House Ways and Means Hearing with Sec . Lew on the 2016 Budget Proposal
House Committee on Ways and Means
“The President’s FY16 Budget Proposal with U.S. Department
of the Treasury Secretary Jacob J. Lew”
Tuesday, February 3, 2015
Key Topics & Takeaways
- Bank Tax: Rep. Adrian Smith (R-Neb.) asked Lew if anyone in the Administration has studied the affect of the proposed “bank tax.” Lew said that this tax is a “small fee on the size of their total basis” designed to be complementary and “make our system safer and sounder” by making it “a bit more costly” to use leverage.
- 529 Plans: Rep. Lynn Jenkins (R-Kan.) cited the President’s proposed changes to the taxation of 529 plans in this year’s budget. Lew responded that the President made it clear the White House will not push this “distraction.” Next, Jenkins described her bill (H.R. 529) to improve 529 plans. Lew said he was not familiar with the legislation, but said he will look into it.
- Middle Class Economics: Lew said that tax reform should “scrap loopholes for the most fortunate” and provide critical tax relief for the middle class as well as those striving to join the middle class.
- FATCA: Rep. George Holding (R-N.C.) told Lew to expect a question for the record regarding the Foreign Account Tax Compliance Act (FATCA).
Witness
- The Honorable Jacob Lew, Secretary, United States Department of Treasury
Opening Remarks
House Committee on Ways and Means Chairman Paul Ryan (R-Wis.) today said that he was disappointed in the President’s fiscal year 2016 budget proposal, but that he would like to find “common ground.” First, Ryan emphasized the need for trade promotion authority (TPA) to “get the best trade deals possible.” Second, he said that “we need to fix our tax code – for everybody” by making it “simpler, flatter, and fairer.” Ryan told Secretary Jacob Lew that it is important to find common ground on these two key issues.
Ranking Member Sander Levin (D-Mich.) emphasized that the unemployment rate has dropped and the economy is growing, but said it is important to ensure that “middle class families are not left out of the growth.” In his view, the President’s budget addresses this problem by closing tax loopholes that benefit a select few. Levin called this “economics of working for all, not just the very wealthy.” Next, he discussed the challenge of currency manipulation and the difficult challenges posed to the U.S. financial markets even though the International Monetary Fund (IMF) countries prohibit currency manipulation. Levin said the IMF “lacks any enforcement mechanism” and he advocated for a bipartisan bicameral salutation to currency manipulation through a trans-pacific partnership (TPP) agreement.
Witness Testimony
In his testimony, U.S. Department of Treasury Secretary Jacob Lew said the economy has progressed and businesses have created the most jobs since the1990s, but the United States is still trying to outcompete with its trading partners. According to Lew, the U.S. economy has “turned the corner on a number of fronts, but resurgence has not reached every American.” He continued that the President’s FY2016 Budget proposal offers “real solutions to make paychecks go farther and grow the economy.” Lew pointed to replacements for the cuts in sequestration and plans to lower the deficit as a responsible fiscal path forward and a pro-growth strategy.
Lew said that tax reform should “scrap loopholes for the most fortunate” and provide critical tax relief for the middle class as well as those striving to join the middle class. In addition, he said that bipartisan business tax reform is needed to ensure that America is the “best place for businesses to grow.” Lew highlighted that the President’s FY2016 Budget proposal includes one-time transition revenues that would be used to rebuild the nation’s infrastructure. He concluded “we can get this done,” with these targeted reforms.
Question and Answer
Sequester
Ryan told Lew that it would be a “show stopper to raise taxes for some sequester relief” and argued strongly for the formula in place that is bipartisan in origin. Lew responded that he would continue to work on a bipartisan basis and that the Ryan-Murray FY14 Budget Agreement did help the Administration deliver a budget on time this year.
Pass-Throughs
Ryan asked Lew how the President’s FY2016 Budget addresses cash flow issues and said “there is not enough in this proposal to do justice to what needs to be done.” Lew answered that business tax reform is needed to lower the tax burden for many small businesses and acknowledged that many companies organize as pass-through entities.
Levin added that pass-through entities have to be addressed in the context of tax reform, but that it would be a mistake to bring up a provision and make it permanent without “pay-fors.”
Rep. Charles Boustany (R-La.) said he was pleased with the Administration’s willingness to find an agreement on tax reform and asked Lew why the budget proposal did not do more on pass-throughs. Lew said a number of “things in the budget help small businesses and pass throughs.”
Repatriation & Highway Trust Fund Shortfalls
Ryan asked Lew for his position on tax reform as part of a solution to the funding issues for the Highway Trust Fund (HTF). Lew said repatriation was a “reverse incentive.” He explained that the idea of tax reform is to have efficiency and economics that incentivize behavior. Lew stated, “We need to get away from the label of repatriation and how it might work.”
