within the justice system here in alabama. both can close and not even exist. >> the cost of college education. everyone should have equal opportunities to go to college. people may be first-time commerce to college. they're giving us more money than they have given us for years. >> treasury secretary testified about his department's budget at a hearing by the senate finance committee. members also questioned him about tax reforms and russia tensions.

[indiscernible] >> the committee will come to order. this morning's hearing will be many on the president's fiscal year 2019 budget proposal. the committee welcomes treasury

secretary mnuchin who is here to testify on the budget along with other patterns -- matters that may arise. the budget includes numerous proposals to deal with the wide array of policy issues. the opioid epidemic, infrastructure, modernizing ,overnment, national security and lowering drug pricing and payments to mention a few. i think i speak for all members when i say we are all very interested in your thoughts and insights on a number of items proposed. the government's receipts will average 17.1% of gdp over 10 years with that budget window slightly below the long-run average of 17.4% over roughly the past four decades. averagings outlays 10% of gdp over the past years,

which is slightly below the long-run average. also includes tax proposals but they are not as sweeping as those we have seen in prior budget. as you would expect the following the new tax law at the end of last year. so far we are on pleased by the benefits of the new tax law which is already benefited american. year,the beginning of the businesses have come forward to announced plans to award bonuses. raise wages and boost 401(k) contributions for their employees. businesses have announced plans to expand businesses and hire more workers here in the united states. estimates, 340me statementsave issued impacting an estimated total of

3.5 million workers. i would like to highlight a few. it example, apple announced will hire 20,000 new employees and will issue employee bonuses in the form of restricted stock units. is also increasing their financial support for coding andation, science technology, engineering, and math. wells fargo raised their base to $15 anmployees hour. they have also promised $400 million in charitable donations. best buy distributed $100 bonuses to employees, and and best buy distributed $1,000 bonuses to its full-time employees and $500 bonuses for part-time employees, reaching more than 100,000 workers in total.

i remember during the floor debate on the tax reform bill, one of our fellow committee members and friends used a pretty great line. in evaluating the tax bill, she said, quote, the proof is in the paycheck, unquote. thus far, i think it's fair to say that she was correct. the tax law has been in effect for less than two months and about 3.5 million workers in a variety of industries have already received increases, enhanced retirement accounts, and other benefits as a direct result of our tax bill. let's keep in mind that these announcements have been about direct decisions made by employers. they don't take into account the changes in the individual tax system which have cut taxes considerably for tens of millions of american families. as the economy expands further, it's safe to say that american workers will continue to benefit

as will the businesses that employ them, which is precisely what we intended to accomplish with the tax reform bill. of course, no bill or law is perfect, and as implementation of the new tax law continues, it has become clear that one provision of the bill, section 199a, which provides a tax deduction for qualified business income, is having unintended effects in agricultural markets due to the treatment of qualified cooperative dividends. though the aim of that provision in part was to preserve benefits previously available to agricultural cooperatives and their patrons for income attributable to domestic production activities, the current statutory language does not maintain the previous competitive balance between cooperatives, other agricultural businesses, and the farmers who sell their crops to them, which existed prior to enactment of the tax reform bill. our colleagues here on the

committee, in particular senators grassley, roberts, and thune, have taken a leading role in identifying a solution for this issue. i'm committed to working with them and partnering with ways and means chairman brady as well as other congressional colleagues and stakeholders in affected communities to develop a solution to this issue that does not choose winners and lose losers and is fair to everyone involved. what's aonce a suitable solution is arrived at, or identified, my goal is to work with my colleagues to advance legislation that can be sent to the president for his signature as soon as possible. of course, with any, as is the case with any major tax reform bill, none of the important provisions we have written will have their intended effects if they are not properly implemented. that's why we will keep pressure on the administration to

implement the law as congress intended. i'm going to keep working to ensure that everyone recognizes the respects congress's role in this process and the fact that the best place to get an explanation of congress's intent is congress itself. where things are potentially unclear in the law, congress should be the one to determine and explain what was intended, and if need be, such as with section 199-a, provide a timely fix. i will continue to facilitate this type of constructive interaction between congress and the administration as things move forward, and i expect that secretary mnuchin will continue to ensure this important dialogue continues. with that, i look forward to hearing from our secretary mnuchin about his views on the president's budget and the ongoing fiscal challenges facing the nation. and we're very happy and pleased to welcome you here before the committee. senator widen.

yden: thank you very much. mr. chairman, today ought to start with the recap on taxes. now, a little more than three months ago, treasury secretary mnuchin went on cable news and said that his tax models showed that the trump tax bill would spur $2.5 trillion in growth. enough to cover its $1.5 trillion cost and leave a $1 trillion cherry on top. the secretary added, and i quote here, we're happy to go through the numbers. we want full transparency to the american people. if you're looking for transparency, the american people finally got a little bit on monday when the budget showed how baseless that mnuchin talking point was from the get-go. revenue, according to the budget

projections, is about to plummet $300 billion short in 2018. $400 billion short in 2019. and it doesn't get any better. the fiscal bottom line is so out of whack, and the budget, so deep in fantasy land, there's a magical $813 billion in growth dropped in out of nowhere to make the overall picture look a bit less irresponsible. but the idea that the tax cuts would pay for themselves is far from the only misleading statement about the tax law. how about the idea that corporate tax cuts would get turned around immediately into workers' pockets, not shareholders.

20 times more money has been spent on stock buybacks than on workers' bonuses over the last few months. as of this morning, millions of workers have not seen their trump bump. it's been great for the slim, wealthy share of the population who dominate the stock market when stocks are doing well. but it's a prescription for trouble when you're reaching into the pockets of the middle class to fund the buybacks that drive up the value of stock portfolios. the famed mnuchin rule, the promise that there would be no absolute tax cuts for the well off, has been shattered in a few trillion little pieces. the administration didn't follow through on the promise to close

the carried interest loophole, and then, of course, there was the promise that the tax bill would not lead to cuts in social security, medicare, or medicaid. on monday, the worst fears of the american people were confirmed. the trump budget admits that the tax cuts don't pay for themselves, so tit hits those key programs, programs like medicare and medicaid, with massive cuts. this morning, it is also important for the committee to discuss infrastructure. and here, we are talking about crumbling roads and bridges and rail in our transportation systems. the administration's infrastructure plan is fiction

upon fiction upon fiction. first off, the idea that this is a $1.5 trillion infrastructure plan is just plain nonsense. even factoring in the new $200 billion infrastructure proposal, the trump budget is a net decrease in infrastructure spending. it cuts infrastructure programs like a bulldozer through asphalt. $122 billion cut out of the highway trust fund. $14 billion cut from the army corps of engineers. $5 billion cut from the tiger transportation grant program. $7.6 billion cut from amtrak. and it just goes on. in my view, if you want big league infrastructure, a good place to start is not by making huge cuts to infrastructure programs that already work. the second fiction is that this plan is somehow going to be workable for the states. just a few weeks ago, the trump administration kneecaped the

ability of states to raise revenue to fund infrastructure projects with changes to the tax code. now, the trump infrastructure plan burdens them with huge new costs they can't possibly afford. and that leads to the third fiction. that the trump infrastructure plan will not be a road map to more privatization and more tolls taking money out of the pockets of our families. if state and local governments can't cover the cost of the projects, they're going to be looking for private dollars, and that can only mean one outcome, colleagues. drive more than a few miles to work, get ready for more tolls. rushing to school in the morning? don't forget the cash for the toll booth. heading to the grocery store or the mall to do some shopping? better remember to budget tolls into your trip. the infrastructure proposal also

brings back a whole host of old, misguided ideas. for example, in our part of the world, selling off the bonneville power administration's transmission system, which makes sense only if you believe people's electricity bills in oregon aren't high enough. oregon aren't high enough. the fact is the trump plan is a green light for infrastructure nationwide to be sold off to wall street investors or, worse, to shadowy buyers from china or other foreign countries. i want to close with this last point, mr. chairman, on our side, we take a back seat to no one when it calls for major investments in our country's infrastructure. in our view, you can't have big-league economic growth with little league infrastructure. and i also believe strongly in responsible private financing and tackling the issue on a bipartisan basis. but getting infrastructure done

