▶ 0:22:36Morning everybody. Uh this event was supposed to start at 10:00, but we're in Washington D.C. Clocks and calendars mean nothing to people anymore, apparently. Not in the world I grew up in, but I got the hammer and I and we're ready to go. Thank you all for being here. I'm not blaming you. I'm not blaming you. I And I don't want to let's And you know what? Let's start with that idea. We're not going to blame each other, and we're going to only stick to the topic today, and we're not going to let Trump derangement interfere with what we're trying to do.
▶ 0:23:05First of all, you folks that gave up a day of your life to come here. Thank you for doing that. Uh when I read your resumes, and I hope my colleagues did the same thing. We're talking about real people in real jobs in real life that understand how it works. Not in an imaginary situation where okay, this is the way it should work, everything else. And I'm always I'm always fascinated by people who tell me how things should work, and I ask them, "That's interesting.
▶ 0:23:34So, in your job or your company, you've been doing that, And they look at you with a puzzled look. I said, "That's what I thought." That's what I thought. So, to have you all here today is incredible. Uh I have some prepared remarks, but first of all, and I mean this sincerely, each one of you, when I read your resume, thank you. Thank you. You are truly what America is made of. It is hard-working American So, thank you for being here.
▶ 0:23:57Um we have an interesting We have an interesting staff here, and I uh I always think that, you know, we take credit for success and blame staff when there when there was a failure. Uh staff on both sides of the aisle, thank you for what you do in putting this together. Members, thank you for being here. Uh we know each other, and uh and we know the people we represent. witnesses, thank you for coming here. We appreciate it. We and we look forward to your testimony.
▶ 0:24:24On July 4th, 2025, President Trump, Congress, and Republican members of Ways and Means Committee not only prevented a massive tax increase, but delivered additional tax relief targeted directly to the hard-working Americans who keep this country running. Families across the country are seeing working family tax cuts where it matters most in their paychecks and refunds.
▶ 0:24:46The Working Families Tax Cuts built on the success of the Tax Cuts and Jobs Act by rewarding work, supporting families, and allowing Americans to keep more of what they earned. The latest tax filing season data prove that these policies are reaching tens of millions of families and workers as it was intended to.
▶ 0:25:06This tax season, more than 60 million Americans, 42% of all filers, claimed at least one of the new working family tax relief provisions. More than 7 million Americans claimed no tax on tips with an average deduction exceeding $7,000. Nearly 28 million Americans claimed no tax on overtime with an average deduction of roughly $3,100. Let me make a comment on that.
▶ 0:25:34I own business and I used to we were really overloaded with work in the shop and I asked the guy who handles our fixed operations, which means the parts department and the mechanic department, I said, "Thad, we're loaded in the back with used cars. We need to get them in and get them get them reconditioned, get them on the lot with that we can sell them." I said, "Tell the guys we'll go double time if they come in Saturday and I'll guys I'll have guys in the parts room to take care of them." And he said, "Are you serious?" I said, "Yeah." He said, "No, are you serious about thinking they're going to come in?" I said, "Why wouldn't they?" He goes,
▶ 0:26:05they get taxed on the overtime. It's like they they go home with nothing. They put the time in, but they don't get paid for it." That's real life and real time and things that happen to real More than 34 million seniors claimed the enhanced deduction tied to social security income averaging approximately More than 1 million Americans claimed the deduction for auto loan interest averaging over $1,800.
▶ 0:26:31That is real tax relief tied directly to how Americans earn a living. It means workers keep more of the tips they earned. It means employees keep more of their overtime pay. It means seniors get tax relief after spending decades paying into the It means helping families manage the cost of purchasing an American vehicle. And those benefits translate into real savings. No tax on tips delivers an average tax cut of roughly $1,300.
▶ 0:26:59No tax on overtime delivers an average tax cut of approximately $1,400. Married seniors can now receive a related to their social security The working families tax cuts also strengthen supports for parents and children. More than 34 million families have claimed the enhanced and permanent child tax credit. The credit The credit was permanently expanded to $2,200 and indexed for inflation ensuring it never loses value over time.
▶ 0:27:28The law also permanently doubled the standard deduction increasing it to $31,500 for married households. That means 90% of tax filers benefited from the simpler filing process. The working families tax cuts reduce tax liability across every income quintile. In fact, a family of four with two children earning $73,000 annually now has zero federal tax income liability.
▶ 0:27:55At the same time, the top 1% now pays nearly 40% of all federal income taxes. A typical family with two children is expected to see approximately $10,900 more in annual take-home pay. Annual real wages are are projected to rise by roughly $7,200 per worker from tipped workers and overtime earners to parents, retirees, young families just getting started. This law is reaching Americans across every stage of life.
▶ 0:28:24These are people who are not asking for special treatment. They are asking to keep more of what they earn. The working families tax cut reflects that expectation. It aligned the tax code with how Americans actually work and earn a living. It prevented a tax increase. It delivered additional relief. And it gave American families the opportunity to keep more of what they earn. Uh and at this time, uh I'm going to recognize my colleague uh to the uh to the left of me, uh Mr. Thompson. We have a very good personal relationship.
▶ 0:28:53Politically, we don't agree on everything, but personally, we agree on the people that we represent, that we represent them in the right way. Mr. Thompson. Thank you, uh Mr. Chairman. Mr. Chairman, I appreciate you having this hearing today, and thank you to all the witnesses for coming in. But, we can't ignore what's become one of the most disturbing abuses of taxpayer dollars and public trust that we've seen in recent memory. Many of our witnesses are here today to talk about their paychecks and their tax dollars.
▶ 0:29:24But, on Monday, we learned that the President of the United States, President Trump, intends to take our tax tax dollars, your tax dollars, and hand them to his political allies, including those who rioted in our capital on January 6th. 1.8 billion dollars of the American people's tax dollars. That's right.
▶ 0:29:48While working families are struggling to pay their bills, powerful people connected with this administration appear poised to profit from taxpayer-backed settlements. That's outrageous, and it's appalling. Americans are dealing with a real cost of living crisis. Families are paying more for groceries, more for rent, more for healthcare, more for childcare, and more for basic necessities.
▶ 0:30:17At the same time, Republicans cut 1 trillion dollars in healthcare funding that will force rural hospitals to close, put seniors out of nursing homes, and kick working families off their healthcare. They say we have to make those cuts because the country supposedly cannot afford healthcare for ordinary Americans.
▶ 0:30:40And at the same time, Republicans are telling the Americans telling American people we can't afford Medicaid, food assistance, and health care for working families, somehow they found 1.8 billion dollars for a political payout fund for Trump allies. This administration was elected on the promises to lower costs for the American people.
▶ 0:31:05Yet, I don't recall any campaign promises to hand millions of dollars to people who beat the hell out of cops on January 6th, but that's what they're getting. A huge slush fund for Trump and his DOJ to hand out money to insurrectionists, rioters, and white supremacists, including those who sought to overthrow our democracy.
▶ 0:31:29This is a DOJ that pardoned January 6th rioters, target targets the administration's political opponents, led by the president's former personal attorney. And the silence from my friends on the other side of the dais is shocking. No, it's it's out it's an no outrage, no oversight, no concern about a break a breathtaking conflict of interest involving our taxpayer dollars.
▶ 0:32:00Instead, I can tell you what we're going to hear from them. Anything that will distract you from the elephant in the room. That is the president is stealing your tax money. But, the American people are watching. This should be this should not be Taxpayer dollars should never be used to reward political allies or personally benefit those in power.
▶ 0:32:26The American people are tired of watching politicians talk about fiscal responsibility and then sit by ideally while tax payer dollars are raided. That's why Democrats on this committee are demanding transparency and accountability. Mr.
▶ 0:32:42Chairman, I ask unanimous consent to enter into the record the amicus brief submitted by Democrats on this committee and on the Judiciary Committee seeking to halt this settlement so that the Congress and the American people can see the illegality of this outrage.
▶ 0:33:00I also ask unanimous consent to enter into the record the text of the slush fund act, legislation introduced by Ways and Means Democrats that would impose a 100% tax on any payments distributed from this fund and require Treasury to publicly disclose who receives the money. The American people deserve to know who is benefiting from this and the American people should get every cent it's paid back to them.
▶ 0:33:30And I would ask my Republican colleagues, should our tax dollars go towards January 6th rioters and insurrectionists? If not, then why not mark up the slush fund bill in legislation tomorrow? Or at the very least, who on this committee would join us in co-sponsoring this bill? Why not stand before the American people and defend these payments publicly?
▶ 0:33:56Taxpayer dollars should never become a political slush fund for the politically Can I get unanimous consent to include those things in Yes, with Thank you, Mr. Chairman. I yield back. Okay, well thank you. We're off to a really good start. This is not unexpected. So, uh But we're in a unique situation because really what we wanted to talk today is about the working families tax cuts and how it affected real people in real time with real issues.
▶ 0:34:26So, I was so impressed with with your resumes. Uh Mr. Saunders, you and your wife have two adopted uh in the family, my wife is one of nine and I'm one of five. We have probably a half dozen adopted children. I have absolutely no idea which ones are adopted because they're all part of the same family. So, thank you so much for being Sefo, I your story coming from Iran, your family in 2008. Okay. Okay, well, no, what do you mean?
▶ 0:34:57Okay, so I'll just recognize these people. Okay. So, I'm trying to leap ahead and I I don't want to do that. Mr. Saunders, why don't you do your opening statement? Then we'll go through each of you, okay? I'm just so impressed with your resumes and the fact that you took time out of your lives to come here. This is critical. Thank you. Mr. Saunders, please. Chairman, ranking member, members of the committee, thank you for the opportunity to share my family's story. My name is Clark Saunders and I'm a high school business teacher in Texas. My wife, Breanna, serves as a church children's director.
▶ 0:35:27Today, I'm honored to speak as a husband, father, and adoptive parent. Breanna and I were married in 2013 and like many couples, we dreamed about a future family. Adoption was something we talked about early in our marriage, but we first tried to grow our family What followed was a long and painful road. For about 6 years, we went through fertility treatments, surgeries, multiple IUIs, medical procedures, and heartbreaking loss. During that season, we prayed often about what God had planned for our family. Over time, the Lord began leading our hearts toward adoption.
▶ 0:35:57After years of heartbreak, we felt like God was opening the door that giving us peace to walk through it. In February of '24, we welcomed our first son, Lucas, home through adoption. After years of waiting and wondering if we'd ever become parents, we were finally holding our son. All of the waiting, praying, and tears were worth it. We later adopted our second son, Levi, through New Life. Today, Lucas is 2 years old and Levi is 10 months old. They're joyful, deeply loved boys and the greatest blessings of our lives.
▶ 0:36:25Adoption is not just part of our story, it is how our family was built. But adoption is expensive. Families often face agency fees, legal fees, home study costs, counseling expenses, travel, medical related expenses, court costs, and many other costs along the way. For our first adoption through Gladney, we spent shy of 60 grand. For our second adoption through New Life, we spent close to 30 grand. In total, our family faced nearly $90,000 in adoption-related costs. These fees are not just paperwork costs.
▶ 0:36:54They support a careful and ethical process including counseling for expectant mothers, case workers, home studies, background checks, legal work, birth parent services, post-placement supervision, and court filings. Adoption involves many people working to protect the child, support support the birth mother, and prepare the adoptive family. For a teacher and a church children's director, nearly 90 grand is not a small number. We're not wealthy. We had to save, sacrifice, fundraise, delay our financial goals, and trust that the Lord would provide.
▶ 0:37:25That is why the adoption tax credit matters so much. For our first adoption, we finalized Lucas's in 2024. In our 2024 tax return, we listed 18,982 in qualified adoption expenses and claimed the maximum 2024 adoption tax credit of 16,810. That credit helped reduce our tax liability after a year of significant adoption expenses. We also benefited from the child tax credit for Lucas.
▶ 0:37:51Our return shows that we received the full 2,000 child tax benefit through the child tax credit and additional child tax credit. We also claimed the child independent care credit, which helped offset part of our child care expenses. These credits matter because adoption is not the end of the financial responsibility. It is the beginning of raising a child. Once Lucas came home, we had all the normal expenses caring for a baby, child care, diapers, formula, doctor visits, clothes, and everything else that comes with becoming parents. For our second son, Levi, we finalized his adoption in January.
▶ 0:38:22So, we were not able to claim the adoption tax credit on 2025 return, but we hope to use the credit in the 2026 tax return. Knowing that relief is available gives our family financial confidence as we recover from two adoptions in a short period of time. There's also an important public policy point here. When Congress supports adoption, it's not simply helping adopted parents. It is helping children move into permanent, stable, loving families.
▶ 0:38:45When children do not have permanency, long-term costs can fall on state and federal systems through foster care, public assistance, Medicaid, housing support, or other safety net By helping families adopt, the adoption tax credit is a modest investment compared to the potential long-term cost of a child growing up without permanent family support. Our sons are not a burden. They're blessings.
▶ 0:39:08Because they were adopted into our family, they now have two parents fully responsible for loving them, providing for them, educating them, feeding them, clothing them, and walking them through the rest of their lives. That is what adoption does. It does not just change a child's legal status. It changes the child's future. The adoption tax credit does not make adoption inexpensive, but provides meaningful relief after families have made one of the largest financial commitments of their lives.
▶ 0:39:33It tells families like ours that the country recognizes the value of adoption and understand that cost should not keep a child from joining a permanent, loving family. The child tax credit also matters because adoption is only the beginning. Child care, groceries, clothing, medical care, they add up These credits help provide stability as we plan for our children's future. For us, these credits are not abstract policies. They're connected to real decisions around the kitchen table. They affect how we budget, provide for our boys, and move forward after the financial sacrifice of adoption.
▶ 0:40:01When Congress strengthens the adoption tax credit and child tax credit, it helps make adoption possible. It helps children join permanent families. It helps parents recover from major financial sacrifice, and helps families like mine provide a stable, loving home. We're grateful for our boys. We're grateful for adoption. And we're grateful that this policy is in place to support families. Thank you for allowing me to share my story. Thank you, Mr. Saunders. Uh Now, Mr. Stifo, uh you're recognized, but I think it's really important.
▶ 0:40:29Your family came here in 2008 from Iran. Is that correct?
▶ 0:40:32Uh Iraq, sir. Uh and you're a server now at Buck and Rider restaurant in Phoenix, Arizona. That's right, sir.
▶ 0:40:39And you're going to be coming attorney? Uh fingers crossed, sir.
▶ 0:40:41Okay. Well, listen, we're glad you're here today. Please, you have 5 minutes. Thank you, Chairman Kelly. Uh thank you, Ranking Member Thompson and members of the committee. My journey in the restaurant industry began during my junior year of high Prom was approaching, and I needed to figure out how I was going to pay for I felt kind of weird having my parents pay for my date. So, I got a job at a as a busser at a restaurant down the road, and I immediately fell in love. I've been in the industry for almost a decade now.
▶ 0:41:10You see, that job ended up paying for a lot more than just my prom date. It's paid for my education. It's paid for my rent. It's paid for my life. Everything that I have built today, I have built through tips. I put myself through college studying political science, and I'm now preparing to apply to law school. You can imagine how incredible this moment is for me. See, I'm here today because of the people who made my journey possible. Servers, bartenders, and bussers. My friends.
