[Senate Hearing 116-473]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 116-473

                  PRESIDENT'S FISCAL YEAR 2021 BUDGET

=======================================================================

                                 HEARING

                               BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 12, 2020

                               __________                                     
                                     

            Printed for the use of the Committee on Finance
            
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-146 PDF                  WASHINGTON : 2021                     
          
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                          COMMITTEE ON FINANCE

                     CHUCK GRASSLEY, Iowa, Chairman

MIKE CRAPO, Idaho                    RON WYDEN, Oregon
PAT ROBERTS, Kansas                  DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming             MARIA CANTWELL, Washington
JOHN CORNYN, Texas                   ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota             THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina         BENJAMIN L. CARDIN, Maryland
ROB PORTMAN, Ohio                    SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania      MICHAEL F. BENNET, Colorado
TIM SCOTT, South Carolina            ROBERT P. CASEY, Jr., Pennsylvania
BILL CASSIDY, Louisiana              MARK R. WARNER, Virginia
JAMES LANKFORD, Oklahoma             SHELDON WHITEHOUSE, Rhode Island
STEVE DAINES, Montana                MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana                  CATHERINE CORTEZ MASTO, Nevada
BEN SASSE, NEBRASKA

             Kolan Davis, Staff Director and Chief Counsel

              Joshua Sheinkman, Democratic Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Grassley, Hon. Chuck, a U.S. Senator from Iowa, chairman, 
  Committee on Finance...........................................     1
Wyden, Hon. Ron, a U.S. Senator from Oregon......................     3

                         ADMINISTRATION WITNESS

Mnuchin, Hon. Steven T., Secretary, Department of the Treasury, 
  Washington, DC.................................................     4

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Grassley, Hon. Chuck:
    Opening statement............................................     1
    Prepared statement with attachment...........................    45
Mnuchin, Hon. Steven T.:
    Testimony....................................................     4
    Prepared statement...........................................    47
    Responses to questions from committee members................    48
Wyden, Hon. Ron:
    Opening statement............................................     3
    Prepared statement with attachment...........................    62

                             Communication

Center for Fiscal Equity.........................................    67

                                 (iii)

 
                  PRESIDENT'S FISCAL YEAR 2021 BUDGET

                              ----------                              


                      WEDNESDAY, FEBRUARY 12, 2020

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 1 p.m., in 
Room SD-215, Dirksen Senate Office Building, Hon. Chuck 
Grassley (chairman of the committee) presiding.
    Present: Senators Thune, Portman, Toomey, Scott, Cassidy, 
Lankford, Daines, Young, Sasse, Wyden, Stabenow, Cantwell, 
Menendez, Carper, Cardin, Brown, Casey, Warner, Whitehouse, 
Hassan, and Cortez Masto.
    Also present: Republican staff: Andre Barnett, Tax Counsel; 
Courtney Connell, Tax Counsel; DeLisa Ragsdale, Chief 
Investigative Counsel; Mark Warren, Chief Tax Counsel; and 
Jeffrey Wrase, Deputy Staff Director and Chief Economist. 
Democratic staff: Adam Carasso, Senior Tax and Ecomomic 
Advisor; Michael Evans, Deputy Staff Director and Chief 
Counsel; Daniel Goshorn, Senior Counsel; Joshua Sheinkman, 
Staff Director; and Jayme White, Chief Advisor for 
International Competitiveness and Innovation.

 OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM 
              IOWA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. We are pleased to have Treasury Secretary 
Mnuchin here today, testifying about the President's fiscal 
year 2021 budget.
    The President's budget includes proposals to confront a 
number of important issues. I want to work with the President, 
the Secretary, and others in Congress to address these and 
other pressing issues within our committee's jurisdiction. Drug 
pricing and multi-employer pension crises are two such issues 
that must be dealt with.
    This budget proposal comes at a time when the economy is 
very strong, especially for working families. Better trade 
deals, less regulation, and lower taxes from tax reform have 
translated into wage increases, especially for lower-wage 
earners, and a historically tight labor market.
    Over 6.7 million jobs have been created since President 
Trump was elected, with nearly 70 percent of the jobs gains 
occurring since we passed the Tax Cut and Jobs Act. 
Unemployment has fallen to a 50-year low. We have had 23 
consecutive months with the unemployment rate at or below 4 
percent, the longest streak in five decades.
    Unemployment for Hispanic and African American workers has 
set all-time record lows. The American middle class is growing, 
and families are benefiting, with a family of four earning 
$73,000 seeing their tax bill cut by over $2,000 after tax 
reforms.
    Statistics like these show that tax reform is a success. 
The Treasury Department's work to implement the new tax law has 
been an important part of that success. We appreciate the 
diligence and of course the dedication Treasury and IRS have 
maintained over the last 18 months to release extensive 
guidance necessary for hardworking Americans and the business 
community to file their tax returns.
    Despite Treasury's steadfast efforts, however, we have 
critics. And those critics have continued their assault on the 
Department for doing its job--criticism that is unfounded. 
While the Treasury plays an integral role when any major tax 
legislation is enacted, the heavy lifting occurs when that 
legislation is being implemented.
    Treasury is following the same process set out in the 
Administrative Procedures Act that has occurred after enactment 
of other tax legislation, like for instance the Affordable Care 
Act.
    Critics continuously use preliminary and incomplete data to 
distort the efforts of tax reform to support a political 
narrative. Critics' focus on revised CBO projections of 
corporate tax receipts is just the latest installment, as I 
discussed in my statement yesterday to my fellow Senators.
    Similarly, we all recall the misinformation campaign in 
last year's filing season when critics tried to persuade the 
public that tax reform was a failure because early tax refunds 
were down. Of course critics conveniently ignored that the size 
of the tax refund says nothing whatsoever about the tax 
liability of an individual.
    In the end, the criticism proved to be flat-out wrong. 
Americans got tax relief, and the average size and number of 
refunds ended up being closely in line with previous years.
    I am hopeful that we can avoid similar scare tactics in 
this year's filing season. Nothing the critics can say will 
refute the fact that every income group in every State saw tax 
cuts under tax reform. And this is particularly true for low- 
and middle-income families, as we see statistics almost weekly 
about blue-collar workers getting higher-percentage wage 
increases on average than the management class.
    Instead, I hope that we can work together on policies that 
will benefit all Americans, including some of the President's 
budget proposals. This committee has a solid foundation of 
bipartisan accomplishment in recent months, including the 
SECURE Act, the Taxpayer First Act, and the USMCA trade deal.
    And after extensive negotiations, we came together just 
before Christmas to extend a number of temporary, bipartisan 
tax provisions. I wish more could have been done to resolve 
them once and for all, as we did in repealing three onerous 
Affordable Care Act health taxes, but hopefully our efforts in 
December can lead us to success in future discussions on the 
expiring provisions that are coming up at the end of this year.
    I am also encouraged by the progress that has been made at 
the OECD to reach a multi-lateral global tax agreement on the 
digital economy. Senator Wyden and I, since a year ago, have 
remained united and bipartisan in our message that unilateral 
measures that discriminate against American companies cannot be 
tolerated. And we continue to support the Treasury Department 
in these negotiations.
    As this year progresses, now we should build upon these 
past successes to make sure that Treasury and our tax laws are 
working for the American people. I have seen administration 
budget proposals from both Republican and Democratic Presidents 
alike. No matter which party controls the White House, members 
will not support everything that is in that budget.
    As a matter of fact, one of our former Presidents, I guess 
it was President Obama's last budget, was defeated on a 99 to 0 
vote. As I have said before: in our system, the President 
proposes and Congress disposes. Even so, today's hearing is 
part of an important process of looking for things that people 
on both sides of the aisle can agree on to support the American 
people in the most fiscally responsible way.
    I have had my say now, and it is time for Senator Wyden.
    [The prepared statement of Chairman Grassley appears in the 
appendix.]

             OPENING STATEMENT OF HON. RON WYDEN, 
                   A U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you very much, Mr. Chairman. And, Mr. 
Chairman, I appreciate also your scheduling this hearing 
quickly.
    The Trump administration's budget is built on policies that 
pillage working families to pay for new windfalls for 
multinational corporations and the wealthy. This hurtful agenda 
has been on clear display over just the past few weeks in two 
events I am going to touch on.
    First, it recently came to light that the Trump 
administration, acting on their own, found a way to milk the 
2017 tax law to create more than $100 billion worth of shiny 
new corporate tax loopholes.
    Now, colleagues, understand these are not the same huge 
loopholes that I and others warned about back in 2017 when the 
bill was written. These are brand-new loopholes that are the 
product of tricky Treasury Department regulatory maneuvering, 
something that in my view looks like it goes beyond the 
Department's legal authority.
    The bottom line: it sure looks like corporate special 
interests are going to make off with brand-new loopholes worth 
$100 billion, in addition to the outlandish share they got from 
the original $2-
trillion Trump tax law.
    Senator Brown and I want to stop this fleecing of the 
American taxpayer. So today, Senator Brown and I are 
introducing legislation that will close these new loopholes and 
fix this new source of tax unfairness. When people say the tax 
code is rigged and the Trump administration has made it worse, 
what I have just described is a textbook case of what they are 
talking about.
    Now, one additional point. Not long after the news of these 
new tax loopholes broke, the President went to Davos. During an 
interview there, he was asked whether during a second term he 
would cut programs like Medicare, Medicaid, and Social 
Security.
    The President said, yes, he would.
    The President called that, and I quote here, ``actually the 
easiest of all things.'' So I have just given you a perfect 
snapshot of this administration's policies robbing the working 
families to pay off special interests and those at the top.
    The President says shredding the safety net is a piece of 
cake. But let us make sure we know what he is talking about. He 
is talking about Medicaid, a program that pays for two out of 
three nursing home beds in America. And that is taking place in 
a country where growing older is really expensive, and 
families--even those who have scrimped and saved--will run out 
of money to pay for long-term care.
    The President is talking about Medicare, without which 
millions of seniors would have no hope of getting high-quality 
health care, or affordable prescription drugs.
    The President is talking about Social Security, which keeps 
American workers from retiring into deprivation and 
desperation.
    The Trump budget cuts in those programs amount to more than 
$1.5 trillion. It probably goes over just fine with the 
ballroom crowd at Mar-a-Lago, but I will tell you, it is a 
terrifying prospect for the hundreds of millions of Americans 
who every single month walk an economic tightrope and count on 
Medicaid, Medicare, and Social Security to be there as a 
lifeline for them in tough days ahead.
    Added up, it is a pretty clear picture. The Trump 
administration will tune out the needs of middle-class 
families, but it gives the world to any corporate lobbyist who 
comes calling at the Treasury Department. You see it in 
Secretary Mnuchin's stewardship. You see it in the budget. And 
as I have shown, you see it in the President's own words.
    Thank you, Mr. Chairman. I appreciate your holding this 
hearing quickly, and I look forward to hearing from our 
colleagues.
    [The prepared statement of Senator Wyden appears in the 
appendix.]
    The Chairman. Before I introduce the Secretary, it is my 
intention--we have a 2 o'clock vote--that you and I would trade 
places to go vote.
    Secretary Mnuchin is the 77th Secretary of the U.S. 
Treasury. Prior to his current position, Secretary Mnuchin was 
finance chairman for the Trump for President organization and 
served as a senior economic advisor. He has very extensive 
experience in global financial markets, U.S. Government 
securities, mortgages, money markets, and municipal bonds.
    He has held various positions in successful private 
enterprises and has a longstanding commitment to philanthropy. 
He was born and raised in New York City, earned a bachelor's 
degree from Yale University--and I suppose there are a lot of 
other things I could say about you, but I want you to take the 
time now to make your statement.
    And we are going to keep this meeting going during the 
vote.

