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PRESIDENT’S BUDGET FOR FISCAL YEAR 2016 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 5, 2015 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

ORRIN G. HATCH, Utah, Chairman 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

DANIEL COATS, Indiana 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

MARK R. WARNER, Virginia 

CHRIS CAMPBELL, Staff Director 

JOSHUA SHEINKMAN, Democratic Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman, Committee on 

Finance .................................................................................................................. 1 

Wyden, Hon. Ron, a U.S. Senator from Oregon .................................................... 3 

ADMINISTRATION WITNESS 

Lew, Hon. Jacob J., Secretary, Department of the Treasury, Washington, 

DC .......................................................................................................................... 5 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Grassley, Hon. Chuck: 

Prepared statement with attachment ............................................................. 41 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 46 

Lew, Hon. Jacob J.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 49 

Responses to questions from committee members ......................................... 70 

Portman, Hon. Rob: 

Letter from Dave Mason and Tim Boes to Senator Portman dated January 21, 2015 ................................................................................................... 119 

Letter from Jeffrey Carrier and Tim Rowe to Senator Portman dated 

January 27, 2015 .......................................................................................... 120 

Wyden, Hon. Ron: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 121 

COMMUNICATIONS

Family Business Estate Tax Coalition (FBETC) ................................................... 123 

Puerto Rico Manufacturers Association (PRMA) .................................................. 128 

(III) 

(1) 

PRESIDENT’S BUDGET FOR FISCAL YEAR 2016 

THURSDAY, FEBRUARY 5, 2015 

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. 

The hearing was convened, pursuant to notice, at 10:04 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Orrin G. Hatch 

(chairman of the committee) presiding. 

Present: Senators Grassley, Crapo, Thune, Portman, Toomey, 

Coats, Heller, Scott, Wyden, Schumer, Stabenow, Cantwell, Menendez, Carper, Cardin, Brown, Bennet, Casey, and Warner. 

Also present: Republican Staff: Chris Campbell, Staff Director; 

Tony Coughlan, Tax Counsel; Everett Eissenstat, Chief International Trade Counsel; Jim Lyons, Tax Counsel; Mark Prater, 

Deputy Staff Director and Chief Tax Counsel; Jeff Wrase, Chief 

Economist; and Nicholas Wyatt, Tax and Nominations Professional 

Staff Member. Democratic Staff: Adam Carasso, Senior Tax and 

Economic Advisor; Michael Evans, General Counsel; Tom Klouda, 

Senior Domestic Policy Advisor; Todd Metcalf, Chief Tax Counsel; 

Jocelyn Moore, Deputy Staff Director; Joshua Sheinkman, Staff Director; and Tiffany Smith, Senior Tax Counsel. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. 

SENATOR FROM UTAH, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

Today’s hearing is on President Obama’s budget for fiscal year 

2016. I want to thank Secretary Lew for appearing before us today. 

I am not going to sugarcoat anything with this budget. Instead, 

I am going to cut right to the chase. The President’s budget proposes to hike taxes by $2.1 trillion, seemingly not content with the 

$1.7 trillion in new taxes he and his allies in Congress have imposed over the past 6 years. 

The President, with this budget, wants to again raise taxes on 

savings, investment, small business, and more, somehow thinking 

that it will help the economy. Sadly, this insatiable desire to raise 

taxes is not intended to bring our budget into balance. Rather, the 

President’s $2.1-trillion tax hike is accompanied by proposals to 

further expand the government to an even greater share of our 

economy. 

The proposed budget never balances. Deficits continue, which 

means that the debt as a share of the economy would remain at 

levels not seen in our Nation’s history, outside of a few years surrounding World War II. That outcome would mean continuing risk 

of what the nonpartisan Congressional Budget Office has labeled a, 

2 

quote, ‘‘fiscal crisis.’’ In fact, CBO has warned us repeatedly about 

potential fiscal crises under President Obama’s tenure. They have 

also made clear that unsustainable entitlement spending is at the 

heart of the potential for a fiscal crisis. 

Yet, the President’s budget proposes precious little in the way of 

reigning in spending on our health care entitlements and does virtually nothing to address Social Security. Despite having pledged 

in 2009 that he would not kick the can down the road on Social 

Security, that is exactly what the President is now proposing to do 

with his budget, even while the Disability trust fund is projected 

to be exhausted next year. 

Simply put, there are too many shortcomings in the President’s 

budget to adequately address in my opening statement, but they 

include higher taxes that would stifle job creation, economic 

growth, savings, and investment; new wealth taxes; muddled 

thinking about distributional issues; a lack of significant reforms to 

our unsustainable entitlements; ongoing deficits and outsized, risky 

Federal debt; and a repackaged bank tax that nods to the ineffectiveness of the Dodd-Frank law. 

