and i think it would have a positive effect. but i don't think that's going to be much of a chance. i say let's work on immigration reform and get it done for everybody. dahlia walker-huntington: you have to remember the context of the creation of the cuban adjustment act as well. this is immediately after the bay of pigs, after jfk's disappointment, people feeling let down, the american administration not being there to provide support. a number of things sort of collided or converged to sort of compel the congress to create come to pass this law. but in addition to the law there's so much support that is built into the cuban adjustment act in the form of help to such a people reconstruct and rebuild their lives. and i think that cubans probably by far, correct me if i'm wrong, the only immigrant group in the history of the united states who

have benefited from this kind of rich support, not just in terms of the law and the ability to arrive and be eligible for the green card a year into your arrival, and five years later citizenship, but all the support, right, support to help you pick up yourself and figure out the way that this country works. i don't think that's extended to other groups unless of course they are designated as refugees. correct me if i am wrong. right? and then in terms of people, you know, leaving their countries to emigrate, no matter where they are going, no matter where they're headed. i want to remind us that no one takes this kind of decision lightly. you're not going on a cruise when you jump into a raft and decide you're going to come to the united states. it's not a cruise. right? the ship is barely seaworthy, i call it a ship, maybe my vocabulary is escaping me for a minute, but the thing that they travel in is not seaworthy

generally. we do not know the number of people who have drowned at sea. we don't know the number of people who have become dinner for the sharks, and so i just want to remind us that no one makes this decision lightly. and next time you're on a cruise i invite you to just go up on deck top at night and look at, look at what you see out there. you see nothing but pitch blackness. all right? and so that is, that's the climate or that's the backdrop of the travel that someone knows when they come to the united states through a makeshift raft or what ever it is they create to try to cross over. that's not a decision people make lightly. gepsie m. metellus: it's also important to take note that we sometimes only think of people here who are undocumented as people that came on boats. the majority of undocumented

people have come on visas and overstated. -- and over-stayed. but even having said that, that decision to get on a plane and to leave everything you know there has to be a push, as the archbishop said, a factor causing you to want to leave, and a pull. the pull factor to come to america is everybody wants to live the american dream. or we want to get the education. we want to have the opportunity to be who ever we can be. it's the only country in the world where you can be born in a shelter and know that if you put your mind to it and to work hard every day, you can become the president of this university, or you can become the head of the hospital. while there are other countries in the world with opportunities, the opportunities that are here, let me qualify that, is more than it is anywhere else.

so you find people from all over the world who want to come to america for that opportunity. we happen to live in south florida which is the gateway to latin america and the caribbean, but if you go to other states throughout the united states you are going to find other pockets of immigrants. you are going to find pockets of africans, pockets of indians pockets of russians, yugoslavians, and they are all going through the same type of immigration battles that we go through here in south florida, but we know the battle or the plight of the haitians and the cubans and the jamaicans because that is the majority of who we have here. and so why don't people go back to their countries? that's kind of a political answer. you have hosted your political show. is what can be done from the government perspective to help other countries to build their economies so that less people

will want to come here from an economic perspective? now the state department under hillary clinton's leadership saw the importance of what's called the diaspora. so i am a member of the jamaican diaspora because i am no longer living in my country. gepsie is a member of the haitian diaspora living here. the state department under mrs. clinton's leadership has seen the importance of the diaspora and so there has been programs that have been put in place for different members of the diaspora to come together to see how they can benefit their home countries. and as jamaicans we do that, i know the haitian community also has a very vibrant diaspora. so that's one way that you can help to stop the pull factor. the push factor, rather. but the pull factor is always going to be there where people are always going to want to come to america because it's a shining beacon in the world of

everything that you can achieve. and to the young man who missed the daca by 30 days, you certainly would've been, you are an example of somebody who would've benefited from the president's executive action because the executive action changed the date. it moved it up. [inaudible] you came within the timeframe but you came 30 days to old? yes. you are really an example of somebody who could use overall immigration reform in order to change your status. >> we have a kid that is your age. helen: to be an unaccompanied minor is a frightening experience. even though you are a young man, your journey may not have been

an easy one, we do not know. i can only imagine if you do not have family here how difficult it is to be able to face the trials and tribulations of coming to a different country that is foreign on multiple levels, it is frightening. part of the problem of trying to assist with unaccompanied minors, particularly the many who are under the age of 12, is who propelled them to come here? are they really unaccompanied? do they have parents that are here? many of them are not going to court. it is a very complex system but there is something that i find interesting and we danced a little over the 2016 presidential election and something that i find gratifying is that two possible republican candidates from florida talk

-- marco rubio and jeb bush, have talked about understanding the opportunities and if they were in similar situations they would do the same thing and for the benefit of their families would come over here and break the law. the struggle is that there is the misunderstanding of breaking the law as if all laws are felonies and they are not. being here illegally is a civil offense and it is not a felony. but unfortunately there is a huge misunderstanding given that issue.

marco rubio gets heckled a lot and criticized a lot because she was on the forefront of immigration reform and then he pushed back because you did not like the bill at the end of it. he does not get the credit for bringing it forward and having it approved and he does not get credit then after for trying to walk it back. but i will tell you something about marco rubio and that is that before the president, six months before the president did different action, i called his office and i asked if i could take a number of undocumented students to him so that he could get a sense of who they were and speak to them and see if there was something we could do with immigration reform. and he accepted and there were maybe eight or nine students who went. some gave full names and some only gave a first name because they were mistrustful. and senator rubio was only in office six months or so, maybe less, and he had a very frank conversation with the students about what could be done and what could not be done.

he allowed them approximately a two hour meeting, allowed them to speak about what the experience was about. they asked, if we are legalized, i think they spoke about legalization but it was met -- but it was not just deportation. what does that imply? do we get social security numbers and a driver's license? what happened to parents was a big concern, will they be kept whole? it was a fascinating process and it started what i think is an important conversation. gabby was a part of that group and she was one of the leaders that really started the dream act from miami-dade college. in that conversation, it was

obvious that gabby, because of her age, was not going to be included in what was being proposed and aged out for daca as well. so you are not alone in missing it because of age, but that is not to say that you cannot contribute and i wanted you to know that. i find it ironic that we struggle with this conversation today and yet, tell me if this isn't strange? we are allowing people to pay for visas to come in here. we have even dropped the threshold. i'm not saying having half a million dollars is easy, but if you have $500,000, you can come into miami and you can promise five jobs. you don't have to prove them. we have people here that deserve the right to not fear deportation.

it is not a right to not fear deportation but deserve the benefit to be here and to not fear deportation. archbishop thomas wenski: we need immigration reform, comprehensive immigration reform. we should not give up on this congress. we have to keep on asking people in this congress. and i think that daca will, on the table. the judge put out a stay but that could be overruled. it could take time. when it gets overruled, then it will be in effect and this time right now for those that could be beneficiaries of it, it is time for them to gather up documentation. there is going to be a lot of paperwork, rent receipts, things the lawyers will be asking. and you should save up your money because the u.s.

government will charge you $500 to partake in that. and a lawyer might ask you for a few dollars more. [laughter] archbishop thomas wenski: for those who are potential beneficiaries of this bandaid and it is only a bandaid to start preparing written documentation and money to participate in it in the eventuality of the stay being overturned. in the meantime, we all have to work for comprehensive immigration reform not only for the beneficiaries but for everybody like our friend here. jorge duany: i think we have time for a couple more questions. anybody else? >> i am a professor in the english department and i have a question.

everything you are saying is important and pertinent for questions. media is important and law is important and communal activism is important. but i have not heard one element that i think might also be of significant importance and that is education. we are talking about putting a face to the problem, but who talks about people here? you talk about the laws, different procedures, a lot of technical things which are very important, i do not deny the significance. but how about education? is there a role for education to play in advancing the cause you have so elegantly advocated? thank you.

