republicans in my district who are appalled at this. they want it solved. they want the real issues. i think that is an issue of trust that has been maintained here. frankly the plausibility story is getting to the level of unbelievable in a lot of ways. i do have some questions because we've talk about the lois lerner e-mails but in adig to those, the committee has also asked for other e-mails. i want to talk to you about those to see the status of those opinions. is that okay. >> sure. >> e-mails from responsive of the committee's request august second 2014 to february of 2014. have you gathered all of those e-mails. >> what were agreed upon such

terp with the investigative committees who we would select customians who would most likely have been involved. >> at this point nobody knows what the answer is. >> we could have had more that could have crashed. >> we could have less. >> does that not boggle the mind of a small number one about a quarter. we can argue back and forth a quarter or not. there may be others in that subset that deals with the areas we're asking me. >> that's a perfect example as to why it had been helpful had we been able to complete the investigation of what happened to the custodians. if we hadn't been able to could that people would be aing -- >> let's change the question. i asked about holly pass. >> my point is -- to the extent

we can provide the full story than it's a lot easier to know and you can disagree about it. but it's a lot easier to know what the custodians. because the ig is doing that we don't know what the answer is. it could be, ten, five, 25. we hope the ig when he conclude his investigation will include the custodians as well. >> thank you for saying drips and drabs and that is what this investigation seems like it has been since it started. everyday we get drips and drabs april the people of tired of it. the congress is tired from it. i will assume from your question that that's a no. after you've said, you've not gaerthered allf

her e-mails. >> i didn't mean to be evasive. we provided all of the e-mails that were determined to be of the process. >> so no. so the question william wilkins yes or no. >> you got all of the e-mails that investigation that started all of this. >> jonathan davis. no. all is all. >> that's right. as i said in march we're happy to keep working with you to figure out what your next priority is. obviously thanks to the system it takes us a lot time. we've taken a lot of stuff. we should not have to explain $18 million. we should have a better system.

the question is we need them all and the clarification issue and we have just not got there. i want to go back to something that was asked earlier, you said we confirmed and you said i don't know who told me. this will be my third i guess with you listening. there's been a lot of meetings in which you were told information but you don't know who told you that. it hit me as i was sitting here. maybe there were multiple people in the room and you're not sure who said it first or told you first. so i will ask you differently. i doechbt want to know who told you first or last. i'm not being specific in that nature. i want to know who was in the room when you were told that we have confirmed all of that. surely, you're very bright individual. you would know at least who was in the room.

>> i have 12 meeting a day on average. >> i do as well. >> in those meetings average 8 to 10 people. i cannot tell you who was in the room on any meeting. i can tell you who was obviously in the room. obviously my counselor was in the room and chief of staff of the i can't tell you and i don't recall because it wasn't at the time who else was in the room. >> it wasn't significant at the time that you may have lost e-mails. that was not a significant meeting. >> your question is was he could confirm. >> you're dealing with a wigger issue. i said is that not significant. >> this entire issue is significant but our agency has to deal with volunteer tax reasons, we've been simplifying for charitable organizations. >> i understand that. that is a great diversion to

everything asked herher:it's no now the fact that they don't like the irs because they have to send their money in. they are now at april issue both party line or regardless. when that is an issue, everything should be focused on that. this is the question that makes it completely inplausible. i appreciate what you is he on dribs and drabs. >> i will make one point clear. nobody has a greater interest in getting all of the information you need. if we could conclude one of these six investigations. find out what the determinations and recommendations. the last thing in the world that benefits us is to have this go on longer than necessary. whatever question do as fast as

we can produce documents. of the relevance of the 960 pages isn't that big amount. it takes a hot of time to get all of that done in our sift jeem t. >> the one thing we can agree upon is the end result where they can restore trust. i will recognize the gentleman from california for five minutes. >> this is around four. >> no, when people yielded me time under our cane rules, that doesn't count. i'll be brief. >> commissioner, we have a history and i want to make sure i get the history straight today because it does matter for this committee. you constantly talk about this agreement in discovery and so on. were you aware that we considered that the irs was stone walling us and giving us information in a way we didn't

like and giving it in order in a way we didn't like it in months of may, june, she broke no rules or regulations. she additionally aunl ethentica all statements. under only she made a number of statements. as we begun investigating we

became aware that she was an active participant in washington in targeting conservatives. in addition to evaluating her history it became very cheer that she did not like conservatives and quote they want us to fix this. this will be the outgoing. we had every reason to focus our investigation on her with deliberately targeting conservatives for their values. therefore, i issued if the ranking member were here he'd call it unilateral but pursuant to the committee rules, i issued a subpoena and made it very clear that our first priority was to have all the lois lern lerner's e-mails that that was the priority. were you aware of that.

>> i was aware of that subpoena. >> you're aware that that was our goal. >> you have eight items on that subpoena. that's athe top of the list. therefore when we e-mailed tom is cane and said is it fair to say that this subpoena had no impact on the process that you were following or the documents that you were reviewing his answer, it didn't impact our production process. >> did it it have any impact on what documents were chosen to be reviewed. no. additionally throughout that transcribed interview we discovered that you all met, had a discussion if you will and decided that you were not going to priorityize any aspect any bit of her documents even though she had made public statements and under unlawfully leesk elea

planting the question, the outcome of an irs investigation. all of that is undeniable. why in the world would the american people clear that you are cooperating with us when we issue a subpoena and now we have testimony under penalty of perjury that you didn't make any changes. you basically continued us based on mutually agreed but they were your criteria primarily as to search terms and never disclosed to us that those search terms were searching but a small portion of what should have been of the entire database. do you have an answer for that. >> i wasn't there. my understanding is that there are five other investigations that were going on and that are going on then. >> did any of them issue binding

subpoenas. >> i don't think anyone else happen binding subpoena. >> but after february of 2014 we issued anything subpoena. did anything change then. >> we began to pull the rest of lois lerner's e-mails. we started with the analysis of the e-mails produced. that's where it was discovered that there were fewer e-mail in the 2011 period. one of the priorities at that time, kpaeting priorities as to determine the process by which all of the conflicting questions and try to respond to document that's made as many of the requests as possible. most of the requests personal for reason and ways and means were documents around the determination process. that was completed. since the full-court press has

been to produce all of her e-mails for her account or any other account. >> thank you. earlier on, i asked you for a discovery pros efs cess of who looking for when. >> i want to add one clarification. obviously we're interested in what you did with subpoenas but you have delivered some -- i guess we're looking at an exorbitant number of documents that you and many people constantly site. what we don't understand that i think the committee has an absolute obligation to understand is that in this process of where you looked understand the sources that this has come from. we're a commit of tee of oversi reform and that you spend the people's money properly. it appears as though the process

is very fragmented that in fact you're looking sort of under kooky jars to use an expression in from my youth. based on a six month back up in a very small server capacity this wouldn't exist. so that means they probably came from other places. we need to know all the places they come from. you sent us in many cases hugely redundant e-mails. understanding that so that we can figure out how to prevent it in the future is important because this is not the last time that a federal judge, an ig or congressional committee is going to want to know details. i think we can agree to that just as corporate america receives countless subpoenas for document production so much so

they developed software explicitly no make these kind of policies. can we have your agreement that we'll have some counting with that staffing. >> we would be happy to talk with your staff further to make sure you get exactly what you need. we actually were dedicated to finding any learner e-mails or anybody els so that we would be able to say that this is all the e-mails that we have. >> i will take an we're more than happy to have a small bipartisan meeting with the individuals who have been involved in this so that separate from the investigation which is important and ongoing, the question of efficiency, the cost effect of fragmented data, the cost affect of having -- i

individual drives like that people have notebooks that have been taken off-line. all the other things that i suspect are one of the reasons it has become so expensive and difficult. that meeting is not exactly on course with this investigation but it is separately a question from a standpoint from the management of the $82 billion worth of funds that the government spends let's see if funding. as one person working in private america to another. your briefing can be of that. our committee needs to have an understanding so we can be apart of policy foundation.

