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Rep. Kevin Brady on the House Democrats’ tax plan: 'This is very bad news for the U.S. economy’

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Rep. Kevin Brady joins Yahoo Finance Live to discuss the proposed tax plan by the House Democrats, the $3.5T budget reconciliation bill, and outlook on the debt ceiling.

Video Transcript

- Just around 28 minutes to go until the closing bell. And you're still looking at selling across the board. Dow, S&P, and NASDAQ all in negative territory. The Dow off 193 points. Biggest laggards in the Dow today. Dow Inc., Caterpillar, Apple, Microsoft, and Goldman Sachs. Those five stocks the worst performers you're looking at. Dow Inc. off just over 3%. Caterpillar and Apple, both those stocks off nearly 2% today.

In terms of the sector action, biggest losses that we are seeing in materials, communication services, and technology. Well, investors are closely watching the developments out of DC. President Biden this week defending his plans to increase taxes on the wealthy and also raise taxes on US corporations while looking to drum up support for his economic agenda. We want to talk about the latest developments.

And for that, we want to bring in Representative Kevin Brady. He's a ranking member of the House Ways and Means Committee. And Representative, it's great to see you again. Thanks so much for coming on. So since we last spoke, we got this plan from the House Democrats on exactly how they plan to pay for Biden's spending plans. And that includes the corporate tax rate, raising that to 26 and 1/2%, imposing a 3% surtax on people making over $5 million. Also increasing the capital gains taxes. I guess, what's your reaction to this and what the Democrats have put forward?

KEVIN BRADY: Yeah. This is very bad news for the US economy, both in the short term and in the long term. There's very few businesses that go unscathed here, from the corporations that compete around the world to Main Street businesses. Certainly, investors get punished in here. I think, overall, looking at the rates and their impact, we estimate up to three million US jobs could be killed, or many driven overseas, sort of going backwards to the bad tax code we had before where US companies certainly couldn't compete. And we're inverting, moving the headquarters, jobs, manufacturing, research overseas. So we think especially as our country fights to get back on our economic feet, this couldn't come at a worse time. And it's very damaging.

- We also heard from Senator Manchin this week. He's one of the Democrats that are opposed to that 3 and 1/2 trillion dollar reconciliation package that Democrats are pushing. He's looking for something that's in the ballpark of a trillion to 1 and 1/2 trillion. I guess if we do see that number come significantly lower, is there any hope or any chance that some GOP members could be on board with that?

KEVIN BRADY: Well, no. There won't be one. I think it is encouraging for Senator Manchin to set a lower number there. But look, there's no excuse to be raising the corporate tax rate while 10 of our global competitors have lowered theirs. Redesigning our international code to, frankly, favor foreign companies and workers over US ones doesn't make sense. There is about five different tax hikes on Main Street businesses.

Bottom line is these are very damaging tax hikes. It doesn't make sense for the US to surrender economically to our global competitors, especially right now. So no. I don't see any Republicans joining this. The question is-- there are about 16 Democrats in the House who run as Main Street moderate Democrats. We'll see if any of them step forward because certainly you can't vote for these tax hikes and hold your self out back home as a Main Street moderate. It just is incompatible.

- There's also the key retirement provisions that are included in this 3 and 1/2 trillion dollar reconciliation bill. And among some of the changes in there, there's a requirement for many businesses to offer a retirement plan for their workers. It would also make changes to the saver's credit. Supporters of this are saying that this would be a huge step forward in closing the retirement gap. I know you don't support this. Why not?

KEVIN BRADY: Well, actually, Chairman Richard Neal I did introduce and pass out of the Committee a bipartisan retirement to savings bill, secure 2.0 to build on our success of the reforms from last year. We did not, though, include a mandate on businesses six employees or larger to offer that retirement plan. It is, I think, burdensome and very difficult for small businesses to comply with.

Also, you know, I think it makes sense to have incentives for businesses of all size to offer these plans. Our bipartisan bill helped local businesses, especially small ones, match the first $1,000 of contribution, made it cheaper for them to offer these plans. So we believe the bipartisan approach the Committee has already approved is far prior to this. This retirement mandate, by the way, is only one of two national federal mandates on business. The other one to offer paid family medical leave structured and run through the IRS is the other mandate as well. We think that one has some real problems as well.

- And then also the big issue, you guys are very, very busy down on Capitol Hill these days. There's a debt ceiling. And I know we're expecting a vote in the House over the coming days. There's been some fighting between the Republicans and the Democrats, just in terms of whether or not this should be addressed, and more so how, I guess, it should be addressed. Where do you stand on this?

KEVIN BRADY: Yeah. So I just spoke with Secretary Yellen yesterday. I agree with her that it is important that we pass this debt ceiling. You don't play games with this. As I told her, two key points here. One, it's important, I think, for Senator Schumer not to tie this to the funding for the government. I can't believe at this juncture in a fragile recovery that you would raise the stakes politically that high. That really doesn't make sense.

Secondly, Democrats haven't had a conversation with this all year on any of these key issues. So our thinking is they must be wanting to go alone again. If they were serious about bipartisan support, as I told Secretary Yellen, bring forward a plan. We can't keep spending trillions of dollars after the emergency is over and hope to retain our financial footing. We need some guardrails that really returns us to normalcy, begins to put some safeguards on government spending related to the economy, a really smart way to get our financial feet on the ground over time. So I'm urging her to bring forward a proposal where we can have these discussions.

- Well, Representative Brady. It's always great to speak with you. Thanks so much for taking the time to join us. We look forward to having you back on Yahoo Finance again. We hope you have a great weekend.