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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast.

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Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 2: Tracy, can I say something that I think is a

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Speaker 2: little silly about US politics or US policymaking?

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Speaker 3: What an intro? Joe? The answer is always so.

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Speaker 2: I'm sure there's plenty of things about our US system

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Speaker 2: of government that you know could be improved upon in theory,

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Speaker 2: but I'm aware of that for various rules that exist

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Speaker 2: in DC, we often pass these laws that just like expire,

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Speaker 2: and I think it has something to do with I

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Speaker 2: don't know, reconciliation and the deficit and the filibuster and

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Speaker 2: all these things where you pass a law and it

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Speaker 2: seems fine, and then if you don't do anything, it

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Speaker 2: just goes away in ten years. It actually seems very

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Speaker 2: hard to pass a law that has any sort of permanence,

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Speaker 2: especially if it changes to government spending or taxation. It

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Speaker 2: seems very hard to make permanent, substantial changes to our

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Speaker 2: fiscal policy.

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Speaker 3: I have to say, when you've mentioned it's been ten years,

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Speaker 3: that's kind of amazing. So you are specifically talking about

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Speaker 3: the twenty seventeen Tax Cut and Jobs Act, aka the

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Speaker 3: Trump Tax Cuts. Those went into effect in twenty eighteen,

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Speaker 3: and many of the cuts are scheduled to expire at

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Speaker 3: the end of twenty twenty five. So by twenty twenty six,

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Speaker 3: if we don't have any change, if we don't go about,

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Speaker 3: you know, doing it all over again, then we could

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Speaker 3: see tax increases.

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Speaker 2: Right like currently. If nothing happens, if we were to

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Speaker 2: get sort of gridlock after November, or just nothing happens,

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Speaker 2: there is this tax hike that is existing lass as

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Speaker 2: starting in twenty twenty six. I believe some taxes are

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Speaker 2: going to go up. I don't know exactly what they are,

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Speaker 2: well learn what they are, but yeah, right now we

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Speaker 2: are on course for taxis Now. Every politician I think

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Speaker 2: on either side of the aisle would probably say, at

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Speaker 2: least for some constituency, some income groups, we don't want

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Speaker 2: this to happen. We don't want taxes to go for

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Speaker 2: Americans earning less than four hundred thousand dollars. That's something

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Speaker 2: Democrats say from time to time, things like that. But

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Speaker 2: it doesn't matter if every side doesn't want it to happen.

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Speaker 2: You still need some sort of compromised law to replace

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Speaker 2: the existing law, and there's no guarantee of that because

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Speaker 2: politics is politics, and so as of right now, Yes,

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Speaker 2: so it is a something for people to recognize. And

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Speaker 2: b I think it's also important to understand what is

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Speaker 2: the existing tax code, what did we change? Why did

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Speaker 2: we have this change under the Trump administration find Dacga.

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Speaker 3: Yeah, the process of actually designing tax policy really interesting

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Speaker 3: and I have a lot of questions, and a lot

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Speaker 3: of it stems from my first ever encounter with US taxes.

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Speaker 3: I was living in London at the time, so I

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Speaker 3: had to file things like the foreign earned income exclusion

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Speaker 3: and stuff like that, and I remember receiving this like

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Speaker 3: four hundred page book from the IRS on how to

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Speaker 3: do your taxes, and it would say, like for box

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Speaker 3: seventy eight, a turn to page three hundred and twenty eight,

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Speaker 3: and I would turn to the page and there would

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Speaker 3: be nothing there of relevance. And I remember sitting on

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Speaker 3: the floor of my living room in London and crying

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Speaker 3: over this paperwork and this like admin that I had

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Speaker 3: to do. So America's tax system seems incredibly complicated to me.

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Speaker 3: I don't even know how you start to make changes

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Speaker 3: to it. And I am very interested to learn.

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Speaker 2: Well, I'm happy to say we literally have the perfect

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Speaker 2: guest because we're going to be speaking with the architect

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Speaker 2: of the Tax Cut and Jobs Act, former Chairman of

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Speaker 2: the Ways and Means Committee, Kevin Brady, the senior consultant

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Speaker 2: now at a can Kevin Brady, Thank you so much

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Speaker 2: for coming on Outlocks.

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Speaker 4: Joe, Thanks for having me. This is exciting.

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Speaker 2: We're really excited about this. Why don't we start at

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Speaker 2: the you know, politicians come in, they say we're going

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Speaker 2: to cut taxes. Right, We've heard it forever and Trump

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Speaker 2: was no different in that respect. But there's a difference,

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Speaker 2: I think maybe between saying we're going to cut taxes

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Speaker 2: and the idea of comprehensive tax reform that effects both households,

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Speaker 2: that affects corporations, et cetera. When you went you're considered

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Speaker 2: to be the architect of the TCGA, when you went

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Speaker 2: into this project of reforming the US tax code, which

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Speaker 2: I believe was the first time the tax code was

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Speaker 2: reformed in over thirty years. At bad point, these things

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Speaker 2: do not come. The stars do not align often for this.

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Speaker 2: What was your goal?

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Speaker 4: Yeah, so our goal one? Again, Thanks for having me be.

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Speaker 4: So the goal was pretty clear because we had a

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Speaker 4: tax code that was was obsolete compared to the rest

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Speaker 4: of the world on the way how businesses competed internationally.

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Speaker 4: Our code was a relic from the Kennedy administration. If

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Speaker 4: that part of the code were a person, it was

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Speaker 4: eligible for AARP. And as result, other countries had passed

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Speaker 4: us by their corporate rates were better. They were driving

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Speaker 4: a modern tax car. You know, we had a whole

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Speaker 4: old clunker. We're a big economy, but we couldn't keep up.

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Speaker 4: So as a result of the highest corporate rate at

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Speaker 4: the time in the world in the obsoste tax code,

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Speaker 4: you know, we were falling behind. For a decade before

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Speaker 4: twenty seventeen, growth was really slow in America one point

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Speaker 4: five percent average GDP growth, way low. Paychecks were stagnant

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Speaker 4: for the decade, and as you may recall, about every

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Speaker 4: other month there was another US company picking up roots

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Speaker 4: from the US and moving overseas or bought by a

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Speaker 4: foreign company, even though we were the bigger factor there

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Speaker 4: moving headquarters and employees overseas. So you know, we had

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Speaker 4: to act ways and means. Committee Republicans actually worked eight

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Speaker 4: years to be ready to do tax reform. And I've

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Speaker 4: credit former Chairman Dave Camp from Michigan and Paul Ryan,

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Speaker 4: who later became a speaker the work we did for

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Speaker 4: all the time, ready for prepared for someone in the

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Speaker 4: White House to lead on tax form, and that's what

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Speaker 4: happened in twenty seventeen.

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Speaker 3: So these type of tax changes, you know, going back

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Speaker 3: to my earlier point about the complexity of the US

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Speaker 3: tax system and maybe it's outdatedness as you put it,

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Speaker 3: Does the ambition start at the policy level. Is it

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Speaker 3: there are particular things in the code that we think

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Speaker 3: are maybe stupid or irrelevant or old fashioned, and so

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Speaker 3: we need to start focusing on those. Or does it

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Speaker 3: start with a general desire to lower taxes or reform

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Speaker 3: the system, and then you kind of work backwards to

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Speaker 3: the individual policy level.

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Speaker 4: So the answer is the big goals and then you

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Speaker 4: work backwards. For example, we specifically wanted a tax code

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Speaker 4: built for great growth, growth of jobs paychecks in the

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Speaker 4: US economy. We wanted to redesign the international code so

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Speaker 4: that it would leap frog America to among the most

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Speaker 4: competitive economies, but we wanted to make sure we wanted

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Speaker 4: to do it in a way where our US companies

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Speaker 4: could compete and win anywhere in the world, including at home.

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Speaker 4: When they did compete, win overseas, bring those dollars, make

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Speaker 4: it easy for them to bring it back invest in

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Speaker 4: the US. The old tax code said, no, don't do that.

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Speaker 4: And we wanted to be to drive innovation because whatever

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Speaker 4: country wins the innovation race really wins the future, I

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Speaker 4: think economically. And we wanted to make America the most

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Speaker 4: desirable place for that new plant, that new research, that

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Speaker 4: new intellectual property. So those were the bigger goals, and

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Speaker 4: then we wrote to those and one of the lessons

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Speaker 4: we learned during the eight years as we laid out

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Speaker 4: drafts of what we might do, is that we realized,

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Speaker 4: especially in twenty seventeen, we had to go bold because

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Speaker 4: we only get this only happens, as you said, Joe,

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Speaker 4: once generation really and so you can't miss that opportunity.

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Speaker 4: The other thing we learned is the boulder you go,

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Speaker 4: the more people are willing to give up parts of

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Speaker 4: the old tax code to drive a new, modern, faster,

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Speaker 4: better performing tax vehicle going forward. So we took lessons

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Speaker 4: we'd learned into the whole tax debate.

