This is a rush transcript from "Your World," February 9, 2017. This copy may not be in its final form and may be updated.
(BEGIN VIDEO CLIP)
SEAN SPICER, WHITE HOUSE PRESS SECRETARY: This is something that the legislative affairs team, as well as the president himself, have -- has engaged with members of Congress to talk about this, both privately and in bigger groups. But there's a very large conversation going on to achieve bipartisan support for a package of this nature.
(END VIDEO CLIP)
NEIL CAVUTO, HOST: All right, what Sean Spicer is referring to is a tax cut, and maybe a big one, and a comprehensive one, and the kind of one that can't go anywhere unless this is guy is the guy going and doing a lot of what he's doing already.
The thing is, Kevin Brady has been doing this for years, folks. So, yes, things materially change with the election of Donald Trump, but he was quietly working behind the scenes to see that this, well, could become a reality.
And it looks closer and closer to becoming just that.
Kevin Brady, the man who heads the House Ways and Means Committee, sir, very good to have you. Welcome.
REP. KEVIN BRADY, R-TEXAS: Thank you, Neil. Thanks for having me.
CAVUTO: Thank you very much. You braved the snow.
(CROSSTALK)
(LAUGHTER)
BRADY: Yes.
CAVUTO: You had no idea what you were in for.
BRADY: It's a little different in Texas these days.
CAVUTO: A little different in Texas.
BRADY: Yes.
CAVUTO: Let's get right to it then.
Everyone seems to be certain -- and the markets certainly were buoyed by this news that a tax cut, which was looking dicey, is not so dicey. Famous conservative Web king Matt Drudge among those saying, wait a minute, this looks like Republicans are out of sorts on this.
Where are you on this?
BRADY: I think this is exciting.
The president is going all in on the economic growth, clearly regulatory reform, a number of those. But the announcement that -- the fact that he's going to make an announcement on tax reform in just a few weeks is critical.
CAVUTO: Do you know what that announcement is?
BRADY: I will get him make that news, but we have been working very closely on it.
CAVUTO: Would it echo what you have been doing?
BRADY: Look, we're going to same direction in a good way.
CAVUTO: Oh, so you're not on different pages?
BRADY: So, I'm pretty positive about where this is going.
And for businesses that want to know this is going to happen this year, this is really important.
CAVUTO: All right. It is going to happen this year.
You mentioned that you're kind of on the same page. I'm quickly paraphrasing here.
BRADY: Yes.
CAVUTO: But does that mean corporate tax reform, individual rate changes are done together?
BRADY: You know, that's my strong preference, because there's growth in both.
And there's growth in both in a major way, in the simplification and just the design of how we tax, so we can leapfrog back to that lead pack in the world, best place on the planet for new jobs and investment. So, the president is going to make his announcement.
I'm hopeful we move those together. But we're having a lot of discussions on timing and sequence.
CAVUTO: All right, but it is fair to say that corporate and then the individual rates are done concurrently?
BRADY: I sure hope so. I think that is the best way to go.
CAVUTO: And the president is of that mind-set?
BRADY: He's looking at it all.
(CROSSTALK)
CAVUTO: That's a very good answer.
BRADY: I'm not stepping in front of this president, let me just say.
CAVUTO: All right, let me ask you, because you were saying, and I think it's well worth pointing out, that although you have been working on this for years with some of your colleagues, everything changed back in November when Donald Trump was elected, because then, all of a sudden, it looked very doable, right?
BRADY: It is.
We worked five years in the Ways and Means Committee under my predecessor, Paul Ryan, and before that Dave Camp, to be ready. And last year, when Speaker Ryan pushed House Republicans in the Better Way Agenda, to have our solutions ready for when that window opens, and on November 9, the window didn't open. The voters threw a chair through it.
CAVUTO: Yes.
BRADY: And now we have the opportunity to change the way we tax, like we haven't had in a generation.
CAVUTO: All right, one of the things that has been talked about is whether you could get enough Democratic support.
And one of the enticements, we were told, was that an infrastructure measure, maybe a significant one, trillion-dollar measure, would be rolled into this same thing. Would it?
BRADY: Possibly.
