U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

20–071 2016

S. HRG. 114–335 

IS OUR COMPLEX CODE TOO TAXING ON THE 

ECONOMY? 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

APRIL 20, 2016 

Printed for the use of the Joint Economic Committee 

( 

DeShaun on LAP51NQ082 with DISTILLER

(II) 

JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

SENATE 

DANIEL COATS, Indiana, Chairman 

MIKE LEE, Utah 

TOM COTTON, Arkansas 

BEN SASSE, Nebraska 

TED CRUZ, Texas 

BILL CASSIDY, M.D., Louisiana 

AMY KLOBUCHAR, Minnesota 

ROBERT P. CASEY, JR., Pennsylvania 

MARTIN HEINRICH, New Mexico 

GARY C. PETERS, Michigan 

HOUSE OF REPRESENTATIVES 

PATRICK J. TIBERI, Ohio, Vice Chairman 

JUSTIN AMASH, Michigan 

ERIK PAULSEN, Minnesota 

RICHARD L. HANNA, New York 

DAVID SCHWEIKERT, Arizona 

GLENN GROTHMAN, Wisconsin 

CAROLYN B. MALONEY, New York, Ranking 

JOHN DELANEY, Maryland 

ALMA S. ADAMS, PH.D., North Carolina 

DONALD S. BEYER, JR., Virginia 

VIRAJ M. MIRANI, Executive Director 

HARRY GURAL, Democratic Staff Director 

DeShaun on LAP51NQ082 with DISTILLER

(III) 

C O N T E N T S 

OPENING STATEMENTS OF MEMBERS

Hon. Daniel Coats, Chairman, a U.S. Senator from Indiana .............................. 1 

Hon. Carolyn B. Maloney, Ranking Member, a U.S. Representative from 

New York .............................................................................................................. 2 

WITNESSES

Dr. Arthur B. Laffer, Chairman, Laffer Associates, Nashville, TN ..................... 5 

Mr. Scott A. Hodge, President, Tax Foundation, Washington, DC ..................... 7 

Mr. Joseph Grossbauer, President and CEO, GGNet Technologies, Chesterton, 

IN ........................................................................................................................... 9

Dr. Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities, 

Washington, DC ................................................................................................... 12 

SUBMISSIONS FOR THE RECORD

Prepared statement of Hon. Daniel Coats, Chairman, a U.S. Senator from 

Indiana .................................................................................................................. 32 

Prepared statement of Hon. Carolyn B. Maloney, Ranking Member, a U.S. 

Representative from New York ........................................................................... 32 

Prepared statement of Dr. Arthur B. Laffer, Chairman, Laffer Associates, 

Nashville, TN ....................................................................................................... 34 

Report titled ‘‘The Economic Burden Caused By Tax Code Complexity’’ .... 35 

Prepared statement of Mr. Scott A. Hodge, President, Tax Foundation, Washington, DC ............................................................................................................. 63 

Prepared statement of Mr. Joseph Grossbauer, President and CEO, GGNet 

Technologies, Chesterton, IN .............................................................................. 74 

Prepared statement of Dr. Jared Bernstein, Senior Fellow, Center on Budget 

and Policy Priorities, Washington, DC ............................................................... 79 

Questions for the record and responses: ................................................................

Questions for Dr. Arthur B. Laffer submitted by Chairman Coats ............. 96 

Questions for Dr. Jared Bernstein submitted by Ranking Member Carolyn Maloney ................................................................................................... 98 

DeShaun on LAP51NQ082 with DISTILLER

DeShaun on LAP51NQ082 with DISTILLER

(1) 

IS OUR COMPLEX CODE TOO TAXING ON THE 

ECONOMY? 

WEDNESDAY, APRIL 20, 2016 

CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, DC. 

The Committee met, pursuant to call, at 2:33 p.m. in Room 562 

of the Dirksen Senate Office Building, the Honorable Daniel Coats, 

Chairman, presiding. 

Representatives present: Tiberi, Paulsen, Maloney, Hanna, 

Schweikert, Grothman, Delaney, and Adams. 

Senators present: Coats, Cotton, Klobuchar, Sasse, Casey, 

Heinrich, and Peters. 

Staff present: Breann Almos, Ted Boll, Doug Branch, Whitney 

Daffner, Barry Dexter, Connie Foster, Harry Gural, Colleen Healy, 

Matt Kaido, Jason Kanter, Christina King, Yana Mayayeva, Viraj 

Mirani, Brian Neale, Thomas Nicholas, Brian Phillips, Ken 

Scudder, and Phoebe Wong. 

OPENING STATEMENT OF HON. DANIEL COATS, CHAIRMAN, A 

U.S. SENATOR FROM INDIANA 

Chairman Coats. The Committee will come to order. 

It is fitting that this hearing falls between Tax Filing Day, which 

was moved to April 18 this year—in case you haven’t filed your 

taxes—and Tax Freedom Day, which occurs on April 24th. As Mr. 

Hodge may explain, Tax Freedom Day represents the day taxpayers can stop working to pay off what they owe the government 

and start earning for themselves and their families. 

Unfortunately, Tax Freedom Day does not include freedom from 

complexity. Throughout the year, taxpayers will have to gather and 

store receipts and records to deal with next year’s filing deadline. 

Some taxpayers will even make business or even personal life decisions based on some quirk in the tax code. 

I was looking for a tangible example at this hearing of just how 

complex our tax law is and, rather than stack up and tear down 

a whole forest of trees to print, that is why these boxes are stacked 

up in front of the dias. In 2014, a publication that includes the tax 

code, regulations, and court decisions that determine tax law totaled over 74,000 pages. If my staff had printed this out, we would 

need 15 boxes of paper that are represented here. 

Now I have got good news and bad news to report with respect 

to 2015. The good news is that the latest version of the tax code 

has fewer pages. We wondered how that could happen, since I 

think as we will hear from our witnesses we are adding to and not 

DeShaun on LAP51NQ082 with DISTILLER

2 

taking from, simplifying the tax code in any way, but was due to 

not an increase in the number of tax laws; it was because an explosion of pages no longer could fit in the binders. So the publisher 

shrank the font size. For those of us whose eyesight is not as good 

as it used to be, it will be ever harder to pay attention to the fine 

print that exists in our tax code. 

It is no wonder 90 percent of taxpayers pay a tax preparer or buy 

computer software to help them figure out their tax burden. 

Even before the new tax complications of the Affordable Care 

Act, the Internal Revenue Service estimated that taxpayers spent 

over 6 billion hours each year preparing and filing taxes. Estimates 

of the dollar cost to taxpayers range in the hundreds of billions of 

dollars. 

Complexity comes with many costs. Aside from the frustration 

and anxiety, it causes taxpayers to spend time and energy that 

could be put to much more productive uses. 

It costs the Treasury, since taxpayers make innocent mistakes 

and are never exactly sure what they owe. And it breeds a sense 

of distrust in the system when taxpayers suspect others are getting 

a better deal because they figured out how to game the tax code. 

But is there a real economic cost? Would America as a whole be 

dramatically better off with a much simpler, much fairer, much 

more pro-growth tax code? 

I think I know the answer, but I look forward to hearing from 

our witnesses with their views on this subject. 

Today we will hear from Dr. Art Laffer, known as the father of 

supply-side economics. We also have Scott Hodge of the Tax Foundation, which is famous for its tax research. We will also hear reallife stories from Joe Grossbauer, a small business owner who lives 

with tax complexity every day. And our final witness is Jared Bernstein of the Center on Budget and Policy Priorities. 

My thanks to all of you for coming here today. We look forward 

to your testimony. 

I now recognize Ranking Member Maloney for her opening statement. 

[The prepared statement of Chairman Coats appears in the Submissions for the Record on page 32.] 

OPENING STATEMENT OF HON. CAROLYN B. MALONEY, 

RANKING MEMBER, A U.S. REPRESENTATIVE FROM NEW YORK 

Representative Maloney. Thank you so much, Chairman 

Coats, for calling this hearing, and to all of our panelists. We are 

here today to talk about simplifying the tax code. 

Most Americans think our tax system is too complex, and I believe we all agree. But simplifying the tax code will be a massive 

undertaking. It will be politically difficult. It will create winners 

and losers. That is because simplifying the code requires eliminating some of the tax credits, deductions, and exemptions that 

make it complicated. 

Those who benefit from these provisions will fight tooth and nail 

to protect them. That is why we should be very wary of anyone who 

offers a quick and seemingly painless fix. Some things are worth 

protecting, like the home mortgage interest deduction that enables 

Americans to achieve the American Dream of owning a home. OthDeShaun on LAP51NQ082 with DISTILLER

3 

ers widely benefit society, like the charitable deduction that helps 

support museums, parks, and other important charities. And some 

credits incentivize behavior that broadly benefits the economy like 

the research and development tax credit. Some credits are critical 

to giving working families a chance to succeed, like the Earned Income Tax Credit. 

However, many loopholes in our tax code are just giveaways to 

narrow, special interests. These are often buried deep in the fine 

print, making the tax code more complicated and less fair. 

So, yes, we should simplify our tax system. We should make it 

as easy as possible for individuals and small businesses to do their 

own taxes and pay them. We should enable companies to spend 

less money on tax accountants and more on building their businesses. And we should plug some of the thousands of loopholes that 

not only complicate the tax code but allow some to take unfair advantage of it. 

But at the same time, we should make sure that our tax system 

raises enough revenue to provide Americans the services they expect from their government, and that they need. And we should 

create one that makes the vast majority of Americans better off 

than they are today, or at least not worse off. 

But I fear that many proposals the conservatives claim would 

simplify the tax code are not really about simplification. Rather, 

they are about radically restructuring who pays how much. 

One proposal in the House Republican Budget is to reduce the 

number of brackets in order to lessen complexity. Some would go 

further. A plan backed by Witness Arthur Laffer is to create one 

flat tax. This would reduce the total number of brackets to one. 

This means that a family that earns $50,000 would pay the same 

tax rate as the family earning $50 million. 

Many conservatives claim these simplification plans that translate into huge tax cuts for the wealthy will not increase deficits and 

won’t affect the government services that many Americans believe 

are necessary. 

The theory is that tax cuts pay for themselves. In other words, 

cutting taxes can translate into such massive economic growth that 

it leads to higher government revenues. 

This means that tax cuts supposedly can take place without offsetting spending cuts. Americans supposedly won’t lose any of the 

government services on which they depend. 

Social Security won’t be touched, or Medicare, or education funding. Our national defense will remain strong. Our highways won’t 

be allowed to fall into disrepair. We won’t have to cut funding for 

dreaded diseases like the Zika Virus. But this math simply does 

not add up. 

Tax cuts don’t pay for themselves. Tax cuts don’t necessarily lead 

to strong economic growth. But they do lead to lost revenue and 

higher deficits. This is the lesson of the past 35 years. 

Despite tax increases under President Bill Clinton, we had a 

booming economy and created more than 22 million private-sector 

jobs, and four straight years of budget surpluses. And then we had 

two tax cuts under former President George Bush which contributed to massive budget deficits, with the tax cuts by themselves 

DeShaun on LAP51NQ082 with DISTILLER

4 

adding, according to some economists, $1.5 trillion to deficits over 

10 years. 

So in summary, when we talk about making the tax code less 

complex, let’s not be fooled into claims that we simply need to flatten the code. My time is up, I guess. This will make it more regressive, shifting more of the tax burden onto the middle class and the 

poor. 

And let’s not continue to pretend that tax cuts pay for themselves. History has shown that they do not in recent history, and 

so let’s get down to the business of simplifying the tax code and 

making it more fair. 

I truly look forward to this very impressive panel and hearing 

your testimony today. Thank you. 

[The prepared statement of Representative Maloney appears in 

the Submissions for the Record on page 32.] 

Chairman Coats. Thank you, Ranking Member Maloney. Thank 

you very much. 

I would like to introduce our panel of witnesses. 

