Janet Yellen Testimony on Economic Recovery, 2022 Budget Transcript

Chairman Wyden: (10:43) This morning, the finance committee is pleased to be able to welcome Treasury Secretary Yellen to discuss the president's 2022 budget proposal. There's lots to discuss and time is tight. Let's begin with taxes. Chairman Wyden: (11:02) Last Tuesday, Americans woke up to what appeared to be the largest unauthorized disclosure of tax payer data in history. As I said at the time, the committee takes the confidentiality of taxpayer data very seriously, and I expect that an appropriate investigation is underway. I want to thank treasury officials who held a briefing with the staff this week on the subject. The committee takes confidentiality seriously. I also take the issue of economic fairness very seriously. The information in the ProPublica report depicts a tax system in which the wealthiest people in the nation pay rock bottom tax rates. Sometimes zero. What's worse is it's all perfectly legal. The details may not have been a surprise to those who follow the taxes, but there's still a gut punch to read it on a page. Chairman Wyden: (12:09) Days later, another new report described a second big tax rip off. In this case, from the people who brought you the carried interest loophole, there is carried interest on steroids. Wealthy investment managers and their lawyers scheme to turn even more of their wage income into tax preferred capital gains using legal documents that essentially said presto change-o in accounting lingo. Even after whistleblowers came forward, the IRS enforcement division found itself over-matched and outgunned, the result of years of Republican budget cuts that hobbled their capacity to crack down on corporate cheating. Chairman Wyden: (12:58) On its way out the door, in January, the Trump administration gutted an effort to put even minor limits on this behavior. Americans also learned that mega corporations have never contributed less to federal revenues in modern history than they do right now. According to the congressional budget office, corporate tax revenue after the Trump tax law is down nearly 40% from the 21st century average. Many of the largest corporations pay nothing. That's zero. Chairman Wyden: (13:38) At the same time, stock buybacks that enrich wealthy investors are through the roof. It was reported that from January through May of this year, mega corporations authorized half a trillion in stock buybacks, the most in 22 years. I bet there's going to be a lot of comments today about people's trust in our tax system. What's damaging to people's trust in my view is the rotten cynical unfairness that Americans who work for a living always seem to get the short end of the stick. The tax code on the books today says that a dollar gained on the trading floor matters less than a dollar earned on the factory floor, but it's not hard to grasp why middle-class wagering earning taxpayers object to that idea. They're paying taxes out of every paycheck to sustain our country and prosperity is wallowed up so often by wealthy individuals who avoid paying a fair share themselves. Chairman Wyden: (14:51) The president and Democrats in Congress have a big agenda designed to create jobs, make it easier to raise a family and help all Americans get ahead. To fund that agenda, the Congress has to make sure that mega corporations and the wealthy, not just workers, has skin in the game. I'll offer just a few specifics before I close. Senator Brown, Senator Warner, and I recently debuted a plan that would eliminate the Trump era deduction for shipping manufacturing jobs overseas, and make sure that multinationals pay their fair share. I'll have a proposal dealing with the core unfairness of the tax code, the special rules that allow the wealthiest people in America to pay little or nothing at all. Democrats are working on a proposal to close the tax gap because protecting confidential tax payer data and cracking down on the tax cheats are not mutually exclusive. Congress must do both. This is a fairness based approach to revenue. And I look forward to working with Secretary Yellen, our guest today on these issues in the weeks and months ahead. Finally, I want to thank Secretary Yellen for leading the battle with respect to a minimum tax for mega corporations around the world. What the secretary is working to do is stop the race to the bottom on taxes for the most powerful of corporations. Key to moving forward colleagues, and we'll talk about it today is putting a quick stop to discriminatory digital service taxes, which unfairly target American workers and American employers. I'll have a question for Secretary Yellen on that. And the rescue plan passed in March, the Congress created a major new economic lifeline for rural communities and tribes. It's all about making sure that people in these communities have resources for school, roads, and healthcare. Implementation is underway. And I want to work with the department and my colleagues to get the job done. Chairman Wyden: (17:12) One last bit of news is the treasury department and IRS are getting ready to send the first advanced child tax payments out to American families. It's been a lot of hard work. I want to commend my colleagues, especially on this committee, Senator Brown and Senator Bennett for all their work to get this program up and running. These payments have the potential to cut child poverty in half if everybody does their part to reach the vulnerable. The committee will be talking about how to ensure that that happens. Secretary Yellen, we thank you for joining us. We'll hear from Senator Crepo, and then we'll have your opening statement, Madam Secretary. Senator Crepo? Senator Crepo: (17:56) Thank you Mr. Chairman, and thank you Secretary Yellen for joining us today. Today, we will discuss the president's fiscal year 2022 budget and proposals for treasury and its agencies. The administration's proposals to increase spending hit Americans with higher taxes and strangle the economy with regulations and red tape is not a path to prosperity. Senator Crepo: (18:20) The president's budget envisions deficits of $14.5 trillion over the next decade with debt exploding to more than $39 trillion or 117% of GDP by the end of fiscal year 2031. Such high debt is risky, especially in the current high inflation environment. Consumer price inflation from April to May was 7.7% at an annualized rate and inflation for durable goods was 36% at an annualized rate. If inflation expectations become unanchored, which no one can credibly claim cannot happen, the resulting increased interest rates can turn federal debt service costs into budget busters. Treasury's top-line budget request of $22 billion is an 11.3% increase over fiscal year 2021. And treasury asks for outsized increases across the board and its various agencies and programs. Senator Crepo: (19:27) I look forward to hearing more about treasuries budget proposals and general explanations of tax proposals in the so-called green book. Those proposals are heavy on tax hikes, introducing new tax ideas of questionable merit and seek to inject more social policy goals into the income tax system. They also call for a mandatory financial information reporting regime. Under this regime, financial institutions would become agents of the IRS, tasked with monitoring and reporting flows into and out of personal and business accounts above a mere $600 threshold. Senator Crepo: (20:08) The proposal which is sold under the guise of trying to close the tax gap is very concerning and pulls almost all taxpayers into a surveillance drag net. The end of big data should not be viewed as an opportunity for big brother. I do not agree with some high tax advocates that private tax information should be a public good, with governments and the public knowing every private aspect of individual and business income and assets. Senator Crepo: (20:42) An overwhelming majority of taxpayers in this country are law abiding and pay the taxes they owe. My concerns are amplified by the egregious apparent leak of private taxpayer information out of the IRS, with the data ending up at ProPublica, which reported sensationalized and misleading claims about taxes paid by named individuals. While ProPublica focused on wealthy people, an IRS leak may involve personal information on American taxpayers across the income spectrum. Senator Crepo: (21:17) Secretary Yellen, it would be helpful for you to share what is known at treasury and the IRS about this apparent massive data breach. I also look forward to hearing about the political agreement struck by the administration and the G7. A recent communique reflects a shift in the US position in OECD negotiations that appears driven by the administration's plans to significantly increase taxes on US businesses. Senator Crepo: (21:46) The United States already has a robust global minimum tax, guilty, and no other country has moved to enact one since. If treasury envisions hiking taxes on US businesses domestically, including onerous changes to the minimum tax, guilty, before other countries adhere to global minimum taxes, the US could suffer from a first mover disadvantage. Higher US tax rates instituted before other countries move poses the risk of others not following through and a new wave of inversions and foreign acquisitions arising because US businesses are once again unable to compete. Congress needs to understand the analysis behind these proposals and whether any agreement would allow foreign targeting of US companies or special carve-outs for particular jurisdictions, including China. Senator Crepo: (22:45) The G7 understandings also advocate for new mandatory financial disclosures and funding for multilateral financial institutions, including a new $650 billion general allocation at the IMF of special drawing rights. I'm interested to hear about the outreach you've done with Congressional Republicans on those funding increases. Additionally, I again ask that treasury work to improve its responsiveness to this committee. Secretary Yellen, I look forward to learning more from you today in our discussions. Thank you, Mr. Chairman. Chairman Wyden: (23:18) Senator Crepo. Secretary Yellen, the floor is yours. Secretary Yellen: (23:27) Thank you, Chairman Wyden, Ranking Member Crepo, members of the committee. It's a pleasure to be with you. When I took off this back in January, the first and most urgent problem confronting our economy was obviously the pandemic, hoping people make it to the other side of the crisis and ensuring they were met there by a robust recovery. Thanks to this Congress and its passage of the American Rescue Plan, I believe we're well on our way towards that goal, but we have to be clear-eyed about something. The pandemic was not our only economic problem. Long before a single American wisdom infected with COVID-19, millions of people in this country we're running up against a series of long-term structural economic challenges that undermined their ability to make a good living. Secretary Yellen: (24:29) For instance, wage inequality. In healthy economies, we see wage growth across the distribution for workers making the highest incomes and those making the lowest. But over the past several decades, that's not been the case in our economy. While the highest earners have seen their income grow, families at the bottom end of the distribution have seen their pay stagnate. Gender and racial pay gaps also persist. At the same time, labor force participation has been dropping. Even before the pandemic, the share of American women in the workforce lagged far behind many other wealthy nations. These trends have coincided with the reordering of the economic map. There've always been richer areas of the country and poor areas, but for most of the 20th century, the latter were catching up with the former. Secretary Yellen: (25:32) The country was rising together. And today, this is less true. There's a divergence among local economies, some areas that are growing more prosperous and others that are stagnating. Climate change adds a fresh layer of crisis on top of this. The average cost of climate related disasters is expected to double every five years. And of course, there's racial inequality. When I started studying economics in 1963, the average black family's wealth was about 15% of the average white family. Maybe that isn't surprising. Jim Crow laws were still in effect. But what is surprising is that it's almost 60 years later and that ratio has barely changed. These destructive forces, the divergence in wages and of geographic areas, the decline in labor force participation, the rise of climate change and the persistence of racial inequality, all of these are combining to block of millions of Americans from the prosperous parts of our economy. Secretary Yellen: (26:48) There are clear reasons why these destructive forces have festered. The private sector does not make enough of the types of investments needed to reverse them. Training programs that can lead to higher wages, childcare and paid leave that would help people rejoin the workforce, or infrastructure with lower carbon emissions and spur growth in neglected communities. For 40 years, we haven't done that. Not as much as we should have. We need to remedy this lack of investment. We need ambitious fiscal policy to start unwinding these trends. And if there is a short summary of the president's budget, that's it. Secretary Yellen: (27:35) The budget, which includes both the American jobs and families plan will repair the fractured foundations of our economy. It does so through a series of smart policies, including childcare and paid leave so more parents can join the workforce, a mass modernization in greening of America's infrastructure to spur commerce and reduce emissions, and investment to make housing and education available to all. And the list goes on. We need to make these investments at some point, and now is fiscally the most strategic time to make them. Secretary Yellen: (28:16) We expect the cost of federal debt payments will remain will below historical levels through the coming decade. We have a window to invest in ourselves. In fact, this budget is both fiscally strategic and fiscally responsible. It pays for itself through a long overdue reformation of the tax code that will make it fairer without touching the vast majority of Americans, those who earn less than $400,000 a year. Secretary Yellen: (28:49) There are some tough trade offs in fiscal policy, but this, a fair tax code for a structurally sound economy is not one of them. With that, I'm happy to take your questions. Chairman Wyden: (29:04) Thank you very much, Secretary Yellen and a fairer tax code for structurally sound economy sounds like a pretty good deal for the American people. And thank you for your leadership. First, Secretary Yellen, I appreciate the president's opposition to raising gas taxes. And the fact is that indexing the gas tax is just a way to start raising taxes on working people next year, rather than this year. And so, I want to now move to questions and that means start with congratulations. The groundbreaking G7 agreement that helps halt the race to the bottom on corporate taxes is extraordinarily important and- Chairman Wyden: (30:03) Is extraordinarily important, and you have moved these negotiations forward in a way that would have just been implausible even six months ago. And so I want to commend you for that. They are a boost to our shared goal of ensuring mega corporations pay their fair share of taxes to fund key investment. Chairman Wyden: (30:26) Now, I remain concerned about how long digital service taxes are going to stay in place once an agreement is struck. Our foreign counterparts have often put in place discriminatory taxes that target American workers and American employers. And these discriminatory taxes, I consider to be digital daggers aimed at some of our most successful high skilled workers and the places that employ them. They should never have been put in place, and yet they remain and even grow. How are you working to put and end to these digital service taxes in the negotiations? Secretary Yellen: (31:14) Thank you, Senator Wyden. We share your goal of making discriminatory digital service taxes a thing of the past, and we've made substantial progress here. At the G7, we've achieved agreement that there will be a removal of all DSTs and other relevant similar measures on all companies. This relates to our insistence at the OECD on both the standstill and rollback of DSTs. The steering group member countries have accepted that DSTs need to be rolled back, and that's important progress. Secretary Yellen: (31:56) Additionally, we've changed the norms surrounding DSTs, conveying to our trading partners that the discriminatory nature of these taxes is unacceptable to the United States. By conveying this message multilaterally, rather than through threats and retaliation, we've also prevented a series of trade disputes that are harmful to US businesses, workers and consumers. Secretary Yellen: (32:24) That being said, we're also retaining all options for discouraging the use of DSTs. The US Trade Representative has started trade retaliation procedures via investigation and sanctions under Section 301. And we're keeping that tool available to use if it were to become necessary to get prompt action to eliminate DSTs. While we very much hope to avoid trade conflicts, this tool remains a useful lever to bring countries to the bargaining table. Chairman Wyden: (33:01) I need to get to another area, Madam Secretary. And your statement sounds constructive to me. What the American people want to know is when are these discriminatory taxes going to go away? So I'd like to close this questioning out. Can you commit to a swift resolution to get rid of these discriminatory taxes that are so bad for our high skilled, high wage workers? Secretary Yellen: (33:29) We are pursuing absolutely every avenue toward a swift and comprehensive standstill and rollback of our DSTs. Our partners are all well aware the importance of this issue and we're exploring numerous options in this space, recognizing that foreign sovereigns have political concerns in this space that frankly are quite every bit as heartfelt as ours. Secretary Yellen: (33:57) But let me emphasize again we share your goals here. We're committed to resolving this issue both on its merit and because it risks standing in the way of a once in a generation opportunity to create a new international tax system to end the serious and very long-standing problems of profit shifting and corporate tax [crosstalk 00:34:21]. Chairman Wyden: (34:22) I've got one other question, but for purposes of shorthand, these discriminatory taxes against our workers and our employers have got to go, and we'll continue to have discussions to make sure that that happens swiftly. Chairman Wyden: (34:38) With respect to my last question, you and I have talked about my view that congressional oversight is so important. And three months ago, I wrote to you requesting information relating to Treasury's handling of the Halkbank Erdogan investigation during the Trump administration. I've sent a number of requests. I know your team's got a lot on its plate, but we haven't gotten what we need. Chairman Wyden: (35:12) And here is what the question is about. Your team seems to believe that we want all kinds of information relating to a DOJ investigation. That's not what we're interested in. We want to see how Treasury and your predecessor handled the matter with Erdogan and Halkbank. So my question to you is can you commit to me that the committee will have substantive production on those requests by the time we start our July session? These are matters in front of Treasury, not Justice. Secretary Yellen: (35:56) I promise to discuss this with my staff and get back to you promptly. Chairman Wyden: (36:03) Good. I just want to emphasize we're not asking for documents that relate to DOJ and DOJ's investigation. We need Treasury documents to get to the bottom of this major scandal and examine Halkbank and Erdogan. I'm over my time. Senator Crapo. Senator Crepo: (36:24) Thank you, Mr. Chairman. And Secretary Yellen, continuing to focus on the OECD international tax negotiations, the administration has proposed a 15% global minimum tax at the OECD, however, the administration's domestic tax agenda includes raising our current global minimum tax, the GILTI tax effective rate, to more than 26%, and the administration appears to be pushing for changes to US law before any other country has even enacted a global minimum tax. Senator Crepo: (36:58) A number of countries have pushed back on the idea, including Ireland, Hungary, and India, and most notably, China. In fact, there are even reports that China will not sign a global minimum tax without carve-outs for its companies and tax policies. Senator Crepo: (37:14) So my first question is, is the administration's position that the US should increase its global minimum tax, the GILTI, or its minimum tax to an effective rate of 26% before others, including China, enact a minimum tax themselves? Secretary Yellen: (37:31) Well, we have proposed a global minimum tax effective rate of 21%, not 26%, and what we're working toward internationally is a global minimum tax that is at least 15% and hopefully higher than that. What the G7 agreed to in London last week was that they would adopt a global minimum tax at least 15%, not 15%, but hopefully higher than that. Secretary Yellen: (38:10) And I think if we're able to make progress domestically on reforming our GILTI, which needs to be on a country by country basis rather than a blended basis, and ourselves move it into the same territory we're asking other countries to do, I think we have a very good chance of getting them to agree. And we're really looking for agreement on this by the time of the leaders' G20 Summit next October. I think we have a very good chance of getting very broad based agreement on this in the OECD and [crosstalk 00:38:56] Senator Crepo: (38:56) So it sounds to me like you're saying that you think the United States should move first, regardless of whether there is a global agreement? Secretary Yellen: (39:05) Well, I think we're trying to move these things in tandem. We feel very good about the progress that we're making internationally and feel the United States would be in a better situation. It would help to fund the important proposals in the President's budget to close tax loopholes that if we raise this tax and reform it, we're going to stop incentives that many American firms now have to shift profits and actual production activity away from our shores. And- Senator Crepo: (39:49) Well, I take it that you're saying that you're not ruling out at least that the United States would act first, but even if we acted in conjunction with the OECD, that does not include a number of critical other nations, some of which have already signaled that they will not do a global minimum tax. Secretary Yellen: (40:10) Well, Senator [crosstalk 00:40:11] Senator Crepo: (40:11) How would we do that? Go ahead. Secretary Yellen: (40:14) You mentioned the Ireland and a few other countries. I've had very constructive bilateral conversations with the Irish Finance Minister and believe that he's going to be working with us to try to raise the global minimum tax, even though that's a highly consequential matter for Ireland. I believe the entire EU will in the end go along with higher minimum taxes. Secretary Yellen: (40:47) Now, if there were a few countries, we do need broad global agreement on this, but we don't need every country to go along with it because pillar two on minimum taxes contain an enforcement mechanism whereby we will be able to incent holdouts, tax havens that don't want to go along with this deal, to come on board and establish a global minimum tax. And if they're unwilling even so to do so, we're proposing changes to the beat to make it more effective and to deny foreign corporations in the United States the deductions that enable them to shift their profits offshore. Senator Crepo: (41:43) Well, thank you. My time is up. I think you're referring to what's been called the shield concept [crosstalk 00:41:48] Secretary Yellen: (41:48) That's correct. Yes. Senator Crepo: (41:49) Correct. I don't have time to get into it with you right now, but I will in questions submitted ask you to explain that concept and how it is that you believe it will work to force other nations to come around. I understand the basics of what it is, and I don't see personally how that is going to work, but I will ask you to clarify that in your written responses. Secretary Yellen: (42:13) [crosstalk 00:42:13] I'd be glad to so. Chairman Wyden: (42:13) Thank you, Senator Crapo. Senator Stabenow, And let me also say to colleagues that Secretary Yellen has got a hard stop time, and so we're going to have to stick to five minutes. And Senator Stabenow? Senator Stabenow: (42:30) Well, thank you very much, Mr. Chairman, and Ranking Member Secretary Yellen, It's always wonderful to have an opportunity to see you and thank you so much for your incredible service. Senator Stabenow: (42:41) I just want to start with a general comment, Mr. Chairman, that I think probably today, as I've heard in other committees as well, we're going to hear a lot about deficits being out of control. And I just always have to put this in some context. I was in the House of Representatives in 1997 when we balanced the budget for the first time in 30 years under a Democratic president, Bill Clinton, went into the Senate. We saw exploding deficits under a Republican president for a number of different reasons, but ended his tenure with a financial crisis. As a Democratic president comes in, President Obama has to dig our way out of a financial crisis. Senator Stabenow: (43:19) By the time he leaves, we are bringing down the deficit. We go into the next president. President Trump explodes the deficit again. Now we'd have a Democratic president who's having to dig us out of a different kind of crisis, which is the health pandemic and trying to right size things. Senator Stabenow: (43:36) So from my perspective working with Democratic presidents, we've tried step-by-step to do the right policies to not only bring down the deficit, but make sure that things are being done right for people in our country. Senator Stabenow: (43:53) So Secretary Yellen, I wanted to talk to you specifically about that in terms of the tax code, because there's clear differences between what President Biden wants, what we want as Democratic majorities, what our Republican colleagues did in their time in charge, the largest tax cut for the wealthiest in our country in 2017. We've put in place the child tax credit. We want to extend that further. The President extends it for five years. I would love to see it as well extended permanently, but the idea of a tax cut for working families. And then you juxtaposition that whole discussion with what we want to do, with what we have talked about. And had hearings in the committee on what's called the tax gap, the difference between what people owe and what people pay. And when we look more closely at that, I mean, the former IRS commissioners calls that gap as large as 1 trillion a year. I don't know if that's accurate. It's certainly, I think, believable. It's several hundred billion. Senator Stabenow: (45:02) But when you look at that, again, from a fairness standpoint, a study in 2019 found that Humphreys County in Mississippi was the most heavily audited county in America, mostly African American, a third under the poverty line, mostly focused on the earned income tax credit, rather than wealthy people, complicated tax forms, ways to hide their income and so on. So we see tax rates that are unfair and then we see folks not reporting income, hiding income, and so on. Senator Stabenow: (45:36) So could you just speak broadly about when the President is talking about tax cuts for working people and then asking everybody to pay their fair share, and frankly, I don't think it's a tax increase to ask a billionaire to pay more than zero on their taxes, people in Michigan don't think that, but could you speak just in the big picture about right-sizing the tax system and making sure that everybody pays what they are supposed to be paying? Secretary Yellen: (46:07) Thank you for that question, Senator. President Biden feels that it's crucial that we have a tax system that's fair and one where we enforced tax laws so that individuals in corporations pay what they owe. And we really need to do that in order to assist hardworking low-income families, for example, with the child tax credit that you mentioned that is working now to reduce child poverty by almost 50% and give children and families the opportunities they need to succeed in America and to get ahead. Secretary Yellen: (46:56) As you pointed out, there's an enormous tax gap. One number we have been using, one estimate is that it will amount to at least $7 trillion over the next decade, and it largely reflects shortfalls and collections for high-income individuals and corporations. And we have proposed, the Biden budget proposes to close this tax gap by giving the IRS the resources and the technology and the money and long-term time perspective they need to recruit and train and retain qualified staff that can conduct specialized audit. We've also proposed to give the IRS a bit more information that will greatly enhance its ability to target those audits at those who were noncompliant and not at tax payers who were obeying the law and paying what they owe. Chairman Wyden: (48:10) I thank my colleague from Michigan. We've got 25 senators waiting to ask questions. Next is Senator Grassley. Senator Grassley: (48:17) Thank you, Mr. Chairman. I want to talk about stepped up basis, and this is a hot topic in every one of the town meetings I have across Iowa ever since the President's proposed it. And I know that the President has said, "Well, there's going to be some sort of spatial rule to protect a family operation by allowing them to delay payment of the tax," but farmers don't by farm land to buy it one day and sell it the next day. Farmers in Iowa and throughout the Midwest, the family farmers, they do it to pass on from one generation to another generation [inaudible 00:48:57] family operation. And sometimes I run into farmers that are in the fourth or fifth generation of farming. Even six or seven generations occasionally you'll run into. Senator Grassley: (49:12) So I want to quote what the Democratic Chairman of the House Agriculture Committee, David Scott, said recently about this administration's proposed exception, quote, "Could still result in significant tax burdens on family farming operations." So my question is isn't Chairman Scott correct in regard to that? Is it really your point that family farms of several generations ought to be broken up because of doing away with the stepped up basis to raise money? Secretary Yellen: (49:51) Senator Grassley, the President's proposal would enable a family to hold onto its farm and to pass it down through generations without paying any tax on that. So the same would be true for small businesses. As long as the property remains within the family, there would be no taxes collected, only if the farm were eventually sold would there be taxes, and that wouldn't be on the value of the farm, it would only be on gains in the value of the farm. Secretary Yellen: (50:38) We feel that eliminating step up of basis at death is an important way of closing what is really a significant loophole, which is the capital gains can escape taxation entirely if individuals hold property until death. And the President's proposal includes an exclusion of a million dollars in capital gains for an individual and two million dollars for a couple, additional up to $500,000 for a couple if a primary residence is involved. And in the case of family farms and businesses, there would be no tax levied as long as it stays in the family. Senator Grassley: (51:31) Okay. On another question, you were recently quoted as saying, quote, "I don't think there's going to be an inflationary problem, but if there is, the Fed will be counted on to address it." I find this nonchalant approach