U.S. GOVERNMENT PUBLISHING OFFICE

33–428 WASHINGTON : 2019

THE PRESIDENT’S FISCAL YEAR 2018 BUDGET 

PROPOSALS WITH U.S. SECRETARY OF THE 

TREASURY STEVEN MNUCHIN 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

MAY 24, 2017 

Serial No. 115–FC03 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

PETER J. ROSKAM, Illinois 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

TOM RICE, South Carolina 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

RICHARD E. NEAL, Massachusetts 

SANDER M. LEVIN, Michigan 

JOHN LEWIS, Georgia 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

TERRI SEWELL, Alabama 

SUZAN DELBENE, Washington 

JUDY CHU, California 

DAVID STEWART, Staff Director 

BRANDON CASEY, Minority Chief Counsel 

iii 

C O N T E N T S 

Page 

Advisory of May 17, 2017, announcing the hearing ............................................. 2 

WITNESS 

Honorable Steven T. Mnuchin, Secretary, U.S. Department of the Treasury .... 6 

QUESTIONS FOR THE RECORD 

Question from Representative Johnson to Secretary Mnuchin ........................... 41 

Questions from Representative Tiberi to Secretary Mnuchin .............................. 41 

Questions from Representative Roskam to Secretary Mnuchin .......................... 42 

Questions from Representative Reed to Secretary Mnuchin ............................... 45 

Question from Representative Smith of Missouri to Secretary Mnuchin ........... 47 

Question from Representative Pascrell to Secretary Mnuchin ............................ 47 

SUBMISSIONS FOR THE RECORD 

Michael G. Bindner, Center for Fiscal Equity ....................................................... 49 

Sports & Fitness Industry Association (SFIA) ...................................................... 59 

Arlen Drof, President, Tax Avoidance Research Center ....................................... 62 

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THE PRESIDENT’S FISCAL YEAR 2018 BUDGET 

PROPOSALS WITH U.S. SECRETARY OF THE 

TREASURY STEVEN MNUCHIN 

WEDNESDAY, MAY 24, 2017 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, DC. 

The Committee met, pursuant to call, at 2:11 p.m., in Room 

1100, Longworth House Office Building, Hon. Kevin Brady [Chairman of the Committee] presiding. 

[The advisory announcing the hearing follows:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

Wednesday, May 17, 2017 

No. FC–03 

Chairman Brady Announces Hearing on 

the President’s Fiscal Year 2018 Budget 

Proposals with U.S. Secretary of the 

Treasury Steven Mnuchin 

House Committee on Ways and Means Chairman Kevin Brady (R–TX) announced 

today that the Committee will hold a hearing on President Trump’s budget proposals for fiscal year 2018. The hearing will take place on Wednesday, May 24, 

2017, in Room 1100 of the Longworth House Office Building, beginning at 

2:00 p.m. 

Oral testimony at this hearing will be from the invited witness only. The sole witness will be the Honorable Steven Mnuchin, Secretary, U.S. Department of the 

Treasury. However, any individual or organization may submit a written statement 

for consideration by the Committee and for inclusion in the printed record of the 

hearing. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page 

of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to make a submission, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a 

Word document, in compliance with the formatting requirements listed below, by 

the close of business on Wednesday, June 7, 2017. For questions, or if you encounter technical problems, please call (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any materials submitted for the printed record, and any written comments in response to a request for 

written comments must conform to the guidelines listed below. Any submission not in compliance with these guidelines will not be printed, but will be maintained in the Committee files 

for review and use by the Committee. 

All submissions and supplementary materials must be submitted in a single document via 

email, provided in Word format and must not exceed a total of 10 pages. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

All submissions must include a list of all clients, persons and/or organizations on whose behalf 

the witness appears. The name, company, address, telephone, and fax numbers of each witness 

must be included in the body of the email. Please exclude any personal identifiable information 

in the attached submission. 

Failure to follow the formatting requirements may result in the exclusion of a submission. All 

submissions for the record are final. 

3 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TDD/TTY in advance of the event (four business days’ notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available at 

http://www.waysandmeans.house.gov

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Chairman BRADY. The Committee will come to order. 

Good afternoon, and thank you all for joining us. Today, our 

Committee is honored to welcome Treasury Secretary Steven 

Mnuchin to testify on President Trump’s fiscal year 2018 budget 

proposals for the Treasury Department. 

Secretary Mnuchin, we are grateful for your time and thank you 

for your testimony. 

As Members of this Committee know, our annual hearing with 

the Treasury Secretary on the President’s budget plays an incredibly important role in our work. Today’s conversation will help set 

the stage for collaboration between Congress, the White House, and 

the Treasury Department. Today’s conversation will help us identify in advance efforts to grow our economy, create jobs, and increase Americans’ paychecks. Today’s conversation will help encourage a constructive, open dialogue, focused on addressing the 

challenges facing our businesses and workers, our communities, 

and our country as a whole. 

Reading through President Trump’s fiscal year 2018 budget proposal, it is a welcome change to see that this budget, unlike the 

Obama budgets of the past 8 years, balances in the next decade. 

The President’s proposals take much needed action to grow our 

economy, create jobs, and help more Americans move from welfare 

to work. We are also pleased to have President Trump’s leadership 

on tax reform. 

Secretary Mnuchin, as you are aware, pro-growth tax reform is 

a top priority for our Committee. In the past 6 days, we have held 

two Full Committee hearings on tax reform. We have heard from 

American businesses large and small. They are eager for a simpler, 

fairer, and more competitive Tax Code. They want to hire more 

workers, they want to increase paychecks, and they want to invest 

in the future of this great country. Today, we are eager to hear 

more of the President’s proposals to create jobs, grow paychecks, 

and strengthen our economy for the long term. 

America faces a number of significant policy challenges with the 

broken Tax Code, an unsustainable national debt, and an economy 

that is performing well below its potential. These challenges do not 

impact only red States or blue States; they impact American workers and families in all areas. And they impact the constituents of 

every Member of this Committee, no matter if you are a Republican 

or a Democrat. 

We are committed to working with President Trump and with 

you, Secretary Mnuchin, to solve them. Again, we are grateful for 

your time today. We look forward to hearing your testimony. 

4 

And I yield to the distinguished Ranking Member, Mr. Neal, for 

the purposes of an opening statement. 

Mr. NEAL. Thank you, Mr. Chairman. I might begin with a parliamentary inquiry. 

Chairman BRADY. Yes, sir. 

Mr. NEAL. Mr. Chairman, how will Members be recognized for 

the purposes of asking the witness questions? How does the Chairman intend to implement what we know as the Gibbons rule? 

Chairman BRADY. Yes. So Committee rule 14, which is often referred to as the Gibbons rule, states that Members who are present 

at the beginning of the hearing will be recognized in order of their 

seniority. Then other Members arriving after the gavel will be recognized in order of their appearance. The rule goes on to provide 

the Chairman discretion to adjust the order of recognition based on 

the ratio in the number of Members from each side of the aisle so 

as not to disadvantage Members of the Majority. This is why we 

often go to a 2 to 1 ratio at some point during a hearing. 

However, Mr. Neal, I am sensitive to the concerns that you raise 

about not disadvantaging Members who were present at the start 

of the hearing, and will endeavor to use my discretion to adjust the 

time of when we go to a 2 to 1 ratio in a way that doesn’t disadvantage the Members who were on time. This may look slightly different at each hearing, depending on the circumstances, but I and 

my staff will work with you and yours to achieve a fair outcome. 

Mr. NEAL. Thank you, Mr. Chairman. There were some of us on 

the Committee who were actually here when Mr. Gibbons was the 

Acting Chairman of the Committee, and that rule has worked very 

well to prompt Members to be here on time. 

Chairman BRADY. I agree. 

Mr. NEAL. Thank you, Mr. Chairman. 

Chairman BRADY. Mr. Neal, you are recognized. 

Mr. NEAL. Thank you, Mr. Chairman. 

Mr. Secretary, it is a pleasure to see you again. We thank you 

for joining us today. A budget is a reflection of one’s values, and 

President Trump’s budget is no exception. 

The President’s budget cuts program after program that middle 

class families rely upon every day. You name it, the Community 

Development Block Grant program, Stafford loans for college students, all drastically cut or zeroed out. The budget also breaks the 

President’s repeated promise not to cut Social Security and Medicare, cutting Social Security benefits by up to $64 billion. The 

budget also cuts Medicaid by more than $600 billion on top of more 

than $800 billion in cuts in the Republican healthcare bill. And it 

would also restrict healthcare coverage for children under the 

CHIP program significantly. 

For Democrats, our values today reflect a strong commitment to 

the middle class. For every issue we consider here in Congress, the 

first question we will ask ourselves and the Majority is the following: Will it help working families? And if the answer is no, we 

won’t support it. Let’s face it, for many American families this has 

not been an easy time to make ends meet. 

You work hard every day, sometimes in multiple jobs, but it is 

still tough to earn enough money to make sure there is adequate 

food on the table and a roof over your head. It is, in particular, a 

5 

struggle for many young Americans today. The front page of The 

Boston Globe this week included a story about how the loss of blue 

collar jobs is forcing young men to fall down the income ladder. 

This is a reason why working families sent a strong signal to Congress last November. 

Many Americans were convinced that President Trump understood the importance of the middle class and that he would be a 

different kind of Republican who would work finally to make sure 

that they would have an edge and an opportunity. Unfortunately, 

the budget that we have witnessed in the last 48 hours is one that 

has let those people down in dramatic fashion. We were elected to 

help America’s working families, and that is why our priority must 

always be the middle class. 

So what are some Democratic priorities? A key priority is to provide affordable, quality healthcare for all Americans through programs like Medicare, Medicaid, and CHIP. More and more middle 

class families rely on Medicaid for long-term care. It pays for 60 

percent of all nursing home residents nationwide. 

As the baby boomers age into Medicare, it would be irresponsible 

to cut funds in this critical program. The reason mom and dad 

aren’t living in your attic is because of Medicare and Medicaid. And 

95 percent of the American children have insurance coverage 

thanks to Medicaid CHIP and previously, bipartisanship. It provides health coverage for working families struggling to make ends 

meet. 

We know the Tax Code is broken, in desperate need of repair, 

and that is why we must continue to pursue reform. But we must 

reject ideology and move forward in a bipartisan manner to create 

a Tax Code that is fair for middle class Americans. Middle class 

families are frustrated by stagnant wages, a Tax Code that favors 

those at the top, and an uncertain financial future. Any tax reform 

plan must be about moving the dial to help middle class families 

grow and prosper. 

Another priority for this side is very simple: Ensuring that working families are financially secure in retirement. We are about to 

experience a retirement savings crisis in this country. According to 

Boston College’s National Retirement Risk Index, about half of today’s households are at risk of not being able to maintain their preretirement lifestyles once they stop working. Far too many Americans are not able to save enough for retirement. 

We also will continue to support initiatives to help Americans 

save, like the auto IRA, making the Saver’s Credit refundable, and, 

as you know, I am a big supporter of tax incentives for retirement 

savings. We should be helping to rebuild and reinforce Social Security along the lines proposed by our colleague John Larson. This 

would allow Social Security to continue to be the foundation of middle class economic security for 171 million workers who contribute 

with every paycheck, knowing that Social Security will be there for 

them when they retire and if they become too sick to work and to 

protect their families in the event of their death. 

Let me close by saying that we will continue our focus on this 

side to make sure the middle class is first. It is going to be true 

on every issue that comes before us, from healthcare to taxes to retirement. 

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And I yield back the balance of my time. 

Chairman BRADY. Thank you, Mr. Neal. 

Without objection, other Members’ opening statements will be 

made a part of the record. 

Today’s sole witness is U.S. Treasury Secretary Steven Mnuchin. 

The Committee has received your written statement, and it will be 

made part of the formal hearing record. You have 5 minutes to deliver your oral remarks. 