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Speaker 2: I want to get in obviously to some of the

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Speaker 2: philosophical questions and about the questions of what a pro

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Speaker 2: growth tax system looks like. But before we do, what

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Speaker 2: don't you just lay out the sort of bullet point

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Speaker 2: versions of what the TCGA did and then what specifically

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Speaker 2: is set to expire and would revert to in the

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Speaker 2: next few years, because I know not some of it

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Speaker 2: is actually permanent, like the corporate side is not going

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Speaker 2: to change. But what do you just sort of give

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Speaker 2: us the bullet points from twenty seventeen and what could reverse.

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Speaker 4: Yeah, so it is different twenty twenty five than it

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Speaker 4: was in twenty seventeen. So really the focus had to

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Speaker 4: begin with growth, you know, because our economy was so slow,

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Speaker 4: and competitiveness because we had fallen so far behind. So

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Speaker 4: that's why focus was on dramatically reducing the corporate tax rate.

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Speaker 4: Because to twenty one which really put us we were

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Speaker 4: dead last. We moved into the middle of the pack.

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Speaker 4: But the redesign of the international code made us very

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Speaker 4: very competitive, and so twenty one percent puts us in

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Speaker 4: the middle of the pack for our major foreign competitors

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Speaker 4: at twenty one percent, and we could have gone lower

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Speaker 4: in that regard. In fact President Trump wanted to go

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Speaker 4: lower there, but what we thought that would perform very well,

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Speaker 4: and it did. We lower taxes on individuals across the board.

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Speaker 4: Our taxes were high, they had been growing since the

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Speaker 4: Reagan tax cuts, and so our job was we believed

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Speaker 4: if you give families, workers, and small businesses, you know,

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Speaker 4: more control over their earnings one, you know, they get

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Speaker 4: to live their dream not the government's stream, and omy

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Speaker 4: is going to grow. And so we did some some

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Speaker 4: big things. I think on the middle class tax cuts.

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Speaker 4: We created the first ever small business tax deduction twenty

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Speaker 4: percent for those what we call pass throughs. Those are

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Speaker 4: the non corporations where the money gets paid by the individuals.

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Speaker 2: You reduced the amount of state and local taxes that

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Speaker 2: I can write off on my text.

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Speaker 4: Thank you. Well, you're welcome. You're welcome. Happy to get

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Speaker 4: out of New York as fast as I can. But yeah,

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Speaker 4: can we talk about Solomon. Yeah, it's hard to ignore it.

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Speaker 4: A lot of our listeners are very yeah, I know,

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Speaker 4: so I should have come in under an assumed name.

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Speaker 4: But you couldn't ignore Salt. It is the biggest single

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Speaker 4: subsidy I think within individual tax code. It's worth a trillion,

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Speaker 4: two trillion, five and we needed those dollars to pay

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Speaker 4: for the small for the middle class tax cuts for

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Speaker 4: the most part. But here's what we did. So we

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Speaker 4: took a look at it. It wasn't a red blue

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Speaker 4: thing at all. In fact, Texas is one of the

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Speaker 4: bigger users of the salt deduction because of our properties,

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Speaker 4: the proper each yeah, yeah, So what we looked at

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Speaker 4: and we realized, you know, everyone's subsidizing everyone, you know,

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Speaker 4: rural community cities, low and modest income, higher income, non itemizers, itemizers,

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Speaker 4: and so we arrived at a simple premise, which is

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Speaker 4: why doesn't everyone just pay their own state and local taxes?

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Speaker 4: I mean, we choose where we work and we live.

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Speaker 4: We have a choice in our elected officials. Why is

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Speaker 4: anyone obligated to help us pay more importantly, why are

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Speaker 4: we obligated to help pay others? Because half the salt

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Speaker 4: deduction goes to households making a million dollars and more.

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Speaker 4: So what we did was and then use that money

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Speaker 4: to lower rates across the board. So take a deduction

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Speaker 4: from some, give it to many more. At the end, though,

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Speaker 4: you know, we compromise talking with the legislators and high

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Speaker 4: tax states. You know, it was really important we preserve

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Speaker 4: some of it. So we took the standard average standard

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Speaker 4: deduction across America, which was five thousand, and we doubled it.

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Speaker 4: But then we didn't stop there. So we took the

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Speaker 4: child tax credit, which was was sort of limited about

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Speaker 4: one hundred and twenty thousand. We took us up to

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Speaker 4: four hundred thousand, provide more tax relief for people who

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Speaker 4: were impacted by salt. Then we did away with the

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Speaker 4: AMT Alternative minimum tax. Again that's what how people couldn't

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Speaker 4: get like in New York, New Jersey couldn't even use

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Speaker 4: the salt tax deduction even those in place. Then we

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Speaker 4: changed the marginal tax rates all to make we want

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Speaker 4: lower taxes in every state, not red states, not every state.

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Speaker 4: And so we made big changes to make sure we

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Speaker 4: saw those tax cuts. And I know most people look

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Speaker 4: at it and say, look, we just need to restore that.

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Speaker 4: And I wouldn't be surprised if there's some give on that,

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Speaker 4: because we've got we've got in our party as well.

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Speaker 4: You know, we've got New Yorkers and New Jerseys, California's Illinois,

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Speaker 4: you know, Minnesota, Long Island Republic. Yeah, so look, that's fair.

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Speaker 4: It's important to them, and so I think there's there's

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Speaker 4: some prett good discus sessions. I think you might see

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Speaker 4: some relief. But here's the warning. It's really expensive. Yeah,

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Speaker 4: and every dollar comes out of those middle class tax cuts.

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Speaker 4: So whatever you give there, you know, you got to

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Speaker 4: figure out where to pick it up somewhere else.

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Speaker 3: Yeah, plenty of people still feel salty about salt. Myself

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Speaker 3: included full disclosure. Okay, this reminds me, though. One thing

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Speaker 3: I always wanted to ask about these is did you

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Speaker 3: have a particular tax model in mind when you started

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Speaker 3: this process. Did you look at potentially other countries and say,

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Speaker 3: they're doing this right or they're doing this wrong. Or

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Speaker 3: is it the case that because of the uniqueness of

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Speaker 3: the US tax system there are no international comparisons that

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Speaker 3: you can really make.

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Speaker 4: There are tons of international comparisons.

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Speaker 3: Okay, good.

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Speaker 4: We spent a lot of time both the way they

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Speaker 4: tax businesses that compete around the world and the way

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Speaker 4: they tax themselves, and obviously we're out of step, especially

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Speaker 4: on the international side. No very few other countries taxed

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Speaker 4: you at home and taxed your business. Odd they taxed

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Speaker 4: you at home, but we were doing both, and it

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Speaker 4: was a problem. A lot of countries have value added taxes,

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Speaker 4: you know, that add more revenue beyond their income taxes.

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Speaker 4: We're well aware of that. But I'm going to tell

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Speaker 4: you what was driving this as a model, and you're

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Speaker 4: going to laugh at first, but let me explain it

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Speaker 4: to you. So and why we did it. So you

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Speaker 4: heard us talk about getting ninety percent of Americans to

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Speaker 4: be able to file on the back of a postcard,

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Speaker 4: and you probably said that is a political gimmick, but

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Speaker 4: in fact, that was driving our goal of simplifying the

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Speaker 4: tax code dramatically, so getting rid of a lot of

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Speaker 4: that complexity for some, lowering the rates for everybody, and

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Speaker 4: creating more fairness and understanding of how we tax people.

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Speaker 4: And our thinking was look for again, there's people who

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Speaker 4: would never be able to do that, but for a

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Speaker 4: lot of Americans, you know, there is something powerful about

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Speaker 4: looking at thirteen lines and saying, this is how I'm taxed.

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Speaker 4: In almost all the neighbors that I can see, this

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Speaker 4: is how they're tax too. And it also makes it

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Speaker 4: harder for Washington to raise taxes because you actually know,

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Speaker 4: you know what I mean, how you are being taxed.

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Speaker 4: So the postcard drove what we hoped would be simplicity, fairness,

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Speaker 4: obviously stronger growth as well. And on the business side,

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Speaker 4: you know, our first proposal, which didn't make it all

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Speaker 4: the way through, was to basically eliminate huge chunks of

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Speaker 4: the international code and replace it with a border adjustment tax,

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Speaker 4: which is basically a consumption tax that asks a simple question,

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Speaker 4: do you sell your product or service in America? If so,

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Speaker 4: everyone's paying the same rate. It doesn't matter where it

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Speaker 4: was made, doesn't matter where it's shipped from, doesn't matter

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Speaker 4: who did it. Are you selling it here? If so,

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Speaker 4: if you're US or you're from France, you're paying the

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Speaker 4: same rate. And so we thought, well, in the the

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Speaker 4: other big virtue of it is that for American companies,

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Speaker 4: you took that tax off of products you're exporting and selling,

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Speaker 4: you put it on those coming in. So now we're

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Speaker 4: more competitive compared to the vat around the world. And

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Speaker 4: the simplicity of it it was bold. I still think it's,

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Speaker 4: you know, an incredibly positive approach on taxes, but we

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Speaker 4: had a short runway to get all this done. You know,

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Speaker 4: industries that that that import a lot, whether you're a

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Speaker 4: Walmart or a refiner or an Apple or whatever. You know,

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Speaker 4: they have real objections to it. We didn't have time

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Speaker 4: to be able to sit through and work, and so

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Speaker 4: at one point we had to jettison what was one

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Speaker 4: of the bolder I think more were positive things. But

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Speaker 4: that's the process, you know, Tracy, you're asking about. It's

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Speaker 4: you do. No matter what your dreams are, you got

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Speaker 4: to get it through Congress.