The budget even puts forward a tax on section 529 education 

savings, which suggests that the budget’s authors are out of touch 

with the American people. Of course, we have heard that the proposal to tax 529 education savings has been withdrawn and labeled 

a distraction. But it is still supported on policy grounds by the administration, although I am happy to see it is withdrawn. 

This is unhelpful, and that is the kindest possible word I can 

think of to describe that particular proposal and others like that 

that are apparently founded on the notion that the American people’s savings are not their own, but instead targets for more redistribution. 

Like I said, there is a lot I could complain about when it comes 

to President Obama’s budget, but let us be honest. Rehashing these 

complaints over and over again is not going to be the best use of 

the committee’s time. 

So, Secretary Lew, let us try to look at some areas in the budget 

where the administration seems willing to go in a positive direction, even if, in my opinion, it falls short on the substance. In those 

areas, let us try to work together toward what I believe is the 

shared goal of everyone here: to help Americans where we can and 

get out of the way when we should. 

For example, I believe that we share a desire to reform our tax 

code, which everyone agrees is severely broken, does not help 

American families, and harms American businesses. And by businesses, I mean businesses of all types, not just one particular organizational form. 

I believe we share a desire to renew Trade Promotion Authority, 

as you identify in your testimony. I believe we share a desire to 

promote productive investments in infrastructure. Of course, if we 

are going to effectively address these issues, the President and his 

administration owe it to the American people to suspend what 

often seems like an unending political campaign for enough time to 

at least explore bipartisan cooperation. 

I will close with a question for you, Secretary Lew. It is a question that you did not answer and evaded in testimony earlier this 

3 

week. The IRS Commissioner evaded a similar question when he 

was here on Tuesday. Secretary Burwell did the same in our hearing yesterday. The American people deserve an answer to this 

question, and I hope you will be willing to give us one today. 

The question is: do you have contingency plans in place in the 

event the Supreme Court invalidates the current structure of the 

Affordable Care Act tax subsidies later this year? I would like you 

to address this question in your opening remarks, if you will, and 

I will note that it is a simple question, requiring only a one-word 

answer: ‘‘yes’’ or ‘‘no.’’ 

Once again, I want to thank Secretary Lew for appearing here 

today. 

[The prepared statement of Chairman Hatch appears in the appendix.] 

The CHAIRMAN. With that, I will turn it over to the ranking 

member, Senator Wyden, for his opening statement. 

OPENING STATEMENT OF HON. RON WYDEN, 

A U.S. SENATOR FROM OREGON 

Senator WYDEN. Thank you very much, Mr. Chairman. And 

thank you, Secretary Lew, for being here on day 3 of what is essentially budgetpalooza here at the Finance Committee. 

While the committee examines the administration’s budget proposal today, the underlying issue remains the health of the budgets 

of middle-class workers and families trying to get ahead. The fact 

is, too many middle-class Oregonians are hurting. 

Our job is to put America’s middle class on solid economic 

ground, lift wages, and make sure that everybody benefits when 

the economy grows. The President’s budget proposals go after that 

challenge in a number of ways, and many of them are designed to 

improve America’s badly broken tax code. For example, the budget 

proposes to make incentives for education, child care, and retirement savings more generous. It would take several steps to address 

the unfair ways our tax system treats wage-earning middle-class 

workers compared to others. And I was pleased to see that the proposal would move towards ending the system of tax deferral that 

traps the profits of America’s businesses overseas instead of reinvesting them here in this country. 

These are all strong ideas, but I see an opportunity to do something even bolder. When it comes to the tax code, colleagues, why 

keep bailing water out of the boat instead of fixing the leaks? The 

most effective improvements Congress can make to middle-class 

tax incentives are going to come through comprehensive tax reform. That is the best route to a modern tax system that is simpler 

and fairer for all, and it is the best way to end the uncertainty 

caused by our tax code and to address its most persistent issues. 

Through comprehensive reform, the Congress can ensure that incentives provide the biggest help to the people most in need. Too 

often that is not how the code works today. Comprehensive reform 

can do more than piecemeal changes to level the playing field for 

wage earners and make filing easier to manage. And there is one 

indisputable fact. A comprehensive approach to tax reform is the 

best option for middle-class families, not one that is focused exclusively on business taxes. 

4 

A lot of Americans—and certainly there are a number in the administration—have advocated a corporate-only or business-only 

plan for reform. I would not want to have to explain to a single 

parent in Oregon why the Congress overhauled the tax code for 

corporations but not for that middle-class person. The corporate 

side of our tax code undeniably needs reform. Tax reform can and 

should make American businesses more competitive in the tough 

global marketplace, but it would be a grave mistake to leave millions of middle-class families and small businesses out. 