>> they are very different as i said. i asked that question sometime ago that we should not have to spend $18 million in this amount of time responding to document and e-mail requests. i think if we could kind of get two birds with one stone. had did this discovery process go and what are the problems with that going forward. it is my understanding is that there's been a tremendous amount of effort made so make sure we found june report starts out by trying to explain tule of the investigators what the process is and why it is so difficult. agree going forward it would help all of us if we had a better system for preserving and finding e-mails . thank you commissioner. i yield back. >> that concludes our hearing

today. thank you mr. commissioner. the hearing is adjourned. budget paul ryan will talk about his anti-poverty proposal that deals with education, tax credits and the length of prison sentences. starting at 9:00 a.m. eastern here on cspan 3. state and defense department officials will testify about the political situation and ongoing violence in iraq. live coverage from the senate foreign relations committee starts at 10:00 eastern also on cspan 3. >> 40 years ago the water gate scandal led to the only

resignation of an american president. american history tv revisits 1974 and the final weeks of the nixon administration. this weekend the house judiciary committee as it considers the impeachment of the president and the abuse of power. >> what you have here are questions about what the framers had in mind. questions about the activities that have been found out by the committee and water gate committee were impeachment and could we prove that nixon knew about them andthem. >> water gate, 4 years later on american history tv on cspan 3. >> next, congressman talks about the ongoing investigation into treatment delays at va medical centers and possible ways to improve services. he also weighs in on president obama's choice to head up the

veterans affairs department. from washington journal, this is 35 minutes. ournal" continues. host: >> we're back with congressman, the republican of kansas sits on the veterans affairs committee. the president has nominated a new veterans affairs secretary bob mcdonald he was up on capitol hill for his confirmation hearing before the senate. i wanted to show our viewers a little bit of what he had to say about his priorities and get your reaction. >> in the midst of all of these problems in the midst of a dysfunctional u.s. congress and bitter partisanship, why do you want this job? >> thank you chairman sanders for the question. i think it's a good question. it's a question my family and i have talked a lot about. i desperately want this job because i think i can make a difference. i think that my entire career whether it was starting at west

point, being in the second air born division. being in the proctor and gamble company for 33 years has prepared me for this task. as i said in my prepared remarks, i don't think there's a higher calling. for an opportunity for me to make a difference in the lives of veterans who i care so deeply about. >> congressman, who do you make of mr. mcdonald. >> that would be a tough question to answer why anyone who want the job. i appreciate his background and i appreciate him stepping up to that but he's stepping into a department that by all accounts has some cultural problems. lack of accountability. it's an uphill task. when he comes in, he can't remove many of the top employees unless the senate would approve of a bill that would allow the secretary to take control of the department and fire nonperformance people in the

bureaucracy. it will be a difficult job but i appreciate him stepping up and i appreciate his background. it's similar to what he faced at proctor and gamble by my understanding. he's got a cultural problem and a long ways to go. >> you don't get a vote but you sound like you support his nomination. >> well, i think he will be confirmed but again what we've heard in my 3 1/2 years is everybody cares about the veterans. we will get back to you on that. actually getting good results and changes there, we haven't seen from a long time. what we heard from whistle blowers that they will get criticized and in trouble for telling the truth. >> the active va secretary testified last week on capitol hill called for more money to deal with this problem. i want to show our viewers why he thinks more money is needed. >> before i conclude let me briefly address the need for additional resources, i believe

that the freightest risk to veterans over the intermediate to long term is that additional resources are provided to support purchase care in the community and not to material remedy the historic short fall in internal va capacity. it would leave pa even more poorly positioned to meet future demand. while the amounts under consideration are large and the contempt of my size, scope, budget they represent annual increases. furthermo furthermo furthermore, sources required to meet current demand, covering the remainder of fiscal year 14 through fiscal year 17 total

$17.6 billion. these funds address only the current short falls in clinical staff, place, information technology and purchase care necessary to provide timely, high quality care. >> the acting vsh a saying the agency needs here is how it makes down. 10 billion to hire additional personnel and $6 billion in infrastructure improvements. can you support that. >> we cannot. we've heard about the lack of integrity of the data. we don't know what the work load is or the capacity. we don't know what the waiting list. the problem in phoenix was not they didn't have enough facilities that they were misleadingly and manipulating the data to achieve bonuses. i've heard from one clinic that

doctors in this particular hospital were seeing four to five patients a day. we've also heard from others within the bureaucracy totally disagree with the secretary. it's not about money. it's about the culture. actually changing the direction we're serving the bureaucracy. >> well since 2013 we've had a 156% increase in the department of va which totally out strips those coming in. what we heard in the hearing is that we have to make sure that the culture of ef employee actually is rewarded for good behavior most importantly what we need is provide fedder ans a choice if they like to go outside the system. right now in many ways, the va did not support that.

medic medical request from the president's propose a. they are looking at $62 billion for mefdmef medical care and they say that medical care accounts for 87.7% of the va budget. >> it is significant. congressman has been most generous. throwing more money into the system that somehow you would fix the system in phoenix by opening up another hospital and clinic. in many places around the country particularly in a rural district, veterans have to get permission. i actually had a the case. they say he has local health care about the va says that's not good enough when he would like to choose local care. if we actually tapped into local community resources and gave veterans a choice i don't think we'd be talking about these large spending increases.

we force the veterans into one choice and option. >> we want to hear from veterans as well. jim is a republican in texas. j jim, what's the name of your town. >> ra an. >> go ahead. >> i have a agency. i believe that you should have elected boards of veterans at every one of these hospitals that have -- that people are there are responsible to. >> jim, i think that would be a great suggestion. i'm certain various enploy ees have suggested that. we need more accountability in the system. i do hear a lot of reports from veterans who say we get good care when we get in there. others say the character is lacking but the question is trying to get onto a secret waiting list.

stone walling from inside the va to a board made up of veterans to provide safety. >> you say that 87% was spent on medical care alone. most of these va centers don't have enough funds to update their systems like most have gone to -- most public agencies have gone to electronic medical records and things like that. when 87% is used on medicine alone that's not enough to improve your care and lower price for veterans. being able to speak to your doctor through electronic means. i think they actually need the extra funds. >> congressman. >> i appreciate that. what we've heard in the committee is that millions and billions of dollars have been

wasted on technology. $127 million for scheduling. actually today the department of defense cannot communicate and talk to the va. it's not for a lack of spending money it's for a lack of a system and procedure and communicate. money is being thrown at this. i believe it's being wasted but i was actually shocked to visit a local hospital. they were rhesitant to let a member of congress visit with employees and staff there. they admitted that their scheduling system was a dos based system from the 1990s but we're told by committee after committee that everything is just fine. meanwhile they are spending money on a 20-year-old system. that's why we need to have an independent assessment. what one expert suggested we troot the va and create centers of excellence and bring in community health care resources.

allow veterans closer to home. they are expected to drive. >> this also from the va website shows a map of the country where gray circles representing those weight times that are less than 30 days, the light blue 30 to 60 days and the dark blue more than 60 days. not that many dark blue circles that we're seeing here. a lot of lightning. so patients are waiting 30 to 60 days. have you seen improvements since this story broke. >> there's no way to tell. that's what we learned. you can't trust the data because it's been falsified. it's been manipulated. it's measuring 500 different metrics. we've heard in the committee that we don't know what the

numbers are. the productivity measure how well are we using our current staff? i've seep and heard that it's not working out we well. the idea that we will hire more people when certainly a lot of people are being taken advantage of it the best they can with their particular resources. that's why you need a cultural change. it goes all the way to the top. the president has known about the problems for more than his sex years as president. the president has got step up and say i got to take control of the situation. the president's nominee for the va secretary slot bob mcdonald testifying up on capitol hill. we covered a little bit of it. go to our website cspan.org to watch it there. gary in memphis tennessee. gary, go ahead.