▶ 0:41:42Everyone deserves a voice in rooms of influence like this one. And I may not be I may not work as a tipped server forever, but I could not be where I am today without that opportunity. And that's why I'm here. I'm here today to advocate for those who make this a lifelong career.
▶ 0:41:59The hospitality industry is uniquely It offers unparalleled flexibility that allows single parents to control their schedules, pick up their kids from school, still make it to soccer practice on mornings, and still provide a strong living for their families. It's an entrepreneurial environment where your hustle directly dictates your You see, to understand the impact of no tax on tips, it's vital to understand the nature of tipped income. It's highly variable.
▶ 0:42:28During a slow week, I might earn $400 in tips the whole week. On a busy night, I might earn that same $400 in a single shift. See, that variability is the reality every tipped professional embraces. We like to say we don't get salaries, we get Saturdays. Yeah, we succeed based on our drive, our expertise, and our delivery. We learn to manage the great weeks so that they carry us through the slower ones.
▶ 0:42:55This past tax season, because of no tax on tips deduction, I received approximately $4,000 back. That money for me went directly towards the budget for law school applications and campus visits. It became real savings that I would not have had That refund kept the door to my future open, and I wouldn't have these opportunities without it.
▶ 0:43:16You see, I'm fortunate to work at a busy establishment where the tips are strong, but there are thousands of professionals working in areas where the margins are And for them, this relief is even more You see, my colleagues and I carry responsibilities that don't show up on a shift schedule. Change, that's the norm. But this time, it was different. When these refunds began reaching our mailboxes and our bank accounts, even the atmosphere on the server floor shifted.
▶ 0:43:48It was honestly pretty cool. There were times in the middle of a dinner rush, food needed to be ran, sorry to the managers watching this, where we started talking about Roth Where we said, should we take a Vanguard and go Voo, or what should we do to optimize our income? We were discussing the mechanics of Roth IRAs and exploring how to optimally These conversations happened because my colleagues and I had the capital to look That is transformative.
▶ 0:44:17See, I've talked to my co-workers about how they use their refunds before coming here today. A mother who's the sole provider for her family right now because her husband recently lost his job, she told me that she didn't know how she would have stayed afloat without it. A bartender who is recovering from an autoimmune condition used hers to stay current on her medical bills and her car A father used his to open a college fund for his 6-year-old. You see, these aren't fairy tales. These are my co-workers, and they're your constituents.
▶ 0:44:48They are proof of a policy functioning exactly as it should. No tax on tips acknowledges the real circumstances of tipped professionals. You see, every tip that we earn is a direct reflection of our effort and our connection with the people that we serve. Nothing could be more American. See, this policy, it allows the working families of the service industry to keep more of the money they have earned directly through their hard work.
▶ 0:45:12Members of the committee, if you would have told that 16-year-old bus boy who got a job to pay for a dance that he'd be sitting here before all of you today, he would have laughed. I want to thank you all for this opportunity and your time today, and I want to leave you all with this. A tip isn't a wage. No corporation sets that rate. There's no negotiation that determines that number. It's one human being looking at another one in the eye and saying, "Thank you.
▶ 0:45:39You deserve this." No tax on tips honors that distinction. And when you honor the way that people earn, you change what they're able to Thank you. Thank you, Mr. Teeple. Uh Ms. Mihalik, you were now recognized. I think it's important people know you're the owner of Garbo's Salon and Spa, and I and you have a number of Subway franchises in Omaha, Nebraska. We talked before this meeting started. I am so impressed with what you've been able to do, you and your husband. It's incredible. Please.
▶ 0:46:10Thank you so much for having me. My name is Darcy Michalek, and together with my husband, I own and operate four Garbo Salon and Spa locations, 21 Subway franchises, one Taco John's location, and two Base Camp Coffee and Wine Bars in Nebraska. Across our businesses, we employ approximately 289 people, and more than 90% of our workforce earns tips as part of their income.
▶ 0:46:35I am proud to testify today on behalf of the National Retail Federation, which represents an industry that supports one in four American jobs. We are a family-owned business, and our salon business is majority woman-owned. Like many small business owners, we are deeply invested not only in our companies, but in the people who make them successful every single day. I want to say thank you to this committee for the inclusion of the no tax on tips provision, and the decision to preserve a competitive corporate tax rate in the one big beautiful bill.
▶ 0:47:05For our employees, tips are not extra income. Tips are part of how they pay rent, buy groceries, support children, care for aging parents, and build a future. In our salons and restaurants, every tip represents a customer choosing to say thank you for excellent service. These are not automatic service charges added to a bill.
▶ 0:47:26They are earned one interaction at a time through hard work, professionalism, and personal The no tax on tips provision has made a real difference for many of our One employee shared with me that the additional refund she received allowed her to finally pay off more than $4,000 in high-interest medical debt that she had struggled with for over a year.
▶ 0:47:48Another employee told me this was the first year in a long time that she did not have to worry about how she would pay an unexpected tax bill while still caring for her children. One of our long-time employees going through a difficult divorce explained to me that the tax relief prevented what he described as a financial bloodbath after being forced to liquidate assets during the divorce settlement process. These are not abstract policy discussions for our workforce. These policies are affecting real people in meaningful ways.
▶ 0:48:18We saw noticeable improvement in morale as employees began receiving larger tax refunds this year. Employees felt seen. They felt valued and they felt like Washington understood the realities of working Americans who rely on tips to support their families. Importantly, preserving a competitive business tax environment also matters. Small businesses need certainty.
▶ 0:48:40We need confidence that we can continue reinvesting in our operations, updating facilities, retaining workers, and serving our communities without facing unexpected tax increases that make growth more difficult. I also want members of Congress to understand the character and the work ethic of tipped workers. A hairstylist spends long hours on their feet while balancing technical precision, customer service, and creativity.
▶ 0:49:05I often tell our salon team they have to be part artist, part chemist, and part counselor, while bringing their very best attitude whether it's at 9:00 in the morning or late in the evening. Our restaurant employees are no different. Many of our Subway employees know customers by name and remember their regular orders even before they reach the counter. They go out of their way to brighten someone's day. The connection is why customers choose to tip. These workers earn those tips through effort, personality, consistency, and care.
▶ 0:49:34I believe the no tax on tips provision recognizes the dignity of that work. It is good policy because it rewards work, supports families, and strengthens local businesses in communities. I will close with something personal. Recently, I read a devotional that said, "Let the daunting size of your task and the sheer weight of your responsibility keep you daily at the feet of God. My husband and I think about that often. We have nearly 300 employees depending on us to navigate an increasingly difficult environment for small businesses.
▶ 0:50:05We take that responsibility seriously. That is why I agreed to testify today. When we see a policy directly helping hard-working Americans, not in theory, but in real life, it's important to say so. The Working Families Tax Cut Act, especially the no tax on tips provision, is making a positive difference for our employees, our businesses, and our communities. Thank you for the opportunity to testify today. Thank you, Ms. Mallick. That's very impressive. Uh Mr.
▶ 0:50:30Alexander, who uh lives in Texas, but makes steel uh in my hometown, the main employer is Cleveland-Cliffs. They make steel. We make steel for that goes inside the uh transformers. Um and it's essential. Uh so, Mr. Alexander, thank you for being here today, and please, your testimony. Uh good morning. Thank you for the opportunity to appear today. My name is Jason Alexander.
▶ 0:50:55I'm a millwright at Optimus Steel, a small, family-run steel mill in Beaumont, Uh I feel blessed with the opportunities the steel industry has provided me and my wife. Uh steel has built this country. Uh the work we do every day continues to strengthen everything from our national defense to the next generation of Over the past year, actions taken by Congress and the administration have made a meaningful difference, strengthening both our industry and people who depend on it.
▶ 0:51:23Helping workers like me build a family and pursue the American dream. As a millwright, I inspect, repair, install, align, maintain the equipment that keeps our mill running. That means welding, brazing, cutting, precision assembly, whatever it takes to keep production moving safely and It's demanding work, and the hours can be long, but it's work I'm proud of.
▶ 0:51:49Steel is essential, and downtime isn't an option when the country depends on a steady supply of American-made materials. That's why policies like the working families tax cuts have mattered so much. When my wife and I filed our taxes this year, we saw the impact firsthand. The year before the working families tax cuts, I actually had to write a check when I filed my taxes. This year, instead of owing money, we received an incredible refund of more than $10,000.
▶ 0:52:20This money I earned through hard work, often through long overtime hours, and for the first time it felt like the system recognized our effort instead of punishing us for it. It's not a handout. That's our money back in our pockets. My wife and I are planning to start a family, so this refund feels like a meaningful head start. A nest egg that will help us take the next step with more confidence. That's something that would would have been harder for us to do before.
▶ 0:52:49We don't talk much about policy where I work, but we do talk about this. I've heard the same from my coworkers. Many of us say it feels like we got a raise with the no tax on overtime. And Washington policies can sometimes feel distant, but this one impacts all of us who work at the mill. At the same time, we need to make sure American companies can keep investing here at home. I'm thankful for the provisions that have helped companies like mine grow and stay competitive.
▶ 0:53:20Full expensing of capital equipment, for example, has helped Optimus Steel expand and modernize. As a result, we've been able to install equipment that drives measurable gains in both quality and output. Strengthening our ability to serve customers more efficiently.
▶ 0:53:39I I also like to take the opportunity to talk about another policy that has been crucial to support steel workers across the I can't emphasize enough how important the 232 steel tariffs are for us. Steel is foundational to any nation's economy and security, which is why countries like China continue to target our industry. American steel workers produce the world's cleanest steels made to the highest quality standards in the most efficient way possible.
▶ 0:54:10The 232 tariffs have revitalized our industry and protected jobs and communities like Beaumont and across the Communities that have grown up around steel mills and they depend on them. I'm thankful to the Lord for putting me in a place to tell my story and the many blessings. Thank you again for the work that you do and for the opportunity to speak today. The policies you're shaping have real impacts on people like me.
▶ 0:54:39My wife and I are grateful for the ways the working families tax cuts have helped us build a better life. Steel workers helped build this country and we're ready to keep supplying the materials that will carry it forward. All we ask for is a chance to compete and if we have that, I'm confident we will win every time. Thank you. Thank you, Mr. Alexander. Uh Mr. Schneider, deputy head of the US policy for Piper Sandler, you're recognized for 5 minutes, sir. And thank you for being here today.
▶ 0:55:09Thank you, Mr. Chairman. Um so, Chairman Kelly, Ranking Member Thompson, and members of the Ways and Means Committee, thank you for the opportunity to testify on the Working Families Tax Cuts Act, also referred to as the One Big Beautiful Bill Act or OBA. It's an honor to be back before this committee, albeit in a different capacity, as I previously served on the staff of this committee under Chairman Ryan and Brady. In my current role, I'm deputy head of US policy at Piper Sandler, an investment bank.
▶ 0:55:35My job is to conduct macroeconomic research to help our clients, institutional investors, to navigate how US policy affects markets. It's important to note that I'm here today representing my own personal views, and the comments I expressed today and in my written testimony do not reflect the views of my The OBRA contains sweeping tax reforms.
▶ 0:55:53First, it prevented an over $400 billion annual tax increase, which translates to over $2,000 per return um on individuals by permanently extending the reforms made in the Tax Cuts and Jobs Act. In addition, many provisions were created or reformed, including on a retroactive basis, to provide tax relief to working families. These provisions are the subject of my testimony today.
▶ 0:56:17Specifically, the law built on TCJA by expanding the child tax credit to 2,200, index for inflation, increasing the standard deduction by $750 or 1,500 for joint filers, and expanding the SALT cap from 10,000 to 40,000 with a 500,000 income Several other new provisions were enacted retroactively, as well, including deductions for up to 25,000 of overtime income, 25,000 for tipped income, a $6,000 deduction for senior citizens, an auto interest deduction of up to 10,000,
▶ 0:56:48a $1,000 deposit for tax-advantaged savings accounts for newborns, and much more. Using a range of estimates from JCT and other non-partisan groups, I find tax relief was estimated to be between 124 billion and 156 billion during this filing season. It's one thing to describe the estimates of tax relief. It's another to see the results in practice. Using data from the Treasury Department, we can track this relief as it is dispersed through a combination of tax refunds, as well as lower tax payments when filing.
▶ 0:57:19According to my analysis, the tax changes in OBRA provided over 148 billion in tax relief to individuals during this filing season, right in the middle of the range predicted by revenue I find that OBRA increased tax refunds by 48 billion and lowered tax payments by 100 billion relative to what would have otherwise occurred. To put these figures in context, there have been 145 million returns filed as of May 1. So, this means OBA provided about $1,000 in tax relief per return filed.
▶ 0:57:50Tax refunds increased from 282 billion last year to 330 billion this year. A 48 billion or 17% increase. At the same time, the average tax refund increased from about $3,000 to about $3,300, an increase of 11%. The difference between these two numbers um tells you something very interesting. Consider the fact that last year 63% of people received a refund. This year about 68% did, a a nearly 5% increase.
▶ 0:58:20That means that over 6 million households went from owing taxes when they filed to receiving a refund. The fact that so many households flipped from owing to getting a refund, um not only increases the total amount of refunds paid, but reduces the average Um that's almost definitionally true as someone goes from owing to getting a below average refund.
▶ 0:58:43In other words, the average tax refund statistic, the 11% increase, is a victim of its own success as more people got refunds for the first time and lowered the average. As for the distributional implications of these retroactive provisions, the fairest way to look at it is looking at the percent change in after-tax income by income group. What we find is that there is mode- modest relief for the bottom two income quintiles, robust relief for middle income groups, and virtually no benefits of the retroactive provisions at the very top.
▶ 0:59:12According to an analysis of the tax by the Tax Policy Center, um the law would boost after-tax incomes by about 35 basis points in the bottom two quintiles, about 90 basis points on average between the 40th percentile and the 95th percentile, and virtually nothing in the top 1%. This pattern is First, very low-income households typically do not pay income taxes, so they do not benefit from deductions.
▶ 0:59:38At the high end, um people do not tend to benefit from these provisions cuz they each have link income limitations ranging from 75,000 to 500,000. Thank you, and I look forward to your questions. Thank you, Mr. Schneider. Uh Dr. Edwards, you are now recognized. Thank you, Chairman [clears throat] Kelly and Ranking Member Thompson. The purpose of the US tax system is to raise revenue to fund government.
▶ 1:00:03National debt has surpassed 100% of GDP and the deficit is $1.7 trillion, clear indications that the tax system is categorically failing at its job. The solution is simple, you need to raise taxes. That simple solution is complicated by the concern that raising taxes hurts the economy, a concern born from the belief that lowering taxes helps the economy.
▶ 1:00:26In my testimony today, I offer my lens as an economist to explain why that belief and the economic power of tax cuts is misplaced and incomplete. I say misplaced because the ability of tax cuts to influence the economy is limited.
▶ 1:00:41Tax cuts are margin off a margin of income to be to be effective as a national economic policy, households must respond the exact right way, to spend when we want them to spend, to save when we want them to save, when the right way is determined by broader conditions in the macroeconomy and not the needs of their own household. In this, the one big beautiful bill act was exemplar.
▶ 1:01:03I testified in front of this committee 2 years ago, and a primary topic of the day was the year 2018, a year in which the economy grew, unemployment fell, wages grew, and members were proud to attribute the strength of the economy in 2018 to the tax cut the year before. Here we are in 2026, a year after a tax cut three times the size, and we have an economy that no one is taking credit for.