helen ag. irre ferre: i would say education has been at the forefront of this discussion. educational institutions have been the primary proponents of the dream act. to show you how complicated it is, we did not get the state tuition waiver, our form of the dream act, until last year. it was absolutely astounding, a state where the hispanic population is so significant. it has been there but for some reason or another, educational institutions push for so many things, at the end of the day they end up pulling back on some things because they have, in legislatures, budget interests

that they need to push more strongly than other issues. i would say that education has been at the forefront as has been hospitals. archbishop thomas wenski: and the human faces, i see them in pews every sunday and you see them in the desks every day. that is the human face. education, like the church, can put a human face on this issue because we are not talking about statistics, we are talking about human beings, men, women, and children, whose futures are affected by a broken system. somebody said, as i like to say, immigration law is not criminal law, it is civil law, so it is not a criminal offense, it is a civil offense. call undocumented aliens lawbreakers is a bit of a misnomer. in that reality, they are not breaking the law as much as the law is breaking them. that is why the law is unjust and has to be changed.

dahlia walker-huntington: the panel that is being done, i want to say thank you for providing us the opportunity by hosting this panel. this can just be one of many that is held. certainly, there is a certain amount of fear in the community. you talked about some of the students not giving their last name. there is this fear of deportation that is very real. from time to time, washington will send an e-mail. a reporter is doing a story and they want to see a particular person who fits this demographic and you cannot find anybody because nobody wants to come forward to put a face on it so that becomes difficult. helen aguirre ferre: two years ago, the feds would come in and clear everybody out.

we did not have this fear 10 years ago. dahlia walker-huntington: the fear was always there. archbishop thomas wenski: it is not just a fair because in the past six years more people have been deported than in the past 19 years. -- 15 years. gepsie metellus: to address another issue of your comment, i think in the advocacy community we need to step up the education through creating opportunities to share the success stories on the one hand. and on the other to remind american brothers and sisters and our country of history and heritage as a land of immigrants, a land whose riches we all enjoy and benefit from today. created and built upon

continuously by immigrants. yes, we have a lot more work to do in terms of community education. helen aguirre ferre: you're absolutely right about that. and just a thought to throw out there, it will be interesting to see if jeb bush runs for president, he married a mexican and he did peace corps. he met her in mexico city. it will be interesting to see how that plays. i was fascinated to see how we presented at cpac, the conservative pac in the republican party. 25 or 30 people walked out but the rest stayed and he got applause. and he had been pro-immigration reform.

that to me says something that i think we have reached the tipping point and things are beginning to change in this country but that needs political will. i will tell you something, a couple of weeks ago, what did john boehner do? he passed the homeland security bill. he said, forget the hasstert view. let's vote up or down and it passed. the world as we know it, continued. and i think that is a lesson that maybe others are going to notice, that the bread continues to be sliced. dahlia walker-huntington: it is interesting that you talked about jeb bush because his name cannot you mentioned in conjunction with that cannot be mentioned in conjunction with his run for presidency without

knowing how his immigration is going to fall out. i would hope he would step up to the plate and that is a problem that people have with politicians in general and marco rubio in particular. because of his wishy-washy, i introduced the bill that i am not going to back it and you are not coming up with an alternative and not your hands off as though your family came over on the mayflower. it is a problem. if politicians will stand up for what they believe in, people will have more respect for them. i certainly would respect to jeb bush if he stepped up to the plate. i am not going to vote for him but i would certainly respect him for stepping up and taking on immigration. archbishop thomas wenski: they say that making laws is like making sausage. not a pretty process. but i think there has got to be

a way to clear the logjam. i do not think the republican party is completely restrictionist. there are certainly some restrictionists in the party strong anti-immigration. there are some on the democratic side as well. i think we have to deal with the good angels on everybody's side and remind people that politics is a noble vocation and it is about the common good. and one of the areas that touches on the common good of everyone in this country today is our broken immigration system, and it needs to be fixed. jorge duany: thank you to a wonderful panel and thank you all for being here. [applause] jorge duany: and good

afternoon. >> head of the u.s. immigration enforcement will testify about the enforcement of immigration laws. we will have live coverage today at 10 a.m. on c-span3. in the afternoon, the senate foreign relations committee will talk about iran legislation. the final measure could give sanctions relief to iran. if lawmakers disapprove. law coverage of this markup starts at 2:15 p.m. eastern on c-span3. >> were you a fan of c-span's first lady series? it is now a book. looking inside the personal life of every first lady in american his great -- history. based on interviews with more than history andians biographers.

learn more about the ladies, their lives and ambitions and unique partnerships with their presidential spouses. the book on the lives of 45 iconic american women provide lively stories of these fascinating women who survived this group me of the white house , sometimes at personal cost while subverting their families and even changed history. c-span's first ladies is an illuminating, entertaining and inspiring read and is available as a hardcover or e-book. >> next, a discussion on some of the challenges and implications to making changes to the u.s. tax code. the panel also spoke about how u.s. tax policy could affect the 2016 presidential race. the cato institute hosted this one hour of event.

peter: thank you for coming to the panel called defining the taxpayers, the real challenge for tax reform. i am peter russo and i am very pleased to host this event. in january, the chairman initiated another effort to get a tax deal done. this is no deal -- easy task eared the past years have seen a bewildering number of tax proposals. none of which crossed the finish line. many economists, like those at cato, prefer something more radical or something that replaces the tax code itself. for decades now, there has been a constant hunt to find new things. have already seen gas taxes, cigarette taxes, and for a very short time, soda taxes.

there is an area left unturned in a hunt for new sources. of course, high taxes and increased complexity are only the symptom of a larger problem, the inability of elected officials of both parties to control spending. and successful resistance has been largely unsuccessful. for the most part, this year's budget appears to be an achievement. but that is only half the coin. in addition to controlling spending, it is essential to get the economy going at a rate comparable to that of previous recoveries. so many of our current woes would be alleviated by robust, economic growth. i shouldn't have to sell the benefits of this, but it would be easy to imagine millions of people returning to the workforce and taking themselves off footsteps.

however, it does not appear that this particular mix of elected republicans and democrats are about to come to any agreement. so that provides an opportunity for us to discuss opinions of our own -- ideas of our own. what is income? what is currently taxed? and what are the effects? to my left is daniel mitchell, a senior fellow at cato who specializes in fiscal policy particularly tax reform. prior to joining cato, mitchell was a senior fellow at the heritage foundation. he has been published in numerous outlets including the "wall street journal" and the "new york times." he earned a phd in economics from george mason university. david burton is a senior fellow at the heritage how -- foundation focusing on

regulatory and administrative law. burton was general counsel at the national small business association for two years before joining heritage in 2013. he previously was chief financial officer and general counsel at a startup, a conservative alternative to aarp. he received his doctorate degree from the university of maryland school of law. finally, jason fichtner is a research fellow at the mercatus center. his research focuses on social security, federal tax policy federal budget policy, to increase savings and investments. his work has been featured in the "washington post," "the wall street journal," and "the new york times." he earned his ba from the university of michigan, ann arbor.

each will speak in turn for 10 to 12 minutes, after which, we will open it up to questions and answers. please, welcome dan mitchell. [applause] daniel mitchell: thank you peter. tax reform oftentimes -- people think it is all about the tax rate. should you have a system with high tax rate? or should you have a tax system based on one low rate. today's panel is really looking at another big part of tax reform. and that is understanding the definition of taxable income and in particular, looking at two competing theories of how to tax capital income. i have a couple of slides that i think will help make this issue more understandable about defining the tax base. as i said, the issue of tax rate

is important. for those of us who want certain types of tax reform, we think it is very important to have a low marginal tax rate on productive behavior. why? because presumably work, saving, investment, risk taking, those are good things in our society. and when you have a high tax rate on those things, you are going to discourage people from being productive. i have an image i found on the internet. i think this really boils down to what the essence of economics is. i agree with politicians when they say, we need higher taxes on tobacco because that will get people to smoke less. i don't agree that we should actually try to control people's private lives, but i agree with them on the underlying economic analysis. when you tax something more, you get less of it. as our little dinosaur is pondering, if higher taxes on cigarettes will lead to less smoking, what higher taxes on work lead to less work?