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Speaker 3: So tell us more about that process. What are conversations

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Speaker 3: actually like are you all in a room together, like

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Speaker 3: yelling at each other? Are there, you know, phone calls

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Speaker 3: at midnight, that kind of thing.

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Speaker 4: So because we started so early, you know, it was

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Speaker 4: just a continual series of meetings, listening sessions, discussions with

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Speaker 4: the scorekeepers like Joint Committee on Taxation, Congressional Budget.

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Speaker 3: I'm going to ask you about that.

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Speaker 4: Yeah, you got to figure out you got to turn

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Speaker 4: the Rubik's cube to figure out, Okay, if we do

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Speaker 4: this and this, what do you get, Like what kind

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Speaker 4: of growth and who pays the taxes and what's the

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Speaker 4: cost of all that? And so we had a long

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Speaker 4: time to run through countless meetings, briefings, bring an ex person,

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Speaker 4: all that. But in twenty seventeen is we really started

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Speaker 4: to get crunch time. All of that accelerated, and so

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Speaker 4: we certainly in the House, we started with this premise

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Speaker 4: and we went to our House members and said, look,

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Speaker 4: we're going to tear the tax code down to its

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Speaker 4: foundation and we're going to rebuild it. So go back

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Speaker 4: home and listen to what people what's important in twenty seventeen,

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Speaker 4: not the nineteen eighties, like what is important to you,

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Speaker 4: and then we rebuilt it from that. And so lots

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Speaker 4: lots of meetings, a lot of listening sessions late into

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Speaker 4: the night. We had the Ways and Means Committee members working.

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Speaker 4: We brought them back for holidays, you had them work

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Speaker 4: when everyone was on recess. A lot of it was

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Speaker 4: listening because to other members in briefing groups from DC

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Speaker 4: and around the country. Even though we didn't get Democrats support,

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Speaker 4: you know, I briefed our Ways and Means Democrats, our

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Speaker 4: new Democrats, our problem solvers, the trade the unions sat

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Speaker 4: down with them. We knew, I knew they weren't going

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Speaker 4: to be able to support this. If I wanted to

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Speaker 4: hear what was important to them to figure out what

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Speaker 4: might be the biparson areas that we can design too,

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Speaker 4: and it was all that was hugely helpful. But the

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Speaker 4: process you're working with, the Senate, the White House, constant

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Speaker 4: media presence, lots of groups attacking or supporting. It's sort

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Speaker 4: of a hurricane, you know what I mean of input.

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Speaker 4: As you're doing that.

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Speaker 2: I'm going to ask you a kind of political question.

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Speaker 2: You can be as forthcoming as you would like to

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Speaker 2: be on this question. But there's obviously a possibility that

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Speaker 2: you know, Trump wins in November, and he says things

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Speaker 2: in the media that I think probably people in DC

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Speaker 2: like wonder, like how serious is he? So, you know,

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Speaker 2: like and some things he says seem like quite ball.

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Speaker 4: You know.

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Speaker 2: He says he's talked on the campaign trail this time

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Speaker 2: no taxes on tipped income, I think he said last

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Speaker 2: night or recording the September twenty sixth, He's like, no,

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Speaker 2: we're just not going to tax us manufacturers. He says

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Speaker 2: some things that are more make economists very nervous, such

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Speaker 2: as massively increasing tariffs would our attacks. And he says

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Speaker 2: things that make people even more head scratched, such as, oh,

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Speaker 2: maybe we could create a thirty five trillion dollar crypto

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Speaker 2: client and pay off the deficit. So what I want

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Speaker 2: to ask you is, from the perspective of a someone

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Speaker 2: writing policy, how should people think about what he says

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Speaker 2: publicly and translating this or taking it seriously? How seriously

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Speaker 2: should we tell you?

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Speaker 4: What do you tell us? How we should? Yeah?

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Speaker 2: And then how these things maybe get molded into something real.

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Speaker 4: Having experienced working with the President both on healthcare, tax

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Speaker 4: reform and in trade to some degree so that every

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Speaker 4: day the press in the Capitol would ask me about

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Speaker 4: the president's latest tweet, I always did, but I didn't

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Speaker 4: pay attention to his tweets. I paid attention to his

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Speaker 4: campaign promises because I've never seen someone in the White

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Speaker 4: House so focused on this is what I said, we do?

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Speaker 4: Have you done it? Because it matters to him? But

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Speaker 4: the flip side of that was, you know, he was

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Speaker 4: not wed to doing exactly that. So my advice always

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Speaker 4: is take him seriously, but not literally, because whether you're

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Speaker 4: working on taxes or trade, whatever, man, he's opened lots

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Speaker 4: of changes. He's listening to sort of that team of

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Speaker 4: rivals discussion. You can shape, and we did in tax

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Speaker 4: from shape a lot of what were campaign promises into

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Speaker 4: positive things, but not exactly.

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Speaker 2: I just one follow up on this one thing that

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Speaker 2: he does not if a future Trump presidency does not

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Speaker 2: really need the help of Congress on would be terrorists. Yeah,

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Speaker 2: and he's talking. He he to your point. He followed

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Speaker 2: through with his terror promises from the twenty sixteen election,

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Speaker 2: and in the twenty twenty four election he has much bigger,

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Speaker 2: terarff promises. And I have to imagine that you know

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Speaker 2: a lot of people, particularly in DC, who are like

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Speaker 2: deeply uncomfortable about this, particularly corporate anyone who trades internationally,

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Speaker 2: et cetera. What are you telling them about the risk

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Speaker 2: of a very different international trading regime unto the next president.

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Speaker 4: Yes. So I'm not a fan of tariffs. I think

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Speaker 4: they're incredibly damaging. You punishes America more than whoever we're

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Speaker 4: trying to punish, And yeah, it is. I don't advise

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Speaker 4: any president to go that route unless there is some

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Speaker 4: very specific target you need to hit. But what I

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Speaker 4: advise them in using the experience of his first term

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Speaker 4: is same thing. Take him he's going to use tariffs

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Speaker 4: for a purpose, if not imposing them, sort of hammering

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Speaker 4: people into coming to the table on issues. I think

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Speaker 4: that's he uses that threat fairly effectively. It is disruptive.

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Speaker 4: I did have an impact on economic growth. There's no quote,

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Speaker 4: both the threat of withdrawing from NAFTA, for example, the

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Speaker 4: major threats with the steel aluminum filed through on in China.

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Speaker 4: There's no question it slowed growth and had an impact,

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Speaker 4: and so would future terror. My advice is again, take

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Speaker 4: them seriously. He likes Tarff's believes that levels the playing field,

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Speaker 4: and he's held that belief since eighties, but that he

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Speaker 4: also listens to the economic impact. You know, he's proud

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Speaker 4: of his economy and he's open to arguments of how

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Speaker 4: this hurts the very people he's trying to help.

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Speaker 3: Since you mentioned economic growth, how do you judge the

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Speaker 3: success of something like the tax cuts, because you know,

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Speaker 3: I'm aware there's a controversy right now over dynamic analysis

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Speaker 3: or modeling, and it does seem hard to disentangle the

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Speaker 3: cuts from other factors. So I'm and it does feel like,

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Speaker 3: you know, you can kind of say like, oh, well

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Speaker 3: the tax cuts did this, but then you can argue, well,

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Speaker 3: there are other things going on and that's why growth

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Speaker 3: went up. So how do you kind of evaluate the

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Speaker 3: actual impact.

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Speaker 4: Yeah, as you know, there's lots of projections ahead of

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Speaker 4: tax reform in the economy, there's lots of different data

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Speaker 4: on it. We try we try to use the government

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Speaker 4: data as much as possible, you know, and we supplement

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Speaker 4: it with lots of other studies and different groups that

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Speaker 4: those are all very helpful, but we tend to rely

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Speaker 4: on so what do the numbers show us? And yes,

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Speaker 4: there are always other factors. I think the relief on

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Speaker 4: regulation played a pretty important part, I think in the

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Speaker 4: economy overall, and you just have the economy in general.

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Speaker 4: So we were always taking a look at how much

435
00:24:26,480 --> 00:24:29,879
Speaker 4: did it grow jobs, how much money returned from overseas

436
00:24:29,920 --> 00:24:32,640
Speaker 4: two and a half trillion, you know, we had innovations

437
00:24:32,680 --> 00:24:37,240
Speaker 4: to do your intellectual property in America, we'll bring it back.

438
00:24:37,600 --> 00:24:42,359
Speaker 4: Those revenues doubled, really good outcome there. Investment from businesses,

439
00:24:42,440 --> 00:24:46,479
Speaker 4: big thing that drives, that drives, equipment that drives all

440
00:24:46,560 --> 00:24:49,880
Speaker 4: this stuff on average went up twenty percent, really good numbers.

