SENATE BANKING, HOUSING, AND URBAN AFFAIRS COMMITTEE HEARING
OVERVIEW
For questions on the note below, please contact Edmund Perry at (202) 547-3035 or Ruth Lunsford at (434) 238-7224.
On September 18, the Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy held a hearing entitled “The Macroeconomic Impacts of Potential Tax Reform in 2025.” Witnesses in the hearing were:
- Kitty Richards, Senior Fellow, Groundwork Collaborative
- Ai-jen Poo, President, National Domestic Workers Alliance; Executive Director, Caring Across Generations
Below is a summary of the hearing prepared by Delta Strategy Group. It includes several high-level takeaways from both panels, followed by summaries of opening statements and witness testimonies and a summary of the Q&A portion of the hearing.
KEY TAKEAWAYS
The following is a summary of the main topics explored in today’s hearing. Each is discussed in further detail in the Discussion section below.
- The hearing centered on the potential for tax reform aimed at creating a more equitable system that benefits low- and middle-income families. Witnesses highlighted the urgent need to reverse the negative impacts of the 2017 Tax Cuts and Jobs Act, stating they disproportionately favored the wealthy and increased economic inequality.
- Subcommittee Chair Elizabeth Warren (D-MA) emphasized that the upcoming tax code discussions will shape the economic landscape for decades, advocating for reforms that require billionaires and corporations to pay their fair share. Warren expressed concern about the ongoing proposals from Republicans that would further reduce taxes for the wealthy while increasing the tax burden on ordinary Americans.
- Witnesses called for a restoration of the corporate tax rate and measures to ensure that wealth is taxed more fairly.
SUMMARY
Opening Statements and Testimony
Subcommittee Chair Elizabeth Warren (D-MA)
The 2017 Republican tax cuts centered on a $1.3 trillion tax cut for giant corporations. In the years since then, corporations have raked in record profits, including by price gouging consumers, but corporate federal income taxes as a share of GDP have fallen by 50 percent. Under President Biden, we raised taxes on $1 billion corporations for the first time in 30 years thanks to my 15 percent corporate minimum tax. Republicans oppose these efforts, but we must ensure that we continue to improve the tax code
Kitty Richards, Senior Fellow, Groundwork Collaborative
Effective tax reform should focus on and rebalancing economic power away from the wealthy and corporations towards low- and middle-income workers. Congress should restore the corporate tax rate to 35 percent for the most profitable companies, implement global agreements to reduce corporate tax avoidance, and reinstate higher income tax rates for the wealthy while eliminating special tax breaks.
Ai-jen Poo, President, National Domestic Workers Alliance; Executive Director, Caring Across GenerationsWithout investments in infrastructure, tens of millions of working family caregivers and parents are making impossible choices between caring for their loved ones and working to pay the bills. The 2017 tax law decreased federal revenue by trillions while doing almost nothing to address the fundamental needs of working- and middle-class families. These tax cuts benefited the people with the least need the most. Our tax policy cannot continue to deepen the inequality of care in America, rather, it should help address it. I urge you to let the 2017 tax cuts for the wealthiest expire and use additional revenue to invest in the care we all need.
DISCUSSION
Helmy (D-NJ): If we raised the corporate tax rate to 28 percent, how could that revenue support low-income families? Poo: The child tax credit is crucial for providing relief to low-income families, and investments in care infrastructure are essential. The potential return on investment from these initiatives is exponential and long overdue.
Warren (D-MA): What impact did the 2017 Trump tax cuts have on domestic workers? Poo: The impact was minimal as average care workers received just $70 annually, compared to $60,000 for the wealthiest 1 percent. This exacerbates inequality and neglects essential workers.
Van Hollen (D-MD): The Trump tax cuts lowered the corporate rate from 35% to 21%, generating only about 1.8% of GDP from large corporations. In 2017 we were told that these big corporate tax cuts would cause such massive economic growth that they would pay for themselves. Republicans now plan to cut corporate taxes further. Did the tax cuts pay for themselves? Richards: No, that claim was laughable and hasn’t held up; Poo: I agree. Van Hollen: Corporations were expected to invest their tax savings, but did investments actually increase after the cuts? Richards: No. Van Hollen: Corporations spent $806 billion on stock buybacks in 2018. Did the average American get a $4000 raise from the Trump tax cuts? Richards: No, in fact, median wage growth actually slowed in 2018 and 2019 after the Trump tax cuts were enacted.
Van Hollen (D-MD): Wealthy executives received average income boosts of $50,000. Did care workers see similar raises? Poo: No, the median income for home care workers is only $22,000 per year. Van Hollen: With companies making record profits, did they lower prices for consumers? Poo: No, prices actually went up. Van Hollen: So, prices rose, wages stagnated, and stock buybacks and executive compensation increased, all while the deficit grew. Now they want to repeat that scenario.
Warren (D-MA): For too long, Republicans have cut taxes for the wealthy while slashing funding for essential programs. The tax fight next year will determine our ability to invest in childcare and housing, and whether millionaires contribute fairly. Other countries have invested in universal, affordable childcare, but the U.S. ranks 31st among developed nations. Why is affordable, high-quality childcare so hard to find? Poo: The system is broken due to a lack of investment. We rely on a patchwork of inconsistent federal and state funding, forcing families to pay up to 30% of their income while workers earn poverty wages.
Warren (D-MA): It takes money to fix this and the top 1% have amassed $44.6 trillion in wealth while paying minimal taxes. Billionaires like Elon Musk and Jeff Bezos are avoiding taxes while childcare workers struggle. Is support for childcare workers anywhere near what billionaires get? Poo: No, if it were, I wouldn’t be testifying here. Warren: Is affordable childcare available to middle-class families? Poo: It is not. Warren: If we invest in childcare from that tax, what kind of return can we expect? Richards: Investments in childcare can yield a return of up to 12-to-1, the return on investment would be huge. Warren: Taxing the ultra-wealthy and investing in care would allow more parents to work productively, ensure care workers earn livable wages, and give children a better start. This is crucial in the upcoming tax fight. Four out of five Americans support raising taxes on the rich. We need to be proactive, not defensive, by reforming the tax code to benefit working families and ensuring billionaires pay their fair share. The current tax system is rigged to benefit the wealthy. We have a chance in 2025 to advocate for a fairer tax code that reflects our values and supports middle-class Americans.