or, for that matter, higher taxes on saving and investment. so the issue of tax rate is very, very important. but our topic today is not a challenge for tax reform, what i think is the real challenge for tax reform. because of you look at some of the proposals that are out there -- and you can go all the way back to the 1980's -- so much of what really happens when we are talking and debating about tax reform in washington is the fundamental discussion over whether or not we are taxing all income, whether we are taxing it zero times, one time, or more than one time. and as the bottom bullet point suggests, i think one of the major issues we need to wrestle with is how do you deal with the tax burden on income that is

saved and invested. there, of course, are -- and david and jason will both be talking about some of the specifics in this discussion but i'm trying to focus on the underlying theory. until we can get our minds around what the real debate is about. so let's look at what i think is really -- this is really a fight over. there are two competing tax bases out there. in the big picture fight, there are two. -- which actually is, basically undermines our current system. and it is certainly the tax base that the joint committee and others use when they analyzed the tax system. and it basically assumes that there should be double taxation. that government should not only tax income, but also changes in net worth. you contrast that to the consumption base. the consumption base, at its core, is simply whether or not you should treat income equally, whether it is consumed today or

consumed in the future. and what is consumption in the future? it is just another way of saying saving and investment. why is that important? it is important because right now, we don't have that neutrality between current and future consumption. why not? because we impose all this double taxation, triple taxation on income that is saved and invested. a consumption-based tax, it doesn't mean a tax collective cash register. yes, the national sales tax is a consumption-based tax. but so is the flat tax. so is the x pact that peter referred to. you are either taxing people when they first early income, or you are taxing people when they consumed income. but if you get rid of double taxation, you have to, by definition, a consumption-based

tax. and when you look at, say, the flat tax versus the national sales tax, they are basically different sides of the same coin. they both have the consumption base. the only difference is the collection point. the flat tax taxes your income one time when you first earn it. and something like a national sales tax taxes your income at one low rate when you spend it. but the bottom bullet point is the important thing. neither of them have double taxation, which is of course pervasive in the current system. you won't be able to read this chart, but it shows the different between a consumption-based tax and the other taxpayer the right side is basically the tax base, sort of what our current tax base is. the top green box is your income. the first green -- blue box is your pay tax on income. then the second green box is year after tax income. you can either consume it today

or consume it in the future. if you consume it today, that is the left side. the government pretty much leaves you alone. but what if you consume that income in the future? that is the right side. and between the capital gains tax, the corporate income tax, the double tax on dividends, and the death tax, it is possible for that single dollar of income to be taxed over and over and over again. which means, of course, there is not that neutrality between current consumption and future consumption. now, why is that a bad idea? well, it is a bad idea because even -- every economic theory agrees that capital formation is a key for long-run growth and higher living standards. why do workers get paid? they get paid because they produce. what determines how much they produce? a lot of it that has on the

quality and the quantity of the machinery, the capital that they work with. so when you impose extra layers of tax on saving and investing that are already imposed on immediate consumption, you are creating a tax bias against capital and, therefore, reducing tax capital in the country and ultimately hurting workers because they will not earn as much because they will not be as productive. it makes no sense to impose a tax bias on productive behavior, especially productive behavior in the form of saving and investing, since every economic theory -- i mean, the socialists and the marxist, they have crazy ideas. they think the government should do the saving and investing. but at least they agree that capital formation is key to run -- long-term growth and higher living standards. i think this image sums up the difference. if you want to harvest apples,

what is the smart way to do it? do you pick the apples off a tree? or do you chop down a tree? if you are taxing capital, you are chopping down the tree. or at least you are sawing off the branches. in a smart, intelligent system where you are trying to maximize income and prosperity for an economy in the long run, you want to pick the apples but leave the branches and leave the tree so that you will get another crop of apples next year and the year after that and the year after that. whereas the mindset of the other taxpayers is, well, not only do we want to tax the apples, but let's at least saw off some of the branches. why? i am not sure other than, here is the political challenge. we have it for two reasons. first, class warfare. who has a lot of saving and investing? rich people, by definition. who has a lot of capital?

if we decide that we don't like rich people for political reasons, or we decide they are the easiest target -- well, you oppose -- impose taxes on capital. a lot of times, rich people also have a lot of capital that might not be easily accessible if you are simply imposing a high personal income tax rate. that is one reason why we have these destructive policies to the other reason -- policies. the other reason i think is just ignorant. how many of us have seen warren buffett make a silly claim that his secretary pays a higher tax rate than he does? he wants us to forget that any capital income he is receiving has already been taxed at the corporate level. not to mention the fact that the income was taxed before he first invested it in some income producing assets. so, if you simply focus on one tax in isolation and you ignore

all the other taxes in the stream that are affecting that same dollar of income -- and a lot of people i generally don't think it is malice or class warfare -- they just don't understand the difference. well, except if the only reason you got a capital gain is, which by the way, because he took income and invested it, but wider assets go up in value? they go up because of expectation in the marketplace that they will generate more income in the future. so whether you are doing it forward-looking or backwards looking, the capital gains tax is a form of double taxation. i will go ahead and stop at this point. we want people to understand that double taxation exists. there is no actual ambiguity about it. if we had somebody appear from a left-wing think tank, they would agree. there is a consumption-based system.

they would simply argue that the other system is justified for reasons of revenue collection or redistribution or something like that. they will agree with the notion that there is double taxation. so, with that, i will go ahead and stop and turn the floor over to david burton. david burton: thank you, dan. i have been asked to talk about two things. investment and the international tax system. so, let me start with investment. let me ask you a question, or pose something for you to think about. if you buy a one million-dollar machine or a $100,000 machine to make widgets, and then your 100 thousand dollar machine in the first year earns $200,000, hasn't made any money?

most people would answer that question, no. so, this is the basic core idea underlining the fact that capital expenses should be deductible like other business expenses. you see that in section 179, but it should be applicable to all investments. let me try to explain some reasons why. dan mentioned that investment is key to productivity and increasing real wages. we see that all over the world many, many different cases. but in the united states, the last time we did anything significant in terms of moving -- was in 1981. under president reagan. which was a substantial move towards -- because businesses could deduct their capital expenses more rapidly.