right right, rebuilding the spine of the infrastructure system that connects the nation requires more than hoping for private dollars. it requires robust funding at a federal level to tackle projects in the national interest. that's not what the donald trump plan does, and it's not even close. the bottom line is the trump infrastructure plan dumps huge costs to states and cities, sells off public assets like an auction at a country fair, at a county fair, and raises transportation costs for hard-working families. and that's why it's, a disappointment to see it added to the list of broke trump promises. we're going to have a lot more to say on these issues this morning. look forward to questions. thank you,ch:

senator. with that enthusiastic set of comments, let me, let's say today i would like to extend a warm welcome to secretary steven mnuchin. we're grateful to have you here. thank you for taking the time to be with us here, for taking the time to be here. mr. mnuchin was sworn in as the 72nd secretary of the treasury in 2017. prior to his confirmation, secretary mnuchin was the finance adviser to donald trump for president. in addition it traveling in that role, secretary mnuchin served as senior economic adviser to the president and assisted in crafting the president's economic positions and economic speeches. before those activities, though, secretary mnuchin also served as founder, chairman, and chief executive officer of dune capital management. he also founded one west bank group, llc, and served as its chairman and chief executive

officering in its sale to cit group, inc. earlier in his career, secretary mnuchin worked at the goldman sachs group, inc., where he was a partner and served as chief information officer. he has extensive experience in global financial markets and oversaw trading in u.s. government securities, mortgages, money markets, and municipal bonds. secretary mnuchin is committed to philanthropic action fists and previously served as a member of the boards of the museum of contemporary art, los angeles, the whitney museum of art, the herbshorn museum on the mall, the new york hospital board, and los angeles police foundation. he was born and raised in new york city and earned a bachelor's degree from yale

university. secretary mnuchin, just please proceed with your opening statement here, and then we'll get into questions. : chairmanmnuchin hatch, ranking member wyden, and members of the committee, it's a pleasure to be here today. actually, it's my one-year anniversary on being confirmed. as treasury secretary, i'm focused on advancing the president's policies that will bring prosperity to the american people through economic growth. this is a core focus of it the president, and he is delivering. last year the economy had two straight quarters of 3% or higher gdp growth, and the growth rate was higher than the average over the previous 20 years. the cornerstone of returning to more robust growth is deregulation and the tax cuts and jobs act. this law is already providing relief to middle-income families by putting money directly back into the pockets of hard-working american families. since the law was enacted, over 350 companies have announced bonuses, wage increases, higher 401k matches, and new hiring

benefiting more than four million employees. we are seeing the fastest wage growth since 2009 at 2.9%. this is a meaningful difference in the lives of the millions of american families. our reforms are making american companies competitive again which is having a demonstratable effect on economic success of the nation. the act lowered the statutory corporate rate from 35%, the highest in the industrial world, to 21%, below the industrial average. it also encourages companies to bring back profits that they have been having sitting overseas by eliminating the tax incentive for keeping that money offshore.

fiscal 2019 budget reforms last year's tax reform legislation which reduces the burden on taxpayers and sets the country up for long-term growth. the policies of this budget will drive down spending and growing the economy, critical to putting the nation on a sound fiscal path long term and reducing the share of deficit by share of gdp. the past year has been an important step forward for our country. we will continue this progress by enacting policies that enable the american people to succeed, and i look forward to continuing to work with congress to make this happen. thank you very much. hatch: thank you, mr. secretary. let's go to five minutes for questions. mr. secretary, the economic growth assumptions in the budget show fourth quarter-over-fourth quarter gdp growth or above at 3% for a number of years, eventually fading to 2.8%. as i understand it, those assumptions follow from anticipated positive growth

effects from policies put forward in the budget including tax reform, regulatory reform, health care reforms, boosting domestic energy production, and others. if i recall correctly, several budgets put forward by the obama administration similarly incorporated growth assumptions. sometimes above 4.0%, in anticipation of results it would obtain if the relative budget proposal were to be enacted. the relevant budget proposal, i should say. secretary mnuchin, are you comfortable with the growth assumptions contained in the budget, and do you believe that the policies proposed by the

administration will lead to strengthened growth in the economy? yes, mr. chairman, i am comfortable with them, and i do believe in them. now the president's budget which incorporates effects on receipts of the recently enacted tax bill, has receipts as a share of gdp averaging 17.1% over the ten-year budget window and receipts as a share of gdp generally increasing over the window ending at 17.8% in 2028. by comparison, the long-run value of receipts as a share of gdp over the period 1977 through 2016 was 17.4%. that is receipts relative to the size of the economy shown in the budget largely fall in line with the long run historical norm. i take that as an indication that the tax reform legislation in light of the ten-year expected revenue stream for the federal government of as much as $45.5 trillion can hardly be thought of as a fiscal action that in any sense guts the federal tax take as a share of the economy.

i wonder if you agree with my assessment there. i do agree, mr. chairman. ok. mr. secretary, i'd like to thank you and your staff for the hard work you put into ensuring that we deliver tax relief to middle-class americans throughout the country. and that will benefit workers and make american businesses more competitive and productive. of course as we move forward, it will be important that the tax law is properly implemented and that implementation is consistent with congressional intent. i appreciate how your department has worked productively with members of congress and their staffs.

will you commit to continuing to work with congress to ensure that our intent in writing the tax law is realized as the law is implemented? secretary mnuchin: yes, i will. we've already started those conversations on certain areas, as you've pointed out in your opening remarks, and we look forward to working with you. sen. hatch: ok. from what i understand, in coming months, the european commission and oecd may advance suggestions about how to tax a so-called digital economy. despite past conclusions by both bodies that it is impossible to distinguish the digital economy from the broader economy, it seems as though they are contemplating measures directed specifically at digital goods and services. along with what some of us see as an aggressive posturing targeting companies. mr. secretary, will you commit to engaging forcefully in american efforts to ensure that nondiscriminatory policies are advanced in this area? secretary mnuchin: yes, i will,

mr. chairman. i had already begun discussions with my foreign counterparts on these issues and making sure that we fairly represent u.s. companies from being unfairly targeted. sen. hatch: thank you. mr. secretary, this administration as well as the prior administration has engaged with the european commission and member states to express concerns about targeting by the european commission of u.s. firms through state aid investigations of the tax administration practices of eu member states. now that we have reformed our tax code to tax the historical deferred earnings of u.s. multinationals, that are the subject of existing state aid cases as well as prospective earnings by ending deferral and taxing intentional income on a current basis, the u.s. has addressed the so-called stateless income issue that was purportedly driving the state aid cases. however, it is not clear that

the european commission acknowledges this fact. the commission is continuing to pursue existing cases and is threatening to launch new investigations in an attempt to encroach on the u.s. tax base under the guise of state aid. at the same time and somewhat ironically, some eu member states have expressed their concerns with certain anti-base erosion measures included in u.s. tax reform and are threatening legal challenges. now mr. secretary, i understand that treasury plans to engage with european officials regarding their concerns with u.s. tax reform. do you agree that treasury needs to ensure that u.s. concerns with eu state aid cases are appropriately addressed? secretary mnuchin: yes, mr. chairman. we're also in discussions on both those issues and look forward to working with you on

that. sen. hatch: thank you. i have more questions, but i'll send them in writing. i've run out of my time. we'll turn it to senator wyden. sen. wyden: thank you very much. mr. secretary, let me start with the question of the stock buyback. since republicans jammed this massive corporate tax cut through congress, major corporations have spent over $120 billion on stock buybacks. this is a problem for the middle class. members of this committee promised that middle-class paychecks would be bulging early in 2018. instead, the ceos are funneling the tax windfall into buybacks that inflate the value of stocks held by affluent executives and wealthy shareholders. meanwhile, recent public announcements by companies have found that the employee pay booth touted by the republicans add up to $5 billion, give or take. $5 billion. that means ceos have spent 20 times more on corporate buybacks than on boosting their employees' compensation.