to the risk of inflation very troubling, as we know from the 1970s, once inflation takes off, getting it back under control can require very painful measures. The early 1980s proved that. As former Treasury Secretary Summers recently stated in an interview with Time Magazine, quote, "The Fed has had almost no success in gently bringing down inflation once an economy has started [inaudible 00:52:18]." Senator Grassley: (52:18) Isn't it incumbent upon the President, you as Secretary of Treasury, and even us in the Congress to take inflationary risks seriously by pursuing responsible fiscal policies, not just expect the Fed to clean up a mess after the fact? Secretary Yellen: (52:39) Senator Grassley, we're monitoring inflation very carefully and do take it very seriously. No one wants to return to the bad high inflation days of the '70s. And I've put forward the view previously, I think this is what most economists think, that the current burst of inflation we've seen reflects the difficulties of reopening an economy that's been shut down, seeing huge swings in spending patterns, and is experiencing bottlenecks. And we are taking steps, those we can to deal with the bottlenecks that are afflicting the economy now. Secretary Yellen: (53:33) It's critically important that fiscal policy be put on a responsible course. As Treasury Secretary, I take that responsibility very seriously and I believe that the budget that the President has proposed is indeed fiscally responsible. And I'd be glad to, I see we're running out of time, but I would be glad to explain in detail why I hold that view. Chairman Wyden: (54:02) Thank you, Senator Grassley. Senator Cantwell is tied up in a hearing. The next two are Senator Cornyn and Senator Menendez. Senator Cornyn, and then Senator Menendez. Senator Cornyn: (54:15) Thank you, Madam Secretary, for joining us today. First of all, I wanted to ask you, when it comes to negotiating a global minimum tax with the G7, what do you and the administration see the role of Congress as being? Secretary Yellen: (54:33) Well, any agreement that we are able to reach, and the G7 is just one group that, an important group that's expressed support for this approach. The largest group involved is the OECD. Negotiations have been going on there for many years. Anything that affects US tax law must be enacted by the US Congress. So Congress plays a critical role. Senator Cornyn: (55:07) Thank you. The administration has proposed to make spending for the IRS mandatory spending, but as you know, the appropriations process is an important part of congressional oversight into agencies like the IRS. Are you endorsing this idea that Congress will be removed from oversight of the Internal Revenue Service? Secretary Yellen: (55:40) No, I have no such thought. I think it's important that Congress have oversight of all the executive branch activities and of agencies like the IRS. Secretary Yellen: (55:54) We've proposed an increase in mandatory spending because the IRS has really not had the kind of budget certainty that it needs to undertake long-term programs of modernization of their technology and hiring, training, retaining the qualified cadre of staff that are needed to improve their audit performance and try to close the tax gap. And we think the certainty that comes with a long period of assured funding and what we've proposed we think is within IRS' wheelhouse to practically increased their expenditures at a pace of around 10% a year than- Senator Cornyn: (56:49) How is that different, Madam Secretary, from every other federal government agency? Secretary Yellen: (56:55) Well, really, these are long-term investments that are just required. We have seen a 20% real shrinkage in IRS' budget and [crosstalk 00:57:10] Senator Cornyn: (57:11) I understand your argument, but how is that different from any other government agency? I'm sure all federal government agencies would like to have mandatory spending and diminished congressional control over their budget. How is that different? Secretary Yellen: (57:28) Well, it's not inherently different, and most of IRS' budget would continue to be flowed through an annual appropriation. Senator Cornyn: (57:38) On another matter, Madam Secretary, my constituents have expressed concerns about the retroactive nature of the administration's proposal to increase capital gains tax. The administration's Green Book notes that the proposal would quote, "Be effective for gains required to be recognized after the date of announcement." First, a clarification, what date does this refer to, the date of announcement? Secretary Yellen: (58:05) I will have to get back to you on that, Senator. Senator Cornyn: (58:07) Okay, fair enough. Secretary Yellen: (58:10) [inaudible 00:58:10] Senator Cornyn: (58:11) And the other concern that I've heard from my constituents is the fundamental unfairness of people making long-term plans, whether it's individuals or small businesses or the like, to basically change the rules of the game on capital gains after they have relied upon existing rules in order to plan their affairs, whether it's a business or an individual or the like. So do you think it's fair to basically retroactively change the rules of the game when it comes to capital gains? Secretary Yellen: (58:51) Congress has the ability to change the tax laws and has done so on many, many different occasions. And I don't see a prospective change in rules pertaining to the taxation of future realization of capital gains as being a retroactive feature. Senator Cornyn: (59:19) Let me ask you one last question about the Foreign Investment Risk Review Modernization Act. As you know, Congress has given Treasury new responsibilities under CFIUS, Committee on Foreign Investment, and I understand working with some of our allies to create a similar policy within their jurisdictions. I think it would be helpful for the US to create a multilateral mechanism to address predatory practices by countries like China and the other countries where our national security interests are involved. Is there a process in place to discuss with our allies a mechanism for- Senator Cornyn: (01:00:03) ... place to discuss with our allies a mechanism for creating a [scythious 01:00:04] type process so that China and other countries could not basically exploit the gaps in that coverage and scrutiny. Secretary Yellen: (01:00:14) I agreed with you that would be a very desirable thing for other countries to do. And I don't know that I would say there is a process in effect. But I know that we have had conversations with many different countries about putting in place, or it's such a process, or enhancing processes that they may already have, have indicated a willingness and have worked jointly with them. And I think it's something we absolutely should be encouraging. Senator Wyden: (01:00:51) The time of the Senator has expired. Senator Menendez. Senator Menendez: (01:00:57) Prior to the Trump corporate tax giveaway bill in 2017, the corporate rate was 35%, the tax rate. After this giveaway, the corporate tax rate was lowered to 21%. Secretary Yellen, as a result of the Trump tax cuts in 2017, what is the new average effective corporate tax rate that US corporations are paying? Secretary Yellen: (01:01:24) I believe the number that I have seen on an all inclusive corporate tax rate that would include also state corporate taxes is a little bit under 26%, maybe 25.8%. And if you look at other G7 countries, our effective tax rate is a little bit below theirs. Theirs is something closer to 28%. Senator Menendez: (01:01:58) Well, I think the average effective tax rate paid by US corporations as I've seen it, it dropped after the Trump tax bill, the effective rate, by nearly half, to almost 8%. And in New Jersey, the average rate for our hardworking families was double that of the US corporations, at about 15%. And, isn't it fair to say that the costs of the Trump corporate tax cuts was a whopping $1.5 trillion unpaid for? Secretary Yellen: (01:02:28) It was very expensive, and I didn't see any, and I believe most economists saw very little evidence of a boom in investment spending or productivity that resulted from it. So part of the reason our deficits are as large as they are now is, of course the pandemic contributed, but the 2017 law made a big contribution. Senator Menendez: (01:02:57) So only the previous administration could manage to lose $1.5 trillion in tax revenue while still raising taxes on millions of hardworking families. Rather than provide much needed relief to hardworking families that already pay too much in taxes, the 2017 Trump corporate tax bill actually made things worse. As an imposed an arbitrary $10,000 cap on state and local tax deductions, one of the oldest deductions in the code. This provision disproportionately impacts New Jersey and other states that make investments in our public schools, roads, bridges, other critical infrastructures. Do you think it's a coincidence that states hardest hit by the salt cap like New Jersey are also the states that have invested the most in public education systems, in their roads and transit and highways? Secretary Yellen: (01:03:49) Well, I mean, that's one reason that these states have higher state and local taxes, is to invest in public infrastructure. And as you know, the Biden administration thinks those investments is critically important. Senator Menendez: (01:04:04) Yeah. And, of course, this is why states like New Jersey contribute more to the federal treasury that it receives, while other states receive far more from the federal treasury than they donate. And so it doesn't make sense, I think, to punish taxpayers and states like New Jersey who choose to make investments in their people and in their infrastructure, they make it a blue chip state, they make it a maker state, and therefore contributes to the federal treasury. But in reviewing the Treasury's green book, which I have here with me, which provides explanation of the President's revenue proposals, including that for infrastructure, I was disappointed to see that the salt deduction is not discussed anywhere in the President's tax proposals. Now, you and I discussed this at length during your confirmation, I discussed the same with your deputy. Both of you committed during your confirmation hearings that you would study and evaluate the salt deduction. Yet there's nothing in that book. So, I expect much more. I expect to see what that commitment is going to yield. Senator Menendez: (01:05:11) And finally, your office responded to me yesterday, six months later, for my questions and your nomination hearing, about the question of how many Latinos were hired? What is the overall inclusion? The fact is, that we see very little progress being made in new hires, the office of minority and women inclusion at Treasury identify that over the past five years, which of course proceeds this administration, there has remained consistent under-representation of Hispanic employees. I hope you're aware that, according to industry publications, the largest money managers have nearly $54 trillion under their management. And of those, the largest minority and women managers represent less than 1%. Senator Menendez: (01:06:03) And yet research shows, by the Knight Foundation, that diverse managers perform the same, if not better than mainstream managers. So I would like to see the Treasury Department as a force, both in its representation in its department, and in creating these access to capitals and opportunities. I don't know, when we have billions in federal pension funds and other funds, why it is that only 1% of minority and women get to manage that money, and this other group of individuals get to manage 99%. I want to see some real change, and I hope you will be committed to that. Secretary Yellen: (01:06:43) I am committed to it. I have met with our [inaudible 01:06:46] officer, and diversity and inclusion in our contracting and in hiring is a very high priority. I'm committed to working hard to change these numbers. Senator Wyden: (01:07:00) Thank you. Thank you, Senator Menendez. I also want to say, on Senator Menendez's important point about corporate taxes. According to the Congressional Budget Office, corporate income tax revenue after the Trump tax law is down nearly 40% from the 21st century average. So I thank [McColley 01:07:19]. Next is Senator Thune. Senator Thune: (01:07:24) Thank you, Mr. Chairman, Madam Secretary, welcome back to the committee. As you can tell, I'm in another committee, we're marking up a bill at the Congress committee today. But let me ask a question about this issue of inflation, which I'm sure has been talked about a good bit already today. But it's the highest, I think as you know, in 13 years, so consumer prices are rising 5% last month. And according to the latest consumer price index, the index for all items except food and energy rule is 3.8%, which is the largest yearly increase in almost 30 years. The energy index rule is 28.5% over the last year. And according to the survey by the Federal Reserve Bank of New York, fears of inflation in the year ahead hit its highest level on record with a consumer expectation up to 4%. Do you view this inflationary trend as transitory, or do you expect an extended period of raised inflation? Secretary Yellen: (01:08:20) Well, I've previously said that I see important transitory influences at work, and I don't anticipate that it will be permanent. But we continue to monitor inflation data very carefully. And importantly, for the long run inflation outlook, we see inflation expectations by most measures, there are many different measures, and by most measures see those expectations as being well anchored. And I think the consensus of forecasters is that this bout is temporary. Partly what we're seeing is that prices that just collapsed at the onset of the pandemic in the service sector where demand collapsed. As the economy's opening back up again, prices are now moving back toward normal levels in leisure, hospitality, airfares, and the like. In most cases, prices remain below pre-pandemic levels, but they're rising, and that's some of what's going on here. But there are also bottlenecks, and clearly firms are having difficulty hiring workers. I believe our economy is on track to get back to a more normal operation, and that inflation will decline over time. But we're going to monitor this very, very carefully. [crosstalk 01:10:04]- Senator Menendez: (01:10:05) Do you still agree with the administration's projection of 2% for the year? Secretary Yellen: (01:10:11) Well, the projections that we made were back in February, and what we said agreed very closely with blue chip at the time. We're going to be doing a mid-session review and coming out with a new forecast. And certainly for this year, inflation will be higher than that. Senator Menendez: (01:10:33) Let me switch gears here for a minute. The Biden administration has proposed having banks report to the IRS gross inflows and outflows of business and personal counts, which would be a significant new intrusion to taxpayer's lives. Just last week the IRS had one of the most widespread breaches in the agency's history in order to advance a political agenda. This apparent leak, a targeted leak, a targeted attack I should say, on a select few Americans undermines the confidence in the agency and goes to the heart of public trust between taxpayers and the IRS's ability to safeguard private information. Can you tell me how the Treasury and the IRS hold individuals accountable who broke federal law by sharing confidential tax information and tax returns? And will you commit to updating me on what steps the administration's taken to ensure this doesn't happen again? And can you maybe tell us what steps you've taken so far? Secretary Yellen: (01:11:28) Yes. This was a very serious situation, and I and the Treasury Department take very seriously the protection of government data. We've referred this matter to the Treasury Inspector General and to the Department of Justice. The IRS commissioner is looking into the matter, as is the Treasury's inspector general for tax administration. But we're