▶ 1:01:26Unemployment is up, wage growth is down, and 55% of Americans said in a Gallup poll that their financial situation is actively getting worse. Before and after are not the same thing as cause and effect. Tax cuts didn't cause a windfall in 2018, and similarly didn't create one in 2026, because tax cuts are simply no match for broader headwinds and tailwinds in the in the Now, that's not to say that the One Big Beautiful Act did not have an effect, but having an effect and being effective policy
▶ 1:01:57are not the same thing. Instead, the only thing tax cuts are guaranteed to do is lower revenue, which is why I say tax policy as economic policy is incomplete without consideration of its cost. Debt financing, a permanent reduction in revenue, has growth consequences.
▶ 1:02:15The Penn Wharton Budget Model estimates that the One Big Beautiful Bill Act requires so much borrowing, it will make the economy $4.5 trillion in tax cuts to boost the economy 1% in the first few years, decrease it within 10, and make it 4 to 5% smaller in the long run because of borrowing.
▶ 1:02:38Now, I don't put weight or too much weight on these exact estimates, but rather what they illustrate, that the growth that you have purchased through the One Big Beautiful Bill Act in the short term is lost and then some in the long term because of borrowing. Raising taxes will occur some pain, but I promise you, the alternative is not I draw two conclusions from this.
▶ 1:03:00The first is the choice is not between raising taxes or lowering taxes, but between raising taxes and giving over our fiscal autonomy to debt servicing. As Moody's wrote last year when it downgraded US credit, the third such downgrade in a a federal interest payments are likely to absorb 30% of revenue by 2034.
▶ 1:03:21Our largest public program will be debt The second is giving up tax cuts doesn't sacrifice much for the economy or economic policy. Outside of recession response, the one big beautiful bill act was the ninth major tax action this century, whose collective 10-year budget costs are over $12 trillion.
▶ 1:03:45If there were If there were a problem in our economy that tax cuts could solve, they would have solved it by now. If tax cuts were the key to job growth, if tax cuts were the key to wage growth, if tax cuts were the key to income growth, if tax cuts were the key to affordability, if tax cuts were the key to the linchpin of Americans economic security, we would have that evidence in hand because we have been collecting it for 25 years, and we don't.
▶ 1:04:11Again, it is not that tax cuts can have no positive effect, but they have failed to grow the economy enough to justify their enormous cost. I I will end by noting that there is reason for optimism because there is so much that we can do when we stop using revenue collection as economic policy and instead use revenue collection to fund economic policy. Policy that is a fraction of the cost. Policy that has proven returns.
▶ 1:04:39Policy that directly invest in families and workers rather than hope they'll respond the right way to a marginal change in tax liability. We are not out of options, but we are out of tax cuts. Thank you for your attention. I yield the remainder of my Thank you, Dr. Edwards. So, um and again, uh a lot of us have come from the private sector that then ran for election and got it got elected and are here.
▶ 1:05:07I I really place a lot of what I I listen to and what I what I look at is being with people who do these things and so the overtime story is is always incredible to me whenever people don't want to work overtime because it doesn't benefit them. That's hard to sit and listen to somebody who's running a business. Mr. Babalik, you have that. Mr. Alexander, you work with guys every day. Mr. Tifo, you do that. Mr.
▶ 1:05:33Sanders, everybody works their I will I will use the terms that are not works their rear end off in order to just break even. So Mr. Alexander, when you're making steel and the people that are there with you making steel, how has this changed your attitude managers come out and say, you know what guys, we're behind and we have an order we have to fill. Uh we're going to do some overtime, but it's going to benefit you.
▶ 1:06:03Now, in the past before this bill, it really didn't benefit you that much to work overtime. Tell me now, the people that you work with every day, when they hear they have a chance to work overtime and make some extra money, how do they feel about that? Is it I don't really get to take it home, so why should I why should I do Uh you work overtime and it benefits you and your fellow workers. So just share a little bit of what happens on the floor of that steel company, real people making real steel in real time in a real country. Yes, sir. Thank you, Mr. Kelly.
▶ 1:06:32Uh so my shift partner, his nickname is Road Rage. He's a big car guy. And so we always say, hey, you get some overtime and that's car money. That's parts, man. So he's he's constantly got extra parts sitting around the house, man. So it's it's appreciated very much so. Mr. Babalik, you have employees. Mr. Tifo, you talk about how you work. Mr. Saunders, you be because you go through the adoption process.
▶ 1:06:58Just a little bit of the people that actually are out there and who this bill was designed to help. This is the Working Families Tax Act. So just tell me what it comes to down to working families, what do these policies mean to them in real time with real wages that help them pay really big bills? For our employees, um we noticed a huge uptick in just employee morale in the first quarter.
▶ 1:07:24Um typically our business is slower first quarter, um January, February, and March just in both of our industries. Oddly enough, we're pretty weather driven. And and when we were able to see those refunds coming back at that time, it really changed employee morale. Um sometimes it's hard to keep people motivated to come when business is slow. And it made it easier to do that, honestly.
▶ 1:07:46It made it easier to look them in the eye when the books aren't as full as they need to be or maybe when you have to send someone home a little bit early in order to make labor. It made it easier for everyone and it changed the way they thought about work. And it it was very very helpful to owners. It was very very helpful to our employees and we're just grateful for it. Everybody has a story. Mr.
▶ 1:08:11Siefu, if you'd share with us the people that you work with every day and whenever we came up with this big beautiful bill a working families tax cuts what was the feeling? I mean that the the whole idea of when you go to work to work and you get paid for going to work. My son, by the way, is a is a laborer uh in construction. He mixes cement, carries cement blocks, he builds scaffolding.
▶ 1:08:33Um and he tells me that everybody he works with looks for They look for overtime and they really and they look at it and then and I think I don't think everybody realized how the the positions changed and they get to keep more. But I know when you guys talk about how you figure it out. If you could share that story with me cuz I got to tell you what, it's so personal and it's what this bill was about. For for servers specifically, Chairman, thank you for the question.
▶ 1:09:01The the tip part of it, the fact that we got to keep more of our tips, because when tips are meant to be a thank you, getting to keep a little more of that thank you, not having to be taxed on that, was helpful. And no matter where you were down the dioceses, it was a bipartisan approach, honestly. Everyone liked it, and they were very, very happy with it. So, I think on behalf of all the servers, thank you all, and we're very, very grateful to have that no tax on tips. Well, thank you. And Mr.
▶ 1:09:27Saunders, I I I sit beside a gentleman who also is has a family like your family. Uh, the ability for people to actually adopt children, I the cost, you shared those early on in your testimony. I don't think if you happen to go that process, you have no idea how much it costs to take on a child, to give a child a loving home, to give a child a future. How did it affect you? How does it affect the way you When you and your wife when you wake up in the morning and you look at those two children you have right now?
▶ 1:09:55The ability to do that, first of all, thank you for doing it. That's the most The most important part of our society is the 25% which is youth, because it's 100% of our future. Thank you to you and your wife for what you're doing. So, if you can just share that feeling of saying, "You know what? We can actually do this." Absolutely, Chairman. Um you know, even going through fertility and dealing struggling with infertility issues is a very emotional process, too. And IVF's expensive as well.
▶ 1:10:26it's hard to to look at your wife and not necessarily know if you can have a family, right? And through support, through donations, and and and grants, and everything that we could find, we're able to adopt. And the costs matter.
▶ 1:10:42like I said in the testimony, it's expensive to adopt, but the two agencies we worked with are amazing organizations, and they care about the birth families, they care about the They counsel these people, the children for the rest of their life, the mothers for the rest of their life. These costs that we incur as adoptive families are necessary and and I understand that.
▶ 1:11:06But, it's a really expensive process and painstaking process and a lengthy process and just being able to see, you know, what, we're going to get some money back through this whole process. Like, and be able to continue with our family and think about another one, you know, and adopting a second. When I look into Lucas and Levi's eyes, I just I just see pure joy. And we're just so blessed as a family to be able to call those our sons.
▶ 1:11:34And um we're just extremely grateful and any kind of financial benefit for families is is totally worth it. Lucas and Levi are blessed to have that love them the way you and your wife do. I got to tell you, it's sometimes these things are really emotional that we go through. Uh and when we talk about tax policy, I I I want to make sure that we concentrate on what it is that we're talking about. Your stories are all so significant.
▶ 1:12:00Um It It concerns me uh because we get too far away from policy and we get into politics. I and I got to tell you, because of my family I and I understand what what people go through to adopt. But, I also understand the effect it has for a child. Your kids are very very fortunate. You're You and your wife are very fortunate. Thank you for being here today. Uh Mr.
▶ 1:12:23Schneider, what does the distributional data say and did we succeed in the goal that we attempted to get to in in this working families tax Uh yes, as the the name of the bill, Working Families Tax Cuts Act, by the distributional tables, focused on the retroactive individual income tax provisions, yes, you did succeed.
▶ 1:12:42There is about a 35 basis point increase in after-tax income for the bottom two quintiles, from the 40th percentile on through the 95th percentile, which is covering, you know, roughly 40,000 in income up to about 500,000, you see nearly a full percentage point boost in after-tax incomes. And above that, there's virtually no relief given that all of the income limitations in place are at 500,000 or less.
▶ 1:13:12I want to thank you all for sharing your your stories. Um Mr. Mr. Edwards, uh uh after what you've heard and what you looked at, does it make any sense of what if we to try to do? I know that we call it the one big ugly bill, the one big this, the one big that, but at the end of the day, did we actually do something, put something together that helps hard-working American families? And I know we're concerned about the debt.
▶ 1:13:38I'm very concerned about the debt, but what I'm concerned about more than anything else is that we forget who pays for all this spending that we have. We can We have an addiction to spending, and it really causes a lot of pain. Uh what Can you add anything else to your testimony? You talked about it, and and Mr. Schneider talked about it. The math is really difficult to look at right now and feel good. Anything else that you'd like to add?
▶ 1:14:03I don't bring up the cost of the bill to anyway slight my, you know, fellow witnesses here today. You said in your opening remarks, Mr. Kelly, that this is about 13 to 1,400 dollars going back to every server or every person who takes overtime. Uh if you I think as you said, there was roughly 10 to 20 million workers that were affected by that. That's around 28 billion dollars. This bill costs 450 billion dollars a year. My fellow witnesses represent less than 6% of the bill's intentions.
▶ 1:14:33And I I applaud your effort to, you know, further remunerate workers in a society and an economy that can be very tough to get by, but I wonder if overtime is so expensive, you didn't amend the Fair Labor Standards Act so that every worker would get more from overtime, no matter what they paid in taxes.
▶ 1:14:49My concern is that the tax code has become so cripplingly complex that it costs so much money to prepare your taxes that whatever you are remunerating through deduction is being eaten up by preparation services, which are running at least two times faster than inflation over the past 25 years. Thank you. Now recognize Mr. Thompson. Thank you, Mr. Chairman.
▶ 1:15:12Uh I think we can say with certainty that a lot of people were helped as we've heard from the witness today. But you can help people, you can help families like the folks who were represented today without providing a huge windfall for corporations and for billionaires.
▶ 1:15:36Windfall a windfall because of this bill that added four and a half trillion dollars to our national debt. And took a trillion dollars away from health care from the American people. Dr. Edwards My Republican colleagues are talking about how this bill was written to help working families.
▶ 1:16:02We knew that that claim was a bit misleading when the bill was first drafted and the Joint Committee on Taxation's own distribution charts point that out. And Mr. Chairman, I'd like unanimous consent to add the distribution charts to the record because they show a different story than what we've heard from one of the witnesses today. Without objection. Ms.
▶ 1:16:28Edwards, can you explain who receives the largest benefits under this bill compared to a working family making say $50,000 a year? Well, your district I'll I'll take your distribution tables and raise you mine from the Congressional Budget Office. Uh they estimated that the top 10% of households will see an annual reduction of taxes of $14,708. Uh at the median for the fifth percent or the fifth decile family, they will see $992.
▶ 1:16:59Now, I don't mean to sound like a snob, like $900 isn't a lot of money because it can be a lot of money. But, of course, that works out to around $82 a month. If you're paid bi-weekly, that works out to $38 a paycheck. That's not paying for health care, that's not paying for child care, that's not paying for elder care, that's not paying for rent, and it's surely not paying for gas. Well, Dr. Edwards, you don't have to sound like a snob. Uh the fact of the matter is, this is the tax committee.
▶ 1:17:25We can write tax policy that benefits the people who are here with as witnesses today, and the families that they represent across the country without providing a huge windfall to the corporations or to billionaires. Isn't that correct? Absolutely. But, that's not what that bill did, is it? This bill poured $450 billion a year into an economy with not much to show for it in terms of aggregate growth.
▶ 1:17:53So, is it fair to say that the largest benefits overwhelmingly flowed to millionaires, wealthy investors, venture capitalists, et cetera? Yes, we have a protective progressive tax system. It does most of the work of rewarding more working families for us. They don't need a small tinkering around the margins. The progressive tax system does its job. So, when you cut taxes, you're going to reward people at the top far more than you can reward people at the bottom.
▶ 1:18:23And you agree that to help finance these outrageous tax cuts to people who didn't need a tax cut in this environment, that the Republicans cut nearly a trillion dollars from health care and hundreds of billions of dollars from uh nutrition Uh it's a devastating cut to social services, sir. Added four and a half trillion to the debt? Will make the economy smaller in the long run, sir.
▶ 1:18:49Can you explain what happens to communities, rural and urban, when hospitals close, food assistance disappears, and millions of Americans lose their health care coverage? I yeah.
▶ 1:19:07I I struggle to put into words the type of devastation to not have a primary care doctor in your county. And to not have a grocery store in your county. To to not have the ability to seek health or seek to seek health care or to purchase food without driving a considerable district distance the way that gas prices are today. We are putting a tax on Americans that way, but you know, there are many parts of the country that private businesses simply do not find profitable.
▶ 1:19:34And I can't imagine that my district is the only district in the United States of America where health care providers are telling me that hospitals and clinics are either going to close or have to lay people off, reducing services, skilled nursing facilities are going to have to close, or lay people off where they won't be able to deal with the needs of the community, or diversion programs like domestic violence programs or addiction programs are going to have to close,
▶ 1:20:05leaving those folks to much more treatment, incarceration, or health care costs going out the going through the roof. And those hospitals, if the Medicaid dollars go away, if someone is injured or becomes ill, those hospitals are still going to serve those people, which is just going to run up the cost on everyone. Thank you, and I yield back. Thank you. Now recognize the chairman of the Ways and Means Committee, Mr.
▶ 1:20:33Smith, for any questions you may have. Thank you. Thank you, Chairman Kelly. Um I want to thank the witnesses for for being here today. Um from day one of becoming chairman of this committee 3 and 1/2 years ago, I told my colleagues that my focus would to pass legislation that had the fingerprints and benefits for working families, small business owners, and Because so often
▶ 1:21:04you hear folks in Washington, D.C., only listen to economist. And I want to say the first four thank you so much for being here. Because you're what I refer to as real I'll tell you, I had a young lady that came up to me in a small town of less than 3,000 people in Fredericktown, just less than 2 months ago. She's like, "Congressman, I want to say thank you. I just got my refund back.
