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we are sparklight, and we are always working for you. >> sparklight supports c-span as a public service along with these other television providers, giving you a front row seat to democracy. >> the house ways and means committee held its first hearing of the 119th congress to consider extending tax cuts that were signed into law during the first top administration. tax experts and business owners testify to the benefits of the extension and how the tax law currently impacts low income and minority communities. the tax cuts took effect in 2018 and are currently set to expire at the end of this year. >> the committee will come to order.

as of today, we have only 142 legislative days before taxes will go up for every single american if congress fails to act. one year from now, the paychecks of every working american will look a lot different as on average their taxes will go up 22%. during the first trump presidency, the tax cuts were the rocket fuel that propelled america out of the stagnation of the obama years. by every conceivable measure, american workers and the economy were better off. americans earn bigger paychecks, unemployment for every group was at historic lows, and poverty dropped to its lowest level in american history. buying a home was an achievable part of the american dream, not just a dream never to become reality. low income taxpayers were helped

more than those at the top. american earners under $100,000 received a 16% tax cut while the amount of taxes paid by the top 1% in fact increased. small businesses, small business optimism hit record highs. american corporation stopped shipping their headquarters, jobs, and tax revenues overseas. the economy soared, creating 5 million new jobs. in the two years after the 2017 tax cuts, the economy grew a full percentage point faster than the congressional budget office projected. over 10 years, that equals $3 trillion in new revenue. even though we lower taxes, tax revenue went up. in fact, we have already seen $1.6 trillion in higher revenues than what cbo projected.

americans are demanding we restore prosperity and build upon the success of president's economic policies that gave the american people the best economy in my lifetime. however, that effort is at risk if we do not make the 2017 tax cuts permanent. if congress fails to act, the average family of four will end up paying the equivalent of nine weeks of groceries in higher taxes. after four years of sticker shock at the grocery store, that is the last thing families need. 40 million parents will have their child tax credit slashed in half. 2 million farmers will see the exemption slashed in half. 91% of all taxpayers will see their guaranteed deduction slashed in half. 26 million small businesses will

be hit with a 43.4% top tax rate, more than 20 points higher than what businesses pay in communist china. today as we speak, businesses are making decisions about where they are going to invest, hire, and grow this year and in the years to come. and they are making those decisions based on the taxes they expect to pay. uncertainty is an unnecessary weight on our job creators and family farmers who will have to start calling accountants and estate planners to figure out how they might navigate higher taxes. if we want to continue president trump's legacy of a strong economy, congress must act swiftly to make the tax cuts permanent. american don't have the luxury of waiting. many have been waiting for years for relief. before us is the opportunity to permanently remove the

uncertainty and anxiety that dampened business expansion, job creation, and economic growth. making the 2017 tax cuts permanent is key to unlocking a second economic boom in a second trump presidency. we would see $284 billion in new gdp growth from a boom in manufacturing. 150 billion dollars in new small business gdp growth from small business is expanding, hiring new employees, and investing in their community. 50 billion dollars in opportunities own investments to revitalize the poorest neighborhoods in this country. over one million new small business jobs each year just for making the small business deduction permanent. just this morning before this hearing, the national association of manufacturers

released a new study revealing that 6 million jobs would be saved including 1.1 million manufacturing jobs by extending the trump tax cuts. we must not leave families and small businesses waiting for congress to do the right thing and provide tax relief at the 11th hour. we must make the trump tax cuts permanent as soon as possible. i'm glad we are joined by our witnesses, americans whose lives were improved by the 2017 tax cuts, and look forward to hearing their stories. i'm pleased to recognize the ranking member. >> thank come mr. chairman. i came to the committee because i believe in the tax code as an engine for change. let's be clear, i've been a pro growth pro-prosperity, pro-fair shot member of this committee which is exactly what the american people are asking us to do right now. recently the financial times and

the economist magazine's said the american economy was the envy of the world. i was struck by the hearing title, "the need to extend trump's tax cuts for working families" when we know most of these cuts went to people at the very top. indeed, the top 2%. the american people are living under this tax plan. they need relief from it. the american people need lower cost. our republican colleagues are looking to come to the aid of the strongest and wealthiest among us once again. last week, treasury released a new report confirming that if this exercise was actually about lowering cost for working families, republicans wouldn't be running their 2017 playbook back to the tune of $1.8 trillion of borrowed money. i don't understand the logic of suggesting that we are going to attack the national debt and simultaneously add $4 trillion to it by a tax cut proposal. a reminder, that we have the

opportunity here to address the national debt and tax relief for middle-class americans and people on the lower end of the scale, but that was not what was entertained. so we are talking now about adding 4.6 trillion dollars to the deficit as part of their mandate. we can lower the cost by making up the difference by extending premium tax credits in the democrat expanded child tax credit initiative, put more money directly into the pockets of those who need it. it's been proven time and again that parents who receive our monthly payments spent the money on the subsidies. child poverty was cut in half in a recent study found parents actually cut back on cigarette use likely because it decreased stress with the security of having more relief. our colleagues are charging ahead on this policy because it graduates from a concept of a plan to empty action. cutting taxes for corporations and billionaires on the backs of people that really need help.

we are all looking forward to seeing how the proposals will play out, as to how the initiatives will be embraced to cut many important social programs while we cut taxes from the republican side for the wealthiest among us. they are guising this agenda behind what they are calling a clear mandate. i ask this morning, what mandate? the smallest popular vote margin, losing seats in the house of representatives? the only mandated agenda we should be focused on is when the american people deserve and the one that they want, working together to make their lives more affordable. the american people deserve better than these tax cuts being extended without any questions being asked. they deserve a worker-centered agenda that delivers relief and gives them, as i noted earlier, a fair shot. they need peace of mind in caring for themselves and indeed

their loved ones. democrats will continue to fight for that, not a cash grab. with that, i yield back my time. >> i will now introduce our witnesses that are with us today. the first is michelle gallagher, a partner. we have margaret, a mother from lynchburg, virginia. and we have allison couch, the owner of ignite accounting and business advisors. we have courtney silver, president of catchy inc.. brendan duke, senior director for economic policy at the center for american progress. thank you for joining us today. your written statements will be made a part of the hearing record and you each will have five minutes to deliver your remarks. we will start with ms. gallagher. you may begin when ready. >> chairman smith, ranking member neil, distinguished

members of this committee, thank you for the opportunity to provide testimony today on the importance of properly extending provisions of the tax cuts and jobs act, tcja. my name is michelle gallagher, cpa from the great state of michigan with 35 years of experience working with businesses of all sizes of the working families, and multigenerational family enterprises. i have seen firsthand how the provisions of the tcja have provided critical support to the businesses, farmers and working families that form the backbone of our economy. to start, i want to strongly encourage congress to make addressing the permanency of tc ja your top priority. taxpayers and their advisors are desperately seeking certainty and protect ability so they can plan for the future. without clarity, businesses and farmers are likely to delay or forego investment which could

stall economic growth and depressive job creation. congress cannot risk waiting until later this year to address these important tax provisions when it is simply too late for taxpayers to react. the 199 ad deduction has been critical for businesses, llcs, and s corporations which represent nearly 99% of my business clients and the vast majority of businesses in michigan and nationwide. they also employ most of the countries workers. 199a help many small business clients stay competitive with large corporations on wages and hiring when inflation was skyrocketing, and during post-covid economic rebound many clients increase investments in equipment to make use of the deduction as well as the last four years of bonus depreciation. if the deduction expires, the

taxes on pastor businesses will go up sharply while publicly traded companies and c corporations will enjoy their corporate rate. this is not fair to the main street businesses/farmers of our country. 199 a should be permanently extended. full bonus of depreciation has been a game changer for business clients. immediate deductions have freed up capital for investments, state-of-the-art equipment resulting in efficiency, production and job creation. lower marginal tax rates have bolstered financial health of businesses, farmers and provided relief for families. when marginal rates are higher, families must tighten their belts and businesses face strain. marginal rates are lower, working families have more take-home and can invest more in

their communities. if marginal rates are not permanently extended, every american worker will go home with a smaller paycheck starting in 11 months. the doubling of the standard deduction simplified filing for millions and provided savings for middle-class families. in addition, the simplicity has saved taxpayers time and enable them to focus on running their businesses and households instead of navigating complex filings. the expanded child tax credit has been a lifeline for working families and has have a direct impact on my family. my brother, a public school teacher, relies on this credit to help provide for his wife and seven children between the ages of 4-19. his salary is stretched thin and the child tax credit has been essential.