441
00:24:50,359 --> 00:24:53,960
Speaker 4: Research did the exact same thing, and so watching the

442
00:24:54,040 --> 00:24:59,000
Speaker 4: economic data, we were achieving much of what we had

443
00:24:59,000 --> 00:25:02,560
Speaker 4: hoped for. The the one element. Twenty nineteen to me

444
00:25:02,720 --> 00:25:05,680
Speaker 4: was the most fascinating year. We watched it closely. Because

445
00:25:06,320 --> 00:25:08,679
Speaker 4: the code had been in place one year now we

446
00:25:08,720 --> 00:25:11,239
Speaker 4: could sort of see how it was working. And we

447
00:25:11,359 --> 00:25:15,840
Speaker 4: know generally how an individual, like a corporate rate cut

448
00:25:16,080 --> 00:25:20,399
Speaker 4: or research and development, how it will perform. Generally, the

449
00:25:20,480 --> 00:25:22,680
Speaker 4: question is how does it all interact, you know what

450
00:25:22,720 --> 00:25:24,800
Speaker 4: I mean, like, how does that it's like a Formula

451
00:25:24,840 --> 00:25:27,840
Speaker 4: one car and bring an upgrade? How does it affect

452
00:25:27,840 --> 00:25:31,000
Speaker 4: the rest of the performance. And so that's what I

453
00:25:31,119 --> 00:25:34,120
Speaker 4: was following twenty nineteen. Couple key things happened, I think

454
00:25:34,160 --> 00:25:38,320
Speaker 4: besides very strong economic growth. One, real wages and like

455
00:25:38,560 --> 00:25:42,240
Speaker 4: a head of inflation grew more in one year than

456
00:25:42,400 --> 00:25:45,680
Speaker 4: in the eight years combined before it. In fact, those

457
00:25:45,720 --> 00:25:50,879
Speaker 4: first three years after TCJA, real wages average nine percent.

458
00:25:50,960 --> 00:25:53,880
Speaker 4: That's the best three years on record. So paychecks were growing.

459
00:25:53,920 --> 00:25:56,680
Speaker 4: We checked the box that was working really well. Poverty,

460
00:25:56,960 --> 00:26:00,400
Speaker 4: you know, twenty nineteen just plummeted in a good way,

461
00:26:00,400 --> 00:26:02,960
Speaker 4: but it did the most, made the most progress among

462
00:26:03,000 --> 00:26:05,800
Speaker 4: the people who'd sort of been left behind, people of color,

463
00:26:06,400 --> 00:26:10,720
Speaker 4: those without a high school degree, disabled, young folks got

464
00:26:10,800 --> 00:26:14,960
Speaker 4: new opportunities. That was that was what we were driving for.

465
00:26:15,000 --> 00:26:18,080
Speaker 4: And then income inequality began to strength for the first

466
00:26:18,119 --> 00:26:21,120
Speaker 4: time in fifty years. According to Larry Lindsay, fed Governor

467
00:26:21,119 --> 00:26:25,560
Speaker 4: and in the White House Economic Team, another goal of

468
00:26:25,600 --> 00:26:30,160
Speaker 4: ours and so yeah, we were every year tracking what

469
00:26:30,280 --> 00:26:33,399
Speaker 4: progress we were making and what provisions might not be

470
00:26:33,480 --> 00:26:34,920
Speaker 4: performing as well as you want.

471
00:26:35,000 --> 00:26:38,920
Speaker 2: You mentioned income inequality. I'm curious your philosophy about the

472
00:26:39,320 --> 00:26:42,240
Speaker 2: role of progressivity in the tax cuts. We obviously have

473
00:26:42,280 --> 00:26:44,720
Speaker 2: a progressive income tax, and the more you make, the

474
00:26:44,800 --> 00:26:47,880
Speaker 2: higher percentage of your marginal in a higher marginal tax

475
00:26:48,280 --> 00:26:51,200
Speaker 2: goes up. A criticism that you get of tax cuts

476
00:26:51,240 --> 00:26:53,360
Speaker 2: is like a lot of the tax cuts benefit the rich,

477
00:26:53,440 --> 00:26:55,720
Speaker 2: but of course the rich pay a lot of taxes,

478
00:26:55,760 --> 00:26:57,960
Speaker 2: so if you're relative to the poor, So if you're

479
00:26:57,960 --> 00:27:00,480
Speaker 2: going to cut taxes, we all know like a net

480
00:27:00,480 --> 00:27:02,600
Speaker 2: where those dollars are going to flow. But just talk

481
00:27:02,640 --> 00:27:05,439
Speaker 2: to us about your philosophy of the role that the

482
00:27:05,480 --> 00:27:08,600
Speaker 2: tax code can play in the TCGA or just generally

483
00:27:09,359 --> 00:27:12,679
Speaker 2: and thinking about the importance or unimportance if that's your

484
00:27:12,760 --> 00:27:14,880
Speaker 2: view of progressivity in the tax code.

485
00:27:14,960 --> 00:27:17,959
Speaker 4: Yeah, so, I don't think people realize how progressive our

486
00:27:18,000 --> 00:27:20,520
Speaker 4: code is compared to other countries. If you just look

487
00:27:20,600 --> 00:27:23,440
Speaker 4: at like what is the top rate, you might say, well,

488
00:27:23,480 --> 00:27:25,680
Speaker 4: it's more in France or somewhere else. But if you

489
00:27:25,720 --> 00:27:29,399
Speaker 4: look at what's the share of taxes that each income

490
00:27:29,480 --> 00:27:33,480
Speaker 4: group pays, we are incredibly progressive. In the top one

491
00:27:33,560 --> 00:27:39,280
Speaker 4: percent in America today shoulder about forty five percent of

492
00:27:39,359 --> 00:27:43,320
Speaker 4: all the income tax burdens. That's unusually high for it.

493
00:27:43,680 --> 00:27:46,639
Speaker 4: And the converse is true as well, Like the bottom

494
00:27:46,760 --> 00:27:49,520
Speaker 4: half of income earners. What we would think is up

495
00:27:49,600 --> 00:27:52,800
Speaker 4: to the middle class shoulder only about a little more

496
00:27:52,840 --> 00:27:56,040
Speaker 4: than two percent of the whole income tax burden. So

497
00:27:56,720 --> 00:27:59,560
Speaker 4: and it grew after the tax reform. It grew a

498
00:27:59,640 --> 00:28:03,760
Speaker 4: quarter for the wealthy, they picked up a bigger burden.

499
00:28:04,280 --> 00:28:06,920
Speaker 4: It's shrunk by a quarter for the modest and low

500
00:28:06,960 --> 00:28:10,160
Speaker 4: income down to two point three percent. So we are

501
00:28:10,440 --> 00:28:13,119
Speaker 4: people are always surprised how progressive we are compared to

502
00:28:13,160 --> 00:28:13,760
Speaker 4: other countries.

503
00:28:13,920 --> 00:28:17,440
Speaker 2: Real quickly, and before we forget to do this, can

504
00:28:17,480 --> 00:28:20,040
Speaker 2: you give us the bullet point in summary of what happened. Okay,

505
00:28:20,119 --> 00:28:23,959
Speaker 2: let's say twenty twenty election, twenty twenty four election happens.

506
00:28:24,000 --> 00:28:27,200
Speaker 2: It's political gridlock. They can agree on nothing in DC,

507
00:28:27,840 --> 00:28:29,240
Speaker 2: what reverts and what doesn't.

508
00:28:29,480 --> 00:28:33,639
Speaker 4: Yeah, so twenty seventeen is all about growth. Competitiveness twenty

509
00:28:33,760 --> 00:28:36,680
Speaker 4: twenty five is going to be about the individual tax cuts.

510
00:28:36,680 --> 00:28:40,720
Speaker 4: Do they hang around? And so all the individual marginal

511
00:28:40,840 --> 00:28:45,120
Speaker 4: rates revert back to pre twenty seventeen. Those are an

512
00:28:45,160 --> 00:28:48,360
Speaker 4: average family for it's gonna be around two thousand dollars roughly.

513
00:28:49,600 --> 00:28:52,400
Speaker 4: Things like the child tax credit is going to shrink back.

514
00:28:52,720 --> 00:28:56,600
Speaker 4: The standard deduction, which we nearly doubled, hugely popular, and

515
00:28:56,680 --> 00:29:00,000
Speaker 4: now ninety percent of Americans don't have to itemize their time.

