I know I want to describe the bill briefly. It's a big bill and it's an important bill and the tax reformers the purists. Remember those other folks that said you could get 30 billion dollars worth of new Revenue. If you're reformed our tax structure have tended to deprecate the bell and say it really doesn't do much on the other hand. The the chief targets of the reformers The Whipping Boy Who are I guess roughly described as big business and more specifically described as the multinationals feel like he lies. They might be but despite the those descriptions. I think it would be wise not to underestimate of the scope of the tax reform measure that is now pending and in my judgment will be made into law of some kind or another.It's a Monumental effort and it is going to explain to him pose great changes in our tax code a first of all I want to talk a little bit about the background on her. Wish this was produced as most of you know, we began the year with a brand new Ways and Means Committee and a brand new chairman. And this is very important to understanding how this bill got put together and Wyatt is why it is in the days of yore Sherman Mills ran his committee with a very tight Fist of the committee work by consensus and produce the tax legislation every once in awhile at it passed on the floor usually without him and then because it was able to operate on her what we call a closed rule where no amendments are authorized this year when the Winds of Reform my Bluetooth through the house causing One Rotten odor to be replaced by anotherWe changed our committee structure and when we did that we changed our chairman. Now almond of Oregon became the chairman of the committee and they committee was enlarged. And that man said more than half of the members of the committee were new had no experience on the committee or in packs were other than whatever carryover they may have had some private life and we had a new chairman and we immediately went from a type closely structured a kind of committee operation to let some of us call an unrestricted start of rampasture environment in which everyone gambles all over the lot. Panda and in that kind of environment what she's right now mccratic and very desirable some very strange things happen. And so if you find things in this bill that strike you as very odd and thank you or inconsistent with what the committee may have done in the past. There is a very good reason for that reason is the way the committee operate it is sad the chairman the Almond began the year with the with the hot breath of the caucus at his back and the cold win the Wilbur Mills at in front of him except by those Gayle's why we ran aground on the energy bill and then came a Cropper we did pass the tax reduction act. We've had a good deal of trouble with the debt ceiling avails that our committee has passed and there we've now I think successfully gotten past the other heard of this tax reform act. Although the house is not a By and large, I think caramel almond has performed admirably. I think he is a noble public servant who has an extremely difficult environment and Judgment Day. He's going to look better and better. I think it's his task has been impossible at some times this year and I've been very pleased to serve under him and think that he runs a pretty good show. The procedures of the committee have always been informal. It's only been a year or two since we've let anybody in to see what we do and because it had formerly been a small committee we have been used to making amendments in conceptual form and then getting the statutory language at some later date and the eventually pasting the bill together. We maintain that same committee tradition this year in the face of increasing the committee to half again as many people and in the face of opening our doors to the public and the press and everybody the one to come around that in addition to the inexperience of some of the newer members led to a kind of a crazy pattern as we began to put our bill together. What would happen is that one day we would vote for a concept and I suppose the Dissection which deals with the deductibility of convention expenses both in this country and abroad is the best example of that kind of work one day we would pass the one solution the next day. We would reconsider and pass another then when we got the language issue before us a week later. We would try something else then we wouldn't have passed the substitute Amendment sometime later and it is the process of what I call doing and undoing and redoing it over doing and it works very well in a tight little experience group. It works miserably in the condition that we were in it had one advantage. However allowed each of the members of the committee to be firmly positioned on all sides of any issue that look difficult to us. We are thankful for those small favors. Besides those procedural difficulties We Came Upon some political difficulties about halfway through our deliberations the minority members of the committee received a fairly early on in the markup sessions that the tax reform bill at in the game. It was being considered primarily. As a vehicle for carrying a tax reduction Bill through Congress and that perception that realization made our group less enthusiastic collaborators and cost a little bit of a falling apart 3 in the last week's that the bill were before I was before us. The primary problem that it caused was that we decided that the if there was to be a tax reduction of there would also have to be spending production much after the fashion of the president's statement of a month or so ago, even though they committee at that time was considering a much more modest than the president has suggested. We said that's fine where you can pick any cut you like but accompany it by at least a proportional spending cut and so the committee spent a good deal of time and in what was a kind of a shuffle and and the debate on procedural and jurisdictional