only one week out on this, and I really want to emphasize, we do not know what happened. We don't have any facts at this point. I promise to keep you updated on what we find, but it is absolutely top priority to safeguard taxpayer data. When we see the results of the investigations that are done, if there are actions that we need to take to shore up the protection of this information, you have my absolute word that we will do so. And we will keep you and Congress informed on what we're doing and what we're finding on this. Senator Menendez: (01:12:52) Ms. Chairman, my time's expired, but I will submit a question for the record dealing with the issue of step up in basis, the tax proposal as it pertains to family owned businesses, farms and ranches. And very interested in what the administration's proposals are to exempt or protect, I should say, those types of entities from what would be an incredibly crushing and onerous tax. Senator Wyden: (01:13:19) All right, thank you very much Senator Thune. Senator Carper is next. Senator Carper: (01:13:21) Thanks Mr. Chairman. Madam Secretary, thanks very much for joining us today and for your extraordinary leadership over all these years. But my colleagues have heard me say more than a few times, whenever someone's offering changes to the tax code, I ask four questions with respect to those changes. And one is, is it fair? The second would be, does that enhance or diminish economic growth? The third, does it simplify the tax code or make it more complex? And lastly I ask, what is the effect on our budget deficit, our fiscal situation? The first of those guiding principles deals with fairness. And it's my experience that people are generally willing to pay their fair shares taxes, as long as they are convinced that others are doing the same. And I'm pleased that many of the proposed investments in Treasury Department's budget are designed to reflect that principle of fairness. Senator Carper: (01:14:14) For example, I've been a longtime proponent of providing greater funding resources for IRS enforcement and operations. Each dollar spent on IRS enforcement generates, I'm told, a return on investment of at least $5. Some may be higher. That's pretty decent return on our investment, and I support those proposals swung. The budget proposal from the administration will help close the tax gap and ensure that large corporations and high income pay individuals more likely will pay their fair share. Another principle that guides my decision-making is the need for fiscal responsibility, and I believe things worth having are worth paying for, and that must be a consideration. Senator Wyden: (01:15:02) Good. Senator Carper: (01:15:02) Mr. Chairman, you said good. Senator Wyden: (01:15:04) We just wanted to hear you, your points were very important. Go ahead. Senator Carper: (01:15:08) All right, good. Thank you. The administration's tax changes include many options to both the tax code fair and more fiscally responsible, including reversing parts of the 2017 tax law. And we should [inaudible 01:15:21] consider these ideas as well as other options to level the playing field, such as lowering the exemption level on the estate tax. Question. Madam Secretary, can you highlight some of the provisions in your budget requests that most effectively strengthen the fairness of our tax system? And would you share with us your thoughts on how we could make these investments while ensuring that our decisions are fiscally responsible, please? Secretary Yellen: (01:15:48) Yes. We've tried to make the tax system fair in our proposals. The President has pledged that no tax payer earning under $400,000 will see their taxes raised by as much as a penny. And he's been absolutely scrupulous in adhering to that promise. So the tax proposals on the individual side would target only very high income taxpayers by raising the top rate back to where it was, but would only apply to joint filers earning over a bad $509,000. He proposes to raise the rates on dividends and capital gains on the principle that it isn't fair for workers to pay a larger share of their wage income than wealthy individuals pay on their rewards, their income from capital. So we proposes to equalize that, equalize those rates on income from capital gains and dividends and from work. And he's proposed to flow in step-up of basis at death or when gifts are given, because that also was unfair that by holding an asset throughout one's life it can completely escape taxation, capital gains taxation totally. Secretary Yellen: (01:17:37) And fairness also means collecting what is owed under our tax code from everyone, rich or poor. And wage income, which is reported to the IRS, is accurately reported to a level of 97, 98% on tax returns. So those are earning W2 wage income do pay what they owe. The tax gap really reflects shortfalls in reporting by high-income individuals and by companies, and the President's proposal would seek to remedy that by providing the IRS the resources they need to audit high income individuals and companies that are responsible for that tax gap to improve tax compliance, to make the tax system fairer. And to collect the information, at least enough information to give a guide as to where the auditing resources should be used so that we do have fairer tax collections. Senator Wyden: (01:18:59) Thank you, Senator Carper. We still have 16 senators to ask questions. And next is Senator Portman. Senator Portman: (01:19:08) Thank you, Mr. Chairman. And thank you, Secretary Yellen, for joining us again. I've found this a fascinating dialogue this morning. I'm going to ask a couple questions I hadn't planned to ask, because it seems like everybody on the democratic side has decided that the 2017 tax reform bill had a negative impact on our economy and on the opportunity for people to get ahead. So let me just ask you a few questions to be sure we're working from the same facts, because it seems like this is kind of a fact free zone on that particular topic. Senator Portman: (01:19:39) Do you agree that, with regard to the tax bill which was implemented in 2018, and then of course COVID-19 hit in early 2020. So let's say in the 18 months prior to February of 2018, which was when COVID pandemic hit and affected our economy in such negative ways. Would you agree that during that time period that we had significant improvements to the economy and to the equality that we all see, meaning that lower income individuals have a better shot? Particular, do you agree that the poverty rate during that period was the lowest it had been in the history of our country since we began keeping track of that back in the 50s, yes or no? Secretary Yellen: (01:20:21) I agree that was the period of good economic performance in the ways you just said, but it was a continuation of trends we had seen in the prior years. It was a little [crosstalk 01:20:35]- Senator Portman: (01:20:35) Let's talk about that for a second, if I could, Madam Secretary, it was the lowest poverty rate in the history of our country. You said it continued to trend, that's not true. With regard to wages, when you take inflation into account wages have been going down in my home state and nationally. In the 18 months prior to February of 2020, we had 19 straight months actually in 2020 in February of wage gains of 3% or more on an annualized basis. Isn't that true? Secretary Yellen: (01:21:07) I agree that there were good wage gains, especially at the bottom of the income [crosstalk 01:21:14]- Senator Portman: (01:21:15) But you just said what I was going to add, which is the lower [core tile 01:21:19] particularly benefited, as well as a lot of middle income Americans [crosstalk 01:21:24]. And that was a huge relief for us, in my home state and elsewhere. And then the unemployment numbers, do you agree unemployment was at a 50 year low? Secretary Yellen: (01:21:32) Absolutely. But [crosstalk 01:21:34]- Senator Portman: (01:21:33) Even for Hispanics and blacks and other marginalized groups, it was the lowest ever in history. Secretary Yellen: (01:21:39) Yes. And I think those were wonderful [crosstalk 01:21:42]- Senator Portman: (01:21:41) So, wasn't that good? Secretary Yellen: (01:21:43) Those were wonderful developments. We had a full employment economy, tight labor markets. And just as a weak economy imposes the largest losses on disadvantaged groups, on minorities, on low income workers, a strong labor market does exactly the opposite. And we had a good, strong labor market that was conferring those benefits. I simply would argue that this was largely a continuation of trends that had been in place. It continued. I don't believe that was caused by the 2017 tax act. It certainly wasn't harmed by that act either, those trends were very favorable. Senator Portman: (01:22:33) Yeah. Well, other economists would differ, including the Congressional Budget Office, which is a nonpartisan group up here that says that the corporate tax reform that you apparently oppose, allowed for workers to gain a lot of benefits. In fact, they said 75% of the benefits went to workers' salaries, wage gains we just talked about. And went to workers benefits, 75% of it. They also said that $1.6 trillion, this is a joint tax number as well, came back into the US economy in terms of repatriation. 1.6 trillion. And you've made the point earlier that somehow everybody was leaving United States during that time period, that's not true. In fact, inversions flipped, we didn't have any inversions virtually in that time period I'm talking about it, as compared to previous when we had a lot of them. So in terms of the trends, we were going the wrong way in terms of losing jobs and investments overseas. Senator Portman: (01:23:22) Anyway, look, I appreciate your background and experience, but I just think that we have misinformed the public as to what happened in 2017 in the interest of somehow raising taxes on the workers I represent who are going to be hit by these higher corporate taxes that you would like to put in place. I'm also very concerned about the budget. You said this morning, I quoted you here saying that you are proposing ambitious fiscal policy. It is ambitious, taking the country's debt to historic levels as a percent of GDP, which is how we ought to measure it. And a $14 trillion increase in spending over the next 10 years. So as you know, during your nomination I supported you. And I said, "Would you commit to me to be the fiscal responsible one among [inaudible 01:24:07] of the cabinet?" And you said you would. So I hope that you will begin to do that and get back on track. Secretary Yellen: (01:24:14) I believe we're getting back on track. Because over 15 years, every dollar of spending proposed in this budget is paid for. And over 20 years, there is a substantial reduction in outstanding debt. Over the next decade, the real interest cost on the debt is projected to be either negative or just barely positive. And in the interest rate environment that we're in now, and have been in before the pandemic, it's not only a matter of the pandemic. We've had the opportunity to finance critical investments that will make our economy grow more quickly and be more productive and fairer, and have the ability to pay for them. And we'll end up with more tax revenue from permanent changes to the tax code that will benefit our economy into future decades when problems of aging populations will get our entitlement programs. Senator Wyden: (01:25:30) The time is- Secretary Yellen: (01:25:31) I believe this is fiscally very [crosstalk 01:25:33]- Senator Portman: (01:25:32) We'll agree to disagree about tax increases. Thank you, Mr. Chairman. Senator Wyden: (01:25:37) Our next Senator will be the Senator Carton. Senator Wyden: (01:25:54) [crosstalk 01:25:54] Senator Toomey. Speaker 1: (01:25:54) I just go to Senator- Senator Wyden: (01:25:54) Senator Brown? Senator Scott? Senator Bennet is next. Senator Bennet: (01:26:07) Hello, Mr. Chairman. Can you hear me? Senator Wyden: (01:26:10) Yes, we can hear you fine. Senator Bennet: (01:26:11) Thank you. Thank you very much. Madam Secretary, I want to thank you and your team very much for the work that they have done to get ready for the monthly distribution of the child tax credit. We're very grateful for that. I wonder if you could talk a little bit about what that work has looked like, and where we are in that process. Secretary Yellen: (01:26:38) First of all, Senator Bennet, thank you so much for your leadership on this issue. I think putting this child tax credit in place really is an important step and we're proposing to continue with to make the non-refundability permanent, and the increase in the size of it. We've worked very hard with the IRS to begin monthly payments to eligible families starting July 15th. Where the IRS, I believe, is ready to make those distributions. Special attention has gone to how to create awareness and make sure that families that didn't file a tax return this year or last year know about their eligibility for the child tax credit, and have a way to apply for it. Secretary Yellen: (01:27:53) The IRS opened a non-filer portal yesterday, and it will take some time to fully develop. It'll be necessary to collect more information about individuals than the IRS needed for the first rounds of economic impact payments. But they're developing that portal and it will be available to non-filers. And we're working hard with members of Congress and through many different channels to get the word out into those communities, and the nonprofit organizations that work with individuals, low income individuals who really need that money are eligible for it, but don't file taxes. Senator Bennet: (01:28:51) And I appreciate that, and the non-filer portal and everything so much. I mean, I have another question on another topic I want to address. But Madam Secretary, I know you know how important this is to working families in this country. And there are a lot of us who have not given up hope that we can find a way to work together to make the child tax credit permanent. It doesn't make any sense to me that we would do something that was this valuable and then turn around and raise taxes basically on working people who can least afford it. So we're going to fight hard through this process to try to make it permanent. And I hope we'll be able to persuade the administration this is the moment to do it. Senator Bennet: (01:29:40) I wanted to just gears with what little time I have left. In May, this committee held a hearing on financing options to bolster American infrastructure. And I was pleased to your strong support from my colleagues at both sides of the aisle for bringing back a taxable bond option, similar to Build America bonds created in the '09 Recovery Act to help state and local governments advance critical public- Senator Bennet: (01:30:03) ... Recovery Act helps state and local government and critical public projects. My colleague, Senator Wicker, and I recently introduced our bipartisan American Infrastructure Bonds Act to do just that. The bill would create a new class of direct pay. Taxable bonds would be attractive to investors who don't benefit from traditional tax-exempt bonds, such as pension funds and institutional investors. And the president's supposedly creating a similar type of bond called Qualified School Infrastructure Bonds, which would be limited to construction or repair of schools. I'm interested in your views on tools like American Infrastructure Bonds, which states and local governments could use for infrastructure projects that could include, but not necessarily be limited to, public schools. Secretary Yellen: (01:30:47) Senator Bennet, I think it's an important and interesting proposal. As you mentioned, our budget proposal does use a tool like that for schools. There's also an additional $ 15 billion proposed of private activity bonds to support transportation infrastructure, but this is an important area. We'd definitely be willing to work with you and your staff to understand how a tool like this could help broadly with the nation's infrastructure and how it could be coordinated with the infrastructure spending