as a result of that, you saw an investment boom that was all most unequaled in our history. that lay the foundation for a very extended. of strong economic growth, and one of the most robust, dynamic recoveries that outlasted the reagan administration. so this is a real-world effect. it can have a tremendous positive impact on the american people. in more formal terms, when you delay the deduction of capital expenses, potentially as long as 39 years under the current system, you raise the cost of capital. a business has to earn more money pretax in order to justify the investment. and as a result, you get less investment. you get less productivity growth. less incorporation of new technologies. and lower real wages than you

would otherwise get. if you have a flat tax type environment, or the current tax system, you mold towards expensing the sales tax. similarly by not taxing as consumption the purchase of a machine, but either system gets you to that result. a couple other things. there is a secondary consideration. the current system plays favorites. it picks winners and losers. so by giving some types of investment relatively accelerated deductions, and expensing others as long as 39 years, it extorts the capital. do you want to broaden the capital stock? make it deeper, have more investment? than the other question is where does that float tackle our current -- that flow? in any of the fundamental tax reform plans, flat tax, anything that moves towards expensing

solves that problem, as well. let me just briefly touch on one other question. we hear a lot about lowering the rates and broadening the base. and that is good. but consumption tax is broader than the current tax system. but in the business sector, we got rid of most of the true junk in 1986 in the 1986 tax reform act. if you get rid of things that are not treating capital investment correctly, there is only enough base broadeners in the corporate side to drop the race -- rate about two points, maybe three. so the problem we face today is that we are an outlier. we have an levels of business taxation compared to virtually every other industrialized country. we have the highest edge into a corporate rate. we have among the very worst treatment of investments. and we also are the only major industrialized country that

taxes its businesses on income earned everywhere in the world instead of just income earned in the united states. so when you combine those three rings, and a number of -- things, and a number of other things, you basically realize that we have a serious problem. we are making the united states one of the least attractive places from a tax perspective. and we see that. our businesses are no longer as competitive as they once were. we need to repair that damage. so, with that, let me move to the international. the u.s. taxes u.s. corporations on income earned throughout the world. now, we also provide a credit for foreign taxes paid, but that credit is limited to the u.s. tax rate times the foreign sourced income. it is really not that simple because the foreign source income is divided up into a whole series of batches. based on the type of income and

what country was burned in. then you have a complex series of rules allocating income for expenses between the united states and abroad for purposes of determining whether the income was earned within the u.s. or abroad, which is necessary for purposes of the foreign tax credit and other reasons. but the short of it is we tax us-based businesses on the incomes throughout the world. one way to avoid that is to merge with a foreign corporation. if you merge with or corporation, the new combined entity is only going to be subject from u.s. tax cut its u.s. income. as long as we do that, we are basically driving corporate headquarters outside of the united states. so when you see anheuser-busch merging with inbev, it is really simple to decide that the new corporate headquarters will be in europe. and asked the people of st. louis how that is working out for them.

when chrysler and mercedes merged, the new corporate headquarters was in germany. not in the united states. and so on down the line. the only way we are really going to prevent this tremendous push to move corporate headquarters from the united states to abroad and, in effect, control the businesses abroad is to move to a territorial system that taxes u.s. businesses on u.s. sourced income. and having a corporate headquarters has a number of positive effects. obviously, you have the higher paid corporate functions in the united states instead of abroad. but it is also proven that u.s. businesses tend to sell more goods made in the u.s. to their foreign hub than if the business is run offshore. somewhat counterintuitively, it is better for u.s. exports to have a territorial system. i guess the last point i would

like to make on the international stuff is that u.s. multinationals have become fairly good at gaming the current system. it doesn't raise that much money. it almost gets into the category of a fiction -- and that is the cousin are able to manipulate the pricing, the pricing of intangibles such as trademarks royalties, and other copyrights, patents, so on and so forth. and lastly interest. whether they borrow abroad or borrow in the united states. so that they can, basically, increase their foreign tax credit beyond what is theoretically the right answer. and drive down the effective tax rate on foreign sourced income. so moving to a territorial system that no longer encourages these inversions will probably

not cost any money. so we have a system that is basically having all these adverse economic effects on the competitiveness of us-based businesses, it isn't raising any, or very little, money. and if you address the intangible questions, you can do that and not lose any money. in terms of how to do that, the former chairman of the ways and means committee had a number of good proposals that would solve the issue. so these are somewhat difficult problems, but they are solvable problems and would put the united states back into the mainstream. and that is what we need to do. we need to move our business tax system to a more competitive tax system. we need to reduce our corporate and passed through rates. we need to move towards expensing of capital expenses, rather than binding the system to it. and we need to move towards a territorial and border adjusted

tax system. with that, i will turn it over to jason. jason fichtner: thanks, david. good afternoon, guys. there is an old joke that if you lined up all the economists end to end, the one thing you would not get is a conclusion. but we are actually up here in a lot of agreement on tax policy. on what is wrong with taxes, the tax system, corporate income tax, what needs to be done with it. and it puts me in an odd spot. my two colleagues have said almost everything. i am going to clean up at some points that they touched upon and we emphasize the importance of it. we are also now getting into the start of the presidential sort of election season, if you will. and with that, candidates come out with their various tax

plans, and there is misinformation on what taxes does and doesn't do. it might be a good time to review some of the important issues about tax rates and bases and margins. so, with that, i want to highlight what both david and dan said about how economists generally prefer a broader tax base with lower marginal rates. this is very important because it really is the tax rates that drive the decision at the margin. it is at the margin where we decide whether or not to work that extra hour. whether or not it is a -- it is too expensive to invest the extra dollar. you will hear some discussion about corporate tax and whether or not we have the highest tax rate. we do. some will say our effective tax rate is lower, but the effective tax rates -- because we have so many exemptions -- that this incentivizes some behaviors. that creates inequities and vice in the tax code.

it is that the effective tax rate that drives the decision, it is the margin. so we really have to focus on the margin and lower the tax rate. we also have a question that comes to both individual and corporate about what we mean about a tax expenditure? we just got rid of all the corporate and individual tax expenditures, we could raise $1.3 trillion. well, tax expenditures aren't all loopholes. certain preferences in the tax code are actually like government spending. but others actually aren't earned. so again, to give you an example. the exclusion of employer provided exclusions for health care. they are in a text on it, we are not taxed on the benefits. the preferential treatment of capital gains is actually

designed to offset some of the double taxation that both of my colleagues talked about. hence, it is not a tax expenditure. certain administrations have called it a tax expenditure. others like president bush have not. if you look at the documents for the budget, and a list a tax expenditure budget, it changes from administration to administration. so it is not consistent. david mentioned the tax reform act of 1986 and how a lot of the junk we have was taken out. it is important to note that that was true. that tax reform is considered the most successful tax reform in american history, and also the worst. we have today more exemptions in the tax code before we passed tr 1986. before we start running the base and lowering the rate, we still

have the first problem. that base starts getting there were and there were again. we might ask a have a chance to do corporate tax reform keep -- reform, even under this president. he has called for lowering the corporate tax rate to 28%. but that might be an area for compromise. i am not sure, but it could be. but keep in mind, the united states' corporate tax code imputes both potential economic growth and potential tax revenue. again, my colleagues mention this. many developed companies are both reducing the corporate tax rate and restructuring the corporate income tax code to make that simpler. i will note that some states in the united states have also been lowering their corporate tax rates and offering competitive tax packages to attract

businesses and investment. foreign investors are doing as well. this drives competitive profit-seeking corporations to minimize the tax exposure and deferred income overseas to lower tax countries. and even for some, to reincorporate outside the u.s. even worse, some companies take debt in order to pay dividends to shareholders in order to maintain income overseas. and last, our country will fall further behind if we do not lower our rates. again, u.s. corporations must turn their accounting departments into profit maximizing centers. companies now need complex financial engineering tactics to minimize revenue losses using tax code preferences. this is why we are so interested in broadening the base and lowering the tax rate.

because through various parts, they can allow -- exhaustive economic research clearly proves the this most basic affect. the more you tax, the less you get. it also makes it so that incentives matter. success will reform will lower the tax rate on both. the u.s. tax code -- tax rates that treat similar taxes unequally can distort consumer and investor decisions, which damages the economy. the current treatment is an emblematic of these problems. something david mention. shifting to full expenses, allowing businesses to write off all expenses, would offer in even ground for capital investments. it would also greatly simplify the tax code, increase investments, and decreased the ability of politically interested companies to gain tax benefits.