516
00:29:00,480 --> 00:29:03,760
Speaker 4: They sort of love that. That reverts as well. The

517
00:29:03,800 --> 00:29:08,040
Speaker 4: small business tax cuts we created goes away. That's really damaging,

518
00:29:08,080 --> 00:29:09,800
Speaker 4: I think in a big way. And then things like

519
00:29:10,280 --> 00:29:13,280
Speaker 4: the estate tax, what we call the death tax family

520
00:29:13,320 --> 00:29:17,120
Speaker 4: farms and businesses, goes back to very few exceptions in

521
00:29:17,160 --> 00:29:21,360
Speaker 4: a much higher rate. Things like opportunity zones disappear. The

522
00:29:21,400 --> 00:29:23,680
Speaker 4: new we create a new child or a tax credit

523
00:29:24,120 --> 00:29:28,000
Speaker 4: for paid family and medical leave, so businesses that created

524
00:29:28,040 --> 00:29:31,840
Speaker 4: those programs tailored to their workers could get some help

525
00:29:32,200 --> 00:29:36,560
Speaker 4: doing it goes away as well. And in some business credits,

526
00:29:36,600 --> 00:29:42,800
Speaker 4: really important research and development expensing, expensing of your equipment, software,

527
00:29:42,840 --> 00:29:46,120
Speaker 4: all of that reverts to a very I think negative

528
00:29:46,200 --> 00:29:51,560
Speaker 4: position there. So yeah, for trillion or more of tax

529
00:29:51,640 --> 00:29:57,160
Speaker 4: heights that it'll slam the economy, and neither party I

530
00:29:57,200 --> 00:30:00,880
Speaker 4: think has anything to win by letting these expire, which

531
00:30:00,920 --> 00:30:05,960
Speaker 4: is where why you asked why something's expiring sometime. So

532
00:30:06,520 --> 00:30:09,040
Speaker 4: I'm not going to just blame it on Senate budget rules,

533
00:30:09,040 --> 00:30:11,360
Speaker 4: but I'm going to blame it on Centate Budger because

534
00:30:11,400 --> 00:30:15,680
Speaker 4: that's what did it. But our thinking was we locked

535
00:30:15,720 --> 00:30:18,760
Speaker 4: in all the growth competitives because so important on paychecks

536
00:30:18,920 --> 00:30:23,320
Speaker 4: and jobs. We left the more biparson issues We believed

537
00:30:23,440 --> 00:30:26,400
Speaker 4: Republican Democrats would want to keep, the middle class tax cuts,

538
00:30:26,760 --> 00:30:30,960
Speaker 4: the small business tax cuts, the child tax credit, issues

539
00:30:31,040 --> 00:30:34,680
Speaker 4: like that, where I think they'll be more common ground

540
00:30:34,720 --> 00:30:36,000
Speaker 4: heading into twenty twenty five.

541
00:30:51,240 --> 00:30:54,400
Speaker 3: I want to go back to the inequality discussion because

542
00:30:54,480 --> 00:30:58,160
Speaker 3: I take the point about progressivism and the idea that

543
00:30:58,200 --> 00:31:01,720
Speaker 3: they're wealthy in America are paying more taxes overall. But

544
00:31:01,800 --> 00:31:08,520
Speaker 3: my impression is the more redistributionist countries that are out there,

545
00:31:08,640 --> 00:31:13,000
Speaker 3: I guess they don't necessarily have really progressive taxes, but

546
00:31:13,120 --> 00:31:16,240
Speaker 3: the difference is that the tax that they get they

547
00:31:16,360 --> 00:31:21,440
Speaker 3: direct more towards the poor. So I guess my question is,

548
00:31:22,120 --> 00:31:27,840
Speaker 3: could we reduce inequality through something other than taxation. Could

549
00:31:27,880 --> 00:31:31,760
Speaker 3: we just spend in a different way in order to.

550
00:31:32,120 --> 00:31:36,640
Speaker 4: Focused with yeah, exactly, you know, perhaps, but we have

551
00:31:36,680 --> 00:31:40,719
Speaker 4: a pretty poor track record of that unfortunately, within our

552
00:31:40,760 --> 00:31:43,200
Speaker 4: spending and the government or of that social safety net.

553
00:31:43,320 --> 00:31:46,840
Speaker 4: You know, I think we're all really cognizant of you know,

554
00:31:47,040 --> 00:31:50,920
Speaker 4: we often discourage work in connecting back to the workforce

555
00:31:51,160 --> 00:31:54,160
Speaker 4: in a lot of those when you put all that

556
00:31:54,320 --> 00:31:59,320
Speaker 4: net together on average, you know, in a state like Texas,

557
00:32:00,160 --> 00:32:04,040
Speaker 4: or that family, whether it's single mom or with a

558
00:32:04,040 --> 00:32:07,800
Speaker 4: couple children, you know, those benefits start to add up.

559
00:32:08,040 --> 00:32:10,800
Speaker 4: Like in Texas, we're a little stingy on all that.

560
00:32:10,920 --> 00:32:14,200
Speaker 4: It's still close to fifty thousand dollars a year. In

561
00:32:14,240 --> 00:32:19,560
Speaker 4: a Pennsylvania it'll be sixty seven sixty some thousand. So

562
00:32:19,640 --> 00:32:22,760
Speaker 4: the problem is is that you make it really hard

563
00:32:23,120 --> 00:32:25,840
Speaker 4: for people to move off out of the social safety net.

564
00:32:26,480 --> 00:32:28,120
Speaker 4: It's not in their interest to do it, or it

565
00:32:28,120 --> 00:32:30,800
Speaker 4: doesn't feel that way for them. And so part of

566
00:32:30,800 --> 00:32:34,680
Speaker 4: our thinking again on the tax code was let's reward work,

567
00:32:35,000 --> 00:32:37,960
Speaker 4: you know what I mean, in a way that allows

568
00:32:38,000 --> 00:32:41,480
Speaker 4: them and encourages them to move back into the workforce.

569
00:32:41,800 --> 00:32:45,600
Speaker 4: That happened in TCJA certainly not to the level we

570
00:32:45,720 --> 00:32:49,280
Speaker 4: will need for the long term. And COVID changed everything

571
00:32:49,600 --> 00:32:54,040
Speaker 4: sort of on labor participation in just change the game

572
00:32:54,360 --> 00:32:54,760
Speaker 4: that way.

573
00:32:54,880 --> 00:32:59,800
Speaker 2: So one of the criticisms of the current I don't

574
00:32:59,800 --> 00:33:03,440
Speaker 2: know current tax code is people talk about this phenomenon

575
00:33:03,800 --> 00:33:10,000
Speaker 2: of by borrow die wealthy people accumulate assets rather than

576
00:33:10,120 --> 00:33:12,640
Speaker 2: sell them. When they go up to enjoy the fruits

577
00:33:12,640 --> 00:33:16,800
Speaker 2: of their increased wealth, they borrow against them, and that

578
00:33:16,920 --> 00:33:19,440
Speaker 2: borrowing is tax free, and then they spend that and

579
00:33:19,480 --> 00:33:22,680
Speaker 2: then assets tend to go up like stocks over time,

580
00:33:23,040 --> 00:33:26,200
Speaker 2: and then they die and then their bequeath to their children,

581
00:33:26,280 --> 00:33:28,880
Speaker 2: and the children get a step up in basis such

582
00:33:29,040 --> 00:33:32,320
Speaker 2: that they don't actually pay capital gains on the original

583
00:33:32,360 --> 00:33:35,120
Speaker 2: purchase of the real estate or the stock or whatever.

584
00:33:35,160 --> 00:33:37,400
Speaker 2: And so one thing that was for about a week

585
00:33:37,440 --> 00:33:39,080
Speaker 2: people were talking about it was like, well, maybe we

586
00:33:39,120 --> 00:33:42,880
Speaker 2: should have some sort of tax on unrealized capital gains.

587
00:33:43,280 --> 00:33:45,720
Speaker 2: Seems very unlikely to me for all kinds of reasons.

588
00:33:45,920 --> 00:33:49,960
Speaker 2: But setting that aside, are there still issues out there

589
00:33:50,040 --> 00:33:53,680
Speaker 2: that seem structurally wrong, such as step up and basis

590
00:33:53,720 --> 00:33:56,760
Speaker 2: and some of these other ways that the wealthy can

591
00:33:56,840 --> 00:34:00,960
Speaker 2: accumulate assets without having a big tax bill before realizing

592
00:34:01,000 --> 00:34:01,560
Speaker 2: their benefit.

593
00:34:01,760 --> 00:34:05,959
Speaker 4: Yeah, you know, I actually don't see that as an

594
00:34:05,960 --> 00:34:09,239
Speaker 4: abuse in the sense that you know, we do that

595
00:34:09,360 --> 00:34:11,399
Speaker 4: in our home equity loans. You know what I mean.

596
00:34:11,480 --> 00:34:14,239
Speaker 4: We build up, We build up that value we borrow

597
00:34:14,280 --> 00:34:18,000
Speaker 4: against for something that's important. The value hopefully keeps going up,

598
00:34:18,080 --> 00:34:20,759
Speaker 4: and when we pass on, you know, we do get

599
00:34:20,760 --> 00:34:23,839
Speaker 4: an exemption. And usually for us, for middle class yeah,

600
00:34:23,920 --> 00:34:26,480
Speaker 4: you know, they don't get hammered with the state tax

601
00:34:26,760 --> 00:34:30,160
Speaker 4: in any way. So I don't know what's wrong with

602
00:34:30,320 --> 00:34:34,360
Speaker 4: borrowing against values you've invested in. And I'll tell you

603
00:34:34,440 --> 00:34:39,680
Speaker 4: this too. Most of those investments come I think, because

604
00:34:40,440 --> 00:34:44,080
Speaker 4: you know our tax code. We try to drive investments.