isn't it correct following this massive corporate tax cut that ceos have spent tens of billions of dollars more on corporate buybacks than on compensation boosts for their employees? mr. senator, i don't believe that's the fair comparison. mr. secretary, those are the facts. we got that information from public announcements, from companies, from sec filings. so tell me how those facts -- secretary mnuchin: again, i was going to explain. i'm not doubting your facts. what i said is i don't think it's a fair comparison. the, there are over four million americans that have received a one-time bonus, ok, as a result of this.

we expect, and as the cea has reported, that wages will increase, and we expect that over the course of this year. that we will see close to several thousand dollars of wage increases. we would not have expected that all to occur in first month. sen. wyden: so we were told on the floor of the senate last december that early this year we would see workers have bulging paychecks. you have just admitted that it hasn't happened yet. but you continue to believe that it might happen in the future. now the administration claims its tax plan, as i've just indicated, would focus on working americans. if you care so much about delivering tax cuts to the middle class, why was it necessary to include in the tax bill a lower top rate for those with incomes over $500,000, or expanded estate tax relief for those with estates worth more than $5.5 million?

neither of those things help the middle class. in fact, you actually conceded last fall that the estate tax change disproportionately helps the affluent. last year during your confirmation hearing, you specifically identified a carrying interest as a loophole the tax bill would close. initially, claimed to solve the problem, but that didn't fool anybody. since then, you've admitted carried interest was not addressed. tell me why these policies, the top rate being lowered for those with incomes over $500,000, expanding tax relief for estates, for people worth more than $5.5 million, and not fixing the carried interest loophole which was pledged repeatedly, how in some way does that help the middle class?

secretary mnuchin: ok. thank you, i'm happy to explain that. as a followup to your previous comment, we do expect, again, millions of americans have seen the effects of this already. we expect with the withholding tax changes in february people will see the tax cuts. sen. wyden: i won't let the record be distorted that way. as of now, ceos have spent 20 times more on corporate buybacks than on boosting employees' compensation. i'll be happy to share with you the information that we've gotten from public reports and sec filings. please proceed. secretary mnuchin: thank you, and i'm not debating your fact on that. in regards to your specific comments, let me see if i can

address them. the original proposal had a full elimination of the estate taxes that was something that the president did support working with congress? we did scale that back to raising the personal exemption. we thought that was important for people to be able to pass on businesses to businesses without unfair double taxation. in regards to the carried interest, it was the president's desire to get rid of carried interest, we worked with congress and came up with a solution to increase the holding period to three years. that was something we did in working with congress. the reduction of the top rate was intended to help many parts of the country which account for a big part of the gdp, particularly new york, new jersey, connecticut, illinois, where we were eliminating the full deduction of state and local taxes, and in essence wanted to offset some of what was the tax increase in those states by a drop of the top rate. i'm going to close this round on your so-called compromise on

-- : i'm going to close this round on your so-called compromise on carried interest, and let me read you a headline in bloomberg this morning. they say, and i quote, new hedge fund tax dodge triggers wild rush back into delaware. that's what they think of the so-called tax loophole. they outline in this article the glorious fix that you have described is going to be so helpful. we already have hedge fund managers, according to bloomberg, showing up with ideas for an even bigger loophole for the fortunate few. mr. chairman, i would just ask that this bloomberg article which shows what a farce the so-called carried interest fix actually is. i'd ask unanimous consent that be written in the record. sen. hatch: without objection. sen. wyden: thank you. : mr. chairman,in

if i could just respond to that last comment. sen. hatch: sure. mnuchin: i've already met with the irs and our office of tax policy this morning. as a result of that article, the irs and tax policy intends to send out in the next two weeks guidance that we do believe that taxpayers will not be able to get that loophole by going through subchapter s, and that's something we believe we have the authority to do under the existing code that left to certain discretion to me as secretary and the irs. so thank you for bringing that up. we will have that resolved. sen. wyden: we have heard again and again about how there would be fixes to these various problems, and we continue to see that the pass-through loophole which we were told again and again would be fixed still is an ongoing problem. we've got all kind of financial experts talking about how it can be gamed. so i would say, colleagues, that when we hear there's a serious problem outlined in a credible publication like i just cited and the secretary says he's going to fix it, sometimes it reminds me of the marquee at the old movie house that fixes are

supposed to show up and never get there. thank you. secretary mnuchin: again, if you don't mind, i want to clarify my comment. it's not a fix. we believe that the interptation of the existing, interpretation of the existing law that people are not allowed to do that, and we'll be putting guidance out. that's different than, mr. chairman, whereas you said there are issues that we need to work with congress to fix, but thank you. sen. hatch: thank you. senator crapo? sen. crapo: senator hatch, i'm going to yield one minute of my time to senator grassley. sen. grassley: i take this time, mr. chairman, to thank you for bringing up in your opening remarks the unintended consequences of the tax law language about 199a and the necessity for correcting it. and working with us to do what, i know you know what the problem is, i know you've been working on it for a long time. it's pretty simple that congress would not pass a law that would

put some segments of our economy out of business, and that's why it needs to be changed. and i happen to sell and buy from a couple cooperatives in iowa, so i'm not, but the status quo should be all anybody ought to be expecting, and this should have been taken care of in january. thank you. sen. hatch: thank you, senator. senator crapo? sen. crapo: thank you. secretary mnuchin, i only have a few minutes here. some allegations have been made or statements have been made even this morning that the tax legislation that we passed will not achieve the revenue targets that we have discussed. i want to clarify a couple of factors. first of all, it's correct, isn't it, that the congressional budget office issued its analysis that if we do nothing, we could expect about 2% growth

for the next ten years under current law? secretary mnuchin: that is correct. sen. crapo: and my understanding is that, and that's an anemic rate of growth in my opinion. what's the historic average? secretary mnuchin: again, it's closer to 3%. sen. crapo: that's what i thought. and what you're projecting is that since we did take action and pass some historic and, i think, powerful tax reform, that you expect through your analysis that we could achieve that or get close to that 3% rate of growth? secretary mnuchin: that's correct. sen. crapo: this is the last bit of information that i understand. i want to confirm with you that in order to make the tax bill revenue neutral, we need to get to about 2.3% or 2.4%. is that correct? secretary mnuchin: that's correct. it's about 35 basis points of additional growth. sen. crapo: we should see, if your projections are correct about approaching 3% growth, not only a revenue-neutral tax bill,

but one that does exactly what was intended, generating surplus? secretary mnuchin: that's correct. i stand by my previous comments on this. sen. crapo: let me switch quickly. i have 2.5 minutes. another topic that you've been approached about today in the hearing. that is what the impact of the corporate tax rate reductions is on workers, salaries, and so forth. during the deliberations over the tax bill, i had the opportunity to ask don batterrthold the corporate rate of the reductions. he said his analysis was that approximately a quarter of the benefit of corporate tax rate cuts go to workers in the form of wages and benefits and increased job opportunities as opposed to owners. and i want to get to owners in a second. is that roughly correct in your analysis? secretary mnuchin: no. in our analysis, many, many economists believe that over 70% will go to workers. so the, the joint tax is more conservative than us in the -- in that analysis. sen. crapo: that's my

understanding. that's a conservative range that you've described there. some i think almost everybody agrees it's at least 25. and many believe it's up as high as 70%. secretary mnuchin: that's right. sen. crapo: with regard to the owners, it's also, as i understand it, understood and analyzed, mr. barthold indicated up to 75% of the corporate tax cut goes to corporate ownership, but that an increasing portion of that ownership is held by pension funds, defined contribution plans, and other retirement funds, not to mention just the stock ownership that members of the middle class now increasingly are owning in their own investments. what are your thoughts on that allocation that mr. barthold discussed? secretary mnuchin: i agree with that. again, there's significant ownership. the capital, even if there are share buybacks and other things, capital is recycled back into the economy. it just doesn't sit in banks. it goes back into the economy. sen. crapo: you just anticipated my next point. i will ask you to close with this in my last 30 seconds. the stock buybacks have been

referenced here as though they were a terrible thing and just benefited really rich people. what is the impact of a stock buyback? secretary mnuchin: stock buybacks or dividends which are really the same, they're just different ways of returning capital to shareholders when a company determines they don't have the use for that capital to make an appropriate return, it's returned to the owners who then deploy it in other business back in the economy. so it, it is a healthy thing, as well. sen. crapo: thank you. and i guess just to reiterate a last point, there are many, many people, millions and millions and millions of people in america who are in the middle class as we describe it who own stock, whether it's in their pension fund, their retirement plan, or their own individual investments. is that not also correct? secretary mnuchin: that is correct. and we're doing whatever we can to encourage that number to go up. sen. crapo: thank you very much. sen. hatch: thank you, senator. senator portman?