Secretary Mnuchin, welcome, and you may begin when you are 

ready. 

STATEMENT OF HON. STEVEN T. MNUCHIN, SECRETARY, 

U.S. DEPARTMENT OF THE TREASURY 

Secretary MNUCHIN. Thank you. It is a pleasure to be here. 

Chairman Brady, Ranking Member Neal, and Members of the 

Committee, it is an honor to be here today, my first time appearing 

before the House of Representatives. I am looking forward to working with Members of Congress and this Committee on passing important legislation for the American people. 

My number one priority as Treasury Secretary is creating sustainable economic growth for all Americans. The best way to 

achieve this is through a combination of tax reform, regulatory relief, and protecting taxpayers. This also includes making some difficult decisions with respect to our budget. 

We are currently bearing the cost of excessive government commitments of previous years, and this has forced us into hard 

choices. But the remarkable thing about economic growth is that 

it builds upon itself. If we develop the right policies today, our children and grandchildren will reap the benefits of an ever-growing 

economy. 

Indeed, in the next 10 years, if we return to the modern historic 

average of above 3 percent annual GDP growth, our economy will 

grow by trillions of dollars. This will be meaningful to every man, 

woman, and child in this country, and future generations. 

Tax reform will play a major role in our campaign for growth. It 

has been more than 30 years since we have had comprehensive tax 

reform in this country. The Administration is committed to working 

with you to change that. We have about 100 people working at 

Treasury on this issue now. We are working diligently to bring tax 

relief to lower- and middle-income Americans, as well as make 

American business competitive again. All of this comes as we simplify the Tax Code, and make it easier for hard-working Americans 

to file their taxes. 

Finally, I would like to speak about the importance of free and 

fair international trade. Few doubt that free trade is a crucial component of economic growth. But trade deals that disadvantage 

American workers and business can hardly be considered either 

free or fair. In meetings with my international counterparts I have 

stressed this dual importance. 

Just 2 weeks ago, I had productive meetings with the finance 

ministers of the G–7, and earlier I met with the members of the 

IMF and World Bank. They understand our concerns, and we have 

approached our international dialogue with a renewed spirit of mutual understanding. 

7 

In the President’s joint session to Congress, he spoke about the 

marvels that this country is capable of when its citizens are set 

free to pursue their visions. Fundamental to that freedom is removing imprudent regulation and uncompetitive taxes from blocking 

their way. 

There has been a significant few months at Treasury. We have 

been studying, developing, and implementing policies that will put 

this country on the path toward sustained economic growth. In 

coming months, we will work with this Committee and Congress, 

and we will look back on an important time for this Nation’s economy and our history. 

Thank you, and I look forward to answering your questions 

today. 

[The prepared statement of Secretary Mnuchin follows:] 

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Chairman BRADY. Thank you, Mr. Secretary. 

First, thank you for your laser focus on jobs, especially those for 

the middle class. And certainly, the recipe for moving this country 

forward is lower taxes and a Tax Code built for growth, balancing 

red tape so our local businesses can thrive, and expanding our economic freedom of trade, because as we know, it is not simply 

enough to buy American, we have to sell American all throughout 

the world. You play a key role there. Mr. Secretary, currently we have nearly $20 trillion in debt, and 

you are using extraordinary measures until Congress addresses the 

debt limit later this year. To its credit, the Trump budget cuts deficits by $5 trillion, but that still leaves increased and growing national debt of $4 trillion more. Absent in your testimony today is 

any reference to the debt limit, though I know that you continue 

to make the case for action by Congress. 

As Treasury Secretary, you also serve an important role as managing trustee of the Social Security and the Medicare trust funds. 

Together, these two programs are the largest drivers of our debt. 

More than that, they are under financial duress for the long term, 

and I worry about them. Also absent from your testimony today is 

any mention of ways or even the need to improve the solvency of 

these critical programs, which I know we share. 

As managing trustee, shouldn’t we be working to make sure that 

our children and grandchildren can count on these important programs, just like seniors and individuals with disabilities do today? 

Mr. Secretary. 

Secretary MNUCHIN. Chairman Brady, thank you very much for 

your comments. And I appreciate your focus on both the national 

debt as well as Social Security and Medicare. 

So first, let me just comment on the debt. We are very concerned that the debt has gone from $10 trillion to $20 trillion over the last 

8 years. And we believe that the most important issue is economic 

growth. As I said in my opening remarks, the difference between 

2 percent and 3 percent sustained GDP is trillions of dollars over 

the next 10 years. So that is our absolute focus. 

I would also just comment in regards to the debt limit, as you 

have outlined, I have used my extraordinary powers, but I would 

also like to emphasize for this Committee and for the rest of Congress, I urge you to raise the debt limit before you leave for the 

summer. We can all discuss how we cut spending in the future and 

how we deal with the budgets going forward. But it is absolutely 

critical that where we have spent money, that we keep the credit 

of the United States as the most critical issue. It is the reserve currency of the world, and we need to make sure that we can raise 

our debt ceiling to pay our debts. 

Chairman BRADY. As part of the upcoming dialogue on increasing debt limit, do you intend, or the agency intend to present solutions to preserving Social Security and Medicare for the long term 

as we go forward? 

Secretary MNUCHIN. As you have mentioned, I take my role as 

managing trustee very seriously. I have begun to look at and review with my staff the draft reports that we will be reporting on 

the trust funds, and I look forward to working with Congress as we 

work through that and look at it. Thank you. 

11 

Chairman BRADY. Thank you. Thank you. My final point. As 

you work toward that end, is your preference for Congress to pass 

a clean debt ceiling? 

Secretary MNUCHIN. That is my preference. 

Chairman BRADY. Thank you. 

Mr. Neal, you are recognized. 

Mr. NEAL. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for the assertive manner in which 

you addressed that issue of raising the debt ceiling. And I was very 

happy that the Chairman raised that question immediately. The 

debt ceiling used to be an issue that we used to address here in 

Congress in a bipartisan manner. So your emphatic support of raising that debt ceiling is much appreciated by all of us today. 

Just a couple of points, if I could, again based on long service 

with the Committee. In 2001 and in 2003, there were tax cuts that 

totaled $2.3 trillion. They were advertised, at the time, as the basis 

for promoting strong economic growth. And in fact, that economic 

growth not only did not occur, but it was the slowest growth since 

Herbert Hoover had been President. And yet the debt that we talk 

about today is conveniently suggested that somehow it happened 

during the last 8 years. 

So not only was there subpar growth in those years, but the deficits began to mount, there was a war in Iraq and a war in Afghanistan with a million new veterans, who we are obligated to care for, 

and then there was the recession in which we were losing up to 

800,000 jobs in some months. 

So when you consider that social spending is formulaic and at 

the end of the Clinton years there were 23 million new jobs and 

an unemployment rate of 3.8 percent, the Clinton economic plan 

appeared to work. And not only did Federal revenue go through the 

ceiling, and Secretary Greenspan warned us that we were paying 

down the debt too quickly, but we had balanced the budget for 4 

successive years. The unemployment rate of 3.8 percent meant that 

social spending, much of which is formulaic at the Federal level, 

also was reduced significantly. 

And I am concerned that the model that is being offered and discussed, and I hope there will be a chance for us as we go forward, 

but I would urge you, based on long experience here for many of 

us on this Committee, that ideology, as it relates to revenue, frequently doesn’t square with revenue forecasts. And trying to project 

what the future might look like, suggesting that, for example, that 

automatically we are going to 3 percent growth during the Clinton 

years, which averaged 4.2 percent, and the Reagan years I believe 

4.1 percent, that most economists think that is unlikely. 

I think we would be supportive of what you would like to do, but 

getting there is very different than what we would all like to do. 

So I am mindful of the fact that even as you propose 3 percent 

growth, I think we need to argue and acknowledge that will not be 

an easy task. And modeling a tax cut for people at the top based 

upon 3 percent growth that might not happen seems to me to be 

a bit of a risk. And you might want to respond to that. 

Secretary MNUCHIN. Well, I first just comment, I know we all 

share a common view of trying to create economic growth in this 

12 

country. And I hope we will all work together to do whatever we 

can on those shared goals. So that is our number one objective. 

We have been working very closely with Chairman Brady and 

others at the Senate on comprehensive tax reform. We think this 

is a critical component of economic growth. We fundamentally believe in dynamic scoring, which implies that when you change tax 

policies, you do impact behavior. There are many, many economists 

who believe this. Like anything else, there will be different models 

that come out. And when we present a combined tax plan, different 

people will have their views. 

But I can assure you we are very focused on being able to pay 

for tax reform, and we are looking at policies that we are going to 

do everything we can to get to 3 percent growth. 

Mr. NEAL. Thank you, Mr. Chairman. 

Chairman BRADY. Thank you. 

Mr. Nunes. 

Mr. NUNES. Thank you, Mr. Chairman. I will be real quick. 

Mr. Secretary, it was great to have you last week meeting with 

us, and I hope that continues. You know, we want to work with the 

Administration to come up with a pro-growth tax plan. As you 

probably know, this Committee has been working for a decade at 

reforming the Tax Code. And so the amount of work and work 

product that we have here, and scoring, working with Joint Tax, 

is quite considerable. And I hope that you will continue to work 

with us as we move forward so that we can deliver the type of 

growth that you want to achieve. 

Secretary MNUCHIN. Thank you. We look forward to that, and 

look forward to building on all the work and expertise as has been 

focused on this. 

Mr. NUNES. Thank you, Mr. Secretary. I appreciate you being 

here. 

Mr. Chairman, I yield back. 

Chairman BRADY. Thank you. 

Mr. Levin, you are recognized. 

Mr. LEVIN. Thank you. 

Welcome, Mr. Secretary. I think it is important to look where 

there is common ground, also to acknowledge where there are some 

deep differences. That may be the only way we find common 

ground. 

In February, you said there would be no absolute tax cut for the 

upper class. Are you willing to sit here today and say under the 

tax plan there will be no, absolutely no tax cut for the upper class? 

Secretary MNUCHIN. Yes, I did say that, and I think I was actually honored by some people at the Senate who nicknamed that 

the Mnuchin rule. So I feel like I am now in good company with 

the Volcker rule and the Buffett rule. 

Mr. LEVIN. I am not sure it is the same company. 

Secretary MNUCHIN. Well, I will take it that way. In any event, 

the President’s objective on the personal side of tax reform is to 

simplify the Tax Code. I think we would all agree the Tax Code is 

way too complicated. The IRS is too big on reviewing personal 

taxes. 

Mr. LEVIN. Mr. Secretary, I agree with that. But if you would, 

would you answer the question? 

13 

Secretary MNUCHIN. I am. I was going to get there. So I wanted to start with the President’s objective to have a middle income 

tax cut. And that is consistent with what I have said earlier. 

Right now, what we are looking at is cutting the taxes on the 

high end and eliminating all deductions, other than mortgage interest and charitable donations. Let me just say that this was a 

short form for the Administration’s proposal. We are working very 

closely, as I said earlier, with Chairman Brady and others on trying to reach a consensus for tax. But the President’s objective is to 

create a middle income tax cut. 

Mr. LEVIN. Okay. But that really doesn’t answer the question. 

In the one-pager that came out, it cuts the top rate, eliminates the 

estate tax, repeals the AMT, and repeals the ACA investment tax 

for those earning over $200,000. So are you willing to sit here and 

say there will be no absolute tax cut for the upper class? 

Secretary MNUCHIN. Again, let me just say, this is going to be 

a collaborative process for tax reform to pass. Obviously, it is going 

to be something that has to be a collaboration between the House, 

the Senate, and the Administration. And when we come out with 

the tax plan, we will show the distribution, as you would expect, 

and you will see it. 

I would just comment, again, our objective is to cut the high-end 

tax and get rid of lots of deductions that will offset that. 

Chairman BRADY. Thank you. All time has expired. 