one thing we should not do, we shouldn't raise taxes. that will make matters worse. the u.s. corporate tax is among the highest in the industrialized world. this takes there jobs, money and companies with them. the former chair of president obama's advisers and david romer suggest that a tax increase of 1% of gdp reduces output by nearly 3%. further, according to research both macro economics and micro perspectives suggest that higher taxes slows economic growth. again, we are looking at the idea that if we lower rates in order to get rid of some of these loopholes, we could raise revenue. david mentioned that, as well. also important to keep in mind especially corporate, that

in part, a tax on labor. it now assumes that 75% of the tax is paid by capital. this is actually a change. a working paper pointed out at one point that slightly more than 70% of the burden actually falls on labor. we are trying to increase taxes on companies, that really passes it onto the consumers. one of the keys to successful -- reform is to move away from us betting system that depends upon an easily manipulated tax system. i know my time is running short and i want to leave some time for questions, but i want to point out something that dan mentioned. that was about warren buffett and how he pays a higher tax

rate -- or he pays a lower tax rate than his secretary. that became also a political issue. but it points out the importance of the income tax and who bears it. to put it straight, the corporate tax rate is 35%. if the business has one dollar of profit that it wants to distribute to its shareholders it is now first taxed 35% on that one dollar. that leaves 65% to go to you the shareholder. but we now have a capital gains tax rate of 20%. if you are in a higher income bracket, it is 23.8%. that means your effective tax rate is over 50% if you are in the highest tax bracket. so we are already taxing capital at 50%. that is the reason why we have a lower capital gains rate. we might want to discuss whether we should ask a get rid of the corporate income tax altogether, and just start taxing income all the same. we would have no corporate

income tax at all. that would definitely increase savings and investment, and also make the tax code more efficient. with that, i will to and it over to questions. thanks, guys. peter russo: i wanted to entertain as many questions as possible. let's take your questions in the form of a question, and not another way. >> all this just assumes that taxing consumption is completely a good thing. and that it, obviously, -- a consumption tax, that is, then taxing the income. i don't dispute that. but there is a bias in all of these i think that you are biased at all these consumption taxes -- that you are biasing

against people consuming. so you sort of switch the bias in favor of, you know, now we are not biased against investment, but we are essentially being biased against consumption. my suggestion, which i made to danny couple of times, is that you should tax the undeveloped -- undervalued tax of the land in which i don't think there is a bias one way or the other. my question to you is, why do i never hear about this tax? it is so superior and it would be politically much easier to get because there are going to be lots of people who don't want consumption -- bias against consumption. they are going to go crazy if you ever try to get a consumption tax. daniel mitchell: i think i have heard of a few small town string that, but i have never looked into it.

a consumption tax is simply an income tax with income properly defined. i.e. no double taxation. that is why i said that a flat tax has the same tax base as a national sales tax. they differ only in the sense that you don't have these extra layers of tax on income that is saved and invested. so you're getting rid of a bias but then you have neutrality. of course, i think it was adam smith who reminded us the purpose of our production is ultimately consumption. that is why we work, that is why we live. but to me, that just brings us back -- and i get to the point jason was making -- about we should have a smaller tax burden, not a higher tax burden. whether you are learning -- looking at it from the perspective of earned income, or percentage to consume your tax rate is very high -- if you are driving a bigger wedge between

your pretax income and are post tax consumption, that is what is doing the damage. you want to make sure that the marginal tax rate on productive behavior, however you want to phrase it, you want that tax burden to be as low as possible. jason fichtner: let me just -- david burton: let me just mention one quick thing. if -- -- you want to send $100 in walmart tomorrow -- if you want to spent $100 in walmart tomorrow, how much is earned? the income tax is, in effect, a consumption tax. it just also taxes savings and investments again. it is not as if consumption is somehow off the hook in income tax. jason fichtner: it is very important that people generally

understand -- david burton: it is important that people understand it. their definition is consumption is change in net worth. according to think about is how much do you have to earn pretax to spend money today -- and if we have a 50% tax, the tax is consumption. if you want to consume in the future, they also tax that consumption plus whatever you earn by deferring it. that is really different. -- difference. it is a tax treatment of future consumption. jason fichtner: there are two sort of principles that

economists try to apply when thinking about what the fair tax code -- and of course, fairness is in the eye of the beholder. but one concept is the ability to pay and who has the ability to pay a tax. the reason the consumption tax is important is the fact that you are going out and putting dollars way -- down -- suggest that you have the ability to pay. where other measures, that looks at capital gains and would tax unrealized capital gains, you might have the ability to pay it, but you don't have the cash flow. so one of the things to look at about property taxes, it is not just the ability to pay that is important, but also is there a tax flow that allow someone to have the ability to pay on a transaction point. keep that in mind. >> i am happy to hear about the tax reform concept, and also simplifications, but when you look at tax reform, you have to

look at expenditures. when you look at issues like subsidizing companies and corporations, and it looks like -- and i was told by a government official that more men are getting the subsidies. and actually spending a lot of taxpayer money to get women and minorities to get the subsidies. i asked, what if we got rid of the subsidies? would it be fair? and he said, well, it would be fairer than the way this now. don't you think that a simple vacation process would be easier? because women who start their own businesses use credit cards. there is a process and they don't have the time. do you think simplifying the tax reform and also, -- cutting back is a safer way to go? jason fichtner: simplification is hugely important.

what investments to make? with we basically decided to make ethanol a tax advantage why not start in ethanol business? we should definitely try to find ways that broaden the base by getting rid of some of these loopholes that allow us to lower the rate. it is important to point out that not all tax expenditures are loopholes. again, the lower the rate is the less valuable these exclusions are in the first place. daniel mitchell: i agree that they hold out the promise of making life sim -- simpler, but instead of the flat line tax plan, he has a two line. what did you make last year? second line, send it in.

all joking aside, one of the advantages of the comprehensive tax of a plan -- if you get rid of the depletion schedules that david was talking about and replace them with expensing, that is vastly simpler. if you get rid of the capital gains tax, that is vastly simpler. a lot of the good things that should be done to eliminate double taxation and move more towards a cash flow-based tax system also get rid of some of the most complicated provisions in the tax code. you have a simpler territorial tax system. it gets rid of all the mess that david talked about in terms of worldwide taxation. one thing about worldwide taxation, a lot of you have probably seen stories about companies keeping $2 trillion offshore. why are they doing that? they are doing that because we have a policy called deferral that enables companies to at least delay -- to get rid of -- guess what?

companies no longer have an incentive to hold money overseas. so the complications that we have are a function of the bad policy and a bad policy that we have gives us the weaker economic performance and the reduce competitiveness. there is sort of a win, win, win situation when you do the policy. and i am sure that is not advocating for the repeal of deferral. he is advocating it to a territorial tax code because president obama would like to change some of the deferral rules. david burton: one last thought. the list is endless. it disproportionately and

adversely affect small firms and startup firms. and large firms can grapple with the complexity, but also, you know, calculating and the cost of making calculations does not -- they are disproportionately large for small firms. so that is a huge burden on entrepreneurial leadership tried to launch the businesses or growth of businesses. >> this has been a terrific conference. and, of course, the title is the tax place. that is, obviously, a critical issue. but i have also heard at least three of you on this panel talk about the impact of the corporate tax rate, which people know is the highest in the world. and i have even heard a discussion about simple vacation and complexity -- simplification and complexity.

the base, the rate, and complexities/simple vacation. -- simplification. on the off chance that there is an impressionable staffer on the ways and means committee here, what might the four of you -- and i would really like to get all four of your opinions on this -- like him or her, the staffer, that is, to take back to chairman ryan and say, chief, this is what we might accomplish in this congress? >> we will go left to right. jason fichtner: the first thing to take back is the lesson that only people pay taxes. corporations are fictional entities, so the burden falls on people. seconds then, the ideal rate.