Rep. Lloyd Doggett (D-Texas) said, “Repatriation is a revenue loser, not a revenue raiser.” Lew agreed.
Vision for the President’s FY2016 Budget
Levin asked Lew about the vision behind the President’s FY2016 Budget. Lew responded that the
Administration identified the obstacles and burdens for middle class families then put in place a series of provisions that will make a real difference. In this way, Lew advocated that the economy is growing at a much better rate than the rest of the world, but not within the middle class.
Social Security Shortfalls
Rep. Sam Johnson (R-Texas) discussed the funding shortfalls for Social Security and asked Lew for his position. Lew said the Social Security Trust Fund is in better share than in past years, and that a stronger economy helps. He added that the “baby boom retirement is underway and it was an entirely predictable turn of events.” With regard to the Social Security Disability fund, Lew argued that the money was spent along the way and the issue is not tied to the current Administration.
Retirement
Rep. Danny Davis (D-Ill.) asked Lew what is in the budget that would help Americans save and prepare for their retirement. Lew responded that the budget incentive for employers to cover workers in 401k plans is important for the setup and maintenance of these plans. Lew added that this was built on the “myRA” program that the administration started last year.
Inversions
Doggett asked Lew for his views on the recent regulations on inversions. Lew responded that “legal tax avoidance has led to the erosion of the tax base” and caused a “race to the bottom.” According to Lew, the United States has the highest statutory rate in the world, and that is why businesses search for tax havens.
Rep. Adrian Smith (R-Neb.) asked Lew if anyone in the Administration has studied the affect of the proposed “bank tax.” Lew said that this tax is a “small fee on the size of their total basis” designed to be complementary and “make our system safer and sounder” because it would be a bit more costly to have leverage.
Tax Extenders
Smith asked Lew if tax extenders should be paid for and Lew agreed, saying that they have never been offset. He added that the Administration has proposed longer term extensions on a permanent basis to allow businesses to plan for the future.
Rep. Lynn Jenkins (R-Kan.) cited the President’s proposed changes to the taxation of 529 plans on page 53 of this year’s budget. Lew responded that the President made it clear the White House will not push this “distraction.” Next, Jenkins described her bill (H.R. 529) to improve 529 plans and Lew said he was not familiar with the legislation, but he will look into it.
Rep. George Holding (R-N.C.) told Lew to expect a question for the record regarding the Foreign Account Tax Compliance Act (FATCA).
For more information on this event, please click here.
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House Committee on Ways and Means
“The President’s FY16 Budget Proposal with U.S. Department
of the Treasury Secretary Jacob J. Lew”
Tuesday, February 3, 2015
Key Topics & Takeaways
- Bank Tax: Rep. Adrian Smith (R-Neb.) asked Lew if anyone in the Administration has studied the affect of the proposed “bank tax.” Lew said that this tax is a “small fee on the size of their total basis” designed to be complementary and “make our system safer and sounder” by making it “a bit more costly” to use leverage.
- 529 Plans: Rep. Lynn Jenkins (R-Kan.) cited the President’s proposed changes to the taxation of 529 plans in this year’s budget. Lew responded that the President made it clear the White House will not push this “distraction.” Next, Jenkins described her bill (H.R. 529) to improve 529 plans. Lew said he was not familiar with the legislation, but said he will look into it.
- Middle Class Economics: Lew said that tax reform should “scrap loopholes for the most fortunate” and provide critical tax relief for the middle class as well as those striving to join the middle class.
- FATCA: Rep. George Holding (R-N.C.) told Lew to expect a question for the record regarding the Foreign Account Tax Compliance Act (FATCA).
Witness
- The Honorable Jacob Lew, Secretary, United States Department of Treasury
Opening Remarks
House Committee on Ways and Means Chairman Paul Ryan (R-Wis.) today said that he was disappointed in the President’s fiscal year 2016 budget proposal, but that he would like to find “common ground.” First, Ryan emphasized the need for trade promotion authority (TPA) to “get the best trade deals possible.” Second, he said that “we need to fix our tax code – for everybody” by making it “simpler, flatter, and fairer.” Ryan told Secretary Jacob Lew that it is important to find common ground on these two key issues.
Ranking Member Sander Levin (D-Mich.) emphasized that the unemployment rate has dropped and the economy is growing, but said it is important to ensure that “middle class families are not left out of the growth.” In his view, the President’s budget addresses this problem by closing tax loopholes that benefit a select few. Levin called this “economics of working for all, not just the very wealthy.” Next, he discussed the challenge of currency manipulation and the difficult challenges posed to the U.S. financial markets even though the International Monetary Fund (IMF) countries prohibit currency manipulation. Levin said the IMF “lacks any enforcement mechanism” and he advocated for a bipartisan bicameral salutation to currency manipulation through a trans-pacific partnership (TPP) agreement.