the expanded child tax credit is not just helpful, it is indispensable and must be retained. the estate tax presents a constant source of worry and financial burden for many family businesses i work with. many business owners and family farmers may appear wealthy on paper but almost always lack the liquidity to pay estate taxes. i've seen this lead to businesses closing or being gobbled up by multinationals because they realize they could not afford to pay the tax. compliance costs related to the estate tax amount to $18 billion annually according to the tax foundation, a figure that exceeds the annual estate tax revenue collected. more money is spent annually complying with the tax than the government collects with the tax itself. if the estate tax is not addressed this year the current exemption will be cut in half

doubling or tripling the amount of unexpected families forced to pay this tax. congress should pull the plug on this for good. no grieving family has to deal with this unfair double tax. small businesses and farms are the heartbeat of their communities creating jobs and fostering local economic growth. as someone who worked closely with businesses, farmers and working families for 35 years, i have seen tangible benefits of the t cja firsthand. i urge congress to permanently and swiftly extend these provisions to provide certainty to america's small businesses, farmers and families, thank you for the opportunity to share my perspective and i look forward to our discussion. >> thank you. >> chairman smith, ranking member neil and members, thank you for your invitation today on the importance of the child tax

credit. i am the mother of three children, boys ages 9,2,1. before i became a mother in '16, i did not know about the child tax credit. i did not know how challenging it would be to provide for my children. this increased when i became a single mother in '17 after experiencing a betrayal and divorce. for four years, the credit lightened the lodo providing for my son with one income and child care expenses. it was a special help to me when congress passed the tax cuts and jobs act doubling the credit to $2000. i remarried in 2020 and for two years received the child tax credit as a two income household. my husband and i had two more children and at the end of '22 i decided to stop working to give my young and active sons my full

attention at home. last year with only my husband's income supporting our family of five, we witnessed the child tax credit making all the difference. my husband and i both have college degrees. we have no school debt or credit card debt yet the majority of our money goes to covering essential yet astronomical costs of medical care, groceries and gas. it takes us one year to pay the hospital bill for giving birth to a child. with an income of $75,000 and without the tax credit, last year we would have over the government over $2000. what a discouragement to have another financial burden placed on our shoulders after filing taxes, however because of the child tax credit, we received back $3500. at times the money we received from the credit has been the only money in our savings account. we are not looking for a handout. my husband and i understand it is our job to provide for our

children. we want an opportunity to thrive. we want to save our hard earned money for our children's future so when they leave home they are not burdens on society but burden lifters. this is what i know about being a hard-working mother today in america, single or married. i am raising children in a culture of giving up. at every turn, there is temptation to give up. on your marriage, your children, yourself. look at divorce rates, suicide rates and abortion rates. people are giving up on children before they come out of the womb but all human life conception to natural death is valuable. as a mother i am unwilling to give up on my children. children of the future of our country. like millions of other young people i am ready for america to be a place where families can thrive. the child tax credit promotes the flourishing of families and when american families are

strong, america is strong. the child tax credit is a simple, significant way the tax code can communicate the value of hard-working parents trying to provide for their children under the current weight of high inflation and an unmanageable cost-of-living. the financial benefit of the child tax credit lightens the load of the financial burden parents carry but also serves to affirm and enforce the value parents hold. we don't want to be rescued. we want to be valued. parents need to hear from their government leaders. don't give up. your dedication and sacrifice remains valuable to this country. without the child tax credit, how else would the government show it supports the important social role of parents? making the expansion within the tax cuts and job act permanent would ensure parents like me that our value will not be forgotten. as parents persevere and the government prioritizes

financially what is truly important, i believe america's current culture of giving up will turn into a culture of life and strength. finally, i want to thank this committee for leading the way in passing the bipartisan tax relief for american family and workers act last year. that bill if it had been signed would have helped the child tax credit reach growing families like mine and updating the tax credit for inflation would have served to lighten the load parents are already carrying as we were to provide for our families in this economy. i hope you will consider parents like me when negotiating and crafting the upcoming tax package and look for ways to further extend the 2017 child tax credit expansion. congress has an opportunity this year to help american families flourish by making the tcja's child tax credit permanent and consider further improvements as was done in the bipartisan package last year.

thank you for the opportunity to testify on this important issue. >> thank you. it is great to have you back with our committee. the last time we saw you was in georgia so we are glad to have you back. you are recognized. >> thank you. good morning. my name is allison couch, president of ignite accounting and business advisors. thank you for inviting me to provide real-world testimony on critical issues before you. as many of you may remember, this is my second time i have testify before this committee on the important issues addressed today. april '23 i came before the committee at a hearing in my home state of georgia to discuss challenges facing small businesses my team and i work with as well as what your committee can do to support the problems they face.

during that hearing i underscored the need for congress to renew provisions of the tax cuts and jobs act of 2017 that small businesses have become dependent on, particularly the small business deduction 199 a and work to reduce regulatory burdens on small businesses so their limited resources are not consumed with meeting onerous requirements. today mike -- today my testimony will be the same. as we get close to the expiration, the clients we support still lack certainty of whether or not many provisions their businesses depend upon will be extended. these include the 20% small business the duction and reduced rates for individual and income tax brackets. they are still faced with steep regulatory requirements imposed by authorities that deplete time and efforts.

for those new to the committee, i sit before you with the perspective of true american small business owner. my own small business, ignite accounting and business advisors, is based in columbia county, georgia. my small team services 200 clients providing bookkeeping, financial statement preparation, sales tax, payroll tax, property tax and income tax services. my business is small. it nurtures other small businesses. a critical aspect is providing financial advice to clients which can include a listening ear and encouraging words. that perspective is a crucial part of any testimony before you. in my april 2023 testimony i underscored the need for congress to act to preserve the deduction. in that testimony i stated the tax burden on small businesses

was already incredibly heavy and allowing this deduction to lapse when it has been in place for many years will not feel like a sunset but a tax increase. today with this section of the code set to expire in less than one year, this remains true and i urge congress to act swiftly to renew it. the small businesses i work with have become dependent on having access to these funds and they need the certainty provided by making the 20% small business deduction permanent. my typical client generates $3 million or less in annual revenue, employees on average 10 people and depends on the deduction. i've practiced public accounting for 21 years and can tell you without a doubt the 20% small business deduction has been the single most beneficial tax deduction for small business owners. moreover this deduction is more far-reaching vertically and horizontally to small business owners when compared to other

deductions. for example, depreciation deductions require cash flow reduction or taking on debt. section 199 a does not. this is true of small businesses nationwide. a recent study on the macroeconomic impact of 199a for small businesses found 25 .9 million small businesses nationwide utilize the deduction and it supports job creation in the sector. as part of my testimony i would like to submit that report to the hearing record. another area of apprehension for small business clients is if congress does not act, the reduced tax rates for brackets established under tcja will increase. the 20% small business deduction is available to businesses that operate as pass-through entities like s corporations and partnerships. their business profits and the deduction flows from their

return to their 1040, taxed at the owner individual tax rate. 33 million small businesses in the u.s. are organized as pass-throughs. as i stated in, 2023, business income is different from business owner income. i would like to stress that point again. they can reinvest in their businesses and employees. if congress does not address the changes, small businesses structured as pass-throughs will be stressed with a tax increase. i highlighted the issue of regulatory burdens imposed on small businesses by the irs including the thresholds on 1099a forms. it has not been adjusted in decades. i would ask you to consider a

one-time adjustment to account for inflation over the years where no adjustment has been made and an annual adjustment thereafter. while the threshold has been adjusting, it is moving in the wrong direction. for the years 2023 and prior, marketplaces have been required to send out forms to taxpayers who receive over $20,000 and have over 200 transactions. 2024, the threshold moves now to $5,000, for 2025, $2500. the intention is to reduce it further for 2026 and thereafter. 1099k requirements are based solely on dollar thresholds. as the committee reviews proposals to reduce burdens on small businesses, i urge you to consider reversing the course on lowering the 1099 k threshold amounts and instead work to

increase it. thank you. chair: ms. silver, you are recognized. >> thank you for inviting me to speak on why congress must preserve the tax cuts and jobs act and how its policies ensure manufacturing remains the driving force of the american economy. courtney silver, president and owner of a third-generation precision machine shop located in concord, north carolina. since 1947, we have been a reliable part of the manufacturing supply chain. we invest in equipment, tech and people. i am honored to be with you today as this hearing marks the beginning of a historic year for the committee. critical progrowth provisions have expired and more harmful changes are on the way at the end of the year. every member of this committee

has the opportunity to take real action that supports manufacturing in america. the stakes could not be higher. a new study released today by the national association of manufacturers shows 6 million american jobs are at risk unless congress preserves pro manufacturing tax policies. america will also lose more than $500 billion in worker pay and more than $1 trillion gdp. manufacturing will bear the brunt of this devastation with one million manufacturing jobs at stake. this economic damage makes sense because the tcja was revolutionary for manufacturers. ketchie experienced the best year and our seven decade history. 2018-2019, we were able to

invest $1 million in capital equipment and create new jobs. we upgraded security, hvac systems and invested in new technology on the shop lore -- floor. we provided raises and bonuses to all employees because without them growth would not have been possible. business boomed through our chain and demand soared. our floor was covered in pallets of materials to keep up with orders. unfortunately in '22, progrowth provisions began to expire such as r&d expensing, enhanced interested duct ability and full expensing for capital equipment purchases. more harmful tax increases are on the way, further threatening manufacturers like ketchie. the loss of the pastor

deduction, increased individual rates, taxes and changes to the estate tax will hurt my ability to grow and create jobs in concord. in addition, it's important to preserve the 21% corporate rate, new international tax policies, many of which impact our customers and suppliers. manufacturers know that the only way to succeed is to relentlessly focus on the future by pouring resources back into your team and equipment. the tax cuts and jobs act allowed me and so many to do so. with 6 million jobs on the line, the time to act is now. these policies are vital for our economy but i want to share how they are changing lives and opening doors to new opportunities. tax reform enabled me to create opportunity knocks, and internship program that bring students into shadow our team on the factory or while earning

school claddagh -- factory floor while earning school credit. they fell in love with manufacturing. they are now full-time apprentices and are able to provide for their families while also contributing to their community and working on a team they admire. we are inspiring the next generation of manufacturers in america. congress has the opportunity to help support this work by enacting permanent and consistent progrowth tax policy. thank you and i look forward to your questions. chair: mr. duke, you are recognized. >> thank you. brandon duke, i am honored to testify today about the 2017 law and implications. let's remember how we got here.