proposals we've made. Senator Bennet: (01:31:30) Thank you, Mr. Chairman. Senator Wyden: (01:31:30) I thank my colleague. Senator Cardin is next. Senator Cardin: (01:31:33) Thank you, Mr. Chairman, and Secretary Yellen, thank you very much for your service. I want to get your view as to how we can use the tax code more effectively to deal with investment of resources to build wealth and equity in communities across the country that have been traditionally underserved. We have several tools that are available. We have the Low-Income Housing Tax Credit. We have the Historic Tax Credits. We have now the opportunity zones. I want to talk about two that are in the president's budget, and get your view as to how you intend to use these tools to deal with the lack of housing opportunities in underserved communities. Senator Cardin: (01:32:16) The New Markets Tax Credit, which I have sought to be made permanent, is made permanent under the president's budget. So that's one tool that has been very effective in Maryland and throughout the country, so I'm interested in your views as to how you would utilize the New Markets Tax Credits. And then there's a new program, the Neighborhood Home Investment Act, which I'm a proud sponsor along with Senator Portman, that deals with a tax credit to deal with the appraisal gap between the value and needs in underserved communities. In the president's budget, you also have the funding for that new tool to deal with underserved communities. Could you just share with our committee how the Biden administration intends to use the tax code to help serve communities that have been left behind in the past? Secretary Yellen: (01:33:16) Well, Senator Cardin, we certainly share the broad aim of trying to help communities that have been left behind, and we have a toolkit that has a number of important elements in it, and you've mentioned too, that we think can make a real contribution. The New Markets Tax Credit, as you mentioned, President Biden has proposed an additional allocation, and we think that it's an important way of channeling funds to qualify community development entities that in turn can make investments in low-income communities. And we will work through, if this proposal is enacted into law, to get that money out and make sure that it's used effectively. And I think the second proposal that you mentioned, the Neighborhood Homes Investment Act, also fills a need that's really not addressed anywhere else, as far as I know, in our tax structure. We have credits to encourage the construction and rehabilitation of rental properties, but this would encourage construction and rehabilitation of owner-occupied housing in distressed neighborhoods. And if this is enacted, Treasury would write rules to make sure that this money is used effectively and is awarded on a competitive basis. Senator Cardin: (01:35:03) Thank you for that. We recognize that in regards to the new program, the Neighborhood Homes Investment Act, we don't have a track record on that. The New Markets Tax Credits, we have a track record. So I would just urge you to work with us as we look to give you that authority as to how it would be implemented so that we can maintain the broad bipartisan support we have. I think it can play a critically important role in reaching a gap that we have today in neighborhoods that are great neighborhoods, but the appraised values just do not allow for the traditional financing. So I thank you for your commitment, and Mr. Chairman, I'll yield back. Thank you. Senator Wyden: (01:35:46) Thank you, Senator Cardin, and your good work on the Neighborhood Homes Investment Act and Secretary Yellen's support is clearly paying off, and I'm going to put it in my big housing bill that I'll be introducing shortly. Credit to you and the Secretary, Senator Cardin. Next will be Senator Brown. Senator Brown: (01:36:05) Thank you, Mr. Chairman, and Madam Secretary, nice to see you again, always. I will echo the words of a number of my colleagues, Senator Bennet most recently, about the Child Tax Credit. I remember when you and I talked soon after your nomination, and I asked you about this, and you said it would be a challenge but you promised that IRS would find a way to make the monthly dispersal of the 250 or $300 per child happen, and you did. And you did even earlier than we with your immense talents and persuasive abilities thought you could. So the parents of 65 million kids across the country will get this financial boost. I mean, Senator Casey and I have talked about this, and when we sit together on the Senate floor, when we voted on this package, the best day of... Certainly I can't speak for him, but the best day of my career, seeing this 10 years of work come forward in this way. And the temporary expansion of the EITC and CTC is so important. Senator Brown: (01:37:11) I appreciate your commitment to work with us to make this permanent, but thank you again for that. My first question is about your efforts on international tax. People in Ohio are furious that our tax code rewards companies when they ship jobs overseas, and stick profits in a tax haven. I'm working with Chairman Wyden and Senator Warner to fix that. The agreement you secured with the G7 can help us reverse that race to the bottom in corporate taxes. Speaking of that, how will that help workers in my state, especially workers that live in fear their factory will be shuttered, and their jobs shipped overseas? Secretary Yellen: (01:37:51) So I think workers, Senator, in Ohio are right to worry that our tax system contains incentives that make it profitable in some cases for American firms to move jobs overseas, and also to move sometimes income overseas to deprive the US of tax revenue we could use an absolutely need for things like the Child Tax Credit, and for education, research, and development aid to manufacturing and other things that would be very positive for them. So I was pleased that if the G7 were able to get unanimous support on the part of our allies for creating a global minimum tax of at least 15%, we're hoping that by the time this is finalized, we can get countries to agree to a higher rate than that. Secretary Yellen: (01:39:08) And what we've had is a race to the bottom in corporate taxes that has just cannibalized tax bases in the United States and around the world, depriving us of the revenue to invest in good jobs and education in addressing climate change and the like. And I'm hopeful that Congress will adopt changes to make. We have a global minimum tax, but we need to make changes to make it more effective, and establishing a global agreement will definitely address incentives that firms now have to shift jobs abroad, and will really address unfair competition that American businesses face from foreign-based corporations that are based in low-tax areas or make use of tax havens. Senator Brown: (01:40:12) Thank you. The other frustration, well, anger is probably a better word that so many Ohioans exhibit about the tax system, is how they pay their taxes every week, every month, every paycheck, the end of the year, whatever, but they also see so many that don't, and the so many that don't are so often some of the wealthiest people in the country. And I think people recognize the problem is the IRS is underfunded on the one hand, and also outmatched by sophisticated actors whose money's hard to follow. Tell us if you would briefly in my last question, Mr. Chairman, how does the president's compliance proposal benefit honest taxpayers that currently, in essence, have to compete with dishonest cheats? Secretary Yellen: (01:40:59) So we've proposed as substantial investment in the IRS to improve their ability to collect taxes from high-income earners in companies where audit rates have diminished by more than 80% over the last decade, and that's where the tax gap is. We've proposed having the IRS collect just a few additional pieces of information that will be simple for financial institutions to provide, that will help the IRS target their audits on the individuals who weren't paying their fair share, and who lead... Honest taxpayers who earn mainly wage income that's accurately reported to the IRS, lead them to feel that they're not getting fair treatment because high-income individuals in companies, either because of our tax laws or because they don't accurately report their income, are able to evade their responsibilities. Senator Wyden: (01:42:13) The time of my friend has expired, and the next two are Senator Lankford and Senator Casey. Senator Lankford: (01:42:22) Secretary, thank you for your testimony today. I do want to make just a couple of quick statements. You made the comment earlier about a fiscally responsible budget. This budget does spend almost 25% of GDP. That is well above the 50-year average. That is even above the amount during the 2009 stimulus time period when there was a very large jump. It assumes a very large group in spending. And one other corrective statement that I want to be able to make, you talk about the difference in wages for the different types of earners. The lowest quartile of income earners after the 2017 tax changes actually went up faster than all the rest. I noticed you went back and looked at a 20-year average rather than actually looking at what happened since the 2017 tax change. After the 2017 tax change, I know you know this statistic, but the lowest quartile of earners actually went up faster than all other quartiles of earners. Senator Lankford: (01:43:20) So I do want to make that correction. I want to go back to something Senator Brown just mentioned as well though, about trying to gather information. You mentioned getting information on more high-income earners. And then if IRS had that, they'd be able to do a better job of actually closing the tax gap. But in your budget request, you actually were asking for information for every transaction for every individual of $600 or more. Now, when I asked the commissioner about this, currently, banks turned in information of $10,000 or more. They have a difficult time processing that much data. Now we're talking about individuals of $600 or more in transactions. Can you tell me why you need that information, that level of granularity? That's not about high-income earner, [crosstalk 01:44:01] everyone. Secretary Yellen: (01:44:02) We're asking financial institutions that already have an obligation to report on the 1099-INT form interest earned by individuals if it amounts to more than a minimal amount. I can't remember, maybe there's a $10 cutoff. We're simply asking to add two boxes to that form, one that would be the aggregate inflows into the account over the course of the year, and the second would be the aggregate outflows from the accounts. So it's not detailed information. It's for accounts where there's already a provision of information from financial institutions directly to the IRS. And we're proposing two additional bits of data that are easily accessible, and involve essentially no additional burden on financial institutions. Those pieces of information are not actionable. They're not taxable items in their own right, but they would greatly assist the IRS in knowing where to target their audit resources. Senator Lankford: (01:45:27) So here's the challenge that I have. As recently as last week, obviously there was an enormous leak from the IRS that we have seen. We don't know how many documents had been leaked out, and that an institution has been started publishing private tax information for individuals. I know there are a lot of individuals who say, "Those are wealthy people, so stick it to them. We'll put the wealthy information out there." The problem is, it's a violation of federal law, and your request is to get a lot more information for private individuals. We also need to see what the IRS is doing. And I heard your answer earlier to Senator Thune, because publishing that data is against federal law as well. So it's not just an instance of if you release the data, that is also a felony, but actually publishing that data is also a felony to be able to do that if they know it's tax data. Senator Lankford: (01:46:15) And from the ProPublica article, they noted that they know it's tax data. It was quote unquote "given to them anonymously." We don't know that to be true, but we do know it's a federal offense for them to be able to do that. So what we want to know is, what is the IRS doing about this? And you've said you're going to give that to Senator Thune, thank you for that. How are they actually following up on it? We'll ask DOJ what they're actually doing as well, but gathering that kind of data on every single individual then to have this large of a breach from the IRS reminds me of old times from the IRS when, quite frankly, Congress gave them less money until they actually took care of all their internal issues. So it doesn't help us actually encourage us to help you with the tax gap. I do want to mention one other issue though, and I'm looking forward to that information you're getting back to Senator Thune, on what's happening on this breach. And that- Secretary Yellen: (01:47:00) Senator, I just want to make one thing clear. We do not know what the source of this information was, and we do not know that it was a leak from the IRS. We're investigating this. It's a very serious matter. We have referred it to DOJ, the inspector general, the FBI. I do not know that it's a leak from the IRS. Senator Lankford: (01:47:28) I have a quick question for you that I need to be able to state, and that is also on the energy issue size. I was very surprised, because you've talked about the fiscal responsibility side of this. You talked about the end of this year, wiping out every kind of tax treatment, even normal tax treatment, for businesses that do oil and gas by the end of 2021. I don't know if the IRS has done any kind of study on what that would do for jobs, what that would do for the price of gasoline across the United States and how that would increase the inflation rate across the country, if that would make us more energy independent or more energy dependent, what that would do to the smallest mom-and-pop companies that do oil and gas because they have percent depletion. Senator Lankford: (01:48:04) Those were a lot of family businesses. Has there been any study from IRS on any of those issues? And you can get this back to me in writing, but the proposals that you made, even for normal tax treatment for oil and gas companies look like they will have a dramatic effect on the price of gasoline for individuals all over the country, and will be a huge hit on jobs and energy independence. Senator Wyden: (01:48:23) My colleague's time has expired, and Secretary Yellen, he indicated it would be acceptable to answer in writing. We will get that, Senator Lankford. Next is Senator Casey. Senator Casey: (01:48:36) Mr. Chairman, thanks very much for this opportunity. Secretary Yellen, we're honored to have you with us today, and thank you for... Really, thank you for two things. One, for your ongoing public service at a challenging time for the nation, and secondly, the way you have done throughout your career, making the connection between economic policy and the betterment of our families and making that connection over and over again. I especially appreciated the work you've done to lift up the provisions in the Rescue Plan and your conversations with Senator Bennet, Senator Brown and others who have done so much for our children. I wanted to ask you first and foremost about women's rights. Senator Casey: (01:49:23) You've discussed your objectives with respect to promoting full legal rights and greater economic and education opportunities for both women and girls, not just here at home, but around the world. And I share those goals, and I know a lot of members of our committee do. The Senate recently advanced legislation that Senator Cortez Masto and I worked on to ensure our trade and development programs, in particularly GSP, include measures on non-discrimination, measures on women's economic empowerment, equal protection and human rights as criteria. So can you discuss how you intend to engage