>> yes, i want to comment. this is somethi this is something new. this has been problems for years. this is unfunded and they haven't got the care that they earned with their service. we spend trillions of dollars to go to war but we're afraid to spend a few million dollars to take care of the people that are maimed end mentally affected by the actual process. >> gary, i appreciate that. as i stated earlier, 156% increase from 2002 to 2013. it's not about the money. we're hearing that from folks inside the va. whistle blowers. there are investigations going on. investigations of retaliation.

i care about the veterans. let me tell you what they need and how they are manipulating the data. >> supporter though say yes, there has been an increase but it's not enough to treat the soldier that's are coming back from afghanistan and iraq. it's only now in recent years that you've seen the large numbers go to the va for treatment. >> we're not seeing that at all. again, below the secretary level, every bureaucrat that has come before the committee particularly in the last two years that we ask the question, do you have enough resources, the answer is always yes. usually you would expect any bureaucrat to say we need more money. everyone says it's not about the money. it's about our system and culture. look a whistle blower from philadelphia. it waep about the resources.

we see the va giving bonuses and millions of dollars to those who aren't performing well at the executive level. at the bottom you have people being rewarded and doing badly. there are 41,000 employees there and an idea if we have another thousand employees that it will fix the system. the house has a bill to fix the situation. the senate has a bill. >> i know they've been working hard on that. chairman miller in the house committee have been trying to get to the bottom of that. finally after many years, the house veterans committee finally issued subpoena because they finally refused to answer our questions. we're finally getting responses. the current investigation that we need a culture of

accountability. that's not going to change. i hear that from veterans. we have to make sure the secretary is held accountable and that we know mhow the money will translate into quicker care. the house is saying we allow them a choice. they have fewer choices than anybody in the health care system in america. that's not right. they should have the best health care not the worst. >> respectfully though, it's always about the money. please give these returning veterans the money that they are asking for. i have no problem with that. give them the money. respectfully again, veterans do want more money thrown at the situation. >> i don't know if colleen is a

veteran. i appreciate your service if you are. they are not hearing from veterans. they need a good system. adding more attorneys doesn't fix that. holding folks accountable for their actions in the system. the secret waiting list, we don't know that anybody has been punished or fired for violating the law. the gao and the office of inspector general has submitted reports for the last decade that has not been put into practice within it. as jim suggested, let's have boards of veterans who say how can we improve this system. what the best experts say this is the worst functioning system we have in america. it should be the best functioning. that will take changes.

not just shoving money at the agency. >> a recent gallop poll seems to mirror what they were saying. 16% said provide better care in a timely manner. do you think there's a way to do that without more money? >> as i indicated earlier, the date su aunclear. the information provided by the va has been manipulate and corrupted. we've been seeing millions and billions of dollars thrown at the them. when you leave the dod you walk over and the records are sitting at the va, it has never happened. it should happen. we need to have a culture of accountability. i wish spending a few more billion dollars would solve the problem but i'm pretty confident just spending another billion

dollars we will come up here and say my gosh. you mean people are still waiting. if they can work a system together that ties the veteran and va and provide accountability. >> on our life for veterans bob is a democratic in jacksonville, florida. >> good morning folks. >> good morning. >> let's show you a short history with the va. just answer the question, please. what happened was i was discharged november fourth, 19 nift, 1957. they gave me the form for the same month. they said i could have an honorable discharge if i could come in. 57 years i've been going there.

57 years. i wouldn't be talking to you right now if it wasn't for them. it's the greatest health care sift ex in the worystem in the . socialize medicine. most countries in the world have that. we don't. that's the only form of socialized medicine that we have. >> bob, what do you want to happen. >> well, leave it alone. it's working perfect for me. just get out of the way. >> okay. bob i'm glad it's working perfectly for you but what eve seen, we have veterans that died languishing waiting for care. we have letter ans waiting years for care. our congressional office is not much different. we have hups of case worker requests because the veteran has had to help and i've heard again

and again it seems to work for those but it depends on the facility. there's no standard of accountability across the system. one hospital appears to have good reports. the nest one not so good. we have people that have died in pittsburgh because of failure there at the clinic. we've seen that in florida, phoenix, across the country. currently there are 70 investigations of manipulation of data which is illegal. we don't know of a single person that has gotten fired for misleadingly congress so we hear good morning from veterans but then we hear the horror stories of those veterans who get locked in clinics or waiting years without care. that shouldn't happen. we should make care everybody getted the best care. i'm glad you receive that care. >> west lake ohio, with

republican kansas republican, i should say. >> thanks for taking my call. i just have a question regarding increasing for medical students because obviously wait times and the accountability is a huge issue. i know medicaid is a huge influence in how many residents you have there. there's a ton of fizz iings who are going to retire in the next couple of years but also the influx of people coming back from population growth. i was wondering if you could speak to see if congress was ever going to raise those spots because i know that currently there's some bills going through the senate and congress. >> yeah. there is a lot of discussion about that, lisa. actually, i think it was the topic of a hearing in the last two weeks in our committee. making sure we have enough providers. that is a growing problem.

in the situation i think there are lots of people reluctant to join. it's a growing concern with a generation of doctors reaching retirement age and many are retiring early because of the new bureaucratic problems in the va. we hear from whistle blowers, we tell them how we can improve the system and we get fired. we've had dozens whistle blowers. we have five ore six that call in but they don't want to call me their name for fear of losing their job. >> there are dozens investigation

investigations. >> by the way the house veterans committee on thursday will be having a hearing on how to restore trust on the veterans department gentleman james wants to know. whistle blowers say is not the problem. what do they say is the problem? >> it varies by situation but it's basically a culture of nonaccountability that everybody gets treated the same whether they are doing a good job or bad job. this is how we can improve productivity or how the supervisor asked them to change data so it looked better. i think bonuses are a great way to encourage behavior as longs as it's tied to better care. people should lose their job if they are playing with data. putting veterans in a sikh different weighting list. it doesn't improve cares.

it worsens care. it's also to fire vaetisee acco. they want to show up to work everyday. they love the veterans and they want to be rewarded for doing a good job. they see people doing a poor job and they are not held accountable. they want to work together all 300,000 employes. >> bill, you're a democrat. bill you're on the air. i'd got a couple of points that i'd like to make. the first is if these demonic republicans would stop starting wars every time they get into the white house there wouldn't be so many veterans needing health care. that's point one nun. point number two is health care is very expensive. may have been you haven't noticed but it's very expensive. my wife spent ten straight

months in the hospital and it completely broke us. we are below the poverty line at this point. point number three, where have you been? for more than three years you've been trying to destroy health care law with all ofs that he voiceless votes. where have you been? it's your oversight job. >> that's a great comment concerning where congress has been. we've had hearings. we've had the oversight but what we found out just in the last two year was that the va were making up the numbers. they were manipulating data say they were doing a good job. my frustration is hearing from under secretary after under secretary and say congressman we will get to that we will solve that problem. until we started issuing subpoenas. this was a bipartisan system

that should be the best in the world but we find out isn't meeting the needed of veterans. we heard that they had 300 v veterans on the waiting list. i walked in and they refused to answer questions. they said they had a gag order that employees could not talk to media and could not talk to congress. america and congress is going to do say if we throw some money it will go away. i hope bill continues to get -- i think he must be a veterans. i hope he continues to get good service. that's not the case. it should be the case for every veterans not just the select few that make it into the system. >> democrat caller. yes, i love krrk span. that's pretty much how i get my information. let me say two points if i could

before i address the current issue on the table. number one, i hope that all americans that have a vote coming up consider the fact that all the senators and congressmen that have been in office for so long and have voted in all the dead that now get voted out of office because at the end of the day, they create the debt and they pay the debt. they have created the debt like in these wars but they have not allocated the money. >> milt yoomilton, i will leave that point. we only have five minute left with the congressman. go ahead. >> as we stated earlier if it was as easy as throwing more borrowed money at it. it might solve the problem. congress and various presidents before president obama ca, it w

take leaderships to come in and be accountable. they will provide proper data to show how the waiting times have deceased. there's a complete lack of trust they are being truthful and we want better care. another $10 billion, i wish that would fix the problem but it won't fix the problem. >> victor is a veterans in miami florida. >> good morning. >> good morning. i think i have my facts correct when i say the va serves about 10 million veterans. the majority of km are vietnam era vets like my s. the va employees 320,000 people. i'm not exactly sure what the budget is. but for those of us who think that universal health care is the solution to health care in the united states, can you imagine a system that has to

serve 30 times as many time. how many employees -- how are we going to pay for it? it just doesn't make sense. >> victors numbers are pretty close but again 156% increase in spending from 2002 to 2013. what we're suggesting in the house position i think a lot of senator as gre oors agree to th. give veterans a choice if they don't like the care they are getting at the local hospital. if my case i get veterans that travel 300 miles. they say i got a community hospital. but i think most americans will reject the model which is that you're forced to go to one facility. if you don't like it good luck getting options elsewhere. >> bud is watching us there in

spri springfield. how are you doing. >> good. >> when i was in the marine core from 1972 to 1976 right after i got overseas she sent me divorce papers. we had a son. we had to go to a medical facility 80 miles one way. the local hospitals were only 20 mile as way and doctors. they gave her i card. why in the world can't the va get the system straight ened ou and give our veterans a card to go to one of these hospitals instead of being on a list. i'm on social disability.