Mr. Tiberi, you are recognized. 

Mr. TIBERI. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary, for being here today. I really appreciate your time. I was pleased to see in your budget request money 

to fund the CDFI in order to maintain existing programs like the 

new markets tax credit program. I hope that is an indication that 

the Administration is supportive of the program, which has been 

effectively targeting investments in low-income communities, both 

urban and rural, across the country. I have been a big supporter 

of it, and it is bipartisan. 

I was unable to attend the hearing yesterday on international 

competitiveness that the Chairman held, but I just want to associate myself with my colleagues who have expressed a concern with 

the current border adjustability tax proposal and its impact on consumers and workers. However, I have been one of the strongest 

proponents of reform, comprehensive reform. I know you are as 

well. And I look forward to working with you and the rest of the 

Administration on implementing actual tax reform this Congress. 

Making our Tax Code more competitive, I think, is really important 

to economic growth. 

And we are going to hear, and we already have heard a little bit 

about economic growth and data, regarding economic growth 

maybe being a little bit too optimistic. But I want to put it in perspective. A similar conversation we had 8 years ago, Mr. Neal and 

I, and I would like to compare, just for a moment, the President’s 

budget with President Obama’s first budget. 

So in its first 4 years, the Obama budget projected average economic growth of 4 percent; the Trump budget, less than 2.8 percent. The Obama budget projected average growth of almost 3.2 

percent over the first decade; the Trump budget, 2.9 percent. 

14 

Obama’s projections for the first year of his Presidency seemed 

pretty reasonable around here at the time, given historical economic growth levels following a recession. But it is not surprising, 

in my mind, that President Obama’s projections never materialized 

because he pursued an anti-growth, increasing taxes, and more regulation policy that left us $20 trillion in debt. This President and 

the Republican Congress, on the other hand, have already gone on 

record to not only try to reduce regulations and the regulatory burden—the President signed now a dozen-plus bills—but to pursue 

tax reform, to lower rates, and ultimately to balance a budget. 

Mr. Secretary, just a quick thought on the border adjustability 

tax and on Mr. Nunes’ point about economic growth. 

Secretary MNUCHIN. Well, I have had the opportunity, Chairman Brady and I have been meeting almost every week since I 

have been in office. I think we are working very closely together. 

I have discussed that there are some concerns we have on the border adjustment tax. But we are looking forward to potential 

changes that Chairman Brady may look at. But we are working 

very collaboratively, and our objective is to get comprehensive tax 

reform done. 

Chairman BRADY. Thank you. 

Mr. Lewis, you are recognized. 

Mr. LEWIS. Thank you, Mr. Chairman. Thank you, Mr. Secretary, for being here today. 

Mr. Secretary, I have often said that a budget proposal is a statement of values and priorities. This Administration proposal makes 

it crystal clear that the hungry, the middle class, the elderly, and 

the struggling will be left out and left behind. This budget says 

more money for war, for guns, for weapons. This budget breaks 

promise after promise to the American people. It raids Medicaid 

and Social Security. It cuts funding for food assistance and support 

for those who have been left out and left behind, as I stated. 

I said over and over again, and I believe it today, that we have 

a right to know what is in the food we eat, what is in the water 

we drink, and what is in the air we breathe. This budget cuts the 

EPA. This is not right. This is not fair and it is not just. I have 

a strange feeling that this budget is not respecting the American 

people. The people are not top priority for this Administration. I 

think we can do much better. 

I have served for a long time as the Ranking Member on the 

Oversight Subcommittee. And we have been very, very concerned 

about how the IRS is being squeezed. We don’t provide enough 

funding for the Internal Revenue Service to collect the dollars. I 

would like for you to respond. Why are we squeezing the IRS? Why 

do we continue to cut and cut? 

Secretary MNUCHIN. Well, first, let me just comment that the 

budget does reflect the priorities of the President around the military. And you are correct, there has been some very difficult decisions made to fund increases to the military. The President thinks 

that the national security is of the utmost importance to the country and that we have underinvested in the military, and that there 

are other areas where we needed to make difficult decisions. 

I would also just say that I do agree with you, and I know the 

President believes in clean air and clean water. As a matter of fact, 

15 

I had the opportunity to visit Flint, Michigan, with him during the 

campaign. And that was quite concerning. 

Particularly as it relates to the Internal Revenue Service, I am 

comfortable that we have preserved within the budget very significant commitments to increasing our technology. 

Chairman BRADY. Mr. Chairman, I apologize. The time has expired on this question. Perhaps we can pick it up later in the hearing. 

Mr. Reichert, you are recognized. 

Mr. REICHERT. Thank you, Mr. Chairman. Welcome, Mr. Secretary. 

In hearings over the past several years, we have heard testimony 

about how permanent tax policy drives investment, growth, and 

business decisionmaking far more than temporary tax policy does. 

In fact, in our hearings just last week, a witness shared with us 

that permanent, comprehensive tax reform is absolutely critical for 

him to make business decisions, and certainty in the Tax Code 

helps American workers. 

Can you share the Administration’s views on temporary tax reform versus permanent, comprehensive tax reform, tax policy? 

Secretary MNUCHIN. Sure. I think our preference is to permanent over temporary. But I would just say permanent is better 

than temporary, and temporary is better than nothing. 

Mr. REICHERT. Well, if we want to go permanent, we want to 

go comprehensive, how does that help—I am especially interested 

in small business. So how does that help small businesses? Can 

you describe what a permanent Tax Code might do to help businesses, help workers, create jobs, increase the GDP, whatever? 

Secretary MNUCHIN. Sure. I mean, I think, first of all, we have 

a very complicated business tax system that is one of the most uncompetitive in the world. We have a very high corporate tax rate. 

We tax on worldwide income. We have a concept of deferral. It is 

not a surprise that our companies have left trillions of dollars offshore. And as part of this, we want to make sure that money comes 

back onshore, and is invested to create jobs. 

And I think a big part of the engine of growth in this country 

is small businesses. We want to make sure that the business tax, 

not just the corporate tax, is something that benefits small- and 

medium-sized businesses as well. That is a big priority of ours. 

Mr. REICHERT. And at the end of your testimony you briefly 

mentioned trade. And I happen to be the Trade Subcommittee 

Chairman. So I look forward to working with you and your team 

at the White House on upcoming trade issues. 

Mr. Chairman, I yield back. 

Chairman BRADY. Thank you. 

Mr. Doggett, you are recognized. 

Mr. DOGGETT. Thank you, Mr. Secretary. Do I understand correctly that you do not believe we should finance tax reform by borrowing from abroad to pay for it? You think that this tax reform 

should be fully paid for with economic growth, changes in spending, 

and other tax policy? 

Secretary MNUCHIN. I do believe it should be fully paid for with 

changes to economic growth and with other ways of broadening the 

tax base. 

16 

Mr. DOGGETT. Great. And do you believe that in its current 

form, the border adjustment tax poses a significant risk to the 

American economy? 

Secretary MNUCHIN. Again, we have had conversations on the 

border adjustment tax. 

Mr. DOGGETT. Sure. And I understand you are trying to be collaborative. But as it is proposed, you have stated that it poses a 

significant risk to the American economy. 

Secretary MNUCHIN. I have expressed in its current form I 

have concerns. 

Mr. DOGGETT. And isn’t the border adjustment tax in such bad 

shape that the Administration does not plan to propose a way to 

fix it because it doesn’t know of a way to fix it? 

Secretary MNUCHIN. Well, I don’t think it is our job to fix it. 

Mr. DOGGETT. You don’t propose to. 

Secretary MNUCHIN. Again, we are working very closely with 

Chairman Brady, okay—— 

Mr. DOGGETT. You count on him to come up with the idea. The 

Administration will not be bringing a border adjustment tax proposal here. 

Secretary MNUCHIN. I think the intent is Chairman Brady is 

going to look at changes. 

Mr. DOGGETT. Okay. Now, as you know, the Republican colleagues here, like you, are very over-optimistic, in my opinion, but 

optimistic about the benefits that this tax reform will bring to economic growth. And they have included within their projections significant benefits from economic growth, dynamic scoring to which 

you referred, to pay for it. But they concluded that was not enough. 

And $1.1 trillion of their paying for it comes from the border adjustment tax. 

What specific changes in tax policy do you advocate? Can you 

identify any specifics, as distinguished from just generalized comment, to make up for that $1.1 trillion gap if the border adjustment 

tax goes? 

Secretary MNUCHIN. Well, let me just comment we have a terrific career staff at Treasury. We have a lot of resources. We have 

over 100 people working on this. I have some senior advisers who 

are full-time focused. And there are lots of different scenarios we 

are running. 

Mr. DOGGETT. Okay. As they look at that, will you also have 

them look at the $2 trillion hole in your budget that comes from 

double counting? Because you have counted the benefits of your 

budget of economic growth to both pay for the tax cut and to pay 

for other provisions in the budget. So I think we are really looking 

at over $3 trillion and have yet to hear a specific change in tax policy you advocate. 

Further, can you tell us whether the Mnuchin rule that Mr. 

Levin asked you about, is it your policy now or not your policy? 

Just yes or no. Is it in effect? I know you want to collaborate. But 

is it yes or no, the Mnuchin rule is what you advocate? 

Chairman BRADY. All time has expired. 

Mr. DOGGETT. Can he just answer yes or no? 

Chairman BRADY. We will have to give the Secretary time to 

answer within your moments. 

17 

Mr. Roskam, you are recognized. 

Mr. ROSKAM. Thank you, Mr. Chairman. 

Mr. Secretary, two points. One is kind of a touch and go and one 

is a little more substantive. So touch and go, as it relates to border 

adjustment in particular, our Committee has really struggled over 

the past several years dealing with the anti-base erosion rules. I 

mean really, really struggled in a very unsatisfying way. The 

Obama Administration really struggled. Section 385, which you are 

very familiar with, redefining debt and equity doctrines that had 

been well placed for 40 years. None of them work. The attractive 

thing about border adjustment is that it works. 

So if all we are doing is lowering the corporate rate and flipping 

to a territorial system, it creates a huge incentive to put IP out of 

the country. And therein lies the rub. I know you are on top of it, 

we are on top of it. But that is one of the things that we need to 

get to. So that is the touch and go. 

Here is my real point. We have to sort out, and you and I had 

a discussion last week, just to continue to highlight this, the capacity at Treasury and the U.S. Office of Foreign Asset Control as it 

relates to Iranian terror. Iran, as we know, is the world’s largest 

state sponsor of terror. They don’t repudiate it, they don’t walk 

away from it. 

We could reconcile the relationship if they came clean and 

stopped it, but they are continuing to do that. As you know, there 

are large commercial aircraft companies, Boeing and others, that 

are determined to sell to the Iranians, notwithstanding the bad activities of the Iranians. Can you speak to that, to your current review, your current understanding? 

And from my point of view, and I think most on the Committee, 

and most in the House, you have the authority, you individually as 

the Secretary, have an incredible amount of authority to fix this 

and keep us safe and to make sure that the world’s largest state 

sponsor of terror does not get access to commercial aircraft, which 

are fungible and can be used for military purposes. 

Secretary MNUCHIN. Well, let me just comment that one of the 

most important parts of my job is on anti-terrorist financing. And 

I am probably spending 50 percent of my time on what we call TFI 

at the Treasury, terrorist financing and intelligence. These tools 

are absolutely critical. They really work. 

In the case of Iran, there is no question the sanctions are what 

brought them to the table. I believe we could have gotten a better 

deal with them at the table. We will use everything within our 

power to put additional sanctions on Iran, Syria, and North Korea 

to protect American lives. And I can assure you that is a big focus 

of mine, and I discuss it with the President. 

As it relates to the licenses that you are referring to, yes, it is 

correct that both in the case of Boeing and Airbus, there are licenses that will be required. And they are under review. 

