In a combative hearing, Republican majority members of the House Ways and Means Committee lambasted President Biden’s 2024 budget and were not swayed by the head of the Treasury Department’s assurances.
Treasury Secretary Janet Yellen testified before Ways and Means March 10 the morning after Biden unveiled his budget proposals for the upcoming fiscal year, supplemented by Treasury’s so-called Greenbook, which provides additional context around the budget’s revenue raisers. Last year, Yellen’s appearance before the committee came over 70 days after the previous budget’s release.
According to Yellen’s written statement, the budget’s tax proposals, such as the 25% wealth tax and increasing the corporate tax rate to 28%, would reduce the federal deficit by just under $3 trillion over the next decade.
“On the spending side, we suggest additional investments to boost our long-term growth potential,” Yellen said. “This includes improving the availability of high-quality childcare, providing free and universal pre-school, and boosting the supply of affordable housing. We also propose restoring the Child Tax Credit and Earned Income Tax Credit expansions that were enacted in 2021 but have since expired.”
As the hearing’s lone witness, Yellen bore the full brunt of the GOP-controlled committee’s frustrations towards the administration’s spending agenda, its negotiation performance on the global tax stage, and IRS funding amidst lingering inflation and the U.S. government on the brink of defaulting on its debts.
“After two years of economic failures, the American people desperately want results,” said Ways and Means Chair Jason Smith of Missouri. “The budget before us today calls for $4.7 trillion in new taxes and $6.9 trillion in new spending, during a staggering debt crisis.” Smith closed his opening remarks by saying Treasury is “woefully falling short in fulfilling its core mission” and that the IRS must address its “trust gap” with taxpayers. He saw the proposed $43.2 billion annual IRS budget as “a joke” given the $80 billion additional appropriation authorized to the IRS over a 10-year period.
Smith asked if Yellen would commit to providing the “legislative text” of the tax increases in the interest of public transparency. Yellen began her response by citing the Greenbook, but Smith insisted that proposed legislative language be given within 30 days. She did not state her intention to comply with Smith’s request, noting that she does not believe the tax policy process between the sitting president and Congress “has ever been done” in such a manner.
“We stand ready to work with you as you consider particular proposals, and we’ll certainly look at legislative language and give you our feedback,” Yellen answered.
Yelled faced hostility from several Republican members regarding the administration’s desire to adopt tax policies reflected in the Organization for Co-operation and Development’s global tax framework, of which 140 countries have agreed to. Some lawmakers expressed concern that implementing the OECD model into the Tax Code, such as the 15% global minimum tax on large corporations operating in foreign jurisdictions, would hinder the United States’ economic competitiveness to the benefit of China.
Lloyd Doggett, a Democrat from Texas, used his question-and-answer time to give Yellen a chance to explain how “stopping the race to the bottom”—in reference to the global minimum tax’s objective in curtailing the practice of large multinational corporations shifting profits to reduce their overall tax liability—does not help economic rivals.
“China will not benefit at all from this,” Yellen responded. “China will be forced to raise their minimum tax on their multinationals up to the level of 15% on a country-by-country basis. And China has signed onto the agreement, but if for any reason China failed to enact this tax and put it in place, there is an enforcement mechanism built into this agreement … [that] would impose a top-up tax on Chinese corporations operating in the United States or in Europe, where they’ve already put the tax into place.”
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