▶ 1:21:36I'm a single mother, who works overtime with three kids. Her refund was over $10,000. $10,000.
▶ 1:21:50The median income for a family of four in Southeast Missouri is 42 a year." She told me, "Congressman, because of that refund, I will be able to pay for my rent for a whole year." We heard testimony saying 900 bucks wouldn't pay rent. This young lady told me $10,000 would pay her whole rent for a year plus That is an impact.
▶ 1:22:21And every single Democrat in the House and the Senate voted against these Because it they said it was helping billionaires. So, I want to ask question. Raise your hand if you're a There's what? Mr. Sanders, you're not a billionaire? No, no, I'm not. But you benefited from the one big beautiful bill? Yes, sir. Wow. Mr.
▶ 1:22:49Stefo, are you a Did you benefit from the one big beautiful bill? Yeah. Wow. Ms. Machalek, are you a billionaire? You own a bunch of restaurants. I am not a billionaire. Did you benefit from the one big beautiful bill? Yes, our employees benefited greatly, as did we. Mr. Alexander, you have a good first name, by the way. I like Jason. Thank you. Likewise. Likewise.
▶ 1:23:18So, are you a No, sir, not yet. I'm working on it. No, not even close. No, I've got a ways to go. So, did the one big beautiful bill benefit you? Yes, sir, very much so. So, that's powerful. These are four Americans, Mr. Chairman, that are what I call real-blooded Americans that are just trying to put food on their table, clothes on their backs, and gasoline in their cars. And we we drafted this proposal.
▶ 1:23:46We drafted this bill by traveling to 32 different The first committee hearing that I held as chairman was not in this beautiful room. It was in a lumberyard in West Virginia. Petersburg, West Virginia. Where we heard from coal miners, farmers, working moms, and small business owners.
▶ 1:24:11The title that hearing was State of America America's economy We wanted to hear from real people because we wanted to craft a tax bill that delivered for real people. Is it perfect? Is anything that Congress does perfect? Absolutely not. But it is the largest tax cut in US And it is the first time we've had no tax on tips.
▶ 1:24:40We've had members of this panel that has fought for a long time to pass no tax on tips. But when they had the opportunity to vote for it, they didn't vote for it. Because they wanted it to be different. It's the same way with no tax on overtime. That's never That's a new policy. Can we improve it? You absolutely bet we can improve it. The adoption tax credit, it was great to improve that, but we can still improve it even more.
▶ 1:25:10And that's what our intention is in this is to help continue for those working families, those small businesses, and those those farmers. Mr. Stiffler, I would like to I'd like to ask ask you a question. Super impressed with your story, your testimony. I'm glad I was out here to to hear it.
▶ 1:25:30I'm a lawyer, so I don't know why you would want to be a lawyer, to be honest, I I appreciate that you're you're moving that way, but um I heard testimony amongst uh one of the six of you that said the solu- This is the quote, "The solution is simple. You need to raise taxes." That was a statement.
▶ 1:25:55Um what's your of telling members of Congress if we should raise taxes? I think as an American, the the term raise taxes always going to cause some form of conflict between people. And I think that's a conversation and something way more complex than I can give you the answer to right now. I wish I could come here and tell you this makes me feel this way, this makes me feel this way. I just don't know yet. It's But what I what I do know
▶ 1:26:26I appreciate that.
▶ 1:26:26What I do know, council member, is that the no tax on tips part of that bill that has helped us a lot. That has changed a lot of lives. That has given security cushions for a lot of people, and that is something that I think has bipartisan approach and is something that I think we can work on and hopefully have for the rest of our time as a country. Thank you. Appreciate it. Um Mr. Chairman, I just think it's also important for the record before I yield back. We heard a statement that wages have not increased.
▶ 1:26:57In fact, that's not a truthful statement. Um wages in the first year under President Trump has increased more than all four years combined under President Biden. Do they need to increase more? You bet you they do. But to say that they haven't increased is simply not true. I yield back. Thank you, Mr. Chairman. I'll recognize Mr. Albani. Thank you, Mr. Chairman.
▶ 1:27:26Uh thanks to all of you for joining us today. Uh today's hearing is supposed to be about whether the Republicans big ugly bill actually delivered for American families. And the evidence makes one thing unmistakably clear. The bill was never designed to help working families. It was meant to help the wealthy and the well-connected.
▶ 1:27:46Um middle-class American families saw hardly any tax benefits from the law, and any benefit that they did see um was quickly erased by Trump's illegal tariffs, by higher health care costs, and now the president's war in Iran jackie jacking up gas prices. At the end of the day, the average working family is paying more for health care, for housing, for child care, and gas because of Republican policies and it's that simple.
▶ 1:28:15And you can talk to people all across the country. Meanwhile, people making over a million dollars will get a tax cut of nearly a hundred thousand dollars. And Republicans paid for those giveaways in parts by gutting the very programs that families rely on including nearly a trillion dollars from Medicaid putting care for more than 70 million children, seniors, and people with disabilities at risk. Yet, the bill is estimated to add more than 4 trillion dollars to the national debt.
▶ 1:28:46Democrats, by contrast, have advanced proven policies that actually help families afford the basics. For example, the expanded child tax credit that we put in place in 2021 gave families monthly payments of up to and cut child poverty nearly in half all across the country. Republicans have repeatedly rejected um our amendments to make this bill better for families.
▶ 1:29:12And this hearing really is about trying to sell a bill that is failing working families across the country. Dr. Edwards, knowing that tax returns are not the only way to help Americans, could you discuss some of the alternative policies that more directly help working families and deliver a better economic return?
▶ 1:29:32Things like the expanded child tax credit or universal paid family and medical leave program or other examples that you may not have included in your Thank you, [clears throat] Congresswoman. I'm going to quickly uh correct the record. I am a real American. My profession does not disqualify from being from being any less American than any other person. It doesn't require any adjective afterwards. Doesn't matter what my profession. I don't have to sit here and list that I have kids or that I have a business or that I have a job or that I have workers. I am just an American.
▶ 1:30:02And I don't necessarily appreciate having to tell you you hard truth about how indebted our country is and how much it will cost. You have created the largest program in US history is our debt service. For someone to tell me I'm not an American just because I have to tell you the unfortunate reality that this can't go on for forever. Thank you for letting me correct the record. Investments in children and family tend to have a much larger return than tax cuts because they're directed to people who will immediately use the money and for whom the market can cannot provide the good.
▶ 1:30:30So for example, child care is something that costs considerable money out of pocket for families that use the service, something around $2,000 a year. It's higher than college tuition and mortgages in most states. Were you to instead publicly offer this good, you could receive a return simply on the earnings of parents of 10 to 1. That doesn't count any type of beneficial effect on the kids or family budgets or redistribution to the economy from having more money to spend that's not directed toward child care.
▶ 1:30:56Something like paid family and medical leave on the other hand, which has a much smaller ticket price than child care, that costs the federal government almost nothing relative to the size of something like the one big beautiful bill, which costs $450 billion a year. Child care would cost close to 22 or 23 to set up through the Family Act. That has a 10 to 1 to return in net social benefit because it improves the health of especially infants and children in the first 6 months of their life so that they, you know, use fewer services in the future and it also improves the health of families.
▶ 1:31:25These two types of bills make direct direct investments that the market and tax cuts cannot, which is why they have such a high And um return is critically important and sometimes when you invest a a little you get a great return and I think unfortunately something that wasn't thought through in this bill, um you know, the the reality is that it continues to biggest benefits go to the wealthy and the powerful at the expense of American families struggling to get through the day.
▶ 1:31:55Um Dr. Edwards, in your testimony you also described the tax code as bloated with 271 tax expenditures including nine new ones from the big ugly bill. How does growing complexity of the tax code harm taxpayers, particularly working Tax preparation services, according to Intuit Accountants, which develops the software that tax preparers use, estimate that people who pay for tax preparation cost them two to $500 a year.
▶ 1:32:21That's going to cut a fourth to a half of the average tax cut you gave Americans because of how expensive it is to prepare their own taxes. The more complicated the tax code gets, the harder this gets. Thank you. I yield back, Mr. Chairman.
▶ 1:32:33Thanks, Mr. Schweikert. Uh Mr. Schweikert, you're now recognized. Thank you, Mr. Chairman. Um Mr. Stepto, um what store do you work at? Congressman, I used to work at White Chocolate Grill and now
▶ 1:32:47Wonderful. And now I'm at Buck and Rider in Camelback.
▶ 1:32:50Okay, so I've been in your I I next time I'm in there, I will look for you. I'll I'll see you there. My my brother's actually a manager at The Cheesecake, so
▶ 1:32:59Um oh yeah, it's it's the family. Okay, so you're a fellow Arizonan. We were one of the I think we ultimately came in number two in the Biden years of We when we were working on this tax bill, the math was working families in our community were actually poor because you did the adjustment of where your wages were compared to your you know, for us in Arizona, if you walk through some of the math,
▶ 1:33:29um real take-home pay, um $7,400 to $10,600. That's a you know, when you've had a people who've gotten their heads kicked in because of the cost of living in our community, that's a big deal.
▶ 1:33:47And and and and it I I'm often concerned that when we're having the debates of our economists, and I love my Um you know, we start to work through the actual math. there's some tough things going on, particularly for us in Arizona. Uh last month, we lost what? 10,800 jobs.
▶ 1:34:11And if it weren't for some of the things we've done in these tax provisions, I'm really concerned what our community would look like. um Mr. Snyder, I I actually want to do um some geek out with you. Forgive me. it's always one of my frustrations. You'll notice there's a verbal game we all play here. Um when we don't like this the percentages, we'll use the num- the the dollar amount. But, I've been looking at some of the tables from your testimony.
▶ 1:34:42And the distributional effects, um can you actually speak to the reality of those with very high income, the percentage they receive compared to those truly in that sort of hard-working middle class on the distributional Yeah, absolutely. There's a There's a number of ways in which we're kind of talking past each other on the distributional effects. Number one, if we're focusing on 2025 policies, we're talking about all of the new things that just happened. That's not a TCJA thing. TCJA is law.
▶ 1:35:12All of these provisions have income limitations, so it's definitely impossible for relief to be accruing at the high end of the spectrum if we're talking about what just
▶ 1:35:21can we can we so everyone sort of Can I play interpreter? Yes. You hit income caps, therefore you don't get to take the benefit.
▶ 1:35:27Correct. So, it's there is no tax relief at the high end of the income spectrum in this bill for 2025. A difference between you know, the ranking member member mentioned some of the distributional tables JC- JCT. We're talking about current law versus current policy. I don't want to go down that path and complicate things. Hap- happy to do so, but when you what you spoke to, percentages versus dollars. I think what confuses a lot of people is we'll use dollars when it suits us and percentages when it doesn't.
▶ 1:35:55If you cut everyone's taxes by 1%, people might say that's very fair, but people who pay more taxes will see a bigger dollar relief than others.
▶ 1:36:03Yeah, and look, where everyone would you agree that United States probably has the most progressive income tax system in the industrialized world now? Yes. And so folks don't understand that how radically because we also don't use a value-added tax. So in many ways it creates a even more progressive tax system of what the taxes paid by, you know, the working class and how we push it off onto this side.
▶ 1:36:33one of the things we're trying to take a also look at in the Joint Economic Committee, one of my other hats I wear, is did we change have any behavioral Did we see cuz we think we're seeing substantial participation in working overtime, labor force participation, we actually see just the demographic clicking down, but we're thinking are we seeing some of our brothers and sisters choosing to stay in the labor force even if they may be eligible for retirement.
▶ 1:37:04where would you go to find that data and are you starting to see what we're looking for? Yeah, you would look at it a number of directions, overall hiring, so these provisions will drive economic growth, that drives hiring, that creates more opportunity for people to enter and remain in the labor force. You would look at spending patterns like credit card data, savings patterns, um all of those things are things that you would look at look at to support exactly what you're looking for. All right, thank you, Mr. Knight. We we will talk some more in this. Um one last thing, Mr. Chairman, is it Mr. Saunders?
▶ 1:37:34Um thank you for adopting some kids. been through it. I have a 3-year-old and a 10-year-old. I want to have a real examination though some of the costs when we've made it so expensive that a middle class family cannot adopt a child. Um, something's wrong in the way the adoption fees and the the fees being charged by some of the adoption service providers.
▶ 1:38:04And it's one of my commitments that that's one of the things we're going to examine. And with that I yield back. Thank you, Mr. Moore. You're recognized for 5 Let me join um committee members in in thanking all of you for appearing here today before us. I just want to thank you, Mr. Saunders and your wife for adopting these beautiful children. And Mr.
▶ 1:38:30Stiffler, I would tip you tip you tip you. I'm a good tipper and and just with your personality, just like you said, it's the hustle that makes it. Uh, and and so thank you all for coming here. I I'm a Democrat, so I am very opposed to this bill. And maybe I should start with you, Dr. Edwards. Um, I just don't know where they get some of these numbers from.
▶ 1:38:54Because according to the research that I've done is the sort of the average um, that someone who makes $50,000 a year gets as a tax refund this year will be $247. And as you indicated, we paid $450 billion a year, had no growth in our economy.
▶ 1:39:16And what we have provided for these outstanding Americans here, and you are and I are also Americans, is crumbs from the master's table basically. And we've robbed Peter to pay Paul in order to do Um, we uh this is $4.7 trillion of debt that was unpaid for. And what we have done is thrown people like Mr.
▶ 1:39:40Stiffler, uh who fortunately for him will not be a wait person forever depending on tips because these will expire and they were not made permanent like some of like the money that we gave to the billionaires and millionaires. This is temporary.
▶ 1:39:57So, um I I guess I want you to respond to try to help me understand a little bit about these We're We're a little [clears throat] bit talking at cross purposes because the way that the Joint Committee on Taxation and the Congressional Budget Office came up with the impact of the legislation was to compare it to current law. There was a tax cut passed in 2017. Its provisions were going to expire. This bill extended those provisions. Therefore, the impact of the bill is the extension and the change to law.
▶ 1:40:25Um what my esteemed colleague is talking about is comparing instead the change to policy assuming that they hadn't expired at all. So, it's it's not both being right and wrong at the same time. Comparing Thinking of whether or not you you think this law doubled down on one or it wrote a new law. So, I the JCT and CBO have always looked at current law as opposed to current policy, which is where they come up with their distributional effects.
▶ 1:40:50So, for example, the distributional effect is a 0.3% increase in resources for the bottom 10% of households and a 2.9% increase in resources for the top 10% of households. I realize Mr. Schweikert left. I thought he would have liked that I used percentages instead of dollars that I can do both. Um but that, you know, the original legislation in 2017, you know, as I said before, we have a progressive tax system. If you cut taxes, the the people at the top will get the biggest check.
▶ 1:41:17They don't necessarily have to get the biggest reduction, but they did over these two pieces of legislation.
▶ 1:41:22you so much for that. You know, here's here's what I would would like to know. The Yale Budget Clinic, it depends on who you believe. They said that tariffs cost people about $2,500 a year. Um we cut the I'm wondering from Ms. Mechelec of all your employees, how many people lost health care because they couldn't afford the ACA? A lot of tipped workers, for example, rely on Medicaid because they don't make that much money.