i don't even fool with the va because it's such a messed up deal. you go up there and see maybe one doctor this time and another one. i was a place in indiana and you can look this up on a map you will see what iep talking about. you stop in the middle of no pla technically. >> bud has this idea of a card where you can go. does the house and senate legislation address that. bud is not asking for a new system. we need to have options an choices. to make bud drive 80 miles .

i proposed this back to the secretary 3 1/2 years ago, you mean like medicare, yeah we're asking you the choice that you give other americans. the house provided that option for two years and provide it in the future ohm if there's more legislation. the va is vehemently opposed to any competition or choice. i guess that's the disagreement. should veterans have the choice other americans have and most higher level folks at the va say no, we don't want to allow that but then the folks on the front line say yeah we'd like to do and be forced to compete for that. >> congressman before the november elections, you might have to vote on another issue which is the situation on the border. i want to show you with a the home land security secretary had to say about funding for border agencies. >> he said ice would run out of money. there's reports coming out today on the hill that republicans may

announce by tomorrow their own house plan to address this situation and that they could dramatically scale back the amount of money the president has requested from $3.7 billion to $2.5 billion. whatever the reduction might be does your department need all the money that it has asked for. >> the department of home land security has asked for $1.5 billion. the focus just on immigration and custom enforcement. the request is for $1.1 billion. $879 million of that goes to building detention capability. another $100 million or so goes to supporting the law enforcement efforts in central america. so the funding we've requested is very targeted at detention deterrents and removal. the other key to our funding request is transfer authority based on evolving circumstances.

if some of the assumptions behind the numbers change, we want the flexibility to transfer money within the department of home land security or from the department of health and human services over to dhs. >> congressman, your thoughts? >> well, i guess the request is being reduced by the administration from 3.7 to $1.5 billion. if we want to address the problem. throwing money doesn't solve the problem. we create a magnet by the president's statement and many failures to enforce the law. i wish again just like the va, i wish we could soflt prlve the p by a billion dollars. that will not solve the problem. nine different ways where the president can do his job enforcing current law and quit sending signals to go into our

country. i think this needs to happen before we give more money. >> appreciate your time. thanks for talking to the viewers this morning. >> thank you. >> on the next washington journal, texas congressman mike connaway on u.s. relations with russia. arizona congresswoman will talk about the problems of children immigrating from central america without their parents. >> the agency efforts to end po poverty in the mississippi delta region. it begins 7:00 eastern on cspan. >> mr. kim of politico, speaker john boehner's border working group chaired by kate granger has recommendations of how to deal with children at the border. what are the key details in it. >> it really focuses on

enforcement. you can look at the heart of the proposal as revitalizing the 2008 anti-trafficking law. in the most simplest terms it would treat children coming from these country ral american countries, would treat them the same as mexican american are treated which makes it a lot easier to send them back home. it would also expedite hearings and create new border security measur measures. it calls for deploying troochs , troops to the border. it has a lot of dheavy measures to deal with the crisis . officially they are still reviewing the recommendations. they did come out this morning. house minority whip ms. hoir had a discussion with reporters

earlier today and seemed to doubt there would be a lot of democratic support for this proposal. we know nancy pelosi and those who guide a lot of the house democrats strategy on topics such as immigration are very opposed to changing that 2008 law because law. you tweeted a letter that speaker boehner wrote to the president on the plan that says it would be difficult to move on supplemental without strong public support to change the 2008 law. tell us more about that letter. >> the white house has had some mixed messages when it comes to changing that 2008 law. when it first told congress that it needs extra funding to deal with the crisis, it called for changes to policy that would in affect tweak that 2008 law and make it easier to send them to their home countries.

there's been opposition from a lot of powerful democrats in the hispanic caucus. they've backed off on sending the changes even though they say they would like some revisions from the law. speaker john boehner is really pressing obama on that point. he's saying if you support this all please come out and say it with clarity so we know where you stand. >> both the house and senate working on the respective versions to respond for the president's border funding request. what does the house appropriation committee chair plan to include in his bill and how does that funding compare with what the white house has requested. >> the white house has asked about $3.7 billion. if you add a separate issue for while fires out in the west it's about $4.3 billion. what the house appropriation chairman mr. rogers is working with $1.5 billion in emergency

funding. that's clearly less than what the president has asked for. we haven't heard a specific administration on that proposal since it was just made public today. the senate democrats are also pushing a smaller package as well. they've $2.7 billion to deal with the border crisis too. it's a question of if it can be reconciles before they go to recess. >> might be see a compromise prior to the august break. >> it's really difficult to see that right now. we're working with the simple factor of time. the august recess not that far away. we have a couple of days this week and next week and then they are out for the month of august. they are not back until about september 8th, i believe. on the policy measures,

republicans ontown are aye insisting on the 2008 law for the children who make the very dangerous journey through mexico to try to come to the united states. democrats are raising serious humanitarian issues it's hard to

the finance committee will come to order. the u.s. tax code is infected with the chronic diseases of loopholes and inefficiency. these infections are hobbling america's drive to create more good wage, red, white and blue jobs here at home. they are a significant drag on our economy and are harming u.s. competitiveness. the latest outbreak of this contagion is the growing wave of corporate inversions where american companies move their headquarters out of the united states in pursuit of lower tax rates. the inversion virus now seems to be multiplying every few days.

medtronics' proposed merger was record breaking when it was announced in june. but the ink in the record books had barely dried when abv announced its intention on friday to require shyer for almost $55 billion. according to the july 15 edition of marketplace -- and i'm going to quote here -- what's going on now is a feeding frenzy. every investment banker now has a slide deck that they're taking to any possible company and saying, you have to do a corporate inversion now because

if you don't, your competitors will. the congress has been aware of the inversion problem. the underlying sickness continues to gnaw away at our economy with increasing intensity. the american tax code is an anti-competitive mess. accountants, lawyers and fast buck artists looking for tax shelters feed off it. this mess is driving american investment dollars overseas, and according to the joint committee on taxation, it is costing american taxpayers billions. on a bipartisan basis, the finance committee must respond now.

the in verversion loophole need be plugged now. second, let's use the immediate steps to apply the indisputable ultimate cure: tax reform. let's, however, recognize that what really counts is that the finance committee is back here

once again discussing to keep plaguing the american economy. it's going to get tougher to create those good waves, red, white and blue american jobs. our tax base is going to keep eroding. eroding. cash piles overseas there elsewhere. the finance committee invited a number of ceos from the inverting companies to join our discussion today. none accepted our invitation. i hope these that these executi will soon change their minds and be willing to answer questions that finance committee members have about this issue. the fact is that without immediate comprehensive tax reform, an antidote to the

inversion virus is needed now to protect the american economy. this wave of inversions may be good for shareholders and investment bankers and private equity firms. yet, the barrage is bad for america. america's free enterprise system is at its best when there is a level playing field. and inversions bestow tax savers on some parties that further distort the free market. absent tax reform being enacted immediately, colleagues, what happens if the inversion virus leads to 20 more inversions over this summer? many inversions to this point have happened in the medical field. but "the wall street journal" just reported that there's evidence of inversion spreading to manufacturing and retail. how many more infections can america's economic body endure.

