in infrastructure, 
childcare in particular--men on the panel, child care for 
working parents, child care--and investments in education are 
what create great conditions for economic growth. My Democratic 
colleagues and I recognize that investments that directly 
benefit American families yield much stronger results than 
using intermediaries, as Dr. Edwards said earlier.
    Now, TCJA promised us rainbows and unicorns. It promised 
things were going to be so great, and that the tax code was 
going to be so simple that we could file our tax returns on a 
postcard. I want to ask the panelists, by show of hands, how 
many of you file your income tax returns on a postcard?
    How many of you earn $50,000 a year or under?
    A hundred thousand dollars a year or under?
    Two hundred thousand dollars a year or under?
    All right. My question is, why don't we have low-income 
taxpayers on the panel today to talk about how the TCJA 
affected them, and whether or not it provided all these 
glorious benefits that my colleagues continue to insist happen 
when the facts show that they didn't happen if you look at the 
Joint Tax Committee's analysis of whether or not the lowest-
income earners got any benefit at all?
    Now, Professor Edwards, fans of the Tax Cuts and Jobs Act 
claim--again, these great claims--that the law's pass-through 
deductions strengthen Main Street and small businesses. Can you 
tell us what kind of taxpayers are taking advantage of that 
huge deduction?
    Ms. EDWARDS. The benefits are concentrated amongst the top 
one percent of filers by income.
    Ms. SANCHEZ. So taxpayers across the income spectrum have 
not benefited equally. Isn't that true?
    Ms. EDWARDS. Not equally, no.
    Ms. SANCHEZ. No. Okay. And if not, does the pass-through 
deduction drive enough economic growth to outweigh the cost?
    Ms. EDWARDS. No.
    Ms. SANCHEZ. No. Thank you. Professor Edwards, your 
testimony outlined the 2017 tax law's failure to increase wages 
for the bottom 90 percent of workers, none of whom are on the 
dais today. So what benefits, if any, have low-to-middle-income 
taxpayers seen in the six years since Trump signed the 
signature tax cuts into law?
    Ms. EDWARDS. You know, Mr. Gramm has said several times 
about people who don't work not paying their fair share. You 
know, you can't pass a $2 trillion tax cut that is concentrated 
at the bottom because they don't pay that much in taxes. If you 
are paying $2 trillion to lower your tax revenue, it is not 
going to the poorest Americans because they don't pay that 
much.
    So it is, I think, kind of just a basic logical argument 
of, if you are going to spend that much in revenue, it is not 
going to go to the bottom because they don't have that much of 
a tax burden. It is going to go to the top. It doesn't cost 
that much to cut people's taxes if they only make $35,000 a 
year. It costs a lot to cut someone's taxes if they make $35 
million a year. That is what drives up the cost of the 
legislation.
    Ms. SANCHEZ. Thank you. And as the IRS has shown, the 
people who are most likely to not pay their fair share of taxes 
are wealthy individuals and large corporations.
    Dr. Edwards, can you expand on what you call the 
opportunity cost of extending the 2017 tax cuts for large 
corporations and highest-income earners, instead of making 
investments in working families?
    Ms. EDWARDS. Working families who were paying a quarter of 
their income for child care would, you know, probably be upset 
to learn that the cost of the 2017 tax cut was enough to create 
a universal child care and preschool system in the U.S., at 
least four, if not five times over.
    Ms. SANCHEZ. Thank you.
    And I just want to add finally, before I yield back my 
time, that, Senator Gramm, I take personal issue with your 
assertion that if a welfare state had been in effect when we 
were growing up, that many of us on the dais would not be here. 
I would submit to you, number one, we are not a welfare state; 
but number two, I wonder if we didn't allow family wealth to be 
passed down tax free to the tune of $13 million per individual 
or $27 million for a married couple, how many Members of 
Congress would be sitting on this dais or would not be here.
    And with that, I yield back.
    Chairman SMITH. Thank you.
    Mr. Estes.
    Mr. ESTES. Thank you, Mr. Chairman, and thank you to our 
witnesses today.
    You know, it is really unfortunate, the amount of 
misinformation that is out there that is trying to mislead the 
American family and American families and the people across 
America about the effects of the TCJA. If we look at the facts 
and the data, the TCJA allowed more Americans to keep more of 
their hard-earned dollars, while Treasury ended up collecting 
more in revenues.
    [Chart]
    Mr. ESTES. A year before TCJA, in January of 2017, CBO 
projected Fiscal Year 2023 revenues would be $4.346 trillion. 
After passage of TCJA, CBO revised their estimate and estimated 
that the revenues would only be about $4.182 trillion, or a 
reduction in revenues by about $174 billion. In reality, the 
Fiscal Year 2023 revenues totaled $4.439 trillion, as we can 
see in this chart, exceeding even CBO's initial estimates 
before they factored in TCJA. And this is only the most recent 
year. If you go back to Fiscal Year 2022, the numbers were 
bigger. In Fiscal Year 2021 they also had bigger numbers.
    And while these tremendous results are still working to 
correct the record--we are trying to correct the record 
regarding CBO's wildly inaccurate projections, and correcting 
the lingering misinformation about the impact of TCJA, which is 
more important than ever as we prepare to renew, extend, and 
strengthen the best aspects of the TCJA in 2025.
    The Tax Cuts and Jobs Act was massively successful due to 
the focus on promoting economic growth and U.S. global 
competitiveness. Prior to TCJA, the U.S. had the highest 
statutory corporate rate among developed countries. We also had 
a worldwide tax system that incentivized companies to hold 
large cash reserves overseas. By lowering the corporate rate to 
21 percent and reforming our international tax system, 
specifically using the GILTI and FDII provisions, we were able 
to bring jobs back, bring intellectual property back to the 
United States, and tax revenue.
    After more than five years, we can confidently say the 
system worked. Corporate tax revenues have increased, even at a 
lower rate, and there has not been a single U.S. corporate 
inversion in that same timeframe. As we look towards 2025, it 
is essential that we find ways to build upon these and other 
successes.
    One key pro-growth provision that must be addressed in 2025 
is immediate R&D expensing. Since amortization took effect, the 
growth rate of R&D spending has slowed dramatically, from a 6.6 
percent on average increase per year over the previous 5 years 
to less than one half of 1 percent over the last 12 months.
    Mr. Ramirez, lagging R&D growth is detrimental to our 
global competitiveness. As someone who has led an international 
engineering and manufacturing firm, how does R&D amortization 
impact our ability to compete in the world?
    Mr. RAMIREZ. Congressman, thank you for the question. I 
think this is the single-most important issue in the tax reform 
right now.
    I mentioned earlier China has a 200 percent super-deduction 
for R&D. My biggest competitor is in China. And now, since 
2022, I get a 20 percent deduction for R&D. I have got to 
amortize it over five years. Since 2022 that one policy has 
created a $20 million hole in my balance sheet. I have $20 
million less liquidity because I have to amortize R&D. And if I 
could just expense 100 percent of it in the year incurred--that 
is a massive drag on our ability to invest and create new 
products and deploy new capital and grow our business.
    Mr. ESTES. Yes. And as I mentioned, we are seeing a 
reduction in R&D expenditures. We are also seeing a reduction 
in jobs in research and development because of that.
    Senator Gramm, I appreciate you being here today, there is 
so much that you have covered. You talked earlier a little bit 
about international tax, and particularly the Pillar Two 
provision. I have been a staunch opponent of the approach that 
was taken to look through that. I want to give you some more 
time to just talk about some of the concerns that you have 
about that. I think it is just detrimental, and I think 
whatever you can add to the conversation would be great to help 
with clarifying that.
    Mr. GRAMM. Well, again, I think you don't have to give 
Americans an advantage. You just need to give us a playing 
field that is flat as compared to our competitors.
    I think that the 2017 tax reduction was very effective 
because it moved us from the highest corporate tax rate in the 
world into a competitive range. The American economy works 
better because we have greater ability of people to make 
decisions. The system is more flexible, more adjustable. That 
is changing now with the regulatory burden.
    I can honestly say, as someone who engages in business in 
the United States and in Europe, there is no socialist 
government in power in Europe that has a regulatory burden that 
is growing at anything like the regulatory burden in the United 
States.
    Mr. ESTES. And as we see, that----
    Mr. GRAMM. It is very, very harmful, and the point being, 
is that it costs jobs, growth, and opportunity. And in the 
process, it is not going to make me poor, but many of the 
people that are having great concerns expressed on their behalf 
are going to be poorer as a result of it.
    Mr. ESTES. Yes, thank you, and I appreciate your time.
    I yield back.
    Chairman SMITH. Mr. Smucker.
    [Pause.]
    Mr. SMUCKER. Thank you, Mr. Chairman. You caught me by 
surprise there.
    First of all, thanks for holding today's official kickoff 
for our discussions surrounding the tax reform that we will be 
needing to do in 2025.
    And I just want to expand on what Mr. Estes just said. That 
chart, I thought, really said the story well. But TCJA, it 
broke records on raising millions of families out of poverty; 
it boosted median income across all demographics; it created 
millions of jobs; it unleashed economic growth; but it also 
made the tax code fairer, not less fair. Thanks to the reforms 
made on the individual side of the taxes, our tax code is now 
among the most progressive in the world.
    According to CBO, higher-income earners started paying more 
in income taxes post-TCJA. In fact, individual income tax 
collection increased by 27.5 percent, overall income tax 
collection, with 80 percent of that being paid by the top 10 
percent of earners. A 5,027 percent increase in total revenues 
coming in; 80 percent of that came from the top 10 percent.
    Corporate tax revenues also went up, even during the 
pandemic. In fact, receipts had double-digit annual increases, 
which had only happened 11 times since 1977. And Mr. Chairman, 
I do have an article from Politico that I would like to submit 
into the record.
    Chairman SMITH. Without objection.
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    Mr. SMUCKER. Thank you. That was all achieved because the 
TCJA, flat-out, it was good tax policy. By targeting reforms to 
the code we closed loopholes, we helped low and middle-income 
Americans keep more of their hard-earned money, and we spurred 
record business investment to grow our GDP. And I just want to 
contrast that with some of the tax policies, what I think are 
bad tax policies that we have seen coming from this 
Administration. It is important we talk about this going into 
2025.
    Last year, my Democrat colleagues passed the so-called 
Inflation Reduction Act, which President Biden repeatedly 
claimed would raise taxes on the wealthy and corporations and 
make them pay their fair share. Now, I still haven't ever had 
anyone define to me what a ``fair share'' is. We keep hearing 
that brought up, and I don't know what the fair share is of 
someone who has earned and worked hard for that money. What is 
the fair share they should be paying? I don't know the answer 
to that.
    But what we have seen is, even though President Biden 
claims that he increased taxes on the wealthy and on 
corporations, the data actually shows--and I will have another 
article, Mr. Chairman, I would like to submit for the record 
from the New York Times.
    Chairman SMITH. Without objection.
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    Mr. SMUCKER. And this goes to Senator Gramm's conversation 
about industrial policy. The data shows that he has actually 
cut taxes for corporations and high-income earners through 
corporate tax breaks for his favored industries. He talks about 
raising taxes, but he has actually benefited and cut taxes for 
his favorite industries.
    And by the way, he also hasn't kept true to his claim that 
the IRS won't audit households making less than 400,000. IRS 
data shows that, as of last summer, 63 percent of new audits 
are targeting taxpayers with income of less than 200,000. That 
is according to a report just out from the IRS.
    So now what we are left with is small businesses in my 
district, who can't take advantage of those cherry-picked 
corporate taxes, now face an audit-heavy environment. And 
really, one of the best benefits that they have received from 
the Tax Cuts and Jobs Act is the 199A deduction for small 
businesses.
    And Mr. Ervin, I very much appreciate you bringing that up. 
I am pleased to be the lead sponsor of extending that 
provision, making that provision important because Main Street 
businesses that employ 60 percent of all private-sector 
employees, they will face a dramatic increase in taxes if we do 
away with 199A. A 43.4 percent Federal tax rate will be the top 
tax rate for them.
    Raising their tax could result in reduced wages, reduced 
benefits for workers, certainly reduced investment in the 
business, and other impacts to our growth. So again, Mr. Ervin, 
I know you mentioned this, but could you expand on how a 43.4 
percent tax rate would potentially impact your business if we 
do not make 199A permanent?
    Mr. ERVIN. Simply put, ultimately, a closed sign would go 
up in my window. And not only in my window, but on the windows 
of most of the other businesses on my street if we had to pay 
that. So hopefully, that simplifies it.