Dr. Arthur Laffer is an incredibly well known figure in tax policy 

circles. He is currently the Chairman of Laffer Associates in Nashville, Tennessee, and long before that he held various esteemed positions, including Chief Economist at the Office of Management and 

Budget, and a member of President Reagan’s Economic Advisory 

Board. 

Most economists and policymakers are familiar with the Laffer 

Curve which shows the tradeoff between tax rates and revenues. 

As legend has it, Dr. Laffer pitched it by drawing it on a napkin 

at a dinner. Since then, he has been a prolific author on tax policy. 

Dr. Laffer, we welcome you. 

Mr. Scott Hodge is another well known expert in tax policy, and 

the President of the Tax Foundation, which calculates the Tax 

Freedom Day that I mentioned in my opening statement. 

He is one of the many creative drivers behind both the Tax Foundation’s Dynamic Scoring Model and the State Business Tax Climate Index. Mr. Hodge has authored over 100 studies and conducted hundreds of interviews on tax policy and government spending. 

Mr. Hodge, we appreciate you joining us today. 

From Chesterton, Indiana, we have a fellow Hoosier, Mr. Joseph 

Grossbauer, the founder, President and CEO of GGNet Technologies. 

His company provides IT management, data security, and data 

center services for a variety of clients. Previously, Mr. Grossbauer 

was the Director of Mercy Hospital and Medical Center in Chicago, 

and an Adjunct Faculty Member at Colombia College. 

Mr. Grossbauer, it is a pleasure to have a Hoosier business 

owner with us today, and I thank you for taking time out of your 

schedule to come down to D.C. and testify. 

And finally, we have Dr. Jared Bernstein, Senior Fellow at the 

Center on Budget and Policy Priorities here in Washington, D.C. 

Before joining the Center for Budget Policy and Priorities, Dr. 

Bernstein served as the Chief Economist and Economic Adviser to 

Vice President Joe Biden, and Executive Director of the White 

House Task Force on the Middle Class. 

DeShaun on LAP51NQ082 with DISTILLER

5 

Before joining the Obama Administration, Dr. Bernstein was a 

Senior Economist and Director of the Living Standards Program at 

the Economic Policy Institute. 

Dr. Bernstein, we welcome you also. 

With that, I would like to turn to Dr. Laffer as our first witness, 

followed by Mr. Hodge, Mr. Grossbauer, and then Dr. Bernstein. In 

accord with our procedures here, we would like to get your conclusions and summaries in a roughly five-minute time frame so it 

gives us plenty of time. We have a number of our members here 

from both the House and the Senate that would like to ask you 

questions and hear from you. 

So, Dr. Laffer, you’re on. 

STATEMENT OF DR. ARTHUR B. LAFFER, CHAIRMAN, LAFFER 

ASSOCIATES, NASHVILLE, TN 

Dr. Laffer. I guess it is sort of like putting the TV inside the 

microwave so you can watch 60 Minutes in 30 seconds. Just teasing. It is really fun being with these other witnesses here today, 

as well, especially Jared Bernstein, who is a dear, dear friend for 

many, many, many years, and an excellent economist and good 

friend, and being with all of you. 

I guess I haven’t been before this Committee for 35 years, and 

I think it’s about time we started doing tax codes again. I would 

like to also have read into the record, if I might, a paper I did with 

John Childs, which is ‘‘The Economic Burden Caused By Tax Code 

Complexity,’’ which covers a lot of what you just talked about, Mr. 

Chairman. 

Chairman Coats. Without objection, we will put that into the 

record. 

Dr. Laffer. Thank you. 

[The report titled ‘‘The Economic Burden Caused By Tax Code 

Complexity,’’ appears in the Submissions for the Record on page 

35.] 

Dr. Laffer. But what I would like to do is, Mrs. Maloney, I 

would like to go right to the comments you made that were very 

interesting. What I would like to do is remove this from being partisan, if I may. It is not Republican, it’s not Democrat, it’s not liberal, it’s not conservative, it’s not left-wing, it’s not right-wing. This 

is economics. 

And in fact, as some of you may know, I was a huge fan and 

voted for and did campaigning for Bill Clinton when he ran for office as President. I voted for him twice. I also did Jerry Brown’s 

flat tax. In fact, I did it verbatim when he ran in the primary in 

1992. And what I would like—— 

Chairman Coats. Art, don’t go too far, because we invited 

you—— 

[Laughter.] 

Dr. Laffer [continuing]. You know I’m a Reagan guy all the way. 

Chairman Coats. All right, that eases the problem. 

Dr. Laffer. But it is not a partisan issue. It is all about economics, and about the incentives here. When you say tax complexity, 

it doesn’t just mean lowering rates, or making one rate. It means 

changing the base, as well. 

DeShaun on LAP51NQ082 with DISTILLER

6 

I would like to give you an example of tax complexity and what 

it leads to. And this is someone you all are very familiar with, a 

man named Warren Buffett, a Frenchman from Omaha, Nebraska—you know ‘‘Warren Buffett.’’ And what he did was he 

wrote a letter to The New York Times in 2011 which described how 

he pays less in taxes than his secretary does. In fact, he pays half 

as much in taxes as his secretary does. 

And in the letter he said: Now I pay a lot in taxes. I pay, and 

he said six million nine hundred and whatever it is, I’ve got the 

exact numbers, but a little bit less than $7 million in taxes, which 

may seem like a lot of money to you, but in fact relative to my income it is not very much at all. 

In fact, he said, relative to my income it is only 17.4 percent of 

my income. Now being the math whiz I am, I went and took that 

tax bill, which was a little less than $7 million, divided it by 17.4, 

and I got Warren Buffett’s adjusted gross income, which was a little bit less, just a wee bit less than $40 million, which is a heck 

of a lot of money for one man to earn in one year in 2010. 

But then I went back to my Chicago training, University of Chicago training, and asked myself: What really is ‘‘income’’? Not the 

definition for the tax code, but the definition you and I would like 

to have, Mrs. Maloney, I mean very seriously. And your income 

should be how much you spend in a year, how much you give away 

in a year, and your increase in wealth. 

Now think about that income. It’s what you spend in a year, 

what you give away in a year, and the increase in your wealth. 

That’s your income from that year that you have to dispose of as 

you see fit. 

So I went to Warren Buffett, the records there, and I looked up 

in the Forbes Magazine to find out what happened to his wealth. 

He owns a company called Berkshire Hathaway, you know. The 

stock is fully traded, so we know how much he owns and what happened to his wealth. And in the Forbes Magazine that year his increase in wealth was a little over $10 billion. 

It went from $37 billion at the beginning of 2010 to $47 billion 

at the end of the year. I then went to the Bill & Melinda Gates 

Foundation Web site. They announced that he had given $1.6 billion that year to the Bill & Melinda Gates Foundation. I didn’t go 

to his two sons’ Web sites, nor do I go to his daughter’s, but he 

gave them a lot of money as well. 

I didn’t look at his checking account to see how much he spent. 

But when I looked at his total income for the year 2010, it wasn’t 

$40 million. His income for 2010 was $11.6 billion, and his total tax 

bill was less than $7 million. 

He paid in taxes 6/100ths of 1 percent of his income that year. 

All legal. What he did was his whole increase in his wealth was 

in unrealized capital gains. As you know, the tax rate on unrealized capital gains is zero, and on the increase it is also zero. The 

gifts to the Bill & Melinda Gates Foundation and the other foundations also pay no tax whatsoever there. 

If you look, he owns Berkshire Hathaway, so he never has to buy 

and sell a company stock. It is all below the shelter there of the 

company. So all the realized capital gains do not come to him in 

taxes; they just go to the company. 

DeShaun on LAP51NQ082 with DISTILLER

7 

You know, this is all because of complexity. And all of it—and 

he is not the only example. If you have a low rate, broad-based, flat 

tax that defines comprehensive income the way Jerry Brown proposed it in 1992, you would catch all of this. This is what we really 

mean by a simplified code. 

Now the code I wrote for Jerry Brown was not a tax rate reduction; it was much more like the 1986 Tax Act which had, for every 

rate reduction you had a broadening of the base to make it static 

revenue neutral. So all of this revenue feedback stuff is not true 

for complexity. 

Now the 1986 Tax Act, which was very—I was very involved in. 

I had done this paper of my own, as well as worked with Jack 

Kemp, as well as Bill Bradley. What we did there was we took the 

income tax down to two brackets, 15 percent and 28 percent. 

We got rid of deductions, exemptions, exclusions. We dropped the 

corporate rate from 46 to 34 percent. And it was static revenue 

neutral. If you look at that bill at that time, we passed in the Senate—and I will just use the Senate vote—the Senate voted 97 to 

3 to pass that bill. 

Now can you imagine that bill being done today where we drop 

the corporate rate from 46 to 34 percent, then the lowest in the 

OECD, and dropped the highest personal income tax rate from 50 

percent to 28 percent, and yet we got 97 votes in there? It led to 

enormous prosperity, and my next-door neighbor and dear, dear 

friend, a guy named Al Gore, who I did the blurb on his latest book 

‘‘The Future,’’ said it led to 20 years worth of prosperity and it was 

the best economic vote he has ever done, period. 

That is what we are talking about: bipartisan pro-growth, lowering the rates, broadening the base, and not making revenue 

shortfalls, not worrying about spending, but trying to create economic growth by really, really significantly reducing complexity. 

Thank you. 

[The prepared statement of Dr. Laffer appears in the Submissions for the Record on page 34.] 

Chairman Coats. Thank you. 

Mr. Hodge. 

STATEMENT OF MR. SCOTT A. HODGE, PRESIDENT, TAX 

FOUNDATION, WASHINGTON, DC 

Mr. Hodge. Thank you very much, Mr. Chairman, and Ranking 

Member Maloney, and all the members of the Committee. I appreciate the opportunity to talk about tax complexity. 

Tax complexity is the number one issue facing Americans today. 

In addition to robbing us of 6 billion hours of our lives complying 

with the tax system, tax complexity punishes success and hard 

work, which robs the economy of its ability to create jobs and prosperity and better living standards. 

And over the past few months, Tax Foundation economists have 

actually been measuring the cost of complex provisions in the tax 

code using our Taxes and Growth macroeconomic tax model. In 

May we will publish these case studies in a new book titled ‘‘Options For Reforming America’s Tax Code.’’ I hope that these case 

studies provide you with some dos and don’ts as you go about 

thinking about fundamental tax reform. 

DeShaun on LAP51NQ082 with DISTILLER

8 

What we find is that much of the complexity of our individual 

tax code in particular results from our attempts to make the tax 

system more progressive, either overtly through multiple brackets 

and rates, or covertly through backdoor clawbacks. 

And as we all know, and as Dr. Laffer has talked about, high 

marginal tax rates really matter. They work to diminish incentives 

and that ultimately undermines economic growth. Economists have 

referred to these high tax rates as ‘‘success taxes.’’ 

For example, we can make our current income tax system a lot 

simpler by reducing the number of tax brackets from seven to say 

three. It would be simpler, more pro-growth, and still progressive 

if we had rates of say 10, 25, and 35 percent. 

Our model estimates that this would boost the long-term level of 

GDP by 1.4 percent, lift after-tax incomes by 3 percent, and create 

more than a million jobs. 

But we also find that our policies aimed at helping the working 

poor also have unintended consequences. 

The complex structure of the Earned Income Tax Credit has the 

ironic effect of encouraging more growth as the subsidy phases in, 

but discouraging work effort as the subsidy phases out, because it 

penalizes workers for every new dollar that they earn above the 

poverty level. 

However, we can reduce those tax penalties with a slower phase 

out rate for the EITC. Our model finds that this would raise workers’ after-tax incomes by 1 percent, and create as many as 164,000 

new jobs. 

You know, I think we all want to simplify the number of loopholes and itemized deductions in the code, but we should use the 

savings from that simplification for lower tax rates. We found that 

if you were to eliminate most itemized deductions, except for the 

charitable deduction and home mortgage interest deduction, and 

reduced tax rates across the board by 10 percent, it would increase 

GDP by 0.6 percent, and create more than 577,000 jobs. 