globe markets are expanding. stockpiles of cash sitting overseas grow at record levels. foreign competitors get more aggressive at champing at the bit to get a deal on the backs of the american taxpayer. the time for action is now. our committee needs to move on a bipartisan basis to close the loopholes that are fuelling the growth of the inversion virus. then the finance committee needs to cure the disease once and for all with comprehensive tax reform. i just want all colleagues to know that i am going to be working with each of you on a bipartisan basis to accomplish both of these tasks. let me recognize my colleague and friend, senator hatch. >> thank you, mr. chairman. i appreciate you holding this, today's hearing. i think we can all agree that addressing the short comings of our international tax system is a critical step on the road to tax reform. as we ask reforms to our tax

code, our primary goals should be should be to make the u.s. a better place to do business and to allow american companies more effectively compete with their foreign counterparts in the world market place. sadly, when it comes to our international tax system, much of the tension gets placed elsewhere. for example, in 2013, the lecd launched its shifting of betts project. while we appreciate of bringing tax authorities together to discuss issues, many of us have expressed concern that the betts project can be used by other countries as a way to increase taxes on american taxpayers. the issues with the negotiations on the betts project are complex and can have far-reaching and negative consequences. while i think we should be willing to work through these issues snal an international consensus is reached, we should not be rushed into accepting a bad deal just for the sake of

reaching an an agreement. i think we're right to expect that the treasury department will represent its employers and workers in the betts association while discussing with congress while the discussions proceed. hopefully, in the end, the focus of these discussions will return to base erosion principles, instead of ways that foreign companies can raid the american treasury or american businesses. of course, while the betts negotiations are importants the most high profile international tax system today happens to be tax inversions. it seems every day we're hearing about a u.s. multinational opting to revert. as i said, i'm glad to be concerned about these corporate inversions. ultimately, the best way to solve this problem would be to reform our corporate and international tax system in a manner that will make our multinationals competitive against their foreign counterparts. that would mean among other things a significant reduction

in the corporate tax rate and major changes to make our international tax system more competitive. over the past few months we've seen a handful of legislative proposals to address the issue of inversions. most of them are punitive and retroactive. rather than incentivizing american companies to remain in the u.s., these bills would build walls around u.s. corporations in order to keep them from inverting. i think that's not only stupid, but i think it's going to -- going to result in results that nobody wants. this approach in my view completely misses the mark. while it may put a stop to traditional inversions it could actually lead to more acquisition inversions as u.s. multinationals would, under this approach, become more tractive acquisition targets for foreign abo ak

acquisition reversion, the result is the same continued stripping of the u.s.-act base. it reminds me of an old joke. a drunk is looking for something understand a street light. a police officer walks up to him and asks, what is he looking for. the drunk says my keys. the police officer helps the drunk look for a few minutes and finally asks did you lose your keys here? the drunk said, no, i lost them across the street. the officer responds then why are you looking for them on this side of the street? and the drunk replies because the light is better over there -- over here. once again, the ultimate answer to this problem and the only way to completely address the issue of reversions is to reform our tax code. however, as i've also said publicly, there may be steps that congress can take to at least partially address this issue in the interim. while i don't support the anti-inversion bills we've seen thus far, i personally am open

to considering alternative approaches. although i do have a few stipulations as to what proposals are considered. for example, whatever approach we take, it should not be retroactive or punitive. and it should be rev knew neutral. our approach should move us towards or at least not away from the territorial tax system. and should not enhance the bias to foreign acquisitions. most importantly, it should not impede our overall progress towards comprehensive tax reform. toward that end, it should not be inconsistent with our house colleagues' approach. i think there's a growing concern among some of our friends on the other side of the aisle to use corporate inversions as a political wedge issue in this election year. in fact, i was recently the recipient of a very politically toned letter from treasury secretary lu on this issue. we're going to have to work together. as you can see, mr. chairman.

we have a lot to discuss today. i want to thank you for holding this important hearing and i'll look forward to hearing from this very distinguished panel. >> thank you very much, senator hatch. and let me just reiterate i'm very much interested in working with you and our colleagues on both sides of the aisle to address both of these issues. the immediate challenge we're facing with this growing inversion virus. and then, of course, the ultimate cure which is comprehensive tax. we now have six witnesses. our first witness is mr. robert stack who is the deputy assistant secretary for international fashion fairs at the treasury department. our next with the is pasqual st. herman for the center of economic cooperation and development. the third witness, dr. desaid zia a professor of law at harvard. a fourth witness will be

dr. peter merrill, a doctor of the economics and statistics group at price waterhouse. a fifth assistant will be dr. robinson at the tech school of business at dartmouth and the final witness will be will alan sloan who is the senior editor-at-large for "fortune" magazine. our thanks to all of you for coming. it's our custom that your prepared statements will be used. if you could use your five minutes to summarize, that would be helpful. i know senators have many questions. we're going to have votes at 10:45. this will be a bit of a juggling act. we will try to handle this as well as the chaotic senate schedule allows. mr. stack, welcome. >> thank you, senators. chairman wyden, ranking member hatch and distinguished members

of the community. i appreciate the opportunity to appear to discuss these important international tax issues to which your committee has devoted substantial effort i'd like to begin by describing the work we're doing in the g-20 betts project and then link that discussion to consideration of the need for international tax reform, as well as measure, outlined in the administration fy-2015 budget proposals to address u.s. base stripping including through so-called inversion transactions. in june 2012 at the g-20 sum miss in los cabos, mexico, the leaders of the world's largest economies identified as a significant concern the ability of multinational companies reduce their tax bills in high-tax countries by shifting income into low and no-tax jurisdictions. the result was the g-20 oecd betts project. and the betts action plan endorsed by g-20 leaders last

september in st. petersburg. the betts action plan outlines 15 specific areas where governments need to work to change the tax rules that encourage companies to shift their income at the expense of the tax base and our own tax base. the betts project is expected to release the first set of recommendations this fall and is set to conclude its work with final recommendations at the end of 2015. the united states has a great deal at stake in the betts project and a strong interest in its success. our active participation is crucial to protecting our own tax base by stripping by multinational companies. because the united states provides a foreign tax credit to u.s. companies for taxes they pay overseas, the united states also has a strong interest in rules that enjoy a broad international consensus. in addition, as home of some of the world's most successful and vibrant multinationals, we have a stake in insuring that

companies play by tax rules that are clear and admin straitable and companies avoid time consuming expensive tax disputes. failure in the betts project could well result in countries taking unilateral inconsistent actions there be increasing double tax aches, the cost to the treasury and the number of expensed tax disputes. i'm happy to report that the ocd betts project has had a promising beginning and area where is work has been done to resolve gaps. i've outlined those in my submission. as the work moves to 2015 there is more that can be achieved and also several areas where we must build against bad outcomes. and echoing senator hatch, those outcomes would include international norms because they're vague and easily manipulated by tax authorities. or international norms that could erode the u.s. tax base or

increase double taxation. the united states needs to remain deeply engaged in moving the betts project to a successful conclusion between now and the end of 2015. while the international discussion over betts are ongoing it's worth acknowledging steps the united states could take today to inform our own tax system to improve competitiveness, secure our tax base and reduce incentives for profit shift big u.s. firms. as the president has proposed, we should reform our business tax system by reducing the rate, broadening the base and imposing a minimum tax on foreign earnings but much would only be a start even with low rates, u.s. multinationals would continue to aggressively seek ways to lower the tax bills by shifting the income out of the united states. so what tools do we have at our disposal. the administration's 2015 budget contains a series of common sense proposals to protect our u.s. tax base which can be enacted as part of reform or in the contest of our current

system. they're outlined in some detail in our budget and in my written testimony but let me highlight two here. one proposal would strengthen our interest stripping rules and level the playing field by eliminating the ability of u.s. subsidiaries by deducting a disproportionate of the united states. it is especially disconcertive to observe among the foreign multinationals that can most graefg civil take advantage of interests in the stripping rules are the inverted companies that is far and parented companies that were previously u.s.-parented. a second deal in the budget would deal with inversions. in secretary lew's letter to congress i want to underline the serious need for the united states to address the loss of federal tax revenue from corporate transactions and the need to redact our budget