▶ 1:41:50I mean, if someone worked 40 hours a week at at minimum wage, they would only make $15,080 a year and they wouldn't qualify for the full child tax credit. SNAP, $900 billion cut. A lot of people who work, who qualify for tax on tips, also relied on the ACA, the Obamacare, and relied on Medicaid. And so, I guess the question that I have for you, Dr.
▶ 1:42:20Edwards, is the squeeze worth the juice? If you wanted to help working families, you could have amended the Fair Labor Standards Act so there's no complicated tax process for getting more overtime. You could have just raised overtime. If you wanted tipped workers to take home more money, you could raise the federal tipped minimum wage above, you know, the $2 and I think 13
▶ 1:42:4213 cents that it is now. We don't have to move every reward to working families through the tax code. We could just make our labor market better. It would be more efficient and more remunerative for them. And I will once again bring up that the fellow witnesses at the table, the credits and deductions that they are talking about represent less than 6% of the spending from the legislation. Ms. can you tell me how many of your employees rely on the ACA, Obamacare, or Medicaid? Or do you pay health care to your employees?
▶ 1:43:12We do offer health care through our companies, yes.
▶ 1:43:16Oh, good.
▶ 1:43:16Um, I I can't tell you off the top of my head, ma'am, how many of them are participating in the ACA, but I do not feel like a large number of our employees are in a situation where they've said that they are out of health care coverage to me, at least.
▶ 1:43:30That's to you. Okay, Mr. Schneider, it's nice to see you. Say hello to Paul for Uh we were very good friends. Mr. Chairman, I will yield back.
▶ 1:43:38Thanks, Mr. Brady. Uh now, consistent with the committee practice, we're now going to go two to one on the Mr. Arrington. Thank you, Mr. Chairman. Witnesses. Um Mr. Schneider, good to see you. Uh As well, thank you.
▶ 1:43:51With respect to the tax code being do we have a progressive tax code and relative to the developed world and developed economies, is ours one of the most, if not the most progressive, or one of the least, if not the least progressive? Where are we on that?
▶ 1:44:11very high and is one of the most progressive in the industrialized world.
▶ 1:44:13One of the most progressive in the industrialized world. Before the Tax Cuts and Jobs Act, which was uh the base um base the the base and foundation for some of the improvements made in the Working Families Tax Cut, prior to the Republicans, President Trump 2017 tax cuts, where what where were we in terms of taxing businesses? Just take the corporate tax rate, for example.
▶ 1:44:40Were we at the higher end of the spectrum of how we taxed American competitiveness, um investment and jobs through the corporate tax rate, or we were on the lower end? Where did we rank in terms of how the people's government and these United States taxed our job creators? In that example, where were we?
▶ 1:45:01We had the highest rate at 35% when we lowered it to 21%. When you add in state and local tax, it's about 4%. We had the average rate in the OECD afterwards. Okay. So, we had the highest tax rate, corporate tax rate in the free and developed world. And in the not-so-free world. My understanding is it was higher than communist China. That's That's crazy. I just just I think people need to just reflect on that a little bit.
▶ 1:45:32The great free enterprise system that is unleashed prosperity and a middle class and a quality of life uh and keep going like no other nation, no other people have ever experienced now finds itself having the highest tax rate among developed nations and even communist China.
▶ 1:45:58And when we reduced it that reduction was when you take the effective rate with all levels of government, we were at the average. We weren't the lowest, we weren't the bottom quarter. We were average OECD in terms of how we taxed our job creators. Is that correct? Yep, absolutely. Okay.
▶ 1:46:20Seems like a good thing to do for team USA, but let's look at the results to make sure that they correspond with our philosophy of less what happened after that? Did uh corporate did did did capital investment and job creation go up or down as a result of the 2017 tax cuts? It it went up.
▶ 1:46:45I mean, uh great example you can use CBO's 2018 forecast and their June 2017 forecast. CBO before the law was enacted said asked what would happen. Look at what they predicted. Exactly that happened. You saw faster GDP growth, faster investment, faster hiring, more wages. Okay. How about unemployment? Where'd that go? Uh it went down into the uh sub-3 and the 4%
▶ 1:47:07with with our um um minority Americans and uh female, it was record uh lows. And what about poverty? Poverty rates? Where did they go? I it was one of the lowest in decades.
▶ 1:47:20It's the lowest in recorded history. Okay, so that's what we got. We have a we And by the way, just to dispel this notion that the these were tax cuts for the rich, let's say it again. I wish we could say it all together in unison uh or sing it in a round. That'd be fun, too. But maybe some I'm just looking for a way for it to absorb. Because it's just a fact.
▶ 1:47:42I mean, we can debate philosophy, but I don't think we should be able to debate the Did the top 1% of uh income earners pay more in taxes after the Tax Cuts and Jobs Act or less? Well, they Yeah, they certainly paid less in taxes after the tax cuts in the law in under TCJA. So, TCJA it it My understanding is the top 1% paid more in taxes.
▶ 1:48:08Oh, in in dollar as a share, yes. As a
▶ 1:48:10of their taxes, it went up. And and so, the tax code in some respect became more progressive. I mean, I'm not sure I I think everybody should have benefited and should have benefited uh Um but nevertheless, it became more progressive.
▶ 1:48:28So, we what we do is we take that base of tax breaks that created all these wonderful things, and we supercharge those provisions that help working families. Why? Because working families lost $3,000 in wages. They were paying over 20% in increased prices. They had record interest rates on borrowing. And so, they were stuck.
▶ 1:48:55And so, what we did was we took fixed income folks, middle income folks, and we said, "Let's put a little more to to cut their uh you know, burden so they can have more take-home pay to deal with the cost of living a crisis. I I think that was a laudable thing. I think I think it was exactly what was needed, Mr. Chairman. Uh thank you for being for indulging me Um and I yield uh I don't have to yield. I went over my time again. Thank you, Mr. Arrington. Thank you, Mr. Schneider. Thank you, witnesses.
▶ 1:49:25Thank you. You're welcome. Mr. Hurd. Thank you, Mr. Chairman, for having us to a very important meeting. Thanks everybody for being here today. Appreciate the dialogue. In addition to allocating 90 billion dollars in tax cuts for the no no tax on overtime and 32 billion for no tax on tip workers.
▶ 1:49:43We had an additional 63 billion dollars tax cut to our seniors not having to pay wages or taxes on those social security It's estimated it went from 63% of social security age to 88% now they're not paying taxes on social security income.
▶ 1:50:01But I'm also proud of what we did inside the bill with a 529, the ability to use that to get certificates to you know, to make sure we have people that can actually get jobs and I spent 35 years in the restaurant business. So I know it very very very well. I know how impactful this has been to people that own restaurants as you both have testified to the people working in the restaurants helping the working families and the things are doing.
▶ 1:50:28But the um my bill was the education workforce freedom act which expanded 529 accounts to make K-12 education more affordable and meet the needs of American workforce. And it also allowed students including public, private and religious school students to use 529 savings account to cover eligible education expenses such as tutoring, standardized testing fees, educational therapies and among other educational expenses. And you know, as we work through this tax code issue and and Dr.
▶ 1:50:56Edwards, I I really appreciate everything you're saying, but I I wrote down cuz I kept waiting to the very very I listened to every word. I don't always do this with every minority witness, but I listened because as as Mr. Swacker said, I I really love economists as well. I love to hear what you have to say. But nowhere in your testimony did you ever say that we should ever cut a single dollar of spending, not one. An economist say that this has no political bias would say friends, you have the ability to make legislation.
▶ 1:51:24Let's look at how we balance this revenue and expenses. Not once in 5 minutes did you say it. I And if I missed it, I apologize, but I listened very intently. And so, you know, when I when I hear my it's rich to hear my Democrat colleagues cuz I sit in here the long hours. I worked on the tax policy. I grew up extraordinarily poor. I I appreciate everything the government does for those who need the most. There's no more benevolent country in the world than America. None. Zero. That's why people are kind of get here at any means.
▶ 1:51:52But, it's rich for my friends across the aisle to say that, you know, we're spending on big big business. I remind everybody about 2 years ago, we passed out of this committee 40 to 3 to get immediate R&D expensing, to get immediate expensing on capital purchases, and interested actually belly, 40 to 3. Now, I don't know if anybody's in this room. I don't see anybody over there voted against it. I know who they were. 40 to 3. And but not for the Senate not passing it, it would have passed. It would have passed.
▶ 1:52:21Democrats supporting the idea that giving businesses the opportunity to immediate expense would create a jobs to put Americans to work. So, it's it's really rich that they say they don't care about that. Mr. Alexander, I'm sure you're aware of this, but, you know, we need more people like yourself that go out and create businesses and work with their hands and skilled workforce. There's some 300,000 new welders needed in the next few years.
▶ 1:52:47So, can you talk to me or talk to this committee or talk to America about why it's so important to have this ability to use the 529 programs to go out and get these certifications so that you can go and come out of these with no student debt and to be able to do that. Yes, sir. Thank you. I know in my circumstance, I would have definitely appreciated that 529 early on.
▶ 1:53:09I would have used that and I'm sure other people um coming out of high school see that as another opportunity rather than maybe going to college, they can enter into a trade and have that benefit. I I appreciate that. Dr.
▶ 1:53:24Edwards, I listen, this is not picking on you because I I just really I just think that we need to talk to more American people because I think we the American people are frustrated with sending trillions of dollars to America to the to the United States government every year and seeing deficits and debts rise. Listen, I there is no stronger budget hawk on this dais than me. As the chair of the Republican Study Committee Budget Committee for 2 years and as the chair, I signed four balanced budgets in a row. You're exactly right.
▶ 1:53:52It's not getting easier under Democrats or Republicans, but the American people want accountability. They want if you look at what's going on, it's crazy. We invested in this bill. I'm looking here at the Tax Foundation $700 inside of this thing that that Democrats and yourself are demonizing to child tax To child tax credits.
▶ 1:54:14Nobody's mentioned how important that is so people can have a little bit more money that was built upon the TCJA child tax credit to give working families the ability to have child care for their sons and daughters as they go to work. $700 billion in this. We talk about the 4.5 trillion. I say this in chambers because there are Democrats and Republicans. I have yet I'm traveling the state today. Not today, but in this in my current process of what I'm trying to do.
▶ 1:54:42I've not had one Democrat come to me and say I wish you'd raise my taxes. And please, if they're in this room, I'll I'll meet you out back. Just tell me who you are. We'll write a bill for you. But not one single Democrat said raise my taxes. And you can say, well, wouldn't expect that. We got to be the adults in the room. But the American people are tired of this experiment of us never doing anything to balance the budgets. They really are.
▶ 1:55:06And when I look at this, of the 4.5 over this time period the Tax Foundation says just to keep your rates, everybody in this room, everybody in America's rates the same, is 3.2 trillion of that 4.5 trillion. So, what we're saying is is the American people are dumb. That they're better off to send that 3.2 trillion to us because we're better stewards of that money. That has never proven to be true. So, with that, I I really appreciate the opportunity, Mr. Chairman.
▶ 1:55:33I I'm I'm This is something that's really frustrating to me that we don't acknowledge that we're doing everything possible to keep as much money in the pockets of the American people as possible so they can spend it the way they see fit, not the way Congress does. I yield back. Thank you, Mr. Heard. I think we all got wrapped around the axle on some of this stuff. Mr. Schneider. Uh thank you. And I want to thank the witnesses. Mr. Schneider, you know, we sit here and we wait for our name to be called and every time your name is called, I say, "Wait, I'm not ready." Uh so, but uh thank you all for being here. Before I I come to the witnesses, I want to touch on a couple things.
▶ 1:56:03One, this idea that we haven't had a conversation about balancing the budget, and we have, and we need to, and I agree with my colleague. But, I'll tell you when the Democrats put forward the IRA a few years ago, we took efforts to to lower the debt. And that bill that was mentioned that passed here 40 to 3 that made investments in American innovation, American businesses, also had a major investment with the child tax credit that the Republicans let expire as we want to see it go forward.
▶ 1:56:34And I'll come back to that in a second to talk about where there's agreement and where there's um need to be fiscally responsible. But, let me again just thank our witnesses. I appreciate all of you being here, and I'm grateful that you're able to come here and share your personal stories. It's really important for us to hear about them. From building a family to pursuing an education to building a career or a business employing hundreds of people, you all represent every one of you, all six, represent the American dream.
▶ 1:57:01Despite what we've heard from someone on the other side, there is broad bipartisan agreement and support for helping working families, small business owners, and farmers succeed. We don't just want you to make ends meet. We should be talking about how do we help working families get ahead? How do we help more people re- uh realize the American dream?
▶ 1:57:23We want all Americans to feel secure in the present, hopeful in the future, and confident in their prospects of reaching their goals and realizing that dream. And too often we make it more difficult. Let me ask we did uh the chairman had you raise your hands earlier. Let me do the same exercise here. Let me ask the to the six, raise your hand if you know anyone who today worries about health care and their ability to pay for health care for their family.
▶ 1:57:50They I see most of people raising their What about and I don't mean to pick on you, Mr. CFO, but I know uh my son just finished law school. I know how expensive education is. My other son's about to start um his MBA. What about people who are worried about paying for education for themselves or their children? Do anyone know anyone worried about the expense, increasing expense of those things? I think we're seeing most raise their hand. Uh I'll be 65 this year. A lot of my friends are beginning to look at retirement.
▶ 1:58:17Do you know people who are worried about having a secure and and dignified retirement in the future? Again, uh raising your hand. And how about the debt? Anybody know people who worry about we're now sitting at 40 tr- Mr. Steve, I wish you had a longer arm, right? Uh we we worry about that. And as I said, I'm 65.
▶ 1:58:38My kids are probably closer to your age and I am terrified that we're leaving the next generation with the inability to tackle the opportunities they want and deserve because we're loading so much debt on you. So, here we are 1 year after passive passage of HR1 and a year and a half into the Trump administration, and the economy is anything but secure. Grocery prices are up. Energy prices are up. Healthcare premiums are up. Education through the roof.
▶ 1:59:04My Republican friends are here today taking a victory lap for literally kicking millions of people off of healthcare, taking SNAP benefits away from people just wanting to put food on the table for their children, and adding approximately $5 trillion to our debt. I can't overstate my frustration with the decision to hand over trillions of dollars in tax cuts to the most fortunate Americans, while adding that $5 trillion of debt to the next generation.
▶ 1:59:33I'm sure those who received the tax cuts at all levels of income are grateful for it. We don't blame them. Nobody likes paying their taxes. But, I bet if they knew what it was going to cost their future, they'd have second thoughts. $4.5 trillion could have been spent to address the needs of communities, working families, children, and seniors in need.
▶ 1:59:52We should be making sure that all Americans can afford their basic needs and pursue their dreams, take care of their family, put a roof over their heads, put food on the table, pay for education and healthcare, and secure their retirement. But, it also means helping everybody know that that future is going to be there for them. It means addressing Social Security and Medicare for the future as generations of folks in this body did more than 30 years ago.
▶ 2:00:18I think it's a disgrace that this bill became law and even more of a disgrace that people are trying to celebrate it. HR1 handed trillions of dollars to the most comfortable among us at the front end, but leaves those reaching for the future holding the bag tomorrow. Driving us into insurmountable debt and pulling the rug out from the most impoverished and vulnerable families who depend on Medicaid and SNAP. If the Republicans on this committee actually wanted to help, their tax bill would have invested in the future of growth.