Now, of course, the Finance Committee is going to be working 

with the Treasury Department closely over the upcoming year on 

a variety of issues in addition to tax reform. The Treasury Department is working hard to look at new approaches to make sure that 

American workers and American priorities are maintained in tough 

global markets. 

So I look forward to hearing about the administration’s efforts to 

address misaligned currencies, particularly with respect to the ongoing discussions on the Trans-Pacific Partnership. And it is important not to forget that Treasury plays an integral role in managing 

economic sanctions against countries like Russia, Iran, and Cuba. 

We welcome, Secretary Lew, as you know, updates on how those 

sanctions are working and how the administration envisions them 

changing in the future. 

So there is a lot on your plate, Secretary Lew. We thank you for 

being here. 

Colleagues, I just want to note, as I tried to do yesterday, when 

it seemed, at some point, the Finance Committee looked like it was 

becoming a mock trial, kind of getting into a whole host of legal 

issues, I think there is something ironic about the fact that a number of our colleagues on the other side of the aisle have filed a Supreme Court brief challenging the law and then keep demanding 

various Cabinet Secretaries explain how they plan to avert the disaster that is going to occur if their brief is successful. 

So I hope that we can have a discussion on the important issues 

relating to the budget, taxes, and our competitiveness. I think we 

talked about this at great length yesterday. At some point, I admitted that Chairman Hatch is a real lawyer, he is a trial lawyer. I 

am a lawyer in name only, having run the legal aid program for 

the Gray Panthers, but yesterday felt like we were going back to 

the Socratic method here in the Finance Committee, and I hope we 

can tackle these major issues in the Treasury budget today. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. I think you are a good lawyer, and 

anybody who can do what you did with the Gray Panthers has to 

have some moxie, is all I can say, and I have a lot of respect for 

you. 

[The prepared statement of Senator Wyden appears in the appendix.] 

The CHAIRMAN. Our witness today is Treasury Secretary Jacob 

Lew. Secretary Lew was confirmed to his current position on February 27, 2013. Previously, Secretary Lew served as President 

Obama’s White House Chief of Staff, and before that he was the 

Director of the Office of Management and Budget, a position he 

also held in President Clinton’s Cabinet from 1998 to 2001. 

5 

Before returning to OMB, Secretary Lew first joined the Obama 

administration as Deputy Secretary of State for Management and 

Resources. 

Secretary Lew also has broad-based private-sector experience. He 

served as managing director and chief operating officer for two different Citigroup business units and served as executive vice president and chief operating officer of New York University. 

Secretary Lew has a long history with the Federal Government, 

including the Federal budget and the budget process. It goes all the 

way back to the tax bill in 1986 and the 3 years before that. 

I am afraid, Secretary Lew, that if I detail your long history of 

public service, we will run out of time for this hearing. I am 

ashamed that you have had to work so long in the Federal Government, but I am really very proud of you for all the work that you 

have done all those years. 

Suffice it to say, Secretary Lew, that we genuinely appreciate 

your long history of service to our country. I want to thank you for 

being here today. I want you to proceed with your statement. 

I have to open the Senate, and I have to be in Judiciary, because 

one of my bills is coming up. So I have asked Senator Thune to 

take over until I can get back, or at least until 11 o’clock. Then, 

if I do not get back by then, I will have others take over. 

So with that, let us turn the time over to you for your statement. 

STATEMENT OF HON. JACOB J. LEW, SECRETARY, 

DEPARTMENT OF THE TREASURY, WASHINGTON, DC 

Secretary LEW. Thank you, Mr. Chairman, for that very gracious 

introduction and welcome. Thank you, Ranking Member Wyden, 

members of the committee, for having me here today to testify on 

the President’s budget. 

A year ago, President Obama said that 2014 could be a breakthrough year for our economy, and the evidence is now clear that 

over the past 12 months, America has made great strides. We are 

seeing real progress in job creation, economic growth, family 

wealth, energy independence, manufacturing, exports, retirement 

accounts, the stock market, health care costs, graduation rates, and 

the deficit. 

The fact is, our businesses created nearly 3 million jobs last year, 

the most jobs in any year since the late 1990s. This capped off 

roughly 5 years of job growth, the longest stretch of job growth in 

our Nation’s history, and the creation of 11 million new jobs. In addition, the unemployment rate dropped to its lowest rate in 61⁄2

years and our economy continued to expand, with healthy growth 

in the second, third, and fourth quarters of 2014 and forecasts projecting above-trend growth for 2015. 