On the business side, everyone on this Committee knows that the 

U.S. has the highest corporate tax rate in the industrialized world, 

along with an obsolete world-wide tax system. Cutting the corporate tax rate and moving to a territorial system would not only 

simplify the tax code but make the U.S. a more competitive place 

to do business in and do business from. 

But just as important, we should replace our immensely complicated depreciation and cost-recovery system with a much simpler 

system of full expensing for capital investment. Dollar-for-dollar, 

full expensing is one of the most pro-growth tax simplification 

measures this Congress could enact immediately. 

And by our estimates, full-expensing would increase the long-run 

level of GDP by over 5 percent, boost our capital stock by 16 percent, increase wages by more than 4 percent, and create more than 

a million new jobs. 

Over the past year, the Tax Foundation has been very fortunate. 

We have gained a lot of special insights into what kinds of tax policies lead to greater investment, wages, jobs, and economic growth, 

and what kind of policies actually retard that. 

DeShaun on LAP51NQ082 with DISTILLER

9 

We have scored the tax plans for every Presidential candidate, as 

well as numerous plans developed by Members of the House and 

Senate. 

In fact, we have scored the plans of two members of this Committee—Senator Lee’s Rubio-Lee Tax Plan; and Senator Cruz’s Tax 

Reform Plan, as well. And during this experience we have modeled 

every conceivable tax reform plan one can think of, including the 

flat tax, fair tax, Bradford X-tax, Value-added tax, and numerous 

plans that blend all of those different things together. 

And to one degree or another, the plans that produce the most 

economic growth tend to incorporate many of the things that I have 

just outlined. They simplify the tax code. They reduce marginal tax 

rates. They reduce taxes on capital. They reduce or eliminate the 

double taxation of savings and investment. And they move toward 

a neutral or consumption tax base. 

Well to wrap up, I hope that members of this Committee as well 

as all of your colleagues take some of these lessons to heart and 

start us down the road to fundamental tax reform sooner rather 

than later. 

Thank you, very much. I appreciate the time and will answer 

any questions you may have. 

[The prepared statement of Mr. Hodge appears in the Submissions for the Record on page 63.] 

Chairman Coats. You nailed the five-minute time limit. We 

give stars for that. So we thank you. 

[Laughter.] 

Mr. Grossbauer, you are joining some rarified company here. 

Warren Buffett, Bill Gates, Jerry Brown, Al Gore, Bill Bradley, 

Jack Kemp. What does a small business owner want to tell us 

about our tax code? 

STATEMENT OF MR. JOSEPH GROSSBAUER, PRESIDENT AND 

CEO, GGNet TECHNOLOGIES, CHESTERTON, IN 

Mr. Grossbauer. Thank you, Senator Coats. And listening to 

the billions of dollars being spoken of here and, you know, they say 

a billion here, a billion there and, you know, the hundreds of thousands of jobs being created or could be created, I want to preface 

my presentation by saying that a thousand dollar investment, a 

thousand dollar outlay, is a significant outlay for me. It is something that I think about very seriously. I think about, you know, 

when I capitalize a piece of equipment and it costs me $5,000, that 

is a big deal to my small company. 

Expanding by one or two employees is a really big deal for my 

company. I just have to say, it is a really great honor to be here, 

and I really appreciate the opportunity to share my story. I want 

to thank you all for allowing me to be here. 

I also have to warn you, I am quite nervous. This is something 

that is clearly out of my comfort zone. So if I flub a word here or 

there, please excuse me. And now let me get on to my points. 

I want to say good morning, Chairman Coats, Ranking Member 

Maloney, and members of the Joint Economic Committee. Thank 

you for the opportunity to testify today. I am pleased to be here on 

behalf of the National Federation of Independent Business, NFIB, 

as the Committee discusses the issue of tax complexity and its negDeShaun on LAP51NQ082 with DISTILLER

10 

ative impact on our Nation’s economy, and especially small businesses. 

NFIB is the Nation’s leading small business advocacy organization. The typical NFIB member employs 8 to 10 people with an annual gross receipts of about $500,000. So when you talk billions, 

we’re not talking billions here, but we are talking about people who 

are really in the trenches every day, you know, growing their business. 

All NFIB members are independently owned, which is to say 

none are publicly traded corporations. While there is no one definition of ‘‘small business,’’ the problems NFIB members confront relative to the tax code are representative of the vast majority of 

small businesses. 

And I am glad the hearing was this week and not last week, because I really literally could not have attended last week. And I did 

not know that Tax Day was due Monday because I was so busy 

worrying about taxes I got panicky on Friday the 15th thinking I 

needed to file my taxes, and luckily I had an extension over the 

weekend. 

A few consistent concerns are raised regardless of the trade or 

industry in which small businesses are engaged, and 5 of the top 

10 small business concerns are tax related. And these tax problems 

fall into three categories: cost, complexity, and frequent changes. 

And I would submit that frequent changes are just additions to 

tax complexity. 

When I started my business 10 years ago, I could prepare my 

taxes myself. But now I have a—and you’ve got to remember, I 

have a staff of six people. I have a staff bookkeeper. I use an accounting firm. And for the really tricky questions, I have a tax attorney. This is really crazy. I’m serious. This is really crazy to have 

a small business having to, you know, call up their accountant or 

their tax attorney just to check on something. 

I will give you a very specific example. I serve as president and 

CEO of GGNet Technologies, which is a technology company that 

provides IT and data center services, along with cyber security, 

breach analysis, and mitigation. We are an S Corporation. 

Since our founding in 2006, our accounting costs have risen more 

than 400 percent. Some of that can be attributed to company 

growth, but much of it is in the rise of accounting costs due to the 

complexity of the tax code. 

It seems like the harder I work, the more I grow, not necessarily 

the more taxes I pay, it’s really the more complex the tax code has 

made my life. You know, I deal with things like, you know, deductions, and how do we, you know, deal with those deductions? 

Do I deduct something? I deal with passthroughs, active and passive incomes, classification of items. You know, tax compliance is 

really now way beyond my capability, and I can deal with pretty 

complex situations in my business. I am no longer small enough to 

prepare my own taxes, but I am not large enough to have an entire 

accounting staff. 

My bookkeeper spends roughly 40 percent of her time working on 

tax-related functions, classifying various items, and filing federal, 

state, and local taxes. Like the doctor in surgery discovering a 

DeShaun on LAP51NQ082 with DISTILLER

11 

much more complex situation and having to call in other specialists, it takes much more time and a much higher cost. 

Between February and April, my bookkeeper and I are frozen. 

We don’t focus on anything else primarily except taxes. Business 

reports and planning are put on hold or delayed because we are so 

focused on taxes. We are unable to produce timely reports on cash 

flow or profit/loss. This is not the way to run a business. 

I can’t even during this time accurately project my staffing 

needs. I do it, but it is not as good as it normally would be. If the 

tax code were less burdensome, I would be able to focus more time 

and resources on my customers, product development, and services 

rather than taxes. And even a small company like mine, you know, 

looks for innovation. How can we be different? 

And I don’t have the time to do that. Every day I have to think 

about taxes. How do I classify an item? Do I classify it under ‘‘operations’’? ‘‘Capital’’? Or ‘‘minor equipment’’? And if ‘‘capital,’’ I have 

to consider the depreciation formula. I mean, really. You know? I 

always seem to be calling my accountant. 

Another decision. We talk about job opportunities. I would really 

like to add more staff, but I just keep using contract workers and 

I follow the IRS Code, rather than hire a new employee knowing 

that the new employee would bring additional costs in tax overhead. 

Payroll complexity forces me to use software. Software doesn’t always classify well, and we end up with support calls to companies 

and my accountant. 

And now we talk about economic development, and we talk about 

economic development in northwest Indiana. I discovered an underutilized fiber optic network in my community. I teamed up with 

three partners to set up an LLC to acquire the SASA. This would 

bring—and we all talk about gigabit service to communities. This 

would bring gigabit service to homes and businesses. 

I would need to build a network operations center, small. I would 

have to hire an engineering staff, well-paid engineers, to make this 

opportunity work. As we developed our business plan and pro 

forma, we recognized the need for correct interpretation of the tax 

code in order to determine if this was a profitable or unprofitable 

venture. 

We did the market analysis. We projected income. Everything 

looked good. We calculated startup costs. Good. Everything looked 

really good. But as part of the due diligence we needed to project 

our tax liability. 

The fiber in the ground became the problem. One accountant 

said it was a capital asset and we’d have to depreciate it like that. 

This just didn’t work. The numbers didn’t work. The bottom line 

is, the numbers didn’t work. 

So on the recommendation of one of our partners, we went to his 

accountant, reviewed it, looked at it, and said the same thing. 

Fiber in the ground is a capital expenditure. You have to depreciate it as capital. 

So I finally went to an accountant friend of mine, just handed 

this off to him and said, you know, what can I do? And he said, 

you’re stuck. So at this point, acquiring the fiber became a risky 

venture and the partners were getting nervous. Out of the blue, or 

DeShaun on LAP51NQ082 with DISTILLER

12 

call it dumb luck, I read an article in one of my news feeds telling 

me that the IRS has reclassified fiber as real estate. 

So I went back to my accountant and showed him this, and he 

said, oh, no, no, no, it was capital. It’s capital. I know the law. It’s 

capital. 

Okay, so now I said, okay, let me go to my tax attorney, you 

know, who always deals with these kind of situations. And he read 

the article, and he said, well, it sure still seems like capital. So I 

pushed him, and he called an associate of his. I don’t know where 

he ended up calling, but he checked further and he said, ah, yes, 

this can now be classified as real estate. That changed the entire 

picture. 

So I’ve yet to receive all the bills for this, but I think that the 

investment, you know, will be worth it. But I want to say, no small 

business should have to go through this trying to build a company 

and create jobs. 

The tax law—and I can’t emphasize this enough—the tax law 

should not be a barrier to growth, and they are a barrier to my 

small business. I am a middle class person. I am not a Warren 

Buffett, you know? I really work very hard. And all of my staff are 

middle class people, and the current tax laws are truly a barrier— 

when I look at that wall over there—they are a barrier to my 

growth. 

In conclusion, small businesses are the engines of economic 

growth. This is not just a slogan. Small business—I’ll give you 

some statistics—created two-thirds of the net new jobs over the 

past decade. 

Chairman Coats. Mr. Grossbauer, I’ve given you extra time 

here—— 

Mr. Grossbauer. Okay, I’m sorry—— 

Chairman Coats. But I did so because you are giving us a real 

live example of the average guy/gal out there trying to run a business in everyday life and make a little bit of profit. And you have 

given us a real, live example of this. 

We talk in mega terms up here in terms of theory and so forth, 

and you have brought it down to us. 

Mr. Grossbauer. I appreciate that. Yes. 

Chairman Coats. So I am going to just cut you off at that point. 

Mr. Grossbauer. That’s fine. 

Chairman Coats. Thank you. 

Mr. Grossbauer. Thank you. 

[The prepared statement of Mr. Grossbauer appears in the Submissions for the Record on page 74.] 

STATEMENT OF DR. JARED BERNSTEIN, SENIOR FELLOW, 

CENTER ON BUDGET AND POLICY PRIORITIES, WASHINGTON, DC 

Dr. Bernstein. Well thanks very much for the invitation. I too 

appreciate your testimony, Mr. Grossbauer, in that spirit. And I 

want to try to emulate my old friend, Art, here and begin with a 

kind of broader view of the question at hand. 

Today’s hearing is about tax complexity, but we cannot really address that issue unless we ask a broader question, which is: What 

is the goal of the federal tax system? 

DeShaun on LAP51NQ082 with DISTILLER

13 

This goal should be to raise the revenue necessary to fund the 

government’s services and public goods that Americans want and 

need, but to do so in a way that is fair, equitable, pro-growth, and 

avoids unnecessary complexity. 

