american companies. >> very important. now let me just say fundamental tax reform i don't believe can be done in six weeks or six months. i believe fundamental tax reform is such a complicated undertaking and would take us well into next year the taxes told us they couldn't score fundamental tax reform within the next six months because they don't have a model that would allow them to do that. mr. falk in terms of the basic structure of a strategy to get at the deficit and debt, do you favor with the commission and the group of six proposed? >> it makes sense to me i would echo the comments and once again it's taken more than a generation to get to this point in time and so there are going to be a lot of things that have to be dealt with to correct our problems and get our fiscal house in order moving forward. >> mr. lang? >> i would agree with the comments made here and fiscally responsible approach to addressing the issues we have

today. >> okay, mr. merlo? >> i agree there is no question of the comprehensive reform is going to have to be thoughtful and have a lot of elements to consider and just emphasize the point about predictability and certainty i think is a key by-product of the decision making process. >> on the repatriation life asked my staff to look into what happened in the last repatriation come in here is what the report to me. a number of empirical analyses have been undertaken to assess the use of the repatriated earnings and their impact on investment in u.s. growth and jobs. these studies found no evidence that firms used repatriated earnings to significantly increase domestic capital and investment, employment or research and development. rather earnings were used to benefit company's shareholders

whose repurchasing programs even though this was explicitly prohibited by the measure. the memo goes on to say researchers also found specifically with regard to employment the number of firms repatriating funds actually reduced employment in their domestic operations in the period after they repatriated funds. for instance a tax economist lawrence sullivan found that three of the top five in the repatriation reduced u.s. employment in 2005 and in 2006. i won't name the companies, but we've got it all laid out here. i would just say to do that clearly fundamental tax reform needs to include how we are dealing with worldwide in come. the ronald reagan administration i served on a commission on the

taxing international corporate earnings. it was one of the most interesting negotiations i was ever a part of. it made this negotiation on the debt ceiling look relatively easy. let me just say the argument that had been made by some in the repatriation that is going to create jobs here, we did it. it didn't produce jobs here. that is the overwhelming evidence. that doesn't mean we shouldn't do the fundamental tax reform because if we are going to be competitive we have to get in the game and our tax code was designed at a time when we did not have to worry about the competitive position in the united states. we were fully dominant when this tax code was developed. i don't think anybody if they were going to sit down and the fis tax code for the united states in 2011 or 2012 would come up with one that looked anything like this one. my time is expired and i thank the panel for their testimony. >> thank you very much.

for your work on the commission the gang of 6i don't think anybody disagrees on the last statement, too it is clearly time to overhaul and an antiquated tax code. but it's not going to be easy. one thing i've learned around here the abstractions are easy sometimes abstractions are cruelty because it's the specifics that really count. for example, a lot of talk about the base. the current tax rate 35% federal , how much could the rate below word if all expenditures were eliminated you don't get very far to stick to the territorial systematists territorial you don't get very far. you get down to 29% approximately. then the next question is what about the interest expense?

q1 to eliminate the interest expense? eliminate the interest expense then we start to make headway in getting the rate down quite significantly. i suspect in the other countries and tax systems which allow the countries to raise revenue because revenue is a percentage of gdp is higher in those countries probably business revenue compared in the united states i don't know, have to research this but it could be a combination of income taxes and those countries and so forth so it's not easy to get the rate down to of levels people talk about say the 25% corporate rate or lower. it's not easy tall and the next set of questions of which potential expenditures are you willing to give up? everybody gives up everything

but there are some specifics for the simple and mr. duke at wal-mart it's pretty important to your company and mr. falk i expect section 199 is important to your company. and to you, mr. lang. so in asking are you each willing to give that up for your companies so long as everything is given up and then we get to questions i think senator stabenow touched on mainly if canada is given such a great incentive to r&d and if we get up our r&d tax credit will a low birth rate make the united states conducted the companies said they could deal with or offset that incentive? i would like you all to tell me