    Mr. SMUCKER. Thank you. I have other questions, but I see I 
am already out of time. But the chairman is not paying 
attention, so we will keep going.
    Mr. ERVIN. Go ahead.
    Chairman SMITH. Ms. Sewell.
    Ms. SEWELL. Thank you, Mr. Chairman.
    You know, there are distinct populations within this nation 
that did not benefit from the enactment of the TCJA in 2017. I 
can tell you right now that the hard-working Americans in my 
district, Alabama's 7th congressional district, were not 
beneficiaries of this legislation.
    If we are going to spend the afternoon discussing the work 
of this committee and the work that we have done to aid hard-
working Americans, let's look back to 2020 instead of 2017. It 
was only the action of Democrats in the height of the COVID-19 
that provided common-sense solutions like making the Child Tax 
Credit fully refundable that addressed the needs of hard-
working Americans who, through no fault of their own, were 
being hit in the hardest pandemic--once-in-a-generation 
pandemic.
    But here we are. We are talking about 2017. And if we are 
to talk about 2017, let's be honest about the cost of the TCJA: 
$2 trillion, $2 trillion. I was in the room in 2017 when the 
TCJA repealed the advance refunding on tax exempt municipal 
bonds. Now, I was a bond lawyer. Ms. Edwards, you talked about 
the opportunity cost, what we could have done with the $2 
trillion. And I can tell you that a lot of the underserved, 
vulnerable communities that I represent, a lot of the towns and 
villages and small communities really did use tax exempt bonds 
to try to revitalize their downtown area. It [sic] actually, 
you know, did hire people and the like. But the reality is that 
we chose to repeal advance refunding of tax bonds, and at a 
time when we saw economic growth.
    My question to you is this. The benefits that the TCJA had 
are not necessarily attributable to the TCJA. Can you talk a 
little bit more about that, and also about the opportunity 
costs?
    I mean, you talked about how we could have paid for 
childcare. I also know that $2 trillion could have gone a long 
way to helping us with the Child Tax Credit, and--which did 
lift millions of Americans out--especially children, out of 
poverty.
    Ms. EDWARDS. Sure. So yes, there is a lot of numbers going 
around. Was TCJA a benefit to the top? Was it a benefit to the 
bottom?
    You know, where I based my assessment is based on the 
Congressional Budget Office projections. So here is how this 
works. You have got a bunch of marginal tax rates and tax laws. 
You change them, and then they go into effect. Why we think it 
benefited the top is because if you didn't look at anything 
that had happened but who got the difference of the tax rates, 
where the tax laws were changed, that was at the top.
    Now, a lot happened in the economy since 2017 that would 
make the actual tax receipts of the government vary based on 
economic activity. So, you know, yes, the top is paying more 
because they are earning more. You know, that is the--kind of 
attributing causal, you know--or attributing the cause to the 
tax cut happens basically when it is enacted of what the 
difference is and the rates are, as opposed to how the economy 
evolves.
    So here is----
    Ms. SEWELL. But Ms. Edwards, I mean, people are saying that 
Black households increased the highest it has ever increased 
because of the TCJA. And I can tell you that the Black 
households that I represent in Alabama, it didn't trickle down 
to them. So can you talk to us a little bit about why it is 
that there were benefits--no one is saying there wasn't 
benefits; it is who benefited.
    Ms. EDWARDS. Yes, exactly. The--you know, the pass-through 
deduction is a great example of--you know, it did benefit some 
small businesses, but 67 percent of the beneficiaries are in 
the top 1 percent. And it is not just did you create some 
beneficiaries that you like, but did you create some 
beneficiaries that you didn't intend to?
    You know, I kept hearing about--I mean, I keep hearing 
about how much wages have gone up, how much income has gone up. 
Child labor has gone up in this country 250 percent since 2017. 
And no one would say that is because of the tax law. But if I 
said, look, they had lower tax rates, they had lower 
regulation, you know, did that lead to child labor, it took off 
at the same time, you would say, no, that is the economy, that 
is immigration, that is other things happening.
    So when I say you are claiming wage increases, you know, 
you would have to take child labor along with it. So they 
happen at the same time, they don't happen for the causal 
reason.
    Ms. SEWELL. It sounds like we use these facts and figures 
to serve our own purposes.
    But what is a fact to me----
    Ms. EDWARDS. Certainly.
    Ms. SEWELL [continuing]. Mr. Chairman, is that my district 
in Alabama did not benefit from the TCJA, and I will not be 
seeking to extend those cuts. Thank you, and I yield back the 
balance of my time.
    Chairman SMITH. Mr. Hern.
    Mr. HERN. Thank you, Mr. Chairman. It always amazes me that 
people who never created a single job know more about business 
than those who have spent their entire life doing so.
    In 2017 Congress lowered the corporate tax rate from 35 
percent, which at the time was the highest tax rate in the 
OECD, and that lowered tax rate went down to 21 percent. Adding 
state corporate tax taxes, now the average combined U.S. 
corporate tax rate is now 25 percent, which is just above the 
global mean of 23 percent. Lowering the corporate rate almost 
to the global mean made American businesses and millions of 
American workers more competitive in the global marketplace.
    It was apparent back in 2017, as much as it is today, that 
the U.S. needs a corporate rate that is competitive with the 
rest of the world. U.S. multi-nationals were fleeing the United 
States, and headlines of corporate inversions were commonplace, 
taking their jobs and capital investment with them as they 
left. Nobody has disputed that fact.
    Lowering the corporate rate, combined with international 
tax provisions, stopped inversions, encouraged domestic 
investment, and made the U.S. an attractive place to do 
business, and created jobs for American workers. Total U.S. 
domestic investment grew by over 20 percent after GOP tax 
reform, and year over year we continue to see record corporate 
tax receipts. Tax reform is working. Jobs and innovation are 
coming back home.
    We should look to build on these gains as we approach the 
massive tax cliff coming at the end of 2025. Unfortunately, the 
Biden Administration has proposed massive corporate tax hikes 
that are out of sync with the rest of the world, has proposed a 
repeal of the vital TCJA international tax provision, Foreign 
Derived Intangible Income, or otherwise known as FDII, which 
play a critical role in bringing intellectual property back to 
the United States and keeping it here to begin with.
    The Biden Administration has also unilaterally committed 
the United States to a global tax policy that could diminish 
the United States' competitiveness on a global scale, and have 
grave consequences for our domestic economy.
    I have said this time and time again, progress on the new 
global tax agreements is important, but Congress must approve 
any commitments that might erode the U.S. revenue base or 
significantly impact bilateral trade and investment flows. 
Congressional action to carry out international tax agreements 
is clear from the text and structure of the Constitution.
    Mr. Chairman, I would like to enter into the record the 
Wall Street Journal op-ed, ``How Congress Can Stop Biden's 
Regulatory Onslaught.''
    Chairman SMITH. Did you say a Wall Street Journal op-ed?
    Mr. HERN. I did. [Laughter.]
    Chairman SMITH. Okay.
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    Mr. HERN. Okay. I know it is controversial.
    Senator Gramm, thanks for all your work that you did in the 
Senate, and so many op-eds you have written. I have followed 
them all. Your Wall Street Journal op-ed is quoted saying, 
remarkably, the Biden Administration agreed to let foreign 
governments tax U.S. companies on their U.S. earnings if 
Congress refuses to adopt the minimum tax. This is an 
extraordinary circumvention of the Constitution, that the Biden 
Administration has attempted to use an international agreement 
that Congress never approved to force Congress to raise taxes.
    How harmful would it be for not only our economy, but our 
democracy, if Congress's hands were ever forced to rubber stamp 
Biden's poorly negotiated global minimum tax?
    Mr. GRAMM. Well, first of all, there was no advice and 
consent given to Congress in any of the negotiations with OECD 
countries concerning the international minimum corporate rate.
    Number two, no treaty was ever passed. No law has ever 
implemented the minimum tax. But what President Biden has 
agreed to is to stand by and allow European countries to tax 
American subsidiaries in their country on income the subsidiary 
made in the United States if we don't impose the corporate 
minimum tax in the United States.
    And if I could urge this committee to do one thing, it 
would be to pass a bill that mandates retaliation against any 
country that implements a tax against American companies to, in 
essence, tax their American earnings. With all of this talk 
about assaults on the Constitution, this is the greatest 
assault on the Constitution in my lifetime.
    And if Biden were a Republican and I were in the Senate, 
there would be no peace until we would stop this thing. This 
has nothing to do with partisanship.
    Mr. HERN. Thank you so much for your testimony.
    Mr. GRAMM. I am sorry, I----
    Mr. HERN. No, no, thank you for being here.
    Mr. GRAMM [continuing]. I have a tendency, as a Senator, to 
just go on.
    Mr. HERN. Well, you guys have no time limit over there.
    I just want to put for the record that I am a proud 
cosponsor of Congressman Smucker's Main Street Tax Certainty 
Act. I think that if we don't make sure that our small 
businesses in America are taxed favorably so that they can 
create jobs, grow, and keep this economy going into the future, 
I always say for the record, there is not a single business in 
America that didn't start as a small business, and we need to 
recognize that.
    I yield back.
    Chairman SMITH. Mrs. Miller is recognized.
    Mrs. MILLER. Thank you, Mr. Chairman, and a special thank 
you to you, Senator Gramm, for spending the afternoon with us, 
your precious time. And to all of you witnesses for being here, 
but I especially want to welcome a fellow West Virginian, 
Michael Ervin of Coal River Coffee Company in Saint Albans, 
which is in my district, for making the trip to Washington and 
getting an earful of how we do business here. It is entirely 
different.
    It is just so good to hear voices of business owners from 
my home state to discuss the benefits of the Tax Cuts and Jobs 
Act and our committee's work to extend the key benefits for 
hard-working Americans like Mr. Ervin and his employees. You 
all are what make the country great.
    The Tax Cuts and Jobs Act is one of the most important 
policies passed into law in generations, and thanks to the work 
of President Trump and the United Republican governance in the 
House and Senate. To this day, the positive impacts of a 
simpler tax code are still being felt, and it is telling that 
Biden and his liberal colleagues in the House and Senate did 
not repeal any key provision of President Trump's landmark 
legislation, and failed to gain the requisite support within 
their own party to raise our tax rate or strip small businesses 
of their fairer treatment that the TCJA did provide.
    Lowering our corporate tax rate to a globally competitive 
21 percent has been a key driver in drawing investment to our 
country and allowing our businesses to reinvest in their 
employees and communities, and I strongly support maintaining 
this rate. Any increase to pay for industry-specific handouts 
undermines the core tenet of the TCJA of broadening our tax 
base and simplifying the tax code.
    The Tax Cut and Jobs Act was extremely successful at 
simplifying the code on the individual side, as well. In West 
Virginia over 97 percent of filers utilize the increased 
standard deduction included in the TCJA. This means that more 
families spend less time worrying about their taxes and have 
more in their pockets at the end of the day. Families, large 
employers, and small businesses all benefited from the passage 
of the TCJA.
    And in West Virginia only 98 percent of our businesses are 
actually small businesses. The 199A, a small business 
deduction, allows for pass-through entities to receive a 
comparable tax rate to larger corporations, allowing small 
businesses to stay competitive and reinvest in their employees.
    And I look forward to working with a reelected President 
Trump, Chairman Smith, and all my colleagues to extend the 
essential components of the TCJA and spend the next year 
hearing from our constituents on how to improve on this 
essential legislation.
    Mr. Ervin, can you describe what the impact on Coal River 
Coffee would be if the 199A deduction was not extended?
    Mr. ERVIN. Absolutely. Let me just start off by saying we 
have only existed since this has existed. When I started my 
company, I probably was considered low-income, to answer Ms. 
Sanchez's question earlier. So, yes, I am qualified to answer 
and speak to these aspects. And it created an environment for 
entrepreneurship in a very economically depressed state. And if 
we lose that deduction, in particular, it will squelch, it will 
kill that environment.
    Not only that, there won't be as much of an incentive to 
actually start something and take a risk, maybe take a loan and 
do the things that are necessary to create economy. And that is 
what we are doing, is creating economy and creating jobs, doing 
what the American dream is.
    And just like my friend over here, you know, his father 
started their journey in this dream. And that is what I am 
doing, hopefully, for my children who are sitting in the back 
of this right now, watching this. They can inherit my business 
someday. And if this deduction is not extended or made 
permanent, which is what I hope, then me and the other 
entrepreneurs, business owners, and 98 percent of the 
businesses in my state might have to close.