in our use the word rate for corporate taxation, is zero. i think that what you can get done is the narrative that we are not competitive with our trading partners. and that to be competitive we should be at or at least equal to, which meets the rich be no higher than 25%. that is still higher than i -- which means the rate should be no higher than 25%. that is still higher than i would like. that seems to be a narrative i would sell. daniel mitchell: i am going to disagree and want small sense with what jason said. we want income to be taxed only one time. therefore, we shouldn't have both the income tax and the tax on capital gains. you could move the corporate tax to zero. i think, administratively, it is much simpler just to tax the income once at the corporate level and not have the double

taxation and individuals. there is one corporate taxpayer. that is a lot easier than checking cap potentially hundreds of thousands of shareholders. it is just simply a question of administration. in terms of your question, jim let me cite an example. ireland is one of the few other countries besides the united states that has a worldwide tax system. but nobody really complains about it because ireland's corporate tax rate is only 12.5%. i forget whether david or jason made this point. if your marginal tax rates get low enough, that some of these distortions go longer have a big value. let's imagine we are going back to 1980 and the jimmy carter tax rate of 70% was still there. that tax deduction was rate valuable. by the time it got to the end of the reagan years and that rate was 28%, yes what? -- guess what? where you going to hire as many lawyers and accountants and so on and so forth to benefit $.20?

no, you had much greater incentive to earn income and be productive without worrying about tax consequences. so the rate is critically important. the whole purpose of the session today is also to focus on the fact that we should fix the base. but the reality, they are both important. make sure you have the base defined correctly because we do want to penalize the saving and investing that every economic theory agrees is so critical. david burton: let me briefly just bring us back to what the point of tax reform -- the point of tax reform is primary to grow the economy. to increase the welfare of the american people. the potential gains from fundamental tax of or are on the order of 50% of gpd. which would make the country feel like it is a noble that it has experienced -- is in a boom that it hasn't experienced since the 1980's.

most of that gain, most of that potential gain, comes from an improvement in business taxation, the taxation of capital. so reducing marginal tax rates on entities and oversee corporations this critical, but getting the tax rate rate is also critical. and to the extent we are dropping rates by getting rid of unwanted preferences like wind energy credits or the income housing credits or the employer-provided health insurance for -- take your pick -- it is progrowth. it improves the welfare of the american people on the whole. to the extent you are dropping tax rate by further extending the period over which you have to conduct -- conduct your investment, whether it is progrowth or not is a very iffy thing. it probably isn't.

so you lose all the growth of fact by broadening the base by raising the cost of capital. that is one of the problems that -- that the proposal had is. a large portion of the revenue that was raised in that proposal was raised -- buy allowances, or doing things like making advertising -- if you do things like that, you are not doing something that is meaningfully progrowth. we have to buck up and i think understand that we are now way out of the mainstream in the industrialized world. we tax our businesses to heavily. we need a business tax cut. and we are not going to be able to drop the rates and become competitive, get to that 25% average, by the way, just an

average, by broadening the business tax base because there is not enough deadwood or inappropriate tax references in the corporate code to do it. >> i have a question about whether or not you know good estimates of how much you get from improving the efficiency allocation of capital, as opposed to changes in the overall cost of capital? david burton: i think the answer to that is not very. most of the simulations looking at tax reform tend to simply look at the capital deepening a fact. i.e. enlarging the capital stock. there is no doubt that you get gains from a more efficient allocation of capital.

price theory would lead you to that result. as far as i am aware, the optimal tax analysis doesn't look at that issue, either. it just looks at the relatively simple, you know, size of the capital stock. and i think it would be good if we could get people to focus on the efficiency gained from a more efficient allocation of capital because it is certainly there. the simplest way to get there and accomplish both results is expensing. alternatively, you have to come up with some economic depreciation concept, but that is, i think, conceptually difficult to impossible because to know the actual decline in the value of the asset, you have robust secondary markets, and we don't.

so i don't think you can ever solve that problem in terms of getting it right, except by expensing. daniel mitchell: let me add one thing to that. every distortion credit that is put in the tax code is put in there to encourage people to make decisions that they wouldn't otherwise make a good they are not economically sensible. two bright people into making economically senseless decisions, there has to be an economic cost to that. what is the cost of all these ethanol and wind credits? ok, how are those resources otherwise used in a way that are presumably better for the economy? it would be good if somebody went out and measured that. david burton: let me add one more thing to show how weak that literature is. as far as i know, the only people that have actually looked at this, other than i think some folks within the treasury that have them published, is the

study in the early 1980's. if you really look at that study, they looked for clean at the length, but in terms of the pattern -- they looked economically at the length, but in terms of the pattern -- there is no empirical information. and, therefore, the proponents of an income tax have an invaluable theoretical problem. they are always get along because there is no relation. they have to guess. the whole tax system is based on a guess. jason fichtner: i would just add one more thing because the discussion is very unlikely. -- very enlightening. i would rather not force the joint task force on the hill to

do something gymnastic. what i think i do know is we see the corporate tax base in some ways erode because of the uncompetitive nature of the tax system. one thing i would also have staffers take back to the members, even if it costs money, we should still do it because it would be better in the long run. we should stop focusing on aesthetic revenue loss, and this none -- on the static revenue loss, and get this done. peter: so, this week senator paul announced his candidacy. we saw senator cruz, and it looks like this weekend hillary clinton will announce. that is what i heard on television. what do we know about their tax plans, if anything? david: well, senators lee and

rubio will be speaking to the heritage foundation on their plan, and we released a paper analyzing it. they are very positive on the business side, and i think people should look at what it does because it is one of the more construct plans. then, i mean, you may want to talk more about this, but as far as i know, senator cruz and senator paul's plans are very 30,000-feet-type flat tax plans without much detail. so, i do not believe secretary of state clinton has given any details about what she would do on tax. jason: i would add out of senator leahy and senator rubio, their plan is one of the best, and they are not trying to hamstring themselves levying

revenue-neutral. they are going for more efficient tax codes and growth. i think that is important. peter: one last one. >> you were talking earlier about what the goals of tax reform being complexity. having worked on tax reform" protects specifically, i can tell you that any -- reform specifically, i can tell you any reform will be complex. it is so complex now, that even if they cut it in half, he would still be incredibly complex. tax people forget that if you talk to the average person about simple text concepts, -- tax concepts, their eyes will spend over. they cannot understand any of that. even other attorneys that i talked to who are not tax attorneys can not have a

meaningful discussion about taxes. my point is, this idea of getting rid of complexity without getting rid of the income tax, to me, whatever you want to call it -- income tax as a consumption tax -- if you start off with income, that determination is --an obstruction, and a very broad abstraction. daniel: you definitely highlighted a big obstacle, but i disagree with you because if you look at the hong kong flat tax, because it does not have taxation, because it is a territorial system, the hong kong flat tax that has been around for 60 years is very durable. it is remarkably simple. is it as simple as the postcard? no. other tax systems around the world -- you find some of them where it is literally a page back and forth. if you are dealing with the tax

base correctly, as i said before, that automatically eliminates so much of the top location. if you are in business and you have to figure out depreciation -- simply putting on your form these are the wages paid, my raw material cost, the investment expenditures, what is left is taxable income, you can have a dramatically simple system. i do not think the definition of income is collocated if you have a consumption base. if you mix it with 102 years of congressional micromanagement, then you get to this is in the you correctly described, which is a big, giant mess. it can be solved. whether it will be -- we will be up here when we are 110 giving the same presentations. david: let me mention that the sources of the new flat tax, really a cash flow tax, and the

sales tax -- one is no depreciable lives. you just deduct expenses. the inventory. it is a mess. particularly if you take the tax law seriously. before you know it, you have employed an army of accountants. that goes away because you deduct the winning curve. then, international -- the income sourcing, allocation firms, deferral rules, separate baskets, all goes away, but under a sales tax, financial transactions are also irrelevant to the tax base. you no longer have to take into account capital gains who your bank accounts, or interest expenses because it addresses neither deductible nor taxable. all the major sources of complexity in the income tax fall away with any of these plans because they are really