grounds as a committee majority say we don't spend and therefore it is not germane nor jurisdiction Ali under our supervision that that we deal with the expanding side of a And that's all we engaged in much parliamentary at El dancing in appeals of the ruling of the chair and out of order. So far those that were taken to the rules committee committee and they have involved themselves and much of the traffic is going on in Congress right now. If you will permit me for a minute if I think that I would lay upon you really my only sermon for the day in connection with this matter and that is the spending limitation. I believe it is wholly appropriate so that the Congress either when it decides that it will extend its data limit or when it decides what its tax policy will be a particularly appropriate that the Congress attach some kind of spending limitation for the future of because it seems to me that the two subjects are inextricably in her wallet. And if the Congress is going to go back to the American people and say we couldn't do that because it isn't in accordance with our procedures or that our jurisdiction won't permit us to consider this problem. Even if the American people thinks it is important, if if that's what he's asked for the American people in my judgment, it won't work. The people of this country have watched the Congress put the Redskins on television in 24 hours. They have watched us raise our pay without raising our voices overnight. They have watched us fight an undeclared war without any interference of jurisdiction or procedure. And for the Congress to say we cannot handle a spending limitation. Because of procedural are jurisdictional problem is I think to take advantage of an unfair Dodge or what I would call it a sort of a Monumental cop out about the end of sermon committee. Finally put his bill in order passed it by an overwhelming vote of 2017. Send it before the rules committee it where it was kicked around a bit because of a couple of problems one of them to patch a spending limit of the second problem was an attempt on the part of some of the Democrats to split out the tax reform elements and move that as one bill and take the tax reduction elements and move them as another bill Rose committee finally decided against that so it's moving the whole soggy bag of grapes in one lump. Sometime after the Thanksgiving recess is complete it again. I say I think the bill is going to pass in some form or other. I know not what will survive except that. I expect the numbers that total number. Is it of its effect will not be changed it greatly and that takes a lot of prognostication or a lot of make that prediction. It means that the bill will have to pass the house with reductions and tax reform joint. It means further will split out the tax reduction because it wants to pass that sooner and will send that back a loan to the house will pass that it will go to the president. He'll be though it and then we can fight over that one separate. The tax reform portion will stay in the Senate and they will work on it for a couple of months probably pass it around the end of the first quarter of the bicentennial year. I was kind of Give me today's NASCAR thing. I expected perhaps by may maybe sooner we would be able to pass this tax reform bill. It's a significant from this standpoint that not in my political lifetime has the Congress passed a bill in an even-numbered year and this is such a pass a large tax bill in an election year is usually considered some kind of political falak. So we are either being foolish are courageous if we go throwing it. How about in my judgment? I think that we will go through it. Now in my judgment as we begin to look at the bill critically the big disappointment about this tax reform Bill other than the lack of a spending silly was that the committee Peyton sufficient attention to the problem of capital formation. And I think as we look at the a society with the federal government during a huge multibillion-dollar deficits as a result reading me the private Capital markets most of the goodies. We do have a terrible problem of capital formation in a very difficult the complex technological age. I had a time of energy insufficiency one enormous amounts of capital are necessary to fuel our economy. Now the committee did extend the investment tax credit extended the corporate cir tax exemption, but that's about as far as it came to Capital formation. It is true that we at least in the committee decision around most of the day withholding taxes on foreign portfolio investors Securities and interest-bearing had have instruments, but I believe that the house will strep that feature from the bill and so will leave only the investment tax credit and the harbor surcharge exemption as the only vestiges of some kind of capital formation. Now they come in at the urging of a number of its members had set aside the capital formation problem into a separate ad hoc study committee. They did the same thing with some problems are foreign income that seem too difficult for the committee to Grapple with at this time. And so those two committees are supposed to be reporting sometime in the second quarter of 1976. My guess is that the reports will be too difficult to handle a particular earlier with the onset of the election season at that time. The chairman has promised tax reform phase to phase 3 phase 4 or more. I don't see any way that's going to happen either. We have too many interruptions to pass bills raising the debt ceiling and make it very difficult for us. Like to talk a little bit about the size of the bill just in general terms. Are you have heard? Of course, that's a well labelled only has a financial impact bring in a quarter of a billion dollars into the treasury and its first year of operation. I do however think that that's not a good way at the judge the bill I think a better way to do it would be to say that the in its first year it raises because of tax reform elements because