    Mrs. MILLER. Tell me----
    Mr. ERVIN. And that is why I am here today.
    Mrs. MILLER [continuing]. Tell me quickly how you have 
reinvested in your community.
    Mr. ERVIN. Yes. Very quickly, we help start organizations. 
We give money toward our Little League programs, in particular. 
And are these bigger corporations doing that? No, they are not. 
We give to almost every sporting team that comes to us. And we, 
obviously, have our program with the Recovery Network. We help 
with organizations that integrate folks with disabilities.
    We employ folks with disabilities, too, and they love being 
a part of something that is bigger because for--go ahead.
    Mrs. MILLER. I was just going to say that is how small-town 
America works.
    Mr. ERVIN. Exactly.
    Mrs. MILLER. And I have to yield back my time. I am so 
sorry.
    Mr. ERVIN. Sure, thank you.
    Mrs. MILLER. And Mr. Ramirez, I had questions for you, too, 
but we talked too long.
    Thank you for being here, all of you.
    Mr. FEENSTRA [presiding]. Thank you. Now I recognize the 
gentleman from North Carolina, Dr. Murphy.
    Mr. MURPHY. Did I scare the Democratic witness away? I must 
have.
    Anyway, thank you all for coming today. You know, it opines 
to me that our Democratic colleagues love to attack the big, 
nasty, big corporations, when 98 percent of our corporations in 
this country have 100 employees or less. And what 
Representative Hern said, that every company starts as a small 
company, is absolutely true.
    You know, a couple of statistics here, the TCJA for 
minority groups had an all-time income, hit all-time highs. 
Compared to the second term of Obama and Biden, wages grew 24 
percent faster for Hispanics, 79 percent for African Americans, 
95 percent for Asian Americans. This is what happens when you 
unleash the power of the American economy.
    Thank you for coming back. Sorry about that. I didn't I 
didn't say anything bad, I promise. [Laughter.]
    Mr. MURPHY. I just want to reiterate that most of the 
corporations in this country are small employees. They are not 
the big, bad things that do things. And so when we cut the 
corporate tax rate, we are hurting our small things.
    Dr. Edwards, let me ask you just a couple of quick 
questions. We are talking about the not-fair-share when the 
rich are not paying their fair share. So they pay 47 percent, 
the top one percent. What percent would you think is 
appropriate for them to pay?
    Ms. EDWARDS. You all, I don't decide fair.
    Mr. MURPHY. I know. I mean, that is what we hear all the 
time. Pay their fair share. Pay their fair share. And when the 
top one percent pay 47 percent of the tax burden, I want to 
know what would a Democrat witness say is the fair share.
    Ms. EDWARDS. Well, speaking as an economist and not as a 
Democrat, what I would say, sir, is that the top one percent 
have also seen the accumulations of income over the past 20 
years. Part of their outsized burden of how much they are 
paying in taxes is also a fact of how much faster their income 
has grown over the past 40 years, and the top one percent 
income share is now at a 70-year high. It is not just the rate 
that sets the share, but also the total amount of income they 
earn relative to the economy.
    Mr. MURPHY. Yes, and I would--you know, I am not going to 
disagree. Their facts are always your facts and my facts, and 
that is just the way life happens.
    To what Senator Gramm said earlier about we want a Child 
Tax Credit, we want to lift up the poor, we absolutely do. The 
problem is, in the State of North Carolina now, 52 percent of 
the births in the State of North Carolina are born to mothers 
on Medicaid. Over half. So think about that geometry. Think 
about those proportions as we move forward. What does that look 
like?
    I still see patients. I still see them to this day whose 
mother I saw as a young patient. And it is grandmothers now 
raising children. And it is generational Medicaid because there 
is no expectation when you have a child that you have to pay 
for it. There is none. And this is the destruction of the 
American dream right there.
    Senator Gramm, I want to follow up. You know, the pandemic 
was horrible for the world. It started in China. We all know 
that. But we did find some few silver linings. We saw our 
absolute and utter dependency upon China. I would love for you 
to comment on how--you were talking about how much regulation 
is killing American businesses. I would love for you to comment 
on what you thought is happening to United States 
competitiveness on the national scale due to over-regulation 
now is doing to our national security. We saw how national 
security is threatened now because if we were at war with 
China, we would have two months' worth of medicines. How is 
this a threat to national security?
    Mr. GRAMM. Well, the security of the United States, when 
you get down to the bottom line, comes from the productivity of 
the American worker. It gives us the ability to not only 
provide the resources for defense, but it gives us the 
technology to always be out front.
    Technology for defense is now coming from the private 
sector. That wasn't true when I came to Congress. It was coming 
from the industrial military complex when I came here. But now 
it is out in the general domain. So the only way we can stay 
ahead is by developing the technology ourselves.
    Mr. MURPHY. Right.
    Mr. GRAMM. We have got to be first.
    Mr. MURPHY. I want to make sure I get in----
    Mr. GRAMM. But regulatory burden strangles our ability to 
do that.
    Now, a perfect example is artificial intelligence. 
President Clinton set out a policy when the Internet came on 
the American scene of first do no harm. You have heard that 
phrase----
    Mr. MURPHY [continuing]. Absolutely.
    Mr. GRAMM [continuing]. In your profession. And we stayed 
out of regulating the Internet, and we dominated it. We 
absolutely dominate the tech industry.
    So what has the Biden Administration done in response to 
artificial intelligence? They are demanding all kinds of 
actions by artificial intelligence to deal with everything in 
the world except artificial intelligence. And my concern is, if 
we don't develop the technology, somebody else will. And will 
the world come to an end? Maybe not, but we will be poorer, we 
will be less dominant in terms of our ability to defend 
ourselves. And even if the lion and the lamb in the world lie 
down together, we had better be the lion. And so, I am 
concerned about it.
    Also, an important point was made that Biden has cut 
corporate taxes more than that corporate taxes have been cut 
under the Biden Administration. And they have, but they have 
been cut for industries government picked. So a perfect example 
is we are providing all these tax credits----
    Mr. MURPHY. Senator Gramm, I need to yield back my time.
    Mr. GRAMM. Let me finish this one point, if I may, please.
    We provided all these tax credits to make computer chips. 
And so the largest manufacturer of computer chips in the world 
in Taiwan says, with all of these subsidies, we will be able to 
make these computer chips in America and they will only be 50 
percent more expensive than the computer chips----
    Mr. MURPHY. Right.
    Mr. GRAMM [continuing]. You can buy from Taiwan. Well, what 
kind of great deal is that?
    Mr. MURPHY. Thank you, Senator. I guess my time has 
expired.
    Thank you.
    Mr. FEENSTRA. Thank you. Now I yield myself five minutes.
    I know a little bit about economics. I might have taught a 
class or two in it. I do know this about economics, that you 
can always argue a picture that you want to portray, right? If 
you want to portray something, you argue it. You spin the 
numbers, right? It happens in economics. That is the great 
thing about the field. You can always argue something.
    But sometimes facts get in the way, get in the way. And I 
just want to talk about a few facts. So under the Tax Cuts and 
Jobs Act, we had a tax code before Tax Cuts and Jobs Act, 
before, you know, our corporate rate was at 35 percent. So 
between 1983 and 2015, we had 60 companies that inverted and 
moved their headquarters to another country. And this trend was 
continuing on until the Tax Cuts and Jobs Act. After that, we 
have had zero--zero--inversions. Think about that, zero.
    So, we have actually had companies that were offshore move 
to onshore, all right, with their intellectual property, their 
cash, their jobs. Oh shocker, jobs. Yes. These corporations 
actually create jobs, right? And they moved onshore, right? 
That is the difference here when you talk about the Tax Cuts 
and Jobs Act.
    Now, one other thing that I want to talk about--and we 
talked about the Congressional Budget Office--projections. 
Great, let's talk about them. So before we had the Tax Cuts and 
Jobs Act, the CBO said--in 2024, they projected that we would 
generate about $405 billion in corporate tax revenue. Now this 
might shock you, but now they project, after the 21 percent, 
after we cut corporate tax, now the CBO projects that we will 
collect $569 billion because of the cut.
    So it begs the question, Mr. Winfree, this begs the 
question: how do you think our role--when we have to reduce the 
deficit, how does this play into economic growth when we have 
this 21 percent cut, and seeing what it is doing for 
inversions, and seeing what it is doing for our revenue coming 
into the Department of Revenue? What are your thoughts?
    Mr. WINFREE. Two comments.
    The first comment is that if you look at the very long run, 
right, if you study revenues over the very long run, we have 
had lots of different tax systems. And at no point in our 
history have we ever been able to grow revenue faster than GDP 
for more than four years, four consecutive years. At the same 
time, Federal health care spending has been growing faster than 
GDP since the 1960s. That is the problem.
    The other problem is that before the pandemic, government 
spending as a percentage of the economy was at about 20 
percent. At its peak--I mean, we had a crisis--it was about 31 
percent. Not faulting that. Now it is at about 22 percent. 
Every time we have a crisis we reset that benchmark.
    Mr. FEENSTRA. Right.
    Mr. WINFREE. That is the problem.
    Mr. FEENSTRA. So, if we have a Democrat-controlled Congress 
or President next year, what is going to happen if it goes from 
21 to 35 percent, and all these other things increase?
    I mean, what do you see? What is going to happen then?
    Mr. WINFREE. It will increase. I mean, this is one of the 
reasons why in President Biden's own budget you see the deficit 
increasing.
    Mr. FEENSTRA. Absolutely. I want to talk about something 
else.
    So, I am probably the number one or two ag district in the 
country, right? So you can well imagine what taxes do. You 
know, we can talk about qualified business income. We have 
talked about that already. But I want to talk about the pilfer 
tax. I mean it is, it is a pilfer tax.
    Think about this. You got the IRS and the Department of 
Revenue actually reaching in the grave with their arm, taking 
the dead person out of the grave and saying, hey, you owe 41 
percent of your property, the property that you paid tax on all 
your life. Now you want to give it to your kid? Oh, you owe 41 
percent. This gets cut in half--and I should say it ends in 
2025, it gets cut in half.
    So I want to ask you, Mr. Ramirez, how would this affect 
you and challenge you if you had to pass your business on to 
the next generation? How does this apply?
    Mr. RAMIREZ. Yes, look, the death tax makes it 
extraordinarily difficult to pass on family-owned businesses. 
You know, the reality is the time I have spent with lawyers and 
accountants doing estate planning to put Husco in a position 
where it could possibly pass on to a third generation would 
have been much better invested creating jobs and investing in 
the business rather than in tax planning.
    Mr. FEENSTRA. Yes, absolutely. And you know what is 
happening in Iowa? And this is a true story. What is happening 
in Iowa--so these families, these farmers, they can't pass it 
on to the next generation, all right? Who are they selling it 
to? Our foreign adversaries like China, foreign countries, and 
stuff like that because the children can't afford the 41 
percent. This is absolutely ridiculous.
    Anyway, that is end of my time and I yield back. And I will 
now recognize Congresswoman Steel from California.
    [Pause.]
    Mrs. STEEL [presiding]. Thank you, all the witnesses, and 
this is a really long meeting, and thank you.
    And Senator Phil Gramm, you know what? I saw you so many 
times in California in the late 1980s, and it is so nice seeing 
you and your wife. So you know, I was really happy to sit here.
    Mr. GRAMM. You look good in that chair, by the way.
    Mrs. STEEL. Someday, hopefully. But you know what? A long 
time from now. But thank you.
    So Tax Cuts and Jobs Act provided tax relief to families.
    You know what? By the way, I recognize myself for five 
minutes.
    The Tax Cut and Jobs Act provided the tax relief of 
families across my congressional district, and provided 
economic growth to businesses of all sizes in California.
    One provision of TCJA that has had huge success for 
companies in California is the Foreign Derived Intangible 
Income deduction. FDII enhances the competitiveness of the U.S. 
and, combined with the competitive corporate tax rate, can 
result in more U.S. jobs and U.S.-based R&D. In fact, a number 
of companies have brought their offshore IP to the U.S. or 
maintained in the U.S. and developed their new valuable IP here 
at home, especially because of FDII. With the current effort at 
the OECD, FDII will be pivotal to protecting the U.S. against 
taxation by other nations.
    I wanted to ask Dr. Winfree, but since he is gone I know, 
Senator Phil Gramm, you are the expert for economy, especially 
for U.S. economy. So do you agree that FDII is a critical part 
of U.S. tax policy, and maintaining and enhancing it should be 
a top priority for Congress?
