| Speaker | Time | Text |
|---|---|---|
| A specific time until which the record will remain open for submission of questions for the record. | ||
| Yes, Mr. Chairman. | ||
| That will be a day or two. | ||
| This concludes today's hearing. | ||
| I want to thank the witnesses and their families, and this hearing is adjourned. | ||
|
unidentified
|
Thank you. | |
| Today in the House, members are working on a bill that would ban transgender student-athletes from competing in girls' and women's sports at K-12 schools. | ||
| Later this week, members will also consider measures related to Taiwan and deporting undocumented immigrants convicted of certain sex offenses and other violent crimes. | ||
| Live coverage when the House returns here on C-SPAN. | ||
| We take you live now to Capitol Hill to a House Ways and Means Committee hearing on the potential extension of tax cuts that were passed and signed into law in 2017. | ||
| We joined that live in progress here on C-SPAN. | ||
| Thank you, Mr. Duke. | ||
| Thank you, Mr. Chairman. | ||
| Thank you. | ||
| Ms. Vendine, you are now recognized. | ||
| Mr. Duke, I'm perplexed by a lot of your testimony today. | ||
| You've had a lot of criticism over the small business deduction, so I'm just curious, what do you consider a small business? | ||
|
unidentified
|
I don't have a particular definition of it. | |
| You don't have a definition? | ||
|
unidentified
|
I don't think I've said the word small business deduction. | |
| So the 199A? | ||
|
unidentified
|
Sure, but that's pass-throughs. | |
| They can be really big. | ||
| There's no, you know. | ||
| So do you think the way that it's being held right now helps small businesses? | ||
| The 33 million small businesses that we have, the 99.9% of all businesses in the U.S. that are small businesses that are able to take advantage of this, do you think that the 199A actually helps them? | ||
|
unidentified
|
Sure. | |
| It gives them a tax cut, increases deficits, increases interest rates. | ||
| So you're concerned about the deficit. | ||
| You're concerned about the debt. | ||
| And as a Democrat, I was really surprised as a Democrat witness that some of the ideas that you held, like we should be concerned about the debt, and we should be concerned about how much of that is owned by China. | ||
| I'm curious, as a volunteer on the Biden-Harris transition team and as the person who was part of the Biden administration's Build Back Better and American Rescue Plan, as the White House National Economic Council, right, you were the senior policy advisor to the White House on those two bills. | ||
| Were you concerned at all about the trillions of dollars of debt that they added, the trillions of dollars of debt that China may potentially own, and the benefit that China directly got as a result of those bills? | ||
| I'm assuming you are advocating against that. | ||
| Because if you don't want additional debt, God forbid, we have trillions of dollars that are going out the door for Green New Deal programs that are benefiting China. | ||
| Am I correct? | ||
|
unidentified
|
The macroeconomic context matters a lot. | |
| Inflation is high. | ||
| Oh, wait. | ||
|
unidentified
|
Unemployment. | |
| The inflation that by adding to the debt, the 20% inflation that we got over the last four years, I'm assuming that you are advocating against all of those tax increases. | ||
|
unidentified
|
Every country in the world experienced those. | |
| 20% that we got in inflation. | ||
|
unidentified
|
I'm assuming you're against those. | |
| Justin Trudeau is facing that problem. | ||
| I do not want to compare the U.S. to Justin Trudeau. | ||
| There's a reason why that man has quit his job. | ||
|
unidentified
|
Okay, but inflation was a global supply chain phenomenon that affected everybody. | |
| Supply chain, you were also, if I am correct, you are the point person on the supply chain data during the infant formula crisis of 2022. | ||
|
unidentified
|
Yes. | |
| Okay, so we all saw how that went. | ||
| I want to make sure that we are appreciating the opportunity right now to be able to kind of correct some of the views that we're seeing, the misinformed views of the Tax Cuts and Jobs Act. | ||
| You are saying that the rich experience getting richer, the poor experience getting poorer. | ||
| However, in 2024, about one out of 180 American taxpayers will make a million dollars or more. | ||
| It's about 5 percent. | ||
| So, based on the government's forecast, the government's own forecast on this, those earning $1 million or more in 2024 will pay an average of about $776,800 in federal income taxes, which is 475 times as much as the average American taxpayer who's making between $50,000 and $100,000. | ||
| The top 1% will pay an average of 31.5% this year, compared with 10 to 12% of the middle class and about 0% at the bottom. | ||
| And the rates near the bottom can be negative because of the refundable tax credits. | ||
| So, according to the Federal Reserve, low- and middle-income tax Americans received the largest increase in wealth during 2018 and 2019. | ||
| Low-income families saw their net worth increase by 37 percent, while middle-income families' net worth increased by 40 percent. | ||