proposal or a similar one aimed at curbing them. once companies invert there is a permanent loss to the u.s. income base since it is safe to assume these companies are not coming back to the united states. these inversion tactics are on the increase. indeed we're wear of many more on the works now. it will worsen our fiscal challenges over the coming years and will reward countries that practice race to the bottom tax competition in an effort to lure away our large u.s. multinationals. as the secretary indicated in his june 15th letter, congress should pass antiinversion legislation immediately with an effective date of may 2014. thank you for the opportunity to speak to you today. i look forward to answering your questions. >> thank you very much, mr. stack. that's very helpful. our next witness will be

mr. passqaul. >> thank you for the opportunity to testify here today. the industry was founded in the aftermath of world war i i and the leadership of the united states. it's a country-drive organization with 34 countries u.s. being the largest member and playing a key role. and it works by consensus. it does a lot of work on tax and in the tax area, we do consult extensively on the project related to project shifting we have consulted society, businesses or stakeholders. in this project, we have issued a number of discussion drafts, more than 3,500 pages of comments have been received and has been taken into account. we have conducted five public consultations as well as webcasts which have been looked at by more than 10,000 viewers. in the area of tax the oecd

facilitating orchestration between tax and its countries to eliminate double taxation. taxation is at the core of each country free to set up its corporate tax system the way it chooses. but as a result, there are risks of double taxation which are not conducive to cross-border investments. since the 1920s, a common set of standards has been agreed and the oced has abated this work. in particular, we have have come up with a model transaction and guidelines. these rules have worked well, but they have also not kept pace with the economy changes. as a result, they have been good at eliminates double taxation, but they have also facilitated unintended double nontaxation. this is an issue for most governments across the world for many reasons. low tax itation in itself is not

a problem. on the contrary, the oced favors low income tax and this is an issue for as long as countries decide to have corporate income tax, the korpgt income tax need to be paid by all taxpayers. and there is a need now to, one, make sure that the rules make sense. the current rules are redacted through organization and easy to gain through artificial settings. there is a divorce now between the location of the activity and the location of the profits which can be booked in a jurisdiction where absolutely nothing is happening. as a result, the sovereign right of countries is undermined. this is a global issue. this is not an issue targeted to u.s. companies. u.s. companies only account for less than a quarter of the fortune global 500 companies. so it's a global issue concerning u.s. and non-u.s. companies. second, there is a need to level

the playing field. and an uneven playing field between companies is not conducive to the right relocation of capital. companies are at the domestic level are at a competitive disadvantage because they cannot use the loopholes in the international tax framework. three, there is a need to reduce uncertainty. uncertainty is bad for companies. is bad for investment climate. and there is increased uncertainty because of these rules not making a lot of sense. a number of tax administrations are planning to dispute the companies which is legal. and a number of companies are working away from the consensus, from the common interpretation of the rules and that results in uncoordinated unilateral measures to corporate tax base but that increases uncertainty. and, therefore, we need to address the serious risk for

businesses. the response from governments has taken place in the context of the g-20 which has called to address the issue of base erosion and profit shifting. we have brought all the g-20 and the oecd countries on equal footing to find ways to address this issue of the tax framework by consensus, in two years' time so principles can be agreed quickly to reduce the risk of uncertainty. we need a principled approach and a cost-effective approach to eliminate the compliance for companies and reduce control. this is not a revenue exercise and should not be, but the useful exercise for the common principles to be more accepted by ensuring consistency in the cross-border environment, increasing such requirement and transparency. the objectives are to secure the consensus, thereafter, reduce uncertainty and improve the way

we can solve disputes. we have come up with an action plan of 50 measures which i describe in my written testimony. some of them are about neutralize hybrid mismatches reducing tax or transfer rules. in clushgs i would say the issue of base erosion and profit sharing is widely shared. and here in the u.s. in particular, we are aware that you're planning to address the u.s. tax system. and we hope the work we're doing at the international level with your support and the engagement of the u.s. treasury can be useful to promote growth and jobs here in the u.s. by fixing some of the issues by the u.s. tax system. the work we hope is particularly timely and we hope it will inform you of your debate. we, of course, will be available to respond to your questions and further assist. >> thank you mr. saint-amans.

let's go to dr. desai. >> i'm a professor of finance and a professor of law at harvard law school. recent merger transactions highlight long simmering problems with u.s. corporate tax particularly with respect to international provisions. my comments attempt to outline the origins, the range of alt tiff solutions guidelines for evaluating reforms and some reforms that should be avoided. the last 12 months witnessed remarkable wave. such transactions reflect the effects of policy, and the changes structure of multinational firms. from a policy perspective, the transactions highlight the increasing costs of employing a worldwide tax regime when other countries no longer retain such regimes. from a firm point of view, the transactions highlight the increased mobility of activity

in today's economy. growing decentering of firms where world headquarters have been split up around the world. rather than question the royalties of executives it is critical to understand the underlying and secular forces. inversions are merely the most visible manifestation of these developments. in addition to inversions, these decisions are giving rise to entrepreneurs that anticipate. merger patterns that affect domiciles in the united states. profit shifting activities that are not value-creating and the subsequent negative impact on all the distortions on the u.s. labor force. while it's attempting to limit the more sensational effects and characterize them as paper shuffling this would be essentially missing the forest for the trees. it would be to focus on u.s.

welfare with particular attention on reforms that would improve u.s. wages. these goals are mistakenly thought to achieve by lilting the foreign activities as foreign agentivities can be viewed as quartering activity away from the u.s. in fact, it suggests the opposite. indeed, american welfare can be advanceded by ensuring that investments in the u.s. and abroad are owned by the most productive owner and the americans flourish. a goal now adopted by most comparable countries. while the developments described above have crystallized the case for international tax reform with an increases intention to switching to a territorial regime. some proposals including those with alternative minimum tax on foreign profits are tantamount to a back door wide world regime with even more complexity than today's system. revenue consider, should be considered large by given the very limited revenue provided by current international tax rules

and the remarkable complexity and distortions required. more properly, the corporate tax is ripe for reform. in addition to international rate action the form should address. the growing prominence of non-c and the condition junction between profits. a useful blueprint for reform would include moving to a territorial regime unencumbered. considerable rate of 18% to 20%. and by some taxation non-c business income. the potential of addressing significant changes in a global economy in a revenue neutral array that will advance welfare. more preferred if feasible. legislation that is narrowly focused on inversions or specific transactions runs the

risk of being counterproductive. leading to several unintended consequences. for example, rules that increase the size of the foreign target to ensure the tax benefits of an inversion can deter these transactions but can also lead to more substantive transactions. more substantive transactions are likely to involve the loss that demand the location of more activity abroad including headquarter functions. similarly, similar targeting those firms may lead to foreign firms leading to some transactions to avoid those regulations. while it's tempts to address specific transactions in advance, it is useful to recall that the last wave of anti-inversion legislation likely spurred these more recent transaction and reduced the prospect of reform in the intervening years. members of the committee, i adviser the foresight in the issues. i'll be delighted to answer any questions.