    Mr. GRAMM. I think it is very important that America has a 
competitive tax system, and I think we ought to do everything 
we can to keep it competitive.
    Again, Americans don't need an advantage. We just need to 
have a level playing field.
    And I see he is back, so you can ask him your question.
    Mrs. STEEL. Dr. Winfree.
    Mr. WINFREE. I apologize, my son has got a baseball game in 
about an hour, and I had to figure out who was going to take 
him there.
    The question was about competitiveness, international 
competitiveness?
    Mrs. STEEL. It is--FDII is a critical part of U.S. tax 
policy. It is a Foreign Derived Intangible Income deduction. So 
maintaining and enhancing it should be a top priority for 
Congress.
    Mr. WINFREE. I think, to follow up on what the Senator and 
Dr. Gramm just said, I think that one of the things that we 
want to do is that we want to make sure that the American tax 
system is competitive, right, both for domestic investors, and 
then also for folks who want to invest in America. Ultimately, 
that is what drives growth. And so I would say yes, I would 
agree with you.
    Mrs. STEEL. So Senator Gramm, you said that 
competitiveness--so when this Tax Cuts and Jobs Act, that it 
reduced corporate tax for 21 percent, that is a competitive 
rate because it is average in the world. So we keep that 
number, it is better for our economy.
    Mr. GRAMM. Only an economy that is intent on suicide would 
have the highest corporate tax rate in the world.
    And again, I just want to emphasize that everybody pays 
corporate taxes. A corporation is a piece of paper in a filing 
cabinet in Delaware. Corporations are investors, and 74 percent 
of all investments in American equities are owned by retirement 
funds, 401(k)s, IRAs, and pension funds. So this idea that 
there is some rich corporation out there is a fiction. And now 
it is a political fiction.
    Corporate America is really your pension fund. And so, when 
you are socking it to corporate America, you are taxing your 
pension fund. So the worker gets hit two ways. One, his wage is 
affected by the corporate tax because about 70 percent is 
passed on to him that can't be passed to the consumer. And 
secondly, her retirement fund is hit by the corporate tax. So 
the corporate tax is really a broad-based tax on poor people in 
America, and the tragedy is people don't know it.
    Mrs. STEEL. Thank you very much. My time is up.
    So Ms. Chu, you are recognized for five minutes.
    Ms. CHU. Dr. Edwards, I also serve on the House Small 
Business Committee, which held a hearing just yesterday on the 
impact of the Tax Cuts and Jobs Act. One of the witnesses at 
this hearing, himself a small business owner, pointed out that 
the TCJA did not adequately address the needs of small 
businesses and does not invest in their success.
    In fact, he shared a survey of small business owners that 
found that 80 percent said that TCJA did not help them hire new 
employees, and 72 percent believe that the tax code favors 
large corporations over small businesses. In fact, this is 
shown in the results of the 20 percent 199A pass-through 
deduction. It is touted as a tremendous help to small 
businesses, but the opposite is true. It gives the largest tax 
breaks to the wealthiest individuals.
    And in fact, as a result, in 2019, the latest non-pandemic 
year for which data was available, the average pass-through 
deduction across all taxpayers who claimed the deduction was 
roughly $7,000. But it was nearly $1 million for the 15,000 
taxpayers with incomes above $10 million who claimed the 
deduction. So it failed to invest in the smallest and youngest 
businesses that really needed the most support.
    So Dr. Edwards, do you believe that extending the expiring 
Trump tax law provisions is an effective way to help the truly 
small businesses?
    Are there better ways to structure the business tax code 
that will help these small firms and boost productivity and 
wages across the board?
    Ms. EDWARDS. The pass-through deduction has the exact flaws 
that you, that you enumerate.
    And, you know, what I have heard from small businesses 
that--over the past few years--what they would like is workers, 
that, you know, hiring is difficult, that they need more 
workers in the labor market.
    And, you know, we have had so many members talk about 
global competitiveness, the U.S. falling behind, wanting to 
level the playing field. Well, we are certainly behind in labor 
force participation, a area where we used to be a leader. We 
used to have one of the highest female labor force 
participation rates in the world, and we are frozen because 
every other industrialized country has paid family leave and 
subsidized child care.
    I understand that small businesses benefit from taxes in 
many ways. I know Mr. Hern says I don't have qualifications to 
speak because I never created a single job. But I created my 
job, and I am a small business, and I know I don't have any 
employees yet, but that doesn't mean I don't have aspirations. 
But I can do nothing without child care, and I can do nothing 
if I don't have a place for my kids to go. And that is truly an 
era where it is not just the U.S. has fallen behind. We are in 
a different century than our peers in how we treat working 
parents.
    Ms. CHU. Well, let me follow up with this, Dr. Edwards. One 
of the most lopsided handouts to the wealthy included in the 
TCJA was this doubling of the estate tax exemption which allows 
joint filers to inherit more than $27 million completely tax 
free.
    But Republicans are not satisfied with merely extending 
this tax break for the ultra-rich. They want to eliminate this 
tax altogether. Now, in 2025 this will cost us as much as $40 
billion a year. But that is the same amount of dollars that it 
would take to extend childcare and universal preschool. So 
there is a cost to our society of this.
    Can you talk about the trade-offs of Republican plans to 
further weaken the estate tax? What are some of the services 
that the government might be able to provide if we let the 
Trump tax law's estate tax provisions expire?
    Ms. EDWARDS. Yes, I have proposed previously that the 
revenue from the estate tax could be dedicated to a trust fund 
intended for children because we have talked so much about the 
estate tax in terms of men like Mr. Ramirez, but he doesn't pay 
it, his kids do. It is paid by inheritors of dynastic wealth. 
And the point of the proposal is that there are a lot of kids 
out there that don't inherit dynastic wealth, and they don't 
inherit businesses, and this would be a way to redirect 
investment to them.
    You know, the government is not limitless, as large as you 
are, and your dollars are competing for priorities. And as much 
as the tax cuts can produce, you know, people who can speak to 
its strengths, childcare, paid family leave, and more 
investments in children would create more workers and higher 
labor force participation, something that would benefit all 
businesses in the United States.
    Ms. CHU. Thank you, I yield back.
    Chairman SMITH [presiding]. Ms. Tenney.
    Ms. TENNEY. Thank you, Mr. Chairman, and thank you to the 
witnesses.
    It is certainly a tremendous honor to have Senator Gramm 
here. One of my very first mentors in Congress was the former 
congressman, Jeb Hensarling, who is a huge fan of yours and 
talked about you all the time. So we appreciate all your 
contributions.
    Mr. GRAMM. He was my student at Texas A&M.
    Ms. TENNEY. There you go. He talked about you a lot. He was 
the chairman of the committee when I was on Financial Services.
    So look, this issue may mean so much to me because I am a 
small business owner. My family business was started in 1946. 
We are still in existence, but barely, because we live in the 
State of New York. And the Tax Cuts and Jobs Act was the best 
thing that has happened to our community in upstate New York in 
probably 30 years.
    And every business I went to, every business I communicated 
with in 2017, regardless of their party affiliation, what 
industry they were in, said this is the best thing that has 
happened to our business. And you want to know why? Because 
most of the businesses in my community are small businesses 
taking advantage of the pass-through deduction. The 199 
deduction is so critically important. They are able to 
reinvest, find employees that they could give more money to, 
and be more competitive against--our biggest competitor in the 
marketplace in upstate New York is the government. The 
government gives out more benefits than we could ever compete 
with.
    And so our small business was the very first one to have a 
401(k), the very first one to have a private health care plan. 
Since the advent of the Obamacare and the Affordable Care Act 
in New York, as well, we now have almost unaffordable 
insurance. Our insurance is terrible.
    We did have childcare, and I raised my son as a single 
parent. I am part of the sandwich generation. I took care of my 
parents, ran our family business, which was always in very 
rough shape in terms of the balance sheet because I was running 
a newspaper when the business cycle was dying on newspapers. So 
imagine. This was very challenging times for us.
    And thank goodness that we have benefits like, for example, 
the estate tax. And boy, did we not have dynastic wealth. And 
there is no such thing as dynastic wealth in upstate New York. 
When you talk about my district in New York 24, the largest 
agricultural district in the entire northeast, the largest 
dairy district, people who work every day to try to run dairy 
farms, to try to have crops under the impressive New York State 
Government. With taxes, and fees, and costs, and all the things 
that are coming to them, they are lucky if they have any value 
left in their land so that they can actually--and then guess 
what? Some of them have to sell their farms and equipment just 
to be able to pay an estate tax. So the estate tax is a godsend 
to businesses like ours in upstate New York. And I would just--
it aggravates me when I hear people talk about dynastic wealth, 
and how these benefits are only for the wealthiest.
    And one thing that we don't talk about. In my district, 
upstate New York, is what I call the Rust Belt of New York. All 
the big companies were founded in my area: IBM, Corning, major 
companies, Kodak, Bausch and Lomb, you name all these major 
companies all along the Erie Canal corridor, where my great 
district is. Most of them are gone. But you know what is left? 
Small businesses, people who are working every day to try to 
make a living. And so that is why these Tax Cuts and Jobs Act 
were so important. Ninety-five percent of the people who work 
in my area, ninety-five percent, work for a small business. 
They don't work for an IBM, 20,000 jobs lost, all--Corning, all 
these other jobs.
    But one thing that was really important that never gets 
mentioned in the Tax Cuts and Jobs Act is the repatriation 
money, and that one-time reduction in the corporate tax rate 
that was given to a lot of businesses--and these are the big 
guys--they took advantage of it, paid a ton of money. It is at 
$1.6 trillion, I believe, that so far. I think it is ended now. 
But they brought hundreds of thousands of jobs from overseas to 
our communities. And every single day in every single year 
those jobs are bringing in payroll tax, sales tax, they are 
helping the economic output in their communities, and they are 
doing exactly what Mr. Erwin, Mr. Ramirez, all of you are 
doing. That is why the Tax Cuts and Jobs Act are so important.
    And it is so important that we consider what this bill was 
aimed at and what it helped, and it really provided relief. And 
I just want one quick question, and I would love to talk to 
Senator Gramm, but I want to talk to Mr. Erwin, because you are 
someone who is actually running a business.
    And tell me about the tax pressures you face, and what 
would happen if the 199A deduction, the pass-through deduction, 
were to end for you if the Tax Cuts and Jobs Act weren't 
extended?
    Mr. ERVIN. That is a great question. So, you know, we would 
obviously have to let go of some employees, unfortunately. We 
would streamline--we would have to pass off some of that cost 
to the customer. And so it would be determined on the community 
if we were going to stay in business in the long run.
    Now, my forecast would be, if it didn't exist anymore, it 
is unfortunate, we probably would have to close our doors at 
some point.
    Ms. TENNEY. Thank you. I appreciate that. And that is 
actually the truth of what is going on. This is why the Tax 
Cuts and Jobs Act are so important to the middle class, to 
middle-tax taxpayers, people who are running businesses with 
one or two employees.
    I know some of my colleagues across the aisle like to focus 
on, you know, the city blocks and the companies with huge 
numbers. But our business is driven by small business, and this 
has been a godsend for us. And I couldn't go into a single 
business in my community that hasn't said to me, ``I hope we 
are going to extend the Tax Cuts and Jobs Act,'' and this is 
New York. This is not Texas. It is not, you know, Florida. This 
is upstate New York, where, you know, we rely on our small 
business community. And the Tax Cuts and Jobs Act has really 
have saved us from some of the harm that has been inflicted by 
one-party rule in Albany.
    And with that, Mr. Chairman, I am over time, but thank you 
so much. I appreciate it.
    Chairman SMITH. Mr. Kustoff is recognized.
    Mr. KUSTOFF. Thank you, Mr. Chairman. Thank you to the 
witnesses for appearing today.
    Senator Gramm, thank you also for appearing today. If I 
could, with you, you have talked quite a bit about the 
reduction in the corporate rate with the Tax Cuts and Jobs Act. 
And I remember just historically, when we passed it out of the 
House and ultimately out of the Senate, we went to the White 
House for signing, the signing ceremony of this bill, which was 
historic and, as somebody in our position, that is a neat thing 
to be able to do. It is really special.
    I remember being on the south lawn of the White House and 
hearing anecdotally about companies that were announcing 
bonuses and pay raises as a result of the Tax Cuts and Jobs 
Act. If I could, just a few, right after the signing, and as 
the bill was getting ready to be signed into law by President 
Trump, AT&T announced a $1,000 signing bonus for 200,000 of its 
employees. They wouldn't have done that without the tax cut 
they got from the Tax Cuts and Jobs Act. They said that. 