consumption taxes. >> regulate [indiscernible] david: yes, in a flat tax you want. in a sales-tax it would be irrelevant. it also does not matter so much anymore. peter: and with that, our hour has come to a close. thank you for coming. one little housekeeping thing. on friday, april 17, at cato institute, we will have another event called should the gao cover the federal reserve. do i come everybody. thank you to our speakers. -- thank you, everybody. thank you to our speakers. [captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> up next on c-span, whistleblowers testify in a

house veterans affairs subcommittee hearing. then marco rubio announces his 2016 presidential run. >> on our next washington journal, we get an update on the 2016 presidential race. we will be joined by shira center and catherine lucy. president obama is scheduled to meet with the iraq prime minister. we will talk to former u.s. ambassador christopher hill about relations between the two countries. " washington journal" is live each morning at 7:00 a.m. eastern. you can join the conversation on facebook and twitter. >> these wayeekend the c-span city tour is looking at the life of saying augustine florida. >> he may have been looking for

the fountain of youth. a lot of people said that he wa nted additional property for the king of spain which is decidedly through. w do e do know that ponce de leon came ashore after searching for good harbor and took on water and wood. this area represents one of the few freshwater springs in the area. and is also the location of the 1565 first settlement of saint augustine. 42 years before the settlement of jamestown was founded and 55 years before the pilgrims landed on plymouth rock. >> the hotel ponce de leon was built by henry morrison flagler. flager is a man who is very little known out side of the state of florida, but he was one of the wealth used men in america. he had been a cofounder of

standard oil with john d rockefeller. he was a man who always wanted to undertake some great enterprise. and as it turned out, florida was it. he realized that he needed to own the railroad between jacksonville in saying augustine to ensure that guest s could get to his hotel. so clearly, the dream was beginning to grow on flagler. he was a man who had big dreams. he was a visionary. >> watch all of our events from saint augustine saturday at noon eastern on c-span 2's boo k tv and sunday afternoon at 2:00 on c-span 3. were you a fan of c-span's first lady serious? it is now a book. looking inside the personal life

of every first lady in american history. based on original interviews with more than 50 historians and biographers, learn details of all 45 first ladies that may these women who they were, their lives, ambitions and partnerships with their presidential's houses. the book " first ladies, presidential historians on the lives of 45 american women," provide stories of these fascinating women who survived the scrutiny of the white house, sometimes at great personal cost while supporting their families and famous husband. and even changed history. c-span's first lady is an entertaining and inspiring read and is now available as hardcover or an e-book through your favorite bookstore or online bookseller. next, two v.a. doctors testified about some of the retaliation they face after becoming whistle blowers at the federal affairs department.

congressman mike kaughman chairs this meeting of the house subcommittee meeting. hman chairs this meeting of the house subcommittee meeting. congressman mike coffman: i would like to ask that be allowed to join us as she has been active in the case of one of our witnesses here today. seeing no objection -- additionally, i would like to ask unanimous consent that three statements be admitted into the hearing record.

two from whistle blowers and one from the project on government oversight. hearing no objections, so ordered. the hearing will focus on the treatment of whistle blowers within the department of veterans affairs. particularly the types and levels of retaliation they experience when reporting problems. this will serve as a follow-up to the hearing conducted by the committee on july -- in july 2014 where we will address what progress the department has made to correct its retaliatory culture and fail to protect conscientious employees. the three whistle blowers we'll hear from today come from v.a. facilities across the area.

the hostility they receive for their behavior shows that the retaliatory culture is still very alive ask well in the department of veterans affairs. the truth of the matter is the congress needs whistle blowers to help identify problems on the ground in order to remain properly informed for the development of an effective legislation. for example, the national wait time scandal that this committee revealed just over a year ago which resulted in the secretary of the department resigning simply would not have occurred without responsible v.a. employees stepping ready to fix problems. in the year since that came to light a new secretary has come

to the department and stayed one of his primary missions is to end whistle blower retaliation in the v.a. jeff miller introduced legislation that would improve legislation to whistle blowers within the v.a. and discourage supervisors and other employees byism posing more strenuous penalties foreign gauging in retaliation. jeff miller introduced legislation that would improve within the v.a. and discourage

supervisors and other employees byism posing more strenuous penalties foreign gauging in retaliation. you should not be working for v.a. and you certainly should not receive a bonus for your despicable actions. to that end i encourage members in support of h.r. 571 retaliation prevention act. along with the whistle blowers here today we'll hear from the office of special counsel regarding the efforts v.a. has made since our last hearing and

where improvements remain absent and needed. i was very pleased to learn that the office of special counsel recently took action on behalf of a whistle blower in the v.a. from the eastern colorado healthcare system. this employee was removed from her nursing duties and assigned to a windowless basement after reporting the misconduct of a coworker. thanks to the efforts of o.s.c., this whistle blower has returned to her nursing duties at an another clinic while her reprisal claims are being invest guyed. they'll also be here to address why whistle blowers continue to have their livelihood jeopardized. i look forward to the discussion we'll have here today on this important issue. with that, i now yield the

ranking member custer for any opening remarks she may have. >> thank you mr. chairman. the sub committee is holding a follow-up hearing to the hearing that our full committee held last july. i believe that some of the most effective hearings this sub committee holds are follow-up hearings. they that is the core of our work here to identify problems and work together to fix them. and ensure the highest quality of care is being delivered to every veteran. today's hearing will focus on the treatment on whistle blowers who play a crucial role in ensuring they're held accountable for providing quality care for the nation's veterans. they were drews mental in helping this committee uncover the wrong doing in phoenix,

arizona, which helped enform or drafting of the choice acts. in addition, the v.a. and the o.f.c. have implemented and expedited the review process for whistle blower retaliation plans. i'm please to hear the v.a. have taken steps moving forward but there are too many problems regarding how the v.a. treat and handles whistle blowers. o.s.c. is responsible for whistle blower complaints from

all across the federal government yet 40% close to half of its incoming cases in 2015 will be filed by v.a. employees. o.s.c. reports that the new number remains overwhelming. and it's monthly intake of new v.a. whistle blower cases remains high at a rate of nearly 150% above historic levels they include include encloseers to fraud and abuse. the large number of complaints received is to some extent a reflection of the size of the v.a. but it also raises serious red flags as to the continuing problems that are systemic throughout the v.a.'s system and the treatment of v.a. employees. the o.s.c. testimony highlights

some troubling concerns they investigate the whistle blowers themselves rather than investigating allegations raised by the whistle blowers. they also reference several cases where the medical records were improperly and unlawfully accessed in what seems to be attempts to discredit some whistle blowers. as a "new york times" article last year outlined there an is a culture of silence and intimidation and a history of retaliation at the v.a. according to the whistle blowers testifying before us this afternoon, this is still the case for us today. they'll testify about this environment of intimidation and retaliation in order to silence whistle blowers. i believe that the v.a. has made progress but clearly more remains to be done. v.a.'s culture of retaliation and intimidation did not happen

overnight but a combination of decades of problems that are deeply engrained in the v.a. system. we must also not forget they are involved in healthcare an industry that is intolerant of whistle blowers. this culture cannot be changed overnight but the sake of our veterans and the sake of ensuring that the v.a. is finding the highest quality of care this the culture must be changed. it's the lack of accountable and the absence of collaborative spirit to in order to seriously address whistle blower complaints. this afternoon let us begin the process of identifying what steps the v.a. needs to take going forward as the v.a. works toward the secretary's goal of "sustainable accountability."

all v.a. employees are working toward the common goal of helping and serving our veterans. mr. chairman i thank you for holding this hearing and before i yield back i want to take a moment and thank our whistle blowers for appearing before us today. it takes real courage to put your careers at risk for coming toward and calling attention to these problems and concerns. it's my hope we move forward creating a culture at the v.a. that welcomes is whistle blowers and acknowledges your portions in better serving our veterans. i hope that the v.a. will be known as an organization that welcomes and encourages all employees to work together to solve problems. and i yield back.

host: thank you reigning member custer. i ask that all members waive opening remarks. i invite first and only panel. on the panel we hear from director of the v.a.'s office of accountability review and the honor honorable and chief of staff legal and quality assurance for the greatest los angeles v.a. healthcare system and dr. marilyn hooker m.d. neurologist and president a. f.g. and mr. richard truemain.