sen. portman: thank you, mr. chairman. and secretary, thank you for being here again to talk about this tax reform legislation that has had incredibly beneficial impact impact, frankly exceeded expectations, i think it's fair to say. we appreciate you working with us on it. and so many of the aspects of this tax reform bill, as you know, had been bipartisan previously including the changes on the international side that create enormous opportunities for growth. we had a system, of course, where jobs and investment were incentivized to go overseas which is crazy, made no sense. now we see announcements of companies coming back to the united states for their production. we see companies that are repatriateing some of the $2 trillion or $3 trillion parked overseas back to this country to invest, and so i think this is something that, you know, we talked about a lot in a nonpartisan setting prior to the tax bill coming up, and then it became more partisan as it came to the floor. we have to remember that this tax code that previously was in place made no sense for ohio workers and american workers. there are two things we focused on.

one was providing direct relief to american families, and that's through the tax relief, including the middle-class families in ohio who are now benefiting. the second was on the business side. and on the individual side, as americans look at their paychecks even this friday, many are going to see that their withholding has changed. they are not seeing as much money going to uncle sam, more money in their pockets. can you tell us what%age of -- can you tell is what percentage of american workers are likely to see their withholding changed in a way that helps them? in other words, that less is coming out of their paycheck every couple of weeks or every month? secretary mnuchin: we anticipate it will be about 90% of americans --

sen. portman: 90%? secretary mnuchin: yes. sen. portman: 90%? i want to thank you and the irs for moving quickly with regard to the withholding tables so that employers can begin immediately to do that. my sense is it's already happening because i'm hearing from my constituents this morning. i had a coffee, i heard constituents on it, had a lot of calls and emails in the last week. john in fairfield, ohio, says he received an additional $51 in his paycheck. he was surprised because he was told by some people that there was going to be no relief for him, and there is. carl from selineville called in. he's pleased to see $60 every other week coming in. earlier this month, another ohio an called to say when he opened his first check since the law took effect, he was pleased to see an additional $300. he said those $300 are going to be used to help cover the car payments for his two daughters. so it's happening. when do you expect that all that 90% of american workers will see it in their paychecks? tell happen by the end of this month, will it happen by the end of this month? secretary mnuchin: yes, we believe that's the case. sen. portman: you've told the irs to send the tables out and told employers they have to make the changes in the next few weeks, is that accurate? secretary mnuchin: that is

accurate. we're pleased with the work that the irs is doing on already implementing the act. sen. portman: and additional tax cuts going directly to families because the changes on the business side, the international side, i talked about some of the pro-growth elements. we're seeing companies taking the savings and investing them back into the plant and equipment and making companies more productive. the economists i talked to say that productivity in the economy is one of the reason we've had anemic growth. we had such low growth not just the past several years but the past decade and a half with no real increase in wages. now we're seeing that for the first time. more than 350 companies have now made decisions to invest in equipment buildings and employees. over four million americans are receiving tax reform bonuses, raises, or increases to their benefits. that's amazing. and let me ask, had you expected to have that much good news about the effects of the tax bill this soon? secretary mnuchin: no, we were pleasantly surprised by those announcements. sen. portman: let me ask you about some of the smaller business elements here.

yes, walmart is paying people more. they're raising their image, entry level. walmart is the biggest employer in the state of ohio and probably most states represented around this dais. that's important. jpmorgan is adding 400 new branches and adding 4,000 new jobs. they're our third biggest employer in ohio. apple's paying $38 billion to repatriate its overseas earnings. hundreds of billions of dollars coming back here. $30 billion in capital expenditures right now in america. they say related to the tax bill. so a lot of great news from larger businesses. but how about the smaller businesses, what are you hearing? i've been to four in ohio, all of whom are investing in their people, investing in their technology and modernization of their plants to make their workers more productive. what are you hearing from smaller businesses? secretary mnuchin: we're hearing the good news, as well, from small business owners that we've either listened to or visited. we're getting the same response about how they can invest in the business and pass on the wages. sen. portman: the small business optimism said to be at record levels.

related directly to the tax legislation. i do have some questions for the record for you on the production tax credit for refined coal facilities, also something on the international side. won't surprise you. want to make sure the cfc net earnings calculation is done properly. i'll submit those to the record. i thank you for being here. and again, congratulations in helping us put together a tax bill that's helping the people i represent. secretary mnuchin: thank you very much. sen. hatch: senator, your time is up. senator cardin? sen. cardin: thank you, mr. chairman. secretary mnuchin, always a pleasure to have you before the committee. senator manchin: thank you. sen. cardin: i want to cover

quickly an issue i mentioned before you walked in. that is your responsibility on implementing the sanctions law that was passed by the congress by 99% of the members, over 99%. this past week, our intelligence committees held their annual briefing, and it was i believe the unanimous view of our intelligence agencies that russia has not only continued its attacks on our country, but that they are even accelerating it. and expected to be active in the 2018 elections. it was for that reason that we passed the sanction laws, to make it clear to russia that we'll take action against them if they continue this type of conduct, mr. putin continuing it. he clearly has. these sanctions are mandatory sanctions, not discretionary. there are various categories. let me just mention one dealing with the intelligence and defense sector. that if there's a significant transaction involving russia, mandatory sanctions need to be imposed. now i want to first start with a compliment. the global mcm initsky law was done under the trump administration, i believe the right way. including treasury department's assessments on implementation of the sanctions. it's just hard to understand how no sanctions have been imposed

under this bill passed by congress, and it sends a clear message to mr. putin that he can continue his activities without fear. can you explain to us how you intend to implement this law passed by congress including the mandatory sanctions? sure.ary mnuchin: senator, thank you very much for that question because i do think it's a very important issue. so first of all, we very much support the legislation, and we are fully committed to follow through on it. on the section you mentioned, the intelligence and defense sector, that area has been delegated to the secretary of state and the state department. so i can't comment on that, but what i will comment is on the other part of the law, the part we're responsible for, the oligarchs and government leaders. as i've mentioned previously in my testimony, we did deliver the report which was phase one. part of it is classified. part of it is unclassified,

sen. cardin: the unclassified part is basically a cut and paste from the forbes list which to me sends a signal to russia that we are not going to take public action against his corrupt regime and the use of oligarchs. secretary mnuchin: senator, that's not the case. and i can assure you that, again, i met this morning with my internal group and the intelligence people. we are actively working on russia's sanctions coming out of the classified briefing. and i look forward to them, i'm going to be meeting with the banking committee on giving them a classified briefing and would be happy to meet with you, as well. sen. cardin: i'll take you up on that. i wanted there have been some, i understand there have been some conversations, this is the beginning of the process, i make the observation you got off to a bad start with no sanctions being imposed. i want to cover the cdfi that your budget eliminates, the program that helps community and