American Airlines announced a $1,000 bonus. FedEx, which is 
based in my district in Memphis, invested $200 million in pay 
raises and $1.5 billion in pension benefits because of the Tax 
Cuts and Jobs Act. Bank of America at that time announced a 
$1,000 bonus for 145,000 of its employees. And if I could, one 
more, First Horizon Bank, which is also based in Memphis, 
announced a $1,000 bonus for its employees. Brian Jordan, the 
CEO, a well-respected CEO of First Horizon, issued a press 
release December 22 of 2017, the day the Tax Cuts and Jobs Act 
was passed. And he said, for a number of reasons and ``because 
of recent tax reform efforts that we believe will benefit First 
Horizon, we are happy to offer bonuses to our people who work 
hard every day to maintain First Horizon's reputation as one of 
the best companies to work for and one of the most trusted 
banks in the country.''
    So I have given a few examples. But Senator Gramm, could 
you talk about how the Tax Cuts and Jobs Act allowed businesses 
to increase wages, to raise wages, to issue bonuses, and invest 
for their workers?
    Mr. GRAMM. Well, at the risk of sounding like a recording, 
I want to start by saying corporations do not pay taxes. A 
corporation is a piece of paper in a filing cabinet in 
Delaware.
    When taxes go up--let me just go through the example with 
it going up--a corporation tries to pass the cost onto its 
consumer. But generally it can't pass all the costs on to its 
consumer. And then economists have studied this in great detail 
for 150 years, and the findings are pretty straightforward. 
Between 70 percent and 50 percent of corporate taxes are paid 
by employees, and the other 30 to 50 percent are paid by the 
investors in the company.
    Now, there is this image that corporate America is owned by 
these mega-rich people. But 74 percent of American stock 
investments are made by 401(k)s, IRAs, retirement programs, 
life insurance companies to back up death benefits, and 
annuities. Just look at your thrift savings plan, if you have 
one, as a Member of Congress. What happened to your thrift 
savings plan from the 2017 tax cut? It exploded, and all that 
went to your retirement.
    Now, unless you are a billionaire, you benefited. So there 
is a complete misconception about how all this works. And the 
tragedy is that when you cut individual income taxes, you have 
already got half the people that don't pay income taxes. So 
unless you are going to just give them money, which is welfare, 
they don't get any benefit. When you cut corporate taxes, you 
affect prices, and they do benefit. And that is one of the 
reasons that the bottom 20 percent of income earners benefited 
so much from this tax cut. They got jobs, and costs were lower 
than they would have been. And these are the same people that 
have been pillaged today by the fact that inflation over the 
last three years has outrun wages. So it is working in reverse.
    So again, corporate tax cuts affect real people.
    Mr. KUSTOFF. Thank you, Senator Gramm.
    Thank you, Mr. Chairman.
    Chairman SMITH. Thank you.
    Ms. Moore.
    Ms. MOORE of Wisconsin. Thank you so much, Mr. Chairman, 
and let me thank the witnesses.
    Let me start out by acknowledging you, Mr. Ramirez, a 
little suburb outside of Milwaukee. I would love to come and 
visit sometimes. You certainly contribute to the notion that 
our region has a reputation for being the machine makers of the 
world, and we are going to reclaim that glorious position.
    And I would say to you, Dr. Edwards, a labor economist, you 
know, educated at the University of Wisconsin, you are well 
educated. And so we are really happy to have you all here.
    Senator Gramm, you know, people do come back to the scene 
of the crime, don't they? Welcome back. You know, I guess my 
questions are going to start out looking at your comments and 
the--sort of the dialogue that has gone on here where, for 
example, you repeatedly said that the Tax Cuts and Jobs Act 
benefited the lowest quintile of workers, and you have even 
attributed something like $5,200 to----
    Mr. GRAMM. That was the average for the whole country, 
the--I had the--$5,220 was the average mean income went up.
    Ms. MOORE of Wisconsin. Okay, because I swear to God----
    Mr. GRAMM. No, that is right, no----
    Ms. MOORE of Wisconsin [continuing]. I couldn't figure that 
out.
    Mr. GRAMM. It didn't go to everybody, but----
    Ms. MOORE of Wisconsin. Because, you know, when you are 
making $21,000 a year----
    Mr. GRAMM. Yes.
    Ms. MOORE of Wisconsin [continuing]. You ain't going to get 
no $5,200 out of the tax--they got nothing.
    Mr. GRAMM. And you ain't going to forget it if you do.
    Ms. MOORE of Wisconsin. That is right. You know, I am 
scratching my head and on my little calculator, and it just 
wasn't working.
    Mr. GRAMM. No.
    Ms. MOORE of Wisconsin. But I would ask you, Dr. Edwards, 
isn't that increase in wages that Mr. Gramm talked about, isn't 
that attributable to the fact that we--at least 22 states that 
raised the minimum wage, cities like Seattle, the Obama 
recovery--there was no direct benefit, other than that 70 bucks 
from the Tax Cut and Jobs Act. Can you help clarify this for 
me?
    Ms. EDWARDS. Yes. The--you know, where--hold on let me 
start again.
    That was the assessment of the Congressional Research 
Service. That is you all's researchers who made the assessment 
in 2019 this had no effect on wages. They looked at expected 
growth rates, unemployment, and expected economic growth and 
made the assessments--you know, I pulled it up--ordinary 
workers had very little growth in wage rates outsized from what 
would have been predicted by the economy and the unemployment 
rate at the time.
    Ms. MOORE of Wisconsin. Okay, listen. Another thing that 
Senator Gramm said is that workforce participation dropped from 
67 percent to 30 percent in the lower quintile. Do you think 
that that is because of things like not having childcare, wages 
were too low, no health care associated with it, no 
transportation?
    What would we attribute to a low--and, you know, if you are 
at the lower quintile, of course, these jobs that are available 
to you are those fringe jobs. What do you--what is your thought 
on that?
    Ms. EDWARDS. Well, the hero and villain of every story is 
Baby Boomers. So the top--the bottom 20 percent now has a much 
higher share of retirees----
    Ms. MOORE of Wisconsin. Okay.
    Ms. EDWARDS [continuing]. Whose income is, you know, fixed 
and adjusted with inflation for Social Security over time. And 
so that share falls.
    You know, I also think I would be remiss if I didn't say 
when we are talking about labor force participation you have to 
talk about men and women differently. Male labor force 
participation, people who typically get nothing from the 
Federal Government, has been declining for 70 years. Women's 
labor force participation, who are the receptors of almost 
every public benefit that you provide because they are the 
caretakers of children, their labor force participation has 
been rising for 70. We cannot confuse the forest for the trees 
here.
    Ms. MOORE of Wisconsin. Thank you. That is excellent.
    So a lot of my colleagues were concerned about workers 
who--you know, about having workforce--you know, the CTC saying 
that you need to work to get a benefit. You know, the Earned 
Income Tax Credit was not changed in the JCT. As a matter of 
fact, they moved to a chained CPI. And workers under 25 didn't 
get any benefit, over 65 didn't get any benefit. So even people 
who were working--I mean, we worked people into poverty with no 
changes to the Earned Income Tax Credit. True or false?
    Ms. EDWARDS. You know, best of my knowledge, yes, but I am 
actually not sure----
    Ms. MOORE of Wisconsin. Okay, well, good, because I got 
more.
    GDP--these things, productivity, prosperity--the GDP would 
have been 6.7 percent had these tax cuts paid for themselves. 
Instead, it was only a 0.2 percent increase in our GDP. So not 
only did these tax cuts not pay for themselves, but our GDP 
only increased by two-tenths of a percent. Is that true?
    Ms. EDWARDS. So mostly it is how much larger--so GDP grows 
pretty much every year, and--as do revenues, right, pretty much 
every year because our economy is getting better. Also, 
spending increased pretty much every year as our economy gets 
bigger.
    The question is, what is the difference between where the 
economy was going and then what the effects--the economic 
effects of the corporate--or of the 2017 tax law, added. The 
Congressional Research Service concluded that the economy grew 
about--by 3 percent, and that 0.2 percent larger than would 
have been otherwise an absence of the tax cuts. So 0.2 percent 
larger. Yes, it is a lot of percentages and rates all at the 
same time.
    Ms. MOORE of Wisconsin. And it went to the top one percent.
    Mr. Chairman, I would yield back and thank you for your 
indulgence.
    Chairman SMITH. Thank you.
    Mrs. Fischbach.
    Mrs. FISCHBACH. Thank you very much, and I do want to thank 
all of the folks that came to testify today, because you have 
had to sit through a lot. And I think there was a couple of 
folks with a little too much caffeine and all kinds of stuff, 
so I appreciate you being here and sticking it out with us.
    But I wanted to ask Mr. Ervin. I know that Congresswoman 
Miller was asking you a question, and you ran out of time. And 
I am from a rural area. And so, you know, what it does, how it 
helps rural areas and those less populated areas, I would love 
to have you finish that answer.
    Mr. ERVIN. So, essentially, your question is, how does the 
current tax situation help the rural areas?
    Mrs. FISCHBACH. And help the communities.
    Mr. ERVIN. Help the community, yes. So just since I have 
been in business, my main street specifically, it is a main 
street in a small town, businesses have opened up.
    And in particular, I will throw out a couple of names. One 
of my first customers on my first day of opening was Brian. 
And, you know, he was a good guy. He was the high school 
basketball coach. And he had a dream of opening a business. And 
a couple years after--it was right before COVID--he shared the 
dream with me and my wife, and we encouraged him. And not only 
did he, but his assistant coaches started an ice cream truck in 
our town. And it was amazing. And then they ended up starting a 
taphouse on my street, which kind of helped instill a nuance 
that we needed on our street.
    And so anyway, that is one primary example that if this 
deduction wasn't around, I highly doubt that they would have 
taken the risk to do what we have been able to do together. And 
he has joined in that entrepreneurial experience or call 
because of the environment that the deduction has created and 
continues to create. And so, you know, that is one thing.
    But there are businesses--I have got a guy texting me right 
now. They are trying to open a coffee shop in Pinch, West 
Virginia. And he has, you know, got a million questions about 
it. And I am going to be his trainer and his consultant in all 
of this, and try to help them do what we have done. In Poca, 
West Virginia, another example, they are trying to revitalize 
that little small town, that main street. They have opened a 
month ago. In Elkview, another place; in Clendenin, another 
place; and my list can go on, and I can bore you with all of 
this.
    If that deduction goes away, this wouldn't have happened. 
It wouldn't. We wouldn't be able to do it. There wouldn't be a 
point because, if we are being taxed at 43 percent, that is 
almost half of our business income. How can I--let alone pay my 
bills? I would have to go back to being a low-income person, as 
my own self-employed person, you know, and it would be 
ludicrous to do that.
    And so, essentially, what, you know, I am doing here is I 
am not just fighting for my family and my street, but for all 
of Main Street America and for American economy, because that 
is what the basis is of our economy, our small businesses. And 
if we are going to put a nail in the coffin of our small 
businesses and entrepreneurs, and as all of you have said, big 
corporations started in garages, they started in kitchens, they 
started in the mind of women and men and boys and girls who 
took a chance and took a risk. And some are successful, some 
are not. That is the American dream.
    But this deduction gives us the opportunity to pursue that 
dream, and to realize that dream, and to help others to do the 
same thing. And so that is what would happen if it doesn't 
exist. If this isn't extended or if it is not considered as a 
permanent tax or a threshold for us, then we wouldn't be here. 
We won't be here.
    Mrs. FISCHBACH. Well, and I appreciate your passion and 
your willingness to help others achieve that American dream. 
And I think what you are saying is every dollar counts, 
because----
    Mr. ERVIN. It does.
    Mrs. FISCHBACH [continuing]. Your margins are so tight, 
particularly when you are starting out or you are a small 
business. And so I appreciate you being here and taking the 
time.
    And you know, I have a couple seconds left, but I am going 
to yield it back because you have said it all.
    Mr. ERVIN. Thank you for your questions.
    Mrs. FISCHBACH. So I yield back, Mr. Chair.
    Chairman SMITH. Thank you.
    Mr. Carey.
    Mr. CAREY. I want to thank the chairman, I want to thank 
the ranking member for, really, having this hearing today.