>> thank you very much, professor. we now welcome dr. peter merrill, and look forward to your comments. >> thank you. thank you. chairman wyden, ranking member hatch, members of the committee. thank you for the opportunity to testify today. my name is peter merrill, i'm a principal with pricewaterhousecoopers. and the focus of my practice is economic effects of tax policy. i'm appearing today on my own behalf and the views i express are my own. i've been asked how the international rules compare with the rules of other countries. my testimony, i will focus on two features of the u.s. corporate tax system that fall far outside international norms. the high corporate rate and the worldwide system of taxation. these features of the u.s. tax system may get more difficult for u.s. companies to compete in global markets. this multinational face ever

growing competition from abroad. in the last 15 years, the number of u.s. companies in the forbes global top 500 list has dropped by a third from 200 to 135. the loss of global market shays by local companies is due to a variety of other factors, out of step u.s. tax system is seen by many as a hindrance than a help. the rate including state tax is 39.1%. this is the highest rate among major economies. more than 14 points above the average for the other oecd countries and seven points higher for the other g-7 countries. an 1986, the u.s. had a relatively low corporate tax rate. however, since then, the other oecd has increased by 13 points while in 1933 to 35 where it has

remained since. while it's widely recognized that the statutory corporate tax rate is high, studies show our effective tax rate also is high by international standards. in addition, the u.s. has a worldwide system under which foreign income earned by foreign subsidiaries of u.s. companies is subject to u.s. tax when received by the u.s. parent. unlike the united states, and all other g-7 countries and unlike 28 of the other 33 oeccd countries they have adoptsed territorial tax systems. as a result of these trends, u.s. multinationals increasingly face foreign competitors that are taxed under territorial systems within the. oecd 93% are foreign competitors on the global top 500 list were based in countries that use territorial tax structures. the significance of this is is that foreign competitors of the

u.s. multinationals can invest their foreign profits at home, without an added home country tax. turning to recent reforms in 2009, three oecd adopted tax systems. the uk, japan and new zealand. the uk package also included lowering the income tax rate from 28 to 21, with a further reduction to 20 scheduled next year. the british government articulated the rationale for these reforms, quote, the government wants to send out the signal loud and clear that britain is open for business. in recent years, too many businesses have left the uk, amid concerns about tax competitiveness. it's time to reverse this trend. that is why the government is prioritizing corporate tax reform. closed quote. japan's adoption of the 95% dividend exemption system had been advocated by the ministry of economy, trade and industry

to encourage a repatriation of foreign earnings. japan's corporate tax rate has been cut five points to 35.6%. and president abe's cabinet has reduced it. and also to 2009, new zealand resorted back to a tax system after which it operated in a worldwide system. there be bringing new zealand's tax system back in alignment with international norms. in closing, the combination of our high corporate rate and worldwide system creates an incentive for u.s. multinationals to reinvest foreign earnings outside the united states. according to a recent study co-authored by tyson, former chair of president clinton's economic visors, switching to a territorial issue would on an

ongoing basis increase annual repatriations and create 150,000 jobs per year. would enhance the ability of u.s. companies to compete at broad and create jobs at home. thank you, i'll be happy to answer question. >> dr. merrill, thank you very much. dr. robinson. >> chairman wyden, ranking member hatch and distinguished members of the committee. it is an honor to appear today to testify on the important topic of international taxation. i'm an associate professor at the tuck's school of business at dartmouth college. my research centers on multinational corporations. it is clear that reform is needed. the international system is one of the most technically complex areas of the u.s. tax code, but raises little revenue. my testimony summarizes in my

view, what the academic literatures in economics, finance and accounting collectively offer in terms of evaluating the range of alternative solutions. the top u.s. federal corporate income tax rate is 35%. this is the highest rate of all oecd countries and exceeds the average. proponentses of adopting a territorial system in the u.s. often cite competitiveness issues. a common assertion is that u.s. firms are at a competitive disadvantage because they face larger tax burdens, operate in under a worldwide system than their competitors operating under territorial systems. generally speaking, this is because u.s. firms face a high home country tax on foreign profits, whereas, their competitives face no home country tax on foreign profits. yet, no country operates either a pure worldwide or a pure territorial system. when loopholes exist that facilitate the indefinite

deferral of the home country tax on foreign profits under a worldwide system the pendulum swings back to appear territorial system. likewise, as eligibility for the foreign dividend exemption under a territorial system is appropriately restricteded, the pendulum swings back to appear worldwide system. this means it is possible for a well-designed territorial system to be at least, if not more as burdensome, as the poorly designed u.s. worldwide system that we have today. evidence suggests that u.s. firms are adept at indefinite deferral. one study finds that financially unrestrained u.s. firms shift as many income as firms operating under territorial systems. also, there is no evidence that the global tax burden of a firm depends on how foreign tax are taxed in the home country of its parent. there is some evidence that certain location differences globally impact, depending on

the home country. for example, a firm resident in home country x realizes a larger reduction than operating in source company a than in source country y. whereas, the opposite may be true for these two firms when operating in source company "b." this suggests that the burden of an international tax system depends significantly on solutions that selectively narrow and broaden the tax base with respect to certain types of income turned in specific locations. whether the tax is worldwide versus territorial. similarly, other research shows that tigs decisions about headquarter relocations, tax haven operations and ownership structures depend on the existence and strength of anti-abuse legislation. maintaining our current worldwide system with deferral or introducing a territorial system leaves the need for anti-abuse positions that are

difficult to administer and enforce. another consideration is eliminating implicit costs. avoiding repatriation which triggers the home country tax on foreign profits under our current system prompts firms to allocate economic resources in an inefficient manner. examples include making value decreasing foreign acquisitions or the inability to respond to domestic investment opportunities. maintaining a worldwide system, but eliminating deferral, would greatly reduce these costs. adopting a territorial system may not. firms operating under territorial systems face implicit costs when attempting to circumvent legislation. to my knowledge there is no estimate of these costs, but my expectation that they would be greater than under a worldwide system, without deferral.

my overall assessment is that our international tax system can be adequately reformed. we need not entire abandon our current system in favor of a fundamentally different system. limiting deferral and lowering the statutory rate would generally shift to income eliminating the costs of repatriation. thank you, and i would be happy to answer any questions. >> dr. robinson, thank you. our final witness, mr. alan sloan. >> chairman wyden -- how do you do this? >> it's on. >> chairman wyden, ranking member hatch. members of the committee, i'm flattered to be here. i'm honored and especially to be hitting cleanup which is my normal role in journalism. before i proceed, i have to say that i'm speaking for myself alone. i'm not speaking for "fortune" magazine my employer. i'm not speaking for fortune's

owner, time inc., i'm not speak for "the washington post" which has run my material for more than 20 years. i, like senator hatch, am appalled to see that inversions are becoming a partisan wedge issue. i don't like this. now, at fortunes several weeks ago we put an american flag on the cover, we called inversions positively un-american. but we weren't being partisan. we were being americans. "fortune" is divided between republicans and democrats. we're acting collectively, not in the socialist sense, but in the societal sense. this isn't a republican problem. it's not a democratic problem. it's a problem for everybody. it's for all of us. and if you don't stop inversions now with some sort of band aid, by the time you get around to doing it, there will be tens of

billions of dollars of taxes that will having lost and will never be recovered. now i am familiar -- i've been writing about inversions and researching them for months. i've heard the argument, well, inversion is a symptom. you can deal with them unless you deal with the whole problem. you deal with the problem, you deal with inversions. well, i happen to have a doctor who is an emergency room doctor. and when someone shows up at the e.r. bleeding, they first thing they do is they put on a to tourniquet, they stabilize the patient. and then they try to deal with the underlying problem. they don't say, well, gee, we have to deal with the underlying problem. you've got an emergency here. it may not seem that way but you've got the beginning of, i think, a massive flood of inversions, unless you stop this. now, i know very little about tax.

i know very little about law. but i do know something about wall street and manias. and i look at this, this inversion thing, it reminds me of the dotcom bubble where people did things that were just crazy. but everyone was doing them. all of these people with degrees and a lot of money and fancy suits whispering in your ear, well, you've got to do this. so people did it. and it was just a disaster. so i've written about wall street for large parts of my career. and they gave us the internet bubble. they gave us toxic subprime securities. and now, they're giving us inversions. it's a product. it's the latest thing that's good for wall street. there's this whole rationale that surrounds it, but i don't think it's good for society. it just doesn't work.

