Brady Delivers Keynote Address at the Tax Council Policy Institute Symposium
WASHINGTON, D.C.- Today, Ways and Means Committee Chairman Kevin Brady (R-TX) delivered the keynote address at the Tax Council Policy Institute’s 17th Annual Tax Policy & Practice Symposium:
Remarks as prepared for delivery
“Thank you very much for having me today. First, I’d like to take a moment to thank Lyn Walker and her team from the Tax Council Policy Institute. I also am grateful to the KPMG team, including former Ways and Means Committee staffer John Gimigliano, for the invitation.
“Your event is the premier opportunity to speak with America’s tax policy innovators and thought-leaders. As we approach the 20th anniversary of the founding of the Tax Council Policy Institute, I’d like to thank you for your hard work and congratulate you on a job well done. Today it is more important than ever that you continue to fulfill your mission of shaping the debate, defining the issues and shedding light on important tax policies.
“Since I haven’t spoken at this event before, I’d like to take a moment to talk to you about my path to this podium.
“For almost two decades, I worked as a Chamber of Commerce executive in three very different economies – the agriculture, military and tourism economy of South Dakota, the slow-growth, heavy refining, union-dominated economy of Beaumont, Texas, and the fast-growing energy, health care and trade driven economy of suburban Houston.
“I know that Main Streets look very different across America.
“Through that experience of helping business start-ups, building a healthier local business climate and recruiting new industry, I had a unique opportunity to witness firsthand how our broken tax code burdens America’s job creators and families.
“One of the main reasons I ran for Congress was because I wanted to work on improving our tax system. In 2001, I was honored to join the Ways and Means Committee, following then-Chairman Bill Archer of Houston, and I have spent the intervening years working on these consequential issues.
“In October of last year my colleagues and I were both grateful and thrilled when then-Ways and Means Chairman Paul Ryan was elected Speaker. And, in November, I was honored to be chosen to serve as Chairman of the Ways and Means Committee.
“Speaker Ryan was right when he said that leading this committee is the best job in Washington. Our committee has the responsibility and the privilege of making policy decisions that touch the lives of every single American.
“I try not to smile too much when I’m around our new Speaker.
“When Speaker Ryan outlined the five top priorities of House Republicans – four of them rest with our Committee. And given the TCPI mission, I know you’ll be glad that pro-growth tax reform is at the top of our list of action items.
“In the months ahead and beyond, the Ways and Means Committee will be the center of the tax reform discussion and debate. In the nearly 30 years since enactment of the Tax Reform Act of 1986, the world has changed and countries around the globe have adapted their tax systems to maximize their competitiveness in today’s global economy while the United States has fallen behind.
“The code we have is too costly, complex and unfair. It is abundantly clear that now is the time to overhaul our tax system from top to bottom.
“What America needs today is a new 21st Century tax code that is built for growth – the growth of families’ paychecks, the growth of local businesses, and the growth of America’s economy. We are inspired by the example set in 1986. And we are committed to taking action that will exceed that standard.
“Our tax reform will be based on six core principles:
“First, the tax code must be simpler, fairer, and flatter. Today, individuals, families and small businesses must grapple with a tax code that is impossible to understand – and that has to change.
“Second, tax reform must close loopholes, eliminate special rules and limit the deductions, exclusions and credits that riddle the tax code today – so that we can lower rates for everybody. Well-advised taxpayers today use an array of complex tax provisions to minimize their taxes under the law. But that complexity is a waste of resources that distorts investment decisions, leads to disputes with the IRS, and takes critical time and capital away from running successful businesses.
“Third, businesses both large and small must have a competitive tax system, including a fair and competitive tax rate. Small businesses, which are typically operated as S corporations, LLCs, or partnerships, deserve a tax system that encourages growth. Small businesses should not believe that their tax rate places them at a disadvantage to large C corporations.
“Fourth, our tax code has to stop encouraging the shift of jobs overseas. Too many American businesses are being acquired by foreign corporations — or engaging in inversion transactions to avoid being a ripe target for foreign takeover. We need a tax code that encourages businesses to locate their operations in the United States, creating jobs here at home and helping to grow our economy.
“We need to replace the current world-wide tax system with a permanent modern territorial-type system that helps American companies compete and win overseas – and then easily bring earnings back home to invest in new jobs, research and growth. No one has yet convinced me that a stranded American dollar left overseas is better than a dollar brought home for any reason.
“Fifth, we need a tax code that is built for economic growth. Tax reform that merely aims to place America back in the middle of the pack won’t cut it. The late Steve Jobs of Apple, when urging his team to develop innovative products, preached ‘when you’re behind, leapfrog.’
“I share that view in tax reform.
“Through that lens, I am often asked about the constraints of revenue neutrality. And my answer is this: real-world budget scoring that recognizes the growth aspects of tax reform is the responsible path. And I won’t leave economic growth on the table because of disagreements over a dime or two. It’s jobs and opportunity we are seeking.
“Only by aiming high and taking an ambitious approach to pro-growth tax reform will we be successful over the near and long-term. Simply put, tax reform in the 21st Century shouldn’t aim to place us in the middle of the pack, but in the lead pack.
“That leads to the sixth and final principle: A 21st Century tax system should not raise taxes to bail out Washington’s spending problem. We know that to eliminate our enormous national debt we must do more than enact entitlement reform and exercise spending restraint. Strategies to constrain spending must be accompanied by growth, and there is no better formula for growth than the right kind of tax reform.
“So what should that 21st Century tax code built for growth look like?