    But I want to touch upon an important issue, and Mr. Erwin, 
I know Saint Alban's well, I spent a lot of time in West 
Virginia over the years, and one of the things that I know is 
important to West Virginia but it is very important to my home 
state of Ohio, which is the Historic Tax Credit. So before I 
get started on my questions, I do want to highlight this one 
issue, and I hope in the future we can have a hearing to have 
an opportunity to discuss where perhaps provisions in the TCJA 
need to be revisited.
    Senator Gramm, great to be with you. The last time I saw 
you speak in any one of these bodies I was a staffer out there, 
and so it is an honor to actually be asking you a question 
later today.
    As part of this legislation, the Historic Tax Credit was 
modified such that the credit actually must be spread over a 
five-year period of time. I cannot find any policy 
justification for this modification, other than the revenue 
constraints that were required in the reconciliation process. 
The impact of the change to five years at the project level 
results in either a lower overall equity investment or a higher 
cost of capital. As projects must be financed, the equity 
investment over five years receiving the entire equity 
investment in just one year. Increased interest rates, as we 
highlighted earlier, have only compounded this problem, while 
other challenges include competing credits such as the green 
energy incentives and also the single year credits.
    Developers, investors, communities that work to revitalize 
these blighted buildings--and for those of you who don't know, 
I represent about 65 percent of the City of Columbus, so we 
have had some of these projects that took credit for, or got 
some credit from this: the Atlas Building, the original 
skyscraper in the skyline of Columbus, Ohio, the Leveque tower, 
which sits in the district, and nearly three dozen other 
projects across Ohio. Hundreds more across the nation are 
facing project delays. In fact, they are facing cancellations. 
And I think, quite frankly, our communities deserve a lot 
better.
    I, along with my dear friend on the other side of the 
aisle, Congressman Schneider, have introduced a bipartisan 
piece of legislation to return the Historic Tax Credit back to 
the single-year credit. And I ask all my colleagues to support 
this proven tax credit that has been vital for rejuvenating 
historic structures to help address the ongoing housing 
shortage and, of course, just the overall development.
    So my question--and Senator, it is an honor for me to 
actually ask you a question, I have watched your career as a 
young staffer and, again, I am really excited to ask you this 
question--Columbus, Ohio, where I live, is rapidly expanding. 
In fact, the Bank of America Institute recently released a 
study suggesting that Columbus, in fact, was one of the 
fastest-growing cities in the United States. Many of the 
corporations have been able to expand, hire new employees 
because of the policies that were included in TCJA. Do you 
believe that it is right that corporations simply received huge 
tax--while it is true corporate rate was reduced from 35 
percent to 21 percent, but didn't we also broaden the base so 
that, yes, these jobs created with the companies are now paying 
a lower rate, but on a much higher slice of that income? You 
have got a minute and 30 seconds, Senator.
    Mr. GRAMM. I have a bad habit of running over, but since my 
wife----
    Mr. CAREY. We won't let you----
    Mr. GRAMM [continuing]. Is waiting for me outside, I am 
going to be quick.
    Mr. CAREY. Good deal.
    Mr. GRAMM. Look, any time you have the highest corporate 
tax rate in the world, you are disadvantaging every company 
that operates in your country. And so the movement from 35 to 
21 was a no-brainer. It is something we should have never 
gotten in the position that we had the highest corporate tax 
rate in the world.
    Secondly, we had this system where, when companies earn 
money abroad, they kept it abroad because why would you bring 
it back here to be taxed? And by simply passing the 2017 tax 
bill and letting people bring the money back, we brought as 
much as $3 trillion back to America to invest in Columbus, 
Ohio. So I think, clearly--I don't understand how you can 
debate the point that it made sense to cut the corporate tax 
rate from the highest level in the world to a level that is in 
the middle, right in the middle of developed nations.
    And then finally, you got all these people that don't think 
they are paying the corporate tax rate who are.
    Mr. CAREY. Senator, thank you.
    And Mr. Chairman, I appreciate your indulgence and I yield 
back.
    Chairman SMITH. Thank you.
    Mr. Beyer.
    Mr. BEYER. Mr. Chairman, thank you.
    And thank you all for staying so late. My college 
statistics textbook was called, ``Lies, Damn Lies, and 
Statistics,'' or as my father would usually say, ``Figures lie 
and liars figure.'' We have heard an awful lot of interesting 
statistics this afternoon, a lot of which make sense.
    By the way, Mr. Ervin, you know, I have been in a small 
business for 46 years. I started more than a dozen companies, 
all of them still thriving. And I heartily agree with you, 
getting rid of the pass-through would be devastating for the 
small businesses.
    I do think, as we look towards whatever we are going to do 
in this year and next, that we have to be aware that much of 
the pass-through is not for small businesses. They are for, you 
know, big accounting companies and big lawyer law firms and the 
like. And so I am very sympathetic about what it would do to 
your business and to my business 20 years ago, but we need to 
take a good--an account of that.
    And with the 35 percent tax rate, certainly the highest in 
the world, but let's also remember that most of the economists 
said that the actual tax rate was about 13 percent because of 
all the different things that people were paying. There were 
some naive corporations paying 35 percent, but most were not.
    We also have to realize that most corporations were looking 
for 26 or 27 percent and were thrilled when it somehow went to 
21.
    You know, it is also reasonable to think that when you put 
more money in people's hands, some good things are going to 
happen to some people. However, what is really important to us 
is who got that benefit. In 1967 our Gini index was .397--Gini 
index, of course, being the measure of inequality, income 
inequality, within our country. It rose to 43 percent in 1990, 
47 percent in 2022. And it is looking at 52 percent right now. 
We have the highest of every industrialized country in the 
world.
    To restate, we have the most unequal incomes, the most 
wealth inequality in the industrialized world right now. And 
sadly, the TCJA did nothing but contribute to that. It is not 
that there weren't good things. There were good things in the 
Jason Smith-Ron Wyden bill that we passed 40 to 3 out of this 
committee, stuck in the Senate right now. Not everything was 
bad, but we need to be honest about the downsides that came 
from that.
    And Dr. Edwards, specifically, when we talk about the 
impact of TCJA on growth, can you talk about timing effects and 
the difference between cause and correlation?
    Ms. EDWARDS. Thank you. Yes, I mean, I am a broken record 
on the other side, where I--while I say the, you know, 
happening at the same time and being caused are not the same 
thing, you know, most of the assessment I take for the TCJA I 
take from the Congressional Research Service. I--you know, I 
didn't--and their assessment was it did not contribute to 
taxes, it did not contribute significantly to economic growth. 
And the economic growth it did contribute was well below the 
average production projection of what it would contribute. But 
it did happen at a time when the economy was growing and when 
wages were rising.
    But, you know, the point that I made earlier was, you know, 
you don't want to claim everything that has happened in 
corporate behavior since 2017. You don't want all that. We have 
had a 250 percent increase in child labor. You don't want to 
claim that. That happened--I mean, that took off right as the 
corporate tax cut went into effect. That--you would never claim 
that, and I would never assert that because, you know, we want 
to look back to, like--we want to look back to the actual 
causes and the actual consequences.
    Yes, companies paid out bonuses. According to the 
Congressional Research Service, they accounted for two to three 
percent of the total decrease in taxes that they paid. They 
also got over $1 trillion in corporate buyouts; 2018 was the 
largest year on record for corporate stock buybacks.
    Mr. BEYER. Dr. Edwards, let me interrupt you for a minute 
so I can give you one more chance to answer the question.
    You know, there was a one-time, one-year surge in corporate 
revenues after TCJA, but we are back down to 16 percent. And in 
fact, if you look from 2001, when it was 19.2 percent, to 
today, where it has averaged 17--16 to 17 percent since TCJA--
you know, my friend, Jodey Arrington, who chairs the Budget 
Committee, is passionate about the debt, as am I. How are we 
ever going to address the debt when we are spending 22 percent 
and corporate tax rates are 16 and 17 percent--or overall tax 
rates? How can we do this without new revenue?
    Ms. EDWARDS. You can't. I brought up earlier in my original 
remarks if we had not had 4 tax cuts since 2000 and maintained 
the revenue as a share of GDP, as it was in the last years of 
the 20th century, you know, we would have $850 billion more in 
revenue each year. That is paying off Social Security in under 
four. All right? That is a child care program and a half in a 
year.
    Now, that is--it is about opportunities and trade-offs for 
where you want to spend the money and how you want to pay off 
your bills.
    Mr. BEYER. Great, thank you very much.
    Mr. Chairman, I yield back.
    Chairman SMITH. Thank you.
    Mr. Steube.
    Mr. STEUBE. Thank you, Mr. Chairman, and thank you all for 
being here. I know that the hour grows late, but each member, 
obviously, has important questions and statements we want to 
make. But thank you for your time today.
    As this year's tax filing deadline rapidly approaches, 
Americans should know that the growth and benefits that they 
have enjoyed since the passage of the Tax Cuts and Jobs Act are 
in peril of going away if President Biden gets his way.
    The difference between President Trump's tax cuts and 
President Biden's promised tax increases could not be clearer. 
President Trump's tax bill dramatically reduced tax rates for 
Americans at every income level. The TCJA sparked economic 
growth that dramatically increased the net worth of Americans, 
especially low-income and middle-income families. In 2018 and 
2019 low-income families increased their net worth by 37 
percent, and the net worth of middle-income families 
skyrocketed by 40 percent. These low-income families 
experienced the lowest tax rates they have seen in 40 years.
    As a result of this, President Trump's historic 
legislation, more than six million people were lifted out of 
poverty. The TCJA also helped drive a jobs boom that still 
benefits the economy by slashing the corporate interest rate 
from 35 percent to 21. A study from economists from the 
National Bureau of Economic Research in the Treasury Department 
found that the corporate tax reform in the TCJA helped increase 
domestic investment by about 20 percent in the 2 years 
following the law's enactment. These are not just numbers on a 
page. They have real meaning to real American families. This 
increased investment leads to jobs, which puts money in 
Americans' pockets and food on their dinner tables.
    Despite all the economic growth and prosperity unleashed by 
President Trump's tax cuts, it seems President Biden seeks to 
increase taxes on American families, which is especially 
concerning considering the crushing inflation that we have 
experienced under his Administration. President Biden made no 
secret of his intentions during the 2020 campaign, when he 
promised tax increases, not cuts. He flat out said, and I 
quote, ``I am going to get rid of the bulk of Trump's $2 
trillion tax cut.''
    The expiration of TCJA is coming soon, and President 
Biden's promises may come to fruition unless we act. Congress 
must act to make sure that the TCJA's reforms for both 
individual and corporate filers are, at the very least, 
maintained. In particular, we need to protect the 199A small 
business deduction because small businesses around the country 
will face a 43.4 percent Federal tax rate unless we act. If we 
do nothing, it will have a devastating impact on small 
businesses and the millions of Americans who are employed by 
these companies.
    Mr. Ervin, I will start with you. As an owner of a small 
business that has benefited from 199A, can you please tell us 
how these tax provisions have real-world impact for employees 
and customers?
    Mr. ERVIN. Thank you for the question. So to make it easy, 
so employees, you know, we are going to have to look at that in 
particular because, you know, obviously, we won't be able to 
keep everyone if we are going to have that deduction gone.
    And then we will have to figure out not only when this 
deduction, if it is gone, I imagine, we would still have the 
continued rising costs of the rest of doing business because of 
inflation. You know, the cost of milk, the cost of green 
coffee, the cost of utilities, which we haven't even brought 
up. And so we are going to have to analyze, you know, very 
soon--because that is only about 18, 20 months away--what we 
are going to do. What is the plan, who are we going to keep. 
And then it is how are we going to raise prices.
    And in my particular part of the world, in my particular 
part of the country, in West Virginia, you know, our median 
income isn't extremely high. And most of the businesses that 
are in my state are small businesses, and they are bringing in 
incomes that are similar to mine, and they are employing people 
the best that they can.
    So essentially, we will have to pass off some of the costs. 
We have to raise our prices. And then, if that doesn't work, we 
would have to close our doors. And that is what we are facing--
not only me, but every small business in America.
    Mr. STEUBE. You would have to raise costs, probably, and 
possibly get rid of employees because of the costs incurred by 
the raise in the taxes.
    Senator Gramm, I noticed in your testimony that you discuss 
how all Americans pay corporate taxes. Can you discuss how 
these hidden taxes affect everyday Americans and their 
investments, employment opportunities, and consumer choices?