 STATEMENT OF HON. STEVEN T. MNUCHIN, SECRETARY, DEPARTMENT OF 
                  THE TREASURY, WASHINGTON, DC

    Secretary Mnuchin. Thank you very much, Chairman Grassley, 
Ranking Member Wyden, and members of the committee.
    I am pleased to be here with you today to discuss the 
President's budget and the Treasury Department's top 
priorities. President Trump's economic freedom agenda is 
working. Tax cuts, regulatory reform, and better trade deals 
are improving the lives of hardworking Americans.
    Unemployment remains historically low at 3.6 percent. It is 
at or near all-time lows for African Americans, Hispanic 
Americans, and veterans. The unemployment rate for women 
recently reached its lowest point in 70 years.
    Before President Trump came into office, experts were 
predicting that we would grow by 14,000 jobs per month. We 
averaged 175,000. Wages for nonsupervisory workers rose by 3.2 
percent in 2019, compared to 3 percent for all private-sector 
employees, which means wages rose faster for workers than they 
did for their bosses.
    The improved employment environment means that more 
Americans have returned to the job market, increasing labor 
participation. Last month's labor participation rate of prime-
age adults reached 83.1 percent, an 11-year high.
    American families are earning more each year, thanks to the 
Tax Cuts and Jobs Act, and paying significantly lower taxes. 
They also have more career opportunities now than ever before. 
America's economic strength and competitiveness are a bright 
spot in the world, as other nations experience headwinds.
    In the year to come, we expect even greater economic growth 
in the United States as we finalize trade deals with some of 
our most important trading partners. The Phase One deal with 
China results in critical, enforceable protections for our 
businesses and a tremendous boost for our farmers.
    The USMCA will add to our success by setting some of the 
highest standards ever in a trade agreement. We are proud to 
have earned the support of a broad coalition of industries. We 
are pleased that it was passed by Congress with strong 
bipartisan support.
    I particularly want to thank the members of this committee 
for their work on this important issue.
    In addition, President Trump's economic policies will 
result in economic growth and will reduce our national debt and 
deficits over time. Federal Government revenue rose by 4 
percent from 2018 to 2019. Unfortunately, in order to secure 
critical funding to rebuild the military, Democrat members of 
Congress insisted on increasing other government spending, 
which resulted in overall spending of 8 percent.
    The administration is committed to working with members 
from both sides of the aisle to address spending going forward. 
The President's 2021 budget for the Treasury Department makes 
clear that we continue to prioritize economic growth as well as 
national security.
    In particular for this committee, we are requesting $12 
billion for the IRS. This includes funding to implement the 
Taxpayer First Act and the third year of Integrated Business 
System Modernization.
    We continue to bring the IRS into the 21st century by 
updating systems, utilizing data analytics, and other 
technology advances to enhance the effectiveness of audit 
enforcement activities.
    We are requesting a program integrity cap adjustment to 
reduce the tax gap, with savings of over $64 billion over 10 
years. We also remain focused on improving customer service for 
taxpayers by reducing call and wait times and enhancing online 
service capabilities.
    I am pleased to be here with you today. Thank you very 
much, and I look forward to answering your questions.
    [The prepared statement of Secretary Mnuchin appears in the 
appendix.]
    The Chairman. Okay, we will do 5-minute rounds.
    Mr. Secretary, critics of tax reform have suggested that 
Treasury created loopholes for big companies and regulations as 
part of a secretive lobbying process. The idea that the 
regulatory process has occurred in secret is hard to 
understand, given that the notice and comment period in the 
Administrative Procedures Act gives people opportunity for 
input. And I do not see how you can do your job of implementing 
a new law that is so far-reaching without listening to 
stakeholders.
    The preamble to each set of regulations makes clear that 
Treasury meticulously analyzed and addressed public comments. 
Sometimes taxpayers were happy with the outcome; sometimes they 
were not. I even heard some of these people in my State who 
were not happy about it.
    The business community certainly does not seem to think 
that they have received everything for which they have asked.
    So, Mr. Secretary, is it not true that the Treasury's 
decisions about tax reform regulations have been based squarely 
on technical analysis and legislative intent, and not by 
corporate lobbyists?
    Secretary Mnuchin. Yes, Mr. Chairman, that is absolutely 
correct. Our job is to implement the legislation, and not to 
make the legislation. On a regular basis, we meet with lots of 
people to take in input. We have reached out to the committee 
and its staff. And again, we go through a notice and comment 
period with the public.
    The Chairman. The second point is, I am pleased to see that 
the President's budget calls for making the tax cuts and 
reforms benefiting individuals and small business firms 
permanent. This includes the doubling of the Child Tax Credit 
to $2,000, nearly doubling the standard deduction, and lower 
overall individual taxes. It also includes a 20-percent 
qualified business income deduction, which greatly benefits 
small pass-through businesses.
    So, Mr. Secretary, in Treasury's estimation, have these tax 
measures been important factors in the high levels of consumer 
confidence and small business optimism reported since the 
enactment of the tax reform? And also, would you expect making 
these tax provisions permanent to have additional positive 
effects on consumers, small businesses, and the economy 
generally?
    Secretary Mnuchin. Yes, we would, Mr. Chairman.
    The Chairman. Yesterday, the House Ways and Means Committee 
argued that CBO's recent adjustments in the corporate tax 
receipts are evidence that tax reform costs more than 
projected, largely because Treasury has provided an additional 
windfall to corporate taxpayers.
    However, as I mentioned in my floor statement yesterday, 
the Joint Tax Committee and CBO have confirmed that one cannot 
infer from CBO's projections that tax reform regulations are 
inconsistent with the statute. In fact, CBO clarified that 
other factors drove the change in projections--namely, the 
economy abroad, trade developments, and the reduction in the 
Bureau of Economic Analysis corporate tax revenue estimates 
between 2016 and 2018, which then of course in turn inform 
CBO's baseline.
    It simply strains credibility to blame tax reform for a 
change in the baseline from years before tax reform was even 
enacted.
    So, Mr. Secretary, is it your understanding that CBO's 
downward adjustment is a result of a number of factors, and 
that it is in fact too early to determine the precise impact of 
tax reform on tax receipts? And also, does the administration's 
budget, like CBO, project steady increases in corporate 
receipts throughout the current budget window?
    Secretary Mnuchin. Mr. Chairman, let me say that our 
analysis has always been higher than CBO. As I have said 
previously, we believe that the tax cuts will pay for 
themselves over a 10-year period of time, which is how we score 
them. We are 2 years in. We have updated our projections for 
the next 8 years, and we believe that.
    Again, let me just comment that spending is increasing as 
well. But the trillion and a half dollars of tax cuts we 
believe will pay for themselves.
    The Chairman. Senator Wyden?
    Senator Wyden. Thank you very much, Mr. Chairman.
    I want to start with what I think is a clear double 
standard with respect to responding to requests on 
congressional oversight. I look at the record, and it seems 
that Democratic requests get shoved to the back of a filing 
cabinet, or somehow Republican requests get the red carpet 
treatment.
    So I want to give you a specific example, and give you a 
chance to respond. Treasury gets two requests from 
congressional committee chairs. One request is backed up by 
clear statutory language in tax code section 6103 requiring the 
Treasury Secretary ``shall provide tax documents'' to the 
committee.
    The other request does not have the same legal basis, and 
certainly to me it looks political. The request from the 
Democratic chair with a firm legal basis was met with nothing 
but legal foot-dragging.
    The request that came from the Republican chairs got VIP 
treatment. They got a response out the door in a flash. So it 
looks to me like there is a double standard here, and that you 
all are tipping the scales of congressional oversight.
    What am I missing, Mr. Secretary?
    Secretary Mnuchin. Well, thank you for letting me respond 
to that.
    Senator Wyden. Two committee chairs, differential 
treatment.
    Secretary Mnuchin. Again, I think we have responded to you 
multiple times on this. The most recent letter was on February 
11th. And as I explained, the House disclosure of tax returns 
is subject to protections in 26 U.S.C. 6103, which on the 
advice of counsel, as we have documented, we had significant 
concerns about.
    That is very different than--I believe what you are 
referring to are SARS requests, and on a bipartisan basis we 
have responded to thousands of SARS requests to the committees 
from both Republicans and Democrats on an equal basis.
    So as we said, Treasury does not process congressional 
requests----
    Senator Wyden. Mr. Secretary, you are stonewalling about 
stonewalling, and----
    Secretary Mnuchin. Well, that is not really fair at all----
    Senator Wyden [continuing]. There is a double standard.
    Secretary Mnuchin. We responded significantly.
    Senator Wyden. Two committee chairs. One gets no response, 
with legal authority, from a Democrat. The Republican gets a 
quick response.
    Secretary Mnuchin. Again, that is just not fair, Mr. Wyden. 
We have responded to this committee, to your request and 
others, of thousands of SARS.
    As I have said, we are following the law of 6103, and again 
we, on the advice of counsel, we have not responded to that.
    Senator Wyden. I gave you a specific example involving the 
tax returns that shows a double standard----
    Secretary Mnuchin. We do not have a double standard at all.
    One has to do with SARS. That is under a different section, 
and we have responded to your request and the Democrats' 
requests on this committee, equally with the Republicans.
    Senator Wyden. Let's talk about something else where, once 
again, it sure looks like there are sweetheart arrangements 
that do not meet the test of the public interest, and I am 
talking about the deal of Turkey's state-owned bank, Halkbank, 
which has been accused of a billion-dollar scheme to help Iran 
evade our sanctions, and it sure looks like Erdogan and his 
son-in-law have been personally implicated in it. And since 
taking office, you have had seven meetings--seven--with senior 
Turkish officials. Two of them were meetings in the Oval Office 
with Erdogan, and one with his son-in-law. They were directly 
implicated in a sanctions scheme.
    You met with them. Does this not send a horrible picture to 
pose in the Oval Office with sanctions violators? I mean, is it 
just open season for sanctions violators in your Treasury 
Department?
    Secretary Mnuchin. Mr. Wyden, I have literally met with 
hundreds of world leaders and finance chairs, so seven meetings 
is nothing that is rare----
    Senator Wyden. What were the meetings about, Mr. Secretary? 
What were the meetings about?
    Secretary Mnuchin. I was just about to finish----
    Senator Wyden. Good.
    Secretary Mnuchin. Those meetings were about many important 
strategic issues. As it relates to Halkbank, I cannot comment 
on the specifics because that is subject to inquiry, both by 
the Department of OFAC as well as the Department of Justice.
    Senator Wyden. Finally, let me be clear on these new 
loopholes that were created. You have made it out like in some 
way the minority was involved in this.
    Our input was never sought in connection with this whole 
array of loopholes. I know, because I would have been fighting 
them every step of the way.
    Thank you, Mr. Chairman.
    The Chairman. Since you brought up the first issue with 
him, I would like to give my view of that--not to defend the 
Secretary, but just to state where I am coming from, because I 
am the instigator of some of these requests.
    Whether it is the minority generally, or whether it is 
Senator Wyden right now, you publicly expressed the frustration 
that Treasury has responded to the committee and produced 
requested documents, but you allege that Treasury has not done 
the same for the minority.
    I think that that is wrong, and I have done a lot of 
oversight work with Senator Wyden, and we work together on most 
of this stuff, and we are even working together on this 
particular issue.
    As the Department itself wrote in a letter yesterday--and I 
will put this letter in the record, without objection.
    [The letter appears in the appendix on p. 46.]
    The Chairman. To Senator Wyden, the categories and types of 
documents that I have sought from Treasury have also been made 
available to Senator Wyden and his side of the aisle.
    My investigation with Senator Johnson has nothing to do 
with 6103. We are proceeding methodically with the oversight, 
instead of running fast, skipping steps, and failing to 
litigate privilege claims. And at this point, privilege claims 
do not even apply to our request.
    So, are you asking for a rebuttal to what I just said?
    Senator Wyden. Yes, and I will be very brief, Mr. Chairman, 
because I am asking a question of the Treasury Department. What 
we are talking about were two instances where Treasury 
documents were requested by committee chairs. In one instance, 
the Secretary has stonewalled the response. In the other, he 
fast-tracked the request. That is what looks like a double 
standard to me. Period. Full stop.
    The Chairman. Okay.
    Senator Lankford, and then after Senator Lankford, it will 
be Senator Stabenow.
    Senator Lankford. Mr. Secretary, thanks for being here. 
Thanks for the insight that you bring to this. Obviously, we 
will go through the President's budget proposal--as every 
President's budget proposal comes to Capitol Hill and gets 
reviewed and then gets set aside. It is a set of ideas, and we 
will go through it. But there are a lot of good ideas as well, 
and I appreciate the hard work that goes into it.
    I will be interested to see how history looks at this 
economy 25, 30, 50 years from now. We look back at the Reagan 
economy and the Clinton economy, and to see the growth that is 
happening--I am watching some pretty remarkable growth 
happening in this economy since the Tax Cuts and Jobs Act.
    And what you have overseen from the Treasury right now--if 
I am looking at this correctly, during the previous 
administration there were 3,600 manufacturing job losses. 
During this administration, we are gaining 12,300 jobs in 
manufacturing alone during that time period. So it is a pretty 
dramatic turnaround.
    Beginning in March of 2018, 21 consecutive months, there 
were more job openings in America than there were people 
looking for jobs in America. That is pretty remarkable. And for 
the last 16 consecutive months, we have had hourly earnings for 
folks who receive hourly pay at 3 percent or higher every 
single month. That is a pretty remarkable economy that is 
happening right now.
    And so, thanks for all your work, because you have put a 
lot of work into this to be able to go through the process. I 
want to ask about a couple of process things in this.
    I have done a lot of work, as many members of this 
committee have, on ending government shutdowns, on trying to 
get away from long-term CRs, and to try to get a solution on 
the debt ceiling. Those are three things that hang out there. 
So while we are talking about budget issues, those always tend 
to be a part of the conversation there.
    Can you put an estimate on the costs, financial costs, of 
government shutdowns, of the cost of long-term CRs, and if 
there are alternate solutions for dealing with debt ceilings?
    Secretary Mnuchin. Well, I do not have the specific costs 
of those, but I will tell you they are quite costly. 
Particularly the CRs have a very significant cost on the 
Department of Defense and their long-term planning. There is no 
question that is a significant issue there.
    I would also just comment, I do share your concerns about 
the debt ceiling. I think that----
    Senator Lankford. We have done 80 of those in the last 50 
or so years.
    Secretary Mnuchin. I think that everybody would agree, we 
cannot ever get to a point where we would default on the U.S. 
Government debt. And I would encourage Congress to think about 
a process where, when we approve spending, we simultaneously 
approve the necessary borrowing.
    Senator Lankford. When you interact with your peers around 
the world on how they handle debt ceiling, what is their 
conversation with you about debt ceiling and how their 
government handles it?
    Secretary Mnuchin. Most people do not have debt ceilings 
the way we do.
    Senator Lankford. Right. And so this is a national anomaly 
for us. It was designed to be something to help control 
spending. But when we have had 80 of them over the last 50 or 
60 years, as far as a debt ceiling increase, they are clearly 
not managing our spending. They have become, as Senator 
Whitehouse says so well, the bear trap in the bedroom, and 
really there is no good result of having a bear trap in the 
bedroom the whole time.
    So it is an issue we do have to resolve. Insights you may 
have on that from Treasury would be helpful to us as well.
    Secretary Mnuchin. Well again, I would just say I would 
appreciate this as a bipartisan issue. Obviously spending is 
approved on a bipartisan basis, and it is important that we get 
to a process where we increase the debt ceiling at the same 
time.
    Senator Lankford. Let me ask two quick questions on this: 
Opportunity Zones. You have three traunches of regulations that 
have come out on Opportunity Zones. Thank you for that. We have 
many folks who are implementing those things.
    There was a bit of an unknown at one point that I have 
asked you about before. A business cannot have more than 5 
percent of their income on things like alcohol sales and other 
things that are listed in the code, particularly that could 
have up to 5 percent of their income and still be a recipient 
on the Opportunity Zones.
    There is not a definition dealing with businesses that are 
cannabis businesses. Are they within that 5-percent amount? Or 
are they not at all, because there is a Federal prohibition on 
cannabis sales?
    Secretary Mnuchin. I am going to have to get back to you on 
the specifics.
    Senator Lankford. That would be helpful, to get clarity, 
because there are cannabis businesses across the country that 
are in Opportunity Zones. They will need clarification. That 
one, you and I have spoken about before. It is difficult to get 
a Federal tax benefit for something that is against Federal 
law. But that is not clearly defined in the last traunch of the 
regulations.
    The other one is, there is a request in this budget to be 
able to transition Secret Service from DHS back over to 
Treasury, where it used to be before. Can you give us some 
definition on that?
    Secretary Mnuchin. Thank you. I appreciate the opportunity 
to comment on that. Let me just first say that this has support 
on a bipartisan basis from the current President and the last 
several Presidents.
    I think you know the Secret Service has a long history. It 
was started at the Treasury Department to counter 
counterfeiting. We think that there is tremendous integration 
moving it back and working with all of our terrorist financing 
activities, and working on our cyber issues. And again, this is 
something that has tremendous support within the Secret 
Service.
    Senator Lankford. Okay. We will look forward to more 
details on that.
    The Chairman. Senator Stabenow?
    Senator Stabenow. Thank you, Mr. Chairman. And welcome, Mr. 
Secretary.
    I do want to start by just talking about the view from 
Michigan, because certainly the numbers you are talking about 
are not what we see. And just for clarity, under the previous 
administration we added about 88,000 manufacturing jobs. Up 
until the last 3 quarters, we added about 12,000 under the 
current administration. But for the last 3 quarters, we have 
seen 2 quarters where we actually have lost manufacturing jobs. 
And the last quarter was flat.
    So the view from the ground is different than what you are 
seeing. And certainly in Michigan, and in the Midwest, we have 
not seen wages rising like you are talking about. We have a lot 
of folks working one job, two jobs, three jobs, waitressing 
three or four jobs, trying to hold things together. But that is 
not the same as having one good-paying job where you can 
actually take care of your family, which is what I would hope 
would be all of our goals.
    You know, when we talk about the tax code as well--I am 
meeting with building construction trades this week. They are 
not very happy about the fact that the tax bill does not allow 
them to write off the cost of buying the tools now, which are 
necessary for their job. And yet big corporations can write off 
what they need.
    They are not very happy about the fact that they cannot 
write off mileage anymore when they move from one job to 
another, or if they move from California to Michigan to get a 
job. That is no longer something that they can take themselves 
as a write-off. And yet, when I tried to close loopholes that 
allow corporations to take jobs overseas, we could not get that 
in this tax package. So my view is a little bit different.
    But I want to focus on something where people did get hit 
and have not yet recovered in the economy, and that is 
pensions. Folks who have worked hard their whole life and 
actually trusted everybody--corporations, government systems--
who said that maybe I will take a little bit less in wages, put 
money in a pension plan so I have it when I can retire with my 
family.
    And when we saw what happened on the stock market--the 
President talks all the time about how the stock market is 
soaring. That is how he measures things. So that is true, the 
top 10 percent wealthiest folks are doing very, very, very 
well.
    But one of the ways that working people and others are not 
is what has been lost in the stock market with the crash, as it 
results in pension reductions. So as a result of the financial 
crash, we know there was over $1.2 trillion just in IRA and 
401(k) loss, not counting the pension system.
    And so my question relates to, what are you guys going to 
do? What do you support in terms of what needs to be done for 
the Pension Benefit Guaranty Corporation? We know that we have 
a million and a half Americans who are going to lose the plans 
that they have paid into their whole life. They are totally at 
risk in the next 20 years. And all we need is one big failure 
like Central States and we will see the Federal backstop go 
insolvent.
    And so this is a very, very big issue, and we have a 
proposal put forward, passed by the U.S. House of 
Representatives, called the Butch Lewis Act, that would give 
them time to recover.
    I mean, we certainly were willing to weigh in, our 
government, to give huge loans to Wall Street, but yet the 
folks who lost their pensions are very afraid and are still 
waiting for somebody to recognize what they lost.
    And so, what are your ideas? What are you planning to do to 
protect people's pensions?
    Secretary Mnuchin. Well, thank you for your comments, 
Senator. I do agree with you, the pension issue is a serious 
issue. I serve on the PBGC, so I am well aware of the issues 
there, as well as, I think you know, we administer certain 
functions associated with the multiemployers, and I acknowledge 
there are some significant issues.
    So I look forward to working with this committee on a 
bipartisan basis to consider legislation to address these 
issues. And we stand ready to provide technical assistance on a 
bipartisan basis to analyze things for you.
    Senator Stabenow. I guess my question would be, does the 
President support the Butch Lewis Act that came over from the 
House of Representatives that is now before the Senate?
    Secretary Mnuchin. I cannot comment on that specifically. 
What I would say is, the President is interested in looking at, 
on a bipartisan basis, these pension issues.
    Senator Stabenow. And in the interests of almost----
    Secretary Mnuchin. And I personally have met with--I 
personally have met with some of the people from these pensions 
and various members of the committee.
    Senator Stabenow. Well, I just want you to know that, while 
we are all basically not acting at this point, other than that 
we were able to come together on miners--which I thought was 
very, very positive--but the reality is I have folks in 
Michigan who now have gotten a 70-percent cut--70-percent cut--
in their pensions.
    Now you know what? That is pretty significant and pretty 
terrifying for people. So we need action. We need action. We 
know what it is. We know what needs to happen. We know the 
numbers. We just need to act.
    And people are counting on us to do that. So I am anxious 
to know what the President will do to act.
    Thank you, Mr. Chairman.
    The Chairman. Senator Carper?
    Senator Carper. Welcome, Mr. Secretary. I just want to 
start off by talking a little bit about climate change and 
energy policy, tax policy, as it might help us create some jobs 
and actually address climate change in an appropriate way.
    I just got back from a trip with some friends who went to 
Antarctica last month, and they said it was pretty warm. They 
were surprised. And we were really surprised over this past 
week when the temperature there was 65 degrees. It is the South 
Pole in Antarctica, 65 degrees. People say, was that a record? 
It sure was. And it beats a record that was set just a couple 
of years earlier.
    Northern California--if you will remember, Northern 
California had wildfires as big as my State, a place called 
Paradise, which went up in smoke. Australia had wildfires last 
month the size of West Virginia, where I was born. In the 
Midwest, huge floods. Hard to get the crops into the ground, 
seeds into the ground. In the last 5 years, it was the hottest 
5 years on record. This past month of January, the hottest 
January on record.
    There is a great song that starts with the lyrics, 
``Something's happening here; just what it is ain't exactly 
clear.'' I think something is happening here, and I think it is 
pretty clear what is going on.
    There is way too much carbon in the atmosphere, and there 
are ways that we can address that. One of those ways is through 
our tax policy. The administration has proposed, as you may 
know, to eliminate some clean energy tax incentives and 
undermine goals that the President said over and over again 
that he wants to achieve.
    But the President's budget proposal to, I think 
prematurely, eliminate important clean energy tax incentives 
would do exactly the opposite. I will mention a couple of 
those: tax incentives to encourage people to buy electric 
vehicles, tax incentives to encourage people to buy vehicles 
fueled by hydrogen--which creates as a waste product 
HO2--a tax policy that incentivizes people to buy 
vehicles powered by natural gas.
    The reason why those are important is because the largest 
source of carbon emissions on our planet comes from our mobile 
sources. Number two is our power plants. Number three is our 
buildings.
    But instead of proposing tax policies that actually lead to 
reducing carbon on our planet with respect to mobile sources 
and buildings and so forth, we are getting just the opposite. 
Why is that?
    Secretary Mnuchin. Let me just comment, because you have 
addressed a lot of different issues. Again, let me just say the 
President very much supports clean air and clean water, and 
having----
    Senator Carper. But he has reduced--the administration, I 
am sorry--the administration proposed reducing EPA funding by, 
I think, almost a third, almost a third. But go ahead.
    Secretary Mnuchin. Again, as it relates to--I think you 
have addressed a whole bunch of different credits, including 
electric car credits and others. Again, I would be happy to 
come and talk to you about the different policies. I do not 
know what you want me to comment on specifically on this.
    Senator Carper. Okay. I will just be as direct as I can be. 
The largest source of emissions on our planet is our mobile 
sources--our cars, trucks, and vans. There are ways to use tax 
policy to encourage people to drive vehicles, including trucks, 
that are a lot more energy-efficient. And instead of supporting 
tax policies that will do that, we get just the opposite.
    The other thing I would say that would be really helpful 
is, when the administration is talking about transportation 
infrastructure, to actually say--when I was Governor, I would 
propose--I was Governor for 8 years--we had tax cuts 7 out of 8 
years and balanced the budget every year.
    I proposed transportation infrastructure improvements in my 
little State, but I always proposed ways to pay for them. And 
we really need the support of the administration as we go 
through this year figuring out what to do on roads, highways, 
bridges, surface transportation, not just to say, ``Oh, this 
would be great, wouldn't it?'' but to say, ``This is how we 
will pay for it''--how we would pay for it. And that is a 
conversation we could have maybe when we get together.
    Secretary Mnuchin. I appreciate that. And the President is 
very much interested in infrastructure, particularly roads, 
highways, rail, and others. I have had several meetings with 
Richy Neal to see if we can find certain ways to work together 
on a bipartisan basis.
    Senator Carper. The President actually mentioned the 
Barrasso bill, which my staff and I helped to write, during his 
State of the Union address. I actually held up, when he talked 
about the need for transportation infrastructure, I actually 
held up my wallet. He didn't see it, but if he had, it was a 
reminder that it is not enough to just say we are going to do 
stuff, we actually have to figure out how to pay for that.
    Secretary Mnuchin. Agreed. And I was encouraged. I believe 
it was passed 24 to 0, or something like that.
    Senator Carper. Yes, that is fine.
    The last thing I want to ask is, tax policies that pay for 
themselves. When we adopted the tax package about a year ago, 2 
years ago, we said it was going to pay for itself.
    I think, whether it was the CBO--any number of entities 
have said it does not really pay for itself. That one has not 
paid for itself, and it is not going to pay for itself.
    Do you have a rebuttal for that? The numbers are rather 
staggering, but I think CBO said that they estimated that the 
so-called tax cuts added an additional $228 billion to the 
deficits for 2019.
    How do you respond to that?
    Secretary Mnuchin. Sure. Let me just comment. And I have 
said this. Again, I stand by our comments that the tax cuts 
will pay for themselves. This will be simple math. So we 
measure this over 10 years. We have 8 years left. I look 
forward to writing the committee a letter in 8 years going 
through all the exact numbers.
    The first 2 years, our numbers are right. Our projections--
as part of the budget process, we go through estimating the 
next 8 years. Again, based upon our estimates of growth and 
various different issues, we do believe they will pay for 
themselves.
    That is different than the deficit, because we have 
increased government spending. And we cannot pay for it twice.
    Senator Carper. Thank you.
    The Chairman. Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman.
    Mr. Secretary, we are facing a precarious moment in our 
republic where truth is under assault by partisan peddlers of 
``alternative facts'' who seek to obfuscate the truth and 
attack those who are there to stand up and speak it--and 
gaslight the public--all in the name of ``politics,'' where 
blind allegiance to a single person is valued over fidelity to 
the Constitution.
    So I would like to go over a few points today and correct 
the record so the American people have the truth before them.
    Now, President Trump claims to have inherited a, quote, 
``disaster'' of an economy from President Obama. And he takes 
credit for what he calls, and I quote, ``an economic turnaround 
of historic proportions.''
    Mr. Secretary, how long has the U.S. economy been posting 
positive GDP growth?
    Secretary Mnuchin. It is the longest-running economic 
scenario we have been in.
    Senator Menendez. Absolutely true. GDP was positive for the 
past 10 years, growing for the final 7 years of President 
Obama's presidency.
    So it has been growing for the last 10 years, including the 
final 7 years of the Obama presidency. And we can both agree 
that President Trump has been in office for about 3 years. Is 
that correct?
    Secretary Mnuchin. That we can definitely agree on.
    Senator Menendez. Okay. So the economy was already growing 
for 7 years before President Trump took office.
    Let us talk about jobs. President Trump claimed he will be, 
quote, ``the greatest jobs President that God ever created,'' 
close quote. And he has repeatedly criticized President Obama's 
jobs record.
    Let us compare the last 3 years of the Obama presidency to 
the first 3 years of the Trump Presidency. Can you guess who 
created more jobs?
    Secretary Mnuchin. I do not have the numbers in front of 
us, but we have created substantially more jobs than the Obama 
administration projected at the beginning of this 
administration by a multiple of three.
    Senator Menendez. Well, let us talk about what actually 
happened. The economy gained 1.5 million more jobs during the 
final 3 years of President Obama's presidency than the first 3 
years of the Trump presidency.
    So President Obama added 8.1 million jobs during his final 
3 years in office. That is more than the amount of jobs added 
during the first 3 years of the Trump presidency, which is 
roughly about 6.6 million.
    So the fact of the matter is that what we had was a growing 
economy. GDP was growing, strengthened dramatically over the 
last several years before this administration took over. More 
jobs were created in the final 3 years of the previous 
administration than when this administration took over.
    And then let us talk about what it really means to 
families. During the last 2 years of the Obama administration, 
median household income increased by $4,800. During the first 2 
years of the Trump administration, household income increased 
by less than a third of that. In fact, median household income 
only increased a mere $550 in 2018, far short of the $4,000 to 
$9,000 gains promised by this administration.
    So let me recap. Let us get to the truth: the Trump economy 
created less jobs and delivered under a third of the earnings 
to families than the final years of the Obama presidency, all 
the while nearly doubling the deficit to a trillion dollars.
    So I think there is a truth that is a real disconnect 
between what the administration is saying and how people are 
living. Bedrock middle-class goals of owning a home, sending 
your kid to college, saving enough for a retirement, are 
distant realities under this administration's economy.
    So I think that is important to set the record straight.
    And then finally, let me ask you. Does the Department 
commit that its actions, policies, and investigations, 
including sanctions, will remain free from political pressure 
by the President? Because I look at the recent nominee, Ms. 
Liu, who was supposed to be before the Banking Committee where 
I also serve, and her nomination has been pulled. I look at 
issues on the question of how we are enforcing sanctions, many 
of which I helped write.
    Can you tell this committee that the Department will 
conduct its actions, policy, and investigations, including 
sanctions, free from political pressure by the President?
    Secretary Mnuchin. Well, I would be happy to answer that, 
but let me just get to--and I would be happy to send you a 
follow-up----
    Senator Menendez. Can you answer my question first, that 
question first?
    Secretary Mnuchin. I just want to say, I have that the 
numbers on disposable income are $4,452 from December 2017 to 
2019.
    In regards to your question, I will specifically say, no. I 
oversee the sanctions department. Sanctions are driven by 
foreign policy. Foreign policy is directed by the President. 
So, no, specifically I would--I would say that sanctions, as 
are other foreign policies, are by direction of the President 
and executed through me.
    Senator Menendez. So political considerations will take 
place. I am not talking about policy considerations. I am 
talking about political considerations that took place in your 
enforcement of sanctions.
    The Chairman. Senator Cardin----
    Secretary Mnuchin. I hear you are differentiating political 
from policy----
    Senator Menendez. I think it is a big difference.
    The Chairman. Senator Cardin?
    Senator Cardin. Thank you, Mr. Chairman.
    Secretary Mnuchin, welcome. It is nice to have you here. I 
want to follow up on one point that my colleague has been 
talking about, because we have the actual growth numbers for 
fiscal year 2019. And you say that the 2017 tax bill pays for 
itself based upon--and one issue is the economic growth, which 
we all recognize.
    You have projected, OMB, a 3.2-percent growth in fiscal 
year 2019. The Congressional Budget Office said 2.4, quite a 
difference. Well, we now have the actual, and it is 2.3. Very 
close to CBO. Now, we do not have the actuals for any of the 
other years, but the difference between CBO and OMB is pretty 
dramatic on the economic numbers.
    So what does CBO know that you do not know? And why were 
they able to project the growth for the first year we have, 
2019, when you were projecting over 3 percent throughout this 
time?
    Secretary Mnuchin. Well, there were a significant number of 
things that impacted the growth this year. One was the global 
slowdown. Two was the GM strike. Three was Boeing. So there 
were a significant number of issues that dragged down GDP in 
the range of 50 to 70 basis points.
    At the end of the day, the projections are dependent upon 
GDP and economic numbers going forward. And a big difference 
between the CBO projections and ours are economic projections 
going forward.
    Senator Cardin. And you can understand how we are concerned 
about the tax bill adding greatly to the deficit, because the 
Congressional Budget Office has been much more accurate than 
OMB. I just point that out, and that is why we are concerned by 
these, we think, unrealistic growth numbers.
    And as you said, you will be able to come back and show us. 
We do not know for how many more years, but you will be able to 
come back and show us, and we will see whether in fact that 
holds true.
    I want to say something positive about your Department, 
particularly the Office of Tax Policy. At one of our hearings, 
I sent a question that was answered on section 179, the energy-
efficient commercial building deduction.
    For years I have heard from, particularly, small business 
owners that they were required to make payments to State and 
local governments in order to receive an allocation letter to 
claim their deduction. That goes against the intent of our law. 
And the letter that was sent back by Treasury acknowledges that 
that is, quote, ``inconsistent with the policy goals of section 
179 for the owner of a public building to seek, accept, or 
solicit any payment from a business that is quid pro quo for 
providing the written allocations,'' end quote.
    So I want to thank you, because I think this letter will go 