with the IMF, the World Bank, and the interagency here at home to support the objectives of an inclusive recovery in the US and around the world? Secretary Yellen: (01:50:15) Well, thank you, Senator, for that question. I think this simply has to be a very important priority, and it's been a priority for President Biden in thinking about how we need here in the United States to recover from the pandemic when you see the disproportionate negative effect that this pandemic has had on women, and often minority and low-income women. This motivates both features of the American Rescue Plan, and it's also motivated many of the proposals in the president's budget that would address wages and working conditions and the care economy, childcare and the like. Secretary Yellen: (01:51:07) And as you said, in our international work, this is something that we want to see promoted around the world. And we're working both with the IMF, the multilateral development banks, the World Bank to ensure that the kinds of goals that you mentioned, women's rights, non-discrimination, we examine every project that we vote on at these organizations with that perspective in mind. And increasingly, this has become a feature of the programs that these institutions run, but it's just as important, in many countries more important, to promote women's rights and their participation in the economy as in the United States. Senator Casey: (01:52:05) Thank you. And in light of the recent developments we've had around the Child Tax Credit expansion, the Earned Income Tax Credit, as well as the Child and Dependent Care Tax Credit, all of which contributed to the conclusion reached by those who spend their lives analyzing child poverty, that that combined effect of those Rescue Plan provisions would reduce child poverty in half, I frankly wish those who have been touting the 2017 tax bill would have joined us in voting for the Rescue Plan. Senator Casey: (01:52:40) Maybe they'll vote with us when we make some of these provisions to lift up families permanent. Because we don't have much time and I know we've got a vote on, I'll send you a written question, Madam Secretary, regarding some of these issues that we're going to try to extend beyond the Rescue Plan to lift up families, one of them involving not just children, but an additional policy on home and community-based services for seniors and people with disabilities. But I'll send that to you in writing so I can give back the chairman 20 seconds. Thanks very much. Secretary Yellen: (01:53:20) Thank you, Senator Casey. Senator Wyden: (01:53:20) Colleagues, we want to keep going. I believe Senator Crapo is with us. Senator Crapo: (01:53:29) That's correct, Mr. Chairman. Senator Wyden: (01:53:31) Wonderful. Thank you, Senator Crapo. Next in line is Senator Warner. I don't believe he is here. Senator Young is next, and he is here. And with Senator Crapo's graciousness, I'll run over and vote, come right back. We'll keep this going, and we'll meet your timetable, Secretary Yellen. Thank you, Senator Crapo. Senator Young is recognized. Senator Young: (01:53:59) Well, thank you to the chairman. Madam Secretary, welcome. One major incentive for domestic investment is section 174 of the Internal Revenue Code, allowing US businesses to immediately deduct R&D costs. This provision has historically received bipartisan support, as it incentivizes research investment and job creation here in the United States. Beginning next year, however, US businesses will be required to capitalize and amortize those costs over five years, rather than immediately deducting them. Earlier this summer, I reintroduced the American Innovation and Jobs Act along with Senator Hassan to prevent the expiration of this important provision. Senator Young: (01:54:49) Allowing businesses to continue to deduct their research and experimental costs would be a critical incentive for investment in innovation in the United States. This legislation has received considerable bipartisan support, with many of my esteemed colleagues on this committee from both sides of the aisle joining the effort. In your response to questions for the record at your nomination hearing back in January, you stated that you would carefully consider the concerns raised regarding the deductibility of research expenditures, paying particular attention to any effects on small businesses during the recovery. So I ask you, Madam Secretary, given President Biden's interest in encouraging investment in manufacturing, jobs, and innovation in the United States, would you encourage Congress to build back better by maintaining the current immediate deductibility of R&D expenses? Secretary Yellen: (01:55:54) So Senator Young, thank you for that question. You're absolutely right that promoting innovation is a critical priority for President Biden, and it is a very important contributor to productivity growth in this country. And we're absolutely looking for ways to do that, and certainly continuing to allow firms to expense R&D rather than shifting to amortizing could be one very effective way to bring that about. There could also be more generous R&D tax credits. There might be other approaches, but many OECD countries do permit expensing of R&D. So this is something we certainly would want to work with you on and find a way to be supportive of more tax support for R&D. I would mention that the president's budget proposes to repeal the foreign derived intangible income feature of the tax law. Senator Young: (01:57:18) Madam Secretary, could I just interject? Secretary Yellen: (01:57:19) ... finance this. Senator Young: (01:57:21) Why is our proposal not in the president's green book? Secretary Yellen: (01:57:27) I think the president has proposed to repeal the FDII exemption and to use the money for supportive R&D, but wants to work with Congress to decide on what is the best approach to doing that. Certainly open to this strategy. Senator Lankford: (01:57:49) Okay. Well, in consultation with other eminent economists and learned individuals, policy experts, and colleagues alike, they believe that we'd get a lot more bang for the buck through the American Innovation and Jobs Act with Senator Hassan than we would through the FDII manipulation that you mentioned, and the two are not entirely equivalent. So I'm going to move on in light of the time limitations here and other colleagues needing to speak. I'll just note that the administration's revenue proposals release last month contain over $2 trillion of tax increases on US businesses, including increasing the US corporate tax rate from 21% to 28% for tax years beginning after 2021. Senator Lankford: (01:58:44) That of course would include a tax that fell somewhat on workers and consumers. This proposal would create a 32.5% combined US corporate income tax burden when considering state and local taxes. By comparison, and my time is running out, by comparison, China has a 25% rate, and the OECD countries have a 23.5% average rate. When thinking about American competitiveness, I think it's very important that we focus on this issue. And I will allow the chairman, the ranking member, to proceed. Senator Crapo: (01:59:26) All right, thank you Senator Young. Next on my list is Senator Whitehouse. Are you there, Senator Whitehouse? I'll move on to Senator Sasse. All right, rather than just go through the list. Are there any senators... I don't see any senators. Are there any senators who are here with us? Senator Young: (01:59:52) Senator Crapo? Senator Crapo: (01:59:53) Yes, Senator Young. Senator Young: (01:59:55) Perhaps- Senator Crapo: (01:59:56) Wait, Senator Cortez Masto just came on. Senator Young: (02:00:00) Okay. Senator Crapo: (02:00:01) All right, Senator Cortez Masto, you may go. Senator Crepo: (02:00:03) Okay. All right. Senator Cortez Masto, you may go. Catherine Cortez Masto: (02:00:04) Thank you. Secretary Yellen, it's great to see you. Thank you for all of your good work. Secretary Yellen: (02:00:09) Thank you so much. Catherine Cortez Masto: (02:00:10) And thank you for the conversation this morning as I was listening to it. So let me ask a couple of questions that you have not addressed. And this one is around the Financial Crimes Enforcement Network. So there is work that has been done by bi-partisan senators. I joined and led a bill with Senators Cassidy, Moran, Sinema and Warren. It's the Financial Crimes Enforcement Network Improvement Act. It was included in the Anti-Money Laundering Act and what the bill does, it gives FinCEN the authority to work with tribal governments and monitor digital currency and investigate financial issues related to domestic terrorism. Secretary, my question to you is how will the president's budget request ensure that the Financial Crimes Network, FinCEN, meet the requirements of the law? If you can address that, that would be great. Secretary Yellen: (02:01:03) Well, I probably have to get back to you with details on that. There is a significant request in the budget for FinCEN. Part of it is to build the beneficial ownership database, which was authorized by the NDAA Act and FinCEN's beginning, but it needs funds in order to do that. But FinCEN's work is very important and I can get back to you with details about the specific issue you asked about. Catherine Cortez Masto: (02:01:41) Thank you, secretary. And I'll include this request as well. Geographic Targeting Orders that require U.S. title insurance companies to identify the natural persons behind the shell companies. Very interested in it as well. So please, if you can follow up on that, that would be great. And then let me just do one final question for you. Again, like my colleagues, I want to thank the administration for including extensions of the refundable credits like the Child Tax Credit and the Earned Income Tax Credit in this year's budget proposal. Catherine Cortez Masto: (02:02:15) I'm a supporter along with my colleagues. We support the extensions of this, but as we continue to build toward recovery, we need to be as inclusive as possible for all families and children. And the 2017 tax cuts eliminated longstanding access to the Child Tax Credit for over a million immigrant children, despite the requirement to work and pay taxes in order to qualify. Because of this, working families in my home state, lost out on over 36.7 million in benefits per year that they had previously been eligible for. Would you and the Biden Administration support restoring eligibility of these children to qualify for the CTC? Secretary Yellen: (02:03:02) The Biden Administration is certainly concerned about these children. I don't know that they have taken a position on this particular issue, but again, I promise to get back to you when we look forward to working with you on this important matter. Catherine Cortez Masto: (02:03:21) I appreciate it. It is an important matter. And thank you again, Secretary Yellen for joining us this morning. I yield the remainder of my time. Senator Crepo: (02:03:29) Thank you very much, Senator Cortez Masto. I don't see the cameras on for any other senators at this point. Are there any other senators who have made it back from the vote? All right, well, not seeing any. Madam Secretary, I want to ask a couple more questions while we're waiting for Senator Wyden to return or another Senator. When we concluded our discussion earlier, you had just mentioned the SHIELD concept in terms of assuring that nations who are not willing to join in a global minimum tax agreement are pressured into joining that agreement. Could you describe a little more clearly how that is intended to work? Secretary Yellen: (02:04:18) Yes. It's intended to counter foreign company profit shifting by denying deductions to firms operating in the United States when they make deductions that reflect payments to their own affiliates, a parent or another affiliate. If that affiliate is based in a tax haven that does not have a global minimum tax. So that's a way that foreign companies operating in the United States make use of tax havens. And by denying those deductions, it makes it impossible for these firms to shift income derived from U.S. activities into tax haven countries. In addition, given that a tax haven would be able to see that its failure to adopt a global minimum tax is depriving them, and this would be, I should say, this is a tool. It's not only something that we're proposing in the Biden Budget, but it's also embodied in the OECD Agreement that's being worked out. Secretary Yellen: (02:05:49) It's intended, it's called an Undertaxed Payment Rule. And a mechanism of this sort is one that every country will have available to it, to deal with tax havens, countries that do adopt the global minimum tax. And it should incent tax havens to want to adopt a global minimum tax because it's going to deprive them the benefits of that they seek to gain by having get lower tax rates. So we think that this SHIELD proposal will more effectively counter this incentive than the current system, the BEAT system that's in place. Senator Crepo: (02:06:39) All right, thank you. I still have more questions and concerns about it, but I see that a couple of my colleagues have returned from the vote and Senator Sasse, you are next. Ben Sasse: (02:06:51) Thank you Senator Crapo. Secretary Yellen, Thank you for being here. Sorry, we're doing popcorn in and out on you during this vote. Secretary Yellen: (02:06:58) It's okay. Ben Sasse: (02:06:59) Glad to get a little time with you. Before you were confirmed, I wrote to you about the strategic perils of economic and broader interdependence with the Chinese Communist Party and now that you've been in office for, I guess, pushing six months and had a chance to read intelligence product consistently since then. I'd just be curious as to an update on your current thinking about whether some degree of financial and technological decoupling from the CCP will be required over the next four years. Secretary Yellen: (02:07:30) So that's a really big question. We certainly recognize the Biden Administration that China is our most serious competitor and that it poses challenges to our security and our democratic values. We're looking at the full range of tools that we have to push back and to address practices that are must, national security and our broader economic interests. It's conceivable, certainly our process denies, through CFIUS, China's ability to make investments in the United States that would harm national security. I would worry somewhat about complete technological decoupling, which our conflict with China could result in growing decoupling of technologies between the United States and China. Secretary Yellen: (02:08:47) I worry that if we are too broad in our policies in terms of how we approach this, that we can lose the benefits that come from having globally integrated technology systems, where advances in one country benefit countries worldwide. The globe has benefited substantially from spillovers of technological developments in one place to other places. I would worry about a decoupled global system. And many of our allies would be very reluctant, I think, to all but stop doing business in China. So, this is a difficult issue. It's one we're concerned about, but protecting our national security and economic security is paramount. Ben Sasse: (02:09:52) So let me pull on the word complete, about complete decoupling, because I agree with you. That's not where we're headed. Obviously agricultural and industrial engagement is nearly inevitable. I live on the bread basket of the world on a per acre basis. The Ogallala Aquifer in Nebraska right now is probably the most productive farm and ranch land anywhere in all of human history. We need foreign markets. There's not enough folks to consume all the protein. Nebraska is the largest cattle state in the union now, as well as where we are in corn and beans. Ben Sasse: (02:10:24) So obviously we want foreign markets, but if you move up the complexity ladder from agricultural and industrial goods into technological goods and services, obviously you're right. Supply chains are going to remain integrated globally, but there are some aspects of