| In the two years after TCJA, more than 6.6 million people were lifted out of poverty, dropping the poverty rate to 10.5 percent, the lowest level in U.S. history. | ||
| And yet we're somehow arguing that the TCJA did nothing for the lower class. | ||
| It blows my mind that we can even say that. | ||
| Ms. Silver, I want to thank you very much for your testimony. | ||
| You talked about how much you were able to reinvest in your businesses after TCJA was implemented, and that is great to hear. | ||
| Can you talk a little bit about what the cost would be if your business and if Congress did not renew the President's tax cuts, President Trump's tax cuts? | ||
|
unidentified
|
It's going to result in less investment in our equipment, less investment in our people, less investment overall. | |
| It would be very difficult to stay competitive. | ||
| So, all of the people that you pay would possibly lose their jobs or get paid less? | ||
|
unidentified
|
Potentially, yeah. | |
| Or your job and your investments would shrink. | ||
|
unidentified
|
Absolutely. | |
| It's a real-life example right there. | ||
| Mr. Chairman, I asked to submit a letter from the Wine and Spirit Wholesalers of America expressing support for the extension of the small business credit into record. | ||
|
unidentified
|
Without objection. | |
| We hear the partisan pundits claim that the tax cuts were just too big for corporations, but this is just not true. | ||
| As part of my work on the Main Street tax team, we were able to get out of D.C. and we talked to real business owners. | ||
| We heard about the successes from policies such as the small business deduction in Section 199A, which created over $66 billion in tax savings for Main Street businesses. | ||
| One of the businesses I met with in North Texas was a Republican National Distributing Company, where I held a roundtable with over 25 small businesses, including roofing companies, community banks, local banks, and realtors. | ||
| These are the businesses across the U.S. who are benefiting from this, and this is why Congress must act. | ||
| Thank you very much, and I yield. | ||
|
unidentified
|
Thank you. | |
| And then the birthday boy of the committee, Mr. Feenstra. | ||
| Thank you, Mr. Chairman. | ||
| And I want to thank each one of our witnesses. | ||
| You all have great testimonies. | ||
| I'm very impressed. | ||
| And I think we all understand how important the Tax Cuts and Jobs Act of 2017 was to our families, to our businesses, to each of us. | ||
| I think about my district. | ||
| I live in a very rural part of northwest Iowa. | ||
| And every day we're fighting to survive that main street. | ||
| That main street made up of all these small little bakery, hardware store, drugstore, you name it. | ||
| And this 199A is so critical for their existence. | ||
| If we did not have 199A, if it sunsets, obviously they'd have a 43% tax increase. | ||
| What would that do to rural America? | ||
| It'd be devastating. | ||
| And to our families, you know, it's been noted many times here that it'd be a 26% increase to each one of our families. | ||
| Where do we get those dollars? | ||
| Where do we get those extra tax dollars? | ||
| And I look back, so what did it do from 2017 until now? | ||
| And we went through COVID. | ||
| This all made a difference. | ||
| I mean, if we didn't have these Tax Cuts and Jobs Act, how catastrophic would it have been to our economy? | ||
| I mean, we would have probably been in a deep recession, even depression. | ||
| Well, we don't ever know. | ||
| But we do know this, is that we survived. | ||
| And that's what we have to look at. | ||
| There's one thing that really bothers me yet, and that is a double tax. | ||
| I want to talk about the death tax. | ||
| I introduced the Death Tax Repeal Act, and we'll reintroduce it next Congress. | ||
| I had over 170 members sponsor this because everyone thought it was so important. | ||
| But think about this. | ||
| The government, when somebody dies, when somebody dies, the government puts their arm in the grave, the IRS puts their arm in the grave, pulls the person back out and says, you owe 41% tax on everything that you accumulated in your life. | ||
| Think about that. | ||
| 41%. | ||
| Pull them out of the ground and say, you owe 41%. | ||
| That person is ready to pay tax on most of that already. | ||
| And yet, to pass it on, we've got to pay 41% tax. | ||
| That's why I am so passionate about getting rid of the death tax. | ||
| And I hope we can do it this coming year, especially in reconciliation. | ||
| On the other side of the death tax, since we have currently, we don't have, we do have the death tax, we have estate tax, it costs approximately $18 billion for small businesses to comply to try to figure out insurance, to try to figure out trust, to figure out how to manage not to pay that 41%. | ||
| $18 billion. | ||
| We could save a lot of money by just getting rid of it. | ||
| So Mr. Gallagher, I want to talk to you about this. | ||
| Obviously, your family has to have jumped through a lot of hoops to try to salvage your business to the next generation. | ||
| Can you talk about that, how it affects you and what compliance looks like? | ||