I would love to get Democrat support on this, because they're seeing the same struggling economy we are. Those companies are leaving from their communities. Their college grads can't find jobs. They know there's a problem.
They're in a pretty bad place right now, frankly, as a party in Congress certainly. Some of their members get tax reform in a big way. I don't know if, at the end of the day, they engage. I hope they do. And we have invited them.
But, if not, we are going to have to move forward this year in the most pro-growth, middle-class way.
CAVUTO: But with or without them? You're doing this with or without them?
BRADY: Yes, we have to.
(CROSSTALK)
CAVUTO: So, notion that the president would presumably have -- I don't even know if this is true, sir -- but that, to entice them, he would need a infrastructure plan, you're not necessarily of that mind?
BRADY: Look, I want to bring them to the table.
I know there's discussions on infrastructure. There's real interest there. I worry about using the tax revenues from tax reform, which we have plowed back into being more competitive, and lower rates. I know that discussion is going to happen.
I know the direction we're going on this. And, look, infrastructure is important to the economy. It's certainly important to the president. So, let's have those talks.
CAVUTO: All right, the other question comes up, will the tax cuts be paid for?
BRADY: Yes.
We designed our -- at least in the way -- let me talk about the Ways and Means approach. So, the approach we took was to go bold, leapfrog America back into that lead pack, but do it in a way that balances within the budget, counting on economic growth, not slow growth.
(CROSSTALK)
CAVUTO: So, you're using dynamic accounting.
BRADY: Exactly, real life, in our view, by an independent group, the Joint Committee on Taxation.
CAVUTO: All right, so others who come back and say, well, wait a minute, they're counting on revenue that might not come in, you say?
BRADY: It's going to be a reasonable analysis of the economy. There's no question, with this bold of tax cuts and the redesign, our economy is going to grow at a big clip.
The Tax Foundation estimates a 9 percent growth in the economy, as simple, 8 percent growth in wages, which is another big goal for ours.
CAVUTO: Nine percent growth over when?
BRADY: Yes, over a decade.
CAVUTO: OK.
BRADY: And then 8 percent growth in wages above where the economy will be. Those are pretty good starts.
And, as I have discussed before, I think the key thing with the Reagan reforms is to lift the economy quickly, so it can accelerate fast, get to a higher altitude as an economy. So we have designed this also to create growth early on as well.
CAVUTO: All right.
Steve Mnuchin, who should be sworn in one of these days as treasury secretary, had talked about the fact that everyone gets a tax cut, but it might not appear the same for everyone, that the rich, for example, would see taxes go down, but have their deductions limited, so it's a net-net even-stevens for them. Are you of that mind-set?
BRADY: If we simplify the code for families, go the postcard approach that we're using, we lower the rates for everybody, but we also eliminate a lot of special revisions, many of which are used by the wealthy.
And so you get back to more that equal -- everyone knows what each other's deductions are, because they're exactly the same.
CAVUTO: But will the rich see a net tax reduction?
BRADY: It depends. We're going very bold on the rate cut.
CAVUTO: But are you, as the chairman as the House Ways and Means Committee, going to try to offset the rate cut with limits on the deductions?
BRADY: So, we're really focused on how simple we can make the tax code.
CAVUTO: Gotcha.
BRADY: And so that's our primary -- the middle-class and working-class rate cuts are going to be significant.
CAVUTO: So, let's talk a little bit about what is significant. I don't know how much you can divulge here. But we have about seven rates now. Right?
BRADY: Yes.
CAVUTO: You want to knock them down to three.
BRADY: Down to three, yes.
CAVUTO: And can you elaborate?
BRADY: Yes, we can.
So, President Reagan, when he did his reforms, there were 14 to 15 brackets. He really cut them dramatically. But today, you still have seven. That's too many. So, we lower the brackets to three. We lower the rates at each level. So, the top rate won't be nearly -- well, 44 percent in real life.
CAVUTO: When you talk about the surcharges for Obamacare.
(CROSSTALK)
BRADY: That's right. And that affects small business as well, so, 33, the top level, because, should the government actually take more than a third of what...
(CROSSTALK)
CAVUTO: So, 33 is the top level. The middle rate?