congressional republicans and donald trump wanted to cut corporate taxes in '17. without cutting taxes for families, it would have been a political disaster. they could not increase deficits beyond the 10 year budget window. they made a big cut to the tax rate. they did a series of tax cuts for individuals that expire at the end of this year. here we are at the beginning of the debate about what to do about it. what have we learned? the corporate rate cut, the centerpiece of the original bill was a windfall for investors spurring a $1 trillion purge in buybacks, none of that trickled down to ordinary workers. cbo projected "residential investment is reduced throughout the entire."

now they say extending these provisions will strengthen the economy in the long run. given the tax cuts did not trickle down, we should focus on the regional impact. who got what? extending these expiring provisions, the average tax cut for the top 1% of households is 60 times larger. even these numbers are rosie. you were talking about a bill that will add $4 trillion to the deficit over 10 years. this is money we are borrowing that we will have to pay back one day in the form of tax increases or spending cuts. our range of analysis estimates this would cost typical families thousands of dollars. alternatively, they can pursue cuts. elon musk has proposed $2

trillion in spending cuts. literally, this would cut every program in the budget by one third including medicare, social security, food inspection and research. the easiest way to offset the tax cuts is to not offset them. there is no free lunch. the tax cuts will have to be paid for eventually. in the meantime, higher deficits could mean continued for higher interest rates, meaning debt is less affordable for working people. this is a poor choice when the economy is strong and unemployment is low like today the very real danger of cuts to working and middle-class families, congress must offset any tax cuts, simply changing

accounting inventions -- conventions, removes the burden these taxes will place on family finances. congress can cut the cost by refusing to extend them for the top 2% of households making over $400,000. the treasury department released an analysis last week showing that would cut the cost to 1.8 chilean dollars. we are talking about a $2.4 trillion tax cut for the top 2% households. these health care cuts are necessary. they are about making room for a tax cut for the top 2% of households. it also makes the cost of offsetting remaining tax cuts easier, so congress can take real steps to bring down the cost of living.

the american rescue plan extension works is the gold standard but i would commend chair smith for his work last year. it would have been a real difference for working-class kids. preventing tax increases is not a reason to cut taxes for the wealthy. cutting taxes for the wealthy is a choice congress may make this year. it is a choice. it is clearly the correct choice. thank you. >> thank you for your testimony. ms. gallagher. one of the major reasons to extend the tax cuts as soon as possible is to give certainty in the long run. small businesses are facing a

43% tax rate if the 199 small business deduction expires. this impacts decisions that are making today on whether to invest, grow, hire. the same is true for the 2 million family farmers. if congress does not act soon, family-owned farms and main street businesses will have to start calling estate planners and accountants to figure out how they will navigate the increases in taxes. speak to how this uncertainty drives decision-making today among america's families, farmers, small businesses. ms. gallagher: my phone has been ringing off the hook since last august. the pending election. families and business owners, the uncertainty of where this

tax change may go. we have been running meetings and scenarios with our clients for months trying to plan for the future. many successful businesses do forecasting out not just one year, but the most successful plan out three, five, 10 years out when looking at investing in more employees or equipment, that takes capital and time to accumulate that capital to be able to afford it. it's imperative as an advisor to help them navigate these tax policies. i have been around 35 tax seasons. i've experienced last-minute tax changes by our government.

it's extremely frustrating on the taxpayers, selfishly the advisors as well. i cannot encourage you enough to do this quickly to help our businesses/farmers make some decisions. >> thank you. we have talked about how working families have watched prices rise by 20% over the past several years or how wages have fallen 3% since president biden took office. the last thing families need is to see washington slashing their child tax credit in half. 40 million families would be impacted. as a mother, share what it would mean for families if congress failed to act and allowed the ctc to be cut in half, and how which ranking the ctc to $1000 impact couples thinking about starting a family or growing the

family? ms. marple: thank you to this committee. working families like mine know the financial benefit of the child tax credit lightens the load of the financial burden parents terry but serves to affirm the value parents hold. slashing the credit in half or by any amount would increase challenges parents face to raise their children in this and it would communicate that the government does not value parents. congress has an historic opportunity to help american families flourish by making the child tax credit permanent and by considering further improvements as was done in the bipartisan tax passage this committee passed last year. >> the trump tax cuts revived

american manufacturing. we saw 20% growth in investment here at home thanks to policies like 100 percent expensing that incentivized manufacturers to buy new equipment. stronger manufacturing at home not only contributes to our economic security but our national security as well helping secure supply chains and make us less dependent on hostile nations like china. incentives have already started to go away as what was testified. as a small business manufacturer how has that affected your business planning and what would it mean for you if congress were to restore the 100% immediate expensing? ms. silver: thank you for the question.

full expensing has impacted me greatly. i have an area on my shop floor that is empty. i hit pause. i put the capital equipment purchase on hold because of these expired provisions. it changes the calculation for me, the business decision feels risky, irresponsible. it impacts the creation of jobs. it impacts my competitiveness. i am at risk of falling behind my competitors. my competitors are investing in similar advancements that increase their productivity and throughput. this affects my ability to be competitive. my customers are large manufacturers across this country and they really need

three things from me and it is high quality precision machine parts delivered on time at a competitive price. to do that i have to invest in our people. i have to invest in our process and equipment technology. >> beyond current policy how would businesses respond to new incentives for domestic manufacturing such as a quicker cost recovery for investments made in new facilities and other policies that further lower the tax burden on those who produce here in the u.s. as president trump suggested? ms. silver: it would make us more competitive. we will grow and thrive. we would innovate more, take risks. it would really drive us and the whole manufacturing supply chain.

it is tough to face uncertain tax code that is changing. we are a pass-through organization so i pay taxes at the individual rate. when those rates are debated and changed, it feels like you are debating the future of my company. a lot of times that income is not liquid. it is tied up in receivables, inventory, work in process. any policy that is permanent, that is consistent, predictable, will help us greatly to continue to support the whole manufacturing supply chain in our country. >> thank you. mr. duke, in regards to the income tax rates and the provisions that affect people making less than $400,000 per year, is that something you

would make permanent for the people? mr. duke: if we could offset the cost by raising the taxes on the wealthy people, that is a good idea. >> i recognize the ranking member for questions. >> i want to thank our panelists. it is an opportunity for instruction and to hear competing perspectives. ms. gallagher, are you aware of the fact that the republican party borrowed $2.3 trillion for the tax cut? ms. gallagher: thank you for your question. i am not in tune with the extent of any numbers or statistics to that level for today's testimony. i am well aware there are plenty of trade-offs in all negotiations and all tax policies we encounter.

i am not familiar with the exact numbers. >> are you aware of the fact that their intention is to ignore what is known as the baseline? that means they will ignore the $2.3 trillion they borrowed and erase it. would you advise your client to ignore their credit card debt or their mortgage debt and take on more debt if they could not sustain it and complained about the debt they already have? ms. gallagher: first of all i am not aware about the intention of the baseline argument for us here today. there are many factors that go into decisions when i help my clients make decisions about taking on debt, in particular with my clients, not the federal

government, sometimes debt is ok. i would just comment that it is not always a negative. >> slid you tell your clients to ignore the debt that they have? >> no. >> thank you. ms. marple, appreciate your comments. were you able to take advantage of the child credit expansion that the pandemic relief package is offered? ms. marple: thank you. i am here to talk about the current 2017 expansion which will expire in december if congress does not act. i would refer you to the tax experts on this panel who can speak to you about the other policies. >> i assume because of electronic deposit you were able to receive the enhanced child credit during the pandemic? ms. marple: i was able to

receive that. >> ms. silver, were you able to take advantage for any of the pandemic relief package is for new opportunities within your business? i hear the arguments you are making. ms. silver: yes, i was. >> did that add to the national debt? ms. silver: i am sure it did. >> thank you. mr. duke, the proposal here today based on the data we have heard is that last year or as the proposal goes forward, a taxpayer who made $1 million last year will receive a tax cut of $78,717. this is not according to the democratic national committee. this is the joint committee on taxation that we have a high regard for.

a taxpayer who made under $50,000 is going to get $273. will you expand on that? mr. duke: we know the tax package is progressive. we know the tax cuts for high income households are higher than for low income households. we know that extending them will increase the income inequality. the treasury announces put out last week throws it out there that we have a $4.2 trillion tax liability that can be broken into two pieces. there is a tax cut for households making over $400,000 and a tax cut for low and middle income families. >> i'm delighted you were able to take advantage of the initiatives that we put out. very pleased. that is why the american economy is the envy of the world. we rebounded more quickly than the rest of the world. however, we added to the debt.

