The Senate's version of the GOP tax bill appears to have momentum. Despite GOP holdouts, the bill seems more likely than not to be headed toward a vote. And should it pass, it would need to be reconciled with the House of Representatives' version of the bill that passed several weeks ago.
Texas Rep. Kevin Brady, a Republican, is the chairman of the House Ways and Means Committee and the primary architect of the House bill. Marketplace host Kai Ryssdal sat down with Brady to discuss whether or not the tax cuts in these bills will pay for themselves (the nonpartisan Joint Committee on Taxation reported today that the Senate bill will not pay for itself), the differences between the House and Senate bills and how to make them agree.
The following is an edited transcript of the interview.
Kevin Brady: Well, look, I have a simple philosophy here. Let's pick the best of both the House and the Senate tax reform bills. Let's look at making this tax reform better at every step, and that conference committee allows us to continue to do that. There are strengths and weaknesses in all these proposals, but listening to our members who represent the whole country about what's really important to them and how we can improve it has actually helped us a great deal every step. So, I'm really eager in the conference committee to work out and find common ground.
Kai Ryssdal: Give me a sense of the biggest sticking points.
Brady: Here's the good news: Because we'd worked with President Trump on one framework, both the House and Senate really wrote toward a pro-growth tax reform. There are some differences in how we structure help for small businesses, how we deal with all of these U.S. companies and jobs and research going overseas, and more importantly, how do we bring them back. The good news is, I think we're all headed the same direction. We just took some different approaches. I don't see anything that isn't solvable in a really positive way.
Ryssdal: Since you mentioned the growth that you all are counting on in these bills, you're counting on it to pay for itself. The White House has said so. You've said so. Everybody is saying so. My question, then, is how come, in your mind, the Senate is less confident. They're less optimistic. They're including these triggers and there's a whole lot of what ifs.
Brady: So I want to make one change to the question.
Brady: So I believe tax reform will lead us back to a balanced budget. You will need two things, though: One, good, strong, economic growth, because I am convinced a sure way to continue these deficits is keep this very slow economy [from] the last decade. But that's not enough. You have to also eliminate a lot of unnecessary provisions and lobbyist loopholes and exclusions in the tax code to be able to help pay for this as well.
Ryssdal: But the Senate's not so sure. They've got these trigger provisions. If the deficit increases, if growth doesn't come, how are you going to reconcile?
Brady: Here's what I support: letting the Senate do its very best job here. I really do. I love this process. The House has acted very decisively. The Senate is really, I think, taking very positive steps, so they produce the very best product, and then we'll go to work to find common ground.
Ryssdal: Virtually all analysis shows that the bulk of the tax cuts and the bulk of the benefit of this bill go to the wealthy in America.
Brady: Yeah, and that's absolutely incorrect.
Ryssdal: No sir, it's not.
Brady: No, actually, it is —
Ryssdal: You look at CBO, you look at the Joint Committee on Taxation —
Brady: No, no. Yeah, Joint Tax, let's start with them. So, one, CBO doesn't estimate the tax plans. Secondly, Joint Committee believes that there's income relief at every level, income level. And when you look at both the tax cuts, which in the House plan, 70 percent of the tax cuts go to families, households making less than $200,000. Well, you think, is that the middle class? You know, between $50,000 and $200,000 in some of these high-tax states, yeah, that's sort of the middle class. Two workers, two kids, you know, working from paycheck to paycheck. They get good, strong tax relief, as they should.
Ryssdal: Let me get from individuals to corporations. The House bill and the Senate bill include big tax cuts for corporations. I guess my question is, Fortune 500 companies are having record profits. Economy is growing. We just saw GDP out the other day. Why does corporate America need tax relief right now?
Brady: Well, here's a simple question. Are Americans tired of watching their jobs and their headquarters and the research and their manufacturing go overseas? The answer is yes.
Ryssdal: Yeah, but sir —
Brady: No, but our tax code in that, the highest rate among our competitors? If you've got the highest prices of all your competitors, I guarantee people are buying elsewhere. Well, guess what? These jobs are going elsewhere, as well. So, the 20 percent rate, it makes America competitive. Along with other provisions, helps leapfrog us back into the lead pack so that we can compete against China and Europe, Canada and Mexico. So I often think the public looks at the wrong P-word, profitability, versus the one we're really focused on: productivity. Because that's what's missing. Right now, that's missing in America. And we've fallen. Boy, last year I think we gave back six years of productivity. That really hurts families.
Ryssdal: I was going to skip the productivity question, but now that you brought it up, I want to poke you in the eye a little bit on this, and I saw you say this on CNBC the other day. Explain to me how corporate tax cuts are going to increase worker productivity.
Brady: Yeah, so, because you're only looking at one provision. Not just the tax cuts, so that you can make an investment knowing you're getting return, and you can compete against that Chinese company, and that European company. That's really good for workers. But we also unleash full and unlimited investment. So, for the first time in history, we give companies a zero tax rate when they invest in their workers. And in that new technology. That drives the productivity that really drives paychecks.
Ryssdal: Just to square the circle here for a second, it's investment that you're counting on in an unproven tax bill. Right? That is hopefully going to work out the way you want it to.
Brady: Well, here's the good news. It's already been proven. We know from President JFK's tax cuts, as well as President Reagan's tax cuts, you saw this happen when America became competitive, and families and businesses can keep more of what they earn. The economy took off. In fact, 20 years after President Reagan, we saw 37 million new jobs. Almost 20 years of almost unbroken prosperity. Right now, unless America wants to settle for the sub 2 percent economic growth, which hurts our families, we have to make a change.
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