minority banks in our community. it administered the new market tax credits. i understand the budget continues the new market tax credits and the administration of the new market tax credits. my concern is that distressed communities, the stakeholders there, it's difficult for them to feel confidence that their -- feel confident that their institutions will be maintained. yes, we want to build distressed communities, but we also want to build the institutions within distressed communities. how can you assure the institutions that work within distressed communities that with the elimination of the cdfi that there still will be a focus by the trump administration on strengthening these communities? secretary mnuchin: well, i can assure you that there will, and we are in the process of awarding the current cdfi grants. i think they have been helpful. this was a difficult decision in the context of overall spending and having to make difficult

decisions. we look forward to continuing to work with you on these issues. sen. cardin: i appreciate that, and you're right. these grants went directly to institutions within distressed communities. we're losing our community banks, let alone minority banks that are particularly important for strengthening distressed areas. so i'll take you up on your offer as to how we can find ways to strengthen the minority opportunities within distressed communities to participate with us including the new market tax credits. secretary mnuchin: thank you. i look forward to working with you on that. sen. cardin: thank you. >> i want to follow up on the sanctions stuff because i can't stress how important it is. it is a really big deal here when we get a vote of 517-5. that is unprecedented in these times to get that kind of vote.

that was the vote on the sanctions bill. and yesterday, director coats, who was selected by the president and director pompeo both indicated that russia sees their meddling in our election in 2016 as successful, and are confident they will be repeating their efforts in 2018. has the president of the united states asked you to impose sanctions on russia? senator maneesh and -- secretary mnuchin: again, first of all, i have a lot of confidence in director coats and pompeo in their work. that work has been incorporated into our report -- sen. mccaskill: that's not my question. has the president asked you to impose sanctions on russia? secretary mnuchin: he didn't have to ask me because i've updated the president. sen. mccaskill: i don't care

whether he didn't have to ask you. i want if he asked you. i want if, i've never heard the president of the united states say a bad word about russia. secretary the nation: -- secretary mnuchin: that's not the case. sen. mccaskill: well, i need to see quotes. i've never seen it he always avoids, this is, sen. hatch: let him answer the question. sen. mccaskill: i will, mr. president, mr. chairman, but he's not answering the question. i want if the president asked him. secretary mnuchin: again, what i'm happy to tell you is that i have told the president, i updated him on the report, i told him we would be doing sanctions against russia, and he was pleefd toased to hear that. sen. mccaskill: ok. has he, have you recommended to him that he publicly explain to the american people that he wants sanctions imposed on russia? secretary mnuchin: i have not

made that recommendationreco recommendation to him. i've publicly said that, but i'm happy to pass on your message to him. sen. mccaskill: do you think that the people of this country and, frankly, government of russia, it would be helpful if they heard from the president of the united states that he believes sanctions are appropriate when a country tries to break the backbone of democracies all over the world? secretary mnuchin: again, the president has delegated to me the responsibility for sanctions. i represent the administration, and i've been very clear there will be sanctions on russia. i don't think i can be more clear on that and that work underway as a result of the report. sen. mccaskill: the election says are coming, fast approach, elections are coming, fast approaching. so far there have been zero consequences, zero. secretary mnuchin: again. i think there were many sanctions issued last year. we're happy to update you and, again, give a classified update of the work in the report which we're proud of what the intelligence committees have done. sen. mccaskill: well, i, if there have been sanctions, they certainly have not been heralded by this administration. they certainly have not been effective because it is very clear that russia according to your intelligence community is actually engaged in doing the exact same thing again. the release the memo, it was very clear that the entire

twitter traffic on release the memo were russian bots. and not a people from this administration or from you condemning that. not one word. and that's what's so hard. the vote was 517-5. we all agree here, the chairman agrees, he vote for it. all my republican colleagues with the exception, i think, of two, voted for it. and i just want to make sure you don't leave here without understand that it is a real head-scratcher. the silence from the oval office about the conduct of russia in attacking our democracy. and i, i hope that there is a new day and that maybe tomorrow the president will step forward and say, enough, russia, we're coming after you. this is warfare. you don't attack our democracy and not pay serious consequences. -- etary mnuchin: sen. mccaskill: i want to talk about the tax plan also.

i'm worried about the carried interest being left in there, but i'm worried about the new loopholes, and the los angeles times headline, gop tax plan creates win of the largest loopholes in decades, that was the headline december 31st. bloomberg just recently, here's the trump tax loophole your accountant can blow wide open. this is all about pass-throughs. and the complicated scenario that we have laid forth on pass-throughs. are you all prepared to lay out strict guidelines because clearly all of the accountant world, it's embarrassing how generous this tax bill was to families like mine and years. -- mine and yours. it's embarrassing. pastors, --l these pass-throughs, the vast majority goes to the 1% most wealthy people in this country. and the accountants are having a heyday with the loophole. how quickly is we expect written guidance on how we can make sure this is not a loophole that will

allow the wealthy to avoid even more taxes going forward? secretary mnuchin: i can assure you that the tax department and treasury have over 100 people and the irs is full-time focused on this. and i assure you we will be putting out guidance and regulations to make sure that people can't booze the pass-throughs, that the intent here was to create incentives so that businesses got those but not for it to be abused. and i can assure you we're working on that, and we'll be doing that shortly. sen. hatch: your time is up. sen. mccaskill: thank you. sen. hatch: thank you. senator whitehouse? sen. whitehouse: mr. mnuchin, this is, i'm new to this committee, so let me start with some simple questions questions. the first is what's what your feeling is about the present level of income inequality in the united states. >> again, the president, i, my

number-one focus is economic growth, and i think if we have proper economic growth that that will shrink the income inequality. the ratio of ceo to average worker pay has gone from 18 to 1 to 270 to 1 in the last 50 years. the top 1% of income earners take 24% of all income out of the economy every year according to the federal reserve. and the top 25 hedge fund managers made more in the last year we have information for, this is 2014, than all 158,000 kindergarten teachers, according to the washington post. you think we'll grow our way out of that? >> yes, i do. >> ok. do you think that the tax code should be progressive in the sense that it demands a higher

contribution as a percentage of income from high income earners than low income earners? >> i think it is quite progressive. many thing we did in the tax cuts act like eliminating the state and local deductions actually made it more progressive. >> so it should be progressive. i'm glad we agree on that. the last report we had from the irs was from 2014. they looked at the top 400 taxpayers aggregated, their income and their tax payments, and calculated that they paid an average federal tax rate of 23%. a lower tax rate for the top 400 taxpayers than a lot of plumbers pay. a lot of teachers pay. one thing that bothers me is that the irs has stopped reporting that information. you are in the position as secretary of the treasury to instruct the irs to start reporting that information again. i don't know what you think, but

i think it's important for americans to get a sense of how things are going in their democracy, to have a fair report of how much the highest income earners are actually paying in taxes. i don't know why that's something that we would want to not disclose. i'm not going to put you on the spot right here, but i will ask you in a question for the record if you will tell the irs to go back to reporting the aggregated tax information for the top 400 taxpayers. so i don't want to put you, i don't want to put you. >> i'm happy to answer the question which is i'm not aware of the report, but i'm happy to go back and speak to the irs and understand why they were comfortable in the past and why they're no longer doing it. obviously there's a sensitivity to any specific taxpayer information, so whether that's a small enough sample, >> i'm happy to get back to you on that.