we acknowledge that. the plan today the republicans are talking about is to ignore what they borrowed and proceed with more borrowing and complained about the size of the national debt. i yield back my time. >> i want to get one thing off the table. as chairman of the florida chamber, we had a hundred 30,000 businesses, 130,000 businesses and dealing with potential tax rates. that is what scares a lot of people in our area. most of the companies are 25 employees or less. a couple thousand businesses, 45 employees or less. that is what we need to be focusing on. the idea that you can have a tax rate of 43% will be many states add another 10%, it is over 50%

tax rates throughout the country. that is why so many are moving to florida, moving to texas because they don't mind paying a little bit more but they're not going to pay 50% plus rates. i want to say that. tcja was rocket fuel for the american economy. america paid less taxes in government revenues increased through the economic growth allowing legislation to expire to raise taxes over 200 million from that standpoint. i introduced hr 137 tcja permanency act that would make the law permanent. ms. silver touched on expensing or depreciation when a lot of people don't realize it is a timing thing. appreciation where we had 50%

plus 10% but it makes a huge difference having the ability to deduct that even though it is a timing issue. is that your thought on it? ms. silver: absolutely. they are small businesses that have long-term contracts. in my business we typically don't. there is a lot of uncertainty as you go forward in your business and think about your strategy. absolutely, being able to deduct that full investment. >> how many employees do you have? ms. silver: 20. >> that's my point. most of america, except the gigantic corporations, the billionaires, i am not defending that but i am depending -- defending people like yourselves, startups who need to make payroll. this is way i look at it.

what is your thought in terms of 199a. in our area, it is a big issue. i have 82,000 businesses in my district alone. they might be subject to some of the 43% bracket. what is your thought on the 199a? ms. silver: my thought is it needs to be extended period. it has been a lifeline for the past few businesses which i just testified, 99% of my business clients. they are partnerships, pass-through entities that can benefit from the 199a deduction. the other important thing about 199a is it gives our small

businesses parity to the c corporations and the publicly traded companies. their tcja lower rate of 21% was made permanent whereas the 199a was not. i think it is unfair to our main street businesses and our farmers to have this expire and to your earlier point, pay upwards of potentially 50% in taxes when c corporations will be up 21. we will see a number of our pass-through entities contacting their lawyers and accountants to become c corporations. that's what business owners do. >> i am short on time. that is one of the biggest issues, where is the fairness. i started on c corporations. now we are on pass-through entities that my kids run. we will not go back to c corpse but that is what we are being

driven to potentially. i want to thank all of our panelists today. >> thank you. mr. doug. >> thanks to our witnesses. i am for an increase in corporate taxes. we have to increase taxes on the wealthy, we have to cut spending which they will resist. where does the tax revenue come from? corporations and the wealthy. when they start squealing, we have a conversation. we are all partners. everybody will take a little pain. those are not my words. they are not a message from the progressive caucus. but rather the recent comments of steve bannon. some time trump advisor will be about as mega as you can get. he reiterated them this very morning. what this committee has to decide, will it maintain its traditional allegiance to the plutocrats or help working

families some of whom are recognized on today's panel? it is encouraging that we see some elements of the republican party that recognize tax reality , that you just cannot cut revenue and without adding to the national debt and you cannot just pour some magical dust on it and ignore what you have done. spiraling national debt has been something that some members of this committee have previously said was a national security crisis. well, it is a crisis just as much if you do it through more tax breaks, for the billionaire class and the multi-national corporations that are paying a tax rate that is a fraction of those paid by main street businesses and by most americans. there is further trouble for working families in the

plans that republicans are advancing. last week president elect trump told americans that on food we can expect "pretty drastic price reductions." all of us would wish him well on that and eagerly await him fulfilling his promise, often repeated, to drastically lower the price of food. most economists are concerned that his policies will have the opposite effect. indeed, the minutes of the last federal reserve meeting suggest we may already be paying higher interest rates because of their concern that trump will stoke inflation. this is especially true regarding his declaration of that "the most beautiful word in the dictionary is tariff and it is my favorite word." in texas a trump grocery tariff tax that he could impose as soon as next monday would likely

increase grocery prices on almost every vegetable and fruits that we buy. republican's are eager for a trade war that no one will win beginning with trumpeters taxes, regressive taxation and the resulting retaliation by other countries and republican alliance on tariff taxes to offset their tax breaks for the super wealthy and will continue to shift the tax burden to some of the very type of business is represented on this panel. one recent study found that if the tax breaks were combined with the tariff increase that the impact would be that 80% of americans would be in worse condition. let's not forget that the last time a retaliation occurred from trump tax tariffs, commerce had to be paid billions of dollars in welfare because of the loss

to foreign markets. the impact of the 2017 trump tax scan was to add about $2 trillion to our deficit and now it is proposed that we add another $5 trillion. the effect on americans is that 7.8% was the tax rate paid by the top multinationals in one year. last year the forma -- pharma industry did not pay any tax whatsoever. meanwhile a working mother with two children who is paid the average rate was paying a tax rate of 20%. that is not fair. i'm glad that mr. steve bannon recognized it. i hope more of our republicans will recognize that these large corporations need to pay their fair share and so do the wealthiest in our country. the biggest loser of their plan will be our debt but the impact that has on the solvency of

social security and medicare and other investments is very critical. as we move forward we need to consider these impacts and look for a tax code that is more fair for working americans and less gift to those at the top. i yield back. >> mr. smith. >> thank you. thank you to our panel here today. this hearing is timely. it is important. it is always healthy to look back and see what we have been, where we need to go moving forward. i am proud to say that the 2017 tcja was a reflection and a result of several years of thoughtful exchange and really diving deep into what we could do at the time to grow our economy, create more opportunity, create more fairness in the tax code. it was interesting. one thing that is left out of

the discussion today especially from testimony earlier is that even barack obama when he was president realized that we needed to be more competitive on the corporate side and proposed a reduction in the rates. a different rate than we ended up at. but barack obama hardly even a moderate president suggested we needed to be more competitive. he saw the inversions that were taking place over and over again . i don't think a score has ever truly reflected the damaging aspects of an uncompetitive corporate tax rate. we can talk about this all we want and characterize this in different ways. the fact is we are in a bad spot

as a country before tcja. had we only done corporate, that would not have been a good look. as we hear today again, the impacts of what we did for families was very positive. without going so far as president biden did with pushing so much money out there calling it tax relief but it was just pushing money out there that triggered inflation. i think it is incredibly important and i believe we all the american people a discussion, an exchange of sharing ideas and reflecting on reality that we would shape policy moving forward in a productive fashion. when i say productive, i mean with this process. ms. silver very accurately and appropriately described, and we

sought out in 2017 on productivity for manufacturers such as ms. silver. it is important that we were agnostic on the size of a company so that everyone could benefit. we knew that with increased productivity if a business would see advantages in the tax code to adding new equipment as ms. silver articulated, that the end result would be good for the company on a micro basis and greet for the economy as a whole is more u.s. companies became more productive and more profitable. call me unreasonable but i think profitability is a good thing. profitability around this town is demonized so often. i think it is sad. we owe the american people a better discussion than what we have been seeing too often here.

i think it is important to note that the thoughtfulness that went into 2017, i think there is a greater understanding that what we did in 2017 was the right thing to do, especially given the factors to consider at the time. looking backward, i'm proud to say we did the right thing. we want to prepare for the future. what do we need to do to be more competitive moving forward? let's look at that. but let's not ignore the successes we've had. very briefly, sorry i've taken so much time. ms. gallagher, i want to give you more time to elaborate on the value of permanent whether it is a state tax, whether it is 199a, the value of permanence and what that would look like to an individual business or beyond. ms. gallagher: thank you.

good to see you. i talked to you this summer on this. permanency. certainty and predictability is key for small businesses and farmers. how can you plan without it? i was thinking of an analogy i could give you but i know you all are very busy people. imagine getting your calendar or your schedule the morning of your day, not having any idea where you were going, who you were saying, what you were supposed to say, what you were supposed to do until that morning. that's how i see this permanency and the need to do this quickly for our taxpayers. they are in the dark and i think certainty and credibility so

they can plan is key. it could stunt economic growth and job creation without. >> thank you. i yield. >> mr. thompson. >> thank you for having the hearing. thank you for the witnesses. i want to make one point about mr. neil's comments regarding the fires in california. it is important to remember that we are the congress of the united states of america, not red, blue or otherwise. if there is a natural disaster or horrific situation such as the people of southern california are experiencing, as members of the congress, we need to be all in to provide help irrespective of where those people happen to reside. thank you for bringing that up. we are going to hear a lot today. we already have and i am sure we will for the rest of the year on

how the trump tax cuts deliver for working families. let's be clear, once ones who benefited the most from these cap thoughts -- tax cuts for the rich. the very rich. working families received pennies. that is not the only misleading plan that my colleagues on the other side have made about the tax bill. they claim to be champions of fiscal responsibility while it was their tax bill that added $1.5 trillion to our national debt. every economist even republicans say tax cuts did not pay for themselves. extending the tcja would add almost $5 trillion to our debt over the next 10 years. if you add all of president elect trump's list of tax cut promises, that number jumps to about 16 million -- $16 trillion.