So my testimony has three main findings. 

Fairness, simplicity, and revenue raising are often complementary. By closing regressive loopholes in the tax code, we reduce incentives to game the system, close wasteful tax breaks that exacerbate inequality without promoting growth, and raise more revenues. Based on demographics, inflation, debt service, and rising 

health costs, a substantial fiscal policy—I should say, a sustainable 

fiscal policy will likely require more, not less, revenue going forward. 

And finally, I find no evidence in support of the claim that supply-side tax cuts come anywhere close to paying for themselves, or 

even are particularly pro-growth. 

Now the complexity in the tax code has nothing to do with the 

number of tax brackets and rates. If taxable income were easy to 

define, it would not matter how many rates existed in the code. All 

taxpayers would have to do is to look up their liabilities in the 

table or an online calculator. 

Instead—and the other witnesses have all said the same thing— 

what makes our system so complex are the exemptions, deductions, 

privileges for certain types of incomes and activities, and other 

loopholes that often allow wealthy and businesses flush with tax 

lawyers to pay less than their fair share. This problem is readily 

seen on the business side of the tax code which is so fraught with 

complex loopholes that the effective corporate tax rate is 10 to 15 

percentage points below our uniquely high top statutory rate of 35 

percent. 

One knowable distortion here is the fact that debt financing for 

business investments is heavily subsidized by the tax code. Another 

is the infinite deferral of foreign earnings. 

That is one reason why the foreign income of U.S. multi-nationals is taxed at a rate 10 percentage points lower than their domestic income. Now think about this for a second. Our tax system actually incentivizes production in Guangdong Province vs. Providence, 

Rhode Island. 

What should we do? Cutting taxes is no free lunch. In my testimony I have a bunch of scatter plots. I have a few here up on the 

slide projector here, showing that the top marginal rates faced by 

wealthy Americans have historically been uncorrelated with GDP 

growth, employment growth, investment growth, productivity, middle class income, as far back as we have the data. 

As Ranking Member Maloney said, this should come as no surprise to those who have lived through the Clinton years where 

higher top rates coincided with economic outcomes much better 

than those during the George W. Bush years when rates were lowest—lower. 

The State of Kansas’ recent experience has proved the prediction 

of the supply side tax cuts spectacularly wrong as cuts recommended by advocates of the trickle-down theory have both 

caused serious underfunding of the state’s education system, and 

have coincided with weak job and GDP growth. 

DeShaun on LAP51NQ082 with DISTILLER

14 

Fortunately, there are changes to the tax code that could simultaneously simplify it, raise revenues, improve fairness, and enhance economic efficiency. My testimony provides examples of such 

changes. 

An easy and obvious starting point is closing the so-called ‘‘carried interest loophole’’ which allows hedge fund managers to face 

favorable asset-based rates on their earnings. Those who claim to 

want to undertake major tax reform, yet are unwilling to close this 

loophole, one with virtually no defenders, should be considered akin 

to those who say they are ready to run a marathon but get winded 

walking up the stairs. 

Broadening the estate tax base and ending step-up basis would 

reduce the preferential treatment on inheritances of millionaires. A 

minimum tax on foreign earnings would help fix the deferral problem, as would efforts to crack down on the increasingly evident 

problem of illegal tax evasion. 

One last point. U.S. foreign profits booked in tax havens have 

grown sharply in recent years. In 2010, foreign subsidiaries of U.S. 

firms reported profits in the Cayman Islands that were more than 

20 times that country’s entire economic output—20 times their 

GDP. This simple fact alone provides overwhelming evidence of 

base-eroding profit shifting from where income is earned to where 

it will be taxed. 

I look forward to further discussion of these and other ways to 

dial back the complexity in the code while dialing up its fairness. 

[The prepared statement of Dr. Bernstein appears in the Submissions for the Record on page 79.] 

Chairman Coats. Dr. Bernstein, thank you. Let me start with 

some questions here. I am going to try to only do five minutes so 

I set the example for my colleagues here. 

But, you know, I cannot resist asking Dr. Laffer to respond to 

what you said, Dr. Bernstein, particularly in terms of pro-growth 

and supply-side economics. My recollection is that after the 1986 

Act we were growing at a rate I have never seen in my lifetime. 

But I would like—and then I want to give you a chance to rebut 

that. So within five minutes, Art, you have about two-and-a-half 

minutes to give us your thoughts on this subject. And then, Dr. 

Bernstein, if you want to go back and forth I think it would be entertaining for us. 

Dr. Bernstein. Just like the old days, Art. 

Chairman Coats. Like the old days, and informative—— 

Mr. Hodge. Should I sit back aways? 

[Laughter.] 

Chairman Coats. When it comes to the next questioner, hopefully somebody will ask you, Mr. Hodge, what your opinion is. I am 

just trying to stay within my five minutes. Go ahead, Art. 

Dr. Laffer. If you take the states with no earned income tax and 

compare them with the nine states that have the highest tax 

rates—oh, sorry [microphone was turned off]. I pressed it again 

wrong. Sorry. 

If you take the states that have no earned income tax in the 

U.S., and you take the states with the highest tax rates, if you look 

at the growth rates over the last 50 years, every single year, the 

nine states without income taxes, earned income taxes, have grown 

DeShaun on LAP51NQ082 with DISTILLER

15 

much faster in every single metric than have the states with the 

highest income tax rates. 

A clear-cut example of growth rates, taxes, same country, same 

time, same place, same station. If you look at the 11 states that 

have introduced an income tax in the last 55-plus years, starting 

with West Virginia and ending with Connecticut in 1991, each and 

every one of those states, in every single metric, each and every 

one in every metric—population, employment, labor force, and, yes, 

even tax revenues—declined relative to the rest of the Nation, 

without exception. 

If you look at the growth rates of Germany and Japan in the 

post-war period, all of these, but most of all in the academic literature, if you go to the academic literature of the top journals, you 

can find all over the place measures of taxes affecting growth. 

In fact, Christina Romer, in her famous article shows the effect 

of tax rate reductions on economic growth, and she I think was 

Obama’s chief economist there for awhile. So the literature is just 

full of those examples when done carefully and academically that 

really show that tax rates do matter. 

You know, if you tax people who work, and you pay people who 

don’t work, do I need to say the next sentence to you? Don’t be surprised if you find a lot of people not working. That’s all we’re talking about. 

We tax speeders to get them to stop speeding. We tax smokers 

to get them to stop smoking. Why on earth do we tax people who 

earn income? Why do we tax people who employ other people? Why 

do we tax businesses that make wonderful products at very low 

cost? To get them to stop earning income? To get them to stop employing other people? To get them to stop making wonderful products at low cost? No. We don’t. We do it to get the revenues. 

But don’t for a moment believe that these taxes don’t have negative consequences. That is the ultimate false hope. You’ve got to 

have a clear eye to be able to also have a warm heart. You’ve got 

to be able to look at the consequences and make a tax plan that 

does have tradeoffs. 

Taxes do affect growth. They do affect incomes. They do affect 

jobs. But we need the money. And how do you get those revenues 

in the least-costly fashion and provide those resources to government for the most beneficial uses possible? 

Chairman Coats. Dr. Bernstein. 

Dr. Bernstein. Thank you very much. I appreciate your giving 

me the opportunity to go back and forth. 

In my testimony I list five scatter plots that I would like to share 

a couple of with you right now. This idea cannot be asserted, it 

cannot be found in the literature the way my friend Art does because I can find just as many studies that go the other way. It 

must be empirically tested. 

What we did here is we took every single year we have on record 

of tax changes, and a whole set of variables. There are five of these 

slides in my testimony: GDP, productivity, labor supply, capital 

supply, investment, median family income. And we simply asked: 

To what extent does the growth in these economic variables correlate with the top rate in the income tax code? 

DeShaun on LAP51NQ082 with DISTILLER

16 

If the supply side claims were correct, we would see an inverse 

correlation. We would see that growth was consistently more positive, whether it is investment, income, GDP, productivity, when 

rates were low, and vice versa when they were high. 

Instead, in every single plot we made—I mean, I really bent over 

backwards to try to get to the bottom of this—the correlation was 

about zero. In fact, if anything it was slightly positive and significantly positive when we looked at median family income, meaning 

that over the course of history family income grew more quickly 

when rates were higher than when they were lower. 

Now I am not saying, and I am not at all claiming—I want to 

be clear about this—that higher rates in fact drive growth and investment up. I am saying that the correlations are not there. And 

if the correlations are not there, it would be an extremely I think 

reckless mistake to try these supply side solutions at home. And 

by ‘‘home’’—and I’ll finish with this because I know we’re crunched 

for time—by ‘‘home’’ I mean Kansas, for example. 

In Kansas, the Governor and the legislature aggressively cut 

taxes urged by policy officials touting the benefits of supply side 

tax cuts. They have blown a hole in their budget, about a $400 million hole in the state budget. Serious under-funding to the state’s 

education system, of great concern to constituents throughout the 

state. And jobs now in Kansas have been growing half as fast, at 

a rate that is half as fast, as jobs growing in the four surrounding 

states. 

So this is an empirical question. It is not a theoretical question. 

And the empirics I think tell you the answer that I stress in my 

testimony. 

Chairman Coats. Well I would love to get into a debate here, 

but two things have happened. One, I have been just handed a note 

that the House is expecting to begin votes at 3:30, a series of those 

votes. Our House Members will have to leave. I want to quickly 

turn it over here to our Ranking House Member, Mrs. Maloney, for 

her questions, and knowing you have to hustle out of here. So you 

are on. 

Representative Maloney. Dr. Laffer, you were quoted in The 

Washington Post yesterday saying that the tax plans proposed by 

Republican presidential candidates Trump and Cruz could lead to, 

quote, ‘‘massive revenue increases,’’ end quote, to the Federal 

Treasury. Is that correct? Yes, or no? 

Dr. Laffer. Yes, that’s correct. 

Representative Maloney. Okay. But, Mr. Hodge, you have 

written something very different. In an op-ed last month, you wrote 

that the Republican candidates’ tax plans would, quote, ‘‘cut federal 

tax revenues substantially,’’ end quote. This was your article on 

which GOP candidate’s tax plan is—— 

Mr. Hodge. That’s correct. 

Representative Maloney. And, Mr. Hodge, would the Trump 

and Cruz tax plans increase revenues, or reduce revenues? 

Mr. Hodge. Both of the plans are tax cut plans, and they are 

intended to be tax cut plans. We modeled all the Presidential candidates’ plans. We found that there is an interesting tradeoff, sort 

of three tradeoffs—— 

DeShaun on LAP51NQ082 with DISTILLER

17 

Representative Maloney. But, first of all, just can you answer 

for me, because I want to go back to the tax brackets and I don’t 

have much time. 

Mr. Hodge. Sure. 

Representative Maloney. You said that they would, quote, ‘‘cut 

federal tax revenues substantially.’’ 

Mr. Hodge. Right. The Trump plan is, in conventional terms, is a $12 trillion tax cut. After we factored in the economic growth, it 

is a $10 trillion tax cut. 

The Cruz plan we find that if measured on a conventional basis, it costs a little over $3 trillion. But once you factor in the substantial economic growth that it generates, about a 14 percent increase 

in GDP, that cost comes down to about $800 billion over 10 years. 

Representative Maloney. But you wrote that they cut federal 

tax revenues substantially. 

Mr. Hodge. That’s what I’m saying, yes. 

Representative Maloney. I want to go back. We have two proposals before Congress right now. There is one, and I would like 

to ask Jared Bernstein, one would reduce the number of tax brackets to three. This is one put forward by the Republicans. And some 

have supported cutting, following Dr. Laffer’s suggestion of a flat 

tax, the number of brackets to one rate for everyone. 

So I would like to ask Dr. Bernstein, is this an effective way to 

reduce tax complexity? What would be the impact of fewer tax 

brackets on the share of the tax burden shouldered by the middle 

class? And how would the wealthiest one percent do under these 

two proposals? 