>> i appreciate it. the other issue i want to talk with you about is as treasury secretary, you oversee finsen, and one of the problems that hearing very loudly in the judiciary committee, senator grassley and i have bipartisan legislation on this, is that the united states is becoming the haven for international kleptocrats and criminals because our shell corporation, or transparency controls are so bad. as the eu and uk is cleaning occupy this, the united states is, cleaning up on this, the suds becoming the laggards with that drug cartels, human traffickers, and other criminal enterprises can hide assets and launder money here in the united states. your deputy assistant secretary at the office of terrorist financing and financial crimes told the judiciary committee that this lack of information, this prevalence of american shell corporations was what she called a vulnerability. and a former treasury special agent and finsen agent testified, requiring the real

owner of a u.s. company to be named during the incorporation trial will cut down in dramatic fashion the ability of criminals to finance their crimes. i would like to ask you to work with us, with senator grassley and myself, in trying to improve incorporation transparency in the united states. i think that when ronald reagan said we were on a city on a hill, echoing john winthrop, he said that for a reason. i don't think we look much like a city on a hill when we become the the haven for crooked gains, become the haven for crooked gains and crepto crats. >> i agree, we need a way of tracking beneficial ownership. we look forward to working with congress. we need to solve this issue. and it's something i look forward to working with you on. >> for the record, mr. chairman, i know my time has expired, but the problem is that even with a warrant, even with a subpoena,

you can't get this information because it's been so well hidden. the traditional tools of law enforcement fail up against this problem of the shell corporations. i thank you, mr. mnuchin. >> senator isaacson, i think you are next. >> thank you very much, mr. chairman. i, secretary mnuchin, i, i like you, and i think most everybody has been somewhat amazed with the results of the tax act and jobs act. i thought it would do a lot of good things. it appears you've done even more. it does bear out the old saying that tax policy drives economic decisions. i think the policy of this administration and the policy that we passed is showing a reinvestment in america. american corporations. but also the people, excuse me, through stock donations,

increases in pay, a reinvestment in businesses. we'll get a reward because businesses are going to grow. the regulatory relief that's taken place under this administration combined with the tax changes that have incentivized investment and business, have done a lot for the economy and built the consumer confidence level which is critical to our economic prosperity as a company. i want to commend you. thank you for what you're doing with that, thank you for the job that you're doing. i also want to say that it is easy for any of us to demonize the upper 1% of anything. the top of anything, performance-wise, whether income or anything else, but they invested quite a bit that they wouldn't invested otherwise. i live in a city, atlanta, led by coca coral, a syrupy soft drink, developed in 1906 and has funded research and advancement for years, those are moneys by the secretary and upper 1% that have made the city better.

home depot started in atlanta, georgia. two hardware store guys had an idea about how to change selling hardware and change revolutionized the business. arthur blank and bernie marcus. they did so. so there are a lot of actors out there who have done things that would be less than admirable, but there are a lot of people at the top 1% who have done things that are unimaginable and wouldn't have been possible before. i wanted to say that first and foremost. i want to take the liberty of taking your time to talk about something that's not under your auspices and responsibility, but part of the budget. it's a part of our country's infrastructure. it needs to be addressed in the president's budget this year. that's the port of savannah. port of savannah is the most profitable port on the east coast of the united states as a net export port. it is a port where 19 years ago we authorized its expansion to 47 feet, to depth of 47 feet. have over the course of time of reauthorized it, and three years ago approved it. and my state put $285 million in that project at the request of the united states government

which they, the united states government promised it would follow with investment in the corps of engineers to complete the $600,000 expansion of the port. so the panamanian ships of the 21st century going through the panama canal can come to the most profitable export port in the united states, the port of savannah. the current budget falls short, and the president recommends $49 million for the federal share of finishing that project. that, unfortunately, is just enough to get us to go back to redredge the settlement we've taken out, but not enough to expand the port. i'm going to be talking every time i get the chance to encourage the administration to look at the port of savannah and the harbor project that's been for 19 years authorized by this congress, has been underway for the last three in the state of georgia, with some federal money and mostly state money. the, it's time for the feds to deliver on their part of the reinvestment. i'm going to do everything i can to fight to see that we get it done. if we don't, we're going to lose jobs, and we're going to lose opportunity. that port generates 300,000 jobs in the southeastern united states and billions of dollars in income to the companies and individuals of the united

states. we've got to see that it finishes expansion or we'll get past by as a country for the ships going through the panama canal, and that business will go somewhere else, we don't want that to happen. you don't have to respond except to say you'll keep the port in mind. >> i will keep it in mind. >> it's good for america and good for the guy that collects his taxes, and it's good for the treasury of the united states of america. thank you very much. thank you, mr. chairman. >> thank you, senator. secretary mnuchin, a comment or request. then a question. first i'll add to the comments on the tax cut and jobs act. louisiana-based companies like builder supply company in shreveport, a bank in lafayette, gulf coast bank in new orleans, as well as big box stores like home depot, walmart, best buy, they're giving better, bonuses, better wages, better benefits, all benefiting on the long-term capital investment, exxonmobil

with a major presence in louisiana announced $35 billion in capex investment. that's going to increase competition for workers driving up their wages. that is the way to reduce income inequality. the tax cut and jobs act bill has been good for our state, and thank you for your role in it. i'm proud to have participated. now a request, if you will. now a request, if you will. one of the provisions in the tax bill was to provide fair treatment for taxpayers in a loss position upon deemed repatriation under section 965. the intent's clear. free repatriation losses are ring fenced. but a potential question has as regards 2017. we want to address that and make sure that we can address that. >> we look forward to working with you.

thank you. >> let me now go to something that the white house raised. the fence-in, the financial crimes enforcement next work, network. you'll have a strategic plan for 2018 through 2022 to modernize the system, the analytical capabilities, to better collect, assess, disseminate, and act upon financial data and intelligence. in my office, we're looking at how the drug cartels transfer $110 billion per year from the united states down into mexico. best we can tell, treasury's getting about $7 billion of it. we know it's going through bulk cash, trade-based money laundering, it's going through people buying cards that have $10,000 on them and are bringing down another form of bulk cash, if you will. we're not sure, though, that the interdepartmental cooperation is very good. it's been difficult to find out. but it seems like we have one department doing this, another that, another this.

but the departments are not doing it in concert. clearly it's important, and it's way to get to the cartels. frankly, i would like to use the money to build the wall. wouldn't be the mexican government, it would be the cartels. you take out their ability to finance their crime mission. any comments on the effectiveness of our different departments working together? >> from my experience, senator, i actually think the department's are working very well together. on this specific issue, we look forward to following up with you. it is an important issue. we want to do everything we can to get the money from the cartels. >> now it seems, though, just, prima fascia if you will, you've got $110 billion reportedly moving south, and treasury's getting $7 billion of it. that seems to be a big gap. so we would like to continue to work with you on this. $7 billion is just, you know,

what you might lose in the back of your couch if you're worth $110 billion per year. we need to grab that. we also wanted that fence-in and its anti-money launder mission uses money pried by the private sector financial institutions. again, this may relate to what sheldon was speaking about. is there a process for verifying information contained in suspicious transaction reports? >> they do. they use it to follow up on the institutions. one of the problems as has been pointed out is the issue of beneficial ownership. we have a flaw in our process of how to track beneficial ownership and whether we do it at the state level or federal government level, that's something we need to solve. >> will that require a statute, or can you do it by regulation to address the issue of the lack of clarity regarding beneficial ownership? >> it, it's unclear. it depends on what the solution is and which way we go. this is something we want to

work with congress and make sure that we're enacting it the right way. >> ok. i'm almost out of time. i yield back. >> senator, >> thank you, mr. chairman. mr. secretary, welcome. glad you're in front of the committee. i have some short comments and one pretty simple question. you and i have talked about the banking committee, there's been a quiet crisis brewing. millions of retired workers are at risk of losing the pension plans they spent an entire career putting money into. at the bargaining table, workers will give up wages today in order to have retirement security in the future. 60,000 ohioans, 1.5 million workers and retirees across the country could see drastic cuts to the pensions that they've been earned and have been promised. it doesn't just affect retirees. it's current workers, small businesses. this week i met with a group of businesses from ohio about a

dozen of them that have done the right things for their workers. they've enrolled them in central states. they're scared to death about the liability and what happens to their workers. what's the thanks that these businesses got? wall street squandered the money, the businesses face bankruptcy if it fails. we know what will happen to the pension guarantee corporation if we don't act. the family-owned businesses that have been passed on for three and sometimes four generations are at risk. and that's not how their story should end. it's not partisan on this committee alone. senator portman's been interested, senator stabenow's been interested, senator robert, nelson, senator scott, casey next to me, senator thune, senator mccaskill, down the table, and the chair and the ranking member all have care good this issue. it affects lots of, most of these states, it affects thousands of workers. i addressed it with my democratic colleagues, the bills.

we need both sides to bring it to the table. that's why the select committee on pension reform is now law and why it's so important. the committee will force congress to finally treat the pension crisis with the seriousness and urgency american workers deserve. my question is this, the we sometimes disagree on things, but this is an area, i think we can agree something must be done. would you commit to this committee and ultimately to the congress and to this select committee, would you commit the treasury of the administration will provide technical support and expertise needed for the committee to succeed? >> yes, i will. it's an important issue and we look forward to working with you, and we are pleased to provide technical help and any policy work you need from us.