605
00:34:44,160 --> 00:34:46,640
Speaker 4: So you know, when you're in a dollar, there's three

606
00:34:46,680 --> 00:34:48,480
Speaker 4: things you can do with it. You can spend it,

607
00:34:48,880 --> 00:34:51,239
Speaker 4: which a lot of us do. You can save, which

608
00:34:51,280 --> 00:34:54,560
Speaker 4: is economically better, Or you can invest that's risky, no

609
00:34:54,680 --> 00:34:57,480
Speaker 4: guarantee you're getting it, but is the most pro growth

610
00:34:57,800 --> 00:34:59,839
Speaker 4: of everything you do with that dollar. And a lot

611
00:35:00,120 --> 00:35:03,320
Speaker 4: of we're trying and to encourage people of every income

612
00:35:03,440 --> 00:35:07,520
Speaker 4: level to invest more, say more and invest more, because

613
00:35:07,800 --> 00:35:11,440
Speaker 4: usually it's good for them and super for the economy

614
00:35:11,480 --> 00:35:14,280
Speaker 4: and in one of my one of my concerns always

615
00:35:14,680 --> 00:35:17,560
Speaker 4: is when you go after unrealized gains or you know,

616
00:35:17,680 --> 00:35:21,279
Speaker 4: tax hikes on the wealthy, you're actually taking those who

617
00:35:21,280 --> 00:35:23,400
Speaker 4: are the super investors, you know what I mean. And

618
00:35:23,440 --> 00:35:27,200
Speaker 4: our country are willing to risk everything to take us

619
00:35:27,200 --> 00:35:31,359
Speaker 4: to Mars or you know, in some cutting edge technology

620
00:35:31,400 --> 00:35:34,160
Speaker 4: that drives jobs and opportunity in such a big way.

621
00:35:34,200 --> 00:35:37,520
Speaker 4: And so I'm always really cautious about just picking that

622
00:35:37,560 --> 00:35:40,880
Speaker 4: group of villains saying, you know, we need more of

623
00:35:40,920 --> 00:35:45,160
Speaker 4: your affair shares, how much your money you owe me. Yeah,

624
00:35:45,200 --> 00:35:48,160
Speaker 4: I think economically and for the US, it's really the

625
00:35:48,200 --> 00:35:51,480
Speaker 4: innovation and the investment we're We're our tax cod is

626
00:35:51,480 --> 00:35:54,200
Speaker 4: pretty good at this driving that risk.

627
00:35:55,120 --> 00:35:58,880
Speaker 3: So speaking of criticisms, we would be very remiss if

628
00:35:58,920 --> 00:36:01,920
Speaker 3: we didn't ask you about one of the biggest ones,

629
00:36:02,040 --> 00:36:04,640
Speaker 3: which is the impact of the tax cuts on the deficit.

630
00:36:05,440 --> 00:36:08,120
Speaker 3: And I know there are all these different ways to

631
00:36:08,239 --> 00:36:12,239
Speaker 3: measure this, but I think you know one fact that

632
00:36:12,400 --> 00:36:16,560
Speaker 3: probably can't be debated is that under Trump there was

633
00:36:16,600 --> 00:36:20,320
Speaker 3: like eight trillion dollars of debt approved versus under Biden,

634
00:36:20,360 --> 00:36:23,640
Speaker 3: I think there was something like four trillion. And I'm

635
00:36:23,680 --> 00:36:27,560
Speaker 3: curious how you link those two things together. So the

636
00:36:27,640 --> 00:36:31,040
Speaker 3: cuts and the deficit. And I guess Joe don't come

637
00:36:31,080 --> 00:36:35,040
Speaker 3: at me. But are Republicans MMT ers now like do

638
00:36:35,160 --> 00:36:36,000
Speaker 3: deficits matter?

639
00:36:36,800 --> 00:36:39,600
Speaker 4: They definitely do, so sort of reset some things. Look,

640
00:36:39,640 --> 00:36:42,799
Speaker 4: I think Biden's debt was much. It's been averaging two

641
00:36:42,800 --> 00:36:48,280
Speaker 4: trillion a year there, and certainly there was an impact

642
00:36:48,400 --> 00:36:51,439
Speaker 4: from TCJ, but not nearly as much as people think.

643
00:36:51,440 --> 00:36:55,319
Speaker 4: And here's why everyone is shocked when I tell them

644
00:36:55,440 --> 00:36:58,880
Speaker 4: that we paid for most of the tax cuts up front.

645
00:36:59,320 --> 00:37:01,680
Speaker 4: We didn't do a trillion and a half dollars of

646
00:37:01,760 --> 00:37:04,200
Speaker 4: tax cuts. We did five and a half trillion dollars

647
00:37:04,400 --> 00:37:06,720
Speaker 4: because we needed to be that bold to get back

648
00:37:06,960 --> 00:37:10,560
Speaker 4: in the game and drive the drive the economy. We

649
00:37:10,760 --> 00:37:14,360
Speaker 4: raised four trillion dollars through reforms that paid for growth

650
00:37:14,400 --> 00:37:17,000
Speaker 4: and for lower rate and so on the day President

651
00:37:17,040 --> 00:37:20,440
Speaker 4: Trump signed it, seventy two percent of those tax cuts

652
00:37:20,480 --> 00:37:23,520
Speaker 4: were already paid for. On top of that, we've seen

653
00:37:24,120 --> 00:37:28,239
Speaker 4: huge revenue growth. For example, corporations now pay more to

654
00:37:28,280 --> 00:37:31,200
Speaker 4: the government at the lower twenty one percent rate than

655
00:37:31,360 --> 00:37:34,440
Speaker 4: was projected at thirty five. I mean, growth really matters,

656
00:37:34,520 --> 00:37:36,960
Speaker 4: drives a lot of revenues. So I think that one

657
00:37:36,960 --> 00:37:39,920
Speaker 4: and a half a trillion. The Congressional Budget Office quickly

658
00:37:39,960 --> 00:37:42,560
Speaker 4: revised it down to about one point one. We see

659
00:37:42,600 --> 00:37:46,839
Speaker 4: more growth since. And unlike most tax cuts, you know,

660
00:37:47,480 --> 00:37:50,920
Speaker 4: you can safely say for most tax cuts you can

661
00:37:51,000 --> 00:37:54,359
Speaker 4: recover about thirty percent of it. Generally that's the rule

662
00:37:54,400 --> 00:37:58,520
Speaker 4: of THEMB. In this case, we recovered twice that to

663
00:37:58,560 --> 00:38:02,879
Speaker 4: begin with. It's gone much higher. It did create deficits,

664
00:38:03,080 --> 00:38:06,480
Speaker 4: no question about it, but I think much smaller than

665
00:38:06,719 --> 00:38:10,800
Speaker 4: most people ever dreamed we would do. Going forward, though,

666
00:38:11,160 --> 00:38:13,720
Speaker 4: Congress is going to have to raise four trillion dollars

667
00:38:13,800 --> 00:38:16,800
Speaker 4: just to keep the current tax cuts. On the Republican side,

668
00:38:17,400 --> 00:38:19,160
Speaker 4: this is going to be a real issue. Debts and

669
00:38:19,200 --> 00:38:22,560
Speaker 4: deficits matter. It's exploded in a big way, and so

670
00:38:22,600 --> 00:38:26,720
Speaker 4: I think, especially if Republicans run the table, who knows

671
00:38:26,760 --> 00:38:29,319
Speaker 4: how this hat works. In November, I think there's going

672
00:38:29,400 --> 00:38:32,640
Speaker 4: to be, especially in the House, some real serious discussions

673
00:38:32,680 --> 00:38:37,359
Speaker 4: about how much of these of the extensions are paid for.

674
00:38:37,640 --> 00:38:38,799
Speaker 4: You know what, I mean, what do we do, what

675
00:38:38,920 --> 00:38:41,680
Speaker 4: kind of other reforms do we do, either in spending

676
00:38:41,760 --> 00:38:45,280
Speaker 4: or tax cut or the tax code itself to lower

677
00:38:45,320 --> 00:38:49,200
Speaker 4: that that number. So no, I don't see us now

678
00:38:49,520 --> 00:38:54,200
Speaker 4: moving to you know, monitor monetary theory. No matter what said,

679
00:38:54,280 --> 00:38:56,680
Speaker 4: I think it's I think that's the biggest issue to

680
00:38:56,719 --> 00:38:57,920
Speaker 4: worry most Republicans.

681
00:38:58,200 --> 00:39:00,600
Speaker 2: I just have one last question and talked a little

682
00:39:00,640 --> 00:39:02,840
Speaker 2: bit about this where some of the goals you had

683
00:39:02,960 --> 00:39:06,960
Speaker 2: in the beginning with related to international revenues and how

684
00:39:07,000 --> 00:39:10,200
Speaker 2: they were taxed. And there are still some certain sectors

685
00:39:10,200 --> 00:39:15,960
Speaker 2: of the economy highly intellectual property oriented sectors like pharmaceuticals.

686
00:39:16,200 --> 00:39:21,160
Speaker 2: Maybe like something also still you know, iPhones, etc. But pharmaceuticals,

687
00:39:21,200 --> 00:39:23,840
Speaker 2: there's this sense of unfairness that Americans pay some of

688
00:39:23,880 --> 00:39:27,520
Speaker 2: the highest prices in the world for drugs, and at

689
00:39:27,520 --> 00:39:30,319
Speaker 2: the same time, many American drug companies seem to pay

690
00:39:30,520 --> 00:39:33,960
Speaker 2: fairly small amount of taxes with a lot of the

691
00:39:34,000 --> 00:39:35,800
Speaker 2: revenue booked overseas.