BRADY: Twenty-five is the middle rate; 12 is the next.
CAVUTO: All right. But now the Senate has -- what I heard out of the Senate is, they had slightly different numbers, some of them slightly higher than that. So, what is fixed?
BRADY: Well, so, I think flattening out the brackets is critical. Lowering the rates is critical.
There's another step we take. We protect more of the first dollars that families earn. So, we significantly increase the standard deduction. That's really important to young families getting started and families retiring.
But we take one other step that I think may be the most pro-growth secret in this proposal, which is, after we have lowered the rates and flattened the brackets and protected those first dollars, for the money you earn from savings and investment, we cut that rate in half again.
One, we're not a nation of savers. We should be a nation of savers. Secondly, it turns out it's incredibly pro-growth in the local communities. And, again, that's -- we're going all in for growth.
(CROSSTALK)
CAVUTO: You're talking like a big, big cut in tax rates, 20 percent down to -- for corporations. Right?
BRADY: Yes.
CAVUTO: And immediately those on the left come out and say, well, how are you going to pay for that? The government almost assuredly is going to be running up bigger deficits in the early years. You say what?
BRADY: There's only one way to do this in balance within the budget. And that is, all those hundreds of specials provisions and loopholes and exceptions for a few have to go away, so we can lower the rates for everybody.
It's a mathematical -- you cannot keep all these special loopholes.
(CROSSTALK)
CAVUTO: But how would you offset it on any spending, though? Would you look at commensurate spending cuts?
BRADY: So, that's actually spending through the tax code.
(CROSSTALK)
CAVUTO: I see. So, everything is done through the tax code.
BRADY: Yes. So, that is, those are eliminated.
CAVUTO: Right.
BRADY: So that everyone can get a lower tax rate. It's the only way we can make this work and be fiscally responsible as we do it.
CAVUTO: All right. But there's the possibility deficits get worse before they get better?
BRADY: Possibly, but not necessarily, because a lot of the growth is front-ended in this as well.
CAVUTO: No, I understand.
So let me ask you another issue that comes up, this idea of a border tax. Some call it, you know, an import tax. I don't know what the accurate jargon is, but that it would -- it's very popular among many of your colleagues. Do you like it?
BRADY: I do, but the point has been lost.
Actually, all this goes to a key issue, which is our competitors, China, Europe, Mexico, others, they're beating us in a number of different ways. They have lower rates. They don't tax worldwide. We still double tax worldwide. And they border-adjust their tax. They take their taxes off the products coming to the U.S. They slap one on ours when we go.
We're about the only country, other than North Korea and a few others, that don't do that. So, today, a foreign product has a tax advantage over a made in America product here and overseas.
So, what we're saying is, let's do away with that whole international tax code and have a simple test. If your product or service is consumed in the U.S., it's taxed at an equal rate, a low 20 percent business rate.
So, it doesn't matter where it was produced. It doesn't matter it's a U.S. or foreign company. For the first time, it's equal taxation. And, Neil, that has huge benefits. One, we finally get true competition, which is always good for the consumers. We simplify...
CAVUTO: Do you know if the president is on board with that? Because he's been of mixed mind.
BRADY: So, he's had a couple different approaches. His latest tweet was equal taxation.
But there's a huge benefit to this as well that most people I think will welcome, which is, by doing this, we eliminate every tax incentive to move your U.S. job and headquarters overseas, in fact, just the opposite. We really reestablish us as that magnet for new business investment. That's our goal.
CAVUTO: So, you hear the president is on board with doing a lot of the broad blueprint things that you look at. Would such a tax, if and when it comes to pass, be retroactive to January 1?
BRADY: So, we want the most growth. And if we move quickly, I think it would make sense to go retroactive.
If it's toward the end of the year, we will have to take a look at that.
CAVUTO: OK.
BRADY: But we want the growth to occur. And I think the most exciting news is, you have got a president willing to lead on tax reform. And we have waited 30 years, frankly, to be in this position.
CAVUTO: And a guy in the House that's been doing it for years.
BRADY: It's exciting.
CAVUTO: Kevin Brady, thank you very, very much. Big news there. Now you know why the markets are so excited.
END
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