Earlier this week, Treasury Secretary Janet Yellen testified before the Senate Finance Committee and the House Ways and Means Committee on President Biden’s Fiscal Year (FY) 2022 budget request. Click here for a full summary of the hearings. This alert includes summaries of both hearings.
Senate Finance Committee Hearing Highlights
Chair Ron Wyden (D-OR) said the administration’s proposed budget addresses long-standing inequities in the tax system by fully funding the IRS and increasing payments to families through the Child Tax Credit (CTC) and paid family leave. He also spoke about his framework to overhaul the U.S. international tax policy and specifically called for a reversal of deduction for corporations that outsource manufacturing jobs overseas. Ranking Member Mike Crapo (R-ID) criticized the budget proposal for increasing the budget deficit and cautioned against the rising tide of inflation. He also expressed concerns over the proposal’s increase in information collection from financial institutions.
- Global Minimum Corporate Tax: Democrats expressed hope that the administration could reach an agreement with other G7 countries in order to establish a global minimum corporate tax to combat tax havens. Republicans expressed concerns that establishing a minimum tax higher than other nations would incentivize corporations to move jobs and profits overseas.
- Capital Gains Tax: Republicans questioned the administration’s proposals for stepped-up basis in capital gains and the impact it would have on families, especially given the apparent retroactive nature of the proposal. Secretary Yellen was unable to give a clear answer on the proposal’s effective date.
- IRS Funding and Tax Compliance: Democrats focused on bolstering tax compliance efforts as a means of achieving equity in the tax code. Republicans raised concerns about whether the IRS will ensure security of taxpayer data given ProPublica’s recent publication of confidential taxpayer information
- Inequity in the Tax Code: Democrats noted the high audit rates Earned Income Tax Credit (EITC) recipients receive compared to audit rates of wealthy individuals. Republicans raised the point that poverty rates declined substantially after the enactment of the Tax Cuts and Jobs Act (TCJA) of 2017.
House Ways and Means Committee Hearing Highlights
Chair Richard Neal (D-MA) stated high-quality infrastructure is the backbone of the U.S. economy. He expressed optimism that President Biden’s budget proposal addresses necessary provisions to bolster the nation’s physical and human infrastructure. He emphasized the importance of taxpayer compliance and noted his support for investing in the IRS to close the tax gap. Ranking Member Kevin Brady (R-TX) criticized the budget proposal for increasing the budget deficit and cautioned against the rising tide of inflation. He also expressed concerns about the repeal of the Tax Cuts and Jobs Act (TCJA) and the implementation of a global minimum tax, which he believes will render the U.S. uncompetitive, globally.
- Global Minimum Corporate Tax: A possible agreement on a global minimum corporate tax was again a popular topic for debate. Democrats were optimistic about reaching an agreement with other G7 countries on establishing a global minimum corporate tax rate. Republicans stated that setting a high minimum tax rate would only work to incentivize off-shoring of jobs and profits.
- Tax Credits: Democrats emphasized the importance of strengthening and enhancing tax credits addressing several issues from housing affordability to education and labor retention. Secretary Yellen expressed a willingness to work on the expansion and enhancement of many of the tax credits discussed.
- Labor Force Issues: Democrats highlighted the importance of providing support to American workers to ensure labor retention in the workforce, specifically pertaining to women. Republicans expressed concern about the impact of supplemental unemployment payments as an incentive for workers to not participate in the workforce.