and since i don't pretonight understand anything about the international tax system, except that i don't understand it, and i'm a simple person. i'm a recovering english major. i'm not a legal person. i mean, to me, if i were you, which will probably never happen because i'd have to be nice to people and be polite, and i don't do that well. i would adopt one of the 11 bills, and sandy levin will probably be angry with me, but i would adapt the carl levin version, the one that has a time, expiration in it. because if you can just stop these things for a while, you can buy time to fix the system. if you sit around and say, well in a few years, we'll do this, it will all be fine, by then, the patient will have lost so much blood, it's going to be hard do do anything remotely

neutral in a tax reform. the other complaint, again, i've heard endless ely, oh, it's so unfair to make this may 8th which is the date in the transaction which i believe also happens to be the date that senator wyden published his op-ed in "the wall street journal" which messed me up because he wrote what i was going to write so i was furious. but i came here anyway. so the may 8th deadline was known, okay? if you look at the contracts of some of these deals there are provisions in there, you know, the anti-inversion stuff changes. so it's not as if this is unprepared or unfair. i mean, everybody knows this. you changed rules retroactively in 2004. and as best i could tell there was not earthquakes or brimstone or fire from the sky. so, please, you know, if you can act like americans, which i know

you can, instead of squabbling. and you get the senate to go along and deal with the house, we can stop -- we can put on the tourniquet. we stop the patient from bleeding out, then we fix the system. and that's what i hope you will do. thank you for your time. i'm happy to answer any questions. >> mr. sloan, thank you. colleagues, we'll stick to five minutes, we'll get in as many as we can. i'm going to ask one question of all of you. i'm going to start with you, mr. stack. i have been about as big a flag waver for comprehensive tax reform as anybody around here. and i am going to continue to keep pushing for bipartisan tax reform as aggressively as possible. the reality is nobody believes that you can get comprehensive tax reform passed this year. and with the investment bankers in that inversion feeding frenzy, there may be 25 more inversions during that time.

so, i'm just going to go down the row here this morning and ask each of you, will that be a bad thing for america? mr. stack? >> yes, senator, that's a bad thing for america. that money is not just a one-time hit. that is a hit we take the year a company inverts. and it's a cost we incur throughout the ten years of a budget window. in addition, i just want to add, companies not only reduce their u.s. tax bill on day one when they invert, but they also adopt techniques to keep stripping out of the u.s., for each of the next ten years as well. so we get hit with a double whammy. it has a long-term effect. it's permanent. so the cost of waiting i think is very high. >> mr. saint-amans. >> i think it's bad. it's a symptom of a disease. either you prevent the companies to invest in the u.s. and i think that's one of the challenges of the u.s. tax code

to date. or you result in inversions meaning that you lose the control of these companies which invert in another country and that's a plus for the u.s. although it's bad a symptom of an issue in the tax code. >> dr. desai. >> some the short run, it will feel good to do something. in the long run, it's not going to help the country. i think there are a lot of medical analogies which are being turned around today which are helpful. rather than a tourniquet, we may have a bleeding patient and these things may anesthetize the patience. >> i think i'm going to take that as a no. dr. merrill. >> on this one, i very much agree with the comments of pascal which is these transactions are a symptom of a very broken system. and certainly, i can understand the desire to put on the tourniquet, but if you leave it on too long without resulting in the underlying problem, you get

gangrene. so i can understand the desire to do something in the short term. but there is the risk of unintended consequences. so fixing the system is ultimately the only real answer to stop the problem. >> so you're in the middle of all of this. we'll put you down in that way. my concern about that position for both of you is that tax reform is moving slowly. inversions are moving rapidly. and that is a prescription for chaos. and that is why i want to see us address both of the issues in a bipartisan way. dr. robinson. >> i don't have any -- any data on this but i do remember reading about inversions, companies leaving other countries such as the uk. and then when a tax system is reformed, they have come back. again, i don't have any data on that, but my sense is that these companies may not be lost forever. i also think, as far as i

understand, inversion transactions, it only affects the tax on the future -- future income. it doesn't impact the tax on the accumulated earnings. so in that respect, i don't think we run the risk of waiting to solve the real problem and sort of letting the markets play out as they do. >> you think it would be a bad thing? okay. mr. sloan. >> i think letting 25 companies invert and then fixing the tax code is a recipe for disaster. i know a little bit about how inversion works. and mr. stack is absolutely right that the problem is not so much what happens to foreign profits. but it becomes much, much easier to move money to earnings strip out of the united states. and you have to stop this. and at some point, when we're

not on the clock, i'll bandy medical analogies with my colleagues. but this is not the time so we'll let that go. >> let me see if i can get one other question in, i'll make this for you dr. desai, given what you've said. let's take walgreens. walgreens is an american icon. it's located in the heart of our country, and they are talking about inverting right now. should americans be concerned about the prospect that if walgreens inverts, they will strip profits out of the united states, and put them into tax havens? is that something americans ought to be concerned about? >> without question. absolutely, there's no question about that. the secondary question is what do we do about it. but absolutely, we should be concerned. >> senator hatch. >> this question is for dr. robinson and dr. merrill.

dr. robinson, in your written testimony, you write, quote there's no evidence to support the assertion that u.s. multinational corporations are at a competitive disadvantage because they face larger more correspondent tax burdens than their competitors under a worldwide and territorial tax system, end quote. you then cite three studies in support of your statement, including one study which finds u.s. multinationals have effective tax rates that are 4% lower than multinationals based in the european union. but aren't there numerous studies that show that u.s. multinationals are subject to higher effective tax rates than foreign-based multinationals? and that seems to indicate that the u.s. -- well, let me put it this way. let me give you an example. dr. merrill cites numerous studies showing in his written testimony a congressional research service released a report earlier this year

studying effect of tax rates. and one part of the report, c.r. notes that the effective corporate tax rate in the united states is 27.1%, as compared to the rest of the oecd countries that have an unweighted average of 23.3%. that seems to equate that the u.s. corporate tax rate is almost four percentage points higher, not lighter than the other oecd country, at least by one measure. now, would you please comment on this. i'd also like dr. merrill to comment on the effect of tax rates phased as faired to foreign-based multinationals. >> all right. so the studies that i wrote in my written testimony measure accounting effective tax rates from financial statements.

i'm not sure what dr. merrill is going to follow up in terms of his study. it maybe a difference in how tax rates are measured. but in the accounting literature, there have been a number of studies, published and unpublished, that have searched extensively in differences for the accounting tax rates in firms resident in worldwide versus territorial countries. and also looked at, as i mentioned, the effect of these effect of tax rates on decisions. there isn't, at least to my knowledge, in accounting literature as measured by an accounting effective tax rate, any evidence to suggest that u.s. firms have higher rates. >> so, in my written statement, there is the comparison of about six different studies that compare effective tax rates to u.s. and foreign companies.

none of the studies are specifically focused on the foreign income of multinational companies. and, perhaps, this is what dr. robinson's comment is referring. the studies i referred to to look at u.s. versus foreign companies including accounting data. one of the studies there, published by the business roundtable, compares the financial statement accounting tax rate of companies in 58 different countries. the u.s. had a higher than average book effective tax rate than the other multinationals in that study. world bank does a study. we helped them with that. compare taxes in 183 countries. looking at purely domestic companies. and there's several other studies that i cited there that have you focused primarily on domestic investment.

so there are a range of studies. i must say, that looking at a broad range of studies, almost every study i've seen has shown when you do an international comparison of the u.s. effective tax rates versus foreign, whether it's foreign statement whether it's done through marginal effective tax rates, the u.s. consistently comes up above average. i put that on my testimony because it is commonly thought that effective tax rates at u.s. companies are low. but international standards, according to all the studies i've seen, except for ones actually in leslie's testimony, the u.s. comes up in the top tile. >> may i address? >> yes. >> this question is for dr dr. desai, it seems that discussion in tax reform can result in the debate of capital neutrality versus capital import neutrality. such a discussion usually is not helpful, in my opinion.

and typically ends up going nowhere. the unit developed an interesting new theory of international taxation. capital ownership neutrality. the idea being that a tax system should not distort the ownership of assets. and in fact, capital ownership neutrality seems to fit in nicely with the acquisition inversions that we're seeing today in which a u.s. corporation across a smaller foreign corporation inverts as part of an qcquisition. it seems that the u.s. corporation is at a disadvantage if it is competing against a foreign corporation, based in a country with a territorial-type tax system. as we know, most developed countries have adopted territorial types of tax systems. 28 of the 33 oecd countries have territorial-type tax