Mr. ROSKAM. Thank you. I yield back. 

Chairman BRADY. Thank you. 

Mr. Thompson, you are recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

Mr. Chairman, I was heartened to hear the Secretary say that 

the debt ceiling issue was important. And I would suggest that we 

18 

as a Committee, in a good show of bipartisanship, send a letter, 

signed by the Chairman and the Ranking Member and all the 

Committee Members, to Speaker Ryan and Leader Pelosi stating 

that we believe it is important to raise the debt ceiling and prevent 

the type of catastrophe that the Secretary has stated. And I could 

do that as a motion or whatever you think is appropriate. Would 

you be willing to do that? 

Chairman BRADY. Please present any draft letters to us, and we 

will certainly consider it. 

Mr. THOMPSON. Mr. Secretary, thank you very much for being 

here today. It is good to see you again. I continue to be concerned 

about going down this road of we are all going to come together 

and do great tax reform. And I want to be there, and I want to be 

part of that. But there is a distinct difference between tax reform 

and just tax cuts. And I continue to worry that as time slips by, 

we may get into the mode where folks are just looking for a ‘‘win’’, 

and we revert to just the tax cut. And if that happens, as you have 

explained, it is not tax reform, and it is highly likely that it won’t 

be paid for. It is just going to add to the national debt. 

So I want to make sure I understand, you are committed to a 

revenue neutral bill. You don’t want to borrow to do this. You want 

to do tax reform, not just tax cuts. Is that correct? 

Secretary MNUCHIN. It is correct that I want to do tax reform, 

and I want them to be paid for through broad-based changes to the 

Tax Code and economic growth. And that is what is critical. 

Mr. THOMPSON. Thank you. On May 21, 2015, the President, 

then candidate, stated that: I am going to save Social Security 

without any cuts. I know where to get the money from. Nobody else 

does. 

And then we see a budget with tens of billions of dollars of cuts 

in regard to Social Security disability insurance, despite the fact 

the President stated that he wasn’t going to cut Social Security. 

The President does understand that the disability portion is Social 

Security. These are people who have paid into the system and have 

become disabled and can’t work. And they rely on—thousands of 

people throughout our districts rely on the fact that they have this 

disability insurance program to provide for them while they are 

disabled and out of work. 

These cuts are going to hurt those folks, going to hurt those families and those communities. Is it the President’s intention to make 

these cuts in Social Security and deliver this devastation? 

Chairman BRADY. Thank you all. Time has expired. 

Mr. Buchanan, you are recognized. 

Mr. BUCHANAN. Mr. Secretary, thanks for being here. I would 

like to make three quick points. You mentioned that we have been 

running trillion dollar deficits. Let me go back. 

In terms of deficit spending, I have been here 10 years, we have 

run a $10 trillion deficit. There is plenty of blame to go around. 

But I want to make sure the Administration is committed to moving toward a balanced budget at some point in the future. 

A lot of the tough decisions have to be made on a bipartisan 

basis. I look around this room, a lot of young people, and we are 

going to bury them in debt if we don’t change it quickly. You are 

a business person. At some point this ends badly. 

19 

Secretary MNUCHIN. I can assure you the President’s very focused on the long-term impact of the debt. 

Mr. BUCHANAN. The second point is just on passthrough entities. I know you refer to business, but 93 percent of the businesses 

formatted in Florida are passthrough entities. Last time we did tax 

reform, they were looking to a lower corporate rate. I want to make 

sure you guys are committed to also get parity with passthrough 

entities, small businesses. In some States it is as high as 50 percent when you add State and Federal together. I want to make 

sure you are committed to not just corporate reduction, but passthrough reduction as well. 

Secretary MNUCHIN. We are absolutely committed to what I 

would call the business tax passthroughs. But I also want to just 

say we will want to make sure that rich people can’t use 

passthroughs to evade the personal tax system. But yes, we are 

committed that small- and medium-sized businesses have the benefit of this. 

Mr. BUCHANAN. And the other point is on the IRS reform. I 

chair the Oversight Subcommittee. And we want to make sure 

something gets done in this space. It has been 20 years. We have 

talked about it briefly. But as we do tax reform, it makes a lot of 

sense to do IRS reform. And I just want to also get your commitment that you guys are thinking about that, because it is a real 

opportunity in terms of business disputes, in terms of being more 

customer friendly. What is your thoughts on IRS reform? 

Secretary MNUCHIN. We are very supportive of that. And as I 

mentioned earlier, we need to invest a lot of money in technology 

at the IRS. And we have preserved those investments as part of 

the budget. 

Mr. BUCHANAN. Thank you. I yield back. 

Chairman BRADY. Thank you. 

Mr. Larson, you are recognized. 

Mr. LARSON. Thank you, Mr. Chairman. And thank you, Secretary Mnuchin. 

Let me start by applauding you and your staff. I really appreciate the conversations you have had with Mr. Neal, Mr. Courtney, 

and myself, and letters from the taxpayers associations about a 

God awful situation for people in the State of Connecticut facing 

crumbling foundations. And we sincerely appreciate your efforts to 

further look into this and help them. 

Secretary MNUCHIN. Thank you. 

Mr. LARSON. Let me also add with my colleagues, I think you 

are absolutely right about the debt ceiling. And we should have 

resolution before we leave here this summer. We cannot leave here 

in August and have the uncertainty that will result from this and 

the gaming and the politics that will take place. It could be a calamity for the country. We stand solidly behind you in this effort. 

Now, Mr. Doggett asked you a question, yes or no, on the 

Mnuchin rule. 

Secretary MNUCHIN. Again, what I have said is the President’s 

objective is not to cut taxes on the high end. His objective is to cut 

middle-income taxes. But this is a process that will involve the 

House, the Senate, and the Administration, and we are working together. 

20 

Mr. LARSON. All right. That is not the answer, but let me also 

ask you what Mr. Thompson asked you. And that is whether or not 

you intend to follow through on this $64 billion cut out of Social 

Security. 

Secretary MNUCHIN. So let me just say, the President is absolutely committed that people who should be paid disability will be 

paid disability. That is what the trust fund is for, and we will 

honor those commitments. So the assumption for changes in disability, and again, I would just say these are assumptions that perhaps there are some cases where people should be going back to 

work, but that for people who long term cannot go back to work, 

they will not see a cut in their disability. 

Mr. LARSON. Well, listen. I hope that this Committee will go to 

regular order. We need a discussion on Social Security. Social Security is insurance. It is not an entitlement. People have paid for this. 

They understand it. We are going to debunk this myth once and 

for all. I appreciate what Sam Johnson has said, that he is going 

to have an open hearing on this. And the vitality of ideas and what 

we plan to do with Social Security ought to be out in the open. 

I appreciate your invitation also to come down to the Treasury 

and talk about ideas that we have on both sides of the aisle to 

make sure that we strengthen this. But this hasn’t been touched 

since 1983. Has anyone in this audience had their insurance premiums go up since 1983? Of course they have. And so we turn 

around and trick the elderly all the time and tell them they are 

greedy geezers? These people are depending upon this. They have 

contributed throughout their lifetime into a fund that is insurance, 

the most successful governmental program that has a 99 percent 

loss ratio. That is pretty good in the private sector, isn’t it, Mr. 

Mnuchin? 

Secretary MNUCHIN. Yes, sir. 

Chairman BRADY. Thank you, Mr. Larson. 

Mr. Smith, you are recognized. 

Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman. Thank 

you, Mr. Secretary, for taking the time to be here to share your insight. I think that a lot of work is being done both here in Congress, in the House, and also at the White House. And I appreciate 

the fact that I think there is a lot more similarity between the details of perhaps what the White House would choose to do on tax 

reform and where we are with the blueprint. And a lot of thoughtful minds are working. And I would certainly invite even more 

folks to join the process as we do move through regular order, and 

how important it is to bring people together so that we can work 

together to solve the challenges that we are facing. We know that 

there are tradeoffs that need to be evaluated as we sort through 

the details. 

I was wondering if you could talk a little bit about the process 

of deciding on how to move forward with various tradeoffs, and perhaps looking at finding the right base broadeners as we help 

achieve permanent tax reform. I certainly associate myself with the 

comments of Mr. Reichert, and how important permanence is for 

tax reform and how much more economically productive that would 

be as well. Can you speak to perhaps the tradeoffs? 

21 

Secretary MNUCHIN. Well, again, I would just comment on the 

process. We have started conducting listening sessions. We have 

had the opportunity to be both here and at the Senate and meet 

with both Republicans and Democrats to get ideas. We have also 

had the opportunity to meet with many outside groups and many 

industry groups, comprising of business CEOs. And we are looking 

forward to, I am sure as the Committee is, getting feedback on different ideas, doing that as well. 

Mr. SMITH OF NEBRASKA. Okay. I thank you. 

I yield back. 

Chairman BRADY. Thank you. 

Mr. Kind, you are recognized. 

Mr. KIND. Thank you, Mr. Chairman. 

Mr. Secretary, thank you. I give you great credit for being here 

today. 

The President, in his first formal budget submitted to the American people, conveniently released it during a week when he is out 

of the country. So in my mind, he either owes you a great apology 

or combat pay for coming up here and defending that proposal 

today. And there are problems with it. Not only was it dead on arrival, it was dead before arrival. And that is why so many Members 

on both sides of the aisle are running from it. 

And I represent a large rural district in Wisconsin. There is not 

much to like in the President’s budget proposal for rural Wisconsin. 

It guts funding for the rural economic development grant program, 

guts funding for the Farm Service Administration offices and technical assistance they provide family farmers. It guts the funding for 

USDA broadband extension programs in rural America. The $900 billion that the Administration is adopting in Medicaid 

cuts will put our rural hospitals in great jeopardy. It will jeopardize our BadgerCare and senior care programs in Wisconsin. 

Other than that, what is not to like for rural America? It just 

seems like a missed opportunity with the type of economic growth 

and the partnership that rural America is looking for with the Federal Government today. 

But I also appreciate that you and many of us are interested in 

taking a run at the Tax Code for the first time in 30 years. And 

yet one of the linchpins of what is being discussed around here, the 

border adjustment tax, you have had some concerns about. In fact, 

you were recently quoted the other day, and I quote you, ‘‘One of 

the problems with the border adjustment tax is that it does not create a level playing field. It has very different impacts on different 

companies. It has the potential to pass on significant costs to the 

consumer. It has the potential of moving the currencies.’’ 

Would you care to amplify or express any of the concerns and 

whether there is things that could be addressed as we are working 

on tax reform? 

Secretary MNUCHIN. I think there are things that can be addressed to lighten those changes. And those are the types of things 

Chairman Brady is working on. And, again, I think the most important issue is that we share common goals of making the business tax system competitive, making the middle-income tax cut, 

and simplifying personal taxes, and doing all these in a way that 

will create economic growth. 

22 

Mr. KIND. Finally, as Treasury Secretary, you are going to play 

an instrumental role in getting the President’s trade agenda back 

on track. Don’t give up on it and don’t give up on walking away 

from multilateral agreements as well. I don’t know if you caught 

the New York Times article about Harley, one of our iconic companies in Wisconsin, setting up a factory in Thailand now. And the 

main reason they are doing it is because of the failure of the TPP 

moving forward. The 60 percent tariff that our bikes are facing as 

we are trying to export them into the Asian market is forcing them 

then to move a factory into Thailand to take advantage of the 

ASEAN markets and the lower tariffs. They then are going to be 

able to gain market access. 

This is one of the consequences of walking away from a robust 

trade agreement, where we need to be at the table establishing the 

rules and trying to level the playing field for our workers, our 

farmers, and our businesses back home. 

Thank you. I yield back. 

Chairman BRADY. Thank you, Mr. Kind. 

Ms. Jenkins, you are recognized. 

Ms. JENKINS. Thank you, Mr. Chairman. And thank you, Mr. 

Secretary, for being here today. 