the trump tax cuts do not deliver for the middle class. a taxpayer earning $1 million or more received a tax cut almost 300 times greater that being a taxpayer making $50,000 per year. the fact is it was a democratic legislation that delivered results for economic results for the middle class. for example, the chips and science bill, the inflation reduction act all contributed to increased domestic manufacturing. it was not the tax cuts. since the ira was signed into law, companies have announced over $130 billion worth of investment in clean energy and electric vehicle manufacturing. my on the other side of of the aisle should go back home and see for themselves because 85% of the ira investments and new projects have gone to republican congressional districts. of the 2007 tax bill raised

costs for millions of our constituents by capping the state and local tax deduction. about an $8,000 per year tax increase to people in my district. mr. duke, republicans claim that the tcja is responsible for increased domestic manufacturing. let's take ev manufacturing. what have been the benefits of the easy credit and what would happen if the republicans repeal that? mr. duke: this is not just an economic issue. it is a geostrategic issue. the policy is an example of positioning automakers to catch up with manufacturing excellence . firms have invested more than $81 billion in manufacturing it passed.

it is helping close the investment cap with china making the u.s. tv industry the most invested industry on a per country basis. these are the vehicles of the future. we cannot let china dominate that market. >> thank you very much. ms. silver, you were the past year of the national association of manufacturers. you refer to that in your testimony. do you agree with mr. duke on the importance of the ev tax credit? ms. silver: i cannot answer that question but i can follow-up with you. i don't know about the ev tax credit. >> and the advanced manufacturing productionms. silp after this, for sure. rep. thompson: you talked about farmers and picked ability and certainty, would you agree that if we want certainty and predict ability and we really care about

our farmers we would take this tariff discussion off the table now? ms. gallagher: thank you for the question. i have not looked at how any tears would impact our farming community. rep. thompson: we have experience of what they did last time. you heard from mr. doggett how we had to bail out farmers because of those tariffs. ms. gallagher: i know that my farming clients have benefited greatly from the tcja provisions specifically on the 199a full bonus and lower marginal rates, increased estate exemption had been a major benefit for my farming clients. rep. thompson: thank you. chair smith: mr. kelly. rep. kelly: thank you all for being here and taking a day out of your lives to talk to people who have never really been in the private sector. i'm a second-generation, my son is running the store, my father started it in 1933 with nothing

but a show room six service bays and work their tails off to make it profitable. i love people who have to make payroll. we were doing tcja to begin with and chairman brady was talking about it. i said actually there are two times in my life where i paid absolutely no tax. how did you get away with that? i said we lost money that year. isn't it bizarre that we talked about where would the revenue come from? we take a certain percentage other people's profits. with the exception that you can lose money and still be held responsible for real estate taxes come every other tax that every other american pays every single day. we come here today and talk about the benefits of tcja, was it really true? yes, it was because be garnered more revenue than we had ever seen before. i can remember being there a day that vote was taken, it was the wealthy, the wealthy, they are

never taxed at their fair share. then we did tcja and all of these wonderful people who left america because they thought america was being too tough on them came home. they made investments. certainty is absolutely the most important part of any business. i wish in the business i was in, there was certainty as to who would buy a car or truck from us for tomorrow. a friend of mine, the mayor of our town, said you know what i would like to see? i would love to see that it was required that you actually have to survive in the private sector before you can go into public office and be paid on commission only and lost your job at least once. all of these wonderful talks that we have going back and forth about who benefits, who loses, who pays it? i will tell you who pays it, companies are profitable. why do these company that left

america come back? because of tcja. why did they leave to begin with? not because they didn't love america, they just knew that america didn't love them anymore. we would tax them out of existence. it is like the little hen. lay, lay. then the hen couldn't lay them anymore. i have to tell you, please, give me a break. ms. silver, i read your testimony. you have been through an incredible life. the loss of your husband, cannot imagine what that was like. raising children. ms. gallagher, working with people. you know in this entity in government, during the height of covid we didn't miss one payday? i wish i could've said that about the dealership. we lost a lot of paydays.

but when it comes down to tcja and what were the benefits of it, where did we hurt people, who duly go after, all the rest of this, all of you, was life better under tcja? we did that tax change in 2017. did america start to blossom again? did we start paying more taxes because we have people making money and businesses being profitable? i know a lot of people that do what you do. this is a tough, tough business. if you would all way in. i get so tired of people talking about tax revenue who have never had to worry about making a profit in order to pay taxes. you have all given your testimony. ms. silver, because i have so many people back home what you do, how tough it is.

it is no bed of roses. i thought your testimony was incredible. all of you, incredible. sounds like you are raising a wonderful family. ms. silver: thank you for your comments, congressman. i could throw some color on this as far as how complex this is. to take raw material and to transform it into a useful object that we all benefit from is extremely tough. there is a whole lot that has to go into that. like i said earlier, we have to make investments in our people, processes in machining technology. you are right, there are definitely years where you don't make a profit. if you take this piece of paper, let's say you slice this 20 times in width.

if you take one of those strands of 20, that is the tolerance that we are holding on dimensions on parts that we manufacture. that is 0.2. you cannot see it with the human eye. this is not me buying equipment, pressing a button and a widget comes out. a ton of small businesses in your district, like you said. we need progrowth tax policies that are permanent, consistent, that are predictable to help us be able to grow. our manufacturing supply chain in our country needs us to grow. they need us here. >> the rest of the world keeps hoping that america will raise their tax rates again because then they will see this group of people who were staying in america come back over and start their business with them.

if we make it impossible to be profitable here, they will leave. we had the greatest tax revenues we have ever had. this is not a trump issue with me, not a red or blue issue. these are red, like, and blue issues. if it is not for america, i don't care about anybody else in the world. if america is strong, the world is safe. thank you for having me. let's go tcja part two and watch america rise again. >> thank you, mr. chairman. i thought you were going to say let's go, notre dame. you mr. opportunity. thank you, mr. chairman for this hearing. i want to associate myself with remarks of mr. neal, my colleagues. the witnesses have been outstanding. when you listen to your testimony, i think you can see that there is a desire here on

both sides of the aisle to help. but that help all comes down to fairness at the end of the day. and the quandary that mr. neal presented i think is one that this committee needs to sort through and have the conversation. and the other thing that he talked about is that you just cannot ignore the obvious and what is in front of you. from my perspective as a ranking member on the social security committee, we cannot ignore the obvious. did you know the last time we extended social security benefits in the united states? anyone want to venture a guess?

it is not a fair question to you. it was 1971. richard nixon was president of the united states. could any of your businesses or households have survived if the last time the responsibility which is that of the united states congress and this committee to adjust social security including the unfair policies of taxing your social security when you retire? i think the american people rightly know, we can no longer ignore these issues. 70 million americans rely on social security. and with 10,000 baby boomers a day becoming eligible for social security, that is an additional

3.65 americans becoming eligible every year. and we have an extended benefits and over 50 years? that is an outrage. when you look at its impact on people, more than 5 million americans getting below poverty level checks. for about 35 million americans in total, the only benefit they have is there social security, that they paid into. this is an earned benefit. and the responsibility of the united states congress. i look forward to working with mr. estes, and i believe my colleagues on the other side of the break i aisle care deeply about this issue as we do. but we cannot ignore it. everybody cares about the national debt.

everybody knows that we are going to have to raise the debt ceiling. and we know we have work in front of us. and yet, let me talk about the fairness, where you see the disagreement is when you see all the money going in one direction, and not even using capitalism's greatest tool for equity, social security. make sure that is the great leveler. including tax breaks for people on social security. including what parents get man what children get, what surviving spouses cap. this is why these are important programs in a democracy and why this committee, as the chairman

started out today, talking about our importance and significance. no greater number than 70 million americans that need a program undressed that has not been touched by congress to enhance it in now going on 54 years. i yield back. >> thank you, mr. chairman. for all of our members here, what we are doing actually is incredibly serious. your country borrows about 70,000 every second. the cost -- the expected additional revenues from taxing everyone more with the expirations at the end of the year would be about $15,700 a

second. the scale of these numbers are terrifying. but as you'll notice when you hear the left and on the right going back and forth, we seem to cherry pick comments over and over that mathematically don't actually walk through the complexity. fact of the matter is, today's tech system is the most progressive ever. the rich pay a higher percentage of federal income taxes. did they get benefits? of course. the fact of the matter is, how many did we remove completely from paying federal income taxes? they still pay payroll taxes. mr. chairman, for submission into the record, i want to put in a series of documents that show the best estimates are almost 70% of the corporate income tax benefits actually go to the worker. and vice versa, if you raise

corporate taxes, about 70% is the mean, come out of the workers wage growth. i am sure you are all with baited breath on the report from cbo last night. chair smith: without objection. rep. schweikert: i have a big stack for you. how many of you saw the cbo report that came out yesterday basically sitting in eight years or so the u.s. has more deaths than births? this is more than just what we are going to extend in the expiring tax policies. the fact of the matter is, the world that we are dealing with today is different than those of us who worked on tcja in 2017. a couple of other things that i sort of want to walk through. we have the reports and it has been supplemented a couple times. cbo, all very recent, that shows