    Mr. GRAMM. Taxes affect all of them. There is no such thing 
as a corporation, except on a piece of paper. All corporate 
taxes are paid by consumers, workers, and investors, and 74 
percent of the common stock in America is owned by pension 
funds, 401(k)s, IRAs. This conception that there is this mega-
rich corporation out there that is not paying its fair share is 
bunk because corporations do not pay taxes. And if people could 
understand that, and if you could remove the politics from it, 
you could dramatically improve the economic environment in the 
country.
    Mr. STEUBE. Thank you all for being here today. And thank 
you for your time.
    I yield back.
    Chairman SMITH. Mr. Moore.
    Mr. MOORE of Utah. Thank you, Chairman, for holding this 
important hearing. I love that we are doing, you know, what I 
have been excited about to get on this committee, talking about 
how we can expand on the successes of the 2017 Tax Cuts and 
Jobs Act leading into 2025. It is going to be a very important 
year. I wish every American was just focused on this one issue 
in all the politics that get presented in an election year.
    Also, to the ranking member, he offered some criticism on 
his opening statement. And while I will deny ever saying this, 
and only doing it when there is, you know, less people here, it 
is fair.
    Mr. NEAL. Could the gentleman yield? You are on camera. 
[Laughter.]
    Mr. MOORE of Utah. It is fair. When each party gets the 
opportunity for budget reconciliation--you have the White 
House, House, and Senate--I believe we sometimes take the path 
of the least resistance, right? And for Republicans, we have 
proven that we wanted to get a stronger, more simplified tax 
code, tax reform. And in 2021 there was an enormous--you know, 
it was ARPA, with a significant amount of spending.
    And so I go back home and I explain, like, hey, you know, 
when you got two philosophies--we are growing our debt, right? 
And I am saying this internally, we need to make sure, as 
Republicans, that we are looking at the spending of our nation, 
and we can't just rely on just doing tax reform, which I 
support completely, because I do believe it is a strong 
economic factor for two reasons, which I will go into.
    And the minority party, when they had the budget 
reconciliation, it was an enormous amount of spending. And we 
have got to get out of that cycle. That is why I loved what 
this committee did this year with the tax relief bill that is 
currently stuck in the Senate. But it was one of those really 
productive aspects of this job that gives me every reason to 
get up in the morning and keep fighting for this, because I 
believe that was a strong--we found waste and we were going to 
replace it with productive, pro-growth policies, both at the 
family level and the worker level.
    Two things that I have key on from Tax Cut and Jobs Act is 
real wage growth and competitiveness. Those two things are so 
important to me. Before I got elected I went to a manufacturing 
facility in my district. And, I mean, they showed me direct 
effects after TCJA and what they did to their front-line 
workers, what they did to grow wage growth across their entire 
community, and buy ambulances for their community, too. I mean, 
those are the type of anecdotes that I know are getting spread 
across when we do significant reform like this.
    But the one thing I would like to quickly talk about, Mr. 
Ervin, I would love to hear from both you and Mr. Ramirez real 
quick. I have the Small Business Growth Act, and that is going 
to lift the deduction cap up to $1.29 million if we can pass 
this current bill that is stalled in the Senate right now. Just 
tell me how being able to immediately expense certain business 
equipment purchases, computer software, machinery helps you 
invest in expanding your operations and workforce.
    Mr. Ramirez, I will go to you real quick.
    Mr. RAMIREZ. You know, we are too big, Congressman, for 
that provision to apply to us. But I will tell you we have a 
lot of small manufacturers in our supply chain, and they are 
really struggling these days. So the health of our supply 
chain, particularly the health of our domestic supply chain, 
obviously----
    Mr. MOORE of Utah. And that is actually what I love about 
this type of reform, is that it will benefit them. They will 
also have strength, growth, and contribute more revenue. Like, 
and we see that, and we just need to continue to invest in 
this.
    Mr. Ervin.
    Mr. ERVIN. Yes. So I am a coffee business owner. And so 
equipment is vital to us. And so, you know, upgrading our 
espresso machines, upgrading our grinders, you know, so to be 
able to write those off--that is the question, right? How does 
that benefit, how does it benefit writing off the equipment 
costs, right?
    So, you know, that enables us not only to purchase the 
equipment, but also to train more people, or take that 
equipment and open another location, or expand and help other 
people sell the equipment to somebody else to help them open 
another location of their coffee business, and train them on 
how to do it. So it helps us create more jobs, simply put. It 
helps us create more jobs, helps us, you know, raise wages, as 
well, whether it is just 600 bucks or $20,000, which is what 
the average cost is of an espresso machine.
    Mr. MOORE of Utah. And from the hard-fought battle from 
this committee and from the leadership of Mr. Chairman, that 
provision is permanent, and small businesses can have that 
expectation going for as long as we can see to be able to have 
that type of write-off.
    To quickly wrap up, Senator Gramm, we want to make sure you 
get to your spouse because we know we don't want to disrupt 
that. Competitive corporate tax rate worldwide. What does that 
mean specifically for workers and families?
    Mr. GRAMM. Well, I think the data makes your case. No 
matter how you want to cut this, if you look at the facts, the 
2017 tax cut, along with deregulation--it is hard to separate 
the impact of the two--had a bigger impact on working people 
than any other action taken by this government in the last 50 
years.
    Mr. MOORE of Utah. Thank you, sir. Thank you all, 
gentlemen.
    Chairman SMITH. Mr. Evans.
    Mr. EVANS. Thank you, Mr. Chairman.
    Dr. Edwards, I am concerned about the Trump tax bill 
negative impact on small business and the workers who are 
employed by them. Studies have shown that the majority of 
benefits from small business tax cut in the 2017 bill have not 
actually benefited rural small businesses, mom and pops. 
Instead, these tax breaks have mostly benefited large 
businesses and revenue lines in the tens, hundreds of millions.
    Dr. Edwards, can you please explain to the committee the 
importance of a tax code that supports small businesses, 
especially for working women and workers in low-income--
employed by these businesses?
    Ms. EDWARDS. Well, this is exciting because they have 
actually gotten all these questions so far.
    So it is--I think Mr. Beyer said it best, that there are a 
lot of good things in this tax bill that were poorly targeted 
so that there are lots of bad components. You know, we--Ms. 
Tenney spoke relatively passionately about farms and wanting 
to, you know, protect the family-run businesses. But, you know, 
the way that we chose to do that was by increasing the estate 
tax to $27 million, right?
    It is the same with the pass-through deduction. If you want 
to help small business, you don't need to design a deduction, 
you know, that two-thirds of which are going to go to the top 
one percent.
    The concern about the top one percent is that they are just 
very good at gaming the tax--not really them, probably their 
tax attorneys and their tax firm--are very good at getting a 
complicated tax code to work in their favor. So the more that 
you can put bright lines so that it affects the people you want 
to affect, the less that it goes to the top.
    So I think, you know, small businesses have all kinds of 
struggles. They struggle to hire, they struggle to pay, they 
struggle with their taxes. But they do not benefit from a $27 
million estate tax exemption. And they do not benefit of two-
thirds of their tax cut going to the top one percent.
    Mr. EVANS. Dr. Edwards, I am strongly supportive of Child 
Tax Credit, one of the most powerful tools in decades for 
alleviating poverty. I do not want to--I want to thank my 
colleagues on the committee who helped work to get a childcare 
tax credit on the House floor.
    Dr. Edwards, can you please explain for us the effect 
regarding the reorganization of tax credit for the American 
economy at large?
    Ms. EDWARDS. The year that the expanded and fully 
refundable Child Tax Credit was in effect, the Census Bureau 
said that income reduced child poverty by 50 percent, it about 
halved child poverty in the United States.
    You know, I think so much about the bill that we have 
been--and the law that we have debated so far today, you know, 
loses sight of the fact that the best way to get hard-working 
Americans money is to just give them the money, and not to have 
it go through their corporation or their employer. If you want 
to help hard-working Americans who are having a hard time, you 
know, affording food, affording basic necessities, you can give 
parents with children additional money through the tax code. It 
doesn't have to go through bonuses as determined by their 
employer.
    Mr. EVANS. I want to thank you, Mr. Chairman. I yield back.
    Chairman SMITH. Ms. Van Duyne.
    Ms. VAN DUYNE. Thank you very much, Mr. Chairman.
    Yesterday the Small Business Committee, of which I am also 
a member, held a hearing highlighting the success of the TCJA. 
And the rhetoric from my colleagues across the room is 
completely different than what we heard from these witnesses. 
None of the witnesses were one-percenters or wealthy 
corporations, but they did share a very clear message that, 
because of the policies that were enacted under this 
Administration, they are all paying more in taxes.
    My Republican colleagues and the American people knew the 
President was lying when he said no American making under 
$400,000 would not feel a tax hike. We knew it was a lie, and 
the hearings yesterday proved this point. And one witness added 
regulatory costs have gone up a whopping 460 percent.
    It has been made clear over the last three years that 
President Biden, with two years of a Democrat-controlled 
Congress, that Democrats are exceptionally out of touch with 
economic policies that benefit Americans. What we hear today is 
an old and repetitive story, which once again they retreat 
under their warm blanket of safe space, of tired talking 
points, and are scared of the reality that cutting taxes and 
eliminating regulations would set loose job creators and 
benefit family budgets.
    Now, look, I went to college. I paid for my own way to 
college. It took me 10 years to pay off that debt. But because 
I am the one who took it out, I am the one who benefited. I 
paid it off. Do you know what got me to be able to pay it off? 
Having a job, having a business that was successful that could 
actually hire people and invest in its employees.
    I also was a single mom, a mom of two. Guess what? My kids 
had to have childcare. I paid for it. Guess how I paid for it? 
I did not ask people who didn't have kids to pay for it. I 
didn't ask the government to pay for it. I actually was a small 
business owner, and I was able to get clients because these 
clients were able to make money, invest in their employees, and 
hire people like me. That is how it gets paid for.
    But, I mean, the TCJA actually grew the economy. And yet, 
in the President's budget, he has proposed $2 trillion in new 
taxes. The only creative idea they have is to tax money that 
you have not yet received.
    In 2025 Congress will be facing an important choice: 
continue the success of the TCJA, looking at new ways to be 
competitive, such as continuing the work that we have done by 
finding new ways for small businesses to access capital; or go 
back to taxing job creators at record levels.
    Lastly, we have an opportunity to get things right the 
first time, with new opportunities when it comes to digital 
assets in cryptocurrencies, and we need to take advantage of 
that.
    Senator Gramm, it is great to see you again. I love your 
work, and you have had some great comments this afternoon. We 
often hear only the other side of the aisle, that the policies 
that we have, that the only thing that we care about are our 
fiscal states when looking at tax cuts. During your time here 
you were a fiscal hawk. Do you believe that the TCJA 
contributed to the fiscal situation that we are in now?
    Mr. GRAMM. Well, on the--first of all, I can see why you 
won in [inaudible] district.
    Look, I can say things about this bill and how it did in 
terms of generating revenues until 2020, when the pandemic 
started. And what I feel comfortable saying is that it paid for 
about five-eighths of itself, according to the Congressional 
Budget Office and the 10-year projections they made prior to 
the pandemic. After the pandemic, you got to understand, 
government spent more in two years than it ever spent in three 
years. And so anything that happened after that, it is almost 
impossible to try to attribute it to something that was set 
into place before it.
    So I know this. I know that the 2017 tax cuts had a 
tremendous impact on ordinary people in the American economy. I 
know that, per capita, that median income grew 50 percent 
faster than in any other year in the last 50 years. I know that 
the bottom quintile, the 20 percent lowest earners in the 
country, were the biggest beneficiaries in percentage terms.
    And let me say before my time runs out, my numbers on the 
labor force participation rate falling from 67 percent in 1967 
to 36 percent today applies only to prime work-age persons. 
Nobody can deny that these massive welfare expenditures have 
induced millions of people to leave the labor market.
    Ms. VAN DUYNE. I appreciate your comments very much.
    And I yield back.
    Chairman SMITH. Thank you.
    Ms. Malliotakis.
    Ms. MALLIOTAKIS. Thank you very much. I appreciate all the 
input that you have provided with us today.
    Look, I think the success of the Tax Cut and Jobs Act is 
clear. I mean, this was a pro-growth, pro-jobs, pro-family 
policy. America gained 7 million new jobs, and middle-class 
families' income increased nearly $6,000, more than five times 
the gains during the entire Obama Administration. And 
businesses were able to buy new equipment. They were able to 
invest, to expand, as our witnesses testified to today.