I represent a district in Kansas where we have a great deal of 

common sense. And I can’t find many, if any, Kansans that support 

our current Tax Code. I think they are eager for lower rates for individuals and corporations, international reforms that will bring 

jobs home, simplification, job growth, and economic benefits. 

But I remember 30 years ago, the last time we did this, as a 

CPA, I was on the tax floor, and I watched the headlines. And it 

seemed like every day tax reform died a certain death. But it was 

able to be accomplished because we had a President at the time, 

President Reagan, who, along with his Administration, breathed 

new life into this thing every stinking day that it died. 

My frustration since my time on the Committee has been that we 

have not had a President or an Administration that was committed 

to rewriting the Tax Code. And now we have a President that ran 

on this. And so I am just curious, will this President be willing to 

get out in front and lead on this issue? Will he visit with the American people about the issues that are important to them, engage 

the stakeholders, work with Congress on this effort? 

Secretary MNUCHIN. Yes. I can assure you that once we have 

further details and we are a little bit further along, this is one of 

the President’s highest items. I had the opportunity to work with 

him on the campaign over the last year on his economic plans. And 

the President has every absolute intention to be part of selling this 

to the American public. 

Ms. JENKINS. Will we see any additional details to the plan 

that you are working on in the near future or are you going to rely 

on leaders on Capitol Hill to promote those ideas and work alongside you? 

Secretary MNUCHIN. I can assure you Chairman Brady, Chairman Hatch, myself, and Gary Cohn at the White House, we are all 

working as fast as we can possibly be. This is our highest priority. 

Ms. JENKINS. Thank you. 

Mr. Chairman, I yield back. 

23 

Chairman BRADY. Thank you. 

Mr. Pascrell. 

Mr. PASCRELL. Mr. Chairman, I have been advocating this 

Committee request President Trump’s tax returns using section 

6103 of the Code, the authority, and so forth. I think my efforts 

have been no secret, so I will get right into the questions. 

Section 6103 specifically states that the Treasury Secretary shall 

furnish copies of the President’s tax returns for internal review by 

this Committee upon request from the Chairman of the Ways and 

Means Committee. Mr. Secretary, we don’t have much time, so a 

yes or no answer would suffice. If and when this Committee uses 

section 6103 authority to request Mr. Trump’s returns, will you 

comply with the directive in the law? 

Secretary MNUCHIN. I am not familiar with that section, so I 

will have to review it with my internal legal department. But I can 

get back to you. 

Mr. PASCRELL. We need fundamental tax reform, but the Congress and the public have no way of knowing how this President 

stands to personally benefit. That is one of the problems we had 

back in 1924. And we have no way of knowing if he is getting special treatment from the IRS. 

Mr. Secretary, if for no other reason than to eliminate a distraction from your agenda, will you encourage the President to release 

his tax returns? 

Secretary MNUCHIN. I am not having any discussions with the 

President. That is his decision what he does. 

Mr. PASCRELL. Secretary Spicer said on April 17 that the President will not release his 2016 tax returns because they are under 

audit. We know that tax returns can be released while under audit, 

and that every President’s tax returns automatically are audited. 

Nevertheless, can you confirm that the President has indeed filed 

his 2016 tax return, or has he filed for an extension? 

Secretary MNUCHIN. I am not aware of it. I don’t have access 

to that information. 

Mr. PASCRELL. As the head of the Treasury Department, can 

you confirm to this Committee that his returns from each of the 

past 10 years remain under audit? 

Secretary MNUCHIN. Again, I don’t have access to that. That is 

within the IRS. I don’t have access to specific taxpayer-level information. 

Mr. PASCRELL. We know in the tax plan that is before us, we 

see a $200 tax break on the other side. That isn’t going to cut it 

for the many folks in the middle class. If you do away with the 

doing away of the deduction for State and local taxes, that is about, 

for the average filer, $3,500 compared to the $200 that you are 

talking about in this particular—let me be charitable—budget that 

you presented. 

Our State faces the highest property taxes in the country. Like 

many other States, we have a high cost of living. How do you justify this revenue grab from middle-class homeowners from highcost States like New Jersey? 

Secretary MNUCHIN. Again, I think, fundamentally, we think 

that the Federal Government should get out of the business of subVerDate Sep 11 2014 06:00 May 06, 2019 Jkt 033428 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33428.XXX 33428
24 

sidizing the States. But we are sensitive to the transition and want 

to make sure that the middle income does have a tax cut. 

Chairman BRADY. Thank you. The time has expired. 

Mr. Paulsen, you are recognized. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

And, Mr. Secretary, thanks for being here. 

As you know, startups are young firms with little to no revenues, 

as they work to build a concept into successful companies. In fact, 

a medical device company and startup can go a decade without 

even taking in a dime of revenue while they invest millions of dollars trying to build a successful product and then get FDA approval. So tax policy tends to impact their business model in a different way than most industries that we speak about in tax reform 

conversations, but these entrepreneurs are clearly driving the future of the American economy, and their success has a huge impact 

on our economic competitiveness. And that is why I made modernizing the Tax Code to encourage entrepreneurship a priority. 

For example, I am working hard to rationalize the tax treatment 

of stock options for startup employees, legislation that we actually 

got passed and through the House last year in Congress. I am also 

working to find a way to protect startups from being unfairly penalized by the Byzantine loss limitations and tax regulations which 

can then depress investment in capital-intensive companies. And 

discrete policy initiatives and issues like this will absolutely make 

a difference for the entrepreneurs out there that are seeking to go 

build the next Apple or the next Amgen. 

So I am hoping that you will work with those of us on this Committee. Mr. Crowley is another advocate for some of these concepts. 

I am hoping you will work with us on some of these concepts in 

tax reform that encourages that new company formation. And, you 

know, can you share a few thoughts on that? Is that something you 

think there is an opportunity for forging ahead with for the entrepreneurship component within the tax reform model? 

Secretary MNUCHIN. Yes, and we look forward to working with 

you on your ideas on that. Thank you. 

Mr. PAULSEN. Thank you, Mr. Chairman. I yield back. 

Chairman BRADY. Thank you. 

Mr. Kelly, you are recognized. 

Mr. KELLY. Thank you, Mr. Chairman. 

Mr. Secretary, thanks for being here. I noticed that part of your 

plans as we go forward are whether it is public-private partnerships or private activity bonds, when it comes to addressing infrastructure and then government-owned properties—Mr. Blumenauer 

and myself are engaged in a piece of legislation that would actually 

do that, along with Senator Heller in the Senate. So I think we 

have both bipartisan and bicameral agreement on this. If you can 

just for a little bit try to address some of the large problems we 

face. And we can use private and public bonds. We can do the activity bonds. We can do so many things that bring the public into 

this, and they see their investment taking place the right way. And 

just, if you can—and I know you are on a tight schedule—try to 

address the Administration’s views going forward of how we are 

going to finance infrastructure and government-owned buildings 

that need repair. 

25 

Secretary MNUCHIN. We are very supportive of public-private 

partnerships and look forward to working with you and your ideas 

on that. I think, as the President has said, that infrastructure investment is of critical importance to him and this country, and we 

are looking at how we can fund a trillion dollars of infrastructure 

without just increasing the national debt. So we are looking for all 

different types of partnerships and incentive mechanisms. 

Mr. KELLY. Well, we are looking forward to working with you. 

Thank you. I yield back. 

Chairman BRADY. Thank you. 

Mr. Crowley, you are recognized. 

Mr. CROWLEY. Thank you, Mr. Chairman. 

Welcome, Mr. Secretary. It is great to have you here before us. 

Mr. Secretary, I believe that a budget reflects a statement of the 

values that our country has for the aspirations, the hopes of the 

people. And I am frightened, quite frankly, of the values reflected 

by this budget presented by the President and by the Republican 

party. 

Mr. Secretary, don’t you agree that protecting the homeland is 

the number one and ought to be the number one job of our Federal 

Government? 

Secretary MNUCHIN. I think that protecting the homeland is 

the number one job, and that is a combination of military, intelligence, and protection here. 

Mr. CROWLEY. And reflected in that would be the Department 

of Homeland Security, correct? 

Secretary MNUCHIN. That is part of it, yes. 

Mr. CROWLEY. Then why does this current budget cut funding 

for the Homeland Security programs for people living in areas at 

the greatest risk of terror after—for instance, places like the city 

of New York? 

Secretary MNUCHIN. I am not familiar with the specifics of 

their portion of the budget, but I know that General Kelly is very 

focused on Homeland Security. I have enormous confidence in what 

he has done, although I am not familiar with the specifics of that 

part of the budget. 

Mr. CROWLEY. Mr. Secretary, I hope that you do familiarize 

yourself with it because I know you are a New Yorker at heart as 

well, and I wouldn’t want to see New York—— 

Secretary MNUCHIN. I am a New Yorker at heart. 

Mr. CROWLEY [continuing]. I wouldn’t want to see New York 

disadvantaged in any way, especially because we know that New 

York was a target, is a target, and will always be a target. 

I am also concerned about what I see happening to our Nation’s 

vets, our veterans, by slashing $1.4 trillion in Medicaid funding 

that would leave at least 2 million vets without access to care. I 

am pleased that my friend and colleague from Nevada, Ms. Rosen, 

Jacky Rosen, is taking this issue of cuts to veterans’ care head on. 

We ought to be encouraging taking care of our vets when they come 

home, not using the VA as a piggy bank for a budget or for this 

Congress’ budget. 

Finally, this budget cuts $64 billion from Social Security. Social 

Security is an earned benefit that workers pay their own money 

into and is not a pool of cash for Congress and the President to use 

26 

for their own spending needs. So I don’t delineate between Social 

Security and Social Security disability. Individuals, workers pay 

into Social Security. The average Social Security recipient with a 

disability worked and paid into Social Security for 22 years before 

becoming disabled on the job. 

So, Mr. Secretary, you can spin it any way you like and the Administration can, as well. A cut to Social Security disability is a cut 

to Social Security, especially those people who are disabled and can 

no longer work. Cutting them or making it more difficult for them 

to receive that benefit is cutting Social Security. 

And, with that, I know my time is up, and I yield back the balance of my time. 

Chairman BRADY. Excuse me. Thank you. 

Mr. Meehan, you are recognized. 

Mr. MEEHAN. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for being with us. 

I was very grateful to hear your discussion in relation to the 

questions that Mr. Roskam asked about the time you are spending 

on looking at terrorist financing around the world. One legacy issue 

that we are still unclear on relates to the Iran nuclear deal that 

was struck by the previous Administration. You are now in a powerful position to understand more about details that were not so 

clear previously. 

One ambiguous question relates to the significant sum that was turned over to Iran, the $1.7 billion, that they have been able to 

utilize by virtue of the release of the four hostages, but there has 

been great difficulty in actually calculating what other kinds of Iranian assets had been subjected to sanctions that were subsequently 

lifted according to the agreement. 

It has been estimated in The New York Times, U.S. News and 

World Report, and other places that it is anywhere between $100 billion and $150 billion, that could be released back into Iran to be 

utilized for numbers of purposes, including the potential that it 

would be funneled back into the sponsorship of terrorism. 

Is there any ability for the Treasury Department to identify what 

actually is out there in the form of assets, which had been previously frozen, which may be in some status of being frozen still? 

Can we calculate if, in fact, $100 billion or $150 billion was returned to Iran because part of the agreement certainly reflects the 

idea that there are supposed to be snap-back provisions associated 

with that, as well as complete compliance by Iran, and some would 

question whether they have been? 

I think you understand the tenor of my question, but the focus 

is, can the Treasury Department calculate what there is with respect to Iranian assets—it seems like they are mostly oil proceeds 

and other kinds of things that have been suspended in Asian banks 

and otherwise—but where it is, what it is, and whether it still may 

be subjected to sanctions? 