“President Reagan had the right approach: broaden the base and lower the rates. You can’t go wrong with that. But as we contemplate a tax code built for growth in a new century, we need to think fresh and bold. We shouldn’t squander this opportunity by simply tinkering with the current code and calling it a day. I am asking our committee to look at tax reform with fresh eyes, examining the whole range of tax ideas – consumption tax, cash flow tax, reformed income tax, and any other approach that will be pro-growth. There is no perfect way to tax, but there are proven ways to grow investment – and that’s what we want in our new tax code.
“Now the question is – how do we get there?
“Fortunately, we are working off a strong foundation.
“Over the past five years, under Chairmen Dave Camp and Paul Ryan, our Committee has laid significant groundwork for comprehensive tax reform. We will continue to build on this foundation.
“In December, our Committee took action that went a long way toward ending the ridiculous annual cycle of temporarily, and too often retroactively, extending tax provisions each and every year.
“After months of negotiations, we passed the PATH Act that made 20 temporary tax provisions permanent and delivered $629 billion of tax relief for families and businesses, small and large.
“Our success with the PATH Act serves as a springboard to our objective of comprehensive tax reform.
“Members of our Committee understand the reality that comprehensive tax reform will not happen until we have a new President. I am hopeful that next January we will have a President – Republican or Democrat – who is committed to making pro-growth tax reform a reality for the American people.
“Our work this year will ensure we are ready to address all aspects of our tax system from individual to domestic business — both small and large — to international business. That means we will be very busy in 2016, soliciting bold and innovative ideas from Members of Congress, from stakeholders like you, and from the American people.
“Here are some of the actions you’ll see soon from the Ways and Means Committee.
“This year, our Committee is leading an inclusive GOP Conference wide effort to produce a blueprint that details our consensus vision for comprehensive pro-growth tax reform. This blueprint will reflect consideration of the wide range of ideas and proposals that are part of an open and robust dialogue on tax reform. We’ll bring together the best elements for the pro-growth tax policy that the U.S. economy needs and that Americans have a right to expect from their government.
“At the same time, we will move forward immediately to draft international tax reform legislation. Our work on international tax reform will be an integral part of our work on comprehensive tax reform. Our work here will be a down payment that clears the way to focus on the work on lowering rates and simplifying the code for all businesses and individuals, so that we are ready to enact comprehensive tax reform in 2017.
“We will send a clear signal to American companies and shareholders that help is on the way – that we won’t stand idly by while our tax code drives them overseas or makes them a target for a foreign takeover.
“As we plan for that finish line in 2017, developments in the global environment demand our immediate attention.
“As you know all too well, our antiquated international tax system and the highest corporate tax rate among OECD countries are forcing many American companies to move their headquarters abroad through foreign mergers. Others are facing an unwanted foreign takeover simply to be able to compete in the global marketplace.
“In the two decades leading up to 2004 we averaged two inversions per year. In the decade through 2014 we averaged four per year. In 2015, there were six more.
“And if the pace so far this year continues, the three in January might become 30 by the end of the year. This struck home particularly for me three weeks ago when Waste Connections, a waste management company located a few miles from my home in Texas, announced that it was being acquired by a foreign company and is moving its headquarters to Canada.
“We need a tax system that makes America an attractive place to headquarter a business and deploy the workforce needed to operate and grow that business.
“The urgency of international tax reform is further heightened by what has been happening in the rest of the world and what is on the horizon.
“The OECD with its Base Erosion and Profit Shifting or BEPS project is recommending new tax approaches that would disproportionately burden American global businesses. Countries around the world are following the OECD’s lead and implementing aggressive new tax measures. And the European Union just announced an unprecedented plan to arm its member countries with a whole arsenal of new revenue-grabbing tax measures.
“Worldwide American companies are rightly concerned that the BEPS project will result in higher foreign taxes, higher compliance costs, and double taxation as the project redraws the lines of cross-border taxation. Ultimately, many of them could be forced to restructure their business operations and move U.S. activities, such as research and development, overseas.
“This isn’t a hypothetical; we see it happening today.
“And to add insult to injury, the European Union state-aid investigations are threatening to impose retroactive taxes going back ten years on American businesses.
“We cannot allow American taxpayers to foot the bill for increased tax collections in Europe and elsewhere.
“A direct result of these global developments is the loss of jobs for hardworking Americans. The loss of a U.S. company means many of its headquarters jobs will move to a foreign jurisdiction.
“And the impact is much deeper than that.
“Every one of these companies has suppliers and other businesses that support their operations. These are local businesses, often small S corporations and LLCs, that will be replaced by foreign vendors when business decisions are made in the new foreign headquarters. The result will be a loss of these local American businesses and the American jobs they create. And the downward spiral will continue. There is no question – this is too high a price to pay.
“Members of the Ways and Means Committee refuse to stand on the sidelines and allow this to happen. We are committed to protecting American workers and the businesses that employ them.
“As you can see, we have ambitious plans for the year. Our team is motivated to tackle these challenges and deliver solutions. And we have a Speaker of the House in Paul Ryan who is giving us the green light to advance pro-growth tax reform at every opportunity.
“We have hard work to do within the Committee to dive into the technical details, tackle the difficult issues, and balance our priorities.
“Success in this critically important endeavor requires a broad conversation. We will listen carefully and consider all the constructive ideas that Members of Congress and stakeholders like you have dedicated time and energy to develop.
“We need you to provide your ideas about tax reform in general and about specific proposals that affect our families and our communities, our businesses small and large, and our economy overall.
“I appreciate your help and thoughtful work on these important issues.
“The American people expect leadership and action – and that’s what they will see from the Ways and Means Committee. And, I can assure you that I am committed to making pro-growth tax reform a reality.
“It’s been an honor to speak with you, and I look forward to working with you in the weeks and months ahead.
“Thank you again for having me today.”