a long way, I hope, to provide the clarity we need. If it does 
not, I will be back in touch with you to make sure that the law 
in fact is carried out.
    I also want to acknowledge that your budget does include 
funds for the Taxpayer First Act. We are pleased to see that. 
That is a bipartisan effort in this committee to get that done. 
But you still have not appointed a National Taxpayer Advocate.
    I say that because the acting advocate, Bridget Roberts, 
has said that it is critical that a permanent National Taxpayer 
Advocate be appointed as quickly as possible to help ensure the 
IRS protects taxpayer rights and meets its obligations to 
taxpayers. That is solely in your hands, the appointment of the 
Taxpayer Advocate. Can you give us any indication when we might 
expect that appointment to come through?
    Secretary Mnuchin. I can. And let me first say, I am glad 
we were able to clear up that other issue, and let us stay in 
touch.
    The Taxpayer Advocate is a very important position. We have 
interviewed some very, very qualified people. We have made a 
final decision at the recommendation of the Commissioner, and I 
expect that we will be announcing that in the next few weeks.
    Senator Cardin. Oh, good. I am glad to hear that.
    And the last thing I will bring up is the--I am pleased the 
budget has in it the modernization of IRS technology. I think 
that is important. I worry about the personnel numbers.
    We have seen a dramatic reduction in the last decade, about 
a 20-percent reduction in the workforce, whereas you have had a 
significant increase in the number of tax returns. This budget 
again cuts the full-time equivalents at IRS. And I worry that 
you do not have the workforce you need and will not be able to 
retain the experienced workers and professionals at IRS in 
order to carry out that responsibility.
    So I hope we can work together. Congress has been, I think, 
a little more generous in this area, so I hope we can work 
together. This committee has a responsibility to make sure the 
tax code is carried out effectively, that we have the audit 
staff we need, et cetera. So I hope we can work--because I 
think you need more help.
    Secretary Mnuchin. We appreciate that. Thank you.
    The Chairman. Senator Hassan?
    Senator Hassan. Well, thank you, Mr. Chair. And I want to 
thank you and Ranking Member Wyden for holding this important 
hearing today. And thank you, Secretary Mnuchin, for testifying 
today about the Treasury Department's budget proposal.
    Mr. Secretary, when you testified to this committee last 
year about the Treasury's budget, I spoke about the importance 
of robustly funding Treasury Department programs that combat 
terrorist funding streams and other forms of elicit financing.
    I am pleased to see that the 2021 Treasury budget proposes 
increased funding for the Office of Terrorism and Financial 
Intelligence, and for the Financial Crimes Enforcement Network. 
These offices play a vital role in combating emerging national 
security threats. For example, terrorists and other 
transnational criminal organizations are increasingly using 
cryptocurrencies to finance their activities, due in no small 
part to the difficulty inherent in tracing these transactions 
and tying funds to specific actors.
    Mr. Secretary, how will the Treasury's proposed budget 
increases assist the Department in monitoring suspicious 
cryptocurrency transactions and prosecuting terrorists and 
other criminal organizations financing elicit activities with 
cryptocurrency?
    Secretary Mnuchin. Well, first of all, thank you, and thank 
the committee for the generous support on the funding increases 
in these areas over the last several years. We have really 
built up a very dedicated career staff.
    And specifically on cryptocurrencies, we are spending a lot 
of time on this, on both an interagency basis and with the 
regulators. We are about to roll out some significant new 
requirements at FinCEN. We want to make sure that technology 
moves forward, but on the other hand we want to make sure that 
cryptocurrencies are not used for the equivalent of old Swiss 
secret number bank accounts.
    So we share your concerns, and you will be seeing a lot of 
work coming out very quickly.
    Senator Hassan. Well, thank you. And I would look forward 
to continuing to work with you about that.
    Another question: under the previous administration, 
Treasury Department budgets contained proposals to improve the 
research and development tax credit for new and small 
businesses.
    As you know, the R&D tax credit supports the efforts of 
startups to invest in the development of new, innovative 
products that lead to job creation and economic growth. That is 
why I have introduced bipartisan legislation, along with 
Senator Tillis, that would modernize and expand the R&D tax 
credit for startups.
    Mr. Secretary, for this year's budget, did the Treasury 
consider including any proposals to improve the R&D tax credit 
for small businesses? And would the Treasury be willing to look 
at our bipartisan proposal to see how we can work together to 
support entrepreneurs?
    Secretary Mnuchin. We would very much look forward to 
working with you on that. And I will have my office follow up 
to make sure we are on top of it.
    Senator Hassan. That would be great. What we are really 
focused on is those companies that do not have a tax liability 
yet but are making these critical investments.
    And so, last question. I am a strong supporter of 
bipartisan legislation championed by Ranking Member Wyden that 
would permanently extend tax cuts and cut red tape for small 
craft brewers in New Hampshire and across the country.
    Last year, along with Senators Roberts, Menendez, and 
Daines, I was on a task force that recommended, on a bipartisan 
basis, passing permanent relief for craft brewers. As part of 
this effort, it is vital that the Bureau of Alcohol and Tobacco 
Tax and Trade--which is, as you know, within the Treasury--
receive increased funding to clear the backlog of approval 
requests for new beverage formulas and labels.
    I continue to hear from New Hampshire brewers that delays 
in approvals are slowing their business growth, despite the 
additional funds that Congress has provided and years of work 
to cut down on the backlog.
    Mr. Secretary, can you explain to the committee what 
resources the Treasury's budget would provide to the Bureau to 
address this backlog? And will you commit to continuing to work 
with Congress on this issue?
    Secretary Mnuchin. Yes, yes, and yes. And let me just say, 
if Congress wants to do anything to simplify the label 
approvals, I would look forward to working with you on that as 
well. And I know there is tremendous bipartisan support for the 
craft brewers.
    Senator Hassan. And as I understand it, the budget proposes 
$5 million in funds to accelerate the processing of formula and 
label applications. So it seems that there is recognition of 
the issue in your budget proposal, and I just would--I think 
what I have heard is a commitment to working with us----
    Secretary Mnuchin. I personally looked at this label issue, 
and we are trying to figure out how to streamline it.
    Senator Hassan. Okay; let us keep working on that together. 
Thank you very much.
    And thank you, Mr. Chairman.
    The Chairman. Senator Cortez Masto--I am passing over 
Portman and Toomey. So if they come back, they will be ahead of 
some other people who are here. Go ahead.
    Senator Cortez Masto. Thank you, Mr. Chairman.
    Mr. Secretary, in your comments that you provided today, 
you state that the ``Federal Government revenue increased by 4 
percent from fiscal year 2018 to fiscal year 2019. 
Unfortunately, in order to secure critical funding to rebuild 
the military, the Democratic members of Congress insisted on 
increasing other government spending, which resulted in 
spending growth of 8 percent from fiscal year 2018 to 2019.''
    So I guess my question to you is: in order to address the 
Democratic members of Congress's increase in government 
spending that you cite, is that the reason why in the current 
budget this administration seeks to cut $200 billion from SNAP 
and TANF for women and children, cut $170 billion from student 
loans, cut $90 billion from seniors on Social Security, cut $76 
billion from persons with disability, and cut $59 billion from 
farmers?
    Is that what this administration thinks is the way to 
balance this budget, on the backs of individuals because they 
do not necessarily work for the military? Is that how I read 
this?
    Secretary Mnuchin. I do not think that is the way you read 
it. The point that I was trying to make is that government 
spending increased faster than we would have liked if left to 
our own devices. I was integrally involved in the bipartisan 
agreement to get that done.
    And as it relates to Social Security, the President has 
been clear that he does not want to cut Social Security; that 
on Social Security there are just some savings in the increase 
of growth for fraud and other issues.
    Senator Cortez Masto. But you do not disagree this budget 
actually requests a cut of $90 billion for seniors on Social 
Security--correct?
    Secretary Mnuchin. I believe it is not a cut. It is a 
reduction in the rate of increase, and it is not to benefits of 
people on Social Security.
    Senator Cortez Masto. So I show a cut for student loans, 
Social Security, persons with disabilities, for farmers, and 
for women and children who seek assistance through SNAP and 
TANF. If that is not a cut, then I would love to talk to you 
about what it is this administration values and what they see--
how these groups and important individuals in our communities 
are being affected. I would love to talk to you about that. But 
I disagree.
    And that is my concern: that this administration says one 
thing, but their actions are just the opposite. And I think it 
is important for us to really talk the true facts, and not what 
you come here and read in your statements about what the 
administration claims that they are doing to the benefit of our 
communities.
    Because I can tell you, when I go home to Nevada, there are 
still people struggling. And I do want to talk to you about--
when you plan and you put together this tax bill that you have 
talked about, and the economic growth, particularly when it 
comes to the budget, I keep hearing you saying that you are 
talking about the budget that shows gross domestic product 
growth will climb to 3.1 percent. And that is your basis.
    Is that correct, that you are basing it on, for the next 8 
years, a 3-percent, or 3.1-percent growth?
    Secretary Mnuchin. It ranges between 2.8 and 3.1. But let 
me just comment on Social Security. I am looking at the 
mandatory programs of Social Security starting at 1038, and it 
goes up every single year through 2030 to 1906. So I do not see 
any cuts.
    Social Security mandatory programs are going up 
consistently in our budget every single year.
    Senator Cortez Masto. Good. So what I hear from you today 
is there is going to be absolutely--there is no request in your 
current budget to cut anything having to do with Social 
Security?
    Secretary Mnuchin. Again, the absolute mandatory programs 
of Social Security----
    Senator Cortez Masto. Well, do not read it to me. Just talk 
to me. Tell me. There are no cuts to Social Security is what I 
am hearing.
    Secretary Mnuchin. I believe there is a cut in the rate of 
increase, not an absolute cut. But again, I would be happy to 
follow up and go through this----
    Senator Cortez Masto. Let us talk about it, because if you 
are cutting Social Security, and the resources, and the 
individuals, and the time for the people who work in Social 
Security to help people in need, then you are impacting the 
people in need.
    So let us talk about that. And I am running out of time, 
but let me ask you this. If you are projecting a 3.1-percent or 
2.8-percent growth for the next 8 years and you have 
independent forecasters saying it is only going to be 2 
percent, or 2.2 percent, and you yourself have said you have 
concerns that growth might be impacted by the coronavirus, the 
3-percent growth, then why are you not adjusting it downward, I 
guess is my question, to ensure that we come to 8 years and the 
tax bill has been paid for? How do we pay for that?
    Secretary Mnuchin. Well, the coronavirus and Boeing are 
just a one-time. When we did the projections, they were back in 
October----
    Senator Cortez Masto. What does that mean, ``one-time''?
    Secretary Mnuchin. It is just a one--it will just impact 
2020. So the coronavirus is not going to impact growth over the 
next 10 years, nor is the Boeing issue going to impact it. It 
may have an impact on one year, and again we just have not 
updated the models because the whole budget process started at 
the end of last year.
    Senator Cortez Masto. So we hope the coronavirus does not 
have an impact beyond this year, is that what you are saying?
    Secretary Mnuchin. I do not expect that the coronavirus 
will have an impact beyond this year.
    Senator Cortez Masto. Okay; thank you.
    Senator Portman [presiding]. Thank you. Mr. Secretary, 
thank you for being here today. I am now sitting in the chair--
--
    Secretary Mnuchin. Thank you. I see that.
    Senator Portman. Senator Grassley is----
    Secretary Mnuchin. You look good in that chair; you could 
get used to that. [Laughter.]
    Senator Portman. It is a little higher seat, actually.
    Great testimony today. You pointed out that tax reform is 
working, and it certainly is. So is regulatory relief, I think, 
and some better trade agreements. And that combination is 
improving the lives of the people we represent, and it is good 
to see.
    When we started off in this effort, President Trump and the 
Congress said, okay, we are going to focus on tax reform 
because we believe that will result in more jobs, better wages, 
and leveling the playing field for U.S. companies that are 
trying to compete in the global economy.
    And all that has happened. Do not take my word for it. Here 
is the Congressional Budget Office in April of 2018, the 
nonpartisan CBO, saying in their analysis of the effects of tax 
reform, ``These changes are expected to encourage savings, 
investment, and work.'' CBO also estimated that that would 
reduce the incentives for companies to invest overseas by $65 
billion per year--so in other words, encouraging investment 
right in the States that we represent.
    Together, these positive effects on the economy, they said, 
would result in average GDP increase of about .07 percent, and 
the CBO projections have held steady. In fact, just last week--
last week--CBO said again in a new blog post that the tax 
bill's effects on the economy have appeared consistent with our 
initial assessment.
    So that is CBO. But the numbers are clear. They are out 
there. Prior to tax reform, the CBO said the economy would 
create an average of 107,000 jobs per month. In 2018, we 
actually got an average of 193,000 jobs. They also said that in 
2019 it would be 27,000 jobs per month. So far we are 6 times 
ahead of that average at 175,000 jobs.
    So you know, that is great. The thing that I like best is 
the wage growth. We have now seen, for 18 straight months, wage 
growth of over 3 percent. And as we know from the Bureau of 
Labor Statistics' information, this is primarily helping folks 
who are non-
supervisory, which means blue-collar workers, mid-income, low-
income workers, and that is just awesome news. It is the 
longest period we have been able to see that kind of wage 
growth since before the Great Recession.
    So it is working. One thing that you will talk about a lot, 
I know today, is the international side. I have already heard 
you talk about it some. People are bringing money home. The old 
tax system encouraged those companies, as you know, to leave 
their income overseas and not to bring it back and pay our 
taxes.
    And the international provisions were designed to end that 
lockout, and that is exactly what has happened. Between January 
2018 and September 2019, the last data which we have, companies 
brought back over $1 trillion in overseas earnings, more than 
the previous 6 years combined.
    So those who say it has not made any difference, look at 
the numbers, which is why, by the way, on a bipartisan basis we 
all agreed we had to do this change of lowering the rate and 
going to a territorial system. It is actually working. And tax 
revenues are up, not down, which is another thing that you have 
talked about a lot.
    I think you have done a very good job of trying to 
implement what was a complicated tax bill, let's face it, 
particularly on the international side. And I want to commend 
you for that difficult job, a whole new international tax 
system--again, one that was very bipartisan in its creation, 
although at the end of the day we did not get a bipartisan 
vote. That part of the legislation was always something that we 
believed was a good idea on both sides of the aisle. In fact, 
Senator Schumer and I co-chaired the task force that came up 
with an international plan that was very much along the lines 
of what we ended up with.
    I think you have been unfairly criticized by some who have 
said, by making the implementation changes, that you are 
somehow not in keeping with the tax bill. I think it is just 
the opposite. And I must say that, today, I heard people 
pointing to the CBO baseline as a reason to say that--evidence 
of that. And I just say, that is not how the regulatory and 
budget process works.
    Treasury does not score tax regulations, the same way it 
does not make law. We make the laws, and the Joint Committee on 
Taxation scores tax legislation. And so your job is to 
implement the law in accordance with the congressional intent. 
And I think you have done your best to do that.
    Second, the Joint Committee on Taxation is the one that, 
again, provides this, not the CBO. CBO may take into account 
some of the same assumptions made by Joint Tax, but they also 
incorporate hundreds if not thousands of other data points.
    So it is also important to note that CBO made both upward 
and downward revisions in terms of the overall forecast, and 
the critics only tell you about the downward revisions, which I 
think is interesting.
    So my sense is that the CBO downward revisions also come in 
large part because companies are actually paying more in 
section 965 taxes--that is the repatriation taxes--in the first 
couple of years than they expected. And as a result, we gave 
companies 8 years to pay it. Companies paid it more quickly 
than that. So that is not a tax cut. Those are taxes already 
paid.
    On the GILTI, which was meant to be a guard rail in this 
new territorial system, I know that you have again come under 
some criticism on the way you have handled that. This is 
exactly what we intended, which was that we would have the 
ability to bring profits home, create that incentive--and 
trillions have come back, as we talked about--but at the same 
time under GILTI those companies who wanted to shift to low-tax 
jurisdictions would be penalized. And that is what you have 
done.
    The number we used for the minimum tax in effect was 13.125 
percent. And the intent of the conference report was very, very 
clear on that. So critics continue to argue that your efforts 
to implement that intent provided new tax cuts. I would say: 
not at all. Specifically, they are saying that your new 
proposed rule clarifies the connection between GILTI and the 
existing subpart (f) rules providing an exception for companies 
with foreign tax rates above 18.9 percent as a brand-new tax 
break. That's ridiculous. Compared to our intent to exempt 
companies anywhere above 13.125 percent, I would say, if 
anything, your approach has been cautious, very conservative.
    So I wonder if you would give us your view on that. Do you 
believe you have taken a cautious and conservative approach to 
this in terms of the GILTI implementation, based on the 
congressional intent, the taxpayer comments, and Treasury's 
regulatory authority?
    Secretary Mnuchin. Our job has been to implement that part 
of the tax code consistent with the intent and as prescribed by 
the law, and that is what we have done.
    Senator Portman. Well again, I commend you for that. I am 
going to come back for a second round in a minute and give you 
more chance to talk about that, and about what you have done to 
faithfully implement the tax legislation.
    Senator Warner?
    Senator Warner. Well, thank you, Mr. Chairman. Great job on 
your opening statement. [Laughter.]
    Mr. Secretary, it is great to see you. I want to ask you a 
couple of questions about, I think, some very good work the 
Department has been doing around beneficial ownership and anti-
money laundering.
    Last week, your department published the 2020 National 
Strategy for Combating Terrorists and Other Elicit Financing. 
And I want to--I know you have gotten a lot of criticism on 
this side of the aisle, but on this I want to commend you for 
putting out this strategy. I think it represents a critical 
undertaking to articulate how little the U.S. Government really 
knows about illicit finance risks and what are some of the 
tools and some of the aspects that we need to move forward.
    One of the key vulnerabilities identified in the report is 
the lack of a legally binding requirement to collect beneficial 
ownership at the time of company formation, a time that we 
think would provide the least burdensome approach. This failure 
to have this basic beneficial ownership information hinders law 
enforcement's ability to swiftly investigate criminal actors, 
as the report points out. But it also drives up significantly 
the cost of law enforcement, in costs on both the public and 
private side.
    So the first question is, Mr. Secretary, do you agree that 
one of our most urgent national security and regulatory 
problems is that the U.S. Government still has no idea who 
really controls shell companies, in many cases being used to 
move billions of dollars across our economy?
    Secretary Mnuchin. Well, thank you, Senator Warner. I think 
this is a critical issue, and I also want to thank you because 
I know you have spent a lot of time with our department on 
this. And I would encourage the committee, on a bipartisan 
basis, to work on legislation. I think this is critical. It is 
critical not only here, but as we push forward FATF and other 
policies around the world, this is a glaring hole in our own 
system.
    Senator Warner. Well, one of the things I would also like 
to have you comment on--and I see some of the risks from my 
role sitting on the Intelligence Committee--is when we see 
regimes like China, Iran, North Korea, that frankly use U.S. 
shell companies to hide some of their activities.
    I think we have seen it a lot in terms of activities around 
fentanyl production. We have seen it used--and some of our 
legislation has gotten great support from the communities that 
are trying to oppose sex trafficking.
    Can you speak a little bit about the national security 
implications, and also some of the risks that this lack of 
having this information poses to our local communities?
    Secretary Mnuchin. You have pointed out, there are very 
significant risks. And the problem is that when someone opens 
up a bank account, the beneficial ownership is kept by the 
banks. But that information is not put into a centralized 
database. So if we are looking at a specific entity and we want 
to see who the beneficial owners are, we have no way of getting 
that information other than first tracking a bank account and 
then potentially pinging thousands and thousands of banks for 
that.
    So it is a very inefficient program, and it allows the bad 
guys to hide their identities.
    Senator Warner. Well, as you indicated--and I would like to 
point out that both Chairman Grassley and Ranking Member Wyden 
have supported efforts to crack down on anonymous shell 
companies, and you were kind enough to indicate you think we 
ought to be taking this up.
    You may be aware that on the Banking Committee, we have a 
broadly bipartisan coalition, four Democrats, four 
Republicans--we named it the ILLICIT CASH Act, which would 
dramatically update our AML regime and deal with this question 
around beneficial ownership, we think in a way that does not 
put undue burdens on businesses.
    As a matter of fact, two other members of this Finance 
Committee who are the ranking and chairman of the Banking 
Committee, both Crapo and Brown, are both members of this 
committee, and we are hoping they will move it toward a markup.
    I should be smart enough to take your earlier statement 
that you support this effort, but if you would like to make any 
final comments on this notion of moving this legislation to the 
Banking Committee--and we have worked closely with the 
administration on that--I would love to hear them.
    Secretary Mnuchin. Let me clarify: I very much support your 
efforts on that.
    Senator Warner. I will take that, Mr. Chairman, as a time 
to yield back my 28 seconds that you might want to use to ask a 
question. Thank you, Mr. Chairman.
    Senator Portman. Thank you, Senator Warner, for your 
responsible approach.
    Senator Casey?
    Senator Casey. Mr. Chairman, thanks very much. Mr. 
Secretary, good to be with you.
    I wanted to focus on one topic, the middle class, and take 
you back to a meeting that you were present at, but I am sure 
you may not remember, because you have had a lot of these.
    We had a meeting in October of 2017. It was members of the 
Finance Committee, both parties, not everyone, but most of the 
committee. The President was there. You were there. 
Administration officials were there talking about the tax bill. 
At that time, the tax bill had not passed. It was in the 
drafting stages.
    I raised a question with the President about the focus of 
the tax bill with regard to the middle class. And he expressed 
a very positive aspiration to have the tax bill be of benefit 
to the middle class. In fact, I remember him turning to you, 
referring to you, I think by your first name instead of 
Secretary of the Treasury, but he said we have to make sure we 
focus on the middle class.
    We know what happened after that. The bill passed, and we 
are told--and this is just two examples of part of the middle 
class--we are told by the Joint Committee on Taxation that if 
you look at the 2017 tax bill and take one segment of the 
middle class, which in this case is 50 million households 
making under $100,000--so that is the category of people--that 
those 50 million households all making under $100,000 a year 
would see a tax increase or decrease, one way or the other, of 
less than $9 a month in 2019. And that is from the Joint 
Committee on Taxation document 10-19.
    So, very little change up or down--$9 a month. Here is 
another way of looking at a segment of the middle class. This 
is kind of the middle of the middle, as the Tax Policy Center 
goes through the quintiles. The Tax Policy Center indicated 
that households earning between $48,000 and $86,000--and that 
is a pretty good share of the middle class, millions of 
taxpayers--got an average tax cut of about $800.
    The top got a lot more, and obviously not just in terms of 
dollars, but the top got a lot more, the top 1 percent got a 
lot more in percentage. I do not think many people dispute 
that. But the question I have is: when you track what the 
President and your team, the entire administration, was saying 
before the bill, after the bill, about what the impact of the 
tax bill was on the middle class, and then subsequently--Larry 
Kudlow was quoted on November 1st of 2019 talking about, quote, 
``tax cuts 2.0'' on CNBC, saying, you know, indicating that the 
intention at least, I guess, was to provide another tax cut.
    Can you tell me, where is that? Is there going to be a tax 
cut that is real, substantial, I hope even transformative, for 
the middle class? Or are we still going to see a tax bill that 
is very limited to $800, or whatever number a lot of the middle 
class got?
    Secretary Mnuchin. Well, I am happy to follow up and go 
through all the numbers with you, but on my numbers the typical 
family earning $75,000 saw their tax reduced by more than 
$2,000, or what was typically by more than half. So I do not 
agree with your numbers that the tax cuts were not significant 
for the middle class.
    Senator Casey. Well, I am just saying--let me interrupt for 
one second--I think what you are disagreeing with is not me but 
the Tax Policy Center. So that is fine.
    Secretary Mnuchin. Well, I am looking at the Tax Cuts and 
Jobs Act distribution chart. And again, I would be happy to 
follow up with you and go through the specific numbers. I am 
looking at Tax Policy Center numbers. We could look at other 
numbers.
    So I do not know which ones you are specifically looking 
at.
    Senator Casey. Well, I would hope--I hope that is not your 
final answer. I would hope that the administration would be 
focused on giving a tax cut which really improves people's 
lives, not either the $9 one way or the other per month for 50 
million people under $100,000. So that is one.
    And then let me just finish with one reference to--I think 
Senator Menendez was talking about jobs by way of comparison to 
administrations. I think the data shows that, if you look at 
the first 36 months under President Trump, basically February 
2017 through January of this year, it is about 182,000 jobs per 
month. The last 36 months of the same time period, the last 36 
months of President Obama's administration, that number is 
224,000 jobs per month in those 36 months. So 42,000 more jobs 
under Obama, adding up to more than a million and a half more 
jobs.
    So I do not think there is anything wrong with the 
President trying to commend the work of his administration 
about job growth, but I think we ought to be clear that if he 
is going to constantly compare himself to President Obama, he 
ought to at least acknowledge that the last 36 months under 
President Obama were stronger than his first 36 months. Maybe 
month number 37 and up will be better, but I think that is what 
the record shows.
    Secretary Mnuchin. Well, actually the economy was not 
stronger. The economy was slower. And as to jobs, when you 
start with a higher unemployment rate, it is easier to create 
more jobs.
    Senator Casey. Well, you guys did not walk into an 
unemployment rate of 10 percent, either, which President Obama 
did.
    Secretary Mnuchin. I am just saying--again I am looking at 
a 4\1/2\ versus a 3\1/2\. Obviously, as you get down to low 
unemployment rates, it is harder and harder to create jobs 
without increased participation.
    The Chairman. Senator Cassidy?
    Senator Cassidy. Mr. Secretary, thank you for being here. 
45Q is a program I am interested in to incentivize carbon 
capture sequestration. Louisiana's geology is well-suited for 
this, and then we have lots of industry that would therefore 
benefit and, in so doing, decrease global greenhouse gas 
emissions.
    We keep hearing that the guidance will be expected within 
weeks. But weeks pass and--what is the current timetable for 
releasing this guidance? And, given the short time frame that 
remains to capture the credit, can we be sure it will be 
released soon?
    Secretary Mnuchin. Yes, so let me just comment. And I know 
there have been delays on this. I am not giving excuses. It has 
been coordinated with two other departments, the Department of 
Energy and EPA. I did review this as recently as yesterday.
    There will be guidance that is coming out in the next few 
weeks. My team has committed to that. And then there are other 
regulations that were supposed to come out in April, but I told 
them they needed to have them come out in March. So we are very 
focused on this, and it is an important issue.
    Senator Cassidy. Sounds great. Thank you.
    Electric vehicles. I am sure you are aware that the 
Treasury's Inspector General released an audit report in 
September finding, one, taxpayers improperly claimed $72 
million in EV tax credits; and two, the IRS does not have an 
effective process to identify and prevent these erroneous 
claims.
    And these have doubled in size in that year since first 
reported. You know, I always figure that electric vehicle tax 
cuts are tax cuts for millionaires and billionaires, right? It 
is the top 1 percent who are buying all the electric vehicles. 
And the guy driving the 1974 Ford pickup truck is the one 
paying in the tax credit.
    So what have the IRS and Treasury done in terms of program 
integrity to be able to identify, or to eliminate this problem?
    Secretary Mnuchin. Well, I agree with you on the first 
part, particularly people who are buying expensive Teslas. And 
I was one of those people who do not need the tax credits.
    I think also we have an unfair situation right now where 
certain U.S. companies still have tax credits and others do 
not.
    But we are working with the IRS on the audit issue and what 
we do to fix that.
    Senator Cassidy. Would it be helpful--one, do you need any 
authority from Congress, number one. And number two, it seems 
as if VIN numbers would be--I am assuming there is a database 
of VIN numbers somewhere out there. It seems like a simple 
solution would be some sort of cross relationship. But again, 
do you need any sort of authority from Congress to do any of 
this?
    Secretary Mnuchin. We will always take a little bit more 
money from Congress to fix these things and collect taxes. But 
no, we do not need any authority. But it is, unfortunately, a 
complicated audit situation.
    Senator Cassidy. I am also interested in the rise of e-
commerce and with the counterfeit goods that are being sold on 
Amazon and other platforms that are a risk to both health and 
safety.
    Now related to that, these counterfeit sellers, sellers of 
counterfeit goods, are less likely to pay taxes that they are 
supposed to pay. Now we are approaching this in a variety of 
ways, but could you tell me about any efforts Treasury is 
making, perhaps in tandem with the Department of Justice, to 
address the tax gap that counterfeits create?
    Secretary Mnuchin. Well, let me comment on two things. The 
counterfeit issue is an issue that the White House is focused 
on. That is not really directly a Treasury issue. But we do 
share the concerns of counterfeit goods.
    I think one of the questions that needs to be considered is 
the people who are selling these counterfeit goods on 
marketplaces. Should the e-commerce companies bear certain 
responsibility for better monitoring on this? Because this is a 
real problem for consumers.
    And ultimately, as it relates to the tax gap, this is one 
component of the tax gap that we are very focused on--what we 
can do on the tax gap overall.
    Senator Cassidy. And then, can you just comment 
specifically on the impact that counterfeit goods have on the 
U.S. economy?
    Secretary Mnuchin. It has a very big economic impact. It is 
lost revenues. It is hurting companies and small businesses 
that sell legitimate items. It is ripping off consumers who 
think they are buying something that they are not getting.
    Senator Cassidy. I appreciate your answers, and I yield 
back.
    The Chairman. Senator Daines?
    Senator Daines. Thank you, Mr. Chairman.
    Welcome to you, Mr. Secretary. I want to spend a few 
moments and talk about the historically strong State of our 
economy. Watching what has happened under President Trump with 
Republican leadership's commitment to tax reform, cutting 
burdensome regulations, this economy is booming.
    And it is benefiting Montanans. It is benefiting the 
American people. I am struck by the job creation number, Mr. 
Secretary. Over 6.7 million jobs have been created since 
President Trump was elected.
    Interestingly, about 70 percent of those jobs, 4.6 million 
of the 6.7 million jobs, have been created since we passed tax 
reform and reached an unemployment rate of 3.6 percent, near a 
50-year low.
    There is a reason I left the private sector to come into 
public service: it was to see outcomes, to see results, results 
like this. Wages are growing for workers across the board. But 
importantly, we are seeing this blue-collar boom. Low-income 
Americans are experiencing the largest wage gains. And average 
wage growth for workers now outpaces the wage growth for 
managers. Americans are getting back to work. This is good for 
Montana; it is good for our country.
    Mr. Secretary, my question for you is, as you look at the 
tax policies that we moved forward with, as we have seen now an 
outcome that was predictable--we saw this when President 
Kennedy through his leadership cut taxes, we saw it under 
President Reagan through this leadership cutting taxes and 
growing the economy and seeing wage growth and more jobs 
created--which tax policies do you see as being some of the 
most important in keeping our economy growing?
    Secretary Mnuchin. I think there is no question, the change 
on the corporate side to a territorial system, and encouraging 
companies to bring their cash back here and build jobs here, 
has been very important.
    I think there is no question the pass-through deduction for 
small businesses has been critical. And I think there is no 
question the tax cuts for the middle class have put a lot of 
money back into people's pockets that they can save or spend.
    Senator Daines. So you brought up the pass-through issue. I 
would like to talk a little bit about that--we call it the Main 
Street tax relief. As we were having discussions back before we 
passed the bill between the C corp side and the pass-through 
side, or I like to call it the Main Street business side--in 
Montana, 90 percent of our businesses are actually small 
businesses. They would be on the pass-through side.
    In fact, according to a recent Square/Gallup Survey, just 
last month 69 percent of small business owners said their 
businesses benefited from the 2017 tax law--69 percent. More 
than seven in 10 say they reinvested over one-quarter of the 
savings that resulted from the tax law back into their 
businesses.
    And I can tell you, that is why myself, along with Senator 
Roberts, Senator Thune, and Senator Blackburn, introduced the 
Main Street Tax Certainty Act, which would make that 20-percent 
deduction with the Tax Cuts and Jobs Act permanent. I think it 
is critical we work towards this on behalf of our small 
businesses.
    The question for you, Mr. Secretary, is how does making 
this 20-percent deduction permanent, as the President's budget 
proposes, help to increase business certainty and provide 
confidence for job creators to invest and grow their 
businesses?
    Secretary Mnuchin. Well, as you have commented, those small 
businesses are the backbone of a large part of the economy, not 
just in your State but in other States. And providing that tax 
relief gives those businesses more money to put back into their 
businesses, to hire additional people, and to go out and make 
capital investments.
    Senator Daines. I want to shift gears for a moment--and I 
agree with you--shift gears for a moment to talk about the 
trade situation.
    I have just been struck by the success you all have seen in 
the last 120 days. Remarkable. I was there in the White House 
with the President when he signed the historic Japan deal in 
October. In fact, I had a Montana cowboy hat in the room with 
me. One of my cow/calf producers, Fred Wacker, from Miles City, 
was there.
    It was followed then by the Phase One China deal. Followed 
then by the Canada and the Mexico trade agreement. The trade 
with these four countries is over $2 trillion, and if you rank 
the top four trading partners in the United States, you hit 
them all: one, two, three, and four.
    I applaud the focus. We have made great progress on trade, 
and I want to congratulate you and the team to that end. I look 
forward to continuing to work with you and this administration 
to hold China accountable now for these existing commitments 
that have been made and to get these Phase Two negotiations 
completed, as well as what you are doing here now with the UK, 
with the EU, India, and other critical markets.
    Let us see how many more we can get done here before the 
end of the year. Thanks, Mr. Secretary.
    The Chairman. Senator Brown?