I close my comments by saying, in addition, there is about a $45 

billion credit—not credit—to families of terrorism, which has been 

won in American banks, which I believe should be used against any 

assets before any dollars are turned over to Iran, but I am wondering if you could have Treasury calculate what is actually still 

potentially subjected to, you know, being held away from Iran? 

27 

Secretary MNUCHIN. Yes. We have very good data and very 

good access to information, obviously, on a classified basis, but we 

are—as I mentioned earlier, the sanctions are very effective. We 

continue to put sanctions on Iran, on their ballistic missiles, and 

on terrorism. 

Mr. MEEHAN. Thank you. 

Chairman BRADY. Time is expired. 

Mr. Renacci, you are recognized. 

Mr. RENACCI. Thank you, Mr. Chairman, and I want to thank 

you, Secretary Mnuchin, for being here. I am very excited to have 

someone leading the Treasury who is committed to getting our 

economy moving again. You cite three areas that can help our economy grow: Tax reform, regulatory reform, and protecting taxpayers. 

I am a strong supporter of getting tax reform done as soon as 

possible. I spent 30 years in the business world before coming here. 

So I understand we have to be able to compete. The United States 

likewise has to set its corporate rate to compete. 

I am pleased that your tax reform outline included a 15 percent 

corporate income tax rate because, to borrow President Clinton’s 

political strategist James Carville’s line, ‘‘It is the rate, stupid.’’ It 

is hard for U.S. companies to compete against Canada, where the 

Federal corporate income tax is 15 percent, or Ireland, where it is 

12.5, or even the U.K., which will be 17 by 2020. So thank you for 

what you are attempting to do. 

As history reminds us, 99 percent of temporary tax cuts in 2011 

were eventually made permanent. Would you support a temporary 

corporate tax cut? 

Secretary MNUCHIN. Again, as I said earlier, permanent is better than temporary, and temporary is better than nothing. So these 

are tradeoffs we will have to make as we go through and score the 

various different alternatives. 

Mr. RENACCI. I understand, and I heard you say that earlier, 

and I agree. 

Do you support eliminating the deduction for interest as part of 

the tax plan? 

Secretary MNUCHIN. Well, first of all, on the individual side, I 

support maintaining the mortgage interest deduction, and on the 

business side, my preference is to maintain interest deductibility, 

which is important for small- and medium-sized businesses, but we 

are looking at that like everything else that is on the table. 

Mr. RENACCI. Do you support extending the 10-year budget period to a longer period so that we can take a look at tax reform 

and maybe get some tax reform done? Does it fit within the reconciliation window? 

Secretary MNUCHIN. I have heard people suggest that, and I 

think that is a very good idea to consider strongly. 

Mr. RENACCI. Okay. Regarding 385 regulations, which went far 

beyond discouraging legitimate cross-border mergers, instead they 

cast a wide net that disrupts ordinary business transactions. You 

know, this is, of course, an issue. I want to thank you and the 

President for reviewing these regulations. Do you have a sense on 

when the review will be complete? 

Secretary MNUCHIN. I don’t. It is under review, and it would 

be preliminary for me to give timing on that. 

28 

Mr. RENACCI. All right. Again, I am currently working on legislation to combat the problem that we have on fraud, waste, and 

abuse, but also tax reform issues regarding improper payments. 

The legislation I am working on requires taxpayers to maintain 

books and records to support amounts reported as earned income— 

this is the earned income tax credit—clarifies taxpayers who selfreport must calculate the EITC based on all allowable deductions 

related to self-employment income, and permits the IRS to disallow 

the EITC and improper education credit payments without a formal audit. Will you commit to work with me on that legislation? 

Secretary MNUCHIN. Yes. 

Chairman BRADY. Well, time has expired. 

Mr. Higgins, you are recognized. 

Ms. Sewell, would you like to be recognized? 

Ms. SEWELL. Yes. Thank you, Mr. Chairman. 

Secretary Mnuchin, I really think all of us in this room know 

that we need to do something to make our corporate tax rates more 

competitive for our industries. I think the concern, though, is how 

do we make sure that it is revenue neutral, that it is deficit neutral, that we also make distributional neutral, as well? 

And so my concern is, how are we going to pay for it? What are 

your views about—I mean, I know the President issued his onepager, but on that one page, it didn’t say how he was going to pay 

for it. 

So can you speak to how he is going to pay for it and what your 

views are about the blueprint that has been ushered out by the Republicans that say the border adjustment tax is the way to go? 

Secretary MNUCHIN. Well, let me just comment that many economic surveys show that over 70 percent of the cost on corporations 

is passed on to the workers. 

Ms. SEWELL. Is that trickle-down economics? Because I can tell 

you that the folks I represent—— 

Secretary MNUCHIN. No, it is not trickle-down economics. This 

is absolutely—there are multiple, multiple reports on who bears 

the economics of the tax. But, in any event, as we progress on the 

details, we will come out with more details on the plan and—— 

Ms. SEWELL. So what is your view on the BAT, the border adjustment tax? 

Secretary MNUCHIN. Again, I think I have been explicit in saying that I think there are certain concerns with it in its current 

form, but we continue to work with Chairman Brady and others in 

looking at it. 

Ms. SEWELL. Well, I have to tell you that I found it quite offensive to hear that the OMB Director Mulvaney in his rollout of the 

budget yesterday redefined ‘‘compassion’’ to be a calculation of how 

many Americans you can kick off of social safety net programs. 

And I just think that what I would like to hear from you is, what 

programs, what line items in the budget that was rolled out yesterday actually reflect this Administration’s commitment to working 

families and to those that are most vulnerable in our society? 

Secretary MNUCHIN. I think there are lots of programs, and, 

again, I think the biggest focus is on economic growth and putting 

American workers back to work. 

29 

Ms. SEWELL. Well, I think it is a misnomer to assume that people who are on SNAP are not trying to work. Most States have 

work requirements, and, in fact, 50 percent of the people who receive SNAP only have it for 10 months or less. So I just think that in taking $190 million out of SNAP, for example, nutrition assistance, that is not showing compassion, and I 

just submit to you that a rising tide lifts all boats, that people who 

live in vulnerable communities are just as American as you and I, 

and they are looking for a hand up not a handout, and we all could 

benefit as Americans if we make sure that, as we rise, they rise, 

too. 

Chairman BRADY. Time has expired. 

Mrs. Noem, you are recognized. 

Mrs. NOEM. Thank you. 

Thank you, Mr. Secretary, for coming today. I appreciate you 

being here to answer some questions. I represent the entire State 

of South Dakota, in which our number one industry is agriculture. 

So I have questions that would relate to that topic today. 

You know, and I understand my colleagues on the other side of 

the aisle have been criticizing the President’s budget, but we 

fought funding issues in President Obama’s budget every single 

year. He cut agriculture dramatically. So this is something that 

Congress has the opportunity to provide funding for and put our 

budget together, and I am always hopeful that rural America will 

do well and continue to feed the world. 

I wanted to talk to you a little bit because you mentioned in your 

opening statement about trade and what a critical component that 

is of the plan to get the economy growing again. And I appreciate 

that. NAFTA has been good for agriculture. We do have some fixes 

that need to be done, and I know the Administration is renegotiating that agreement. I would just encourage that, as we go 

through that process, we don’t damage the market we have already 

created there. We have some issues with dairy and other commodities that need to be looked at, and so I am glad we have identified 

that and that the Administration is going after it. 

The other concern with agriculture, though, is that while we renegotiate trade agreements, we miss out on market opportunities. 

Other countries are looking to negotiate with these countries, and 

we need to be aggressive in going after them currently so that we 

don’t lose that market access in the future. So I would just encourage speed as we negotiate free and fair trade with other countries 

so that we lock up those markets for the United States. 

And then, also, I want to touch on agriculture programs and how 

they are impacted by tax reform. 

Thank you—and thank the Administration for looking at repealing the death tax. That hit my family personally. It is a double taxation. It is an unfair tax, and it should be repealed. So I want to 

thank the Administration for identifying that in tax reform. But 

also interest deductibility, like-kind exchanges, and expensing are 

all important to the agriculture industry, and I just wanted to ask 

you your thoughts on those issues and how we go forward. 

Secretary MNUCHIN. Well, again, let me just assure you that 

agriculture is one of our most important exports, and this Administration is doing everything it can to make sure that more markets 

30 

are open for our farmers to export things to. In our recent negotiations with China, we are pleased that we have opened the market 

to beef. It has been over 9 years since our farmers have been able 

to sell beef, and that is something that was very important to the 

President. 

Mrs. NOEM. Thank you. And, again, we do have other countries 

that are trying to access other markets that we are still in negotiations with. So speed is very helpful so we don’t lose that potential 

in the future. 

Secretary MNUCHIN. Okay. We understand that. Thank you. 

Mrs. NOEM. And on tax reform, those are critical components 

that we are hoping to get rates low enough that those small farmers that do feed the world and feed this country—I always talk 

about agriculture as a national security issue. We need to grow our 

own food so other countries don’t control us. 

So thank you for being here today. 

Secretary MNUCHIN. Thank you. 

Chairman BRADY. Thank you. 

Mr. Holding, you are recognized. 

Mr. HOLDING. Thank you. 

Mr. Secretary, thank you for being here. I want to compliment 

the professionalism of your staff. I have had an opportunity to meet 

with a number of them to talk about some discrete issues, and I 

look forward to working with you and them as we go forward. 

I agree with you about growth. It is the key to solving our debt 

problems. It is the key to prosperity for future generations. I am 

not so sure I agree with you about temporary tax cuts being better 

than no tax cuts, because if we have temporary tax cuts, they rarely incent the growth that you want. They don’t incent the behavior 

you want. And if we have temporary tax cuts that contribute to our 

debt problem, I am afraid this is not going to be as good as no tax 

cuts, but we will work through that. I think we agree that permanence is the best, and I believe we can get there. 

We all agree that moving to a territorial system is key. The base 

erosion is a problem, and a territorial system for business tax is 

a solution. I also would like to point out that we are only one of 

two countries, Eritrea being the other one, that tax our citizens regardless of where they live, and have worldwide taxation, rather 

than residency-based taxation. And, last week, we were hearing 

from executives, and I heard from a number of people that this 

makes our U.S. citizens extremely unattractive to hire abroad because it costs up to 40 percent more to hire a U.S. citizen for a position in another country. So, if we are going to make our companies more competitive worldwide, I hope we look at making our 

citizens more competitive worldwide by looking at a residencybased taxation for earned income. I think that would be an added 

benefit to tackle while we are tackling, you know, comprehensive 

tax reform. 

We talk about companies leaving the country. We had over 5,000 

citizens expatriate last year. That was a huge increase—you know, 

it is over a 500-percent increase from what the expatriation rates 

were from over 10 years ago, a 26 percent increase from just last 

year. So that is another area that we can work on. 

31 

And then, lastly, I want to pick up from something Ms. Noem 

brought up. We appreciate the President including in his budget 

the elimination of the inheritance tax. We hope that we will also 

look at the elimination of the gift tax, as well as the inheritance 

tax. You know, the two, in my mind, go very hand-in-hand, and to 

any extent that a gift tax elimination might cause some problems, 

you know, we can find rules to rein in any abuses of gift tax elimination, so I look forward to working with you on that. 

Secretary MNUCHIN. Thank you. 

Mr. HOLDING. Thank you, Mr. Chairman. 

I yield back. 

Chairman BRADY. Thank you. 

Mr. Higgins, you are recognized 

Mr. HIGGINS. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for being here. You are the principal economic adviser to the President. The tax policy that has 

been advanced to this House would provide 3 million wealthy 

Americans with about a $200,000 tax cut and about 250 million 

not-so-wealthy Americans with a $200 tax cut. The nonpartisan 

Committee for a Responsible Federal Budget says that the White 

House budget will increase the national debt by $5.5 trillion. 