692
00:39:36,040 --> 00:39:37,600
Speaker 4: Is there still more work to be done.

693
00:39:37,719 --> 00:39:40,320
Speaker 2: Let's say you had another crack at it and somehow

694
00:39:40,400 --> 00:39:42,799
Speaker 2: the stars aligned, Is there still more work to be

695
00:39:42,840 --> 00:39:45,520
Speaker 2: done in your view on getting that right?

696
00:39:46,160 --> 00:39:49,360
Speaker 4: I think let me just say this tax reform was

697
00:39:49,400 --> 00:39:52,239
Speaker 4: not perfect. Yeah, we went through the political process. On

698
00:39:52,320 --> 00:39:54,479
Speaker 4: the day it was signed, I had a thousand things

699
00:39:54,480 --> 00:39:57,160
Speaker 4: I wanted to do differently, and my advice too that

700
00:39:57,200 --> 00:40:00,960
Speaker 4: to Congress now is don't just extend these them. There's

701
00:40:01,000 --> 00:40:03,880
Speaker 4: always room to do that, I think. You know, we

702
00:40:03,920 --> 00:40:07,600
Speaker 4: went into the international with how do we become super competitive?

703
00:40:07,600 --> 00:40:12,600
Speaker 4: But also how do you prevent companies from exporting their

704
00:40:12,600 --> 00:40:15,600
Speaker 4: income to lower tax countries? How do you prevent them

705
00:40:15,640 --> 00:40:20,040
Speaker 4: from importing their deductions to lower the rates. It's complicated,

706
00:40:20,200 --> 00:40:25,719
Speaker 4: in probably more complicated than needed. We generally achieve that.

707
00:40:26,280 --> 00:40:30,040
Speaker 4: Can you do more in that regard? I think we can.

708
00:40:30,200 --> 00:40:33,680
Speaker 4: But the outcome we noticed was one it was much

709
00:40:33,719 --> 00:40:37,399
Speaker 4: harder for companies to do it. Two multinationals now are

710
00:40:37,440 --> 00:40:42,359
Speaker 4: investing so much more in America than overseas. That's good. Yeah,

711
00:40:42,400 --> 00:40:44,800
Speaker 4: we always got to look at at how we improve

712
00:40:44,840 --> 00:40:45,839
Speaker 4: the international side of this.

713
00:40:46,400 --> 00:40:49,600
Speaker 3: Is there room for more multilateralism when it comes to

714
00:40:50,200 --> 00:40:53,879
Speaker 3: global tax regimes? Could you perhaps coordinate so that it's

715
00:40:53,920 --> 00:40:55,320
Speaker 3: not a race to the bottom.

716
00:40:56,000 --> 00:41:01,320
Speaker 4: You know, I really disagree with that with the philosophy.

717
00:41:01,360 --> 00:41:03,880
Speaker 4: Secretary Llone, who I respected a great deal. I got

718
00:41:03,920 --> 00:41:05,600
Speaker 4: to work with her when I was head of the

719
00:41:05,680 --> 00:41:09,960
Speaker 4: Joining Economic Committee. You know, feel strongly about that approach.

720
00:41:10,320 --> 00:41:13,040
Speaker 4: It seemed to me, you know, the last three years

721
00:41:13,080 --> 00:41:15,480
Speaker 4: America has really been trying to you know, sort of

722
00:41:15,480 --> 00:41:19,759
Speaker 4: course our allies into making sure no one can have

723
00:41:19,840 --> 00:41:23,840
Speaker 4: competitive rates visa vi each other. I think that's a mistake.

724
00:41:24,480 --> 00:41:27,399
Speaker 4: I actually think the race ought to be to more

725
00:41:27,480 --> 00:41:30,919
Speaker 4: grow better paychecks, more competitiveness that way, and so yeah,

726
00:41:30,960 --> 00:41:35,200
Speaker 4: I think these international sort of cabals on tax are

727
00:41:35,239 --> 00:41:37,640
Speaker 4: often mistake. But if you're going to do it, here's

728
00:41:37,680 --> 00:41:41,680
Speaker 4: a lesson from the last couple of years. If you're

729
00:41:41,719 --> 00:41:45,120
Speaker 4: going to do international tax treaties and agreements, you've got

730
00:41:45,120 --> 00:41:48,120
Speaker 4: to take both parties along with you because you want

731
00:41:48,160 --> 00:41:50,799
Speaker 4: the agreement to stick, right, you want to have the

732
00:41:50,800 --> 00:41:53,480
Speaker 4: buy in from both parties. In the past that was

733
00:41:53,480 --> 00:41:57,759
Speaker 4: the case, not so much the last the current administration,

734
00:41:57,880 --> 00:42:00,920
Speaker 4: which is a shame because I think had both and

735
00:42:01,280 --> 00:42:03,719
Speaker 4: even Democrats will say, look, there hasn't been a lot

736
00:42:03,760 --> 00:42:08,640
Speaker 4: of conversation to do international Take the time to keep

737
00:42:08,719 --> 00:42:10,960
Speaker 4: your folks with you. I don't care Republican or a

738
00:42:10,960 --> 00:42:14,279
Speaker 4: Democrat in those conversations, because you're can end up with

739
00:42:14,280 --> 00:42:15,960
Speaker 4: a better product and it'll stick.

740
00:42:16,719 --> 00:42:17,080
Speaker 5: All right.

741
00:42:17,160 --> 00:42:20,000
Speaker 3: This is my last question, But it feels like, no

742
00:42:20,040 --> 00:42:23,279
Speaker 3: matter what happens in November, we are all going to

743
00:42:23,400 --> 00:42:28,200
Speaker 3: have to familiarize ourselves with the reconciliation process. Can you

744
00:42:28,239 --> 00:42:30,600
Speaker 3: tell it? What should we know about that? What's the

745
00:42:30,640 --> 00:42:32,640
Speaker 3: most important thing to remember?

746
00:42:32,760 --> 00:42:39,600
Speaker 4: So Tracy had to go there reconciliation triggering. I yeah,

747
00:42:39,719 --> 00:42:41,600
Speaker 4: let me get this. Let me show you the scars

748
00:42:41,600 --> 00:42:45,879
Speaker 4: on my back. So you know. Reconciliations you use. It's

749
00:42:45,880 --> 00:42:49,080
Speaker 4: a budget process. Both party use them, uses them usually

750
00:42:49,120 --> 00:42:54,760
Speaker 4: for very important things. They're limited basically spending and tax issues,

751
00:42:54,840 --> 00:42:58,760
Speaker 4: tax growth issues, lots of complex rules, but the bottom

752
00:42:58,840 --> 00:43:03,880
Speaker 4: line is reconciliation budget if approved by the House and

753
00:43:03,960 --> 00:43:08,120
Speaker 4: the Senate, it goes to President, allows that bill to

754
00:43:08,200 --> 00:43:10,799
Speaker 4: pass with the simple majority in the Senate, but with

755
00:43:10,920 --> 00:43:15,320
Speaker 4: a lot of rules to go with it. So reconciliation

756
00:43:15,480 --> 00:43:19,080
Speaker 4: happens first. So Congress has to agree on what the

757
00:43:19,480 --> 00:43:24,960
Speaker 4: what the parameters are for tax reform or healthcare in

758
00:43:25,000 --> 00:43:28,200
Speaker 4: the Affordable Care Act or in the in the Build

759
00:43:28,239 --> 00:43:31,719
Speaker 4: Back Better or the Inflation Reduction Act. So that's the

760
00:43:31,760 --> 00:43:34,920
Speaker 4: first step. It's not easy to do it if either

761
00:43:35,000 --> 00:43:38,280
Speaker 4: but but here's the tip tip off. If either party

762
00:43:38,920 --> 00:43:44,640
Speaker 4: runs the table, reconciliation will show us what they're going

763
00:43:44,719 --> 00:43:47,719
Speaker 4: to do in taxes or spending, you know what I mean?

764
00:43:47,800 --> 00:43:50,719
Speaker 4: It will it will show you right up front what

765
00:43:50,760 --> 00:43:54,880
Speaker 4: the guardrails are are around this. If there is divided government,

766
00:43:54,880 --> 00:43:57,160
Speaker 4: which most people think there will be in one way

767
00:43:57,400 --> 00:43:59,759
Speaker 4: or the other, you won't have that, and so you'll

768
00:44:00,040 --> 00:44:01,719
Speaker 4: you'll sort of glean all that at the end of

769
00:44:01,760 --> 00:44:06,520
Speaker 4: the process. So reconciliation is a runway that you land

770
00:44:07,000 --> 00:44:11,919
Speaker 4: these major bills on. The House version will invariably look

771
00:44:12,000 --> 00:44:16,560
Speaker 4: different than the Senate version because of these very difficult

772
00:44:16,600 --> 00:44:22,560
Speaker 4: budget rules. The reason for years Republicans wrote tax reform

773
00:44:23,120 --> 00:44:27,759
Speaker 4: to be revenue neutral was that we could get permanence there,

774
00:44:28,200 --> 00:44:32,880
Speaker 4: which to me, the best tax code is a permanent

775
00:44:33,640 --> 00:44:35,319
Speaker 4: at least as much as you can get with the

776
00:44:35,360 --> 00:44:37,960
Speaker 4: political environment that will change these That's where you get

777
00:44:37,960 --> 00:44:42,279
Speaker 4: the most growth, most certainty, the better outcomes, which is

778
00:44:42,280 --> 00:44:45,680
Speaker 4: why it's been frustrating to in reconciliation. We didn't get

779
00:44:45,960 --> 00:44:50,160
Speaker 4: all of this permanent for the long term. But it

780
00:44:50,200 --> 00:44:54,640
Speaker 4: is what it is, and it's a really an arcane process,

781
00:44:54,680 --> 00:44:55,799
Speaker 4: but a really vital one.