the degree that you are willing to give up the provisions you currently use very significantly. >> mr. chairman, with first the overall work corporate tax rate that would be competitive in the global marketplace such as in the mid-20s for example, then we would be willing to look at every aspect of those incentives that we participate in. we believe that all should be on the table for discussion. >> so you're basically saying you are willing to develop as long as your rate commodore had line rates, the core rate is say mid-20s or something like that? >> we are competitive, we are competing against -- >> mr. falk? >> i give the same answer i mentioned in my comments we to get advantage of the r&d credit and the manufacturing credit and spend half a million in capital in this country every year and take advantage of the depreciation. as the rate drops from the 40%

to 22, 23 or 25 -- >> the federal act now. >> those incentives are a lot less valuable. >> mr. lang? >> in the working group we've had this exact conversation and i would agree that everything should be on the table. we should look at it is a whole package and look at what the end result is. there's a number of things from the manufacturing incentives to the acceleration on the depreciation etc. that were things that the right rates would be worth putting aside. so i think that agreeing with other folks on the panel, we should look at everything and at the end of the the the overall system needs to be competitive to compete in the global marketplace. >> we are going to look at everything but to make some decisions and i'm kind of asking for guidance here if your industry is 25% sufficient to compete with the canadians some

of you don't have that break. it's been a critic for our industry the primary competitors are going to be in asia based on the competition and the effective rates, the statutory rates are 15 to 17% often lower than on the effective basis so i'm concerned that when we look at the details and go through the details in the 20% rate it won't be competitive from the semiconductor industry. >> you're concerned it will not become the mid 20 might not compete in asia -- >> yes, that is my belief. >> mr. merlo? >> i agree with everything already said. everything should be on the table. that's going to be an imperative to simplify the tax code as well. >> my time is expired. senator hatch? >> thank you mr. chairman. it's nice to talk about everything being on the table, there are certain things that make you competitive with the rest of the world, and without which -- without any guarantee

the rates are going to stay down. so, we have to consider all of this and consider how this works in the future as well. but let me just ask this question for the entire panel considering the corporate tax reform the focus is typically on the corporate tax provisions in the code. have important is it to focus on the impact corporate tax reform will have on the company's financial statements for instance if the net operating loss it carries forward from year to year they can offset the tax income in the future years thus it can be a very valuable asset to your company. that is the reduced taxes in the future years so it's a corporation of 100 it would reduce given that 35% tax rate, corporate taxes by $35. that's the corporation under the current financial economy rules right the state that a $100 of assets the company holds a $35.

however the corporate rate would reduce the 25% then this asset will only be worth $25. now that is in some sense the corporation would lose $10 by virtue of the corporate tax rate going down ten percentage points to lead us to handle the reduction would immediately show up as a 10-dollar reduction in the corporation's net income and lower their earnings per share. very supportive of the corporate tax, no question about that. i would hope the effort to reduce the corporate tax rate would not be slowed down by the financial accounting considerations. however, i can understand those are real concerns that you have to be concerned with. now, the r&d tax credit is absolutely critical but you point out 13 times we have failed to adopt it. both the chairman and i worked hard. i would like to make that

permanent because i think you would give you a kind of competitive advantage in the rest of the world because of the incentives and creativity of the workers in your industry. i'd like you to share with me your thoughts on this business of how you handle these accounting matters should the tax reform take into consideration the financial accounting impact of reform? >> first in the whole discussion of lowering the overall rate say from 35 to 25,000 discussed even related to the incentives and credits, we recognize the have to be a trade-off for the formula to work. we believe the same would apply to your question about the anno well -- nol. it's worth it to have a permanent long-term corporate tax revision that would have a

competitive rate in the global marketplace and that transition related to the questions about nol as well as credit we think would be worth the challenge. >> my comment would be i would say do the right thing for the country and the accountants will figure it out so i wouldn't worry about the financial implications of this. i would say far more countries have the tax liability from taking advantage of things that can accelerate depreciation so as those reverse of the lower tax rates dillinger the benefit from this and so why would not let the accounting didn't leave during the economic position for the united states of america. >> we are one of those companies that has nol on our balance sheet and i would agree with the statement here we should do the right thing to make america competitive and do the right thing for the long-term structure of the business and let the accountants figure out

how the accounting is impacted. senator i'm certainly not an accountant, and i agree with my colleagues in terms of what the finance folks figure it out and we will have our staff get back with your staff on any further comments. >> the would be great. there are a lot of complaints trying to change the tax code but it's not too complex to realize we have to be competitive with the g8 and the g20 and i'd like to be more competitive and i believe if we did that you would create more the jobs and opportunity and products to sell. i've seen you all these years, just terrific at what you do and there are always a lot of trade-offs on these types of issues and we just have to see what we can do but this has been a valuable panel and i want to thank you all for being here.