we maximize gdp growth and wage growth if we offset most of these tax extensions because you don't bleed out the capital stack required, so you actually have lendable, borrowable money for your businesses. that makes the world difficult. a couple of other things i want to walk through here on both cbo and tax foundation charts. this will also be submitted for the record. basically showing that if we had done the expensing, the series of research development expensing, capital expensing, it actually has much less cost and equal to or greater than economic velocity than we did in the industrial policy of what was done with the ira and chips act because it has a better distribution, those dollars

ultimately go where it maximizes investment philosophy. i am sorry but this is may be the most important committee in the world. can we get our basic economics and our math right? this is a big deal. you have a country -- mr. chairman, that is now facing a movement around the world where government debt is almost a full point from where we were in december. if we go to a five handle on u.s. sovereign debt, for the next 10 years, that is almost 9 trillion additional borrowing just to pay for that. how does this committee produce policy that says we are not going to raise taxes on working people? we need our small businesses to be hitting a new productivity curve because that is how we

survived. at the same time, how do we thread the needle and communicate to the world debt markets that we are serious? please don't keep raising our interest rates. because at this moment, where the interest rates are going, just that increase of going to a five handle is double, actually double the cost of extending all of these tax provisions. i understand if we don't get this right, the debt and bond markets are going to run this country, not us. i yield back. chair smith: mr. davis, you are recognized for five minutes. rep. davis: let me thank all of our witnesses. 2021 child tax credit expansion almost halved child poverty in just one year. it pains me that the republican

expiration of the 2021 child tax credit expansion doubled the child poverty rate in just one year. yet here we are again with republicans advocating an average $78,000 tax cut for millionaires while demanding working families and seniors pay thousands more in tariffs, lost medicaid, medicare, from student aid, housing, and social security benefits. the tcja does nothing to help parents afford childcare. in 2021, the democrat's family care credit improvement took the benefit from $600 for one child to $4000, and from about $1200

with two or more children to $8,000. $8,000 is a lot better than $1200. tcja does nothing to improve the earned income tax credit to stop taxing low income workers into poverty. in 2021, the democrats nearly tripled the earned income tax credit and made critical expansions for younger workers, older workers, fostered youth and homeless youth. tcja fails to help these workers. tcja does nothing to increase housing insecurity. in fact, mr. duke mentioned that housing investment is lower today.

mr. duke, as an economic expert, can you speak about how tax policies that support low income individuals, parents, and workers strengthen families and boost our economy? for example, if we help parents without tax liability, get up to $8,000 credit for their childcare, like we did in 2021, or if we restored the 2021 earned income tax credit expansion, or if we created a new renter's tax credit, how would these benefits help not only these families but the economy, as well? mr. duke: absolutely. we have $4 trillion on the

table, so that is a lot to work with. as i mentioned in my testimony, housing investment basically cratered after the law passed. i suspect a lot of the reason why i cbo found that growth went down after we spent the tax cuts is because housing investment gets hammered. it's a very interest-rate sensitive sector. a key thing is paying for whatever we are going to do to keep the deficit in check, which is going to keep housing investment going. on top of that, though, we have room to make investments in family that directly benefit. you mentioned a lot of them. the child tax credit was an enormous success in 2021, making sure working-class families get the same tax credits that working-class families do. this committee oversees the largest affordable housing program we have, low income housing tax credit. that is an example of a better priority than a lot of what is in that $4 trillion, two and half trillion dollars for those

homes making under $400,000. the earned income tax credit, making more support available to low income renters makes a lot of sense, while making sure we have robust housing investment going by offsetting letter extension happens by raising taxes on the wealthy and the corporations. rep. davis: thank you very much. mr. chairman, i yield back. chair smith: mr. lahood is recognized for five minutes. rep. lahood: thank you for your valuable testimony on this important subject we are talking about. there was some reference earlier about the election and may be the insignificance regarding the results of the election or somehow this was not a mandate on what happened in the election. this is our first full hearing really since the election. i guess i look at the election results a little differently. if we were sitting here six months ago and i would tell you

donald trump would win all seven swing states, the popular vote, record amounts of african-american males, record amount of latino males, i don't think anyone would have believed us. but that was the results of what happened. the other thing that never changed in the election if you look over the last year, 72% of the country thought we were headed in the wrong direction based on the economy and immigration. we are headed in the wrong direction. you drilled down on that in economics and we have alluded to it today, the insecurities and anxieties the american people have. lower, middle class people felt it. devastating inflation. cost-of-living increases. lower wages. lack of economic optimism. anxiety on living the american dream. that was reflected in the election results. when we think about those results, that is the reality, that is the mandate we have to fill those campaign promises we

made on fixing the economy. what better way to do that then continue the tax cuts and jobs act from 2017? go back to the tax cuts and jobs act, we have talked about some of the results here today. i would argue, my nine years i've been in congress, it is the most important and most impactful vote i've taken in voting for the 2017 tax cuts and jobs act and what it did for the american economy. greeted the best economy of my lifetime. you look at what he did for the economy, higher wages, record employment, record investment in small and medium-size businesses. it created a booming economy. going even further, we moved six and a half million people out of poverty. people to talk about that enough. it was the largest migration of people leaving poverty, leaving welfare programs to go into our economy under the tax cuts and jobs act. why would we want to continue

that particularly with the election results we just had? i would also mention on the international side, particularly what we did guilty, international tax provisions, we repatriated three point $5 trillion back to the united states. no one talks about inversions anymore. pre-tcja, companies were inverting all over the globe. no one inverts anymore because of the changes we made, bringing that 3.5 trillion dollars back to this country. those are the tangible, real results we have from tcja. i admit, covid got in the way of that growth path, we all admit that, but what better way to continue with those results then by making the tax cuts permanent? as we begin, i want to mention two goals that we should be accomplishing. we need to ensure the tax cuts are preserved. if we let them expire at the end

of the year, the average taxpayer in my district would see 822% tax hike in 2026. i know that percentage is similar to a lot of other districts. this is simply unacceptable. we need to work together to make sure we are protecting the full gamut of taxpayers, whether individuals, small businesses, family farms and so on. second goal, which i hope we can accomplish in addition, extending the tax cuts. it is for us to consider the tax proposals that address some of the new challenges that we are seeing in the country today. there are commonsense sense reforms are already out there that address affordable housing, childcare, taxation of americans living overseas. i hope we can look to better support working families and ensure our tax code is more progrowth and evenhanded. ms. gallagher, i have a question for you. my district that i represent in central and northwestern

illinois, large number of family farms, family-owned small manufacturing companies. you alluded to it in your statement that you made about what can be done for farms and small businesses if we were to let the estate tax exemption be cut in half at the end of the year due to the expiring tax cuts. can you talk about what that would mean for businesses? ms. gallagher: thank you for the great question. it will impact at least twice, maybe three times as many of what i say on expecting families. i think most are oblivious to potentially this estate tax exemption being cut in half. many small businesses, yes, they have advisors. we do our best to advise our clients on these things. but the middle-class businesses are the ones who will be on expecting of this and will not have, in my opinion, the time or

money to hire the accountants and estate planners to develop the estate plan that can protect those assets. i would also comment that farmers in particular are most at a disadvantage. manufacturers and companies as well because they have very illiquid assets. farmers in particular, the values of their land continue to increase. it is very valuable but you cannot continue to pull cash out of it unless you sell some of it. there is no cash to pay the estate tax, so it can be devastating to a family when they don't have the cash to pay the estate tax and they need to plan. chair smith: ms. sanchez, you are recognized for five minutes. rep. sanchez: thank you. i just want to take a minute to recognize the fires still raging in los angeles. i traveled home this weekend and while my district is safe, many of our friends and neighbors in

los angeles, including in mist s. chu's district is apocalyptic. we have seen a lot of this information and lies being spread, attempt to score cheap political points and i just want to remind folks that these are real people who are hurting. families who have lost they deserve better from our nation's leaders. i hope we can focus on ways to help these families recover, just as we have done for victims of other natural disasters across the country. that is not what we are here to discuss. republicans are attempting to renew trump's signature tax scam that rewarded our nation's wealthiest at the expense of working families. republicans say the hearings about making the trump tax cuts permanent for working families. let's not forget what they really did. in 2017, they permanently cut

taxes for large corporations which allows them to continue paying less in taxes than ever before forever. republicans claim those tax cuts would trickle down to everyone else. slashing the corporate income tax rate only further lined the pockets of millionaires, executives and shareholders. republicans love the claim they are helping working families but the fact is under their policies working families only get the crumbs. we need to chart a new and fair path in tax policy. we should expand and makes fully refundable the child tax credit like democrats anyone, which cut child party nearly in half. we should expect the earned income tax credit to reach the millions of low income workers who work full-time but don't make enough to make ends meet. we should increase the child and family caregiver tax credits to help families manage their

exhausting and expensive balancing act of working in caring for their loved ones. my democratic colleagues recognize investments that directly benefit american families yield much stronger returns then continually cutting taxes for the wealthiest in the country. mr. duke, can you fix claim it happens when the neediest families experience a drop in income from the death of a parent or natural disaster such as we have seen in los angeles to their eligibility for a child tax credit that is not fully refundable? mr. duke: a good tax credit that supports families reduces income volatility. we can see with the earnings requirement, the child tax credit increases that volatility for low-wage workers. if they lose their job, if they take time off to care for a new child, if a loved one dies, they have to leave the workforce. they lose the child tax credit.