technology that are uniquely dangerous and huge parts of the future of the world are going to be a U.S. slash democratic capitalist free nations that believe in open navigation to seaways, human rights, the Rule of Law, et cetera. Ben Sasse: (02:10:58) Or there's going to be more of a CCP digital authoritarian led internet and portions of the technological world. So short of complete technological decoupling, which surely you're right about, what are some mid points that you envision as plausible stopping points and scenarios of the next three to four years? Secretary Yellen: (02:11:17) Well, I think national security has to be a key concern and we have to be assiduous in evaluating economic policies that, for example, through monitoring of individual data can pose risks to our national security. And so some technology areas I expect that we will have decoupling with because we have to, to protect our national security. Ben Sasse: (02:11:53) [crosstalk 02:11:53]. Am I at time? Senator Crepo: (02:11:55) Yeah, your time's up, Senator, sorry. Ben Sasse: (02:11:57) Gotcha. Thank you, Secretary Yellen. I'll follow up as well. Thanks Mike. Senator Crepo: (02:12:01) Thank you. And I saw Senator Barrasso, but he stepped away from his desk. Are you there Senator Barrasso? Elizabeth Warren: (02:12:09) If you need a Democrat, I'm here, Senator Crapo. Senator Crepo: (02:12:13) I see you, Senator Warren. Senator Warren, you may go next. Elizabeth Warren: (02:12:15) Okay. Thank you. So welcome, Secretary Yellen, it's good to see you here. Last week, ProPublica published an investigation into some of the wealthiest American's tax returns showing that, year after year, multibillionaires pay basically no federal income taxes. And here's the worst part, it is possible that they did it all legally. That's because, year after year, lobbyists and members of Congress have worked together to hollow out the tax code. Elizabeth Warren: (02:12:49) So take Jeff Bezos. He is the second richest person in the world. His net worth is nearly $195 billion, but his salary, it's about the same as the average public school teacher in Massachusetts, $80,000. So, Secretary Yellen, I want to ask about who our tax code is structured to benefit, Jeff Bezos or a Massachusetts public school teacher? The average family in America pays about 7.2% of their total wealth in taxes. And that includes public school teachers. If the same rate applied to Jeff Bezos last year, he would have paid $14 billion in taxes. So Secretary Yellen, if all we do is increase the federal income tax rate, is it ever possible for Mr. Bezos to pay the same proportion of his wealth and taxes as the average public school teacher? Secretary Yellen: (02:13:47) Well, President Biden is proposing important ways to address this disparity- Elizabeth Warren: (02:13:55) I understand that, but let's just start with our current tax code. If we continue to focus on income tax, will Jeff Bezos ever pay a proportion amount of his wealth, as say, a Massachusetts public school teacher? Secretary Yellen: (02:14:09) Well, if we raised the rate on capital gains and we eliminate step up of basis and regard death as a realization event, so that all of those capital gains are taxed and not allowed to permanently... So, if we tax capital gains and [crosstalk 02:14:35] Elizabeth Warren: (02:14:35) Sorry, Secretary Yellen. I don't want to interrupt, but my question was pretty simple. It was about income taxes. I think what you're saying is, the only way we're ever going to get a tax rate from Jeff Bezos is if we tack something other than income. His income is only $80,000 a year, and Jeff Bezos uses all the tricks he can to keep his money in the form of what is today tax-free wealth. So let me ask you a different question. If billionaires like Jeff Bezos have wages, about like the average public school teacher, how do they have the money to buy mansions and private islands and superyachts? Well, the answer is they can borrow against their wealth rather than realize the gains on stock growth. So Secretary Yellen, do multibillionaires pay taxes when they borrow against their wealth to do things like buy superyachts? Secretary Yellen: (02:15:30) Well, to the extent that they avoid capital gains by selling assets to support those spending needs, they avoid paying a capital gains tax. And even if they did, the capital gains tax is lower than what your school teacher in Massachusetts may earn. And so, that seems like unfair tax avoidance. And of course [crosstalk 02:16:01] borrow against assets, but billionaires have lots to borrow against. Elizabeth Warren: (02:16:06) Well, actually, let me ask you about that because I think you're going to the heart of the matter. Does the public school teacher in Massachusetts have the same options as Jeff Bezos? That is the option to collect stock instead of a salary, the option to pay no taxes, the option to accumulate wealth tax free, and they have plenty of cash flow to pay her bills by engaging in borrowing? Secretary Yellen: (02:16:33) No. Your school teacher doesn't have most of those options. And the Biden proposal would end many of these options for very rich individuals in a whole variety of different ways. The carried interest loophole would be closed. There would be higher capital gains taxes and no step-up of basis at death. And all of that would [crosstalk 02:17:05]. Elizabeth Warren: (02:17:06) So under our current law, the teacher's going to pay her taxes year after year to help support her community and to help support the nation. And Jeff Bezos gets to laugh at her for paying full freight, while he keeps his money and even builds his personal wealth without paying a penny more in taxes. Our tax code basically lets billionaires like Bezos opt out. It says, once you accumulate enough wealth, you don't have to pay to help run this country anymore. Jeff Bezos is a billionaire grifter. And so are the rest of these hugely wealthy people who pay next to nothing in taxes. So Secretary Yellen, we have a choice. Do you think we should give up trying to tax the ultra rich like Jeff Bezos or should we change our tax laws so billionaires also have to pay to run the country? Secretary Yellen: (02:18:01) We propose to change the tax laws to make it much fairer on all of these dimensions. And that is central to the tax proposals President Biden is put into this budget. Elizabeth Warren: (02:18:14) Right. I support the president's proposals. They'll go a long way to build revenue for everyone by making taxes on millionaires a little fairer. But I want to point out, the easiest, most obvious solution to this tilted system is instituting a wealth tax. A tax on people worth more than $50 million would provide at least $3 trillion in revenue and that's money for universal childcare, for taking on the housing crisis, rebuilding our crumbling infrastructure. This is about choices. We can fund universal childcare, or we can hand Jeff Bezos enough money to build a superyacht. [crosstalk 02:18:54]. Senator Crepo: (02:18:54) Thank you Senator Warren- Elizabeth Warren: (02:18:55) [crosstalk 02:18:55] We make the tax code work for public school teachers, not Jeff Bezos. Thank you, Mr. Chairman. Senator Crepo: (02:19:00) We need to move on. Thank you. Senator Whitehouse, you're next. Sheldon Whitehouse: (02:19:05) Great. Thank you very much, Senator Crapo, I appreciate it. And Secretary Yellen, we are reaching the end of a long hearing for you and I appreciate your patience and fortitude with all of us. First, a word of congratulations, I think the global minimum tax agreement is a really big deal and very significant and a really important stopper against a race to the bottom of corporations competing with each other and countries competing with each other over tax gimmickry, not on innovation and good management. So thank you for that. And anything you can do to push that 15% number up, you have a cheering band of enthusiasts in the Senate to urge you on. Secretary Yellen: (02:20:01) Thank you. Sheldon Whitehouse: (02:20:02) The second flag I wanted to place was with respect to the negotiations that we're going to be coming into on climate, internationally. You've expressed your support for putting a price on carbon emissions. A number of, I think we're seven senators, are filing a updated Carbon Pricing Bill in the Senate tomorrow. I don't think that a carbon price is the solution, but I think it's an irreplaceable part of the solution. And it's the only way I can think of to offset the $600 billion subsidy that the IMF has reported. Fossil fuel gets every single year just in the United States of America. So I hope you'll stick to your guns to make sure that we are on a safe trajectory to less than 1.5 degrees Celsius global warming and stick to your guns on pricing carbon to make sure we get there. Secretary Yellen: (02:21:14) I am supportive of carbon pricing, it's something I've long been in favor of. And President Biden, I believe, is also supportive of using carbon pricing. He's proposed a clean energy standard that would achieve a hundred percent carbon-free electricity production by 2035. That's an important step he wants to take to cut emissions in line with our nationally [crosstalk 02:21:49]. Sheldon Whitehouse: (02:21:50) [crosstalk 02:21:50] another important part of the solution. But if I may, I'd like to go onto the question for you. We have spoken about the problem that has emerged with 501(c)(3) and 501(c)(4) corporations. The chairman opened the hearing by talking about the importance of taxpayer confidentiality and his expectation that an investigation was underway with respect to the 501(c)(3)s and 501(c)(4), we have seen political abuse. It is, in my view, contrary to law. It has been influenced heavily by special interests and the result has been corrosive to democracy. I've asked you to look into this and I hope that in the same way that we expect investigation of leaks of taxpayer information, we can also expect investigation into what went wrong in the 501c space. In particular, you mentioned that there has been a referral to DOJ on the taxpayer confidentiality breach? Secretary Yellen: (02:22:57) Yes. Sheldon Whitehouse: (02:22:59) I have been pushing for an explanation as to why, for a decade, neither the IRS nor Treasury made a referral to DOJ when 501(c)(3) and 501(c)(4) forms came in that were patently inconsistent with other forms filed with election agencies, both under oath. Which would seem to predicate a simple, false statement investigation. So again, back to this 501(c)(3), 501( c)(4) mischief, I really hope that you will task some entity within Treasury to report to you and to us on what the heck went wrong and what produced this miserable decade of 501(c)(3) and 501(c)(4) abuse. Secretary Yellen: (02:23:54) I understand the importance of this issue, Senator Whitehouse. We really need to get dark money out of politics. And this is an important area in learning about this issue. I found out how very complicated it has been. And I know for example, that the IRS has been prohibited from issuing guidance in this area for a number of years. I do believe that this deserves serious study. And I promise to do that. Sheldon Whitehouse: (02:24:33) Thank you very much. [crosstalk 02:24:38]. Yep. I understand my time is over. I just wanted to add that I think we can solve that rider problem and I know we intend to. Ron Wyden: (02:24:45) And Senator Whitehouse, Madam Secretary, [inaudible 02:24:49] of your comment that this is very complicated. Senator Whitehouse has consistently been a voice for transparency and accountability on dark money and we'd very much appreciate all his leadership. Getting close to the Secretary's stop time, but Senator Hassan is here. Maggie Hassan: (02:25:07) Well, thank you so much Chair Wyden and Ranking Member Crapo. And Secretary Yellen, thank you so much for a long morning, but a very fruitful one and we appreciate it very much. I want to just start to just follow up on a conversation you had earlier this morning with Senator Young concerning the R&D Tax Bill that he and I are co-sponsoring, which would strengthen R&D tax incentives for startups and innovative American businesses. In your confirmation hearing, we discussed the importance of promoting domestic R&D, which is key for out-competing China and creating jobs as the economy recovers from COVID-19. Secretary Yellen, will you continue working with this committee to strengthen R&D incentives in the tax code, including by expanding the R&D credit for startups and small businesses? Secretary Yellen: (02:26:00) Certainly. It's a high priority of President Biden. It's a priority in the budget. There are some areas that lacks specificity, but where we want to do more to promote R&D and glad to work with you on this and to discuss the specifics. Maggie Hassan: (02:26:24) Well, thank you so much. I appreciate that. And I look forward to it. Another topic, Secretary, in your confirmation hearing, we also discussed the importance of Treasury programs that combat the financing of terrorist and criminal organizations. I was pleased to see the president's proposed budget included a request for a $196 million in funding for the Office of Terrorism and Financial Intelligence, a $10 million increase from last year's funding level. Can you speak to how this increased funding will help Treasury combat terrorist and organized crime financing? Secretary Yellen: (02:26:59) Yes, this is a very important office. And it's seen a very big increase in its role and mission over the last five or six years. Among other things, it manages more than 30 sanctions programs and sanctions have proven a critical national security tool. I think imposing sanctions have advanced U.S. national security and foreign policy interests in areas, including counter terrorism, protection of human rights, combating drug trafficking, anti-corruption and non-proliferation. And the request for additional funds is to support an increase in staffing for OFAC and for IT infrastructure. Maggie Hassan: (02:27:57) Well, thank you for that clarification. And I'm also glad to hear about the IT infrastructure piece because it's so critically important in Treasury, as well as so many other agencies across government. I also want to turn to the issue of unfair trade and supply chains. I was encouraged to see that as part of the present supply chain review, the administration recommended creating a strike force led by the U.S. trade representative that would address unfair trade practices that impact domestic supply chains. In the bipartisan U.S. Innovation and Competition Act, I pushed for a similar amendment, it's now in there, that would strengthen investigations of major trading partners whose unfair practices systemically affect you as supply chains and workers. Secretary Yellen, how is the Treasury supporting broader efforts to combat unfair trade practices and strengthened supply chain resiliency? Secretary Yellen: (02:28:57) Well, Senator, immediately upon taking office, the president directed a whole of government effort to shore up our supply chains and addressing unfair trade practices is a key component of that work. We welcome fair competition from abroad, but in too many circumstances, unfair foreign subsidies and trade practices have adversely affected U.S. competitiveness and impacted manufacturing unfairly. So the administration is really implementing a comprehensive strategy to push back on unfair competition that erodes the resilience of our supply chains and industries. And this strike force that you described will be led by USTR and it's one element of the strategy. Its goal will be to identify unfair trade practices that have eroded- Secretary Yellen: (02:30:03) ... fight unfair trade practices that have eroded US critical supply chains and they will recommend trade actions to address these practices. Senator Maggie Hassan: (02:30:12) Thank you so much, Secretary. Thank you, Mr. Chair. I'll submit one more question for the record about implementing the employee retention tax credit for businesses that started up during the pandemic. I appreciate our time, thank you. Senator Wyden: (02:30:24) I very much appreciate