▶ 2:00:47Would have added the uh child tax credit credit. Would have invested in all Americans and the American families for the future, long into the future in a responsible way. I'm out of time, but I wish we could come back and and look at this and do in a way that lowers our debt debt, secures our future, and makes more families confident that they'll achieve the American dream. I yield back. Thank you, Mr. Estes. You're recognized for 5 minutes. Well, thank you, Chairman Kelly, and uh thank you, Chairman Smith, for uh helping bring us together this morning.
▶ 2:01:17You know, as you all know, I look at the witnesses today, you know, I'm reminded that we aren't here just to talk about economic theory or about lines on an IRS spreadsheet. We're here to talk about tangible, real-world relief. The title of today's hearing says it all. Your paycheck, {comma} returned. For the past few years, everyday Americans have watched their hard-earned paychecks get absolutely eaten up by inflation caused by runaway spending by my Democrat colleagues.
▶ 2:01:45But, thanks to the leadership of this committee and the passage of the working family tax cuts, the one big beautiful bill, the tide is officially turned. This past tax season, American people just didn't file their taxes, they finally felt some of the historic relief that we promised them. Look at the data that's come in from this spring's filing season. The average tax refund broke records, coming in over $3,300 per filer. That's an 11% increase from last year.
▶ 2:02:10This isn't just a statistics, that's real money back in the pockets of people who built this country, helping them pay off credit cards, buy groceries, and repair their How did we do it? By listening to the forgotten men and women of America. We delivered common-sense policies that reward hard work and innovation, not government bureaucracy.
▶ 2:02:31One Kansan in my district, Deborah, shared with us that when she filed her taxes this year, she was surprised to receive a larger refund compared to last year, and that was thanks to the new $6,000 senior tax deduction. Additionally, millions of service industry workers, our waiters and waitresses, barbers, drivers, and so many others see the benefit of no tax on Over 25 million hourly workers who stayed late and worked hard kept more of what they earned through no tax on We permanently boosted the standard deduction,
▶ 2:03:02brought back full immediate expensing on it for our Main Street businesses, and ensured that 88% of our seniors pay zero tax on their social security. This hearing is our opportunity to look at the undeniable success story of the tax season. I want to thank our witnesses for being here to share some of their stories today. Uh Mr. Snyder, I will start with you. You know, as you look at the effect of the working families tax cut, can you give your uh perspective on the importance of the permanence and stability in the tax code?
▶ 2:03:30And can you tell us how businesses and families are reacting and how that translate into higher investment, higher wages, better opportunities for people and their families? Yeah, of course. Um permanent policy is is very important. tax salience is also important. Um so, if you have a permanent system, people are more more likely to understand the benefits they're receiving, respond to them the the way we hope, whether that's uh working more in the case of say overtime uh and the like.
▶ 2:03:56So, you know, permanence um provides that certainty especially for businesses that they know in the case of full expensing for equipment is now permanent, full expensing for R&D is now permanent, the EBITDA interest limitation is now permanent. All of those are are really helpful for long-term uh planning and for investment and growth. Yeah, thank you. Um Mr. Stefoe and Miss Miss McCollick and and Mr. Alexander, um all of you work in industries where either you or or your your colleagues uh actually benefit positively from no tax on tips or no tax on overtime.
▶ 2:04:27Um you know, you have more of your money for you know, uh spending on the the things that you and your family need. Uh can any of you talk about opportunities that you have to see uh to utilize that money for education, for home ownership, for family life, for your regular day-to-day businesses or regular everyday expenses. Sure. Thank you, sir.
▶ 2:04:50Um Yeah, so whenever this bill first passed, some of our co-workers were talking about how we may get a hammock and a pantry and stay up at the mill all the time for for the opportunity to get a lot of overtime. So Um but personally, my family me and my wife were planning on having children soon and working on that and and it'll be very helpful moving forward.
▶ 2:05:16For me, one of the things that you mentioned was providing housing and and being able to pay rent, having consistency and knowing that you're able to do that. I think one of the things that resonated with me, one of our stylists, who I didn't mention, told me that he saved every tip that he had for 1 year for a down payment on a condo. And a year later, he was able to be successful in to be able to purchase that. So I think that the tip portion of this bill was really important.
▶ 2:05:43I think just allowing them to keep more of that allows them to make those investments in themselves, which is critically important. Thank you. The nature of this restaurant industry for tipped workers at least is one that's kind of variable. Growing up during like going to restaurants and working at restaurants during school, I would oftentimes have conversations with my managers where I go, "Hey, I have this final coming up. I can't work this next week and a half." And they'd give me that flexibility.
▶ 2:06:08Having this refund come around mid-March, early I think it was like February, in the middle of my preparation for the LSAT exam, meant that I could take a little breathe like a breather. I could go, "Okay, I'm going to actually study, not have to worry about work for a little while because of that refund coming back to me." Great. Well, thank you all for being here and being able to talk about your stories and the positive success you've seen. Thank you. I'll yield back. Thank you. Mr. Smucker, you're recognized for 5 minutes. Thank Thank you, Mr. Chairman. Um thanks to each of the witnesses for being here. Dr. Edwards, appreciate you being here.
▶ 2:06:37I want to respond to just a few of the things that were said here in some of your comments. So, first um glad you're here, glad that you're participating in this debate. Your opinions are important. We're glad you're an American, and we hope that this tax uh bill works as well for you as everyone else here, and as well for as for everyone else in your uh income bracket, and we expect it'll do just Uh I do want to say um just a couple things.
▶ 2:07:03Um one, you talked about uh the impact of the bill on rural hospitals and access to care. We want everyone to have access to care. We want hospitals to work. That's why there's a a fund that provides additional resources for rural hospitals. Um but, I want to push back on your your characterization of uh Medicaid.
▶ 2:07:24Uh Medicaid, after the provisions the changes that we made in this bill, will from an annual uh reimbursement to the states of $691 uh billion to uh a trillion within the next 10 years. That's not a cut in Medicaid. In fact, what we're trying to do, and CBO back this up, is trying to ensure that Medicaid dollars go for Americans who deserve it and are qualified for the program. Do you think that's important?
▶ 2:07:55That Medicaid goes to individuals who are qualified for the program? What does qualified mean? Oh, there's clear qualifications for Medicaid today. I do not think that you should make people work to get health Do you think we should ensure that states uh require Medicaid recipients to to comply with the qualifications before they're given Medicaid?
▶ 2:08:17Well, I would never tell a state to violate federal law or order, but I would also not seek to ensure low-income populations by making them work if, for example, their health condition prevents them from working.
▶ 2:08:29Okay, I I want I need to get back to uh another You You agree there was a conversation about who is benefiting from this bill. Um you agree that lower-income workers in the lower brackets uh or maybe let me put it this way, income workers who are are tip workers uh because it may not always be lower-income brackets uh or overtime are going to pay less this year or pay less after the first year than they did before. Do you agree with that? If they
▶ 2:08:56Okay, they'll pay less in taxes. If they successfully claimed the credit. Yes. Uh so, they'll pay less and an individual who is on the higher brackets will pay the same as he would pay the year before. Uh the answer is yes. Um uh because we uh simply extended those tax uh rates from 2017 that were in effect. So, the answer is yes.
▶ 2:09:23So, the You know, the when you say that this benefits higher-income earners uh more than lower-income earners, it's just not true. The facts uh are what they are. Do you think we have a progressive tax Less than it used to be. Uh what what percentage do you think the lower If you divide into quintiles, what does the lower 20% uh the lowest quintile pay in taxes? Of Of households or filers? Um households.
▶ 2:09:53Households, the bottom quintile uh you'll have mostly Uh they don't earn any They They They pay less than zero, right?
▶ 2:10:00Well, or they don't have any tax liability cuz they don't
▶ 2:10:02What what percentage do you think the top 20% quintile earners pay? All right, the top 1% pays about 45% of all taxes. The top
▶ 2:10:12as a percentage of income. Oh, as a percentage of income. The bottom 50% of filers, it's roughly 3%.
▶ 2:10:19And what's the top? The top is going to be around 23. I have a chart. That's right. And and I specifically want to address this because some of the rhetoric that you've put forward and Democrats put forward paint an entirely different picture and I had someone come into my office just last week who actually believed some of the things that Democrats are saying, who believed that higher income earners were paying less as a percentage of their taxes than lower income earners.
▶ 2:10:46This chart shows of course exactly uh the opposite. This shows the the bottom 20% over here pay uh minus 3.6% dollars. When they file taxes, they get money back. And the top 20% pay pay 25 and a half percent. That's a very progressive tax system. That doesn't mean that they're only paying more dollars, which of course they are because they're earning more, but they're paying a much higher percentage of their total income.
▶ 2:11:15Based on the rhetoric we hear, people don't think that this is true. My constituent literally did not think that this is true and I've had to produce something like that to prove it. The other point, your point you just made, the uh higher income earners pay most of the federal dollars. You're concerned about the debt. I appreciate that concern. Uh 3 and a half trillion dollars of the dollars coming to the Treasury was paid by the top uh 20% last year. And you want to know something?
▶ 2:11:43After 2017, as a percentage of total revenue coming in, that went up. Because their income went up, sir. So not only No, as a percentage. As a percentage of the total revenue, it went up and the total dollars went up. So not only did we make it more progressive in 2017, we made it even more progressive in the tax bill uh that we just did. And I'm sorry, I'm out of time. I hear the gavel. I'd love to talk more. Thank you.
▶ 2:12:11I'd like to hear more, but but we're on a time basis here. Mr. Gomez, you're recognized for 5 minutes. Thank you, Mr. My Republican colleagues, just say it with me. If you're rebranding, you're losing. And that's what you're trying to do when it comes to having these hearings and these dog and pony shows when it comes to what is actually called the one big beautiful bill.
▶ 2:12:37You're rebranding, you're losing cuz that bill is so unpopular because of what it did to the American people, who it favored, who it favored, who it favored at the expense of the working class. $1 trillion in Medicaid cuts, $200 billion in SNAP cuts, tax cuts that favored the wealthiest Americans and the largest corporations in this country at the at their expense.
▶ 2:13:06And let's not forget, when you guys were cutting the money in the Energy and Commerce Committee, your Republican colleagues were doing all that slashing to those programs. And this gentleman who uh Mr. Alexander who said him and his wife want to have I love it.
▶ 2:13:27But a lot of the births in this country are actually um people who are on So, all of a sudden they're not going to be able to they might not be able to get the kind of care and the treatment that they need to have that family. So, if you're rebranding, you're losing. And that's one of the things we want to kind of focus on. And I know the people my Republican colleagues talked about what are people feeling in real life, what kind of impact real life.
▶ 2:13:57Well, let's talk to the American people and what they're feeling in real life. A CBS News poll said that um asked the question, is your income keeping up with the inflation? 77% said no, it isn't. No, it isn't. And that's because if you add into the cuts to those programs, there's another 2,500 every family is paying because of Trump's reckless tariffs, increase in the cost of goods, baby shoes.
▶ 2:14:2699% of baby shoes are made outside of this country. Cribs, most are made outside of this country. Car seats, most are made outside of this country. You go on and on and on. Those costs, those tariffs are going to impact how you be able to raise that child. And I know cuz I have about a 3 and 1/2 year old. So, this is not a working family agenda. This is a squeeze the middle class agenda. And so, what else is going on?
▶ 2:14:53Rent is going up and up and up. Uh paying for groceries, up. Child care, up. Everything is up. And now, families are actually in a worse situation. One in eight uh is now uh one of eight credit card holders are behind on payments. Behind on payments.
▶ 2:15:18Auto loan delinquencies are reaching a record a record highs not seen in over 30 years. As a like coming from a working class my family and uh my mom worked four jobs a week to make ends meet. Uh we never had health insurance. My dad worked two jobs a week to make ends meet.
▶ 2:15:37Um I know the cars are something that is just crucial to get to work, to take your kids to school, if you have um to provide for your family. So, when auto loans are reaching the super high rates, it is a signal that the economy is not doing well. The American people are not doing Because they need that.
▶ 2:16:05That's life That's their That's the the lifeblood of being able to provide for their families. It It is a big deal. And we keep And we saw it started seeing this last year. And it's continuing and getting worse. So, we want to talk about real-life consequences, how this is like how the American people are feeling. My Republican colleagues don't want to look at the entirety of people's experiences.
▶ 2:16:34People don't give a damn about their one big beautiful bill and how it benefits X person. They're thinking, "Can I make ends meet this Can I Can I pay down a little bit of debt if I have any money left over? Is the war in Iran, that was a war of choice by this president, going to drive up gas prices higher and higher? And when is that going to abate?" That's what they're asking themselves.
▶ 2:17:02So, when they're the Republicans are they're trying to fool the American people of the damage that they actually caused to the American worker and the American family. And yes, things will get worse when it comes to gas prices. They just want to make They're trying to rebrand and hopefully survive the midterms. That's their That's their That's their their approach. That's their goal. And they're not going to do anything to help the American people actually get by. With that, I yield back. Mr. Castor, you're recognized for 5 minutes.
▶ 2:17:32Thank you, Mr. Chairman. Thank you for the witnesses for appearing today. Uh Ms. Mahalik, if I if I can with you, was impressed when Chairman Smith talked about the very first hearing he had was a a field hearing. We've done a number of field hearings in this committee where we've gone outside of Washington, D.C., and really gone to the witnesses. And we had a hearing a few weeks after we passed the one big beautiful bill last year in July.
▶ 2:18:01Uh and one of the witnesses I remember was a man who owned convenience stores and office buildings. They talked about how that that model was really affected after COVID when wouldn't go back to their offices for a But then how the which which gave the tax break for the deduction for small business was really able to help him in terms of of growing his business.
▶ 2:18:32You've got a lot of varied interests from your salons to your Subway stores. Can you talk about the section 199A and the permanency and that 20% deduction what that's meant for your collection of small businesses? Thank you so much. Uh, some of our businesses eventually will really benefit from that section. We currently have been in a growth mode and have been able to take advantage of bonus depreciation, which we have done.
▶ 2:19:02Obviously, that will eventually run out and we are always ready to pay less taxes. So, if there's anything that's going to help us flow through more income to the bottom line to help us reinvest in our employees and our businesses, it would be a good thing for Well, with with section 199A putting more money back in the in the pockets of small business that does allow you to hire more employees, I would suspect, And pay increased wages.
▶ 2:19:32Which we are doing in Nebraska with our mandated minimum wage. Yes. Good. Thank you very much. We appreciate you you being here today. Thank you. Mr. Saunders, if I if I can with you, talked about the um the financial challenges, if you will, with with adoption with your first and second child.
▶ 2:19:53Can you talk about the child tax credit and what that's what that's meant and how that how that figures into all the expenses that you you and your wife outlayed to adopt your two children. Absolutely. Um any benefit that we can get for having a child is going to be helpful.
▶ 2:20:14you know, again we're I'm a school teacher and my wife works at a church, so our income is is not super just being able to have that money to be able to spend even on them. Um just having money to put towards college, put money towards um their future. Every little bit is beneficial. You also talked about the I think the second child you adopted was last year in 2025.
▶ 2:20:44Is that right? Yes, sir. Uh he was born in July, and so he finalized we finalized his adoption in January. So, we didn't quite make the cut to take advantage of the adoption tax credit. It'll have to be in 2026 for that one.