    But also, we saw unemployment rates, right, reach the 
lowest points, particularly for African Americans, Hispanic 
Americans, for veterans, for women. Unemployment for women hit 
its lowest rate in nearly 70 years, and poverty rates 
decreased. Nearly seven million people were lifted off of food 
stamps. We saw the middle class, like I said, the family income 
increase, but we also doubled the Child Tax Credit from 1,000 
to 2,000. Well, I wasn't here, so I didn't do it, but the 
Congress did, with President Trump, double the Child Tax Credit 
from $1,000 to $2,000, benefiting 40 million families.
    My first question is--because I have legislation that would 
increase the standard deduction, so my first question is to Dr. 
Winfree.
    I believe that, obviously, increasing the standard 
deduction allows people to keep more of their hard-earned 
money. What are your thoughts on whether we should be looking 
at further increasing that standard deduction, which was 
doubled during the TCJA?
    Mr. WINFREE. Thanks. That is a great question. I think 
that--a couple things. I think that there are costs and 
benefits to increasing the standard deduction.
    I think that the cost to increasing the standard deduction 
is that you are potentially removing people from paying taxes. 
And now it is tax relief, and that is a good thing, typically, 
in that it provides people, you know, more income in their 
pockets, increases aggregate demand, and so on and so forth. 
But I would be careful about the level at which you increase 
the standard deduction.
    Now, that said, one of the positive aspects of increasing 
the standard deduction in 2017 when we did the TCJA was that 
you are--we talked about base-broadening measures before. By 
increasing the standard deduction, you are not picking winners 
and losers, right? And so, ultimately, what you are doing is 
you are reducing the number of itemizers, and that is a----
    Ms. MALLIOTAKIS. One point seven million Americans have 
benefited from that, and I appreciate your comments.
    Senator Gramm, in 1983, that was the last time that the 
Social Security taxable income threshold--it was set at $25,000 
for an individual, $32,000 for married couples. It has not 
increased in four decades. I think that is really a hardship on 
our senior citizens who are relying on their Social Security 
checks. Should we be looking at increasing that threshold that 
has not been increased in 40 years?
    Mr. GRAMM. Well, you got to remember that Social Security 
increases as real earnings increase because, as you pay in 
more, you get more.
    Social Security is a tough issue because it is so difficult 
to deal with it. I dealt with it twice in my career, once in 
the Reagan budget and once in the bipartisan reform of Social 
Security. I think our primary focus today on Social Security 
has got to be on the fact that it has now, on a cash basis, 
been running a deficit for seven years. The problem is going to 
get much greater. And so I would be very loathe, in good 
conscience, to recommend that we raise benefits. I think we 
have got to come to grips with what do we want people to have, 
and what are we willing and able to pay for.
    Ms. MALLIOTAKIS. Yes, and I think, at a minimum, we need to 
eliminate the marriage penalty for----
    Mr. GRAMM. Well, and also, I got to come back to the point 
that was raised earlier about taxing Social Security benefits. 
And I didn't come here to be partisan, but being here and 
hearing this debate makes me feel more partisan I am ashamed to 
say.
    But Bill Clinton imposed a tax on Social Security benefits.
    Ms. MALLIOTAKIS. Yes.
    Mr. GRAMM. I am proud to say I voted against it.
    Ms. MALLIOTAKIS. Well that is great. Well, hopefully we 
can--I am a Republican, and I heard it from a Democrat, 
hopefully, we could work together to make sure seniors can keep 
more of their Social Security benefit, not--that has to--it is 
so outdated, 40 years. We really need to increase that 
threshold.
    One last question for Mr. Ramirez. For manufacturing to 
bring Active Pharmaceutical Ingredients, pharmaceutical 
manufacturing, back to the United States, what tax incentives 
would you recommend, if any?
    Mr. RAMIREZ. Thank you for the question. In zero seconds, 
you know, I think it got hit before. What we need is a level 
playing field. We need competitive tax policy, competitive 
trade policy. And American manufacturers will win in that 
scenario and do it here in the United States.
    Chairman SMITH. Mr. Schneider.
    Mr. SCHNEIDER. Thank you, Mr. Chairman, and I want to thank 
the witnesses, A, for staying long for all of us as we get to 
the end of this hearing.
    And so, you know, next year--I think the reason we are 
having this conversation, one of the things we are talking 
about is that next year we will be having very significant 
conversations about expiring aspects of the 2017 tax bill. We 
don't agree, Republicans and Democrats, on the impact of that 
bill or the wisdom of that bill. We will agree to disagree. But 
I think what we can agree is that that bill has not--is not 
standing the test of time, which is why we are here, eight 
years later, having to have these conversations.
    And I think, Mr. Ramirez, you talked about a level playing 
field in trade and tax, and this is something where I think we 
most certainly all can agree. And I definitely, as a Democrat, 
agree with you 100 percent.
    My hope next year--we won't know who will be in the 
chairman's seat. I, as a Democrat, hope it will be Chairman 
Neal. But either way, if we are going to address what needs to 
be done in a way that will stand the test of time, we have to 
do it in a way that I think was very different than it was done 
in 2017, where we rushed it through this committee and to the 
House, where we didn't have hearings to evaluate the ideas 
being considered, where we didn't work in a bipartisan way.
    I remember saying to then-Chairman Brady, ``I want to sit 
down and work with you.'' I wasn't on the committee at that 
time, but I wanted to try to find a path forward that would 
help small businesses and make sure that they can stay 
competitive, that would protect the innovation that drives our 
economy and that has helped the United States--made the 20th 
century the American century. We have to have a tax policy that 
makes sure the 21st century remains a century where American 
enterprise, American ingenuity, American workers can continue 
to lead.
    You know, so if I think about how we are going to be 
successful, I think we should--and Senator Gramm, you were here 
in 1986--how do we do it in a way that stands the test of time, 
has the consideration and deliberation that is necessary, and 
reaches across the aisle. As we think about that, I will lay 
out some of my key priorities as we look forward.
    I mentioned one: we have to ensure that the U.S. remains 
innovative and competitive in this global economy. I was 
talking to some people earlier today. The advantages we enjoyed 
75 years ago, 40 years ago, 48 years ago when we talked about 
tax, those have been compressed today. It is a global economy 
where other economies are bigger than they were, their workers 
are better trained, their industries are more competitive. We 
have to make sure ours stay at the end. That is why I wish we 
could get the Senate to move on the bipartisan bill that would 
restore the R&D credit. And I will come back to the Child Tax 
Credit on that as a piece.
    But we also have to be at the table as we look at the OECD 
tax work going. We can't let it go without us.
    We have to invest in our kids. We can't be innovative if we 
don't invest in our children. When we in the American Rescue 
Plan raised the Child Tax Credit, we found a way to cut child 
poverty by 50 percent in this country. That success can't be 
understated, and yet we let it slip away. We need to invest in 
our young kids in early education through their primary grades 
onto university and Ph.D.s in science or manufacturing, or 
whatever the case may be, because if we don't do that we are 
going to fall further behind.
    And third, we need to make sure that we are addressing the 
challenges of climate change. The threats are real. We see it 
in the storms, the bigger tornadoes, the more powerful 
hurricanes. We need to make sure that we are leading. And I 
think in this committee we can have a real impact on that.
    So I want to be sensitive to the time. So I--we have had 
good conversations. We will agree to disagree on some things. I 
know that there are many things we agree on. We have to work 
together, Republicans and Democrats, if we are going to create 
a tax system for our country that moves our country forward, 
that tackles the fiscal challenges. We can't sustain a $34 
trillion debt, and we have to work on bringing that down. But 
we can't do it if we go to our corners, if we let the show 
horses replace the workhorses on this committee.
    So Mr. Chairman, I look forward to working together for the 
remainder of this term. And whoever is chairman next term, I 
look forward to making sure that this committee earns its 
reputation, as it always has, as a committee that gets things 
done. I yield back.
    Chairman SMITH. Thank you.
    Mr. Gomez.
    Mr. GOMEZ. Thank you, Mr. Chairman. First, I am glad once 
again to be back on the committee. I was off for about 13 
months, but I am very happy to be here, although I wasn't here 
in 2017, when the Trump tax cuts were passed.
    But when I heard that we were going to have a hearing on--
and the Republican majority wanted to have a hearing on the tax 
cuts, I thought, really, you really want to do this? Because I 
believe that the Trump tax cuts are really one of the most 
egregious giveaways to the most wealthy individuals in this 
country, and it didn't really work out very well for the 
Republicans in 2018. So I said, all right, let's do it, and 
let's go with the top five greatest hits that resulted from the 
Trump tax cuts.
    One, it gave 83 percent of the tax cut to the richest 1 
percent. And if you want to really look at it even finer, it 
gave 60 percent of the tax cuts to the top one-tenth of 1 
percent. So think about that. Let that sink in, that those tax 
cuts were not for the working class or the majority of 
Americans, but really the folks at the top of the income 
ladder.
    And it made the corporate tax cut permanent, while leaving 
all the provisions for families and individuals temporary. 
Seriously? So we are going to give the corporations a permanent 
tax cut--and I understand some of the reasoning--but when it 
comes to individuals, you guys are going to just make it 
temporary? I find that insulting, as somebody who grew up with 
parents that never made more than $38,000 a year, you know. 
Giving temporary tax cuts to working people, but permanent? I 
think that says a lot.
    It ballooned the deficit by $1.5 trillion, and the bill 
never paid for itself. I was brand new, so I was meeting with a 
lot of folks regarding the--this tax plan after I got elected 
and how it was going to impact. And I was always told by every 
expert these tax cuts never, ever pay for themselves. Supply-
side never worked. I mean, how many of you have heard about the 
Kansas experiment, where they tried to cut taxes and taxes and 
taxes. It blew up the deficit; it reduced revenue so much that 
their own Republican legislature had to repeal those tax cuts, 
and then had to override the Republican Governor Brownback's 
veto, right? Supply side doesn't work. Tax cuts never pay for 
themselves.
    But that is a story, it seems like, as old as time that 
people want to keep telling people. That is how--that is what 
you people sell. And then we have some people of this committee 
itself that are for the Trump tax cuts but are talking about 
the deficit as we speak on the floor. I find that just 
egregious.
    Five, it reduced the top tax rate for millionaires.
    And then six, it disallowed deductions for union dues, for 
union dues. This is peanuts, right? But who does that impact? 
It impacts construction workers, ironworkers, plumbers, 
teachers, nurses. Go on and on. The people that are building 
this country, the people that take care of our children, the 
people that are right now building the bridges, right, and our 
infrastructure, the people that are going to help make sure 
that the Francis Scott Key Bridge is rebuilt in record time. 
These are the people who we just--we took that away. Why? It 
was not a big pay-for. It was to be petty and political.
    So a lot of what I have seen really just tells me where we 
see our country and what we value. The tax code is about 
values, in my belief, and you can do it in a way that supports 
working people or not. And I think that is what the Trump tax 
cuts did. At the same time, what Democrats want to do, we want 
to focus on policies and tax policy that helps working 
families, the middle class, gets us up and people who are 
struggling to get in the middle class make it a little bit 
easier. We want affordable childcare, affordable housing, and 
housing that is affordable. We want to cut the child poverty 
rate like we did under the American Rescue Plan.
    One last thing. We have a very different idea of what the 
role of government should be in people's lives. But I was 
listening--and with all due respect to one of the speakers--
said the greatest abuse of the Constitution of the United 
States in my lifetime was President Biden going to Europe and 
negotiating a minimum corporate income tax and giving them the 
power to cut--to tax corporate income in America, but if you 
don't raise the rate.
    Here is the thing. The greatest--that is exactly what I--we 
had it transcribed. The greatest abuse of the Constitution in 
my lifetime is when a former President incited a riot that 
tried to stop the peaceful transfer of power. That is the 
greatest abuse of our Constitution in my lifetime, attacking 
the idea of America itself, that it is a country that is 
governed, self-governed, by the consent of the people. That is 
the greatest abuse.
    And that is what really is--this is about, I believe our 
values. Democrats believe in our Constitution, the working 
class, and the middle class, and some don't.
    With that, I yield back.
    Chairman SMITH. Thank you. I want to thank each and every 
one of you for the 4 hours and 15 minutes that you have been 
part of this hearing. This is the beginning of what we are 
going to see over the next 20 months with the expiration of 
$4.3 trillion worth of tax cuts on all Americans. So we have a 
lot of work before us.
    Please be advised that members have two weeks to submit 
written questions to be answered later in writing. Those 
questions and your answers will be made part of the formal 
hearing record.
    With that, the committee is adjourned.
    [Whereupon, at 6:17 p.m., the committee was adjourned.]
      

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