my colleagues work on that Employee Retention Tax Credit within the first package, thank you. Senator Maggie Hassan: (02:30:30) Thank you. Senator Wyden: (02:30:31) Senator Toomey's back. Senator Pat Toomey: (02:30:32) Thank you very much, Mr. Chairman. Welcome back Secretary Yellen. I have to say, and I think this will not come as a surprise to you, I'm just extremely disappointed by this entire process that you and your colleagues have engaged in with the G7. This idea that countries that are pursuing greater economic freedom and the prosperity that comes from it, that that constitutes a race to the bottom, I think couldn't be a worst way to think about this. Expanding economic freedom, diminishing the burden countries put on their businesses, their economies, their opportunities for growth, that's not a race to the bottom that we should try to prevent, that's a race we ought to be winning, and I just completely disagree. Senator Pat Toomey: (02:31:24) And by the way, I think everybody has to acknowledge that there's an implicit confession in this whole effort, which is that the Biden proposals, with respect to tax reform, make America less competitive and that's why we need these other countries to inflict the same kind of damage on their economies that he is suggesting we do to ours. I think it's completely misguided, I have to say. Senator Pat Toomey: (02:31:49) Let me get to one of the specifics, you know very well, and we all remember that prior to the TCJA, US multinationals had a significant incentive to establish their headquarters in some other country, almost any other country, at least from a tax point of view, because we had such an onerous tax regime on the income earned overseas, especially if you wanted to bring it back home. We address this head-on, we made significant changes to deal with this and I haven't been able to identify a single corporate inversion of a major American company since the enactment of TCJA. And so I maybe I've missed something, Secretary Yellen, are you aware of a single corporate inversion of a significant large American multi-national post 2017's tax reform? Secretary Yellen: (02:32:46) Well, what we're concerned with is shifting of profits to tax havens where the United States loses the ability to gain the tax revenue and competition from firms in other countries that make use of tax havens. More broadly, we do have to raise tax revenue in order to be able to finance important expenditures that make us more [crosstalk 02:33:20]- Senator Pat Toomey: (02:33:19) I understand. Madam Secretary, I really hate to rudely interrupt, but I've just got so little time. And so I know you want to raise the taxes and the president wants to raise taxes, but rather than getting into a general debate about that, I do want to... I'd like to exchange some data with you. The data that I've looked at suggests that there has been no shifting of American corporate earnings to lower tax jurisdictions. When I asked, are you aware of an inversion that has happened since 2017, you kind of shifted to a different question, which is a concern about income shifting. I'm still not aware of a single corporate inversion that has happened since we eliminated the incentive to invert. And yet we have in the Biden proposal something called the SHIELD, which is an acronym for stopping harmful inversions and ending low tax developments. I don't know why you have to do something to stop inversions that are not occurring. Secretary Yellen: (02:34:22) [crosstalk 02:34:22]. Senator Pat Toomey: (02:34:22) I would also point out that we have a global minimum tax, we have GILTI and most of the rest of the world doesn't, but we've got it low enough that it isn't a prohibitive problem. The administration is now proposing doubling the rate to 21%. But earlier you told Senator Crapo, I heard you earlier in this hearing, and I thought I understood you to say that the administration's proposed effective GILTI rate is 21%. But as you know, the existing tax law disallows taking full credit for all of the overseas taxes paid, and that increases the effective rate from the statutory 10 to about 13 and an eighth. If you raise that to 21, unless you allow full credits for which current statute doesn't, the effective rate will be 26 and a quarter. So my question for you is, are you contemplating allowing the full crediting of foreign taxes paid rather than the partial crediting that occurs under the current law? Secretary Yellen: (02:35:28) I'll get back to you on that, but I believe we haven't changed that. Senator Wyden: (02:35:34) I thank my colleague from Pennsylvania. We've got two other senators waiting in the queue. I believe Senator Daines is first, then Senator Barrasso, but we're going to get you both in and we can do it before the sand is out of the hourglass and the Secretary has to leave. Senator Daines. Senator Steve Daines: (02:35:55) Mr. Chairman, thank you. And thanks Secretary Yellen for being here. Secretary Yellen, I sent you a letter yesterday, you probably haven't had a chance to read it yet. So I'd like to ask for unanimous consent to submit it for the record, Mr. Chairman. Secretary Yellen: (02:36:08) I [crosstalk 02:36:10]. Senator Wyden: (02:36:12) Madam Secretary, just so the record's clear, without objection it is so ordered. Senator Steve Daines: (02:36:19) And it's on the topic of cybersecurity, something I'm hearing frequently from Montana's business owners across our country, who are worried about the major upticks in cyber attacks and ransomware payments that we've seen recently. That attack on the Colonial Pipeline controls nearly half of the gasoline, jet fuel, diesel flowing on the East Coast, should serve as a wake up call for a country. Of course, we saw the same with this attack on our food supply chain as well, most likely Russian cyber attacks. Senator Steve Daines: (02:36:49) The financial system facilitates commerce in every industry and an attack of a similar magnitude that we saw on treasury or a major financial institution could cripple the financial system as well as our economy. Secretary Yellen at the most recent financial stability oversight council meeting just last Friday, the 11th of June, you outlined three key priorities. One, vulnerabilities in non-bank financial intermediation. Two, climate change. Three, treasury market resilience. I'm concerned that treasury's focus on longer-term risks associated with climate change is coming at the expense of the major threat, the immediate threats we're seeing from cyber attacks and ransomware attacks that we're seeing nearly on a daily basis. My question is, do you really believe that cyber security of our critical financial infrastructure, even after the recent surge in attacks is still not a top three priority for the FCC? Secretary Yellen: (02:37:50) It's a huge priority, Senator Daines. It is a great threat to financial stability. Treasury has long taken the lead in trying to pull together the financial sector to exchange information and to raise preparedness. It has groups of fondly known as FBIIC and FSSCC that are organized to address financial sector threats. It is one of the most important focuses these days in supervision of banking organizations, the FFIEC, which is the group of federal bank regulators, has a comprehensive program, it's an enormous [crosstalk 02:38:53]- Senator Steve Daines: (02:38:52) Secretary Yellen, thank you. We've spent both of us years in managing large organizations and at the end of day, it's a zero sum game, and priorities say this is the most important. And I just would hope that what's going on right now with the cyber attack, something truly could bring down the entire finances in the United States government would rise to a top three issue, because everything can't be the most important thing. And I'm just concerned, climate change is a longer-term issue, we've got some very acute challenges today that could literally bring down the financial system, the US government and our country. Senator Steve Daines: (02:39:26) So I got a couple other questions, I want to go back to the G7 and the recent agreement to a global minimum corporate tax rate of 15%. I think a bigger test is going to come at the G20 next month, which includes China, Of course. It's clear that China does not have the best record of living up to its commitments, whether we're talking about a session in the WTO or otherwise. Secretary Yellen, will you commit to not agree to any deal that includes special carve-outs for China or any other country, and what steps would you take to ensure that China does agree to a deal, is held accountable and fulfills their commitments? Secretary Yellen: (02:40:08) We would not agree to any type of carve-out that would meaningfully weaken a robust global minimum tax regime, not for China and not for other countries, we want this to work and not be filled with loopholes. We continue to work to try to bring China into this agreement, other countries are doing the same. We'll see where we are when we get to Venice in a couple of weeks for the G20 meetings. I'm hopeful china will decide it's in their interest to join this agreement, but I do pledge that this is not an agreement that we will weaken. Senator Steve Daines: (02:40:57) Secretary Yellen, thank you. Senator Wyden: (02:40:57) The time for my colleague has expired. We've got Senator Barrasso next. Madam Secretary, we're going to have Senator Barrasso take his five minutes. The floor is waiting for me, we will have you out within three or four minutes of your hard stop, and I'll be back to wrap up. Okay, Senator Barrasso. Senator Barrasso: (02:41:17) Thanks, Mr. Chairman. Thank you very much Madam Secretary. Thanks for testifying before the committee. Your budget request is for about 11.3% increase from fiscal year 2021 in the department's budget, it includes about a 10.4% increase in the IRS budget. This includes $5.5 billion in the enforcement account to hire more compliant staff. In my experience, the overwhelming majority of Americans and people in Wyoming are trying to pay the correct amount of taxes that they owe. The tax code is complex and dealing with the IRS, I know for people at home can be intimidating, it can be confusing, it can be stressful, and it can be never-ending. Thankfully for many, we have taxpayer advocacy and a taxpayer advocate service. I think it's a very important tool that the IRS has to help taxpayers. The taxpayer advocate, I meet with them in Wyoming, they don't have the resources or the authority to resolve every problem that taxpayers encounter with the IRS, the issues that they can help with are limited, but their assistance and guidance can really be invaluable, I've heard that from folks at home. Senator Barrasso: (02:42:26) Given the focus on enforcement in the budget, can you detail to me how the Treasury Department and the IRS are going to enhance the visibility of the taxpayer advocate and ensure that the resources are available to help people receive answers to questions and provide guidance to so many Americans who are just simply trying to correctly follow the law? Secretary Yellen: (02:42:48) Well, I agree, taxpayer service generally is not what any of us should want it to be at the IRS. And this is partly due to lack of resources, the decrease over the last decade of about 20% in real terms of resources. And more recently, the pandemic has put special strains on the IRS. But the funding that we're seeking for IRS in the budget, you mentioned the importance of compliance, I've emphasized that, but customer service broadly speaking is also important and that would be an important thing that we would want to see greatly improved. Senator Barrasso: (02:43:40) Well, thank you. I agree with that, I think it would be very helpful to the taxpayers who are trying to comply, trying to follow the law, trying to get it right and sometimes they just need a little assistance and the taxpayer advocacy group does do that. Senator Barrasso: (02:43:53) I wanted to move to the budget, singling out producers of oil and gas products by just allowing them from using certain tax provisions, such as intangible drilling costs and percentage depletion. That proposal will almost certainly raise gas prices at the pump, it'll affect working Americans leading to a violation of the president's promise. He said he wasn't going to raise taxes on anyone earning less than $400,000. So at the same time, in some of the infrastructure spending discussions with Congress, administration has rejected even indexing the gas tax, because the president told us that when we were in the Oval Office meeting with him, he said, "No, indexing the gas tax or raising the data stacks would certainly raise gas prices at the pump." That would affect working Americans and violate the president's tax play. But what you're proposing in the budget is certainly going to raise the cost at the pump. Senator Barrasso: (02:44:47) So it seems to me that the two positions are inconsistent. The president saying he doesn't want gas prices to go up by adding taxes, but he is willing to let the gas tax prices go up by taking away some of the deductions that exist right now for those people who produce America's energy. Secretary Yellen: (02:45:05) The president is very concerned, as most countries around the world are about climate change and sees no policy justification for subsidizing fossil fuels. He really believes that inefficient subsidies for this industry can reduce more efficient investment elsewhere in the economy, and he wants to see the United States become a global leader in clean energy and to see an increase in really good jobs in a rapidly growing sector. So his proposal includes subsidies for green energy production, and will create jobs in a new and expanding sector. With respect to price increases, I've looked at some recent studies on what the impact would be of phasing out fossil fuels subsidies, and generally, although there might be some positive impact, the impacts are generally found to be small. Senator Barrasso: (02:46:25) Well, I appreciate your comments. It looks like time has expired for me. I don't see the chairman back yet, but I would point out that until he... And he'll be back to adjourn, if he shows up I'll stop immediately. That we're facing a $27 trillion debt, the budget requests a billion dollars for the International Climate Change Fund, that's an increase of almost 786% over funding from last year happening at a time when American people are facing significant challenges at home. Communities across our nation emerging from the pandemic, dealing with soaring debt, declining infrastructure, whether it's the Green New Deal or the UN Climate Change slush fund, I think the American people can't afford these kinds of policies. And why should taxpayer support borrowing more money from countries like China in order to send it overseas to international bureaucrats in the name of climate change? I don't get that at all. Secretary Yellen: (02:47:23) Well, climate change is a global threat, and while we need to make meaningful reductions on our own, our efforts won't be successful at addressing the climate threat unless we see similar efforts around the world. And the United States committed as part of its Paris Agreement to help provide funds for developing countries, for low-income countries to reduce their climate emissions and to address the impacts of climate change. And we've upped our contributions to the Green Climate Fund in order to make good on that commitment, which is a very important one. Senator Barrasso: (02:48:10) Well, thank you very much Madam Secretary, I see that the chairman has not yet returned from the vote. I know you have a hard stop at 45 minutes after the hour, It's now 44 minutes after the hour. I don't know if I'm entitled to adjourn the meeting, but if he doesn't come within the one minute, I would be happy to adjourn the meeting, because I know you have places to be and commitments to meet. Secretary Yellen: (02:48:32) Thanks so much. Senator Barrasso: (02:48:33) Thank you. Secretary Yellen: (02:48:35) Much, appreciated. Thank you, Senator. Senator Barrasso: (02:48:38) Thank you, Madam Secretary.