    Senator Brown. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. I want to--I got word last night 
that Jessie Liu, with whom we were going to do a hearing in 
Banking for her nomination, she was inexplicably and suddenly 
withdrawn for nomination by the President last night.
    When did you learn the President was withdrawing the Under 
Secretary of your Department?
    Secretary Mnuchin. I believe it was 2 days ago.
    Senator Brown. Two days ago. Can you tell me why her 
nomination was withdrawn?
    Secretary Mnuchin. I think you know nominations are at the 
President's direction, and we do not comment when nominations--
as a matter of policy--when nominations are withdrawn, which 
happens for a variety of different reasons at different times 
when that is done.
    Senator Brown. So you do not have any opinion or knowledge 
of why she was withdrawn?
    Secretary Mnuchin. Again, what I have said, as a matter of 
policy, the White House----
    Senator Brown. Okay, I was just going to give you a second 
chance, Mr. Secretary.
    Prior to her position, you may know this--or maybe you do 
not, I do not know--she was U.S. Attorney for the District of 
Columbia. She was involved in the cases of three of Mr. Trump's 
convicted political operatives--Mr. Gates, Mr. Stone, Mr. 
Flynn. Absent any plausible explanation for his withdrawal of 
this nomination, even though you claim--I hope you know you are 
more or less under oath--you claim to have known it for 2 days. 
It appears this is another stop on the President's personal 
retribution tour, an attempt to ensure that she did not come 
before the Banking Committee tomorrow to answer under oath 
questions about those prosecutorial decisions.
    With prosecutors scaling back sentencing recommendations on 
Mr. Flynn, with senior DOJ officials suddenly intervening 
yesterday to reverse and make more lenient the sentencing 
recommendations of career prosecutors, four of them withdrew, 
one of them actually resigned--it tells us a lot.
    I mean, this personal retribution, this PR tour for the 
White House, this personal retribution tour the President is 
engaged in started with the Prayer Breakfast of all places and 
then the East Room. And then his attacks on Colonel Vindman, 
mocking his accent. Senator Portman and I work a lot with the 
Ukranian community, and I am proud that so many Ukranians have 
called America home, leaving the Soviet regime. And he was 
serving this country, and the President mocks him.
    The unannounced, the surprise, unexplained withdrawal of 
Jessie Liu--and I would hope you would give an explanation that 
is counter to the one that everyone assumes, and that is that 
she is part of the President's personal retribution tour.
    So I am hopeful that either at this hearing or later you 
will help us and tell us the real reason.
    Mr. Chairman, I want to shift to another question that 
Senator Wyden has been a leader on. I appreciate your response 
to the letter I sent you last month about the international tax 
regulations. Since I wrote you, the nonpartisan CBO revised its 
corporate revenue projections so that over the next 10 years 
they are projecting $110 billion less in revenue than 
previously thought.
    The report says CBO reduced its projection of the amount of 
income subject to tax under certain provisions related to 
international business activities. These changes, which lowered 
corporate receipts, reflect the implementation of the law--they 
go on. I am most interested in the regulations affecting U.S. 
tax obligations of multinational corporations on their foreign 
income.
    Before Treasury issued these regulations, did Treasury do 
any analysis of how much revenue would be lost?
    Secretary Mnuchin. Treasury doesn't do analysis as part of 
the regulations. But what Treasury does do is, when we update 
the budget and there are specific regulations or technical 
changes, we do take that into account.
    Senator Brown. So did you estimate how much? Did you have 
any estimate about how much revenue would be lost on those 
regulations?
    Secretary Mnuchin. Again, what I would say is now, having 
re-analyzed those relative to the overall receipts, we do not 
think there are significant material changes----
    Senator Brown. Well, $110 billion is pretty significant. 
And when you look at----
    Secretary Mnuchin. Oh, I do not think there are hundreds of 
billions, just to be clear.
    Senator Brown. I did not say ``hundreds.'' I said $110 
billion.
    Secretary Mnuchin. I do not think there are----
    Senator Brown. Well, when the President--you do know this. 
When the President put out his budget Monday, after your tax 
cuts about which you brag and always forget to mention this 
would never happen during periods of economic growth--when the 
budget deficit explodes the way it does, something that your 
administration does not seem to care about--the President then 
goes to Davos and announces it, and then takes it back. Then he 
goes in his budget and makes huge cuts in Medicare, Social 
Security, Medicaid, and all kinds of things that matter to 
working-class families, while the rich in this country get 
richer. And that seems to be the way this administration seems 
to want to go.
    Thank you.
    The Chairman. Senator Cantwell?
    Senator Cantwell. Mr. Treasury Secretary, we have had a 
chance before to talk about the problem we have in the United 
States of America with the lack of affordable housing. I 
particularly wanted to ask you about the Low-Income Housing Tax 
Credit.
    The tax credit has two different credits: 9 percent, which 
is mainly used for new construction of affordable housing; and 
4 percent, which is used for new construction, mostly workforce 
and rural housing rehabilitation of existing affordable 
housing.
    The 4-percent accounts for about 53 percent of all the 
affordable housing built in the United States. The tax credit 
writ large--about 90 percent of the affordable housing that is 
built in the U.S. is built with the tax credit, which means if 
we do not expand the capacity for the credit, we are not going 
to get more supply. And we certainly have a supply problem.
    So right now, the 4-percent credit is challenged, because 
it is not trading at 4 percent because it is a variable rate. 
Right now it is trading at 3.2 percent. So one of the things 
that my colleague, Senator Young, and I have been working on is 
making that 4 percent a floor on the tax credit, a fixed rate.
    This would help us immediately provide more affordable 
housing in the marketplace by just the value of that credit 
being fixed for those making these investments and getting the 
tax credit.
    So could you give me some feedback on that as the Treasury 
looks at this issue, and whether you would support the 4-
percent fixed rate?
    Secretary Mnuchin. We would definitely be happy to work 
with you on that.
    Unfortunately, Senator Brown just left, but I was going to 
make the comment that we do care about affordable housing, and 
I am hoping--it is a different committee--that we can work on 
housing finance reform, because affordable housing is a big 
component of that. But we would definitely be willing to work 
with you on the issue you just brought up.
    Senator Cantwell. On the 4 percent? It is the easiest thing 
to do right now. We would certainly appreciate the Treasury 
looking at a larger investment beyond just fixing the 4 
percent. We think that the supply side of the equation clearly 
shows that we are not getting the job done across America, for 
lots of different reasons, lots of different changes in 
demographics.
    It is clear that the population who does not have 
affordable housing is costing us a lot of money too. It is 
probably 25 percent more to deal with the same population in 
emergency situations: the hospitals, shelters, you know, 
incarceration.
    Secretary Mnuchin. We agree with that.
    Senator Cantwell. So getting this solution would be a big 
boost to economies across the United States, because the rural 
communities are facing just as much of a challenge as the urban 
centers.
    So I would like it if you could give us feedback on that as 
well.
    I think I am going to stop right there. Thank you, Mr. 
Chairman.
    The Chairman. Okay. Senator Toomey came back, so I am going 
back up to the top of the list. Senator Toomey, go ahead.
    Senator Toomey. Thank you very much, Mr. Chairman. Mr. 
Secretary, welcome, and thank you.
    Let me just say off the top, I want to say I really 
appreciate the way you have consistently engaged in a dialogue 
with Senators to, I guess inform the judgment of the folks at 
Treasury in the implementation of our tax reform. I appreciate 
that ongoing dialogue. I think it is very constructive.
    Related to that point, you know one of the things that I 
always thought was most constructive and pro-growth about our 
tax reform was moving to enabling business to fully expense 
capital expenditure in the year in which it occurs, rather than 
having these various depreciation schedules depending on the 
type of the asset.
    As you understand very well, for peculiar reasons, we have 
these expensing provisions phase out over time in the next 
several years. I have introduced--actually, I will be 
introducing tomorrow a bill that will make those expensing 
provisions permanent and provide businesses with the assurance 
that they will be able to fully expense the capital investment 
that they make.
    My view is that that enhances--it effectively lowers the 
after-tax cost of capital. Doing that means more gets invested. 
That means workers are more productive and end up getting 
higher wages.
    So just quickly, I think I know the answer, but are you 
generally of the view that encouraging that full expensing is 
good for the economy?
    Secretary Mnuchin. Yes, I agree.
    Senator Toomey. Okay. And related to that is the issue 
which we know around here by the acronym of QIP, which stands 
for the Qualified Improvement Property. So this alludes to the 
technical error in the drafting of the tax reform by which 
improvements--leasehold improvements for business--instead of 
being able to fully expense them when they occur, because of 
the drafting error, they have to be depreciated over a very, 
very long period of time. And that raises the cost for anybody 
making leasehold improvements.
    And as you know very well, retailers especially, 
restauranteurs to a very large degree, have regular needs to 
make substantial leasehold improvements. And that category of 
investment has, really unsurprisingly, actually had a negative 
impact, while the rest of CapEx has grown.
    So I know you have been supportive of this, and I just want 
to ask you to continue to work with us to get this technical 
fix into the tax code as soon as we can.
    Secretary Mnuchin. Yes, I am just going to comment on that. 
I mean, I think both Democrats and Republicans acknowledge that 
that was a drafting mistake; that it was not intended to be a 
policy change.
    We unfortunately cannot fix that through our regulations, 
and I have constantly brought this up with members on both 
sides of the aisle. This should not be a Democrat or a 
Republican issue. There is a segment of the economy that was 
unfairly hurt by this mistake, and this is our number one 
request to get a congressional fix for.
    Senator Toomey. Well, I completely agree, and I appreciate 
your support on this.
    Then finally, I wonder if you could just--and I apologize 
if you have already covered this, but if you have not, I would 
love to get an update on where we are with the OECD and the 
talks about tax policy. And specifically I am very concerned 
about the digital services tax that some European countries are 
attempting to impose as a practical matter on American 
companies.
    I want to commend you for your work in helping to reach 
what looks to me like kind of a truce for now. The French have 
agreed not to impose these taxes on us. We have agreed not to 
impose tariffs on their products. I am hoping that that gives 
us a moment to negotiate an agreement, but I also think it is 
best if it is done with respect to the entire OECD rather than 
on a strictly bilateral basis.
    Anything you can share with us on the status of those 
discussions?
    Secretary Mnuchin. So I think, as you know, these 
international tax issues are probably the most complex issues 
there are. But the President has been very clear that we think 
that the digital service tax is an unfair attack on U.S. 
companies, and discriminates. And he has been personally 
involved in this, with discussions with President Macron and 
others.
    As a result of his involvement, we have reached what I call 
a truce with France where they will not be collecting this this 
year, while we continue at the OECD. The good news is that the 
UK also will not be collecting it this year. And I think all 
these countries have agreed, if we have an OECD solution, they 
will replace the DST with the OECD's solution.
    So we are actively working on that, and that is a priority 
for us for the balance of this year.
    Senator Toomey. Thank you very much. Thank you, Mr. 
Chairman.
    The Chairman. Senator Whitehouse?
    Senator Whitehouse. Thank you, Mr. Mnuchin. Let me add to 
the bipartisan chorus of urging you to get 45Q done. It has 
taken 2 years, which I think is inexcusable. Somebody has done 
a rather poor job of quarterbacking that within your 
organization, but I am glad you say it will be done in a few 
weeks. Please--did you hear us?
    Secretary Mnuchin. It will, I assure you. And there is no 
excuse for why it has taken as long as it has. So I assure you 
it will be done.
    Senator Whitehouse. Thank you. So on another issue where we 
agree is incorporation transparency and the problem of the 
shell corporations that bedevil so many American interests.
    At the moment, we probably have two Republican votes for 
the Judiciary version of the incorporation transparency bill. 
And I do not know that we have any from the Banking Committee. 
So your people and your administration need to make a bigger 
effort politically to emphasize the national security and 
economic security prerogatives behind your support of the 
incorporation transparency legislation because, at the moment, 
it is jammed up.
    I think it is jammed up because there are a lot of slippery 
interests that make a lot of money off of this rather creepy 
shell corporation international crookedness clyptocracy 
economy. And they are working through lobby groups to try to 
jam this up.
    I hope you agree with me that they ought not to succeed. 
But I want you to know that they are going to succeed unless 
this administration makes it quite clear that this is a bill 
that the President really wants to pass, that this is important 
to our national and financial security.
    So I offer you that heads-up, and I hope you act on it.
    I have been in contact with the Banking Committee about a 
set of economic warnings that are out there, and I will give 
you a copy of the letter that I wrote to Chairman Crapo and 
Ranking Member Brown. But I want to take a minute and read you 
some parts of it.
    It was prefigured by a December letter that I wrote based 
off the warnings about a coastal property values crash that 
have come from a number of sources, but in particular Freddie 
Mac--a fairly credible source for a warning like that--and of a 
carbon asset bubble crash led primarily by the Bank of England. 
As you know, they have been at this for quite some time.
    There are now over 30 sovereign and central banks echoing 
those warnings. So between December 2nd when I sent the first 
letter, and February 6th when I sent this one, the Bank for 
International Settlements came out with a very significant 
warning that the physical and transition risks associated with 
climate change would affect the stability of the financial 
sector and could be irremediable by ordinary methods. The 
impacts could be so great as to--here is their language--``make 
quantifying financial damages impossible,'' that the effects 
would be, and I quote them again, ``catastrophic and 
irreversible; that these climate-related risks will remain 
largely unhedgeable as long as system-wide action is not 
undertaken.'' And it emphasizes that this is a systemic 
financial risk.
    The words ``systemic financial risk'' mean something fairly 
significant, do they not? They do. And it is a severe warning, 
is it not, the warning of systemic financial risk? Is it or is 
it not a severe financial warning of a systemic financial risk?
    Secretary Mnuchin. I am not following what the question is. 
So I understand, obviously, what systemic risk is.
    Senator Whitehouse. And it is serious?
    Secretary Mnuchin. Systemic risk, by definition, is 
serious.
    Senator Whitehouse. Thank you. That is all I needed to 
hear.
    Then we went on in that same time period to the BlackRock 
letter in which CEO Larry Fink wrote, ``Climate change has 
become a defining factor in companies' long-term prospects; 
that we are on the edge of a fundamental reshaping of finance, 
compelling investors to reassess core assumptions. And that in 
the near future, and sooner than most anticipate, there will be 
a significant reallocation of capital.''
    That is another pretty ominous phrase, is it not?
    Secretary Mnuchin. That is his opinion. I do not take it as 
an ominous phrase, but, yes----
    Senator Whitehouse. Well, it will be interesting to see. It 
goes on, ``McKinsey recently warned that climate change could 
make long-duration borrowing unavailable, impact insurance 
costs and availability, reduce terminal values, and trigger 
capital reallocation and asset repricing.''
    The World Economic Forum put out its Global Risks Report in 
the same month, listing the top five most likely risks facing 
the world over the next 10 years, and all five were climate-
related risks.
    And last--sorry, Mr. Chairman--last, the Stanford Graduate 
School of Business report of January noted again that the 
financial risks from climate change are systemic, singular in 
nature, and that global economic losses from climate change 
could reach $23 trillion, three or four times the scale of the 
2008 financial crisis.
    My question to you is, have you ever heard so many and such 
severe warnings from so many, and such respected sources, about 
a looming risk of economic crash, ever?
    Secretary Mnuchin. Well, let me just say, every time 
everybody agrees on financial risks, sometimes they turn out 
not to be the case. And when people do not see them, it is the 
worst you can expect.
    There was a lot of discussion on this issue when I was at 
Davos. I will say it is something that, both on an 
international basis and at the FSOC, we continue to talk about 
and monitor.
    I think one of the big questions is, how does technology 
change over the next 20 years? And what is the cost of carbon 
recapture? There are a lot of very extremely interesting 
potential technologies that will reduce the cost of carbon 
recapture quite dramatically.
    The Chairman. Before I call on Senator Sasse, I want to 
say, since I am a partner with Senator Whitehouse on beneficial 
ownership, I want to thank you for your support, and I hope you 
can talk loudly about it, because we have to overcome a lot of 
special interests to get that thing passed.
    Senator Sasse?
    Senator Sasse. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary, for being here.
    Let us talk about China a little bit. We had Chairman 
Powell at the Banking Committee this morning. And when he was 
asked a series of questions about the coronavirus, he said that 
it was--not quoting here but paraphrasing--that it was too 
early to tell if the public health event would materially 
change China's economic relationship with the rest of the 
world.
    So I have two questions about that for you. The first is, 
do you agree that it is too early to tell what the impacts of 
coronavirus are going to be? But more significantly, what kind 
of data would the Treasury Department be looking for to see the 
earliest signs of whether or not China may be undergoing some 
sort of changed relationship with the rest of the world? 
Obviously, it is going to overlap with a bunch of trade 
questions we should explore.
    Secretary Mnuchin. Well, let me just say, Chair Powell and 
I have spoken about this recently, and I think we both share 
similar views.
    So any time you are modeling something like this, you have 
to start with what the impact is of the virus and the way it is 
spreading. I think on the one hand, there are certain aspects 
of it that are much more concerning than SARS. On the other 
hand, I think China started dealing with this much earlier.
    So I think that the scientific data--when we have another 2 
to 4 weeks' worth of data, we will have a much better ability 
to extrapolate this. There is no question it is having a 
significant impact in China. To what extent the virus spreads, 
the rate it spreads, is something we are obviously monitoring 
very carefully. And to have the economic impacts of this, I 
think we need another 3 to 4 weeks of data to be able to 
extrapolate in a more specific way.
    Senator Sasse. Thanks. And I appreciate your point that 
they have tackled this earlier than SARS. But we should just 
have a shared understanding in this room and in the broader USG 
context that this disease, 9-ish weeks old, got no attention 
for over 5 weeks from the Chinese Communist Party because they 
have this myth that Chairman Xi can preside over China. I think 
their language at their most recent party conference was, 
``from east to west, from north to south, across all sectors of 
the economy, he is functionally all-knowing.''
    Well, if you believe that kind of BS, then obviously you 
would need to hide the emergence of a global pandemic, because 
1.4 billion Chinese, 90 million members of the communist 
party--and as he consolidates more and more power at the top, 
this myth that he is able to centrally plan everything that 
happens in their civilization means if you have something 
horrible, a natural disaster like a disease, the Communist 
Party essentially becomes a great incubator to spread that 
disease by lying to your people about the competence of the 
leadership.
    So they may have addressed it faster than SARS. They still 
addressed it way too late, and there are people both in China 
and beyond dying because of the malfeasance and 
maladministration of the Communist Party.
    Could you distinguish a little bit between what you see as 
the victories of Phase One on the China deal that are real, and 
what you hope could be the most front-end, realizable goals in 
the Phase Two agreement and how you see that timeline, please?
    Secretary Mnuchin. Well, I think the Phase One agreement is 
quite significant. It is the first time that there have been 
serious commitments. It is everything from the forced 
technology issue, patent protection, agricultural structural 
issues, financial services issues, currency provisions, and a 
real enforcement provision.
    So I think they are quite significant. Obviously, our 
biggest focus is implementing Phase One. That to a certain 
extent has slowed down, given the virus, as expected. And I 
think Phase Two--the good news is Ambassador Lighthizer and I 
have the entire Phase Two chapters dealt with, and we have said 
we may roll them out as Phase Two A, B, C, D. It does not 
necessarily have to be a big bang. But we know what we want to 
get in Phase Two.
    Senator Sasse. When you say you have those chapters dealt 
with, have you looked at Phase Two A, or whatever the piece 
that is the earliest batch--what is the earliest and the worst 
case scenario time line you envision?
    Secretary Mnuchin. We really have not determined that. I 
mean, the President has been very clear he wants us to execute 
on Phase One. He wants us to make sure as we move to Phase Two 
we get what we need to get and does not want to set arbitrary 
timelines.
    So I think, as you know, the President kept significant 
tariffs on to create an incentive for them to do Phase Two, and 
those will not be reduced until we do that.
    Senator Sasse. Thanks. You mentioned that there have been 
real commitments about IP theft and forced technology transfer 
in Phase One.
    I want to start by saying I have a lot of skepticism of 
whether or not the Chinese Government will keep their 
commitments. But I applaud the President for having been one of 
the first people to push on the fact that China has been a bad 
actor and that we needed to shine a brighter spotlight on them.
    So I applaud the President for having done that. But it is 
also the case that they have made pledges many, many times in 
the past about IP and technology that they have not kept their 
word on. Have you seen personally any evidence of things like 
Chinese ownership for past wrongdoings?
    So the Equifax indictments that were announced by the 
Department of Justice and the Attorney General this week, 
really great stuff, that more than one-third of--great news 
that they had been, that they are being indicted. The event 
itself is horrific, the 2017 hack of Equifax that led to the 
personally identifiable financial information of more than a 
third of Americans being stolen. It is great that the Attorney 
General and the Justice Department are focused on that, but in 
any of your dealings with them, as you have these conversations 
about getting honest and getting real about IP, intellectual 
property, more broadly in the future, do they ever own any of 
their past wrongdoing?
    Secretary Mnuchin. Well, let me just comment. Obviously the 
Equifax thing, which is obviously quite concerning--and that is 
a law enforcement issue, so we have not had specific 
discussions with them around Equifax.
    I will say that, as it relates to specific technology 
things, I think there is a legitimate interest internally in 
China by a large group of their area, that they want to put 
these protections in place, because they realize their economy 
cannot move forward without them.
    Now as you said, there have been commitments they have made 
in the past that they have not honored. The difference here is, 
this agreement has real enforcement provisions built into it.
    Senator Sasse. I am at the kids' table, and I recognize you 
see me as the most junior member, basically behind your 
shoulder here. I do not want to upset the Chairman----
    The Chairman. You are not so junior. You get the same 5 
minutes everybody else gets.
    Senator Sasse. That is a good way of pointing out to me 
that the clock is ticking at 6\1/2\ minutes. I will follow up 
with you separately about some other IP issues.
    The Chairman. Senator Young?
    Senator Young. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary, for your service and for being here today as well.
    Since tax reform, our economy has absolutely been roaring. 
It has really been encouraging. We have been able to sustain, 
along with regulatory reform and implementation of USMCA 
forthcoming, the longest period of economic expansion in 
American history.
    And I know folks back home in my State are really enjoying 
the fruits of our prosperity. Since tax reform, real disposable 
personal income for an average household in the State of 
Indiana has risen around $6,000. Moreover, average hourly 
earnings have grown at a rate of 3 percent or higher for 16 
consecutive months, with the largest wage gains concentrated in 
the bottom quarter of the wage scale.
    So that is something I will continue to tout, and I commend 
you and your Department for your hard work to help effect this 
change.
    As you know, Mr. Secretary, there are skeptics still, 
despite these hard numbers, of the Tax Cuts and Jobs Act, who 
are trying to draw attention away from our outstanding economic 
results and push concerns of stagnant wages, and I just want to 
give you an opportunity to sort of respond to this narrative we 
hear out there and elaborate on how changes in investment 
behavior matter for ordinary Americans like those I just 
described.
    Secretary Mnuchin. Well, thank you. I think there is no 
question we think that the tax cuts are having a real impact on 
the economy, and a real impact on wages, as you have pointed 
out--and that the average American is seeing real economic 
gains.
    Senator Young. That about says it. Well, thank you.
    And as you continue to implement the Tax Cuts and Jobs Act, 
I stand ready, this committee stands ready, to help you and 
also to help our taxpayers navigate the new changes and make 
sure that businesses and individuals alike have the necessary 
guidance.
    So I would like to turn to a distinct topic, but a really 
important one, and it is the emergence of cryptocurrency and 
the challenges that creates for the U.S. Government in various 
ways.
    So these technological advancements and the increasingly 
interconnectedness of our world financial institutions are 
addressed in the President's budget. In fact, he proposes to 
move the Secret Service back to Treasury to create new 
efficiencies. And recently, the IRS has increased enforcement 
and released additional guidance related to crypto.
    Proponents of crypto believe it can benefit the everyday 
consumer by lowering transaction costs for online purchases, 
increasing protection from identity theft, and breaking down 
various financial barriers.
    How does your Department, Mr. Secretary, plan to respond to 
this rapidly evolving technology of cryptocurrency and other 
digital assets?
    Secretary Mnuchin. Well, thank you. And as you have 
commented, we are very supportive of bringing the Secret 
Service back home to the Treasury where it started, and the 
efficiencies of having it together.
    We are spending a lot of time on the issue of 
cryptocurrencies and digital payment systems. It is a crucial 
area. And there are a lot of different things that get grouped 
together into this one area. So let me just be brief.
    But on pure cryptocurrencies like Bitcoin--and there are 
others--we want to make sure that these are not used as the 
equivalent of secret bank accounts. So we are working with 
FinCEN, and we will be rolling out new regulations to be very 
clear on greater transparency so that law enforcement can see 
where the money is going and that this is not used for money 
laundering.
    There is another component of the market, which people 
refer to as ``stablecoins,'' where we do think technology can 
be used to reduce payment processing quite considerably, 
particularly for small-dollar payments cross-border.
    And then there is a third component that people are looking 
at, which is Central Bank issued currency. That is something 
that Chair Powell and I do not think the U.S. needs to consider 
now but could consider again down the road.
    Senator Young. You preempted my follow-up question there as 
it relates to central bankers. There is a concern that they 
could use these virtual currencies to operate outside of the 
current international financial system, right?
    Well, as the Department stands ready to begin working on 
that, I look forward to engaging with you on that issue. So 
thank you so much. I yield back my 5 seconds.
    Senator Wyden [presiding]. All right. Mr. Secretary, here 
is where we are. The chairman had to be out of the room for a 
couple of minutes, so Senator Thune is going to ask his 
questions. I have one additional area I want to explore with 
you that should be quick. I appreciate your patience, and we 
will recognize Senator Thune. And I think the chairman will be 
back.
    Senator Thune. Thank you, Mr. Chairman. And thank you, 
Secretary Mnuchin, for being here today.
    As has already been pointed out, in the 2 years since tax 
reform has passed we have seen, and continue to see, the 
benefits of that. Last week's jobs number was great, another 
225,000 jobs created. And probably most importantly of all is 
just the annual hourly wage growth that we have seen that has 
been north of 3 percent again for 18 months now in a row. And 
unemployment is at 4 percent or under for 23 months in a row. 
So these are not blips on the radar. These mark sustained 
progress and a fundamental shift in the trajectory of the 
economy in an era where lackluster growth is no longer the new 
normal.
    And so we believe the policies are working, and we want to 
continue to make life better for American workers. And I hope 
that our friends across the aisle will put partisanship aside 
and join us in creating even more opportunities for American 
workers. And one way to start, of course, would be to very 
thoughtfully engage on some proposals that you have put before 
us today.
    And before I get to my question, I want to mention too, to 
thank you for your efforts to thread the needle on the 199A 
regulations and ensure that the ``grain glitch'' deal that we 
struck with stakeholders is clearly reflected in those 
regulations. So thank you for your attention to that.
    The President's fiscal 2021 budget once again seeks to 
improve clarity in worker classification, an issue particularly 
important in today's gig economy. And as you know, I have 
introduced legislation that would help develop clarity 
surrounding the tax treatment of this new generation of 
workers. And the administration's proposal includes many 
elements of this legislation.
    The bill, the New Economy, works to guarantee independence 
and growth, and the NEW GIG Act addresses the classification of 
workers--independent contractors versus employees--and creates 
a worker safe harbor based on a set of objective tests. The NEW 
GIG Act also modernizes information reporting requirements and 
provides for voluntary withholding by independent contractors.
    Mr. Secretary, do you agree that one way we can address the 
tax gap is by updating our tax reporting laws to ensure that 
the IRS has the information it needs to enforce our tax laws 
while also respecting the traditional distinction between 
employees and independent contractors?
    Secretary Mnuchin. Yes.
    Senator Thune. So this is a follow-up to that. How 
important is it, in your mind, that Congress modernize the tax 
code to respond to the changing nature of our economy and the 
evolving nature of how goods and services are increasingly 
provided?
    Secretary Mnuchin. We look forward to working with you. We 
think it is a significant issue.
    Senator Thune. Good. Okay. We hope so. We would like to see 
this change get made and get enacted.
    In a post-Wayfair world, there remains a potential for 
discriminatory and duplicative taxes on digital goods and 
services such as online downloads of music and cloud computing 
services. And while my home State of South Dakota was careful 
in the way it crafted its sales tax law, the potential for 
multiple and discriminatory taxes levied on these types of 
goods and services could threaten the growth and innovation of 
this important sector of the economy, something that I have 
worked with Ranking Member Wyden on in the past.
    And we have introduced the Digital Goods and Services Tax 
Fairness Act, a bill which would provide some rules of the 
road, if you will, for taxing digital goods and services, and 
it establishes a framework across multiple tax jurisdictions.
    Mr. Secretary, do you agree that more certainty on these 
and other interstate commerce issues is needed after the 
Wayfair decision?
    Secretary Mnuchin. We look forward to working with you on 
that as well.
    Senator Thune. Well, we are going to give you that 
opportunity. We are going to have a hearing on that really soon 
in the Commerce Committee.
    The last thing I will say is, we appreciate the work that 
you did last year to implement changes to Treasury guidance for 
high-
deductible plans used with HSAs. The inclusion of chronic 
disease management as preventive care is an important step in 
helping patients with conditions like diabetes or asthma better 
manage their health, and I look forward to continuing to work 
with you on that.
    And we have one other issue that is related to that. I have 
a bill called The PHIT Act, and it would allow HSA dollars to 
be used toward expenses related to physical activity. And I 
think that is something that is on the preventive side that we 
can do that would really help in the curve when it comes to 
reducing health-care costs.
    And I would just simply ask you, in response, would you 
commit to working with me and my staff on ways that we can 
address that issue through legislation, or through further 
administrative fixes?
    Secretary Mnuchin. We will; thank you.
    Senator Thune. Great. That was easy. I got all my questions 
answered.
    Mr. Chairman, I yield back.
    Senator Wyden. Thank you, Senator Thune.
    One additional area, Mr. Secretary. Senator Menendez and I 
both asked you about whether the Treasury Department was being 
tough enough on sanction violators. And Senator Menendez asked 
if sanctions decisions would be free from political 
considerations, and you simply said, ``no.''
    Now President Trump has one of his Trump Towers in 
Istanbul, and senior Halkbank officials have offices there. In 
a letter that your office sent to me in November--and I am 
going to put that into the record now.
    [The letter appears in the appendix on p. 63.]
    Senator Wyden. You said that when President Erdogan asked 
Trump to go easy on Turkey, President Trump referred Erdogan's 
request to you.
    So my question to you is, did President Trump ask you to 
intervene and assist with Turkey's sanctions' violation?
    Secretary Mnuchin. So I want to just clarify one thing on 
the first part. When the question was asked about political, I 
was using the word ``political'' and ``policy'' 
interchangeably. So I just want to be clear in my response, I 
was not differentiating. And perhaps policy was the right 
response, and not political.
    As it relates to--and again, I want to be careful about how 
I respond to this, because this is subject to ongoing law 
enforcement with both OFAC and with the Department of Justice. 
The reason why the President referred Halkbank to me and to DOJ 
was because there were ongoing issues, and the portion of the 
OFAC fell under my responsibility. That was the reason why it 
was referred to me.
    Senator Wyden. So my question is, did President Trump ask 
you to intervene and assist Turkey with their sanctions 
violations?
    Secretary Mnuchin. He didn't ask me to intervene. What he 
asked me to do was to--again, he knew that I was responsible 
for overseeing the OFAC provision of it, okay? And again, I 
can't go into the specifics of the investigation. Again, this 
was a violation--sanctions violation, as you're aware of--as it 
relates to Halkbank.
    And it would not be irregular for us to talk to government 
officials, specifically where there are areas under my 
responsibility.
    Senator Wyden. Well, you told me that there were seven 
meetings. Now I know enough, having served on the committee, 
the Treasury Secretary is a pretty busy fellow. Seven meetings? 
What happened in these meetings?
    Secretary Mnuchin. Well, I just want to say, my calendar is 
public. So there is no surprise. I assume the seven number is 
correct. But again----
    Senator Wyden. That is what you told me.
    Secretary Mnuchin. But again, I meet with finance 
ministers. I meet with world leaders with the President on a 
constant basis. So, many of these discussions had nothing to do 
with sanctions issues, or Halkbank issues, whatsoever. They had 
to do with financial issues--we were having trade discussions 
with Turkey. We were having discussions around foreign policy 
issues. We were also having other foreign policy discussions.
    So again, these are not--I do not want to in any way imply 
that these were all Halkbank discussions, whatsoever. Almost in 
every G20 we have been at, we have met with Turkey on a regular 
basis, on a bilateral basis.
    Senator Wyden. Okay; we will leave it at that for now. Some 
meetings were about Halkbank and some were about other matters, 
based on your last answer.
    Thank you, Mr. Secretary, for your testimony today on the 
President's fiscal year 2021 budget. We are going to ask 
members on both sides of the aisle--I think the staff knows--to 
submit any written questions for the record by close of 
business on Wednesday, February 26th.
    And with that, the hearing is adjourned.
    Secretary Mnuchin. Thank you, very much.
    [Whereupon, at 3:19 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