782
00:44:56,040 --> 00:44:58,560
Speaker 2: Kevin Brady, thank you so much for coming on out Laws.

783
00:44:58,600 --> 00:45:02,000
Speaker 2: There was a really fun and very informative.

784
00:45:01,480 --> 00:45:03,520
Speaker 4: Well thanks for having me and thanks for a really

785
00:45:03,520 --> 00:45:07,200
Speaker 4: good questions give complex issue. Tracy thanks, thank you.

786
00:45:07,280 --> 00:45:09,040
Speaker 3: Sorry I stirred up the.

787
00:45:10,239 --> 00:45:26,640
Speaker 5: We didn't start with that, Yeah, Tracy, I found that

788
00:45:26,680 --> 00:45:27,520
Speaker 5: to be very interesting.

789
00:45:27,560 --> 00:45:29,920
Speaker 2: I really liked hearing just like even from a process

790
00:45:29,960 --> 00:45:33,719
Speaker 2: standpoint or a philosophy standpoint of what reform of the

791
00:45:33,760 --> 00:45:36,040
Speaker 2: tax code is, what reform of the tax code is

792
00:45:36,440 --> 00:45:39,879
Speaker 2: within the constraints of the US legislative process. I found

793
00:45:39,880 --> 00:45:41,560
Speaker 2: that to be a very informative episode.

794
00:45:41,800 --> 00:45:44,520
Speaker 3: It was really interesting. One thing I'll say is it

795
00:45:44,760 --> 00:45:47,719
Speaker 3: very much reminded me of a conversation I had in

796
00:45:47,760 --> 00:45:52,360
Speaker 3: a bar once with that's a good sign for any episode,

797
00:45:52,400 --> 00:45:54,960
Speaker 3: well with a policymaker. And I won't say I won't

798
00:45:55,040 --> 00:45:57,400
Speaker 3: say who, but you know, he was talking about how

799
00:45:57,800 --> 00:46:01,280
Speaker 3: there's this tendency to think of there's an idea floating

800
00:46:01,280 --> 00:46:04,440
Speaker 3: around that the US doesn't have a very strong social

801
00:46:04,480 --> 00:46:07,360
Speaker 3: safety net, at least when compared to you know, some

802
00:46:07,480 --> 00:46:10,840
Speaker 3: places in Europe or elsewhere. And he was making the

803
00:46:10,880 --> 00:46:14,160
Speaker 3: point that there is a social safety net, it's just

804
00:46:14,640 --> 00:46:18,040
Speaker 3: so much of it is embedded in the tax system

805
00:46:18,760 --> 00:46:22,520
Speaker 3: rather than direct spending. Yeah, and I don't you know,

806
00:46:22,640 --> 00:46:25,719
Speaker 3: I don't necessarily I'm a journalist, so I don't have opinions.

807
00:46:25,760 --> 00:46:26,680
Speaker 4: And I no, I know.

808
00:46:26,800 --> 00:46:30,120
Speaker 3: No, so I can't agree or disagree with the goals

809
00:46:30,160 --> 00:46:32,480
Speaker 3: behind that, But I do think if you want to

810
00:46:32,560 --> 00:46:36,520
Speaker 3: understand the US economy, it's important to realize like how

811
00:46:37,239 --> 00:46:41,200
Speaker 3: big and complex and important the tax system actually is.

812
00:46:41,320 --> 00:46:43,319
Speaker 2: No, and we could go a lot deeper, Brothers, even

813
00:46:43,360 --> 00:46:45,520
Speaker 2: with like another episode, which is this is such a

814
00:46:45,520 --> 00:46:48,759
Speaker 2: good point, which is how much we rely on the

815
00:46:48,800 --> 00:46:54,960
Speaker 2: tax code, specifically refundable tax credits et cetera, tax credits

816
00:46:54,960 --> 00:46:57,759
Speaker 2: for people who don't pay for tech ownership, like all

817
00:46:57,760 --> 00:46:59,600
Speaker 2: of these things through the tax code where it's like,

818
00:46:59,680 --> 00:47:02,319
Speaker 2: you know, some things like so for example, people talk

819
00:47:02,360 --> 00:47:05,640
Speaker 2: about child tax credits, you could you could just instead

820
00:47:05,640 --> 00:47:08,200
Speaker 2: of talking about child tax credits at all through the

821
00:47:08,239 --> 00:47:11,880
Speaker 2: Social Security Administration, send out people send out checks. Instead,

822
00:47:12,000 --> 00:47:15,000
Speaker 2: you file taxes and you get money. Back to former

823
00:47:15,080 --> 00:47:19,000
Speaker 2: Chairman Brady's point at the end, it does sound like

824
00:47:19,040 --> 00:47:21,120
Speaker 2: if there were ever some if even if we could

825
00:47:21,120 --> 00:47:24,000
Speaker 2: ever agree on one ideal tax system would look like

826
00:47:24,239 --> 00:47:26,520
Speaker 2: it would be a never ending process of sort of

827
00:47:26,560 --> 00:47:32,400
Speaker 2: like asymptotically getting there over time. Probably, thank you, thank you,

828
00:47:32,480 --> 00:47:36,919
Speaker 2: And we're probably theoretically many many more things that could

829
00:47:36,960 --> 00:47:38,560
Speaker 2: be done. Can I say one other thing. You know,

830
00:47:38,600 --> 00:47:41,160
Speaker 2: I sort of I enjoyed hearing this sort of like

831
00:47:42,640 --> 00:47:45,560
Speaker 2: a certain I don't know old fashioned is the word,

832
00:47:45,600 --> 00:47:47,960
Speaker 2: but I would say old fashioned view of like, you

833
00:47:48,000 --> 00:47:52,600
Speaker 2: know what, competitiveness, cutting taxes, this is the path to growth,

834
00:47:52,640 --> 00:47:56,320
Speaker 2: et cetera. It's certain, you know, certain old school vibes

835
00:47:56,360 --> 00:47:58,479
Speaker 2: that I feel against a little bit. Like you don't

836
00:47:58,520 --> 00:48:02,200
Speaker 2: hear as much these days in conversations about growth. You

837
00:48:02,239 --> 00:48:03,720
Speaker 2: hear a lot about industrial policy.

838
00:48:03,880 --> 00:48:05,520
Speaker 3: And I thought it was all about the vibes.

839
00:48:06,400 --> 00:48:08,560
Speaker 2: No, it's just a specific thing of like, you know,

840
00:48:08,840 --> 00:48:12,000
Speaker 2: let's cut the taxes and yeah, like it's nice to

841
00:48:12,040 --> 00:48:12,960
Speaker 2: hear from a believer.

842
00:48:13,480 --> 00:48:14,600
Speaker 3: All right, shall we leave it there.

843
00:48:14,680 --> 00:48:15,359
Speaker 4: Let's leave it there.

844
00:48:15,440 --> 00:48:18,480
Speaker 3: This has been another episode of the Authoughts podcast. I'm

845
00:48:18,520 --> 00:48:21,640
Speaker 3: Tracy Alloway. You can follow me at Tracy Alloway.

846
00:48:21,360 --> 00:48:24,160
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.

847
00:48:24,440 --> 00:48:28,200
Speaker 2: Follow our producers Carmen Rodriguez at Carman Erman, Dashel Bennett

848
00:48:28,239 --> 00:48:31,360
Speaker 2: at Dashbot, and Keil Brooks at Kelbrooks. Thank you to

849
00:48:31,400 --> 00:48:34,400
Speaker 2: our producer Moses Ondam. From our odd Laws content go

850
00:48:34,440 --> 00:48:37,239
Speaker 2: to Bloomberg dot com slash odd Lots, where we have transcripts,

851
00:48:37,239 --> 00:48:39,719
Speaker 2: a blog, and a newsletter, and you can chat about

852
00:48:39,760 --> 00:48:41,960
Speaker 2: all of these topics twenty four to seven in our

853
00:48:42,040 --> 00:48:44,560
Speaker 2: discord discord dot gg, slash.

854
00:48:44,200 --> 00:48:47,239
Speaker 3: Od lies and if you enjoy all blots, if you

855
00:48:47,400 --> 00:48:49,720
Speaker 3: like it when we talk about the US tax system,

856
00:48:49,880 --> 00:48:52,720
Speaker 3: then please leave us a positive review on your favorite

857
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858
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859
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860
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861
00:49:05,920 --> 00:49:06,440
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