Dr. Bernstein. Well as I tried to stress in my testimony, the 

complications of the tax code, all those boxes over there, are simply 

not driven by the number of rates. This, by the way, is a finding 

I have seen in all the testimonies you’ve heard today. 

The complications are driven by all the different definitions of income, the exemptions, the incentives to defer income overseas, to 

finance investments with debt vs. equity, to defer foreign earnings, 

and so on. All the things we have been talking about today and the 

things that Mr. Grossbauer is busy with February through April. 

That would not change one whit if he or other filers had 1 rate 

as opposed to 3, or as opposed to 12. I actually asked a tax accountant about this, and I quote her in my testimony, about this question of rates vs. the other aspects of complexity, and she called it, 

quote, ‘‘gut-busting laughable’’ that somehow reducing the rates— 

reducing the number of rates would make a difference, if you left 

all these other complexities in place. 

The other problem you face, as you intimated in your question, 

is that typically if we are trying to be revenue neutral, and we reduce taxes at the top, which is characteristic of the kinds of plans 

you have been talking about, and certainly characteristic of those 

put forth by Republican candidates mentioned earlier, if those are 

going to be revenue neutral, you have to make the revenue up 

somewhere else. 

And so typically they increase the tax burden on the middle 

class. 

Representative Maloney. And what does history show us 

about the impact of tax cuts on revenue? 

DeShaun on LAP51NQ082 with DISTILLER

18 

Dr. Bernstein. If you—this is actually a fairly simple relationship that can be I think distracting and made more complicated by 

some of the mythology around supply side taxes. Historically if you 

cut tax rates significantly, you will lose revenue on net. 

Now I want to be very clear. I am not contradicting my fellow 

witnesses in terms of the following point: There will be potentially, 

under certain conditions, more capital investment, more labor supply, under some tax cuts. That is not saying—but on net, the question is how much will you get back through these growth effects vs. 

how much will you lose? 

And I think history is pretty clear on this point, that the growth 

effects of the kinds of tax cuts that are being bandied about here 

today do not come anywhere close to offsetting the revenue costs. 

Representative Maloney. My time has expired. Thank you. 

Chairman Coats. Thank you. Our Vice Chairman, Mr. Tiberi. 

Vice Chairman Tiberi. Thank you all for being here. 

Mr. Hodge, something in your testimony really jumped out at 

me. You mentioned that the multiple depreciation schedules that 

we have in place create often a complex and arbitrary process. 

As you know, we have talked about before, I introduced a bill to 

make 50 percent depreciation permanent. I was pleased with what 

was included in the PATH Act that was passed last year and 

signed by the President to extend it for five years, but I think we 

should go further and I know you do, as well. 

You mentioned in your written testimony that one way to both 

simplify the tax code and increase economic growth would be 

through full expensing. You have modeled my 50 percent current 

depreciation bill, and I think you have also modeled Representative 

Nunes’s ABC permanent expensing, full expensing bill. And I know 

in my bill’s case you stated that it would increase GDP by over one 

percent a year, and create over 200,000 jobs. 

And you mentioned in your verbal testimony what full expensing 

would do. But you also say, and I quote from your written testimony, ‘‘Dollar for dollar, full expensing is one of the most progrowth tax changes that Congress could enact.’’ 

And last week I asked that same question to Tom Barthold, who 

as you know is the Chief of Staff at JCT, and I gave him a story 

about a manufacturer in my state that said they modeled whether 

to build a plant overseas or in the United States, and because of 

the temporary law of bonus depreciation they decided to build the 

plant in Ohio, thereby providing more employment and paying 

more taxes in our state. 

So to me, expensing and full expensing in particular seem like 

a no-brainer. When I asked Mr. Barthold about his thoughts and 

gave that example about expensing and bonus, he explained that, 

and I’m going to quote, ‘‘While expensing reduces the cost of capital 

and increases investment,’’ he also said, ‘‘there are tradeoffs that 

occur at the same time.’’ 

That government receipts would decrease, creating a larger government deficit, driving up interest costs, which could in turn ultimately increase the cost of capital. 

I know your modeling has maybe a different approach than that, 

that those tradeoffs might not occur, but more importantly even if 

DeShaun on LAP51NQ082 with DISTILLER

19 

they do, that we would see GDP growth at 5 percent, which we 

would obviously love to see and have not seen for a long, long time. 

Could you tell us why you believe that even with those tradeoffs 

that growth would be around 5 percent in your modeling? 

Mr. Hodge. Well I think that in this case the Joint Tax’s model 

is incorrect, that deficits cause some increase in interest rates. I 

think the last seven years have sort of proved that wrong. 

And especially with the small numbers that we are talking 

about, with the size of global capital markets, a little bit of a deficit 

to pay for full expensing would not drive interest rates at all. In 

our model we hold Federal Reserve policy constant. So we don’t 

measure that at all. And we just figure that the Fed would be accommodative of this. 

And so what we are looking at is the pure effects of moving to 

full expensing, which, as Mr. Barthold mentioned, dramatically 

lowers the cost of capital. That drives investment in new plant and 

equipment. Ultimately that makes the workers far more productive. 

More productive people earn more. And in turn that leads to a 

growing healthy economy. And it leads to better living standards. 

And that is ultimately what tax policy should be doing. And I think 

that full expensing really ought to be first and foremost on the top 

of our agenda here, along with lowering tax rates, obviously. But 

expensing would be a powerful tool to gaining U.S. competitiveness, to bringing jobs back to the United States, especially highpaying manufacturing jobs. 

Vice Chairman Tiberi. Thank you. I am going to yield back because we have a vote coming up, Mr. Chairman. 

Chairman Coats. Thank you. I am going to get my list here. It 

is unfortunate that votes have made a play here, but it does open 

up the possibility and the probability and the ability for Senator 

Klobuchar to go next. 

Senator Klobuchar. Okay. Well as I said, I could defer to one 

more House Member if you would like, and then go after that. 

Chairman Coats. You offered to do that, and I thank you for 

doing that. 

Senator Klobuchar. Okay. 

Chairman Coats. Your colleague, Congressman Paulsen. 

Representative Paulsen. All right. Thank you. I thank my colleague from Minnesota. Minnesotans are Minnesota nice, so I appreciate that. 

[Laughter.] 

Mr. Chairman, thanks for holding this hearing. I think the focus 

has been very apt, in terms of the impact of a very complex tax 

code on our economy. It doesn’t matter if you are an individual, a 

small business, a large employer, this is probably one of the top 

concerns I hear about from many folks in Minnesota. The tax code 

is too complex, too costly, it takes too much time to comply with. 

Nine out of 10 Americans have to pay someone to do their taxes 

for them or purchase the financial software to do their taxes. 

I remember one company, a large employer—you shared some 

great testimony, Mr. Grossbauer—but there was a large employer 

who spoke at the Ways and Means Committee not too long ago, 

and they talked about having a 17,000 page tax return. So, think 

DeShaun on LAP51NQ082 with DISTILLER

20 

of the army of accountants that have to go through that process, 

and the ingenuity and the know-how that is not employed in helping the company produce more growth. 

So, I guess my question is this. Dr. Laffer, you have already 

dated yourself a little bit with the Reagan tax reform initiatives 

back in 1986, but if you could give some additional advice, you did 

some comparisons before with states and international, but if you 

could give simple, straightforward advice about what we should 

focus on when we talk about growth, what would you advise? We 

are going through this once-in-a-generation opportunity to get it 

right, to do it right. We will do this right hopefully right after the 

next Presidential election. We’ll be ready to go. 

Dr. Laffer. Yes, and that is the reason I am here today. I took 

a hiatus for 35 years. I’m here because I think the opportunity is 

right now. And I think if we did the first thing here, what has been 

talked about here, expensing, corporate tax rate reduction, to really 

kickstart the system, I think that would be a wonderful one. Not 

unlike Reagan’s 1981 tax bill. 

But that should be considered a first step. You can do some simplification of personal income taxes, as well. But the long run position should be to make the tax code do the least damage possible 

to collect the requisite revenues to run government. 

And if you look at that, what you want to do is have the lowest 

possible tax rate to provide people with the least incentives to 

evade, avoid, or otherwise not report taxable income. That is why 

I used the Warren Buffett example there. You want the lowest possible rate to do that, and the broadest possible tax base, so you provide people with the least places in which they can place their income to avoid paying taxes. 

So you really want to do the least damage. All taxes are bad. 

Some are worse than others. The reason we have taxes is to collect 

the revenues to run government. Then you want to spend your 

money in the best way possible. 

Both of those are really, really important. I mean, Mrs. Maloney, 

the issue there is that tax simplification includes tax rates and the 

tax base. And you can make it static revenue neutral like we did 

in the 1986 Tax Act, and there is no reason why you can’t do—that 

is what I did with Jerry Brown’s flat tax, as well, in 1992. There 

was no net revenue loss on a static basis. 

And what you will do is just generate pure economic growth. But 

the first ones I would kickstart tax reform with some of the biggest 

types of taxes we dropped, with a Democrat, by the way, through 

an amendment that we cut the unearned income tax rate from 70 

percent to 50 percent with Reagan. That was, I believe it was, I 

forget whose amendment it was (it was the Brodhead Amendment) 

to the bill, but Reagan agreed to do. It also cut the capital gains 

tax. 

That is what we have to do to kickstart. Once this economy 

starts growing, then you can afford to really go into a much broader tax reform just like we did in the 1980s. 

Representative Paulsen. Mr. Grossbauer, you talked about 

fiber optics getting categorized as real estate. Is there another example you have of what you think the focus should be on, or what 

DeShaun on LAP51NQ082 with DISTILLER

21 

small businesses or the entrepreneurs as the engine of the economy 

would want to have us focus on first and foremost? 

Mr. Grossbauer. Well, you know, listening to full expensing, 

one of the most difficult—am I on [referring to the microphone]— 

one of the most difficult things is depreciation, and how do we depreciate capital items. 

I have data center space in Chicago. I have a lot of servers in 

Chicago. It is all capitalized. It is all capital equipment. And the 

depreciation laws are really, really—you know, hit my company 

very hard. 

And I can only imagine how it affects, you know, Arcelor-Mittal 

and U.S. Steel, but it does impact my company. So that’s something that would make a clear impact on my company. 

As we think about, you know, growth, this becomes a barrier. 

Representative Paulsen. Thank you, Mr. Chairman. 

Chairman Coats. Thank you. Now, Senator Klobuchar. 

Senator Klobuchar. Thank you very much, Mr. Chairman. 

I am a big fan on moving forward on tax reform, and doing something about the trillions of dollars overseas. We certainly know this 

in Minnesota with the Medtronics situation, although that has 

worked out for us in terms of adding jobs in our state. But overall 

that’s just not how we should run our business situation. And so 

we not only need some rules. Mostly I’m interested in corporate tax 

reform and trying to bring that money from overseas, and creating 

incentives. 

But ours was kind of—however, I do have one. You will probably 

call it an aberration, but CNBC did the rankings of the best states 

to do business in, and maybe Dr. Bernstein knows this, but the 

number one state to do business in was? 

Dr. Laffer. Minnesota. 

Senator Klobuchar. Minnesota. And we actually have a 3.7 

percent unemployment rate. Yet our taxes—we were just checking 

this—are somewhere in the middle. But of the top earners, Governor Dayton made some changes because we had a $6 billion 

budget gap, and put them at 9.85 percent. So they are one of the 

higher tax rates for top earners. 

And CNBC said they have never had a state quite like ours. It 

is a bit more pro-union. It is a bit more higher wages. And it is 

also clearly not in a low tax. I think Texas was second. But what 

they noted was, more and more with the economy stable companies 

are looking at places with good infrastructure, high quality of life, 

well educated employees. And I just thought maybe you wanted to, 

might want to comment on that, Dr. Bernstein. 

And I have another question of you, Dr. Laffer, but I thought you 

might want to look at this strange aberration. 