that is getting hit twice from that. that is why full refund ability is so powerful. this is america. most are connected to the labor market. the ones who art are retired -- are not are retired, a disability, or they were in the labor market the year before and he will get a job after. it is hard to get by in america without a job. that is why full refundab ility makes sense. rep. sanchez: they rely on the child tax credit to get by. it should be for hard-working families like hers. isn't it true that under the republican policy you can receive part of the credit if you make over $400,000 a year for joint filers? mr. duke: that is right. rep. sanchez: isn't it true there's an earned income requirement under this republican plan so that the pores you don't even earn enough don't get the full credit? mr. duke: that's right. rep. sanchez: does that sound like this tax policy they are trying to push is going to help

the neediest, hardest working families in the country/ -- country? mr. duke: it does not. rep. sanchez: nearly 80% of tax cuts for individuals in the tc j went towards white households and present about 67% of american taxpayers. and the wealth of billionaires has nearly doubled since the enactment. can you tell us how extending the tcja will widen the racial inequality? mr. duke: america is a country where wealth is distributed unequally and there's a racial pattern. 10% wealthiest white hellhole told two thirds of the entire country's 12 -- white households hold two thirds of the entire country's wealth. even more, we will have to pay for it somehow. we will do it through taxes on imported goods, through cuts to health care. now or in the future. low and middle income families

are going to pay the price and that will drive that. rep. sanchez: i appreciate our witnesses' testimony today and i yield back. chair smith: mr. harrington, you are recognized for five minute. >> i can't imagine any world that anyone from any political party would call what happened and transpired as a result of progrowth policies attacks scam. you -- a tax scam. you would have to have the fundamental belief it is a scam because that is not the american people's money we are playing with here in washington. that is actually rightfully the government's money, i think. there is no way to describe the lowest poverty rates in recorded history as a scam. there is no way to describe the results of the trump tax cuts and the broader trump economic agenda, deregulation, america first trade, and the results of the highest capital investment

ever, highest r&d investment ever, lowest unemployment rates for minorities and women ever. no repatriation of our jobs and businesses overseas. repatriated capital, repatriated businesses, repatriated jobs back to the great u.s. of a. if that is a scam, i've got some oceanfront property in west texas to sell you. those on the lower income spectrum benefited the most. the top 1% paid more. we got more progressiv that sensein -- progressive in that sense. all boats rose on the tide of prosperity as a result of good competitive tax rates for our country and our families.

i guess my colleagues want to go back to when we had higher tax rates than communist china. what is pro-american about that? how are we going to unleash economic growth, job creation and prosperity with that kind of tax rate? we reduced it to 21%. we not even in the top quarter of the most competitive tax rates. i guess my colleagues want to go back to being the highest business tax rate in the free world. it makes no sense. they american people have the clearest contrast between my colleagues' policies and the associated affects on our families and economy relative to the republicans' policies and associated affects. we have never had a clearer contrast between the two.

we had total control when we passed tcja. they have had total control for the last -- not the last four years with the two previous years. -- but the two previous years. there is no comparison. think about the last four years. we had the worst, most regressive tax in 40 years called inflation on working families. we had $8 trillion in deficit spending. we had higher taxes, a barrage of regulations on our small businesses, our job creation engine. we stomped the production of domestic energy, the life let of the economy repeatedly with a whole of government assault. why wouldn't we have experienced

the inflationary firestorm and the crisis that has decimated families today? why wouldn't we? with those failed economic policies and the reckless spending combined we were paying people not to work, expanding welfare without even the reasonable common sense expectation that if you are able to work and you receive social services on behalf of the american people that you ought to be looking for a job are working at least 20 hours a week. the american people were clear about what was on the ballot here. they didn't want anymore of the last four years. we could not have suffered anymore. we need to lock in low tax rates and relief. what did they lose in their income over the last five years? let me ask a question and 15 seconds, ms. gallagher.

what would happen to working families if you put a $5,000 tax hike on them right now on the heels of the last four years of having inflation burn a hole in their budget, in their pocketbook? you have interacted personally with them. you can tell the story. i want to hear it. i'm out of time, so can she answer that question? chair smith: quickly. ms. gallagher: i will be brief. they will tighten their belts, meaning they will have less money to put back into their household and into their communities. that will stifle economic growth. it becomes problematic. rep. arrington: especially when the credit card debt is the highest it has ever been. especially when consumer debt is the highest it has ever been. when we just added $3 trillion in consumer debt. the apr went up by 50%. they are out of money.

they don't have any more credit cards. i yield back, mr. chairman. chair smith: you are recognized for five and its. -- minutes. >> as we review the effects, we should be guided by simple principle. the american people deserves a congress that put the american people's interest first, all the american people's interest first, not just some. i can't think of a better place for this committee to do this then through an expanded and fully refundable child tax credit. we have fed economists, academics, parents, guardians, ms. gallagher and ms. markel talking about the advantages of a child tax credit. it has helped millions of children across america, including over 11,000 children in my alabama district. it is not just expanding ctc,

it must be fully responsible -- refundable and timely received. to make the child tax credit fully refundable would allow many more families to take advantage of this crucial resource. we know that because in 2021, the democrats and the american rescue plan gave more money per child and made it fully refundable, capturing millions of families who make very low wages who may not file taxes or make no wages at all. i think it matters how we structure the child tax credit. i think the plan -- the way we did it under the american rescue plan was the best way. we gave more money to children and gave more opportunities for their families to have better resources. likewise, the ctc would have a more immediate impact if the child tax credit is paid in advance in monthly installments

with the option of depositing it directly into their checking account. people do not pay for rent or utilities on an annual basis. they pay for it monthly. i'm not sure why we would do the same for ctc. it's important we are accountable not just a some american families but to all american families. i can't tell you have any times i was stopped at the grocery store by many of my constituents during the american rescue plan 2021 year and was told by countless parents how that increase in money and being given it monthly with such a huge advantage to them. they were able to get instruments for the children and better food for their children. we as an american people, if are going to spend $4 trillion into debt we cannot do that on the backs of our working families and children.

we should be trying to figure out ways we can be fairly distributing those resources. another area that the tax cut and jobs act has negatively impacted is limiting the ability of municipal governments and public entities to improve their communities, especially those underserved communities. the tax code incentivized these investments in providing tax credits and tax incentives to investors to invest in the communities. as a former bond lawyer i believe we need to use all the tools in our toolkit to make sure we are revitalizing communities. tcja repealed the advanced refunding or tax-exempt bonds that were advanced refunds so many communities, please public entities and governments could not take advantage of lower interest rates. the borrowing cost went up. there are many ways in which we can effectively help more americans and better use the $4 trillion we are investing in expanding the tcja.

i also think it is critically important we look at expanding the earned income tax credit. mr. duke, you talked about that and i would like for you to elaborate on ways we can literally -- we talk about a rising tide lifting all boats. the fact is we have an opportunity if we're going to open the tax code again to benefit more americans. can you talk about that? mr. duke: low-wage workers without children are the only group in the federal tax code. that is a policy error we need to fix. in 2021, we tripled it for these low-wage workers picking $14,000 a year. people not making much money. it prevents the tax code from taxing them deeper into poverty. they are working as cashiers, as construction workers. some of the hardest work in the country.

we should value that were considered insulting them we should value that work instead of insulting them. >> i would hope the republicans will work with us on structuring this child tax credit, the low-income housing tax credit as well as new market tax credits and advanced refunds so we can truly broadly affect all americans. i yield back the balance of my time. chair smith: mr. estes, you are recognized for five minute. rep. estes: thank you to the witnesses for being here this morning. we have so much important work to do for the american people and i'm glad we are starting with this critical issue of progrowth tax reform. i wanted to discuss an op-ed i wrote for the telegraph. i'm deeply concerned the oecd is working hard to finalize pillar 2 guidance before the change in administration.

we have warned the agreement which mandates a global minimum tax implements a utpr provision and unfairly treats u.s. tax credits as that your mental to the country's tax sovereignty, american ingenuity, the federal treasury and our economy. our allies would be best served with partnering with the incoming administration, not with one halfway out the door. i asked consent to submit this op-ed for the record. chair smith: without objection. rep. estes: the americans across the country have suffered under historic inflation thanks to the damaging policies of the outgoing administration. kansans need economic relief in the trump tax cuts are a surefire way to deliver it. without the tax cuts, taxes on nearly every american will go up. the average taxpayer in kansas would pay over $2200 more in taxes if the trump tax cuts are allowed to expire. by extending the 2017 tax cuts we will avoid this tax hike and

allow americans to keep more of their hard-earned money. making the trump tax cuts permanent will do more than just provide needed relief to individuals and families. these tax cusp help businesses and innovators who create and sustain countless jobs in communities across our country, leading to job creation and economic growth. we can't go backwards from the growth we gotten out of 2017 to lose all these benefits. key to the success was the r&d expense provisions. after the trump tax cuts, r&d investment grew by 18%, amounting to over $2 trillion in new facilities and activities, extending immediate expensing of r&d would generate over $70 billion in new investment and support over 21 million jobs. we have the advantage of knowing how beneficial immediate r&d expense is as we've had three years to see the damage and hardship that happens without it.