              Prepared Statement of Hon. Chuck Grassley, 
                        a U.S. Senator From Iowa
    We are pleased to have Treasury Secretary Mnuchin here today to 
testify on the President's Fiscal Year 2021 budget proposal.

    The President's budget includes proposals to confront a number of 
important policy issues. I look forward to working with the President, 
the Secretary, and others in the Congress to address these and other 
pressing issues in the committee's jurisdiction. Drug pricing and the 
multiemployer pension crisis are two such issues.

    This budget proposal comes at a time when the economy is strong, 
especially for working American families. Better trade deals, less 
regulation, and lower taxes from tax reform have translated into wage 
increases, especially for lower-wage earners, and historically tight 
labor markets.

    Over 6.7 million jobs have been created since President Trump was 
elected, with nearly 70 percent of the job gains occurring since we 
passed the Tax Cuts and Jobs Act. Unemployment has fallen to a 50-year 
low. We've had 23 consecutive months with the unemployment rate at or 
below 4 percent, the longest streak in nearly 5 decades. Unemployment 
for Hispanic and for African American workers has set all-time record 
lows. America's middle class is growing, and families are benefiting, 
with a family of four earning $73,000 seeing their tax bill cut by over 
$2,000 after tax reform.

    Statistics like these show that tax reform is a success. The 
Treasury Department's work to implement the new tax law as we intended 
has been an important part of that success. We appreciate the diligence 
and dedication Treasury and IRS have maintained over the last 18 months 
to release extensive guidance necessary for hardworking Americans and 
the business community to file their tax returns.

    Despite Treasury's steadfast efforts, however, the critics have 
continued their assault on the Department for doing its job--criticism 
that is unfounded.

    While Treasury plays an integral role when any major tax 
legislation is enacted, the heavy lifting occurs when the new 
legislation is implemented. Treasury is following the same process set 
out in the Administrative Procedures Act that has occurred after 
enactment of other tax legislation, like the Affordable Care Act.

    Critics continuously use preliminary and incomplete data to distort 
the effects of tax reform to support their political narrative. Their 
focus on revised CBO projections of corporate tax receipts is just the 
latest installment, as I discussed in my statement yesterday on the 
Senate floor.

    Similarly, we all recall the misinformation campaign in last year's 
filing season when critics tried to persuade the public that tax reform 
was a failure because early tax refunds were down. Of course, they 
conveniently ignored that the size of a tax refund says nothing about 
the tax liability of an individual or family. In the end, the criticism 
proved to be flat-out wrong. Americans got tax relief, and the average 
size and number of refunds ended up being closely in line with previous 
years.

    I'm hopeful that we can avoid similar scare tactics in this year's 
filing season. Nothing the critics can say will refute the fact that 
every income group in every State saw a tax cut under tax reform, or 
the fact that this is particularly true for low- and middle-income 
families. Instead, I hope we can work together on policies that will 
benefit all Americans, including some in the President's budget 
proposal.

    We have a solid foundation of bipartisan accomplishments in recent 
months, including the SECURE Act, the Taxpayer First Act, and the USMCA 
trade deal. And, after extensive negotiations, we came together to 
extend a number of temporary bipartisan tax provisions. I wish more 
could have been done to resolve them once and for all, as we did in 
repealing three onerous Affordable Care Act health taxes. But hopefully 
our efforts in December can lead us to success in future discussions on 
the expiring provisions that are coming up at the end of this year.

    I'm also encouraged by the progress that has been made at the OECD 
to reach a multilateral global tax agreement on the digital economy. 
Senator Wyden and I have remained united and bipartisan in our message 
that unilateral measures that discriminate against American companies 
cannot be tolerated, and we continue to support Treasury in these 
negotiations.

    As this year progresses, we should build upon these past successes 
to make sure Treasury and our tax laws are working for the American 
people.

    I've seen administration budget proposals from Republican and 
Democrat Presidents alike. No matter which party controls the White 
House, members won't support everything that they see. As a matter of 
fact, one of former President Obama's last budgets was defeated on a 
99-0 vote.

    As I've said before, in our system, the President proposes and the 
Congress disposes. Even so, today's hearing is part of the important 
process of looking for things that people on both sides can agree on to 
support the American people in the most fiscally responsible way.

                                 ______
                                 

                       DEPARTMENT OF THE TREASURY

                          Washington, DC 20220

assistant secretary

February 11, 2020

The Honorable Ron Wyden
U.S. Senate
Washington, DC 20510

Dear Senator Wyden:

I am writing as a follow-up to the Department of the Treasury's January 
10, 2020 response to your December 5, 2019 letter. A recent public 
statement attributed to your office indicates you may have overlooked 
our response, which explained how the Department accommodates 
congressional requests for information collected and maintained by 
Treasury's Financial Crimes Enforcement Network (FinCEN), including 
Suspicious Activity Reports (SARs).

Treasury takes very seriously the obligation to protect the 
confidentiality of information collected and maintained by FinCEN 
pursuant to the Bank Secrecy Act (BSA), particularly SARs. Disclosure 
of such information is limited to the circumstances prescribed by 
statute and regulation. The applicable regulations provide that the 
Secretary of the Treasury may ``within his discretion'' disclose this 
information ``for any reason consistent with the purposes'' of the BSA. 
In addition, the regulations explicitly authorize the disclosure of 
such information in response to a written congressional request that 
meets certain specifications.

As our prior letter explained, Treasury does not process congressional 
requests for FinCEN records on a partisan basis. Over the past year, 
the Department has provided FinCEN records in response to requests from 
both sides of the aisle. Most of those productions have been in 
response to requests made or joined by Democratic members. Due to the 
sensitivity of FinCEN records, it would be inappropriate to comment 
further on these productions.

The recent statement attributed to your office also appears to 
reference congressional requests for confidential tax returns and other 
return information. Disclosure of tax returns and return information is 
generally prohibited under the stringent protections of 26 U.S.C. 
Sec. 6103, subject to a carefully delineated list of statutory 
exceptions. Treasury takes its obligations to protect taxpayer 
confidentiality seriously, and accordingly takes care to ensure that 
returns and return information are not disclosed unless one of these 
statutory exceptions is available.

Sincerely,

Brian T. McGuire

cc:  The Honorable Charles E. Grassley

                                 ______
                                 
             Prepared Statement of Hon. Steven T. Mnuchin, 
                 Secretary, Department of the Treasury
Chairman Grassley, Ranking Member Wyden, and members of the committee, 
I am pleased to be with you today to discuss the President's Fiscal 
Year (FY) 2021 budget and the Treasury Department's top priorities.

President Trump's economic freedom agenda is working. Tax cuts, 
regulatory reform, and better trade deals are improving the lives of 
hardworking Americans. Unemployment remains historically low at 3.6 
percent and is at or near all-time lows for African Americans, Hispanic 
Americans, and veterans. The unemployment rate for women recently 
reached its lowest point in nearly 70 years. Before President Trump 
came into office, experts were predicting that we would only grow by 
14,000 jobs per month in 2019.\1\ We averaged 175,000 jobs per 
month.\2\
---------------------------------------------------------------------------
    \1\ Congressional Budget Office (August 2016). ``An Update to the 
Budget and Economic Outlook: 2016 to 2026.''
    \2\ Bureau of Labor Statistics (February 7, 2020). ``The Employment 
Situation--January 2019.''

Wages for non-supervisory workers rose by 3.2 percent in 2019, compared 
to 3.0 percent for all private-sector employees, which means that wages 
rose faster for workers than they did for their bosses.\3\ The improved 
employment environment means that more Americans have returned to the 
job market, increasing labor participation. Last month's labor force 
participation rate among prime-age adults reached 83.1 percent--an 11-
year high.\4\
---------------------------------------------------------------------------
    \3\ Ibid.
    \4\ Ibid.

American families are earning more each year and--thanks to the Tax 
Cuts and Jobs Act--paying significantly lower taxes. They also have 
---------------------------------------------------------------------------
more career opportunities now than ever before.

America's economic strength and competitiveness is a bright spot in the 
world as other nations experience headwinds. In the year to come, we 
expect even greater economic growth in the United States as we finalize 
trade deals with some of our most important trading partners. The Phase 
One deal with China will result in critical, enforceable protections 
for our businesses and a tremendous boost for our farmers.

The USMCA will further add to our success by setting some of the 
highest standards ever included in a trade agreement. We are proud to 
have earned the support of a broad coalition of industries, including 
manufacturing and agriculture, as well as labor. We are pleased that it 
passed Congress with strong bipartisan support. I particularly want to 
thank many members of this committee for their work on this important 
issue.