Dr. Bernstein. So if you look at the Kansas story, the slide over 

there shows that for all their tax cuts not only did they blow a revenue hole in their budget, but their job growth is half as fast as 

those of surrounding states. 

Well if you break down those surrounding states, the states that 

are doing the best tend to be the ones whose taxes are actually 

higher. The ones who have experimented with supply side, Missouri to some extent, Oklahoma, they are finding economic results 

that are relatively worse than the others. 

DeShaun on LAP51NQ082 with DISTILLER

22 

And I do think—again, I am not trying to say that raise your 

taxes and watch growth bust out everywhere, because what really 

matters is what you do with it. And here I strongly disagree with 

Art’s ‘‘I hate taxes,’’ or ‘‘no taxes are good.’’ It is all a matter of 

what you do with them. 

When you say taxes are all bad, you are also saying Social Security and Medicare are bad 

Senator Klobuchar. Okay—— 

Dr. Bernstein. No, my point is that if you are going to use your 

tax revenue to create a business friendly environment, through infrastructure, through an educated workforce, you are going to draw 

business in. That has certainly been the Minnesota case. You know 

that better than I do. 

Senator Klobuchar. Well we have 17 Fortune 500 companies. 

We are second per capita for Fortune 500. We may be something 

of a unique situation, making everything from the pacemaker to 

the Post-it note. 

But I do think that is an issue. Now where we are having some 

major challenges, and Dr. Laffer you are an expert on this, is the 

steel industry. Iron ore, we’ve lost 2,000 workers, in the part of the 

state where my grandpa was an iron ore miner. The plants are 

idled because of steel dumping, because of overproduction, because 

of Chinese currency manipulation, and the White House is actually 

working on this quite a bit, but we invited Dennis McDonough to 

Minnesota and he went up north. We are really concerned about 

security if we do not have a steel industry, and we are also worried 

about how we get ourselves out of this. 

So if you could, in my remaining minute and a half here, if you 

could comment on that and what you think we could do there. 

Dr. Laffer. Well I was born in Youngstown, raised in a steel 

family, all the way back. The problem with steel, as I see it, is location. And location is because of tax, in part. Obviously a lot of other 

factors come in. And Minnesota is a lovely, wonderful state, by the 

way, it really is. 

And if you look at my Rich States/Poor States ranking, which I 

do every year, I have for the last 10 years with ALEC, you can see 

the ranking—— 

Senator Klobuchar. Okay, alright, but let’s get to—— 

Dr. Laffer. What you have now is U.S. companies are taxed at 

U.S. rates, no matter where they make their profits, etc. If you 

have two locations, A and B, if you raise taxes in B and you lower 

them in A, producers and manufacturers and people are going to 

move from B to A. 

What we have done is increased tax structures on manufacturers, especially steel and these types of things, depreciation schedules all play in this both for the customers, etc., that have made 

the U.S. a not favored location. 

We have the highest corporate tax rate in the OECD, and that 

clearly causes discrimination. And our corporate taxes are global. 

And so therefore no matter where the U.S. company is located, it 

has to pay the U.S. tax rate, even if these companies are competing 

against other companies with much lower tax rates in those foreign 

locations. 

DeShaun on LAP51NQ082 with DISTILLER

23 

And that to me explains a large reason of why we did so well 

during the 1980s and are doing less well now. 

Senator Klobuchar. How about the currency manipulation? Do 

you believe that’s a part of it? 

Dr. Laffer. I do. I testified for TPP, and I think currency manipulation is a serious issue with TPP. I think all of these things combined make a lot of difference. But the tax rates really have a hammering effect on U.S. companies in aggregate, and especially on 

manufacturing companies and, if I may double down, especially on 

steel companies from my home town of Youngstown, Ohio, steel, 

which is pretty important. 

Senator Klobuchar. Right. Thank you, very much. 

Dr. Laffer. Thank you. 

Chairman Coats. Senator Cotton. 

Senator Cotton. Thank you. 

Dr. Laffer, Mr. Hodge, one of the two of you said that obviously 

taxes are necessary and always have been to fund the legitimate 

and needful functions of government. Some are better, and some 

are worse. 

Would you care to characterize which ones are the worst in terms 

of their impact on economic growth? What the alternatives might 

be, and whether they are politically feasible? 

Mr. Hodge. Sure. In fact, economists at the OECD have looked 

at this in a very interesting study a few years ago. They found that 

corporate income taxes and taxes on capital are the most harmful 

taxes for economic growth, followed by taxes on income, followed by 

taxes on consumption, and finally taxes on property. And why is 

that? 

It all has to do with the mobility of the factor in the economy. 

Capital is the most mobile factor in the economy, and thus the 

most sensitive to high tax rates. And you see that with our corporate tax system. 

Income taxes are slightly less sensitive because people are less 

mobile. I cannot follow my employer to Ireland to take advantage 

of that 121⁄2 percent corporate tax rate. And obviously property tax, 

you can’t move property. So it is less sensitive to tax policy. 

So keeping that in mind should guide our tax reform measures 

as we go about trying to reform the tax system. And that is why 

things like full expensing are such a powerful engine for growth, 

is because it is reducing the cost of capital. 

Senator Cotton. Dr. Laffer. 

Dr. Laffer. I totally agree. Corporate and personal income taxes 

are key. I would rank the order the other way around. The literature has a great deal to say on this, and progressive income 

taxes are killers. The more successful you are, the higher the rate 

you pay, which really teaches you how to change where you live, 

where you report income, how you report income. 

If you are facing a 50 percent marginal income tax rate, you are 

going to spend 50 percent of your time trying to reduce your tax 

bill rather than trying to earn more income. It is just simple math. 

And the literature is unambiguous that the income taxes, both 

corporate and personal, are the key drivers. And progressive taxes 

are much worse than flat taxes. 

DeShaun on LAP51NQ082 with DISTILLER

24 

Senator Cotton. It sounds like you are saying to Senator Klobuchar, as revealed in some of your research, about people moving 

from higher tax states to lower tax states? 

Dr. Laffer. Well I just finished my book, which is ‘‘The Wealth 

of States,’’ which is about 430 pages of combining all the literature 

and all the data on states. As you all know, I do Rich States/Poor 

States every single year, have done it forever. We look at all these 

metrics, and we rank the states. And it is unambiguous how important taxes are for a movement of people, movement of jobs, and 

prosperity. If you don’t believe me, look at West Virginia, unfortunately. 

Senator Cotton. Dr. Bernstein, so the hierarchy we just heard 

from Mr. Hodge and Dr. Laffer, capital, income, consumption, property. Would you care to reflect on that? 

Dr. Bernstein. Yeah. I am much less moved by all of the discussion on how responsive capital income is to these changes. I think 

the evidentiary record is quite different than has been represented. 

So if you look at the relationship between real investment and 

changes in capital tax rates, there is just nothing there. So I think 

that they are very much exaggerating that. 

If I may say, where I think I would answer your question, where 

I would make a change, is on the estate, inheritance side of the 

code. And actually Art might agree with me on this. The extent to 

which we favor inherited income, step-up basis, I’m sure you’re familiar with, step-up basis is a huge waste of money. And it is also 

an economic distortion because it creates a lock-in effect. So that 

is where I would start. 

Senator Cotton. Mr. Hodge, you look like you wanted to respond. 

Mr. Hodge. Well, I kind of find it interesting when people say 

that they are unmoved by the effect that taxes on capital can have. 

Then people complain about the profit-shifting behavior of U.S. 

companies out of the United States to lower tax jurisdictions. 

The reason we have profit shifting, and we have seen economists 

such as Kim Clausing demonstrate that about a third of our corporate tax base is being moved out of the U.S. because of our high 

corporate tax rate. 

So the key to moving that tax base back into the U.S. is to cut 

our corporate tax rate. 

Senator Cotton. Dr. Bernstein. 

Dr. Bernstein. The extent of tax evasion and tax avoidance is 

remarkably insensitive to changes in the tax rate. Now it may be 

the case, where Scott and I might agree, it may be the case that 

if you took our corporate tax rate down to 10 or 12 percent you 

would see the kind of differences he’s talking about. But the damage that that would do to our fiscal accounts and the knock-on 

damage it would do to the rest of the economy would make that 

prohibitive. 

So again, I really think you have to be driven by the empirical 

record here, and you simply don’t see the kind of elasticity responses that not only are these guys talking about, but that they 

are erroneously building into their models. 

DeShaun on LAP51NQ082 with DISTILLER

25 

Senator Cotton. Do you have anything to say about the distribution of Dr. Laffer’s, Mr. Hodge’s hierarchy of capital income—— 

Dr. Bernstein. I think that they’re—I agree with them, and I 

think that there is wide bipartisan agreement, and again this 

agrees a little bit with what Scott just said, that the corporate side 

of the code is a mess. And, that our statutory rate is 

uncompetitively high. 

I think the difference between us is that I recognize that very 

few corporations in the multinational space pay anything like that. 

Senator Cotton. Dr. Laffer. 

Dr. Laffer. Yeah, but it’s not just what they pay. It’s what the 

expenses are that they go through to avoid paying taxes. And what 

I’ve done here on this is shown that there are huge expenses that 

companies pay, but that don’t get collected by the government in 

tax revenues. 

What we want to do, and what my paper that I read into the 

record does, is try to eliminate or reduce the difference between the 

cost to the company and what the actual government collects. 

And what happens is, people will spend fortunes getting around 

the taxes so that the government doesn’t get the revenue and there 

are damages done to the companies as well. And that just makes 

no sense whatsoever. 

If you are going to pay taxes, at least let the government collect 

them. But that is not what these tax codes—and if I can say, 

Jared, I mean very seriously the complexity of these tax codes, and 

all of this stuff you’re talking about, is just disastrous. And you 

used Kansas as an example, which is really unfair because I’ve 

done the response to Kansas in the Investors Business Daily. You 

know those numbers. 

Look at North Carolina. Look at Indiana. Look at these states 

that have done major tax reform. Look at Texas vs. California. 

Look at Florida vs. New York. Look at Tennessee vs. Kentucky. 

Look at any of these states. For goodness sakes, the evidence 

couldn’t be more obvious. 

It takes—it takes—I mean sophistry of the worst kind to be able 

to convolute these results into something that goes in the opposite 

direction. 

Dr. Bernstein. Well let me disagree—— 

Dr. Laffer. Let me finish, first. 

Dr. Bernstein. Sorry. 

Dr. Laffer. You cannot tax an economy into prosperity. You just 

plain can’t. Everyone knows that from first grade on. And the Tax 

Foundation has done wonderful work on this. I would just disagree 

with them that they’re not quite as strong a result as I think they 

really are, but, hey, I love ya. But it’s just silly to argue that taxes 

don’t matter. They matter, and matter a lot, and everyone knows 

that. Everyone who has been in business knows that. 

Dr. Bernstein. Thank you. If I may—— 

Senator Cotton. If we have the time—— 

The Chairman . We have the luxury of more time here. 

Senator Cotton. Well I’m having fun, and I have the floor until 

someone else comes in. 

DeShaun on LAP51NQ082 with DISTILLER

26 

Chairman Coats. Senator Cotton and I are having a great time, 

and—— 

Senator Cotton. And Dr. Bernstein—— 

Chairman Coats. He is still on the floor, and he is going to give 

you some time. 

Dr. Bernstein. Well I appreciate the opportunity because I 

think there are actually some common views here that I would like 

to amplify, and I suspect you share them, Senator. 

Which is that the problems with the corporate side of the code 

that were just described by Art strike me as spot on. And the expenses that businesses have to go through to bend themselves into 

a pretzel, I mean last I looked GE, which I don’t think makes tax 

law, has something like a thousand tax lawyers on staff. And just 

like Mr. Grossbauer was saying, that’s inefficient. 

That said, it is not that the politicians and the people on this 

panel disagree with broadening the base and lowering the corporate rate. It is all of the industries and their lobbyists who would 

get dinged, because let’s face it, if you are going to do tax revenue 

neutral, corporate tax reform, and I think that’s the lowest bar, I 

think we need more revenue. You are going to have winners and 

losers. 