>> good. thank you, mr. secretary. thank you, mr. chairman. >> mr. chairman, thank you very much. mr. secretary, good to be with you. thank you. i wanted to start with a matter that arose in the debate around the tax bill. and i think part of the story was missed in the coverage and missed in the debate, and that's what happened with regard to the child tax credit. there was a lot of publicity and attention paid to the debate about the tax credit, and i'm afraid that the, the real story was missed because according to one source, this would be the center on budget and policy priorities, the increase, the new part of the tax credit in a sense, the increase in the child tax credit in the bill, when you

compare it to current law, here's what it resulted in, a single mother, with two children, earning 14,500, her increase would be 75 bucks total. but a married couple with two children, earning $400,000, that family would benefit from the child tax credit $4,000 in the year. about 333 bucks per month. so 75 bucks for the single mom of an increase, an increase of 4,000 for the family with income over 400,000 bucks. and this isn't your responsibility to publicize a

provision in the tax bill, but i wanted to ask you about that. how do you feel about, what's your view of that policy? and when you consider, not just nour job as treasury secretary, but the administration's job with regard to helping families, what do you think the purpose of that tax credit is? >> well, again, i think the purpose of the tax credit was to get relief to middle income families. i'm not familiar with the specific example you've outlined at 14,500. i can tell you, i am familiar with the median numbers and we've looked at lots of examples, but we're happy to follow-up. i assume your number is correct, but obviously this impacts different taxpayers differently, but the intent was for the median family, it did deliver significant middle class relief. >> i would argue that we had an opportunity to have a transformative child tax credit and it didn't happen. but let me move on. the other issue i wanted to raise with you was wages of

there were a lot of assertions made that a cut in the corporate rate would lead to a wage increase. bloomberg intelligence estimates currently are that corporations will ultimately devote $875 billion to buying back stock. so far this year, corporations have authorized 20 times more on stock buybacks than they've spent on increasing wages. last may, you told the committee that over 70% of the cost of corporate taxes are actually born by the worker, unquote. if companies aren't keeping to that and are giving a majority to dividends and buybacks, do you think we should have a mechanism in place to make sure employees see the gains from this tax cut? >> i commented on this earlier, the similar question. and again, we do stand behind

what we do believe. and there are many economists that support this, that over 70%, on the low end, it's probably 30%. so we do stand behind that. we think we're going to see that. we think we're going to see wage increases and as i commented earlier, to the extent there are share buybacks, that's capital that's recycle bad being into the economy, back into the economy, it doesn't sit in banks. >> i would have preferred that we give it to the workers. my argument didn't prevail. mr. secretary, less than a minute left, but i wanted to ask you a question about russia's sanctions. we passed the countering america's adversaries where congress provided additional authorities to hold countries accountable for aggressive actions. are there currently budget constraints that prevent treasury from fully exercising the authorities granted under this legislation? and if not, are there other

constraints? >> there are not budget constraints, and i commented on this earlier. i apologize, you missed it. so i'll restate it, that we are actively working on those sanctions. you should expect them in the near future. phase one was creating the report. i'm happy to come talk to you in a classified setting about the report, but i assure you, those sanctions are coming. we're actively working on that as we speak. >> thank you, mr. secretary. >> thank you. senator menendez. >> thank you for being here. last week when you testified before the banking committee, i asked you about the irs's fundamentally flawed advisory released two days after christmas, which prohibited thousands of new jersey families from deducting their property taxes in 2017, despite rushing to pay them in the final days of last year. you responded that the rule was meant to prevent taxpayers from, and i quote, abusing the system. i have to say, i'm offended.

offended by that accusation. let's be clear, the people of new jersey work hard. they pay far more than our share of taxes. they punch way above their weight economically. we're just not a blue state, we're a blue chip state that drives innovation and dynamism. so we're not abusing the system. in our view, the system is abusing us. let me ask you another way. so prior to the passage of the trump corporate tax bill, was there any prohibition against deducting prepaid state income taxes or local property taxes in the year they were paid? >> first, let me comment, i didn't mean in any means to offend you. so i apologize if that's the case. the guidance that the irs put out is completely consistent with what has been -- >> i'm sorry to interrupt you. that's not what i asked you.

i asked you, was there any provision prior to the passage of the trump corporate tax bill, against deducting prepaid state income taxes or local property taxes? >> yes, there was. the irs interpretation did not change as a result of the bill. and i would just say, in certain cases, again, it's very fact-specific. in certain cases, again, if it has been assessed, people could pay their taxes this year, >> let me ask you this. if that's the case, that they were both prohibited based on your answer, why would section 1104.2 of the trump corporate tax bill prohibit the deduction of prepaid state income taxes? why would the bill disallow something that was already not allowed? it's illogical. >> on the real estate side, there was no change to current are law. and the irs felt it was important to put out guidance to give taxpayers information. >> well, is there anything in the trump corporate tax bill that prohibited the deduction of

prepaid property taxes? in the bill? >> i'm sorry. we are talking about prepaid property taxes. so our interpretation of the, -- >> i'm asking you, in the law, can you point to me a section in the law that specifically prohibits the deduction of prepaid property taxes? >> again, not in the bill. but in the irs actual code, yes. we'd be happy to follow-up with your office and i'll bring a team from the irs to go through this with you. >> prior law doesn't prohibit the deduction of prepaid property taxes. the trump corporate tax law doesn't prohibit the deduction of prepaid property taxes. therefore they should be deductible under the law. the law that we passed was silent on this issue specifically, but prohibitive about state income taxes. so it seems to me that clearly we should be allowed to permit the deduction of property taxes when they are paid. i just heard you in an answer a little while ago, talk about the estate tax, we want to avoid double taxation. that's exactly what's happening to places like new jersey and

other parts of the country that get hit with this tax bill that ultimately doesn't allow them the full deductibility that has existed for a long time. let me ask you another question. the administration has bragged about trickledown bonuses that only about 2% of american workers are receiving after the trump corporate tax bill. do corporations get to deduct these bonuses from their 2017 taxes even if they don't pay the bonuses in 2017? >> again, that's a very fact-specific question that i'm not prepared to answer. >> let me inform you that corporations can deduct the full amount of the bonuses in 2017, regardless of whether or not they actually made the payment. this is important because by deducting in 2017, corporations can, to use your words, mr. secretary, game the system. and claim an even larger deduction in 2017 without spending a time. but in contrast, a middle-class family that actually paid their property taxes in 2017 won't be

able to do deduct them in the year that they paid them, which to me is blatant hypocrisy, and would be shocking if it doesn't so neatly fit into the pattern of an administration that puts corporations above the people who live on main street. so i urge you to look at this again, because if it's good enough for corporations to be able to make a deduction in the year in which they didn't even pay it, then taxpayers should be able to make a deduction in the year in which they did pay it. and i urge you to relook at this issue, because it's just a question of fairness and justice. and if it's good enough for corporations, it's good enough for middle-class families. >> i just want to clarify one thing. in certain circumstances, the prepayment would be eligible. in certain circumstances, the prepayment wouldn't be eligible. so i just want to clarify that. ok? the guidance was strict interpretation of current law. >> senator bennet? >> thank you, mr. chairman.