In addition to improving our business environment, President Trump's 
economic policies will result in economic growth that will reduce our 
national debt and deficits over time. Federal Government revenue 
increased by 4 percent from FY 2018 to FY 2019.\5\ Unfortunately, in 
order to secure critical funding to rebuild the military, Democratic 
members of Congress insisted on increasing other government spending, 
which resulted in spending growth of 8 percent from FY 2018 to FY 
2019.\6\ The administration is committed to working with members from 
both sides of the aisle to address spending going forward.
---------------------------------------------------------------------------
    \5\ Bureau of Fiscal Service (October 2019). ``Final Monthly 
Treasury Statement.''
    \6\ Ibid.

The President's FY 2021 budget for the Treasury Department makes clear 
that we continue to prioritize economic growth as well as our critical 
role in national security matters. Of particular interest to this 
committee, we are requesting $12 billion for the Internal Revenue 
Service (IRS). This includes funding to implement the Taxpayer First 
Act and the third year of the Integrated Business Systems Modernization 
Plan. We continue to bring the IRS into the 21st century by updating 
systems and utilizing data analytics and other technological 
advancements to enhance the effectiveness of audit enforcement 
activities. We are requesting a program integrity cap adjustment to 
reduce the tax gap, with net savings of $64 billion over 10 years. We 
also remain focused on improving customer service for taxpayers by 
reducing call and wait times and enhancing the IRS's online service 
---------------------------------------------------------------------------
capabilities.

I am pleased to join you today to discuss ways for us to work together 
to make our economy even stronger by creating more jobs and higher 
wages for hardworking Americans. Thank you very much, and I look 
forward to answering your questions.

                                 ______
                                 
      Questions Submitted for the Record to Hon. Steven T. Mnuchin
               Questions Submitted by Hon. Chuck Grassley
    Question. As you know, last year Senator Scott and I introduced a 
bipartisan Opportunity Zones reporting bill called the IMPACT Act. The 
bill, in part, directs Treasury to make publicly available a report 
that tracks various outcomes and economic indicators.

    If enacted, can we count on the Treasury Department to provide the 
information required in the IMPACT Act to both guard against abuse as 
well as track the success of the Opportunity Zones program?

    Answer. If enacted, Treasury will work to report any information 
required by the Improving Medicare Post-Acute Care Transformation Act 
(IMPACT) Act. In its current form, though, several items in the bill 
may provide challenges to data collection and reporting, and we would 
be pleased to work with your staff on those issues (which are 
summarized below).

    First, in section 3(a), the bill requires that qualified 
opportunity funds (QOFs) must annually report information about 
investments. Included among the data items requested are the following: 
``the approximate number of residential units (if any) for real 
property held by such corporation or partnership'' and the ``average 
monthly number of full-time equivalent employees of such corporation or 
partnership for the year.'' Both measures are of characteristics of 
businesses that were attractive investment opportunities for QOFs. 
Treasury believes that total residential units and employment 
statistics are better measured at a longer time interval, and over a 
wider area. Note that looking specifically at businesses that receive 
funding will overestimate the effect of the opportunity zone incentive 
if those businesses attract employees that would have otherwise worked 
at another job in the area, and will underestimate the effect of the 
incentive if other businesses are able to expand as a result of the 
incentive. Similarly, the construction of residential units may be 
funded through opportunity zones QOFs, but the total affordable housing 
in the greater community may not change by the same amount.

    Second, the public reporting of information as described in section 
3(b) would require substantial masking of tax data to ensure compliance 
with section 6103 of the Internal Revenue Code taxpayer protections. 
Without legislating a waiver of section 6103 protections, data from 
many census tracts and industries will require such censoring.

    Treasury appreciates the changes made in 3(b)(3)(B) in response to 
our prior conversations about data aggregation and reporting. A 5-year 
window will indeed provide a much clearer picture of local economies 
due to data availability.

    Question. Despite the positive economic growth and record-low 
unemployment numbers I mentioned in my opening statement, some have 
argued that the tax cuts aren't benefiting workers and the middle 
class.

    However, according to the White House Council of Economic Advisors, 
net worth of households has increased 12.1 percent (more than $12 
trillion) during the first 11 quarters of the Trump Administration--
more than any other president's first 11 quarters in office since this 
data was reported.

    Importantly, the net worth of the bottom 50 percent of households 
has increased by 47 percent--more than three times the rate of increase 
for the top 1 percent of households.

    Clearly there's more to be done, especially on policies that will 
encourage wage growth and discourage wealth inequality. But, Mr. 
Secretary, wouldn't you agree that workers and the middle class are 
benefiting from tax reform?

    Answer. Workers and the middle class are absolutely benefiting from 
the administration's tax reform. After the passage of the Tax Cuts and 
Jobs Act (TCJA), real wages \1\ grew by 1.5 percent per year, compared 
to the average from 2009 through 2016 of 0.6 percent. If we restrict 
our focus to wages for production and nonsupervisory workers--
reflective of the middle and working class--the numbers are 1.7 percent 
for the post-TCJA period, and 0.6 percent for the previous 
administration. These numbers reflect wage growth that is over 2\1/2\ 
times as strong after the passage of the TCJA. This wage growth wasn't 
mandated in the TCJA; instead it was a result of powerful growth 
incentives in the TCJA causing a labor market as strong as any seen 
since the 1960s, as measured by the unemployment rate.
---------------------------------------------------------------------------
    \1\ Average hourly earnings deflated by personal consumption 
expenditure prices.

    Moreover, the TCJA's strong supply-side incentives are designed to 
encourage investment and thereby boost wages far into the future. 
Beyond reductions in the statutory rate for large corporations, changes 
include providing owners of smaller, unincorporated businesses with a 
20-percent tax deduction, scheduled to expire in 2026, which helps them 
compete with large corporations. Further, the 2017 Act provided full 
expensing for equipment investment through 2022. By encouraging capital 
deepening, all these measures will improve labor productivity, and thus 
---------------------------------------------------------------------------
increase wages, for years to come.

    Workers also benefited from individual tax reform. Council of 
Economic Advisors (CEA) has estimated the average household experienced 
increased income worth $4,000 as a result of the law. For tax year 
2018, Tax Policy Center estimated that 65 percent of households had 
lower individual income tax burdens as a result of TCJA, while only 6 
percent, mostly upper-income households, had higher burdens. The 15-
percent rate paid by many working and middle-class families was cut by 
20 percent, whereas the top tax rate paid by the richest families was 
cut by 7 percent and the second-highest tax rate was not cut at all.

    Question. Mr. Secretary, the budget calls for a $400-million cap 
adjustment for IRS tax enforcement programs.

    I know that IRS Commissioner Rettig has stated publicly that the 
IRS will be ramping up enforcement of the tax code with regard to 
suspected tax evasion techniques, such as syndicated conservation 
easements.

    How does such an increase in the budget help with tax enforcement, 
especially with regard to enforcement against higher-income 
individuals?

    Answer. The FY 2021 request includes resources to help target the 
tax gap and provide robust civil and criminal enforcement to protect 
against those who pursue overly aggressive tax positions, while 
ensuring honest taxpayers have access to the services they need.

    The budget proposes a $400-million discretionary program integrity 
cap adjustment in FY 2021 to fund investments in expanding and 
improving the effectiveness and efficiency of the Internal Revenue 
Service's (IRS's) overall tax enforcement program. The budget proposes 
$280 million for the Enforcement account and $120 million for the 
Operations Support account. Additional adjustments are provided in 
future years to fund new initiatives and inflation. These investments 
will generate $79 billion in new revenue over 10 years and will cost 
$15 billion for net revenue of $64 billion over 10 years.

    The cap adjustment includes additional examination employees. The 
decline in staffing since FY 2010 has led to a decrease in the 
individual audit coverage rate from 1.1 percent in FY 2010 to 0.45 
percent in FY 2019, which increases the risk to the integrity of the 
Nation's voluntary tax compliance system. As audit coverage rates 
continue to decline, individuals and businesses may decide that the 
chance of the IRS auditing them is minimal, and take riskier positions 
on their tax reporting, especially since the IRS's audit coverage 
decline has been widely reported and is public. The additional 
resources will fund a broad range of compliance priorities and allow 
for earlier case assignment and resolution.

    Question. Mr. Secretary, there have been accusations that Treasury 
issued tax reform regulations that it didn't have the authority to 
write.

    As you know, Treasury has broad authority to issue regulations 
under section 7805 and many other specific provisions of the Internal 
Revenue Code. Historically, Treasury has asserted significant authority 
to administer and implement the tax law, regardless of whether the 
administration was Republican or Democratic.

    While that authority has limits, the proposed regulation in 
question relating to the new Global Intangible Low-Taxed Income, or 
GILTI, rules seems squarely within Treasury's regulatory authority. The 
GILTI rules are intended to prevent companies from generating profits 
in zero or low-taxed jurisdictions without paying some U.S. tax.

    The high-tax exemption that is the subject of the Democrats' recent 
criticism is targeted at preventing double taxation where companies 
have already paid high levels of foreign tax. This regulation is 
consistent with the intent of GILTI and with pre-existing anti-abuse 
rules targeting low-taxed foreign earnings.

    Mr. Secretary, doesn't Treasury thoroughly consider statutory 
authority and congressional intent when writing regulations, and wasn't 
this the case with the proposed high-tax exemption?

    Answer. The Treasury Department treats questions of statutory 
authority with the utmost thoroughness and seriousness. That was 
certainly the case with respect to Global Intangible Low-Taxed Income 
(GILTI) high-tax exception mentioned in your question. As explained in 
a February 11, 2020 letter from Deputy Assistant Secretary Vaughan, 
Treasury's regulations are fully consistent with governing law in 
substance as well as process. The GILTI regulation was reviewed and 
approved by several members of Treasury's Office of Tax Policy and the 
IRS's Office of Chief Counsel, in addition to Treasury's General 
Counsel. The legal authority for the rule was clearly explained in the 
regulation's preamble, which was issued in final form this summer. In 
short, we strongly agree with your assessment of the statutory 
authority for the high-tax exception.

                                 ______
                                 
      Question Submitted by Hon. Chuck Grassley and Hon. Ron Wyden
    Question. We understand that historically OMB has listed IRS 
whistleblower awards as subject to sequestration under the Budget 
Control Act of 2011. We question that decision, as awards under 7623(a) 
of the Internal Revenue Code are discretionary, but awards under 
section 7623(a) are mandatory with no discretion. Whistleblower awards 
made under section 7623(b) are paid from collected proceeds and are not 
paid from appropriated funds. Therefore, applying sequestration to 
these amounts overrides the mandatory nature of these awards, as 
Congress enacted into law. We know recently OMB reconsidered whether 
AMT-based tax refunds would be subject to sequestration and arrived at 
the correct answer that such refunds should be exempt. Are you willing 
to ask OMB to make a similar examination of IRS whistleblower awards 
under section 7623(b) and work with our staffs and other experts in 
this area to consider whether they should be exempt from sequestration?

    Answer. The Treasury Department is always willing to work with your 
staffs to consider legal and policy issues, including the treatment of 
whistleblower awards under section 7623(b). It is important to note, 
however, that the determination of whether various provisions are 
subject to sequestration under the Budget Control Act of 2011 is made 
by the Office of Management and Budget (OMB) and any change in position 
would need to be made by OMB.

                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
    Question. Secretary Mnuchin, in 2018 I led the effort to modernize 
the Committee on Foreign Investment in the U.S., also known as 
``CFIUS,'' via the enactment of the Foreign Investment Risk Review 
Modernization Act or FIRRMA. FIRRMA gave CFIUS broad authority to 
review and assess foreign investments coming into the U.S. by expanding 
its regulatory authority and by granting the committee its own budget. 
Last year, the committee received its own independent budget for the 
first time, totaling $20 million, with about half derived from user 
fees.

    Can you describe how the transition for CFIUS is moving along and 
provide some insight into the cases CFIUS is reviewing?

    How much does CFIUS expect to receive in user fees this fiscal year 
and how much has been collected to date?

    CFIUS reviews increased significantly from 2010 through 2018. But 
it appears there are no statistics available for the number of cases 
CFIUS reviewed in 2019. Can you provide my office with an estimate of 
funds by object class and full-time equivalents for FY 2020, FY 2021, 
and updated caseload for 2019?

    Answer. Implementation of the Foreign Investment Risk Review 
Modernization Act (FIRRMA) will help ensure that identified national 
security risks arising from certain foreign investments are effectively 
addressed. Implementation has involved several primary lines of effort: 
regulatory implementation, staffing, and infrastructure. Several 
highlights include:

        Regulatory Implementation: In January 2020, Treasury issued 
two final regulations implementing FIRRMA that became effective in 
February 2020, meeting the statutory deadline. In April 2020, Treasury 
issued an interim rule establishing a fee for transactions filed as a 
formal written notice. In May 2020, Treasury issued a proposed rule 
revising the scope of mandatory declarations for certain transactions 
involving critical technologies.

        Staffing: Since FIRRMA's enactment in August 2018, Treasury's 
Office of Investment Security and Office of General Counsel have 
utilized FIRRMA's special hiring authority to increase CFIUS-related 
staff from 23 employees to 74 staff and contractors. The expanded 
resources have allowed the CFIUS to process cases more efficiently, 
conduct more work identifying non-notified transactions, and 
proactively promote investment screening mechanisms with numerous U.S. 
allies and partners.

        Infrastructure: In FY 2020, Treasury began renovations within 
Main Treasury to accommodate the expanded Investment Security staff in 
secure workspaces. The first phase was completed in August 2020, and 
additional renovations should be completed in FY 2021 and early FY 
2022. In May 2020, Treasury implemented a new Case Management System 
that facilitates the filing of transactions through a secure online 
portal, enabling more efficient and effective review and management of 
case load.

    In calendar year (CY) 2019, 231 notices were filed with the 
Committee on Foreign Investment in the United States (CFIUS). 
Additionally, in CY 2019, CFIUS processed and completed action for 94 
declarations submitted under the ``pilot program'' related to critical 
technology transactions. In July 2020, Treasury submitted its Annual 
Report to Congress for CY 2019, providing further detail regarding the 
transactions that CFIUS reviewed last year.

    On April 27, 2020, Treasury issued an interim rule establishing a 
fee for the filing of a formal written notice. On May 1, 2020, Treasury 
began collecting fees. The rule applies a tiered fixed-fee schedule 
based upon transaction value--with fees ranging from zero to $300,000. 
Through November 13, 2020, Treasury has collected $5.6 million in 
filing fees.

    The total amount of fees collected per fiscal year will depend upon 
the number and nature of formal written notices that are filed--factors 
that are largely outside of CFIUS's control. Informed by historical 
data, the President's Budget for FY 2020 estimated collection of $10 
million in fees in FY 2020. This estimate was developed before both the 
issuance of FIRRMA's implementing regulations (including the interim 
filing fee rule) and the severe disruption of global economic activity 
by the COVID-19 pandemic.

    On May 15, 2020, Treasury released the public unclassified CFIUS 
Annual Report to Congress for CY 2018, along with summary data for CY 
2019. The report and the file, ``Notices, Withdrawals, and Presidential 
Decisions for Covered Transactions'' are accessible at https://
www.treasury.gov/cfius/.

    In CY 2019, 231 notices of covered transactions were filed with 
CFIUS. Additionally, in CY 2019, CFIUS processed and completed action 
for 94 declarations submitted under the ``pilot program'' related to 
critical technology transactions.

    Treasury's spending plan estimates for FY 2020 and FY 2021 are as 
follows, based on projected expenditures during the fiscal year, using 
both single year and no-year appropriations:


------------------------------------------------------------------------
               Category                     FY 2020          FY 2021
------------------------------------------------------------------------
Salary and Benefits                        $10,360,000      $18,900,000
------------------------------------------------------------------------
IT Infrastructure                           $6,800,000       $9,600,000
------------------------------------------------------------------------
Facility Construction                       $8,740,000       $3,300,000
------------------------------------------------------------------------
Other Direct Costs *                        $8,396,000      $10,896,000
------------------------------------------------------------------------
Total                                      $34,296,000      $42,696,000
------------------------------------------------------------------------
Projected FTE                                       58             102
------------------------------------------------------------------------
* Other direct costs include data subscriptions, travel, training,
  computer/phone seat costs, processing of security clearances and
  badging, and other personnel shared services. FTE is a driver for
  several of these costs and is expected to increase in FY 2021.


                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
                         sippra implementation
    Question. Almost exactly 2 years ago, President Trump signed the 
bipartisan Social Impact Partnerships to Pay for Results Act, also 
known as ``SIPPRA,'' into law--a law which I and Senator Bennet 
championed for years. The bill created the first Federal outcomes fund, 
and tasked the Department of Treasury with its administration.

    I want to commend you for your work and that of your staff in 
standing up this new program and preparing to issue the first grants. I 
know it's been difficult, but that's because you and your team have 
been trailblazers--creating an entirely new way for government to fund 
programs that deliver results, one that I hope we can build on going 
forward. Your department ran a rigorous and thorough competition, and a 
bipartisan commission unanimously recommended eight finalists receive 
contracts where they will be paid if they deliver results. One of those 
finalists, I'm proud to say, hails from Indiana.

    I want to convey the importance of moving forward with this first 
round of awards. I know it's been a complicated process, but making 
these initial awards is critical so that we can continue building 
momentum for this innovative approach that our legislation sought to 
catalyze.

    If your department or other Federal departments have further 
clarifying questions for these finalists before awards can be made, I 
encourage you and your team to continue to work with finalists to 
answer those questions.

    Can you please speak to what, if any, obstacles your department 
faces as it finalizes this process?

    Will you please provide me and my staff with an updated timeline 
for the SIPPRA award process at your earliest convenience, and 
additional information on the SIPPRA Interagency Council's current 
selection process?

    Answer. The primary challenge that the SIPPRA program faces is the 
availability of staff from Treasury, partner agencies, and applicants 
to move toward final SIPPRA awards. The novel COVID-19 public health 
emergency has impacted the SIPPRA program in the following ways:

        The Treasury SIPPRA team has focused on implementing certain 
Coronavirus Aid, Relief, and Economic Security (CARES) Act programs 
since April 2020. During the first half of 2020, this did not 
significantly slow SIPPRA program progress since the critical path 
activity since fall 2019 was the Federal Interagency Council on Social 
Impact Partnership (Council) certification process. As the critical 
path has pivoted to post-certification award determination activities, 
the Treasury SIPPRA team's involvement with CARES Act initiatives 
continues to impact the timing of making SIPPRA awards.

        SIPPRA permits Treasury to transfer authority to different 
Federal agencies to administer SIPPRA awards after Treasury makes the 
final award determination. As such, Treasury has been working with the 
relevant agencies to transfer award administration and finalize the 
project and the independent evaluation grant agreements, but this 
process has slowed significantly because many of the agencies have been 
and continue to be focused on implementation of their respective CARES 
Act programs or other COVID-19 related relief projects.

    We will be happy to provide to you and your staff an updated 
timeline for the SIPPRA award process.
                    slot jackpot reporting threshold
    Question. In 2018, Congress enacted the Tax Cuts and Jobs Act to 
simplify and modernize our outdated tax code. While I applaud the work 
of the administration to implement TCJA, I also believe much can and 
should be done by Treasury to review existing and outdated regulations 
to ensure they do not place undue compliance burdens on individuals and 
businesses. One unduly burdensome regulation that still needlessly 
harms my constituents and businesses in Indiana is the current $1,200 
slot jackpot reporting threshold, which has been in place for 
approximately 40 years. Accounting for inflation, that number should be 
more than four times higher today--roughly $5,000. Unfortunately, 
however, the threshold amount has remained static and, as a result, 
continues to impact many more of my constituents than was originally 
intended. Furthermore, this information reporting requirement often 
does not result in a filing obligation for the taxpayer. The result is 
additional compliance obligations for businesses and superfluous 
filings submitted to the IRS.

    Are you willing to consider updating the current slot jackpot 
reporting threshold to reflect 4 decades of inflation? Additionally, 
will Treasury add updating the information return regulations to the 
priority guidance plan?

    Answer. The Treasury Department and IRS appreciate this feedback 
about the reporting threshold, and we are sensitive to any concerns 
about requirements that are viewed as imposing unnecessary compliance 
burdens on taxpayers. In evaluating the reasonableness of any reporting 
rule of this kind, the Treasury Department and the IRS must weigh the 
burdens against the compliance benefits provided through third-party 
reporting. With that in mind, we are open to hearing more from the 
gaming industry about the burdens imposed by the current reporting 
thresholds. Additional information will further inform how to evaluate 
and prioritize this matter going forward.
                        u.s.-uk trade agreement
    Question. Thank you for your efforts in responding to digital 
service taxes (DSTs) in France and other countries.

    As we've seen, an increasing number of our trading partners are 
penalizing U.S. exporters by implementing discriminatory revenue taxes 
on digital services provided by U.S. firms. These DSTs are narrow in 
scope and are specifically designed to target U.S. digital companies 
and the U.S. tax base. The taxes range in size from 2 percent to 7 
percent, and some could go as high as 15 percent. These taxes apply to 
revenue, not to income, and they are bringing in a larger range of 
American content companies, tech companies, travel firms, telecom 
firms, and others.

    France's discriminatory DST has a $500-million annual price tag for 
U.S. companies--tax revenue that is properly allocable to the U.S. The 
response from Treasury and USTR has been very helpful. But in the 
meantime, other countries like Austria, Czech Republic, Italy, Spain, 
Turkey, and the UK are moving forward with their own digital taxes. 
Expected DST collections from these taxes would be over $3 billion 
annually. And the new European Commission President has threatened to 
reintroduce an EU-wide digital tax at the end of this year.

    What more can the U.S. Government do to counter these 
discriminatory taxes? In particular, given progress towards a U.S.-UK 
trade agreement, how can the U.S. Government hold the UK accountable 
regarding their consideration of a DST? I also would encourage 
continued close coordination between Treasury and USTR on this 
important issue.

    Answer. In July 2019, the Office of the United States Trade 
Representative (USTR) began an investigation under section 301 of the 
Trade Act of 1974 (section 301) to determine whether the French DST is 
unreasonable or discriminatory and burdens U.S. commerce. In December 
2019, USTR announced its determination that the French (DST) is 
unreasonable or discriminatory and burdens or restricts U.S. commerce 
and therefore is actionable under sections 301(b) and 304(a) of the 
Trade Act. Pursuant to that determination in July 2020, USTR announced 
that the imposition of 25-percent duties on certain products from 
France including handbags and cosmetics. However, in recognition of the 
ongoing bilateral and multilateral discussions between France and the 
United States to reach a satisfactory resolution to this matter, USTR, 
pursuant to section 305(a) of the Trade Act, suspended the additional 
duties for up to 180 days to allow additional time for those 
discussions to continue.

    On June 2, 2020, the USTR announced the initiation of further 
section 301 investigations of DSTs that have been adopted or are being 
considered by a number of U.S. trading partners, including Austria, 
Brazil, the Czech Republic, the European Union, India, Indonesia, 
Italy, Spain, Turkey, and the United Kingdom. The Treasury Department 
is coordinating closely with the USTR on these matters and is actively 
involved the UK-U.S. trade agreement negotiations.

    We are also working diligently on the Organisation for Economic Co-
operation and Development-G20 effort to preserve and renew an 
international consensus on the taxation of multinational enterprises in 
a rapidly changing global economy. While this process is important for 
the United States, the United States has consistently objected to the 
adoption of measures that focus solely on digital businesses, whether 
DSTs or proposals for a new international consensus that taxes more 
heavily only a limited group of predominately U.S.-based companies. We 
hope that an agreement can be reached. Meanwhile, the United States 
remains opposed to DSTs and similar unilateral measures.

                                 ______
                                 
                  Question Submitted by Hon. Ben Sasse
    Question. It is my understanding that the Office of Tax Policy and 
its counterparts at the IRS have for some time been working on guidance 
addressing ``private use'' rules applicable to public power entities--
like those in my State--that make use of tax-exempt bonds. I appreciate 
the diligence that Treasury personnel have brought to bear on this 
issue but recognize also that filers must work under requirements 
imposed by Federal tax law that are not always clear. Could you please 
provide an update on Treasury's work in this area?