▶ 2:20:59When uh when you were working on your taxes for last [clears throat] year, you did get a a fairly substantial refund as it relates to that adoption. Is that right? For the 2024, yes.
▶ 2:21:12It was around $20,000, $21,000. Yes, sir. Is that that correct? in terms of other parents who are looking at adopting, this new tax law does provide incentive, doesn't it? Yes, sir, it does. It makes it where it feels like it's it's something that can be affordable to a family.
▶ 2:21:35Cuz the financial if you're talking about 20, 30 thousand dollars to invest in your not a lot of people that's a car that's that's paying for an entire car, right? Just to start to have a child. And uh and even that comes with risks, where sometimes it placements don't happen, and sometimes you incur even more costs.
▶ 2:21:57So, just being able to not have to, um, and just having the ability to not have to sacrifice as much to have that standard of living for your family is super helpful, and and having that money coming back in our pockets in 2026 tax um, being able to apply that adoption tax credit for our second son will be a huge benefit to our family. Thank you, Mr. Saunders. Thank you again to all the witnesses for appearing, and Mr. Chairman, I'll yield back my time. Thank you, Mr.
▶ 2:22:27Kustoff. Ms. Meindl, you're recognized for 5 minutes. Thank you so much, Mr. Chairman. I want to thank all the witnesses for joining us here today from all around the country. You know, I I know members of this committee really appreciate the sacrifices that you're making to just be here today. Um, as the, uh, uh, Chairman Jason Smith mentioned, you know, none of you are billionaires. I I I I'm assuming you didn't fly here on private jets. She actually had to pay for, you know, pay the book the cost for to get here, and we really appreciate you being here today.
▶ 2:22:55Um, I think this filing season has proven beyond a doubt that Republicans, when we're in control, um, control the levers of power, we really deliver real results for American families and workers, and like the ones that you see in front of us today. And let's be clear, I mean, I've heard the the comments from my, uh, colleagues on the other side of the aisle who really don't care about your stories. They don't really don't care about what what you have to say.
▶ 2:23:20They don't want to hear about the positive, um, um, benefits that you've gotten from policies that have been passed. I mean, you just heard it. Nobody cares about it. Nobody wants to hear about that. I disagree, and I really appreciate you being here. But let's be clear, if Democrats had their way in the past year, the tax bill on the average American family would have increased by an average of $1,700. That's on the average American taxpayer.
▶ 2:23:48But in the Working Families Tax Cuts, one provision that really struck out to me is making the boosted standard deduction. So, this is for everyone. This is not just for billionaires, this is not just for millionaires, but this is for the majority of people who actually file their taxes. That they boosted the standard deduction, the IRS data shows that up to 90% of filers opt for the standard deduction after it first doubled in the TCJA.
▶ 2:24:12But for the tax year of 2025, the standard deduction was $15,750 for single filers. It was $23,625 for heads of household and $31,500 for married couples filing jointly. And in addition, it was adjusted for inflation each year in perpetuity to ensure that Americans continue to fully reap its benefits. If that is not helping hard-working taxpayers, hard-working Americans, I don't know what is.
▶ 2:24:40Provisions like the boosted standard deduction contained in the Working Families Tax Cuts have provided critical help to many middle middle-income families that no longer pay a dime in federal income tax. So, a family of four with two children earning up to $73,000 now owes zero federal taxes. And that is real relief for working parents, for Main Street, and for the backbone of our economy. Mr.
▶ 2:25:04Alexander, I want to thank you for being here today and for the critical work that you are doing for the Americans steel manufacturing. And as you know, the Working Families Tax Cuts significantly expanded expanded the 529 savings plans so that they can now be used not just by four-year universities and colleges, but for registered apprenticeships, for trade school certifications, welding programs, and for tools and equipment that are needed for skilled trades.
▶ 2:25:29I have long been a proponent of this approach to help people find new careers or to support North Texans hoping to break into these types of jobs. From your experience working in a steel mill, how do you think this benefits the next generation of steel workers in your mill or even current workers like yourself. Yes, ma'am. Thank you. Um I know for me personally this would have been a great opportunity to uh as starting out as a welder to have these options.
▶ 2:25:55And so uh younger people coming into the mill now, they have those options and I believe they will take advantage of it, especially having um the overtime tax breaks along with it along with the industry uh be a great benefit. Okay. Um in this job I hear over and over again that we are not replacing enough retiring workers in the manufacturing sector. Do you think that more people would go into welding or the trades and bridge that gaps if families could use education savings account dollars to help cover the cost of training? Yes, ma'am. Absolutely.
▶ 2:26:24And I would have earlier on. Good to know. Uh Mr. Schneider, going back to the subject of the standard deduction, um in your expert opinion, how beneficial is the permanent boosted standard deduction for middle-class workers in terms of things like reporting requirements from itemizing and keeping um their hard-earned income? Uh yeah, great question. It's benefits about 90% of tax filers. It's about 12 billion to 18 billion in tax relief.
▶ 2:26:51I'm sorry. It affects how many? Uh 90% of tax filers, roughly. So, the vast majority of the country takes the standard deduction. It used to be about before TCJA was about 70% would take it. So, it's dramatically simplified filing for for majority of tax filers and provides about annually about 12 to 18 billion in tax relief for all of those individuals. Why do you think that they take that now versus in the past? More people take it now.
▶ 2:27:14Um a larger Well, when the SALT deduction was capped at $10,000 and mortgage interest was reduced, while SALT um the standard deduction was dramatically increased. It made the standard deduction just simpler, easier, and better than itemizing. So, wait. You're telling me that we're actually simplifying filing with taxes? That's correct.
▶ 2:27:29Are more people getting to keep what they make? Yes. And are larger tax returns being given to the American people? Yes. And that was as a result of this bill? Correct. Excellent. Thank you very much for your testimony. I yield Mr. Beyer, you're recognized for 5 minutes. Mr. Chairman, thank you very much, Madam Ranking Member, and thank you all very much for being here. I just want to say that I like and appreciate my Republican friends talking about all the tax breaks.
▶ 2:27:52I am concerned that aside from this meeting, most of the rhetoric is about the debt, which I very much care about, $40 trillion now equal to our national GDP, and we're doing very, very little about that right now. We're just talking about giving money back, not where the money's coming from. I also don't think it's fair to say that we don't like hearing about it. As the father of two adopted children, I I wish we had that back when I was a young man. I love hearing about uh overtime workers not having to have taxes on it.
▶ 2:28:22I do object to the fact that so many people have to work overtime just to make ends meet, that 40 hours isn't enough for many, many people to get by in this And I and I do think that what I'd like to talk about is the tax on non-working Um because one of the things that really upsets me about this bill is not the people [clears throat] that worked hard and built a business and invest over the Um their taxes, they pay taxes on it.
▶ 2:28:47But rather, our tax structure very much benefits children born into that family. My Republican friends and the president chose to give a few thousand heirs of multi-million dollar fortunes a $200 billion tax break by making the previous custody estate tax permanent. Um Chris Van Hollen, the Senator from Maryland, and I have a bill that reduced the income taxes for every American making less than $135,000. We don't want to touch a $200 tax break for the richest people in America.
▶ 2:29:15This was originally given in 2017, and it's made our debt worse, and and it's moved so much of our country in the wrong direction, especially we consider the war of choice in the Middle East weighing on working middle-class Why on Earth give the wealthiest people in the who've done nothing except being born to a rich mother or father or grandparents or great-grandparents a gigantic tax cuts when ordinary Americans are struggling.
▶ 2:29:42We hear every day from the young people, the the kids under 40, under 35, under 30 that they can't afford to buy a house. Maybe we'll never will ever be able to. That they can't afford a car, that they're postponing having children, that they're postponing marriage. Um all while we have a handful of people, a really small number, that are taking this huge $200 tax break. And how do we pay for it? Well, we we've talked before about slashing funding. We've cut Medicaid. It looks like it could be a trillion dollars out of Medicaid.
▶ 2:30:1235,000 people in Virginia have lost their health insurance just this year because of the cuts due to Affordable Care Act tax credits. Vulnerable Americans with disabilities. If the goal was to cement the dominance of a new class of American aristocrats, they've done a really really good job. And given that since the 2017, we've seen the number of billionaires in America quintuple um over these last 8 years.
▶ 2:30:35Yes, they're paying a greater more dollars per person, uh not a greater share of the tax burden, but they're doing it because we have this explosion of the very very wealthy. I don't begrudge them that. Um what I do begrudge is that they can then make sure that their children and grandchildren and great-grandchildren never have to work again. And there's the step-up in basis, which means that they're never going to pay capital gains on it. As long as you hang on to it and pass it on to your kids.
▶ 2:31:01No, the capital gains is completely And the whole notion that uh yeah, I paid taxes on it, but but my kid didn't pay any taxes on that. Right now, look at the numbers. It's Um some people say, "Well, what about farms and small businesses?" Right now, 2/10 of 1% of operating farms would be subject to the estate tax. That's two out of every 1,000 farms. The share of estates worth more than half of their assets in businesses is nine out of every 10,000 businesses that are doing that. So, it's a relatively small group.
▶ 2:31:32And so, we got we got the new Gilded Age and I'm just really concerned about it. So, Dr. Edwards, you have a minute. I'd love for you to think about what this means to our our culture and this division between the very rich and the very poor, which by the way is incredibly destabilizing for Yes, I I mean, Mr.
▶ 2:31:52Smucker has left, but the reason why the top 1% is paying so much in taxes despite having a lower rate and paying a smaller share of their own income is because their own income has exploded so much. You have actively reduced their tax rates, but their income is climbing so quickly that they're paying more in taxes, making it look like your tax efforts are in fact reducing their, you know, increasing taxes on the rich, but really it's increasing income in the rich that has resulted in higher tax collections from them.
▶ 2:32:21Uh myself and others have proposed to bring the estate tax down from uh $30 million to remove the step-up basis and to use the proceeds from the estate tax to establish a children's trust fund so that every child in the United States can be apportioned from the fund uh something like a basic income that we had briefly through the child tax credits, child care, Medicaid, school meals, extra money for kids who have developmental delays so that we are taking from the very wealthiest children a little bit off the top to give children who were
▶ 2:32:51not so wealthy more of a chance and to relieve the burden that's the cost of children put on so many working families. And maybe that would get us to have babies again. Thank you very much. I yield back. Mr. Pitzer, you're recognized for 5 minutes. Thank you, Chairman Kelly. Thank you uh each one of you for coming today. You know what? I I just want to thank President Trump. I want to thank him for what he has done for families and for workers.
▶ 2:33:20Promises made, promises kept. Think about what has happened. Promises made. He said no tax on tips, delivered. No tax on overtime, delivered. Going to do double the child tax credit, delivered. Adoption tax credit nonrefundable and increased, delivered. Take home pay raising 10,000 10,900 dollars per employee, delivered. 7 million new jobs, delivered. It goes on and on. And what does this do?
▶ 2:33:49Think about it everyone. It helps every worker. It helps every single family reduce their cost and have more money in their pocket. More money in their pocket. What does that mean when you have more money in your pocket? That means you can buy more things. That means you can create your budget. That means you can cash flow things. Right? I hear all this BS. Oh, what it did to to the rich, whatever. What did it do for the businesses? What did it do for families? What did it do for the worker? It was incredible.
▶ 2:34:20And I'm so proud to be a part of writing that bill and delivering it and getting it done and working with President Trump. I want to just talk to you Mr. Alexander. I'm I'm proud of what you do. Steel steel mill worker, mechanical worker. We have a lot of skilled trades people in Iowa also. Just like you, they work hard. Right? They work hard every day. They they they create overtime. So, what does this mean to you when you have no tax on overtime? How does that help you? How does that create financial relief for you?
▶ 2:34:52Yes, sir. Thank you. I don't actually need the overtime, but I it's there when I do need it. And I'm thankful for those opportunities that have been made available through those tax cuts. And so, I can if I want to save up for something, I can pick up some overtime and it's there. It's available. Exactly right. Puts more money in your pocket, right?
▶ 2:35:12Yes, sir. That's right.
▶ 2:35:12More money in your pocket. Absolutely. Uh, Mr. Stefano. Uh, you work at a restaurant server. same thing. You work hard. I'm sure you work hard. So, what does that mean no tax on tips? What does that mean to you? How does that help you and and I know you're pursuing education and you're pursuing a future career. So, what does this mean to you to have a little bit more money in your pocket?
▶ 2:35:38I think what it means for me and everyone else is a tipped worker in my field is that there's opportunities that are opening for us that weren't there beforehand. There's a little bit extra money that we have at the end of the day that we can use for future retirement, investment, things like that, which is new for this kind of field. Yep, thank you. And then also, Mr. Saunders, public school teacher. Uh, you adopted kids. Thank you for doing that. Awesome. That is awesome. So, what did that adoption credit that the extra dollars how how did that benefit you?
▶ 2:36:11just it gives us the freedom to have a lifestyle [clears throat] and a life that is enjoyable and comfortable. Uh, we don't have to struggle to make ends meet when we can have something like adoption that costs so much um, to be able to be funded or at least partially funded by that refund.
▶ 2:36:31and again, I I just implore Congress to continue to explore whatever opportunities you can to help finance more adoptions so that these kids have better families, better futures, and are actually a less tax burden on other programs. Yes, thank you. You guys are great Americans. All right, you work every day. You get paid. All right, you're real. You've been affected by this Families Tax Cut Act by putting more money in your pocket.
▶ 2:37:01It's helped all of you. I just want to say to all of America, that's what this bill does. I want to thank President Trump again. I want to thank all of us that wrote the bill and got it done. Delivered the result for the American people. Thank you and I yield back. Thank you. Mr. Santos, you're recognized for 5 minutes. Thank you, Mr. Chairman. Thank you to the witnesses. We really appreciate you taking all the time to be here today. It's a great service that you are and like Mr. Feenstra said, you're all great Americans. We really appreciate you being here today and taking this time. Uh I want to ask a couple of you couple different questions.
▶ 2:37:31Mr. Santos, congratulations on your adoption. Uh would you say the economy's in good shape right now? I would I would say that the costs have increased a bit in a lot of different areas of our lives. Mr. Stefanik, would you say the economy's in good shape right now? Costs have increased for sure. So, that's So, that's like not good, right? That's bad. Costs have increased, but there's also some money going back in a worker's pockets. I don't know. Okay. Ms. Mihalik, how do I say your name? It's Mihalik.
▶ 2:38:01Mihalik, Ms. Mihalik, what would you say? Is the economy in good shape right now or is it kind of tough? I can speak just from my perspective. First quarter was a little soft for us. Second quarter really has started to become better for us as far as sales increases over last year. I see you have like 21 Subway stores and some other franchises. Aren't the cost of goods going up pretty dramatically? Yes, sir. I would say that labor. Yes.
▶ 2:38:23Why do you think the costs are going up so much for the cost of goods that you purchase for your Subway shops and other franchise? Certainly supply chain affected it after COVID. Um and I think, you know, we we continue to feel the impact of that.
▶ 2:38:35keep on going up a little bit now, right? Because of fuel costs and because of the tariffs? Our buying group does a really nice job, actually. We've actually had some decreases because of their hard work in trying to source different things.
▶ 2:38:45Well, when I talk to economists throughout the country, they say that the war has caused everybody's gas price. Mr. Santos, do you drive a a car? I do drive a car.