thank you for holding this hearing. mr. mnuchin, it's nice to see you again. thank you for your service. this year, we're working on a farm bill. chairman roberts and ranking member stab and i were both members of this committee and are working hard to write the next farm bill. i notice that your budget cuts $260 billion from farm bill spending on top of a 15% cut in discretionary spending for usda. and i'm all for finding savings. in fact the ag committee, you may not know this, was the only committee that got bipartisan savings in the last budget process. the last farm bill was projected to save $23 billion. only committee that did its work. cbo now tells us that bipartisan work on behalf and fueled by our farmers and ranchers is now saving $100 billion. many of colorado's farmers and ranchers are struggling with low prices, facing persistent drought and are fighting hard every day to keep their operations moving. i'd like you to tell them about

the proposed cuts when they have already, unlike anybody else, actually did their work last time. how are these proposed cuts going to help them? >> well, again, i'm not the expert on the farm area, but it's an important part of the economy and i look forward to working with you on these issues. >> well, but could you elaborate on how the cuts are going to affect our farmers and ranchers, particularly at these commodity prices. >> again, there were difficult decisions made in the budget, and obviously as it relates to farmers, this is something that would have some impact, and again, look forward to following >> i know from at least my perspective, and i hope speaking both for republicans and democrats on the ag committee, it really adds insult to injury when we did our work last time to see, farmers and ranchers, especially in this commodity environment, getting whacked. and by the way, i don't think you have made hard choices.

giving $37 billion to 572,000 taxpayers that make more than a million dollars a year by borrowing that money from our kids is not a hard choice. and now you're having to backfill already, just a month later, mr. secretary. do you know what the deficit was when bill clinton left the presidency? >> i, i, i do. and because of the economic growth during that period of time, we saw revenues increase significantly. and since that period of time, the deficits have increased significantly. >> what was the deficit when bill clinton left the white >> we were actually during that period of time, paying down, >> we had a surplus, didn't we? >> that's correct. >> a $5 trillion surplus projected over a decade. >> don't know what it was over the decade. >> that's what it was, and we were holding hearings about what to do with the surplus.

do you know what the deficit was when president obama became >> i have the numbers with me. >> it was about $1.2 trillion. it became $1.5 trillion. and i saw jack lew who is here, your predecessor, and secretary geithner beaten to death by members of this committee over the deficit during the worst recession since the great depression. i have statement after statement after statement of republican colleagues who were unwilling to lift a finger to, when we had a 10% unemployment rate, beating those guys to death, as they sat here. and now, we pass $1.5 trillion tax cut, we borrowed all that money from our kids. last week, the president signed that spending bill like we've never seen before. and so the estimates now are that even in an economy where we're seeing tremendous growth, we're going to have a trillion dollar deficit next year and maybe as much as 2 trillion over ten years. how can you look yourself in the

mirror? >> well, again, let me just first say, i share your concerns over the deficit, and that's why i think it's important on a bipartisan basis we work on this. we've put together a budget that shrinks the deficit, but the president is concerned that the debt went from 10 to $20 trillion -- >> and we're on, that was when we had a recession, mr. secretary. that was when we had a recession. we will have a recession. we may have an armed conflict of some kind. and the idea that we're now spending the money instead of trying to figure out how to work in a bipartisan way, to do the work, and mr. secretary, the assumptions that underlie your budget save $675 billion by repealing the affordable care act. the majority leader has already told us we're not doing that. they attempted to repeal it over and over and over again. the majority leader says we're not doing that. that's $675 billion. you save $1.5 trillion by slashing non-defense

discretionary spending to a level we've not seen since president hoover. >> your time is expired. >> senator widen has a couple of questions and then we're going to wrap this up. >> i think senator mccaskill may have a couple of ones. >> you do? >> no, i don't. >> ok, senator widen. you'll be the last one. >> i want to talk about infrastructure for a moment, mr. secretary. state and local governments now are responsible for more than three-quarters of all government investment and infrastructure. despite that, the core of the trump infrastructure plan is for the states and localities to pony up even more money. in fact, administration officials were actually quoted over the weekend, talking about the need for local governments to increase property taxes and sales taxes.

this, of course, comes as senator menendez eloquently noted after the tax bill causes a dramatic curtailment of the state and local deduction known as the salt deduction. aside from raising taxes on many middle class families by subjecting them to double taxation, cutting back the salt deduction makes it more difficult for local governments to raise new revenues. so, i've got a yes or no question. and i think it's pretty direct. does the trump administration actually support local governments raising taxes two months after passing a law that ensures that those taxes are no longer deductible from their federal taxes? and this is a yes or no answer, mr. secretary. because of what your administration officials said last weekend. so you're either agreeing with them or not agreeing with them and have at it.

>> again, i realize you want a yes or no answer, but not every single state is the same. some states have very high taxes. like california and new york. so i surely would not encourage california and new york to raise their taxes. i would encourage them to lower their taxes. >> so it seems to me, you are definitely agreeing with the officials who were quoted last weekend that certainly in substantial parts of the country, your answer on infrastructure is the need for local governments to increase property taxes and sales taxes. i'll keep the record open, so you can amplify on that, but you basically said, hey, what the administration officials said last weekend was our view, with the possible exception of some states that we know have been very concerned. let me finish with one last question. as you know, i've repeatedly asked the treasury department to turn over to the committee its

records on russian, financial transactions in the country, and across the board, the department has refused. has refused to turn over to me as the ranking democrat, these records, many of which aren't even classified. so now, according to news reports, the fbi's investigating whether alexander tortion, a russian official with close ties to vladimir putin and the national rifle association, used russian-backed shell companies to funnel money to u.s. tax-exempt entities that spent millions of dollars backing the trump campaign in 2016. so, as you and i have talked about, i consider this oversight function absolutely key to the committee's work. earlier in the month, i wrote letters to both you and the nra, seeking more information about these alleged transactions, transactions that could involve shell companies, money

laundering and the like. now i just got a commitment from the nra to respond to my request. they said they will get us these documents. so i'd like to renew my request to you today, will you respond as the nra has, to my request for documents and do it promptly? >> senator, i am aware of your request. as you know, we have lots of resources that are promptly? cooperating with three bipartisan committees, as well as the special prosecutor. these are the same resources that we use for sanctions and national security and as we've talked about, our focus on russia's sanctions. we've been following through on previous administration information that we needed to follow up. so we look forward to working with you and the chairman. again, we have the request. >> mr. chairman, just very briefly and i'll be very brief. mr. secretary, you have not

responded to one single request, not one. and now, when i asked about something where the nra, to their credit, said they were going to get back promptly, you said, we'll see what happens. that is a textbook case of essentially telling the committee with lead jurisdiction over your agency that when it comes to oversight, and when it comes to reasonable requests, you're saying, not interested. i think that is very detrimental to the public interest and i hope you change your mind. thank you, mr. chairman. >> i don't think that was the interpretation of my comment. >> not one request has been honored. >> nor did i interpret it that way as well. look, this has been a particularly contentious day as far as i'm concerned. and you're in a tough position, there's no question about it. you're doing some very, very important work for this country. and i personally appreciate it. i want to thank you for being here today.

and i want to thank my colleagues for their questions and for their participation at today's hearings. now for any of my colleagues who have any written questions, i ask that you submit them by wednesday, february 21st, and with that, this hearing is adjourned. >> thank you.

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>> returns this month with a look

at 12 new supreme court cases. -- behind the significant supreme court decisions. beginning monday, but right 26. live at 9:00. do help you follow all 12 cases, we have companion guides written by veteran supreme court journalists. to get your copy, go to c-span.org/landmark cases. he called for real author pandemic and all hazards prepared against biological threats. after his remarks, the panel talked about defensive vaccines and drugs.