Economists on the right, left, and in the center say tax cuts don’t 

pay for themselves; they never will, and they never have. You want 

3 percent growth. I want 3 percent growth, as well. All of us do. 

I just want to urge you to urge the President to do a robust investment in America’s infrastructure. It won’t pay for itself, but 

most economic studies indicate that you could reclaim about half 

of the money that you lay out for infrastructure, given the jobs that 

would be created and the resources in the private sector that would 

unleash. It is very important, I think, to the growth of the economy 

because that is the way you reduce debt and deficit. 

You know, China is making a major move to displace America as the global economic leader. China just announced a $1 trillion infrastructure bill to open up China to 47 other Asian countries so 

that they can sell their stuff to 47 new markets more efficiently. 

We have a budget that wants to spend $1.5 billion to build a $40 

billion wall that we were told we would never have to pay for. Your 

budget wants to spend $3 billion a month to continue a 16-year 

war in Afghanistan and responds to a $2 trillion need for American 

roads and bridges with a pathetically weak $200 billion investment 

in infrastructure, maybe. 

I just think that, you know, the focus on tax cuts here should not 

be discussed in and of themselves. It has to be something increasingly more, and that infrastructure investment is so critically important to the competitiveness of America, and I would urge you 

to please urge the President on behalf of the American people to 

advance a real infrastructure bill that will create real growth and 

unleash the resources of the private sector. 

With that, I yield back. 

Chairman BRADY. Thank you. 

Mr. Rice, you are recognized. Oh, excuse me, Mr. Smith, you are 

after Mr. Rice. 

Mr. RICE. Thank you. Mr. Secretary, since 1986 was the last 

time we did tax reform, and at that time our Tax Code was pretty 

32 

competitive, but in those last 30 years, the world has left us behind 

in terms of the velocity of their tax system. Every industrialized 

country, all of our trading partners have border adjustment in 

some form. 

Now, since 1990, our manufacturing base has declined precipitously. In 1990, 50 percent of Americans were in the middle class. 

Today, it is 43 percent. In 1990, the median household income in 

2013 dollars was $52,000. Today, it is $52,000. So the middle class 

has shrunk, and they haven’t had a raise in 27 years. And I believe 

that is a direct and foreseeable result of our antiquated tax system. 

Now, last week, Ambassador Lighthizer was here talking about 

renegotiating NAFTA, and I asked him, ‘‘How are you going to get 

around the advantage that Mexico has with their 16 percent valueadded tax, their border adjustment?’’ He said, ‘‘You know, that creates a real problem.’’ 

Yesterday, we had a hearing on the border adjustment, and the 

CEO of Archer Daniels Midland was talking about agricultural exports, corn, wheat, and soy beans. We have lost 50 percent of our 

market share in the last 30 years, and our primary competitors are 

Russia and Brazil, both with 15 percent plus border adjustment. 

So, when China, which has 6 percent of the world’s land and 20 

percent of the world’s population, needs to buy grain, are they 

going to pay 15 percent more for American grain because of our antiquated tax system? 

Now, I hear you say, and I read about it in the periodicals, that 

you have problems with border adjustment, but as a tax lawyer, I 

had doubts when I got into it, too, but the more I have learned, 

the more I have recognized this is a necessary component if we 

want to rebuild our middle class. 

So what I want to know is, where are you on border adjustment? 

How can we solve your problems? And if you don’t like it, what else 

can we do to rebuild our manufacturing base, rebuild our middle 

class, and give them a way overdue 27-year raise? 

Secretary MNUCHIN. Well, I can assure you our priority is to 

the middle class and is making sure that our businesses are competitive, and we absolutely share common goals on what we are 

trying to do to make American business competitive. 

Mr. RICE. How can we do revenue neutral tax reform, how can 

we make our tax system competitive if we don’t do border adjustment, which every other industrialized country has? 

Secretary MNUCHIN. Well, as you comment on other countries—do I have time to continue? 

Chairman BRADY. So perhaps Mr. Schweikert could yield a moment for the answer because time has expired, and we are really 

staying tight on that. 

Mr. Schweikert. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. I will yield a moment. 

Secretary MNUCHIN. I was just commenting on the border adjustment. Many other countries do have a VAT system and a corporate tax system and use them in conjunction. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman, and Mr. Treasury Secretary. 

33 

Can I run through just a handful of things because we are supposed to be actually discussing the 2018 Presidential budget? And 

I will tell you one of the things I did appreciate is someone that 

actually believes compassion is actually also thinking about my 19- 

month-old little girl and the ocean of debt she will exist and live 

in and spend the rest of her life paying back for what we have 

spent today. So I hope there is some compassion for the young and 

what we are doing to their futures. 

Could you actually walk me through, as I am looking at the 

budget line items right now, what you believe actually the 2018 

borrowing is going to be? 

Secretary MNUCHIN. I don’t have the 2018 borrowings in front 

of me. 

Mr. SCHWEIKERT. If I look at some of the numbers right now, 

at least it looks like in 2017, we have actually used an additional 

raise in the statutory debt limit of about $816 billion. That’s obviously debt sold to the public and borrowing from internal accounts. It looks like we are still going to actually need $740 billion of 

new borrowing capacity, both from internal accounts and outside 

borrowing, in the 2018 year. And I beg of our brothers and sisters 

here on the Committee, you know, I have heard so much talk, but 

the GDP numbers actually look reasonable. I mean, for next year, 

you actually are saying for 2018, I think, what, 2.4? 

Secretary MNUCHIN. That sounds about right. 

Mr. SCHWEIKERT. We are at 2.4 percent GDP for 2018. And 

then 2.7 in 2019, and then 2.9. You don’t actually start saying we 

are at 3 percent GDP until 2021? 

Secretary MNUCHIN. No. I think they look quite reasonable. We 

scale up to 3 percent. That is correct. 

Mr. SCHWEIKERT. So I have heard this dance here and some 

of the publications saying, ‘‘Oh, it is crazy; we’re going’’—you know, 

compared to some of the Obama budgets we look at where sometimes there was 4-plus GDP built into them instantly, the numbers 

here look fairly reasonable. 

My great interest here is, as we actually get up against the debt 

ceiling, how do we work with you to also do a series of things that 

revolve around debt management? You know, look, we are going to 

continue to bathe in debt because of our demographics. How do we 

encourage you to actually do the full-throated look at the long-term 

bonds, the trills, and other things of sweeping idle cash into accounts to do what is necessary for the debt management? 

Secretary MNUCHIN. I can assure you we are carefully studying 

all these issues. We are looking at ultra long bonds right now, both 

50- and 100-year bonds. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

Chairman BRADY. Thank you, and thank you for allowing the 

Secretary to finish that answer. 

Ms. DelBene, you are recognized. 

Ms. DELBENE. Thank you, Mr. Chairman, and thank you, Mr. 

Secretary, for being with us today. 

Prior to Congress my work was as a businesswoman and entrepreneur, and I know how important it is that we have a responsible budget but also responsible fiscal policies. You brought up the 

debt ceiling, and earlier today Director Mulvaney was speaking 

34 

with the House Budget Committee and talked about the need for, 

perhaps, addressing the debt ceiling earlier as revenues were coming in slower, and so this might be a more urgent issue. 

Do you believe this is a more urgent issue and that we need to 

make sure we pass this by June, so we aren’t waiting until the last 

minute in the need to provide certainty and stability as folks talked 

about going forward that we need to do this right away? 

Secretary MNUCHIN. I think it is absolutely important that this 

is passed before the August recess, and as far as I am concerned, 

the sooner the better. 

Ms. DELBENE. So you would support doing it right when we get 

back from Memorial Day and that this needs to be a clean bill addressing raising the debt ceiling? 

Secretary MNUCHIN. I am supporting that this is done as quickly as possible, yes. 

Ms. DELBENE. And that it is clean? I worry that people have 

played politics with this in the past. So are you on record as saying 

this needs to be a clean bill focused just on raising the debt ceiling? 

Secretary MNUCHIN. I mean, my preference is that it gets 

passed as quickly as it can however the House and the Senate 

want to pass it. My objective is to get this done quickly. 

Ms. DELBENE. And that would mean a clean bill, I would assume. 

Secretary MNUCHIN. That would be my preference. 

Ms. DELBENE. Thank you. 

Also, when we talk about making sure we have our responsible 

budget, there are a lot of assumptions that have gone into this 

budget, many concerns that I have with the concept that tax cuts 

will automatically pay for themselves. But we look at assumptions, 

too. We really need to be assuming a future economy, and you have 

said publicly that job loss due to artificial intelligence and automation is not even on your radar and won’t be real issues for another 

50 to 100 years. But many technologists and industry experts estimate that, for example, by 2032, half the trucks on the road would 

not have human drivers or that the trucking industry’s current size 

could transition to automation. That means 1.75 million lost driver 

jobs over the next 15 years. 

So, if we look at these issues that are upcoming, shouldn’t we be 

looking at making assumptions and realizing the need for job training and making sure people have skills in a new economy, things 

that right now are not addressed in this current budget and would 

impact people’s ability to have the jobs of the future? 

Secretary MNUCHIN. Yes. Let me just comment, when I made 

the comment on artificial intelligence, and there is different views 

of artificial intelligence, I was referring to kind of like R2–D2 in 

‘‘Star Wars.’’ Robotics are here. Self-driving cars are something 

that are going to be here soon. So I am fully aware of and agree 

that technology is changing, and our workers do need to be prepared. 

Chairman BRADY. Thank you. 

Mrs. Walorski, you are recognized. 

Mrs. WALORSKI. Thank you, Mr. Chairman. 

Mr. Secretary, thanks so much for being here, for taking the 

time. An issue that is resonating in my district, and I know, you 

35 

know, as we talk about these big items, I look at this issue with 

the IRS, as somebody mentioned earlier, as like a logistics thing. 

The IRS is the face that most Americans are dealing with as we 

look at individuals and even corporations. And so this was part of 

the blueprint. And, you know, I spend a lot of time going around 

my district. I get a lot of feedback from folks who really want a 

fairer, simpler tax form, and they want us to assure them—and I 

guess I am interested in your position here—on this issue of a service-first IRS, because the American people deserve—and one of the 

reasons that we have gotten so much feedback on this is because 

our blueprint says that the American people have a right to quality 

service, privacy, confidentiality, and a fair and just tax system. And 

I know you kind of alluded to this earlier, but I am just interested, 

I guess, to hear from you that this might be a little box that we 

are talking about logistically in here about how important this is 

to the American people who don’t trust the IRS. So where is this 

on your priority list? Are we working together toward the same 

goal here? 

Secretary MNUCHIN. Absolutely. I can’t read that box from this 

far away. 

Mrs. WALORSKI. I just read it to you. I didn’t skip a word. 

Secretary MNUCHIN. But based upon what you said to me, as 

I have said, technology is very important. Keeping taxpayers’ information safe and secure in the world of cyber issues is of enormous 

importance to me. We support the idea that 95 percent of the 

American public should be able to fill out their tax form on a large 

postcard. We want to simplify this, and the American taxpayers deserve to be treated fairly by the IRS and have appropriate service. 

Mrs. WALORSKI. And I appreciate that. And I guess the other 

reason I am asking you this, Mr. Secretary, we had a Subcommittee meeting with one of the IRS advocates, who do an incredible job. They have done a great job for my constituents in Indiana, but there has been such a hesitation on the side of the IRS 

to invest in commercially available technology that is being used 

around the world, but millions, multiple millions keep getting 

shoved into the IRS with no new technology to show for it. There 

is some kind of a problem with commercially adaptive kinds of 

things that are already working. Do you see that commercially 

competitive window opening finally with getting to be able to modernize this technology? 

Secretary MNUCHIN. I can assure you I have a technology background, and I will be spending a lot of time with the IRS and other 

areas of the Treasury on upgrading our technology. 

Mrs. WALORSKI. I appreciate that. Thank you so much. 