Witness Testimony
In his testimony, U.S. Department of Treasury Secretary Jacob Lew said the economy has progressed and businesses have created the most jobs since the1990s, but the United States is still trying to outcompete with its trading partners. According to Lew, the U.S. economy has “turned the corner on a number of fronts, but resurgence has not reached every American.” He continued that the President’s FY2016 Budget proposal offers “real solutions to make paychecks go farther and grow the economy.” Lew pointed to replacements for the cuts in sequestration and plans to lower the deficit as a responsible fiscal path forward and a pro-growth strategy.
Lew said that tax reform should “scrap loopholes for the most fortunate” and provide critical tax relief for the middle class as well as those striving to join the middle class. In addition, he said that bipartisan business tax reform is needed to ensure that America is the “best place for businesses to grow.” Lew highlighted that the President’s FY2016 Budget proposal includes one-time transition revenues that would be used to rebuild the nation’s infrastructure. He concluded “we can get this done,” with these targeted reforms.
Question and Answer
Sequester
Ryan told Lew that it would be a “show stopper to raise taxes for some sequester relief” and argued strongly for the formula in place that is bipartisan in origin. Lew responded that he would continue to work on a bipartisan basis and that the Ryan-Murray FY14 Budget Agreement did help the Administration deliver a budget on time this year.
Pass-Throughs
Ryan asked Lew how the President’s FY2016 Budget addresses cash flow issues and said “there is not enough in this proposal to do justice to what needs to be done.” Lew answered that business tax reform is needed to lower the tax burden for many small businesses and acknowledged that many companies organize as pass-through entities.
Levin added that pass-through entities have to be addressed in the context of tax reform, but that it would be a mistake to bring up a provision and make it permanent without “pay-fors.”
Rep. Charles Boustany (R-La.) said he was pleased with the Administration’s willingness to find an agreement on tax reform and asked Lew why the budget proposal did not do more on pass-throughs. Lew said a number of “things in the budget help small businesses and pass throughs.”
Repatriation & Highway Trust Fund Shortfalls
Ryan asked Lew for his position on tax reform as part of a solution to the funding issues for the Highway Trust Fund (HTF). Lew said repatriation was a “reverse incentive.” He explained that the idea of tax reform is to have efficiency and economics that incentivize behavior. Lew stated, “We need to get away from the label of repatriation and how it might work.”
Rep. Lloyd Doggett (D-Texas) said, “Repatriation is a revenue loser, not a revenue raiser.” Lew agreed.
Vision for the President’s FY2016 Budget
Levin asked Lew about the vision behind the President’s FY2016 Budget. Lew responded that the
Administration identified the obstacles and burdens for middle class families then put in place a series of provisions that will make a real difference. In this way, Lew advocated that the economy is growing at a much better rate than the rest of the world, but not within the middle class.
Social Security Shortfalls
Rep. Sam Johnson (R-Texas) discussed the funding shortfalls for Social Security and asked Lew for his position. Lew said the Social Security Trust Fund is in better share than in past years, and that a stronger economy helps. He added that the “baby boom retirement is underway and it was an entirely predictable turn of events.” With regard to the Social Security Disability fund, Lew argued that the money was spent along the way and the issue is not tied to the current Administration.
Retirement
Rep. Danny Davis (D-Ill.) asked Lew what is in the budget that would help Americans save and prepare for their retirement. Lew responded that the budget incentive for employers to cover workers in 401k plans is important for the setup and maintenance of these plans. Lew added that this was built on the “myRA” program that the administration started last year.
Inversions
Doggett asked Lew for his views on the recent regulations on inversions. Lew responded that “legal tax avoidance has led to the erosion of the tax base” and caused a “race to the bottom.” According to Lew, the United States has the highest statutory rate in the world, and that is why businesses search for tax havens.
Rep. Adrian Smith (R-Neb.) asked Lew if anyone in the Administration has studied the affect of the proposed “bank tax.” Lew said that this tax is a “small fee on the size of their total basis” designed to be complementary and “make our system safer and sounder” because it would be a bit more costly to have leverage.
Tax Extenders
Smith asked Lew if tax extenders should be paid for and Lew agreed, saying that they have never been offset. He added that the Administration has proposed longer term extensions on a permanent basis to allow businesses to plan for the future.
Rep. Lynn Jenkins (R-Kan.) cited the President’s proposed changes to the taxation of 529 plans on page 53 of this year’s budget. Lew responded that the President made it clear the White House will not push this “distraction.” Next, Jenkins described her bill (H.R. 529) to improve 529 plans and Lew said he was not familiar with the legislation, but he will look into it.
Rep. George Holding (R-N.C.) told Lew to expect a question for the record regarding the Foreign Account Tax Compliance Act (FATCA).
For more information on this event, please click here.