>> v.a. exists to serve veterans. that service takes place through interactions between veterans and frontline v.a employees. doctors and nurses, claims processers and cemetery workers and countsless others upon whom v.a. depends to serve veterans with the dignity compassion and dedication they deserve. we depend on the same employees to have the moral courage by helping to make our processes and policies together. >> the department's responsibility to protect whistle blowers is an integral part of our objectsation to provide safe, high quality healthcare and other benefits to

veterans in legally compliant and fiscally responsible ways. it is important to keep in mind that the underlying purpose of the whistle blower protection rules is to encourage candid disclosure of information. so problems can be identified and corrected. v.aplt is fully committed to correcting problems and ensuring fair treatment for employees who bring problems to light. secretary mcdonald talks frequently about his vision of sustainable accountability. we need a work environment in which all participants to top v.a. officials tpraoerly share what they know whether good news or bad for the benefit of

veterans and as good stewards of the taxpayer's money. to reach these goals the department has taken several important steps. last summer, the secretary reorganized and assigned new leadership to the v.a. office of the medical inspector which investigates disclosures related to patient care. they also established my office to ensure leader accountable for serious misconduct. in addition to its on going work investigating leader misconduct o. a. r. is working to improve the ability. v.a. has also improved its khraeub collaboration. that certification reflects the department's commitment to

educating employees and supervisors about the whistle blower protection rules. the v.a. has also negotiated with o.f.c. and expedited process to speed corrected action for those experiencing retaliation. we are also working with o.f.c. to create a robust knew face to face training program so they understand their roles and responsibilities under the protection rules. since secretary mcdo notnald was con tkeurpld they met with whistle blowers across the system and engaged with those who raised their voices to propose solutions. they do that both to acknowledge the critical role whistle blowers play in improving the

programs and to model to supervisors throughout the engaged open and accepting behavior they expect them to exhibit. they have identified problems v.a. needs to address. last month i had the opportunity to appear before the sub committee to provide the department's views including two to whistle blowers. at that time i acknowledged and i reiterate that the department still has work to do to ensure that all digs khroerz received prompt attention and protected from retaliation. not withstanding significant efforts on our part v.a. is still working toward the full culture change we must achieve to ensure all feel safe and any supervisor who retal late is

held accountable. on behalf of the department i'm committed to continue to work with o.f.c. and this committee to get things right. i'm honored that they have asked me to assist them in this critical effort. this concludes my testimony. i look forward to answering any questions you may have. >> thank you, chairman coffman and members of the sub committee. thank you for the opportunity to to testify about the special counsel and our on going work with whistle blowers. last july i spoke to this about their early efforts about the unprecedented increase in whistle blower cases from the v.a. since then there has been substantial progress. for example, they started an expedited process. this process has resulted in

relief for many whistle blowers including landmark settlements on behalf of phoenix v.a. employees. in total, they have secured relief for over 45 v.a. whistle blowers and putting courageous public servants back on the job. these sentl settlements are accepting messages if they report problems they'll be protected from retaliation. in my earlier testimony i also addressed several serious problems with investigations by the v.a.'s office of medical inspector or o.m.i.and in response to my concerns, this review that is led to positive change. a recent whistle blower case is tkepldemonstrative demonstrative. in response to the referral the

medical inspector determined that the beckly facility was trying to save money guy substituting medications with older and cheaper drugs. they were made over the objections of mental health providers. this was a clear violation of v.a. policies. o.m. i.investigation called for review of all patients who were impacted to determine if there was any harm caused by the subs stews. they also recommended the discipline be considered for beckly leadership and others who were responsible. while the facts are very troubling, the omi responses and sign of progress from where we were just nine months ago n an organization the size of a v.a. problems are bound to occur. therefore there it's critical when they identify problems they are addressed swiftly and

responsibly. properly functioned omi is key to doing so. finally since last year the v.a. became the first cabinet level department to complete them. in addition to fulfilling the basic certification requirements they're work to conduct training for supervisors. it's not consistently filtered down to the regional facilities. so additional training for regional employees may help address this issue. i want to close by flagging 1edation natural and on going area of concern. often where whistle blower comes forward with an issue of real importance, the v.a.'s investigation focused on the whistle blower instead of their disclosure disclosure. there are two main problems with this approach.

first by focusing on the whistle blower, they may not receive the attention that it deserves. second instead of creating a welcoming environment, it could chill whistle blowing and their own actions might come under intense scrutiny. the v.a.'s focus should be holding accountable those who are responsible and not going after whistle blowers. we looked forward with working with the v.a. and committee to address this issue. we appreciate the committee's on going attention to the issues we raised. i thank you for the opportunity to testified to and i look forward to your questions. >> thank you. doctor, you are recognize for five minutes. >> thank you, mr. coffman and all other members for inviting me again to i think a very important meeting. since my last testimony

july 2014, when i returned back to west l.a. v.a. hospital in my position as associate director, my leadership -- my direct leader was essentially resigned resigned -- basically was assigned to a chief of staff outside of west los angeles to long beach hospital, who i've never met and still have never met. i started to notice that my patience were reassigned mid therapy to other surgeons. when i asked this, the chief of staff said, "if you don't like it, take it to congress. there is nothing they can do to me." i reported the statement to congress and also the office of special counsel. following that, i was presented to go into the operating room when i had a patient under anesthesia. i was told my credentials had

been revoked to go in the operating room. when i asked that an hour later they were told, oops, we made a mistake. it's okay. unfortunately veterans and other hospital officials overheard that conversation. i have essentially been removed from my office in the chief of staff suite and transferred to the fourth floor. the cleaning crew told me they believe it used to be a nursing storage unit. there is a hole in the floor and non functional along with some of the other equipment in the room. a group of the general -- a piece of plastic was placed over the floor and janitorial other

employees have reported that it seemed to be more of an investigation into me than my actual complaints. when the v.a. submitted court records saying the meaning i was removed from a chain of command was because i testified in congress. there's a sworn affidavit that said i questioned her authority and that's why i was transferred out of the chief of staff offices because i questioned her authority in congress. i don't remember actually mentioning donna's name personally during my original testimony. through all of this i have always placed veterans

ahead of of me essentially and today we should focus on the veterans. because of the way i was brought up, i will always take a stand for this population. you remember i made reference to the e-mail in november 2012, that's part of the packet i committed where i questioned the irregularities of the counsel. i also noted there is a number of patience and the number of colon cancers that were entering the system but later appearing with advanced cancer. i did this as a team player asking for a briefing to all of the chief of staff. i was rebuffed. i want to go on the record to be more specific. i witnessed the did he lesion of

179 consults. two, the systemic did he lesion of the consults most of them were done by non-medical staff. three, i witnessed 40,000 consults. the other thing i want to go on record when i realized it was probably result me in losing my job but i think the veterans deserve better. $25,000 was given to our v.a. where is it? it was reported that it was given. >> could you review that number with us again. >> i'm sorry $25 million was

appropriated to our hospital to improve access for veterans. >> thank you. >> doctor. >> thank you for the opportunity to speak on continued whistle blower retaliation. my written statement outlines the type and extensive reprisal against federal employees that continues. retaliation is destructive and costly to our nation in so many ways and too convenient to be used without fear of consequences. when they sound alarm it's for the safety and well being of the veterans we serve. my written statements speaks as a house divided with power and resources for the v.a.