The House Ways & Means Committee held its first hearing on tax reform Thursday, focusing on corporate tax cuts, which exposed the big divide between Republicans and Democrats.
Rep. Bill Pascrell, D-N.J., said the focus on business taxes sent a “wrong message to the middle class … that we’ll make your lives better if we help the business community.”
Rep. John Lewis, D-Ga., noting that the panel was composed of five white men, asked, “Where are the women, where are the minorities, where are the little people? “
The hearing, led by Chairman Kevin Brady, R-Texas, co-author of the Republican tax reform plan, aka “A Better Way,” heard from five witnesses, all businessmen.
Four of them – the CEOs of AT&T, Emerson Electric Co. and S&P Global and the chief alignment officer of Atlas ToolWorks — favored the Republican tax proposal, which, among other things cuts the top corporate tax rate from 35% to 20% and allows for the immediate, rather than gradual, write-off of new business investment.
Only one witness — hedge fund manager Steven Rattner, who was the so-called car czar in the Obama administration — was skeptical. Rattner said the hearing’s focus was “excessively narrow” and he preferred a “holistic approach” to tax reform that would benefit the middle class as well as businesses and pay for itself, not increase the deficit.
The four businessmen favoring the Republican proposal said the U.S. corporate tax structure currently hurts businesses competing internationally because U.S. corporate tax rates are the highest in the world and foreign profits of U.S. companies are taxed overseas as well as in the U.S. when they’re repatriated (although there is a credit for foreign profits). They prefer a territorial system, which would mostly exclude foreign-earned income, and is used by many other foreign countries.
“The U.S. remains a tax outlier,” said Douglas L. Peterson, president and CEO of S&P Global Inc. “Our tax system is antiquated, unfair, and hinders our ability to compete on a global scale. It is time for a change. The current system is stifling our economic growth.”
All four contended that a tax reform would lead to more investment and more jobs, helping not just their companies but their customers’ companies and employees.
Rattner said the benefit for employees was “very, very indirect” and “you’ll probably find the relative benefits to the average worker won’t line up.” He, along with Rep. Lloyd Doggett, D-Texas, said proof was needed to show how workers would benefit.
All five of the panelists, however, said it was important that tax reform not wait. The last major overhaul of the tax code was more than 30 years ago, in 1986, when Ronald Reagan was president.
There’s “enormous urgency” around tax reform because of the political calendar and new administration, said Rattner. “If we miss this opportunity and don’t find common ground we’ll regret this later.”
Brady told CNBC last week that he could introduce a tax reform bill sometime in June. The committee has scheduled another hearing next Tuesday, May 23, on Increasing U.S Competitiveness and Preventing American Jobs From Moving Overseas, and will consider border adjustment and other policies.
— Related on ThinkAdvisor:
- House Delays Medicare Tax Repeal on Wealthy in AHCA Bill
- Who Will Be Hurt by Trump’s Plan to End State & Local Tax Deductions?
- JPMorgan’s Kelly: Trump’s Tax Plan Faces Roadblocks
- My Client Almost Paid a Boatload of Money in Taxes
- Businesses Salivate Over Trump’s Tax Ideas, but Will They Happen?