Mr. Chairman, I yield back my time. 

Chairman BRADY. Mr. Smith, you are recognized. 

Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman. 

Mr. Secretary, thank you for being here with us today. I, a couple 

months ago, had several tax policy roundtables throughout the five 

major cities of our congressional district, which is southeast Missouri. And at all five of those roundtables, I had people that 

showed up from all different backgrounds—farmers, small-business 

owners, families, big businesses, taxpayers, and some individuals 

that don’t pay taxes. 

36 

My question is, of the issues that came up at every one of those 

round tables there were two, two that were consistent in all five. 

One was to simplify the Tax Code, which you were just referring 

to, and I am very grateful to hear that. And I look forward to hearing more policies in the future of what the Administration, how 

they would like to simplify a 70,000-page Tax Code. 

The second one kind of follows on what Mr. Rice said, and everyone in our district said: We want the Tax Code to establish a level 

playing field for the farmers and small businesses in southeast 

Missouri. Right now, we don’t have a level playing field, and President Trump has said numerous times that we need to make sure 

we have a Tax Code that puts us on a level playing field. What is 

that approach? 

Secretary MNUCHIN. Well, again, I think that is an absolute 

priority, and whether it is through trade deals or whether it is 

through the Tax Code, the President has said, and I agree, we need 

to have reciprocal trade, that free trade is reciprocal. 

Mr. SMITH OF MISSOURI. I have read your statement of a reciprocal tax. Could you explain what that is? 

Secretary MNUCHIN. Well, again, I think the concept is that if 

we are charging somebody zero, and they are charging us 25 percent, that is not free and fair trade. 

Mr. SMITH OF MISSOURI. So would you be able to implement 

a tax just on an individual basis, or how would you do that overall? 

Would it be in the Tax Code? 

Secretary MNUCHIN. We are happy to follow up with you on it. 

I mean, there are obviously technical issues and how we do this 

and whether we do it in our trade agreements or what we do, but 

the idea is reciprocal free and fair trade. 

Mr. SMITH OF MISSOURI. I totally agree with you. I would just 

be happy to get the details to try to help push those policies. 

So I appreciate you being here. Thank you. 

Chairman BRADY. Thank you. 

Ms. Chu, you are recognized. 

Ms. CHU. Secretary Mnuchin, there are many questions I could 

ask, but I am compelled to comment on your Administration’s 

budget, which leaves all but the wealthiest few with horrific cuts. 

Remember when this President said he would save Social Security without cuts? He loudly proclaimed, ‘‘Believe me,’’ and many 

did. Well, it turned out not to be true. In fact, when asked if individuals receiving Social Security disability insurance would receive 

less from this budget, OMB Director Mulvaney said, ‘‘I hope so.’’ 

Now, you, yourself, Secretary Mnuchin, said that this budget 

wouldn’t touch entitlements. 

How does that square with the proposed $600 billion cut to Medicaid included in the President’s budget released yesterday? This is 

not the time to mince words. This budget’s assault on the 99 percent of average Americans will cost lives, and what is worse, the 

barebones Trump tax plan that slashes taxes for the wealthy and 

exacerbates inequality is used to justify the financing of this horrendous budget. 

Essentially, the Trump tax plan combined with a Trump budget 

guarantees that many people will suffer so that those on the top 

can get richer. I am thinking of people like my constituent Caitlin. 

37 

Caitlin became disabled when she was 29, and despite what people 

like OMB Director Mulvaney will tell you, she did work. She 

worked for years until she couldn’t anymore. But when her health 

meant she could no longer continue, she signed up for SSDI. This 

was not because she was lazy or because she wanted to live off the 

government. It was a tragic necessity that came at great cost to 

her. In fact, she now lives below the poverty line and makes so little that she didn’t even meet the minimum income requirements 

for affordable housing projects in the area. 

When Caitlin heard about the budget, she wrote to me on behalf 

of the one in five Americans who have a disability and who know 

they still have much to contribute to our country. What Caitlin 

needs is help, help to get out of poverty, manage her health problems, and know what it feels like to contribute again. She wants 

this, but it is being taken away from her thanks to the cuts in the 

budget needed to pay for Trump’s tax cuts. And that is the rule of 

the Trump budget, which is that if you are doing well, you get 

more money through a tax cut. If you are struggling to work because of a disability, you get less. If you run a family business like, 

say, The Trump Organization, you get a passthrough business tax 

break. If you have a family and lost your job, then too bad for you. 

Well, people like Caitlin and the millions of Americans who work 

one, two, three, or four jobs deserve better than what this budget 

has to offer them. 

I yield back. 

Chairman BRADY. Thank you. 

Mr. Curbelo, you are recognized. 

Mr. CURBELO. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for your presence here today. I 

would briefly like to associate myself with the Chairman’s comments at the beginning of this hearing where he discussed the importance of reforming and strengthening programs like Social Security and Medicare. I think it is critical that the Administration 

work with this Committee on not just making sure we keep our 

promises to today’s seniors but also tomorrow’s seniors, people in 

my generation, people younger than me who would like to see these 

programs around for us when we get a little older. 

Mr. Secretary, the budget provides continued support for the Volunteer Income Tax Assistance program as well as tax counseling 

for the elderly and low-income taxpayer clinics, or VITA, which 

provides assistance for low-income residents in underserved communities in filing their tax returns. We are dedicated to creating 

a service-first IRS. 

Can you talk about the importance of these programs for the IRS 

and how they fit into that service-first mentality that we would like 

to see the agency adopt? 

Secretary MNUCHIN. Well, we are going to review all the different service areas at the IRS, and I think we are going to make 

sure that we bring a mentality of customer service, particularly 

there are a lot of things we can do online to make sure that we 

are responsive. 

Mr. CURBELO. But specifically with regard to these programs 

that serve the least fortunate people who really struggle to file 

their tax returns and to comply with the law, can you make a comVerDate Sep 11 2014 06:00 May 06, 2019 Jkt 033428 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33428.XXX 33428
38 

mitment that the Administration is going make sure that, as we 

look at reforming the IRS, making it more customer focused, that 

we will pay special attention to these services that help the least 

fortunate in our country? 

Secretary MNUCHIN. We absolutely want to make sure that we 

have the proper services for the least fortunate. I want to make 

sure that these are the right programs and they are working, but 

yes. 

Mr. CURBELO. Thank you, Mr. Secretary. 

Another issue, the budget proposes reducing improper payments 

by increasing the data-sharing capabilities between agencies and 

support for business systems modernization. 

Can you discuss the importance of business systems modernization and data sharing to the IRS again in the context of this service-first approach? 

Secretary MNUCHIN. Well, again, I think it is just critical that 

we invest in the infrastructure at the IRS and make sure that we 

have the technology and that we look across agencies, and I would 

also just comment, you know, that our fiscal services area within 

Treasury touches almost every single receipt and payment, and 

that is something we will also continue to work on. 

Mr. CURBELO. Thank you, Mr. Secretary. 

And I will just say, speaking for myself, that as we reform the 

IRS and as it becomes that agency that is really on the side of 

American taxpayers, I truly believe we should allocate more resources to the agency so that it can help us effectively administer 

the Tax Code in our country. 

Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for being here. 

Chairman BRADY. Thank you. 

Ms. Sa ́nchez, you are recognized. 

Ms. SA ́ NCHEZ. Mr. Secretary, thank you for taking the time to 

appear before the Committee today to discuss the Administration’s 

fiscal year 2018 budget. I hope that we can find ways to work together over the coming years. 

But I have to begin by saying that I am profoundly disappointed 

and almost offended that you have been sent here today to sell us 

on the President’s budget proposal. 

In your testimony you said: If we develop the right policies today, 

our children and grandchildren will reap the benefits of an evergrowing economy. 

I couldn’t agree with you more on that sentiment, but where you 

lose me is on almost every single line item in this budget. 

I continue to believe that budgets are a clear reflection of our priorities, and if these are the President’s priorities, then I am pretty 

appalled. Our priorities should be pretty clear. Creating an environment for good-paying jobs that allow workers to support themselves and their families, offering our children a chance to achieve 

their dreams through higher education, and fostering an innovative 

business environment that allows domestic businesses to thrive. To 

me, the President’s budget would be laughable on these points if 

it wasn’t so sad. He guts student loan security, the social safety 

net, and retirement savings for hard-working Americans. 

39 

And with the few minutes that I have, I would like to dig in on 

a couple of specific items that are mentioned in the President’s 

budget. I want to start with the paltry parental leave proposal. 

While the President’s paid parental leave proposal may help spur 

a long overdue discussion on the issue, that is about all I can see 

that it achieves. The President has said over and over again that 

we would be tired of winning under his Presidency. Well, if a proposal that keeps us dead last in parental leave policies among developed countries is winning, then I am afraid to see what losing 

really looks like. 

The budget proposal also lists important items for tax relief for 

American families, citing an expanded standard deduction and 

helping families struggling with child and dependent care expenses 

as one of the priorities. Family care expenses are serious issues 

and present my constituents with some of the most difficult economic decisions they face. But in this budget, these issues seem to 

be reduced to little more than a sound bite. 

Childcare costs in this country are staggering. In many States, 

families are spending more to send an infant to daycare than they 

are spending to send a child to college. My constituents deserve a 

serious proposal that addresses this issue, and I stand ready to 

work with anyone across the aisle on serious proposals that try to 

address those issues, but I remain profoundly disappointed by the 

dismal budget we are discussing today. 

And, with that, I thank the Chairman and yield back the balance 

of my time. 

Chairman BRADY. Thank you. 

Dr. Davis, you are recognized for the final question. 

Mr. DAVIS. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary. 

Both conservative and progressive policy experts agree that the 

refundable earned income tax credit is an amazing pro-work success story with strong evidence of encouraging work and alleviating 

poverty. Indeed, the major expansion of the EITC was led by conservative Republicans. The earned income tax credit helped 

Chicagoans, Illinoisans, and Americans. Almost 14 percent of my 

constituents and 8 percent of Illinoisans benefited from the EITC. 

In my congressional district alone, just under 100,000 workers 

with children earning less than $50,000 received the EITC. Moreover, 5 percent of my constituents benefit from the refundable child 

tax credit. Given the high number of working poor in my district, 

it is alarming that only 15,000 of my constituents benefit from the 

childcare and dependent tax credit, showing that this tax credit 

fails to help the lowest income workers. 

That is why I am introducing a bill today with Representative 

DelBene that makes the childcare and dependent tax credit refundable and increases the maximum credit per child to help middleclass and low-income families. 

I am deeply concerned about the Republican tax plan that appears to cut or at best restrict these critical supports for middleclass families. When one-fifth of the children in the United States 

live in poverty and in a time of stagnant wages and appalling 

wealth gaps, we should be expanding the refundable tax credits 

and increasing assistance to middle-class families. 

40 

Could you clarify for me the Administration’s position on refundable tax credits, including the EITC, the CTC, the AOTC, as well 

as making the childcare and dependent tax credit refundable? 

Thank you. 

Secretary MNUCHIN. Thank you for your concern on those, and 

we believe many of those programs are critically important, as you 

have described, and we are reviewing them. 

Mr. DAVIS. Thank you very much, Mr. Chairman. 

I yield back. 

Chairman BRADY. Thank you, Dr. Davis. 

I have two thoughts. First, I would like to thank Secretary 

Mnuchin for appearing before us today. I look forward to working 

with you on all these growth, job, and opportunity issues. 

Please be advised, Mr. Secretary, Members of the Committee 

have 2 weeks to submit written questions to be answered later in 

writing. These questions and your answers will be made part of the 

formal hearing record. I also would like to make note that we are 

standing in recess as far as the healthcare markup. We expect to 

reconvene this evening after the second series of floor votes. 

With that, the Committee stands adjourned. 

[Whereupon, at 4:03 p.m., the Committee was adjourned.] 

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