>> thank you. senator wyden its all yours. >> mr. chairman, i just had one other question. >> okay, go ahead. >> mr. duke, i was struck by the point with respect to your ultimate desire to have a tax rate in the mid-20s and to me that is very much in the ballpark for tax reform and i've tried to work with german bachus on this for a lot of years. but me walk you through how looking at the math and we would like all of your folks on this because deferral is so much money like 500 billion over ten, you get rid of that and it is such a large amount and you use that to slash rates dramatically in the united states and i am

absolutely convinced you can get in the mid-20s. and you also have the benefit of less dena in a more straightforward system. my concern about going to a territorial system, and i put myself to sleep at night trying to understand all the aspects of the territory is that he will keep a lot of the complexity in the system, you have lots of gaining and really permanently the question of the transfer pricing where somebody generates a sale at one place and books the profit somewhere else, but especially you have more business overseas rather than but chairman bachus start us off with in terms of more incentives for jobs in the united states

and i think it will be hard to get the rate in the mid-20s if you go to that kind of system. i wasn't able to figure it out and a lot of people smarter than me. is it fair to say at the end of the day that you all are willing to put work through a lot of these concepts so we can get to the point we started with german bachus so we have more jobs and a greater level of competitiveness in these tough global markets and you all are still open on the design of some of these? >> yes, sir we are open for discussion and development of these. i would tell you even though we talk some about our growth outside of the united states, this year more than half of the capitol investment is being invested here in the united states. we invest somewhere between 12.5 to $13.5 billion over half of it is here. we've announced even recently

our desire to build more stores and grow in urban markets in the united states where jobs are needed and products are needed and so we are here wanting to grow here in the u.s. but we also have an opportunity to grow and help american companies by growing outside of the united states and we would love to work with you and discuss in more detail. >> thank you. i'm going to give you all a question for the record in writing about tax policy and its effect on exports as well because this is another opportunity for growing more jobs in the united states and german bachus has been very patient this morning. thank you. >> thank you, center. we don't have much time. what about turning this around? i would change the code to get more investment in the u.s. in addition to the investment in the u.s. basically the subject of this hearing.

[inaudible] lower the marginal rate for activity in the u.s. and the territorial basis to make a u.s. a more attractive investment for companies all over the world. >> simplicity, predictability, those are all the teams we've been talking about all morning. >> how much to make ourselves less competitive because we have a system that is complex with the tax attorneys for it simple? and it's my understanding that our system is more complex. is that -- does that put america at a competitive advantage? >> a simpler system would attract the investor. >> okay. thank you very much this has been helpful hearing.

we have a lot more discussions. thank you. it's been the goal to get us to a much more competitive system. thank you very much. the senate is adjourned. [inaudible conversations] [inaudible conversations]

last week a house subcommittee looked at the impact on the new consumer financial protection bureau on small businesses. president obama in july nominated former ohio attorney general to head the consumer watchdog agency but the full senate has not yet voted on whether to confirm him. elizabeth warren, who was overseeing the bureau since its inception was passed over for the position in large part due to the opposition in the senate. this is an hour and ten minutes.