And the losers do not like it. We can sit around all day and 

agree. 

Secondly, look, Art and I have a fundamental factual disagreement on the state-based evidence. We are not going to hash it out 

here. But I would be happy to submit evidence to the Committee 

in very much support of states that have in fact raised their taxes 

who are doing a whole lot better than states that have lowered 

them, and vice versa. It goes both ways. 

Chairman Coats. Well, the Committee, I can tell you, would 

welcome both of you submitting that. That is what we’re here—we 

are not the Joint Tax Committee, but we are the Joint Economic 

Committee, and we do have a tax component. So we would appreciate all the information that either one of you can give us. 

Senator Cotton, take whatever time—— 

Senator Cotton. Yes, I will keep rolling if no one else is. 

Dr. Bernstein, what about the fairness of that hierarchy? So here 

at capital income, rich people can have more of that than poor people. Consumption is a higher percentage of poor people’s income 

than it is for rich people. And property has a smaller variance, either a small, single family home to a billionaire’s home who can 

only have a certain number of square feet, and bathrooms, and car 

garages, and all the rest. 

But income can be infinite. Do you have concerns that the hierarchy that Dr. Laffer and Mr. Hodge have laid out is not fair? 

Dr. Bernstein. Well, it’s a good question because I think they 

were largely answering questions vis-a`-vis growth in their hierarchy. And I think that when we talk about fairness or distribution, I do think you probably have to flip that hierarchy considerably. 

The fact that capital income is largely concentrated among the 

wealthy, the ownership therein, and that it is taxed at a privileged 

rate, builds in a level of unfairness, or regressivity into a tax code. 

DeShaun on LAP51NQ082 with DISTILLER

27 

Now broadly our tax code is progressive, but that is on the income 

side. 

If you actually look at the benefits of favorable treatment of capital-based income, they flow exclusively to the top 20 percent. And 

within the top 20 percent, the top 10, 5, 1 percent. So that is a regressive problem. 

Senator Cotton. And Dr. Laffer or Mr. Hodge, would you care 

to respond? 

Mr. Hodge. Do you want me to go first? 

Dr. Laffer. Go ahead. 

Mr. Hodge. One of the challenges of tax reform is that what is 

politically popular—and that is tax cuts for individuals—is not 

really the biggest driver of economic growth. And what is not politically popular—and that is, cutting capital taxes—is the biggest 

driver. 

So you have this sort of I think conflict there between politics 

and good economics. And somehow trying to balance that is one of 

the challenges of fundamental tax reform. 

Dr. Laffer. Let me, if I can, just say on the income distribution 

and what’s going on, high tax rates are not paid by the top one percent of income earners. End of discussion. If you look at the effective tax rate of the top one percent of income earners, it is flat all 

the way across history with statutory rates going up and down and 

all over the place. The top one percent of income earners find exemptions, loopholes, that’s why I used the Warren Buffett example. 

It is a perfect example of how you get around your taxes, and 

how he personally has gotten around his taxes. All legal. When you 

look at the migration of income from high income tax states to low 

income tax states, the wealthy move from California to Texas. They 

do. All of that you can see ‘‘How Money Walks,’’ or in my book ‘‘The 

Wealth of States.’’ We have documented IRS data from the beginning of time. 

If you look at estate taxes; those estate taxes filed in states that 

don’t have an estate tax and in those that do have an estate tax, 

there’s two times as many filed in a state that does not have an 

estate tax as there are in states that have estate taxes. And the 

size of the estates is nearly twice as large. 

People really like their own money and will go to great lengths 

to go around taxation. It is pure and simple common sense. And 

that is what they do. 

And, Jared, all your talk notwithstanding, if you look at North 

Carolina, we cut the highest tax rate by two percentage points. We 

cut the welfare generosity variables. We cut welfare eligibility. And 

now look at North Carolina. Huge surpluses are going on there, 

and prosperous, and all the boycotts have been gone there a long 

time. And that is Governor McCrory, as you know. 

If you look at the other states. Indiana. Your state. Look at 

what’s happened with Mike Pence, and before Mike, 

whatchamacallit—— 

Chairman Coats. Mitch Daniels. 

Dr. Laffer. Mitch Daniels. I mean, it’s great. Look what happened with right-to-work there. If you look at the states, right-towork is the way it’s going. Look at right-to-work states’ growth vs. 

nonright-to-work states’ growth. You can see it clearly. You can see 

DeShaun on LAP51NQ082 with DISTILLER

28 

it with income taxes. Jared, I just don’t know where you’re getting 

your evidence because the academic literature is replete with the 

examples I am describing. I could send you hundreds and hundreds 

of articles that show this. Now they show it in different ways, different magnitudes, but no one thinks that raising tax rates increases growth. 

Chairman Coats. I feel like the moderator at a debate, a Presidential debate here—— 

Dr. Laffer. He’s wrong on that. 

Chairman Coats. You have raised Dr. Bernstein’s name again, 

and he has 30 seconds to respond. 

Dr. Bernstein. Well, thank you. Thank you. 

Mr. Hodge. Could somebody pick on me, please? 

Dr. Bernstein. I’m sorry? 

Mr. Hodge. Could somebody pick on me, please? 

[Laughter.] 

Dr. Bernstein. I think I can arrange that, Scott. Art doesn’t 

want to talk about Kansas. Art was instrumental in nudging Kansas to embrace the kind of supply-side tax cuts he has been arguing are absolutely, unequivocally associated with higher growth. He 

predicted, quote, ‘‘an immediate and lasting boost to the Kansas 

economy.’’ 

Not only has the budget there been seriously underfunded, the 

state’s education system is in trouble there. It is widely recognized 

that the tax cuts were the reason for that. And as I’ve mentioned, 

job and GDP growth have really done poorly relative to neighboring 

places, including places that actually either increased or certainly 

did not lower their tax. 

The Kansas Legislative Research Department’s projection suggested the economy is going to remain weaker relative to the overall U.S. economy for the foreseeable future. This is an experiment. 

In fact, Governor Brownback called it an experiment. And it is 

a failed experiment. And you can bang the table with your shoe all 

day, but the data tell you what they tell you. 

Senator Cotton. Dr. Bernstein, rather than talking about Kansas, let’s talk about Arkansas for a minute, since we pronounced 

the last six words of that name correctly, you brought up the 

stepped up basis for the estate tax. Dr. Laffer just brought it up 

as a critic. I want to talk about the impact it has, particularly in 

rural areas. I think a lot of people, when they think about the estate tax, have the image of, you know, wealthy investors who have 

highly liquid assets like marketable securities that when they pass 

away could be easily sold to pay off the tax. It’s not always the 

case. 

In rural areas, the classic example in Arkansas would be timber 

forestry products. You own a lot of land. You have a lot of trees. 

It takes 40 years to make a tree. Very asset high. Very cash poor. 

Regardless of the threshold or the exemptions, you still often see 

families having to break up family businesses to pay the tax. 

What is the right solution to that if it is not simply repealing the 

estate tax, which as you might guess would be my proposal. 

Dr. Bernstein. Well, the exemption for the estate tax for couples 

is $11 million. And the estate tax hits 0.2 percent of estates—not 

DeShaun on LAP51NQ082 with DISTILLER

29 

2 percent, 0.2—so 2 out of 1,000. And for those who get hit by it, 

the average tax rate is 17 percent. 

So I would consider that to be, if anything, an extremely fair and 

even a regressive treatment. So I would probably push the other 

way, as suggested in the President’s budget, to lower that threshold. He suggests a threshold of $7 million for couples. Instead of 

hitting 0.2 percent of estates, that would hit 0.3. And I think that 

would be, that would be a smart thing to do in the sense of revenue, meeting some of our revenue needs. 

Senator Cotton. Dr. Laffer. 

Dr. Laffer. Yeah, I think he missed your question. I think you 

were talking about state taxes and what happens with them. 

Senator Cotton. No, I was talking primarily about federal—— 

Dr. Laffer. Oh, you were—— 

Senator Cotton [continuing]. The same economic—— 

Dr. Laffer [continuing]. The movement among states with and 

without estate taxes is just unambiguous. Rich people move to 

lower estate tax states, and they take their money and their jobs 

with them. And they move a long time ahead of time because they 

are not quite sure when they are going to die, and they do it in 

massive—the best one of all was the very famous Senator, a guy 

named Howard Metzenbaum from my home state of Ohio, and 

Howard Metzenbaum, weeks before he died, moved to Florida 

where there is no estate tax. And he wasn’t wrong to move to Florida. He just was wrong in espousing an estate tax for everyone else 

except himself. 

And we see it all the time. Rich people move from California. 

And if they don’t move, they shelter their income. That’s what they 

do. And all these data are just clear as bells. And, you know, when 

you look at the U.S., if you take tax revenues from the top one percent of incomers, we have the data back to 1913. We’ve got it all, 

by account. If you look at it, when we’ve cut statutory rates, revenues from the top one percent of income earners rises as a share 

of GDP, which also rises very rapidly. When we’ve raised rates, tax 

revenues from the top one percent have declined as a share of 

GDP. 

In 1978, tax revenues from the top one percent of income were 

11⁄2 percent of GDP. In 2007, tax revenues from the top 1 percent 

of income earners were 3.1 percent of GDP, with all those tax rate 

reductions. If you look at that period, it is unambiguous. Rich people respond to tax rates, and they pay you more money at lower 

rates within reason. And that is why we want a low-rate, broadbased tax so when we collect those monies from the rich people, 

and not just have them go into shelters and not pay any taxes like 

Warren Buffett. 

Chairman Coats. Senator Cotton—— 

Senator Cotton. I am exhausted. 

Chairman Coats [continuing]. Good—— 

Senator Cotton. I am out of questions. Thank you all very 

much. 

Chairman Coats. You set the record for time allotted to members of this Committee. Just two points in closing. 

This has been fascinating. I mean, we could go on for hours here. 

Dr. Laffer. Jared would run out—no, just kidding. 

DeShaun on LAP51NQ082 with DISTILLER

30 

[Laughter.] 

Chairman Coats. No, we don’t want to be too hard on him. But 

our Finance Committee on which I sit, we brought back Bob Packwood and Bill Bradley to tell us how did you guys get it done in 

1986? Well, it was an exhausting series of opportunities, and doors 

opened, and doors closed, and work-arounds, and so forth. 

There is strong bipartisan support for, and need for comprehensive tax reform, but we just cannot seem to get the thing moving, 

for whatever number of reasons. But I think all of you have laid 

out some real reasons why we need to keep pushing on this, and 

why it is important for the country. 

By the way, Dr. Bernstein, I was handed a note here from my 

tax staff which said that during the last two years Kansas has exploded in growth. Labor force participation is nearly 5.3 points 

higher than national average. So maybe it just took longer to kick 

in. 

Dr. Bernstein. The slide in my testimony on the job growth, we 

made that yesterday with the most up-to-date data there is. 

Chairman Coats. Alright. Well—— 

Dr. Bernstein. I challenge that. 

Chairman Coats. I’m not trying to promote Art’s book on the 

states. Some of my information comes from some people we know 

in Kansas that basically have said, look, as long as the Royals are 

competing for the World Series, and the Jay Hawks are competing 

for the Final Four, life is still good in Kansas. So I don’t want to 

denigrate Kansas too much. 

But nevertheless, this has been a fascinating time here with the 

Committee. I love the back and forth. It is so much more dynamic—so is dynamic scoring—so much more dynamic than it is 

just simply the question and the time to move on, etc., etc., etc. 

Mr. Grossbauer, you were part of a very, very interesting hearing 

here. 

Mr. Grossbauer. It was. It was quite fascinating. 

Chairman Coats. I hope you enjoyed it. 

Mr. Grossbauer. I did. 

Senator Cotton. If I can say, if you had simply rolled your eyes 

and sighed more at your panelists’ responses, you would have gotten called on more in that last long round. 