    Answer. The ``private use'' rules in the Internal Revenue Code 
related to tax-
exempt bonds are complex. While addressing these rules is an important 
guidance project, significant Office of Tax Policy and IRS resources 
have been devoted to quickly implementing guidance that addresses 
issues related to COVID-19, including the CARES Act. The Office of Tax 
Policy and its counterparts at the IRS continue to study the ``private 
use'' rules as well as those applicable to public power entities and 
plan to focus on these rules going forward.

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
                         firpta notice 2007-55
    Question. In December 2019, I and 10 other bipartisan members of 
the Senate wrote you a letter urging the Treasury Department to 
withdraw section 2 of IRS Notice 2007-55. This notice has hurt foreign 
direct investment in commercial real estate, transportation assets, 
housing stock, and other essential infrastructure and the time for its 
repeal has long come.

    Please provide an update on Treasury's response to the Senate's 
most recent letter and the agency's consideration of withdrawing 
section 2 of IRS Notice 2007-55.

    Answer. The Foreign Investment in Real Property Tax Act (FIRPTA) 
reflects an important tax policy principle--namely, that foreign 
investors should not be taxed in a more favorable manner on U.S. real 
estate investments than U.S. investors. It is consistent with the 
accepted international norm for countries to impose tax on the gains of 
foreign investors from real property located within their borders, and 
that right to tax is preserved in most income tax treaties.

    Encouraging foreign investment in the United States, including in 
commercial real estate and infrastructure, is an important priority.

    One example concerns the exemption for qualified foreign pension 
funds from FIRPTA as a result of the enactment in 2015 of the 
Protecting Americans from Tax Hikes Act. In response to comments 
regarding ambiguities in the statute, the Treasury Department has 
worked with the House on technical corrections to the statutory 
language. Furthermore, Treasury and the IRS recently issued proposed 
regulations to address certain ambiguities in the legislation that will 
further encourage investment in the United States by foreign pension 
funds.

    Implementation of the TCJA and responding to the pandemic have been 
top priorities for Treasury, but once TCJA implementation and the 
pandemic response are further along, Treasury will consider Notice 
2007-55, taking into account the new international tax rules.

    We look forward to working with Congress to explore ways in which 
we can achieve our shared goal of encouraging foreign investment in 
U.S. infrastructure while protecting the U.S. tax base.
                   cdfi bond guarantee program (bgp)
    Question. The administration's budget proposal signals an intention 
to tighten the BGP's collateral and cash requirements and add new risk 
mitigation strategies. The BGP has operated for years, as intended, 
with no loss to taxpayers. Safeguards already in place are more than 
adequate, and indeed, probably overly constrictive on CDFI 
participants.

    How will the proposed changes increase economic and community 
development in low-wealth markets as the BGP is designed to do?

    Answer. The FY 2020 Notice of Guarantee Availability for the BGP 
includes new overcollateralization requirements as outlined in the FY 
2021 budget submission, as well as the enhanced use of other 
preliminary recommendations to mitigate risk. It is unknown at this 
time whether the new collateralization requirements will increase the 
availability of BGP financing in low-wealth communities. Applications 
for the FY 2020 round were reviewed over the summer and a $100 million 
guarantee approval was publicly announced on September 30, 2020. 
Treasury will consider whether implementation of the remaining 
preliminary recommendations are necessary, feasible, and will produce 
the desired policy results, after considering the results of the FY 
2020 funding round and the effect of the implementation of the risk 
mitigation strategies.

    Question. What is the Treasury Department doing to increase access 
and utilization of the BGP?

    Answer. With respect to the two proposed changes implemented in FY 
2020, the Community Development Financial Institutions (CDFI) Fund has 
hosted a series of webinars and conference calls to answer questions 
and help ensure that potential Qualified Issuer and Guarantee 
applicants have the information they need to consider whether to apply. 
Treasury will also consider how other potential changes to the BGP, 
such as streamlining escrow agent and custodian structure and creating 
a designated bonding authority, could produce the desired policy 
results of allowing more credit-worthy CDFIs to utilize the BGP to 
offer long-term, low-cost financing to low-wealth communities.
                          sanction enforcement
    Question. Mr. Secretary, you have appeared before this committee 
since the passage of CAATSA in 2017 and committed to implementing the 
law. A law, which mostly includes mandatory, not discretionary 
sanctions. I have been disappointed by the lack of attention to this 
sanctions regime despite broad bipartisan support for the law. The 
administration has yet to impose required sanctions on Turkey for its 
purchase of the S400 air defense system from Russia. I know that 
responsibility for that section of the law rests with the State 
Department, but it speaks to an overall clear lack of political will on 
the part of the administration to impose sanctions on the Kremlin.

    With the 2020 election fast approaching, there are legislative 
efforts here in the Senate including the Defending American Security 
from Kremlin Aggression Act, which would impose crushing sanctions on 
Russia if it interferes again. This bill passed with a strong 
bipartisan vote out of the Foreign Relations Committee and should be 
enacted into law if we are serious about protecting our election. Few 
in the Senate believe that any political will exists in the 
administration to take a tough line with Russia. So here is your chance 
to clearly tell us.

    With less than 9 months to go before election day, what specific 
steps will your department take to deter Russian interference in our 
election?

    What specifically will you do between right now and election day to 
protect our democracy?

    Answer. As we have demonstrated, Treasury will aggressively utilize 
the full range of its authorities against those who attempt to 
interfere in our elections. Executive Order (E.O.) 13848, which the 
President issued on September 12, 2018, authorizes Treasury to 
designate foreign persons, including those in Russia, determined to 
have interfered in a U.S. election. This E.O. adds to the broad range 
of authorities under which Treasury may take action against malign 
actors, whether based in Russia or elsewhere, who attempt to interfere 
in our elections.

    Additionally, Treasury will continue to use authorities provided by 
Countering America's Adversaries Through Sanctions Act (CAATSA) and 
E.O. 13694, as amended, to impose sanctions on malicious cyber-enabled 
actors, including those determined to have interfered with or 
undermined election processes or institutions.

    While we cannot preview any future sanctions actions that we will 
take, rest assured that Treasury continues to use its authorities to 
apply pressure and hold Russia accountable for its actions. For 
instance, in September 2019, Treasury imposed sanctions under E.O. 
13848 against 16 Russian entities and individuals, including affiliates 
of the Russian Internet Research Agency and its Kremlin-linked 
financier Yevgeniy Prigozhin, in response to attempts to influence our 
2018 midterm elections.

    A whole-of-government approach is necessary to counter any foreign 
intervention in our election process, and we have worked in close 
coordination with other agencies to implement that approach.
                         halkbank and sanctions
    Question. Based on reports, when President Erdogan raised concerns 
last year to President Trump about Halkbank, a Turkish bank accused of 
the largest Iran sanctions violations in U.S. history, he responded 
that Treasury, along with Justice, would handle it. Indeed, you seemed 
to confirm those reports in a letter to Senator Wyden.

    Did the President ask you to take any action, or refrain from 
taking any action, regarding Halkank? Did he suggest in any way that 
you ``go easy'' on the bank, or do a favor for President Erdogan?

    Has the President directed you or the Department to intervene in 
any other matters regarding sanctions?

    Rudy Giuliani has represented Reza Zarrab, an international gold 
trader who, according to DOJ prosecutors was at the ``heart of [a] 
massive and brazen scheme'' to help Halkbank evade U.S. sanctions. Has 
Rudy Giuliani met or contacted you to discuss Reza Zarrab, Halkbank, or 
anything related to Iran sanctions?

    According to calendars released through FOIA, you met with Rudy 
Giuliani in July 2017. What, specifically, was that meeting regarding? 
That was a few months after Zarrab reportedly hired Giuliani. Did he 
raise Zarrab at that meeting?

    Have you or the Treasury Department taken any action based on a 
request or inquiry by Rudy Giuliani?

    Answer. Senator Wyden entered a copy of the referenced November 20, 
2019 letter from the Department of the Treasury to Senator Wyden in the 
hearing record on February 12, 2020. As that letter and Secretary 
Mnuchin's February 12 testimony make clear, the Department of the 
Treasury and the Department of Justice (DOJ) are the executive branch 
departments responsible by law for the investigation and enforcement of 
economic sanctions. Accordingly, any referral to Treasury and the DOJ 
regarding a potential sanctions violation is appropriate. DOJ has 
exclusive authority over criminal prosecutions of alleged schemes to 
evade U.S. sanctions, though Treasury routinely consults with DOJ on 
such matters. On October 15, 2019, DOJ charged Halkbank with a multi-
year scheme to violate and evade U.S. national security controls 
against the Government of Iran. The U.S. government treats pending 
criminal matters with the utmost sensitivity, and Treasury is unable to 
comment on any ongoing prosecution of potential sanctions violations or 
potential investigations thereof. The Secretary's consistent position 
is that the United States expects full compliance with all applicable 
sanctions programs.
                                  ofac
    Question. I continue to be concerned that the Trump administration 
does not take Russia sanctions seriously. As you know, OFAC is a 
demand-driven organization, and they clearly are not getting signals 
from the White House that Russian is national security threat that 
needs to be addressed with priority and urgency. Because of this lack 
of demand, OFAC has not dedicated adequate resources towards developing 
targets with respect to the Russia sanctions regime. I understand that 
only a small percentage of OFAC targetters are dedicated to Russia 
sanctions. This flies in the face of the will of the Senate which voted 
98-2 in 2017 for the CAATSA bill.

    Do you agree with an overwhelming majority of the Senate that 
sanctioning Russia targets should be a priority?

    Will you work with the White House to increase the demand for new 
Russia sanctions?

    Will you commit to increase the amount of OFAC targetters dedicated 
to Russia sanctions?

    Answer. Treasury continues to prioritize the use of its authorities 
to apply pressure and hold Russia accountable for its actions. In fact, 
this administration has sanctioned approximately 330 Russia-related 
entities and individuals.

    Our sanctions are intended to impose costs on those supporting the 
Kremlin's malign activities, and ultimately shape Russia's behavior. It 
is important to do this in a way that minimizes unintended and negative 
spillover to the United States, our European allies, and the global 
economy. We have targeted a broad range of malign activities in which 
Russia has engaged, including Russian interference in democratic 
elections, its purported occupation of Crimea, aggression in eastern 
Ukraine, support for the Assad regime in Syria and the illegitimate 
Maduro regime in Venezuela, and malicious cyberattacks, among other 
activities. Additionally, we are constantly investigating new targets 
to counter, disrupt, or deter unacceptable Russian behavior.

    While our current authorities allow us to target illicit actors 
supporting all of these malign activities, we welcome the opportunity 
to consult on any proposed legislation to develop new authorities to 
further increase pressure on Russia. We remain mindful of Russia's 
interlinkages with the global economy, and we encourage a strategic 
approach to ensure that the cost of sanctions is borne by the Russian 
economy, minimizing negative spillover impact.

    Regarding resourcing, we remain grateful to Congress for continued 
support through the increase of funds in recent years. To carry out its 
mission, each year, the Office of Foreign Assets Control (OFAC) 
receives a portion of the Terrorism and Financial Intelligence 
appropriation. All funding is utilized to support sanctions programs 
that the U.S. Department of the Treasury administers. Over the past few 
years, OFAC has received increases in its annual funding to hire 
additional employees for all areas of the sanctions cycle. For 
instance, funding increases were directly utilized to increase staffing 
of OFAC sanctions investigators for various sanctions programs, 
including Russia sanctions. These investigators build evidentiary 
packages regarding potential sanctions targets, which is the vital 
first step of the sanctions process. OFAC has also increased its staff 
in its Licensing, Regulatory Affairs, Enforcement, and Compliance 
areas, all of which assist the general public and the financial sector 
on adhering to sanctions regulations, including those related to 
Russia. Drawing on OFAC's recent submission to Congress under the 
National Emergencies Act, the overall resources to support the Ukraine/
Russia-related sanctions program accounts for nine percent of OFAC's 
workforce. In addition, OFAC is able to shift employees among sanctions 
programs, to surge support as the need arises.
                                 turkey
    Question. The President has previously admitted that he has a 
``little conflict of interest'' when it comes to Turkey, because of 
Trump Towers Istanbul, from which he continues to benefit. Has the 
president ever raised Trump Towers Istanbul with you? If so, in what 
context?

    Has the President ever raised any personal or financial interest he 
has in Turkey? If so, in what context?

    In any of your meetings with President Erdogan or Turkish 
officials, have you, or has anyone from the Department, raised Trump 
Towers Istanbul? If so, what was discussed regarding Trump Towers 
Istanbul?

    Do you think it would be appropriate, or inappropriate for you or a 
Turkish official to raise Trump Towers Istanbul in an official meeting?

    Do I have your commitment that the President's ongoing financial 
interests in Turkey will play no role in U.S. policy towards Turkey, 
including on sanctions, investigations, or otherwise?

    Answer. The Treasury Department develops policy based on the best 
interests of the United States, and executes its duties in accordance 
with the law. The Department abides by all applicable ethics laws and 
regulations. As stated above, the Secretary's consistent position is 
that the United States expects full compliance with all applicable 
sanctions programs.
      information requests for children of presidential candidates
    Question. Mr. Secretary, the President's budget proposes to 
transfer the Secret Service back to the Treasury Department, and I take 
it that you support that proposal. Correct?

    As I understand it, during negotiations with Congress over the 
transfer issue, you have agreed to a provision that would make 
available, to the public, the cost of Secret Security protection for 
the President, the Vice President, and their families. However, you 
have insisted that the information not be made public until after the 
2020 election.

    In a recent letter, Chairman Grassley and Chairman Johnson asked 
the Secret Service to provide information about any Secret Service 
protection provided to Hunter Biden.

    If the Secret Service is transferred back to Treasury, would you 
approve such a request?

    Would you provide the Finance Committee with information regarding 
Secret Service protection for Vice President Biden's son?

    If so, do you think it is fair to provide the public with 
information about Secret Service protection provided to Vice President 
Biden's son, but not about President Trump and his children?

    The Treasury Department is reportedly complying with a document 
request from Senate Republicans referencing the children of a 
Democratic presidential candidate.

    If Treasury received a document request referencing the children of 
a Republican presidential candidate, would the Department comply with 
that as well?

    According to public reporting, in draft legislation that would move 
the Secret Service from DHS back to Treasury--a move which you 
support--the administration objected to a reporting requirement to 
disclose the costs of presidential travel before November, because it 
might negatively affect the Republican presidential candidate.

    Why don't you have similar trepidation about releasing the 
information that Senate Republicans have requested, which are related 
to a Democratic presidential candidate?

    Answer. It would be inappropriate to comment on a congressional 
request sent to another agency or to speculate on a request that has 
not been received by Treasury. Treasury responds to congressional 
requests for information from members on both sides of the aisle and 
does not respond to any request on a partisan basis. Indeed, over the 
past 3\1/2\ years, the vast majority of information Treasury has 
provided to Congress to accommodate its legislative oversight function 
has been in response to requests made or joined by Democratic members 
of Congress. The Department does not generally comment on specific 
congressional requests out of deference to requesters, but for further 
information, I respectfully refer you to the February 11th letter that 
Treasury sent to Senator Wyden and was entered into the February 12th 
hearing record.

                                 ______
                                 
                Question Submitted by Hon. Sherrod Brown
    Question. Last month, President Trump signed what he is calling 
Phase One of a trade agreement with China. The agreement included 
commitments that the Chinese government will purchase U.S. products, 
protect intellectual property and stop forced technology transfers. 
China has made commitments on intellectual property and tech transfers 
going back 20 years and hasn't lived up to them.

    What specific commitments on intellectual property and tech 
transfers in the agreement with China have never been negotiated by any 
previous administrations or previously agreed to by China?

    Answer. China made promises on forced technology transfer in 
previous bilateral dialogues, but China's obligations under the 
Technology Transfer chapter of the Phase One agreement cover a broader 
scope and with greater detail. The Intellectual Property chapter 
contains numerous commitments that China did not make in previous 
bilateral dialogues, including commitments related to trade secret 
misappropriation, unauthorized disclosures of trade secrets and 
confidential business information by government authorities, and early 
resolution of pharmaceutical patent disputes, among others. In 
addition, China's obligations under the Technology Transfer and 
Intellectual Property chapters also are subject to Phase One agreement 
enforcement provisions.

           Questions Submitted by Hon. Catherine Cortez Masto
        estimate on growth and cost of the tax cuts and jobs act
    Question. Given that CBO and the Federal Reserve estimate lower GDP 
growth over the next 10 years than does Treasury, how much over time 
does the tax bill cost and when, specifically, will it pay for itself 
under the aforementioned rates?

    Answer. Following full implementation of TCJA, both real wage rates 
and GDP growth rates were significantly higher than what was realized 
during the previous 8 years. Our resulting revenue estimates prior to 
the onset of COVID-19 continued to fully cover the static revenue 
impacts of tax reform. Such revenue estimates are not made using 
others' economic growth forecasts.
                              wage growth
    Question. What is the effect of the Tax Cuts and Jobs Act on ``real 
wage growth''?

    While economists have seen some growth in wages at the bottom of 
the distribution (i.e., lowest wage workers), does it hold true that 
most of that has been driven by State and local minimum wage increases?

    Answer. After the passage of the TCJA, real wages \2\ grew by 1.5 
percent per year, compared to the average from 2009 through 2016 of 0.6 
percent. If we restrict our focus to wages for production and 
nonsupervisory workers--reflective of the middle and working class--the 
numbers are 1.7 percent for the post-TCJA period, and 0.6 percent for 
the previous administration. These numbers reflect wage growth that is 
over two and a half times as strong after the passage of TCJA. This 
wage growth wasn't mandated in the TCJA, which unlike minimum wage laws 
didn't attempt to legislate wages; instead it was a result of powerful 
growth incentives in the TCJA causing a labor market as strong as any 
seen since the 1960s, as measured by the unemployment rate.
---------------------------------------------------------------------------
    \2\ Average hourly earnings deflated by personal consumption 
expenditure prices.

    Moreover, the TCJA's strong supply side incentives are designed to 
encourage investment and thereby boost wages far into the future. 
Beyond reductions in the statutory rate for large corporations, changes 
include providing owners of smaller, unincorporated businesses with a 
20-percent tax deduction, scheduled to expire in 2026, to help them 
compete with large corporations. Further, the 2017 Act provided full 
expensing for equipment investment through 2022. By encouraging capital 
deepening, all these measures will improve labor productivity, and thus 
---------------------------------------------------------------------------
increase wages, for years to come.

    With respect to minimum wages, these cannot be responsible for very 
much of the observed wage growth we have seen simply because they 
haven't affected that many workers. Although some minimum wage hikes 
have been large (for instance, a 20-percent hike this year in New 
Mexico), the population-weighted national average increase in combined 
State and Federal minimum wage in recent years has been closer to 4 
percent. From 2017 through 2019, average wage growth for the economy 
overall was about 3 percent, which compares favorably with the period 
from 2007 through 2010, when overall wage growth was 2.6 percent but 
population-weighted national average minimum wages were rising by about 
6 percent. In both cases, overall labor market conditions, influenced 
by administration policies, were more important in determining wage 
growth than were changes in statutory minimum wages.

    A study \3\ by the CEA found that only 1.4 percent of all workers 
were affected by minimum wage hikes in 2018 and 2019, because the vast 
majority of Americans earn more than minimum wage. As a result of so 
few workers being directly affected, CEA finds that minimum wages 
contributed only 0.2 percent of the wage growth observed among the 
bottom third of the income distribution in that time period.
---------------------------------------------------------------------------
    \3\ ``Minimum wage increases do not explain low-wage workers' 
earnings gains.'' CEA Economic Issue Briefs, February 25, 2020.

    Minimum wage increases, if anything, incentivize firms to hire 
fewer workers and use more labor-replacing technology, worsening 
inequality and the labor market outlook for lower-income Americans.
                    renewable energy tax incentives
    Question. The FY 2021 budget cuts energy-related tax incentives, 
but the solar industry analysis shows a 10-year Investment Tax Credit 
extension drives $87 billion in investment and over 113,000 jobs.

    What is the justification to cut incentives that create more than 
twice the benefit for the economy as they cost?

    Is it the administration's position that tax incentives for oil and 
gas extraction are better for the economy and environment than tax 
incentives for clean energy resources? Please provide a justification.

    Has the administration considered how repealing the tax incentives 
will impact the quarter million Americans working in installation, 
manufacturing, engineering and other jobs supported by clean energy tax 
policies? Please provide a justification.

    Answer. The administration is supportive of all American energy 
sources and applauds the job creation and retention across the sector. 
With respect to the energy-related tax incentives proposed to be cut in 
the FY 2021 budget, the administration believes that the industries 
supported by those tax incentivizes have shown great success and 
resilience and are no longer in a position where government assistance 
is needed.
                             tax avoidance
    Question. What are the proactive and public-facing policies this 
administration can commit to in order to stem tax avoidance, 
specifically for new ``pass-through businesses''?

    Answer. The administration is committed to stemming tax avoidance 
through the efforts of the Treasury Department and the IRS. In order to 
improve taxpayer compliance and address tax avoidance, the IRS 
continues to focus its resources on 
service-wide strategies to combat abusive transactions, as well as to 
uncover the use of various methods to conceal transactions or assets 
offshore, address the tax effects arising from the evolving digital 
world economy, and in high-dollar, multi-year employment tax cases. 
Specifically, the IRS is initiating an effort to increase audits of 
high-income individuals and related passthrough entities (e.g., 
partnerships, trusts, and S corporations) and will begin examinations 
of taxpayers within this category this summer. This is in addition to 
ongoing activity of the Global High Wealth work underway for several 
years that looks to the network of closely held businesses, including 
passthrough entities, employed to operate a wide range of activities 
and that may also be used to mask activities that improperly reduce 
Federal Income Tax liabilities. These audits require specialized skill 
and are more complex when offshore entities are introduced into the 
network of closely held businesses.

    A Partnership Research Study to measure strategic level reporting 
compliance is currently underway. Audit results will be used to better 
understand the nature and extent of partnership misreporting and 
improve the ability to detect and reduce noncompliance, develop and 
improve workload selection methods, and guide resource allocations.

    The IRS also has several issue-specific campaigns focused upon 
passthrough business activities and has initiated a broad Tax Cuts and 
Jobs Act Campaign, which will evaluate structures and transactions 
implemented to take advantage of specific provisions of the 
legislation. The IRS is also focused on deterring potential tax 
avoidance through micro-captive insurance transactions, where the 
insured business is frequently a pass-through entity, and syndicated 
conservation easements, which use a partnership structure that may 
consist of several tiers of investors, to achieve an improperly 
inflated charitable contribution deduction by individual investors.

    Finally, the IRS continues to update its systems and utilize data 
analytics and other technological advancements to enhance the 
effectiveness of audit enforcement activities to reduce the tax gap. An 
important advancement in this work is the creation of an agency-wide 
board to share methods and approaches to identifying available data 
sources and exploiting the data using a variety of tools to identify 
instances of suspected or known non-compliance.

    Question. How can the IRS can reduce tax evasion? What audit 
procedures, collections, and criminal tax prosecutions can the Treasury 
Department expand?

    Answer. In order to support the agency's efforts to detect and 
deter fraud while strengthening the National Fraud Program, the IRS 
recently formed the Office of Fraud Enforcement (OFE). The OFE will 
work to strengthen the internal compliance relationships in the IRS 
between criminal investigation agents and civil-side revenue agents and 
revenue officers and work with external partners. In addition, the IRS 
recently designated a position to coordinate ongoing investigations and 
develop new approaches to identify promoters of aggressive tax 
arrangements.

    The IRS continues to utilize civil and criminal penalties as well 
as parallel investigations to deter and/or stop tax evasion. Parallel 
investigations occur when both IRS's Criminal Investigation (CI) 
division and a civil enforcement division investigate the same 
individual or entity at the same time. The goal of a parallel 
investigation is to ensure the IRS effectively balances civil and 
criminal actions to achieve maximum compliance. Simultaneous, but 
separate, parallel criminal and civil actions, including promoter 
investigations, play a key role in the IRS's efforts to stop the 
proliferation of abusive transaction schemes.