>> the committee is not in session. i would like to take a moment to mention the subcommittee has received a statement for the record from the independent community bankers of america and without objection i would like to insert this statement in the record. hearing none, the statement will be inserted into the record. >> if committee members have an opening statement prepared, i ask that they be submitted for the record. i would like to take a moment to explain their rights for you to read you will each have five minutes to deliver your testimony. the light will start out as green when you have one minute remaining allied will turn yellow and finally read at the end of your five minutes. i asked you try to keep it to that time limit, but i will be a little lenient as you finish. our first witness today is here representing the consumer financial protection bureau.

dan sokolov, have i got that right? is that it hideous as it for the research market and regulations. this division is responsible for understanding the consumer financial markets and evaluating whether there is the need for a graduation and the cost and benefit for the existing regulation. prior to joining the cftc, he held positions with the department of the treasury and served as attorney for the federal reserve. mr. sokolov, we look forward to your testimony. >> on the subject of small business in the consumer financial protection bureau. it is the federal agency accountable for establishing clear rules of the road for the consumer financial marketplace and mr. chairman, you mentioned the importance of the vibrant

marketplace that is precisely what we are striving for. although the jurisdiction is limited with regard to the small business credit, we take our responsibility in this area very seriously. we recognize that small businesses are critical to the nation's economy and the small financial-services providers are a critical source of products and services for the consumers. to the of one to provide a brief update on the stand of the cftc as alexi explain efforts to reduce and avoid unwarranted regulatory burdens on small providers and how we believe we may be able to assist small business borrowers over time. the bureau opened for business last thursday july 21st. the inspectors general of the treasury department and federal reserve have reported favorably on the efforts to stand up to the agency. we are already at work strengthening the consumer financial market and working towards a market where consumers can readily see prices and risks and compare products to make the choices that they believe are

best for them. we have taken input from thousands of individual consumers and mortgage lenders and brokers on how to simplify federal mortgage disclosures and make them less burdensome. we are launching the bargain for supervising the largest banks and their affiliates. we are taking our first consumer complaints about credit cards and set up a strong office of surface member affairs reaching out to military families and looking to address the unique financial challenges they face. to fulfill the mandate is to bush by congress, we have hired an expert staff from the private, public and nonprofit sectors striving to build an agency that is smart, effective and balanced. at this efp, we've been building into the agency dna come extensive outreach to small financial institutions such as community banks and credit unions. we believe in the importance of financial services marketplace where small providers can thrive. we will work to reduce regulatory burden on small financial service providers

wherever possible, and we can take as an example disclosure reform. we'll understand lenders deep frustration with the current mortgage forms required by federal law. they are complicated come sometimes duplicative, and more costly than the need to be. as we have solicited feedback from thousands of consumers, lenders and brokers to make the disclosure simpler to use and easier to complete. minimizing regulatory burden will continue to be a pretty for us. often a regulation is not the best answer to a problem. congress has given many different tools to address problems and consumer financial markets and we will strive to address problems as we see them as effectively as we can and to the least burdensome means available to us. in addition we will consider the potential benefits and cost of the proposed regulations for consumers and covered persons including small lenders. we will diligently comply with the regulatory flexibility act and follow the requirements of

the small business regulatory enforcement act the objectives and statutory authority is to focus on financial products and services for consumers. the bureau does not have jurisdiction of the credit except in limited cases of congress has explicitly and affirmatively granted such jurisdiction. we recognize a vibrant small-business sector is critical to the economy and we are aware of many small businesses today report having difficulty obtaining credit. a difficulty through to the most severe financial crisis since the great depression. so although the rule with respect to small business credit is quite limited, we hope to help many small-business owners and freeways. first, we will implement diligently the equal credit opportunity act. this prohibits discrimination and business lending. second, as required by law we will provide the public new data that may shed new light on the demand for and supply of small business credit. will move deliberately and we

will consult lively to attempt to maximize the benefit of the loan data for small businesses and to minimize the cost for the lenders to what report the data, will work to ensure the consumer credit histories are as accurate as possible, more accurate credit histories would help the start-ups and business owners frequently rely on their personal credit history to apply to the first business loan. we believe that a fair and more transparent consumer financial marketplace would be the boom to the financial service providers of all sizes and the more leveling playing field would benefit the small ones in particular. thank you. i look forward to your question. >> thank you, mr. sokolov. the cftc recently sent a letter to the ceo of the financial institutions informing them that they are not subject to the