[Laughter.] 

Chairman Coats. That is true. Listen, this is terrific. I want to 

thank all four of you for being here. You added a real dynamic to 

a very, very important debate for the future of this country. And, 

frankly, it has been 30 years and we are falling further and further 

behind. If there is a consensus here on anything, it is that we need 

comprehensive tax reform, and we need it now. And our country 

will benefit from it. 

Thank you all very, very much. This hearing is adjourned. 

(Whereupon, at 4:01 p.m., Wednesday, April 20, 2016, the hearing was adjourned.) 

DeShaun on LAP51NQ082 with DISTILLER

(31) 

SUBMISSIONS FOR THE RECORD 

DeShaun on LAP51NQ082 with DISTILLER

32 

PREPARED STATEMENT OF HON. DANIEL COATS, CHAIRMAN, JOINT ECONOMIC

COMMITTEE

It’s fitting that this hearing falls between Tax Filing Day, which was moved to 

April 18 this year, and Tax Freedom Day on April 24. As Mr. Hodge may explain, 

Tax Freedom Day represents the day taxpayers can stop working to pay off what 

they owe the government and start earning for themselves and their families. 

Unfortunately, Tax Freedom Day does not include freedom from complexity. 

Throughout the year, taxpayers will have to gather and store receipts and records 

to deal with next year’s filing deadline. Some taxpayers will even make business or 

even personal life decisions based on some quirk in the tax code. 

I wanted a tangible example at this hearing of just how complex tax law is. That’s 

why these boxes are stacked in front of the dais. In 2014, a publication that includes 

the tax code, regulations, and court decisions that determine tax law totaled over 

74,000 pages. If my staff had printed this out, they would need the 15 boxes of 

paper represented here. 

I have good news and bad news to report with respect to 2015. The good news 

is that the latest version has fewer pages. 

The bad news is this was not due to a decrease in the number of tax laws. It was 

because the explosion of pages no longer fit in the binders, so the publisher shrank 

the font size. Now taxpayers really have to pay attention to the fine print because 

it’s all fine print. 

No wonder 90 percent of taxpayers pay a tax preparer or buy computer software 

to help them figure out their tax burden. 

Even before the new tax complications of the Affordable Care Act, the Internal 

Revenue Service estimated that taxpayers spent over 6 billion hours each year preparing and filing taxes. Estimates of the dollar cost to taxpayers range in the hundreds of billions. 

Complexity comes with many costs. Aside from frustration and anxiety, it causes 

taxpayers to spend time and energy that could be put to much more productive uses, 

including time with family. 

It costs the Treasury, since taxpayers make innocent mistakes and are never sure 

exactly what they owe. And it breeds a sense of distrust in the system when taxpayers suspect others are getting a better deal because they figured out how to 

game the tax code. 

But is there a real economic cost? Would America as a whole be dramatically better off with a much simpler, pro-growth tax code? 

I think I know the answer, but I look forward to hearing the views of our distinguished witnesses. 

Today we will hear from Dr. Art Laffer, known as the father of supply-side economics. We also have Scott Hodge of the Tax Foundation, which is famous for its 

tax research. We will also hear real-life stories from Joe Grossbauer, a small business owner who lives with tax complexity every day. Our final witness is Jared 

Bernstein of the Center on Budget and Policy Priorities. 

My thanks to all of you for tackling this complex issue, which I hope will become 

much simpler. 

PREPARED STATEMENT OF CAROLYN B. MALONEY, RANKING DEMOCRAT, JOINT

ECONOMIC COMMITTEE

Thank you so much Chairman Coats for calling this hearing, and to all of our 

panelists. 

We are here today to talk about simplifying the tax code. Most Americans think 

our tax system is too complex, and I believe we all agree. 

But simplifying the tax code will be a massive undertaking. It will be politically 

difficult. It will create winners and losers. 

That’s because simplifying the code requires eliminating some of the tax credits, 

deductions and exemptions that make it complicated. Those who benefit from these 

provisions will fight tooth and nail to protect them. 

That’s why we should be very wary of anyone who offers a quick and seemingly 

painless fix. 

Some things are worth protecting, like the home mortgage interest deduction that 

enables Americans to achieve the American Dream of owning a home. 

Others widely benefit society, like the charitable deduction that helps support museums, parks, and other important charities. 

And some credits incentivize behavior that broadly benefits the economy, like the 

Research and Development Tax Credit. 

DeShaun on LAP51NQ082 with DISTILLER

33 

Some credits are critical to giving working families a chance to succeed, like the 

Earned Income Tax Credit. 

However, many loopholes in our tax code are just giveaways to narrow special interests. These are often buried deep in the fine print, making the tax code more 

complicated and less fair. 

So yes, we should simplify our tax system. We should make it as easy as possible 

for individuals and small businesses to do their own taxes and pay them. We should 

enable companies to spend less money on tax accountants and more on building 

their businesses. 

And we should plug some of the thousands of loopholes that not only complicate 

the tax code, but allow some to take unfair advantage of it. 

But at the same time, we should make sure that our tax system raises enough 

revenue to provide Americans the services they expect from their government and 

that they need. 

And we should create one that makes the vast majority of Americans better off 

than they are today—or at least not worse. 

But I fear that many proposals that conservatives claim would simplify the tax 

code are not really about simplification. Rather, they are about radically restructuring who pays how much. 

One proposal in the House Republican Budget is to reduce the number of brackets 

in order to lessen complexity. 

Some would go further. A plan backed by hearing witness Arthur Laffer is to create one ‘‘Flat Tax.’’ 

This would reduce the total number of brackets to ONE. This means that a family 

that earns $50,000 would pay the same tax rate as a family earning $50 million. 

Many conservatives claim these simplification plans that translate into huge tax 

cuts for the wealthy won’t increase deficits and won’t affect the government services 

that many Americans believe are necessary. 

The theory is that ‘‘tax cuts pay for themselves’’—in other words, cutting taxes 

can translate into such massive economic growth that it leads to higher government 

revenues. 

This means that tax cuts SUPPOSEDLY can take place without offsetting spending cuts. Americans SUPPOSEDLY won’t lose any of the government services on 

which they depend. 

Social Security won’t be touched. Or Medicare. Or Education funding. Our national defense will remain strong. Our highways won’t be allowed to fall into disrepair. We won’t have to cut funding for dreaded diseases like the Zika Virus. 

But this math simply does not add up. Tax cuts don’t pay for themselves. Tax 

cuts don’t necessarily lead to strong economic growth. 

But they do lead to lost revenue and higher deficits. 

This is the lesson of the past 35 years. 

Despite tax increases under President Bill Clinton we had a booming economy, 

and created more than 22 million private-sector jobs, and four straight years of 

budget surpluses. 

And then we had two tax cuts under former President George Bush which contributed to massive budget deficits, with the tax cuts by themselves adding, according 

to some economists, $1.5 TRILLION to deficits over ten years. 

So in summary, when we talk about making the tax code less complex, let’s not 

be fooled by claims that we simply need to ‘‘flatten’’ the code. 

This will make it more regressive, shifting more of the tax burden onto the middle 

class and the poor. 

And let’s not continue to pretend that ‘‘tax cuts pay for themselves.’’ History has 

shown that they do not, in recent history. 

And so let’s get down to the business of simplifying the tax code and making it 

more fair. 

I truly look forward to this very impressive panel and hearing your testimony 

today. 

Thank you. 

DeShaun on LAP51NQ082 with DISTILLER

34 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 1 here 20071.001
35 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 2 here 20071.002
36 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 3 here 20071.003
37 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 4 here 20071.004
38 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 5 here 20071.005
39 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 6 here 20071.006
40 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 7 here 20071.007
41 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 8 here 20071.008
42 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 9 here 20071.009
43 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 10 here 20071.010
44 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 11 here 20071.011
45 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 12 here 20071.012
46 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 13 here 20071.013
47 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 14 here 20071.014
48 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 15 here 20071.015
49 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 16 here 20071.016
50 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 17 here 20071.017
51 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 18 here 20071.018
52 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 19 here 20071.019
53 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 20 here 20071.020
54 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 21 here 20071.021
55 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 22 here 20071.022
56 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 23 here 20071.023
57 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 24 here 20071.024
58 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 25 here 20071.025
59 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 26 here 20071.026
60 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 27 here 20071.027
61 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 28 here 20071.028
62 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 29 here 20071.029
63 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 30 here 20071.030
64 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 31 here 20071.031
65 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 32 here 20071.032
66 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 33 here 20071.033
67 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 34 here 20071.034
68 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 35 here 20071.035
69 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 36 here 20071.036
70 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 37 here 20071.037
71 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 38 here 20071.038
72 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 39 here 20071.039
73 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 40 here 20071.040
74 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 41 here 20071.041
75 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 42 here 20071.042
76 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 43 here 20071.043
77 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 45 here 20071.045
78 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 44 here 20071.044
79 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 46 here 20071.046
80 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 47 here 20071.047
81 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 48 here 20071.048
82 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 49 here 20071.049
83 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 50 here 20071.050
84 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 51 here 20071.051
85 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 52 here 20071.052
86 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 53 here 20071.053
87 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 54 here 20071.054
88 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 55 here 20071.055
89 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 56 here 20071.056
90 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 57 here 20071.057
91 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 58 here 20071.058
92 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 59 here 20071.059
93 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 60 here 20071.060
94 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 61 here 20071.061
95 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 62 here 20071.062
96 

1 A ‘‘rolling 10-year basis,’’ means that data are measured in 10-year increments at a frequency of every year. For example, the first data point plotted in Figure 2 would be 10-year 

growth between 1960 and 1970; the second data point would be ten-year growth between 1961 

and 1971, etc. 

QUESTIONS FOR THE RECORD FOR DR. ARTHUR LAFFER FROM SENATOR DAN COATS, 

CHAIRMAN

1. In response to a question, you compared the difference in growth between states 

with an income tax and those without one. How many states are you referencing and 

could you elaborate in more detail what performance measures you used and how 

those states compare to their higher-taxed counterparts? 

Mr. Chairman, thank you for this question. 

As of 2016—and ever since the early 1990s when Connecticut was the last state 

without an income tax to implement one—there have been nine states without 

earned income taxes. These states are Alaska, Florida, Nevada, New Hampshire, 

South Dakota, Tennessee, Texas, Washington and Wyoming. 

The distinction of ‘‘earned’’ income tax is necessary because both Tennessee and 

New Hampshire have taxes on so-called ‘‘unearned’’ income such as interest and dividend income, although Tennessee is just starting the process of phasing out its ‘‘unearned’’ income tax. 

A simple way to examine the effects of earned income taxes on economic growth 

in states is to compare those nine zero-earned-income-tax states with the nine states 

with the highest earned income tax rates. Figure 1 below shows this exact comparison over the most recent 10-year window for which data are available. 

The metrics examined in Figure 1 are all of the typical measures of a state’s economic growth—decadal growth in population, employment, personal income, gross 

state product and state and local tax revenue. And the results in Figure 1 are clear 

as bells—the nine states without earned income taxes are vastly outperforming the 

nine states with the highest earned income tax rates. 

And this trend is not a new development that only applies to the most recent ten 

years. In fact, I’ve extended this analysis back in time using historical state income 

tax rates, examining real personal income growth rates in the states without earned 

income taxes vs. an equivalent number of the highest earned income tax rates (e.g., 

if, at a point in history, there were 12 states without earned income taxes, I compared growth in those 12 states to growth in the 12 states with the highest earned 

income tax rates). Again, the results are astounding. Figure 2 below shows that, on 

a rolling 10-year basis,1 there hasn’t been a single 10-year period over the past 55 

years in which the highest earned income tax rate states outperformed the states 

without earned income taxes. 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 63 here 20071.063
97 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 64 here 20071.064
98 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 65 here 20071.065
99 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 66 here 20071.066
100 

Æ 

DeShaun on LAP51NQ082 with DISTILLER


Insert offset folio 67 here 20071.067