    To reduce tax evasion in the collection arena, the IRS focuses its 
resources on addressing egregious employment tax violators by taking 
appropriate actions including asserting the Trust Fund Recovery 
Penalty, referring cases for criminal fraud, and partnering with the 
Department of Justice on suits for injunctive relief. Additionally, 
investigations of successor and fabricated entities and bankruptcy 
fraud are investigated by IRS Collection.

    In efforts to identify scams, the IRS is carefully reviewing every 
Form 7200, Advance Payment of Employer Credits Due to COVID-19, to 
prevent fraud that includes what appears to be a new business trying to 
claim the credit. Suspicion of fraud results in the OFE conducting 
further research and coordinating with CI.

    On the criminal side, the IRS continues to use data analytics to 
identify large areas of non-compliance. CI added a new Applied 
Analytics section and hired data scientists to take advantage of tools 
like Palantir and to better collaborate with other IRS Business 
Operating Divisions, law enforcement agencies, and academia. The 
Nationally Coordinated Investigations Unit (NCIU) is a data-driven 
section within CI that focuses on case-development of national issues 
including international tax enforcement and employment tax. The NCIU 
proactively addresses key non-compliance issues and emerging threats 
using cutting edge techniques to better manage and leverage all 
available data to better select criminal cases to ensure nationwide 
coverage of all program areas.
                    financial services for cannabis
    Question. If Congress opens the door to cannabis banking through 
legislative action, does the Department commit to facilitating the 
deployment of financial services for cannabis and cannabis-affiliated 
businesses?

    Answer. The Department of the Treasury will implement any 
legislation passed by Congress and signed into law by the President.
          community development financial institutions (cdfi)
    Question. Has the administration conducted public research on the 
Community Development Financial Institution (CDFI) program's impact?

    The only justification in the budget for eliminating the CDFI 
program is ``over-reliance.'' How did the administration come to this 
conclusion? What research is this based on? Please provide an evidence-
based justification.

    Answer. The administration is committed to promoting growth and 
jobs in low-wealth communities. Since its creation in 1994, the CDFI 
Fund has awarded nearly $3.6 billion to CDFIs, community development 
organizations, and financial institutions through programs including 
the Bank Enterprise Award Program, the Capital Magnet Fund, the CDFI 
Program, the Healthy Food Financing Initiative, and the Native American 
CDFI Assistance Program. In addition, the CDFI Fund has allocated $61 
billion in tax credit allocation authority to Community Development 
Entities through the New Markets Tax Credit (NMTC) Program, and 
guaranteed bonds in the amount of over $1.6 billion through the CDFI 
Bond Guarantee Program (BGP).

    Difficult decisions have to be made in allocating money between 
different priorities, and the FY 2021 budget will allow the CDFI fund 
to administer ongoing program functions including the NMTC and zero 
subsidy BGP. In addition, under the FY 2021 budget the CDFI fund will 
continue to conduct ongoing program compliance reviews of prior-year 
award recipients for all programs. The budget request is also intended 
to cover the cost to administer certification of CDFIs, as required by 
the Riegle Community Development and Regulatory Improvement Act of 
1994, as well as Community Development Entities, as required by the 
NMTC Program.
                           slot tax threshold
    Question. The current IRS reporting minimum threshold for reporting 
slot machine winnings is $1,200 for a single machine payout and has not 
been adjusted for inflation or changed since the requirement was 
implemented in 1977. Adjusted for inflation, the threshold would be 
around $5,000.

    Under current regulations, when a player hits a winning jackpot 
worth $1,200 or more, the operator is required to pull the slot machine 
offline until all necessary paperwork is filled out by the winning 
player and casino operator. This can oftentimes take up to an hour for 
before the player returns to the casino floor and the machine is 
reactivated, which seems overly burdensome and disruptive for both 
parties. While I believe it is important to ensure that the appropriate 
taxes are collected on gambling winnings, I also think it is imperative 
that this is accomplished in an efficient and effective manner.

    I am an original cosponsor of the Improving Laundering Laws and 
Increasing Comprehensive Information Tracking of Criminal Activity in 
Shell Holdings Act or the ILLICIT CASH Act. Section 204 of that bill 
requires the Treasury Secretary review thresholds for currency 
transaction reports and for suspicious activity reports.

    Has the Treasury Department considered changing the slot machine 
winnings threshold? If yes, what changes has it considered?

    Will you commit to review the current slot tax threshold 
regulations and take appropriate action to modernize them?

    Answer. The Treasury Department and IRS appreciate this feedback 
about the reporting threshold, and we are sensitive to any concerns 
about requirements that are viewed as imposing unnecessary compliance 
burdens on taxpayers. In evaluating the reasonableness of any reporting 
rule of this kind, the Treasury Department and the IRS must weigh the 
burdens against the compliance benefits provided through third party 
reporting. With that in mind, we are open to hearing more from the 
gaming industry about the burdens imposed by the current reporting 
thresholds. Additional information will further inform how to evaluate 
and prioritize this matter going forward.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    This administration's budget is built on policies that pillage 
working families to pay for brand-new windfalls for corporations and 
the wealthy. That harmful agenda has been on clear display over the 
last few weeks in two events I want to address.

    First, it recently came to light that the Trump administration--
acting on their own--found a way to milk the 2017 tax law to create 
more than $100 billion in shiny new corporate tax loopholes. Understand 
that these are not the same huge loopholes I and others warned about 
back in 2017 when the bill was written. These are the product of tricky 
regulatory maneuvering--some of which looks to me like it goes beyond 
the Treasury's legal authority. The bottom line, it sure looks like 
corporate special interests are going to make off with new loopholes 
worth $100 billion in addition to their outlandish share of the 
original $2-trillion Trump tax law.

    Senator Brown and I want to stop this fleecing of American 
taxpayers. Today we're introducing legislation that will start closing 
these loopholes and fixing this new source of unfairness. When people 
say the tax code is rigged and the Trump administration has made it 
worse, what I've described is a textbook case of what they're talking 
about.

    Not long after the news of these new tax loopholes broke, the 
President went to Davos. During an interview he was asked whether 
during a second term he would cut programs like Medicare, Medicaid, and 
Social Security. He said, yes, he would. He called it ``actually the 
easiest of all things.''

    So here you've got a perfect snapshot of this administration's 
policies robbing working families to pay off special interests and 
those at the top. The President says that shredding the safety net is a 
piece of cake.

    He's talking about Medicaid, a program that pays for two out of 
three nursing home beds in America, a country where growing old is 
expensive and families run out of money to pay for long-term care. He's 
talking about Medicare, without which millions of seniors would have no 
hope of getting high-quality health care or affordable prescription 
drugs. He's talking about Social Security, which keeps American workers 
from retiring into deprivation and desperation.

    The Trump budget cuts those programs by more than $1.5 trillion 
combined. That might sit just fine with the ballroom crowd at Mar-a-
Lago, but it's a terrifying prospect for the hundreds of millions of 
Americans who every month are walking an economic tightrope, are 
counting on Medicare, Medicaid, and Social Security to be around today 
and in the future.

    Add it up, and the picture is clear: the Trump administration will 
tune out the needs of middle-class families but gives the world to any 
corporate lobbyist who comes calling at the Treasury Department. You 
see it in Secretary Mnuchin's stewardship. You see it in the budget. 
You see it in the President's own words.

                                 ______
                                 

                       DEPARTMENT OF THE TREASURY

                          Washington, DC 20220

                           November 20, 2019

The Honorable Ron Wyden
Ranking Member
Committee on Finance
United States Senate
Washington, DC 20510

Dear Senator Wyden:

I write in response to your October 24, 2019 letter regarding Turkiye 
Halk Bankasi A.S., a/k/a Halkbank.

As your letter notes, on October 15, 2019, the Department of Justice 
(DOJ) charged Halkbank with a multi-year scheme to violate and evade 
U.S. national security controls against the Government of Iran.\1\ The 
U.S. Government treats any matter under criminal indictment by DOJ with 
utmost sensitivity, and the Department of the Treasury is unable to 
comment on this or any other ongoing prosecution of potential sanctions 
violations or potential investigations thereof.
---------------------------------------------------------------------------
    \1\ See Department of Justice press release, ``Turkish Bank Charged 
in Manhattan Federal Court for its Participation in a Multibillion-
Dollar Iranian Sanctions Evasion Scheme'' (October 15, 2019), available 
at: https://www.justice.gov/usao-sdny/pr/turkish-bank-charged-
manhattan-federal-court-its-participation-multibillion-dollar.

Treasury and this Administration take potential sanctions violations 
very seriously. For example, in 2017, Treasury officials provided 
extensive information to DOJ concerning the investigation into Mehmet 
Hakan Atilla, former Deputy General Manager of International Banking at 
Halkbank, referenced in your letter. In January 2018, in the U.S. 
District Court for the Southern District of New York, Atilla was found 
guilty of conspiring with others, including Reza Zarrab, an Iranian-
Turkish gold trader, to use the U.S. financial system to conduct 
transactions on behalf of the Government of Iran and other Iranian 
entities and defraud U.S. financial institutions by concealing the true 
nature of the transactions. Specifically, Atilla was convicted of 
conspiracies to defraud the U.S., to violate the International 
Emergency Economic Powers Act (IEEPA), to commit bank fraud, and to 
---------------------------------------------------------------------------
commit money laundering, as well as a substantive count of bank fraud.

Treasury is proud of its role as an integral part of the 
Administration's maximum pressure campaign against the Iranian regime 
and administers a robust sanctions program against the Government of 
Iran and those who act on its behalf. On this and other fronts, federal 
law entrusts Treasury and DOJ with authority over enforcement of U.S. 
sanctions. DOJ has exclusive authority over criminal prosecutions of 
alleged schemes to evade U.S. sanctions, though Treasury routinely 
consults with DOJ on such matters.

Treasury will not hesitate to target prohibited or sanctionable conduct 
involving Iran wherever it occurs. While the Department does not 
comment on its investigations of potential violations of sanctions 
prohibitions or possible sanctions actions against specific targets, as 
a general matter, we have aggressively used our authorities to pursue 
enforcement actions against those who violate our sanctions 
prohibitions within U.S. jurisdiction, as well as to impose 
designations and other sanctions against those who support the Iranian 
regime's malign activity or engage in other sanctionable conduct, 
including conduct that is wholly outside of the United States.

The Department's authorities for pursuing such actions include 
Executive Orders 12957 and 12959, as clarified by Executive Order 
13059, which prohibit, among other things, the exportation, re-
exportation, sale or supply, directly or indirectly, to Iran of any 
goods, technology, or services from the U.S. or by a U.S. person. In 
addition, in 2018, the President broadened the scope of the sanctions 
that were in effect prior to January 16, 2016 and directed the 
reimposition of U.S. sanctions relating to Iran that had been lifted or 
waived in connection with the Joint Comprehensive Plan of Action 
(JCPOA). These sanctions include all relevant blocking sanctions, menu-
based sanctions, and correspondent account and payable-through account 
sanctions, as determined by Treasury or State, consistent with 
applicable authorities.

The Secretary of the Treasury generally implements the sanctions 
imposed by the Iran program through regulation. Transactions prohibited 
by these authorities, including transactions with the purpose of 
evading or avoiding sanctions, which are not otherwise licensed by 
OFAC, constitute violations of IEEPA or other applicable law. Depending 
on the facts and circumstances of a particular matter, an OFAC 
investigation may lead to a finding of violation, civil monetary 
penalty, or criminal referral.

With respect to your letter's questions, Secretary Mnuchin has met with 
senior officials from the Government of Turkey on multiple occasions to 
discuss a range of foreign policy and national security issues, and a 
list of those meetings, based on the Secretary's official schedule, is 
enclosed. At some of those meetings, Turkish government officials 
expressed concern about the impact on Halkbank of U.S. economic 
sanctions on Iran. As was publicly reported, when Prime Minister 
Erdogan raised concerns directly with President Trump in April 2019, 
the President referred the issue to the Executive Branch departments 
responsible by law for the investigation and enforcement of economic 
sanctions-the Treasury and DOJ. As previously noted, the U.S. 
Government treats pending criminal matters with utmost sensitivity, and 
Treasury is unable to comment on any ongoing prosecution of potential 
sanctions violations or potential investigations thereof. The 
Secretary's consistent position is that the United States expects full 
compliance with all applicable sanctions programs.

If you have further questions, please direct your staff to contact the 
Office of Legislative Affairs.

            Sincerely,

            Frederick W. Vaughan
            Deputy Assistant Secretary
            Office of Legislative Affairs

cc:  The Honorable Charles E. Grassley, Chairman

                                 ______
                                 

                               Enclosure

As referenced in the accompanying letter, provided below is a list of 
meetings based on Secretary Mnuchin's official schedule involving the 
Secretary and senior officials from the Republic of Turkey:

      April 22, 2017: Pull Aside at World Bank/IMF Annual Spring 
Meetings with Deputy Prime Minister Mehmet Simsek of Turkey.

      October 13, 2017: Pull Aside at World Bank/IMF Annual Fall 
Meetings with Deputy Prime Minister Mehmet Simsek of Turkey.

      July 21, 2018: Bilateral Meeting with Finance Minister Berat 
Albayrak of Turkey.

      April 12, 2019: Pull Aside at World Bank/IMF Annual Spring 
Meetings with Finance Minister Berat Albayrak of Turkey.

      April 15, 2019: POTUS Meeting at The White House with Finance 
Minister Berat Albayrak of Turkey.

      June 29, 2019: POTUS Bilateral Meeting in Osaka, Japan with 
President Recep Tayyip Erdogan of Turkey.

      November 13, 2019: POTUS Working Lunch at The White House with 
President Recep Tayyip Erdogan of Turkey.

                                 ______
                                 

                             Communication

                              ----------                              


                        Center for Fiscal Equity

                        14448 Parkvale Road, #6

                       Rockville, Maryland 20853

                      [email protected]

                      Statement of Michael Binder

Chairman Grassley and Ranking Member Wyden, thank you for the 
opportunity to participate in the annual budget ritual.

As we all know, the appropriations process for the next fiscal year 
takes place within the context of the Bipartisan Budget Act of 2019. In 
an election year, staying within the current parameters is the best 
course. Early passage makes transition easier for the next 
administration and Senate, regardless of electoral outcomes. Even if 
the President is reelected, staff turnover is to be expected in the 
Department and the Committee. If changes are to be made due to changes 
in party, enactment before the election can always be supplemented with 
new legislation.

We see three issues of concern for the coming fiscal year. The first is 
to provide increased funding for the Office of Tax Policy. Whether tax 
cuts or comprehensive reform is on the horizon, having a full partner 
in the Department is essential for estimating support and a quick 
turnaround from enactment to the issuance of regulator guidance.

The second area of concern is tax administration. While a common 
refrain on this to pie is the adequacy of software, this is a canard. 
SAS is the current programming language. It is constantly being updated 
on the vendor side and training is available, if funded. The problems 
are thus training and beta testing, not the age of the software. More 
important is the need for stronger audit resources, especially for 
complicated high-income and corporate returns. More auditing means more 
compliance, even among those who are not audited.

The IRS has lost resources to do this, both through retirement and 
underfunding. Using the A-76 process for both programming and auditing 
allows for the rehiring of revenue agents and an easier acquisition of 
new ones, particularly those with experience in finding loopholes in 
the current system. Creating or utilizing more than one firm will keep 
labor rates and profits lower. Comprehensive tax reform, which is 
discussed next, will also require massive retraining, although the 
reforms we propose will shift most such activity to the states. A cadre 
of agency and contract experts in more than one firm should be ready to 
migrate when this occurs.

Tax reform will reduce complication. Please find our current (and 
evolving) proposals for long term reform in Attachment One. While they 
are a longer-term prospect than the 2021 appropriation for the 
Department, they still fall within the jurisdiction of the Committee. 
We do not expect action upon tax reform until the next Congress, but it 
is always good to highlight our proposals.

Shifting to a single system for all business taxation, particularly 
enacting invoice value-added taxes to collect revenue and employer-
based subtraction value-added taxes to distribute benefits to workers 
will end the need for filing for most, if not all, households. Any 
remaining high salary surtax would be free of any deductions and 
credits and could as easily be collected by enacting higher tiers to a 
subtraction VAT. Note that a subtraction VAT collection will closely 
duplicate the collection of payroll and income taxes--as well as 
employment taxes--but without households having to file an annual 
reconciliation except to verify the number of dependents receiving 
benefits.

Creation of an Asset VAT to tax capital gains and returns would also 
greatly simplify taxation. Recent reforms to corporate, pass-through 
and dividend taxation with a consolidated rate of 21% will make 
agreement on a final number easier--especially if Affordable Care Act 
and Pease taxes are also eliminated. The current tax with these is in 
the neighborhood of 23%. It was 25 % in the prior administration. If 
both parties agree to end the debate at 24% (or 20% of invoice), K 
Street can be converted to high-end condominiums.

There is no reason to fear consumption taxes, as they are implicit in 
the current system. These taxes are withheld by employers for the 
income and payroll taxes of their labor force. A VAT simply makes these 
taxes visible while subtraction value-added taxes make them manageable, 
allowing employers to adjust pay more easily for larger families, pay 
for health care or insurance and fund public and non-public schools for 
dependents and college or technical training for workers, as well as 
retirement plans that give employees a stake and a say in the firm and 
a more secure retirement.

Tax reform will simplify tax administration on all levels. Firms will 
submit electronic receipts for I-VAT and C-VAT credit, leaving a 
compliance trail. S-VAT payments to providers, wages and child credits 
to verify that what is paid and what is claimed match and that children 
are not double credited from separate employers. A-VAT transactions are 
recorded by brokers, employers for option exercise and closing agents 
for real property. With ADP, reporting burdens are equal to those in 
any VAT system for I-VAT and A-VAT and current payroll and income tax 
reporting by employers.

Employees with children will annually verify information provided by 
employers and IRS, responding by a postcard if reports do not match, 
triggering collection actions. The cliche will thus be made real.

High salary employees who use corporations to reduce salary surtax and 
pay I-VAT and S-VAT for personal staff. Distributions from such 
corporations to owners are considered salary, not dividends.

Transaction-based A-VAT payments end the complexity and tax avoidance 
experienced with income tax collection. Tax units with income under 
$75,000 or only one employer need not file high salary surtax returns. 
Separate gift and inheritance tax returns will no longer be required.

State governments will collect federal and state I-VAT, C-VAT, S-VAT 
payments, audit collection systems, real property A-VAT and conduct 
enforcement actions. IRS collects individual payroll and salary surtax 
payments, perform electronic data matching and receive payments and ADP 
data from state. SEC collects A-VAT receipts.

I-VAT gives all citizens the responsibility to fund government. C-VAT 
invoices encourage lower carbon consumption, mass transit, research and 
infrastructure development. A-VAT taxation will slow market volatility 
and encourage employee ownership, while preserving family businesses 
and farms. Very little IRS Administration will be required once reform 
is fully implemented. All IRS employees could fit in a bathtub with 
room for Grover Norquist.

Thank you again for the opportunity to add our comments to the debate. 
Please contact us if we can be of any assistance or contribute direct 
testimony.

                                 ______
                                 
Attachment One--Tax Reform, Center for Fiscal Equity, November 13, 2019

Individual Payroll Taxes. These are optional taxes for Old-Age and 
Survivors Insurance after age 60 (or 62). We say optional because the 
collection of these taxes occurs if an income sensitive retirement 
income is deemed necessary for program acceptance. Higher incomes for 
most seniors would result if an employer contribution funded by the 
Subtraction VAT described below were credited on an equal dollar basis 
to all workers. If retained, the ceiling should be lowered to $75,000 
reduce benefits paid to wealthier individuals and a floor should be 
established so that Earned Income Tax Credits are no longer needed. 
Subsidies for single workers should be abandoned in favor of radically 
higher minimum wages.

Income Surtaxes. Individual income taxes on salaries, which exclude 
business taxes, above an individual standard deduction of $75,000 per 
year, will range from 6% to 36%. This tax will fund net interest on the 
debt (which will no longer be rolled over into new borrowing), 
redemption of the Social Security Trust Fund, strategic, sea and non-
continental U.S. military deployments, veterans' health benefits as the 
result of battlefield injuries, including mental health and addiction 
and eventual debt reduction. Transferring OASDI employer funding from 
existing payroll taxes would increase the rate but would allow it to 
decline over time. So would peace.

Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes, 
dividend taxes, and the estate tax. It will apply to asset sales, 
dividend distributions, exercised options, rental income, inherited and 
gifted assets and the profits from short sales. Tax payments for option 
exercises and inherited assets will be reset, with prior tax payments 
for that asset eliminated so that the seller gets no benefit from them. 
In this perspective, it is the owner's increase in value that is taxed. 
As with any sale of liquid or real assets, sales to a qualified broad-
based Employee Stock Ownership Plan will be tax free. These taxes will 
fund the same spending items as income or S-VAT surtaxes. This tax will 
end Tax Gap issues owed by high-income individuals. A 24% rate is 
between the GOP 20% rate and the Democratic 28% rate. It's time to quit 
playing football with tax rates to attract side bets.

Subtraction Value-Added Tax (S-VAT). These are employer paid Net 
Business Receipts Taxes that allow multiple rates for higher incomes, 
rather than collection of income surtaxes. They are also used as a 
vehicle for tax expenditures including health care (if a private 
coverage option is maintained), veterans' health care for non-
battlefield injuries, educational costs borne by employers in lieu of 
taxes as either contributors, for employee children or for workers 
(including ESL and remedial skills) and an expanded child tax credit.

The last allows ending state administered subsidy programs and 
discourages abortions, and as such enactment must be scored as a must 
pass in voting rankings by pro-life organizations (and feminist 
organizations as well). An inflation adjustable credit should reflect 
the cost of raising a child through the completion of junior college or 
technical training. To assure child subsidies are distributed, S-VAT 
will not be border adjustable.

The S-VAT is also used for personal accounts in Social Security, 
provided that these accounts are insured through an insurance fund for 
all such accounts, that accounts go toward employee ownership rather 
than for a subsidy for the investment industry. Both employers and 
employees must consent to a shift to these accounts, which will occur 
if corporate democracy in existing ESOPs is given a thorough test. So 
far it has not.

S-VAT funded retirement accounts will be equal dollar credited for 
every worker. They also has the advantage of drawing on both payroll 
and profit, making it less regressive.

A multi-tier S-VAT could replace income surtaxes in the same range. 
Some will use corporations to avoid these taxes, but that corporation 
would then pay all invoice and subtraction VAT payments (which would 
distribute tax benefits). Distributions from such corporations will be 
considered salary, not dividends.

Invoice Value-Added Tax (I-VAT). Border adjustable taxes will appear on 
purchase invoices. The rate varies according to what is being financed. 
If Medicare for All does not contain offsets for employers who fund 
their own medical personnel or for personal retirement accounts, both 
of which would otherwise be funded by an S-VAT, then they would be 
funded by the I-VAT to take advantage of border adjustability. I-VAT 
also forces everyone, from the working poor to the beneficiaries of 
inherited wealth, to pay taxes and share in the cost of government. 
Enactment of both the A-VAT and I-VAT ends the need for capital gains 
and inheritance taxes (apart from any initial payout). This tax would 
take care of the low income Tax Gap.

I-VAT will fund domestic discretionary spending, equal dollar employer 
OASI contributions, and non-nuclear, non-deployed military spending, 
possibly on a regional basis. Regional I-VAT would both require a 
constitutional amendment to change the requirement that all excises be 
national and to discourage unnecessary spending, especially when 
allocated for electoral reasons rather than program needs. The latter 
could also be funded by the asset VAT (decreasing the rate by from 
19.5% to 13%).

As part of enactment, gross wages will be reduced to take into account 
the shift to S-VAT and I-VAT, however net income will be increased by 
the same percentage as the I-VAT. Adoption of S-VAT and I-VAT will 
replace pass-through and proprietary business and corporate income 
taxes.

Carbon Value-Added Tax (C-VAT). A Carbon tax with receipt visibility, 
which allows comparison shopping based on carbon content, even if it 
means a more expensive item with lower carbon is purchased. C-VAT would 
also replace fuel taxes. It will fund transportation costs, including 
mass transit, and research into alternative fuels (including fusion). 
This tax would not be border adjustable.

                                   [all]