| Yes, and thank you for that question. | ||
| I'm very passionate about it as well, primarily because I've seen the impacts of what happens when either people have not planned for it or just simply don't have the money to pay the tax. | ||
| So the hoops are real. | ||
| The hoops that these businesses and farmers jump through is starting out with identifying their personal goals for their family, first of all. | ||
| So every single one has a different story and a different need and a different goal. | ||
| So this is not a cookie-cutter plan that everybody can just put into place. | ||
| It takes a lot of customization and a lot of planning and a lot of planning early. | ||
| The hoops include setting up multiple entities, like a number of different trust vehicles can be used, limited partnerships, LLCs, setting up entities to help create the best benefit so the heirs can get the most amount of money when death does occur. | ||
| You have to have many appraisals done. | ||
| Your business has to be appraised, your real estate has to be appraised, your farm has to be appraised. | ||
| The costs are astronomical for what they have to go through. | ||
| All the stuff you have to go through just to comply with the death tax, just to try to figure it out. | ||
| And we can get rid of it and we don't have all the problems. | ||
| I want to talk about one more thing: paid family medical leave tax credit. | ||
| To me, this is so important. | ||
| Ms. Cowitz, you talked about this in Atlanta. | ||
| Can you briefly talk about how important this is to small businesses as an incentive and not a mandate? | ||
| Yes, thank you for your question. | ||
| So, the Paid Medical Leave Act is very important to be able to retain, you know, you want to retain quality employees. | ||
| And right now, it's very difficult, especially in my industry as an accountant, to find and retain quality employees. | ||
| However, it's so important for small business owners to not be mandated to pay various things like a paid family medical leave act, and it's much more beneficial if it comes in the form of a credit. | ||
| Absolutely. | ||
| I want to thank you for that. | ||
| Incentivize makes all the difference in the world, and we can do family medical leave. | ||
| I'm again passionate about that also. | ||
| Thank you very much. | ||
| I yield back. | ||
| Thank you, Mr. Schneider. | ||
| Thank you, Mr. Chairman. | ||
| I want to thank you for having this hearing. | ||
| I thank all of our witnesses for sharing your perspectives today. | ||
| Ms. Silver, I just want to commend you. | ||
| I actually went and looked at your website and saw what you do as a company, and your investment in people, especially young people, and bringing people into manufacturing is so important. | ||
| Also, impressed third-generation family business. | ||
| Before I came to Congress, I was a consultant. | ||
| I worked with family businesses principally. | ||
| And getting from the first generation to the second generation is hard. | ||
| Less than a quarter of all businesses make it to that point, but less than 10% make it to the third generation and 1% to the fourth generation. | ||
| So it is really difficult. | ||
| And there's a lot of reasons for that, obviously. | ||
| Ms. Gallagher, I might turn to you because you advise a lot of these businesses. | ||
| I'm guessing a lot of them are family businesses. | ||
| The firm I work for as a consultant is now part of Plant Moran, where I know you started your career. | ||
| But what do you tell your clients as they approach a point where they're starting to take on too much debt? | ||
| What is the cost to a family business of having too much of a debt burden? | ||
| There are a lot of different aspects of a family's finances. | ||
| So debt in a silo cannot be addressed. | ||
| Well, I disagree because when you have too much debt, as you start to accumulate debt, you have to service that debt. | ||
| And you have to start paying the interest on the debt and start paying the principal on the debt. | ||
| And as a business, as you're trying to grow, if you take on debt to maybe acquire some equipment or go and branch off into a new business line, that's going to pay itself back. | ||
| But if you're taking on debt to basically spend extravagantly, that debt service is going to become a huge burden. | ||
| Ms. Gallagher, are you aware of what the debt service of the United States, what the burden is at this point? | ||
| No, I am. | ||
| I'm not. | ||
| It's larger than our defense budget. | ||
| We're paying more in interest and service of our debt than any other line in our discretionary budget. | ||
| And so as we stand here and we find ourselves again in this conversation about giving large cuts in taxes to people who are doing really, really well. | ||
| And I'm not talking about small businesses. | ||
| I'm not talking about folks who are struggling to make ends meet. | ||
| But to take away from programs like Medicaid and investments in education to give a tax cut to people who don't really need it and add to the debt of the country so we're losing. | ||
| Now, Ms. Silver, you know from your experiences, you're looking at making ends meet. |