since r&d expensing expired in 2022, we have seen investment dropped from over 6.5% increase each year to less than 0.5% per year. that means we have less economic growth, fewer jobs for american workers and less tax revenue. in a recent report we have seen job growth but not manufacturing jobs. we are competing globally for jobs and investments and without r&d expensing we risk losing good innovators, jobs and dollars to other countries like china that are choosing to incentivize r&d investment. we can't afford to fall behind on the international stage this way. i want to highlight that in january the house of representatives showed it was possible to find consensus by passing the tax relief for families and workers act. not only did the legislation passed put it past with huge bipartisan support, 357-40.

given the american people's desire for change, i'm hopeful this committee and congress can once again come together to deliver meaningful tax reform that will boost the economy and allowed americans to keep more money in their pockets. ms. silver, some people conceive of the business provisions as handouts for special treatment for business. can you share how r&d expensing allowed you to reinvest in your business to support your employees and customers? ms. silver: thank you for the question, congressman. manufacturing is a total team sport. this expired r&d tax provision has affected my customers and affected my suppliers. no matter what your size or structure of your business, we are affected by this. i can give you example. i run my business on a software, erp system is called an the

company that built that software is in taxes. -- texas. their tax liability when i buy a lot after this expired. they have less ability to reinvest their profits to create new jobs, to innovate the product that i use every to run my business. there is a ripple effect definitely to me. that is just one example. rep. estes: we are hearing it over and over because of the cash will costs and not being able to write out the expenses on your taxes. you are not getting the benefits and therefore your customers are not getting the benefit. thank you. i'm out of time. i have more questions but i will yield back. chair smith: you are recognized for five minutes. >> thank you. i want to thank our witnesses for being with us today. i appreciate that so many witnesses have highlighted the

benefits of expanding the child tax credit. when democrats expanded the child tax credit in 2021, child party was cut nearly in half with the credit reaching over 65 million kids. the republican version of the child tax credit leaves out one in three children, especially the ones that needed the most. when republicans lead the expanded child tax credit expire , child party more than double. this data, there's lots of data, underscores the importance of expanding the child tax credit beyond what was done in in the -- in the tcja. republicans are focusing on the good things from the tcja, but when a reality we have spent the last seven years trying to fix the many mistakes they made. for example, republicans made changes to the r&d credit to help pay for their $3 trillion bill, making it more difficult and expensive for businesses to invest in r&d. we have a chance to meaningfully

help families and small businesses by reforming our tax code. republicans are moving full steam ahead with plans to spend trillions upon trillions on more trump tax cuts for the wealthy and well-connected, leaving working families to foot the bill. even worse, republicans want to partially pay for these tax giveaways by cutting medicaid and medicare which provide basic health care to low income families, people with disabilities and seniors, gutting critical investments to combat climate change and imposing across-the-board tariffs on imports which economist estimate would raise prices on the average american household by thousands of dollars per year. this means higher costs at the grocery store, gas pump and pharmacy counter. these negative impacts will get worse when our trading partners retaliate by cutting off access to their markets or blocking

essential goods like critical minerals from coming into the united states. mr. duke, can you discuss the regressive nature of tariffs and with the likelihood impacts are -- what the impacts would be of the first -- the tara first trade proposals -- tariff first-rate proposal? mr. duke: tariffs are the most regressive form of tax. treasury assume the bottom 90% will only pay about 20% of the total individual income taxes that are paid. they pay about 30% of corporate taxes. the bottom 90% pay more than half of taxes on imported goods. this understates the regressive video tariffs. --regressivity on tariffs. it create -- it taxes

higher income rates different than lower income people. is based on national security, industrial strategy and resilience. the more industries you apply that to the less effectively we accomplish those things. when using it as a 20% across-the-board, it's a national sales tax. it is the most regressive way to raise revenue. rep. delbene: i also wanted to talk a little about the irs. republicans claim to be concerned about the nation's deficit, yet they continue to advocate for and enact policies that increase it. republicans continue to target the irs and have rescinded $20 billion of the $80 billion in the inflation reduction act to help make sure folks are paying their taxes, especially the wealthiest are paying their taxes. mr. duke, can you speak to how cutting irs funding impacts the deficit? mr. duke: the bulk of the irs funding was dedicated to hiring staff, step up enforcement of tax law and modernizing a 20

century technology that was at the irs. -- 20th century technology. they focused on auditing wealthy corporations. is it surely effective and has paid for itself multiple times. cbo estimates of one dollar cut to the irs funding will read the deficit by $2.50. iris spending is a critical part of our law enforcement apparatus. that is how we caught al capone. i don't understand why we would like terrorist and money laundress and fentanyl dealers off the hook by cutting irs funding. rep. delbene: thanks again to all of our witnesses are being. i yield back. chair smith: you are recognized for five minutes. >> i am glad we are holding this hearing. as we engage on implementing tax policy over the next few months and years, it's important to understand the impacts of the tc j an impact it had on the economy and the american people.

-- tcja. we are hearing tired arguments about the tcja that are false. we have heard the tcja made the tax code more progressive. that is false. we heard that the tcja benefited the rich at the expense of middle income america. that is false. mr. chairman, i have a chart from the irs that i would like to submit into the record. chair smith: without objection. rep. smucker: i would like to explore a little bit of this today. this is a chart comparing -- is from the irs, 2017 tax returns filed compared to 2018 tax returns filed. there are some striking results here. the tax cuts and jobs act, 2018 was the first year it went into effect, it reduced average

effective income tax breaks for filers in every one of the irs's income tax bracket. every one. the largest benefits going to the lowest and middle income households. for instance, in the $40,000 to $50,000 income range they were about 12 million returns. the average tax paid by them was reduced by 18%. in the $10,000 to $15,000 range, the average tax paid was reduced by 71%. as opposed to the top 1%, they saw a but much less. they sought reduction of less than 5%. the benefits most certainly accrued to the lowest income earners and everyone or every class at least saw a reduction

in their taxes paid over their taxes in 2017. we also saw the poverty level reach the lowest ever in the history of the country. the poor were lifted out of poverty. one of the interesting things of this chart is that we saw upward mobility as a result of the tax cuts and jobs act. for instance, the number of individuals in the 25,000 over earnings bracket was decreased by more than 2 million filers per year. that many people moved up and earnings. the highest increase in earnings, over one million filers, was the $100,000 to $200,000 range.

the american people did not believe democrats last session when they said -- when they looked at how they felt after four years of the biden administration compared to four years of the trump administration. they understood that the tax cuts and jobs act benefited them. they saw the impact of their pocketbooks. the understood real wages have gone up about $6,000 annually compared to a reduction of real wages after inflation with the biden administration. they told us they understood that in the election. to the democrats on the committee, they didn't believe you last time and they are not going to believe you now. what i suggest is that we find ways to work together. i do agree there's a number of things from the democrat side of the aisle here today. i'm concerned about the debt. we ought to be sure we are doing

the extension of these tax cuts. we are implement and policies that grow the economy. you can't change our fiscal trajectory that we are on, which is not going to end well without strong economic growth policies. we could agree on a lot of that. otherwise we should have corresponding cuts in spending to offset the costs of any tax increases or tax extensions that are not covered with additional revenue through economic growth. there are a lot of areas for us to work together. we should do that. we should do what is right for the american people. these tired arguments about what happened with the tax cuts and jobs act, they didn't leave you then and they are not going to believe you today as well. thank you, mr. chairman. chair smith: ms. chu, you are recognized for five minutes. rep. chu: the republican tax

bill provided a gigantic tax break for corporations, leading to billions of dollars of profits for them. there were no conditions for this money. this bill gave a top tax rate cut for millionaires and billionaires from 39% to 37.5%, giving them millions and millions of dollars of profit. there were no conditions for this money. yet i have just returned from my district in southern california which has been completely devastated by the eaton fire, leaving it an apocalypse. in altadena and northern pasadena the fire has destroyed over 7000 structures, left 20,000 people homeless, burned schools and businesses and community institutions to the ground. first responders have found a

people who lost their lives and expect that number to rise. thousands of people have lost their homes and a lifetime worth of belongings and memories. yet scores of republicans led by president-elect trump and speaker johnson are already threatening to place conditions for a disaster assistance to these victims. i invite any republican in congress who is entertaining these demands to visit my district, see the devastation for yourself and look the victims in the eye when you tell them they don't deserve help from their country because you disagree with certain policies passed by their state. this is the united states of america. we help our citizens when they fall victim to a natural disaster regardless of their political party or opinions. we do it without strings

attached. just like we did in december for victims of hurricanes milton and helene. i bring this up because i have not heard a single republican suggest that the trillions of tax cuts for the wealthy they are proposing to make permanent should be conditioned or come with strings attached. one thing is for sure. we should not impose conditions for helping people at the absolute lowest time of their lives. and now i will turn to another subject. mr. duke, i noticed you had written some pieces about pass-through entities for the center for american progress before the trump tax law passed. as a longtime member of the small business committee i would like to ask you about the one -- >> we