of changes it will bring in 2.6 billion dollars of new money end of the treasury at the same time. It allows is somewhere around 1.8 billion to escape because of changes that have been made in the interests of tax Equity. The net is 800 million or 3/4 of a billion as you will or which is the net result as you go down the road a little bit into the 50-year you're talkin about new Rev. A 4.6 billion and the the amount that we will not collect because of tax Equity features is about 2.1 billion. Are you talkin about the some pretty big numbers in terms of distribution of income and in my judgment, that's the one of the very important features of the bill. If on top of that you add the tax reduction features, which I hope you won't have to do. I hope they get separated out you talking about another 15 and 1/2 billions of dollars. So you're talkin about a fair-sized document with a with a great deal of complication to it. Now in this shuffling of income who are the winners and who are the losers. It's very hard to settle out all we know is it whenever we pass a bill in Washington the chief Winters are the lawyers so we'll count them as number one game. I suspect you guys will finish your fast II. Next well, the people who build and who inhabit the low income housing because we have restrained ourselves from taking from putting them into some of the more restrictive real estate probation divorce due to the changes in the handling of alimony payments retired. People will be some of the principal beneficiaries because of the retired the credit working parents are going to be great beneficiaries because we have expanded deductions for childcare by about the 350 millions of dollars people who move for business reasons will be the beneficiaries to the tune of about forty millions of dollars each year if we can hold that The elimination of the withholding tax on dividends and interest for for portfolio investors from overseas. I suppose we could say that the Arabs will be big Winners. My guess is we won't hold it disaster victims who have new kinds of tax treatment will also be winners at those who have Capital losses that they would like to write off against ordinary income will be allowed to do so and we got to count them as winners. Obviously a Ross Perot is a big hitter at this point, but looks to me like he's going to have the dinner pulled off the table in front of him. And so We can count him as a temporary beneficiary only. People who are part of pension programs, which are individually funded at a lesser amount than the individual would have been able to set aside had he had an individual retirement account will also be a beneficiary and then we have a few kind of odds and ends. The railroads are getting finally getting that depreciation write-off on on some of what I would call Daniel maintenance and that's not a bad deal for them worth about 20 million, I guess and finally all you home gardeners garden tool tax credit. No, no one is quite sure why that's in the bill except for the personal charm or Congressman Burke. It is sad that he could charm a cat off a Fish Wagon and he did. Now we all look at the losers and see who the guys are. That didn't make out. Well, it's bad high-income fellow that's been sheltered losses and so far he's got he or she is going to take a kick in the head by Boston the El Al section and in the minimum tax on individual section and they are going to be the principal of contributors is a pot from which all these blessings shall flow the real estate industry I think is going to suffer and even residential housing. I think he's going to find that there with far less in Santee of there is going to be less investment and we are going to have more difficulty in those Industries energy developers are going to find it is more difficult for them with the removal of the intangible right off or for developed. I think that it is going to be less attractive for drilling with in this country. And I think that perhaps in that area even though it is clearly a reasonable probation in terms of tax Equity. It is probably not a reasonable provision in terms of the of the situation that we find ourselves in now individual business people who use their homes as offices are going to take a bit of a Kick In The Head companies that sell abroad will find more than a half a billion dollars that they thought they might get under the disc Provisions not available to them. If this bill is passed and come in a little more on that in the future. Those companies are engaged in the sales of Agriculture or military products will get no disc benefits at all. Oh and other loser are the gamblers. Are we are we now have a withholding tax on gambling winnings of over? I forgot maybe it's a hundred. I think it's $1,000. So if you hold up at the racetrack and go to collect a thousand or more, you're going to find Uncle Sam there in front of you. That's a great step up for us. Normally, we don't get that money. The race tracks are of course obliged to take the names of the big Winners and forward them to Uncle Sam. But but we have what we call it the 10 percenters who will take your winning ticket to the window. Give them the bogus name give you your money back last 10% then the government never get this year. Now it's well to remember that the the large reform and if this can be a call to Reform Bill originates from George Schultz his administration and treasury where the administration first made its recommendations for a limitation of accounting losses. Those the recommendations were picked out by the current Secretary of the Treasury secretary Simon and put into the administration recommendations of this year. It is true that they were substantially modified to take care of the energy crisis which had the which had worsened and to take care of problems in residential housing the suggestions, which we picked up where those that they had been around for several years. The aim of this giant bill was first to provide tax