▶ 2:38:54You have an electric vehicle or you use gas? It's gas-powered.
▶ 2:38:57It's gotten pretty high, right, recently? Yeah. I'm in Texas, so the prices are a little lower in Texas. Yeah, what what How much Do you know how much you're paying a gallon? I think most recently it was around 360 a gallon.
▶ 2:39:10Oh, there was some report the other day that every state's over $4 a gallon now. My state, I'm paying 457. How about you, Mr. Stivers? Do you drive a car? Yep. Gas prices going up? Uh I drive electric, but yeah.
▶ 2:39:20drive electric?
▶ 2:39:21Yeah, no one you don't have to drive a gas car to know gas prices are definitely going up.
▶ 2:39:24Yeah. Mr. Alexander, welder, right? Are you welder Is a millwright the same as a welder? Yes, sir. Millwright. We weld. It's kind of a multi-craft. Yeah. How is uh How's the econ How do you think the economy's doing generally? Uh in comparison to Just right now. How do you think the economy's doing? Is it doing well or is it doing poorly? I would say in comparison to the previous administration, I would say it's okay for me. It's okay for you? So, gas prices are not up where you Well, like I said, in in comparison.
▶ 2:39:53How about the grocery store? Yeah, it's better. It's better? Oh, that's not what people are saying throughout the country. Mr. Snyder, I know you're an expert used to be on this committee. How would you say the economy's doing right I'd say it's in a modest shape. It's got a unemployment around 4 4.5% which is low. Robust growth 2.6% year-over-year.
▶ 2:40:13Yeah, 72% of Americans are saying the economy's in bad shape, just so you know. They're not happy with the economy. Dr. Edwards, how would you say the economy's doing right now? The economy has been slowly slowing for the past six quarters and if we do not turn that around, we will slowly enter a recession. Yeah, so most experts and even the general public is saying the economy's in very bad shape right now. Affordability is the number one issue in America. And you know, I think that anybody would you know, you guys were chosen as witnesses because you benefited from the tax bill. I heard someone say earlier, I don't know if it was Dr.
▶ 2:40:43Edwards or one of the one of the people up here said you represent 6% of the people that receive tax benefits. Most of the tax benefits went to people much wealthier than you. I mean, Mr. Mihalik is probably doing pretty well with 21 stores, but the uh We You can't begrudge people for getting relief on overtime. Do you know what the cap on the amount of overtime you can you can claim, uh, Mr. Alexander? What's the cap on the amount of overtime you can claim this this deduction for?
▶ 2:41:14Uh, if I'm married, I believe it's 30,000. I think it's 25,000. If you're
▶ 2:41:20you're married, it's 12,500. Do you have to pay social security on your overtime still though? Uh, yes, sir. And Mr. Stiffler, you do the taxes. It's the same type of thing, $25,000 cap. Do you have to pay tax social security taxes on your overtime I'm not sure I don't get overtime, but I think the same rate
▶ 2:41:37I'm I'm sorry, not overtime, on tips. I meant on tips, I apologize.
▶ 2:41:40yeah. Yeah, and you have to pay you have to pay social security on even that 25,000. You still have to pay taxes social security taxes on those things. I mean, I want to be clear that it's a very good thing. We need to make sure we have a social security net for us in the future, but it's good to also have the deduction from the taxes so that workers get to keep more what they earn. Yeah, deductions are a great idea. It's wonderful. People save more money in people's pockets. We all that's the great thing. There were some bad things in that bill though. So right now we see prices going up from tariffs. We see prices going up from the war.
▶ 2:42:10We see prices going up from having so much debt, the most amount of debt in the history of our country, which causes upward pressure on interest rates. As a result, it's harder to borrow money to buy a home or to lease a car. We see upward pressure on health insurance costs, and we see upward pressure on energy costs in our country. All these things are going up specifically related to policies of this administration. But thank you so much for your time. We really appreciate you being here. Mr. Horsford, you're recognized for 5
▶ 2:42:36Thank you to the chairman and to the ranking member. I want to continue on the line of questioning from my colleague Mr. Suozzi to talk about the other added costs that workers are experiencing and to step back and and really discuss the full household budget that workers, particularly tip workers, Um they rely on Medicaid and they rely on the Affordable Care Act as well.
▶ 2:43:04So, even if a worker receives a temporary tax benefit, that benefit can be wiped out with their monthly health insurance premiums um that are at risk and if nearby hospitals and clinics face new financial pressures and aren't even In fact, because the enhanced premium tax credits were allowed to expire and Medicaid is facing new cuts, some worker working families could see premiums rise by up to $180
▶ 2:43:36every single month. That's over $2,000 a year. So, um Ms. Mahalik, would you agree that working families for working families a tax refund is only meaningful if they're not losing more on the other side of the ledger through higher health care cost or reduced access to care? Sir, I really was just coming here today to speak about the benefits of no tax on tips, not more of a global conversation.
▶ 2:44:05Right, but health care is in this bill. They call it the one big beautiful bill. I call it a betrayal of a bill. In that bill, it cuts a trillion dollars out of our health care system. So, just from a business standpoint, wouldn't you agree that if your workers have to pay more in cost through health care, that that's doesn't equate to some temporary relief that they might be getting on this side?
▶ 2:44:34Having access to affordable health care is certainly something that we always have to be focused on.
▶ 2:44:38Thank you.
▶ 2:44:39Um and certainly making the health care system more efficient in that regard. Agree with you there. So, I represent Las Vegas, large percentage of tip workers. And Mr. correct? In your testimony, I commend you for what you've done. Your story, you're pursuing your legal degree potentially in the future. Um and it's a powerful story.
▶ 2:45:05And I've heard a lot of other stories just like yours in the in the in the with the constituents that I represent. One of those constituents that I met recently, her name is Leslie. She's a bartender in Las Vegas. She discovered that because she and her husband, who's also a tip worker, file uh their taxes jointly, they face what amounts to a marriage penalty uh under the current law.
▶ 2:45:30And for workers who are paid through service fees or automatic gratuities, those earnings don't count as tips under this bill that was passed by the other side. Would you agree that if Congress is going to say no tax on tips, that the policy should actually work for the workers who rely on tips, including married workers and workers paid through automatic gratuity? Shouldn't that be something that the bill should accomplish?
▶ 2:45:56The automatic gratuities, I'm not 100% certain on along with surcharges uh service charges. They're not included. Pardon? They're not. Yeah, but I can agree with you 100% that the no tax on tips right now for the servers who are getting the voluntary tip, if you're filing jointly and the amount is 25,000 for an individual, that if we're filing jointly with a married couple, it should 100% be 50,000. I agree with you there.
▶ 2:46:18And so that's something that was promised, but because they didn't take the time to write it correctly, it's it amounts to a marriage penalty. That's why I've introduced the Tips Improvement Act to correct this issue with so we don't have this marriage penalty and so that we address the automatic gratuities not counting as well. Well, Congress Definitely. I'm reclaiming my time. Just yes or no, Mr. Schneider.
▶ 2:46:47Are you aware that the subminimum wage, which is $2.13 an hour, has not been increased since 1991? Are you aware of that? I wasn't aware of that. So, it's a fact, the subminimum wage, which is the basis by which tip workers are paid in many states, um, is $2.13 an hour, and it hasn't been raised since That to me speaks to
▶ 2:47:18not putting more of the money in the pockets of the people who earned it, and that's another thing that my bill, the Tips Improvement Act, addresses. Finally, Mr. Alexander, on the issue of this overtime, Representative Malliotakis and I introduced the No Tax on Overtime for All Workers Act to ensure that millions of the workers who are left out of this bill are actually included. So, Mr.
▶ 2:47:42Alexander, if two workers both give up nights, weekends, and time with their families to work overtime, should one get tax relief while the other is left out because of a tech techni- technicality in the statute? Uh, thank you, sir. Uh, I believe that they could, uh, benefit from however they see fit. So, under the Republican bill that was passed, millions of workers are excluded because they didn't write it correctly.
▶ 2:48:11Millions of workers who work overtime like the ones that you referenced, um, should be able to get that benefit, and Representative Malliotakis, who is a Republican, and I are working to try to fix that. So, this is why I would just prefer us to work on getting the policy right. I commend the workers who are here today.
▶ 2:48:31You are the people that we should be fighting for, and I'm working to make sure we actually have a working tax cut plan that works for for people, not for the billionaires and the big corporations who benefited from this betrayal of a bill. I yield back. Dr. Davis, you're recognized for 5 minutes. Well, thank you, Mr.
▶ 2:48:50Chairman, and I certainly want to thank all of the witnesses for the long time that you've been here and for the excellent experiences and testimony that you've given and shared with us. I want to thank you, uh, Mr. Sanders, for highlighting the importance of a fully re funded a dump adoption tax credit to ensure that every eligible family receives a full value of the tax credit.
▶ 2:49:20So, thank you very much for your explanation and your experiences and what you and your family have done and are doing. I'm proud to co-lead the adoption tax refundability Act that would remove as a barrier to adoption. I'm also pleased that the law now allow partial refundability of up to $5,000.
▶ 2:49:50I've heard about many families who adopted in 2025 receiving the 5,000, but I'm still working with the Internal Revenue Service to make sure that families who adopted to 2025 receive the $5,000 for their outstanding adoption credit. Dr.
▶ 2:50:14Edwards, I recently received data from the Internal Revenue Service about where the 3.4 million taxpayers who had delayed refunds live. Alarmingly, 110,000 Illinoisans had delayed refunds.
▶ 2:50:37in California, in Texas, in Florida, and the list goes on. For months, Representative Sewell and I have asked the administration for basic information to determine if the 3.4 million taxpayers with delayed refunds have received their
▶ 2:51:08We haven't gotten any information yet, and I'm worried that the reduced and staffing at the Internal Revenue could be delaying these refunds for who likely need the money the most, like the elderly, the poorest people who are unbanked. So, Dr.
▶ 2:51:32Edwards, given your expertise, uh can you talk about, as we close, how delayed refunds and returned Internal Revenue resources mean to vulnerable the most vulnerable taxpayers? Thank you, sir.
▶ 2:51:57the share of loans for auto loans and credit cards that are in 90-day delinquency are at rates that we have not seen since the financial crisis. That type of acute squeeze on credit is occurring in an economy where consistently for about 7 years, 40% of Americans will say they did not have enough cash on hand to meet a $400 expense without going into debt.
▶ 2:52:23That that number has hardly budged throughout the, you know, twist and turns our economy has taken over the past 7 years. So, we have a permanent, you know, large class of Americans who are right at a knife's edge. Now, that's not to say that they would necessarily fall into financial ruin, but they're they're in a position to have to borrow when they're already borrowing too much, likely. They're in a position to have to borrow when if they are unbanked or underbanked, they're going to have to go into alternative financial services that high that charge much higher rates of interest. You know, debt is not free.
▶ 2:52:53Interest is not free even for low-income Americans, and I it is of incredible concern if someone is owed money who is incurring debt in order to wait for it to come. Thank you very much, and once again, I thank all of the witnesses for your endurance and for a great hearing. Mr. Chairman, I thank you and the ranking member, and yield back to balance of my time. Thank you, Dr. Davis. Mr.
▶ 2:53:19Representative, Thank you, Chairman Kelly, for hosting for holding this important hearing today. Also to Representative Davis for his remarks on the adoption tax credit, which I'll speak to to to some of that. He and I co-led that effort. I want to begin sharing a couple of real-world stories of how this committee specifically delivered relief for American families and potentially changed their lives.
▶ 2:53:46Matt from Logan, Utah, northern part of my state, has a 4-year-old son who isn't old enough to go to school. He and his wife both work and pay approximately $7,700 each year for him to attend a local daycare. The expanded child tax credit of $2,200 covers nearly a quarter of his yearly day daycare costs.
▶ 2:54:10young newlyweds who are in the process of adopting a little girl told my office that the working families tax cuts making $5,000 of the adoption tax credit refundable relieved some of the financial barriers for them to start their family. I'm proud had have led out on this effort, again, with my colleague uh Representative Davis.
▶ 2:54:29I'm proud that I can go home to Utah families and tell them not only did we prevent the largest tax increase in American history, we focused the benefits on low- and middle-income families and set our gener- next generation up for success. I was proud to lead the legislation proposing Trump accounts, which establishes investment accounts for every American child. Mr. Saunders, uh thank you for being here today. Can I Can you speak to Trump how Trump accounts will will help your two Yes, sir.
▶ 2:54:59So, um I just recently uh read about the Trump accounts, and I think that's a cool, unique opportunity to create a retirement fund uh for the kids. So, Levi would actually benefit from that cuz he was born uh in 2025.
▶ 2:55:16Uh he would get the additional $1,000 seed money, which would be a huge blessing to start not only funding uh him through a college fund, but also this fund to help him just understand just the necessity and the the realization that you should s- you should save up for retirement, you should save up for uh bigger things in in your future.
▶ 2:55:39And so, um we're both me and my wife are looking at the Trump accounts that will start in July, and uh we'll probably consider putting money towards them. The Invest in America initiative that started several years ago that has broad support. Uh we culminated it, we got it done last year. It's even more than that. Mr. Saunders, I'll add to your experience with it.
▶ 2:56:02Can you think of an initiative, this is rhetorical, but can you think of an initiative that has drawn already so additional private capital? So, the thousand bucks that you mentioned about your son, it's your dau- son or daughter, that's amazing, it's great, it's going to set them on a new footing, but we're talking six billion dollars from one fi- family foundation, private foundation. Other companies have come on board, they're going to start matching this.
▶ 2:56:25This is galvanizing the the the private sector, the non-profit sector to be able to get in and to go support our next generation knowing what they have ahead of them. Uh it's it's something fascinating and it will change the mind frame from this next generation to say, "Hey, investing is easy for me. I now have a place to put it.
▶ 2:56:44I can go put $15 that I made from mowing that lawn and I can watch it grow in the next 10 years, 20, 30, and hopefully 50 years as they keep these accounts to hedge against what we're seeing um and to prepare them for retirement. So, I love that you're being able to see uh this directly impact your your own family and we're seeing it as a macro macro issue. Um I'll just end with Mr. Schneider. Quick question for Mr.
▶ 2:57:09I One of the one of the Democrats' favorite lines is that the working families tax cuts was a handout to the wealthy. You and I both know that that's just not true. Uh can you quickly give some examples of how this bill is targeted to benefit the working class? Yeah, thank you. So, I I do agree that a lot are talking past each other and specifically in 2025, current law is current policy, they're the same thing.
▶ 2:57:32So, in this bill, all of the provisions that affect individuals have income limitations, whether it's 150,000 for seniors, whether it's 300,000 for tip to overtime workers, or 500,000 for SALT. Every single benefit has an income limitation. So, necessarily, any retroactive relief that benefits individuals during this filing season, of which there's about 150 billion spread across 145 million returns, all of that is going to people earning below 500,000. I can't add anything more to that.
▶ 2:58:01That's a great summary and I appreciate your input. Thank you all to our witnesses for being here and I yield Thanks. I want to thank our witnesses for appearing before us today and the staff for all the work they do to put this together. Please be advised that members have 2 weeks to submit written questions to be answered later in writing. Those questions and your answers will be made part of the formal hearing record. With that, the subcommittee stands adjourned.