equity. At least in in terms of the perception of the people of the United States that we had heard from all the McGovern estic reformers that all we had to do was make the tax system Ferrin and we never had no one would ever have to pay any more texts again then work for a living and if you hear this enough times you begin to think that somebody's walking off with Fort Knox. It's a one of the games was to build more Equity into the system important than equity and overriding goal. But Simplicity is helpful to our chief shot at Simplicity was to increase the standard deduction as you know, some 69% of taxpayers use the short form today the increase in the standard deduction will push an unknown percentage more on to the short form. The use of the tax credit for child care and some of the other changes in the individual deductions that we met. We think I will cause a good deal more and therefore in still a good deal more Simplicity of particularly at the level of where Simplicity is needed. Finally, although it was not a stipulated all of the committee the committee I think spent more time than it needed to on trying to see how much money it could put together. He isn't it frequently took its eye off of Simplicity and if it started to drag some more money in my judgment, that's the mistake now the committee added a fourth goal and one which I think is not within the committee's province and that is the stimulation of the economy and that was a justification for the tax reduction unaccompanied by a spending limitation. Not to that. We had a couple of other features technical amendments administrative improvements and and the Deadwood section in which we tried to make the administration a lot easier or more simple and so on it but these are noble effort. Anyway, okay now that's what the bill looks like our kind of a description of it. I told you a little bit about what I think's going to happen to it as it goes over to the Senate against split apart and and he has handled that as a separate bill probably in the first part of 1976 and the even if you don't consider it before my think you will have to consider it as a as an important change or series of changes in our tax law. I believe that some of the provisions are not time with particularly those that takes a lot of energy development particularly those to take some incentive out of out of residential housing both the Post-Standard and and low-income. Are there a lot of features in it that that I am not thrilled about an unbalanced. However, if we forget about the tax reduction portions of it, I really don't think it's a terribly worrisome piece of gear. And as matter fact, I will vote for it. If in fact the tax reductions, I remove or if the tax reductions are accompanied by some kind of a spending ceiling is filled the hazard as he has any major piece of legislation with mistakes or things of which I do not approve. On the other hand one must examine these things from a balanced standpoint and and in so doing I think that overall it's good. One of the reasons that I do so is that I think that are treatments of foreign income and of foreign sales was more merciful than I would have expected from this particular Congress. And in fact, I think that's where the committee in that field more than any other places where the committee stood up and was counted for what I think is right as we went into our discussions. The multinationals were the bad guys a desk was a tax fraud deferral of tax credits thought to be terrible boondoggles in the name of big business and big corporations and and swollen profits and awful profit tears and when the committee Particular features. I wish the did quite carefully it it looked at each facet of the are the sales of American companies abroad in those markets are with their competitors who are headquartered in in other countries, and we found that attacks features a reasonable. It seemed to us that they are absolutely necessary for the preservation of jobs in America based on those sales abroad and for the preservation of our balance of payments, which as you know, I have been subject to a little jolt up almost 30 billions of dollars in in oil cost this year and I've got an expense item for this country that continues to grow and I think the committee did a pretty good job of messing with them a little bit. Stop about a third of the disc benefits, but in my judgment those will not be at will not do irreparable harm to our ability to merchandize overseas and to protect American jobs at home. So I suppose that a tall is almost as much in recognition of this rather statesmanlike job that a committee from which I did not expect this kind of a job that I am in general support of this particular kind of a bill tax reform is terrifically difficult than I would not want anyone here to have the impression that we do it all in in all cases in the Statesman like manner the business of building a tax bill is a holy political exercise and tax reform is whatever at 19 or more members of the committee say it is on any particular Adventure those of you who work with the tax laws all the time. I understand as you look at their complexity at the contradictory nature of the laws, what are obvious inequities understand what we have produced each time we mess with it is some kind of a compromise or a result of a legislative political struggle in the arena of tax legislation. And and the blood comes out as is a political result the best one that we can achieve without completely rolling over anybody and without completely letting majority around them up and saw this is exactly that kind of product. I think on balance a good one on the other hand. There isn't a person among you who can't find many many terrible things about it. Now, I have successfully expanded half an hour more or less with now getting into the detail or revealing to you the depths of my ignorance on this lock. And so I'm going to take advantage of the elapsed time to thank you very much.