From a global perspective, we continue to outperform our trading 

partners, many of which are still trying to climb out of the vast 

hole created by the global economic crisis. At the same time, with 

the Affordable Care Act in place, about 10 million Americans now 

know the financial security of health insurance, and health care 

prices rose at the lowest rate in decades. 

The automobile industry continued its rebound in 2014, even as 

we marked the official end of the auto industry rescue, and American taxpayers recovered more money than we invested. 

6 

Finally, thanks to the administration’s all-of-the-above energy 

strategy, we moved closer to energy independence than we have 

been in decades, and gas prices fell, providing a shot in the arm 

for families and small businesses. 

So today our Nation has turned the corner on a number of fronts. 

Yet, as we know, this resurgence has not reached every American. 

For too many hardworking men and women in this country, it is 

still too hard to get ahead and too hard to earn enough to raise a 

family, afford child care, pay for college, buy a home, and secure 

a retirement. 

The President’s budget meets these challenges by offering real 

solutions to grow the economy, strengthen the middle class, and 

make paychecks go further. This budget is built around the basic 

idea that hard work should pay off. It is practical, not partisan, 

and it lays out clear steps to rein in spending and eliminate wasteful tax breaks so we can reduce taxes for working families, as well 

as many businesses and manufacturers. 

What is more, this budget replaces the across-the-board cuts 

from sequestration and makes sensible investments to increase our 

economy’s competitiveness, while maintaining a responsible fiscal 

path. 

As we know, not long ago, some were predicting that the President’s policies would explode our deficits. A little history, though, 

makes clear the opposite is true. In the 1990s, when I was Budget 

Director, I oversaw three budget surpluses in a row, and we were 

on a path to pay down our national debt. 

But when this administration took office in 2009, there was a 

very different reality. After years of runaway spending, including 

tax cuts for the most well-off and two wars, neither of which were 

paid for, and then the financial crisis, our deficits reached a postWorld War II high. 

The President moved to right our Nation’s fiscal ship. With his 

balanced economic approach, the agreements forged with Congress, 

and a growing economy, the deficit has fallen by almost threequarters, the swiftest downturn since the period of demobilization 

following World War II. 

The deficit is projected to decline even further in the next fiscal 

year. And today we are putting forward a plan to lower our deficits 

to about 2.5 percent of GDP over the 10-year budget window. 

Our Nation’s improved financial footing has occurred even as 

Congress was able to undo a portion of sequestration in recent 

years, replacing these cuts with more sensible and balanced savings. Still, nothing has been done to address these dangerous cuts 

in 2016. Without congressional action, vital funding for our national defense and key priorities like education, infrastructure, and 

research will be severely cut back. 

The President’s budget provides a path to eliminate sequestration while achieving the President’s longstanding commitment to a 

responsible and balanced fiscal approach. In other words, it charts 

a specific way forward to not only keep our fiscal house in order, 

but to create room for pro-growth economic policies which are needed to keep our Nation stronger for the future. 

One pro-growth strategy is tax reform to restore basic fairness 

and efficiency to our system. By scrapping loopholes and tax breaks 

7 

that reduce the taxes for the most fortunate Americans but do not 

help our economy, we can provide critical tax relief for middle-class 

families and those struggling to join the middle class. 

Our economy should work for everyone, and everyone should 

shoulder their fair share to maintain our Nation’s fiscal health. 

This budget also places a serious focus on achieving bipartisan 

business tax reform so that America is the best place in the world 

for businesses to locate, grow, and create the kind of good, highpaying jobs that support middle-class families. 

This plan shows how members of both parties can reach common 

ground and realize the shared objectives of simplifying the system, 

removing wasteful tax preferences and distortions, and lowering 

tax rates so that we no longer have a system in which some businesses pay nothing while others pay the highest rates in the developed world. 

It is time to stop rewarding the corporations and industries that 

have the best lobbyists and the most creative accountants and start 

strengthening businesses that build, hire, and invest here in the 

United States. It is also time to make inversions, a loophole that 

allows U.S. companies to lower their taxes after they buy foreign 

businesses, a thing of the past, and this budget does that. A more 

fair and efficient tax system will help create good middle-class jobs 

and grow our economy. 

We know that with business tax reform, there will be one-time 

transition revenues. The President wants to use some of these onetime revenues to make long overdue repairs to our Nation’s roads, 

bridges, ports, and airports. The need to rebuild our infrastructure 

is irrefutable, and that is why this budget tackles our infrastructure challenges by creating an extended period of sustained funding for a 6-year surface transportation bill and starting an innovative new bond program that will ignite more public-private partnerships in cities and States across the country. 

Of course, keeping our comeback on track, building on the momentum we have made, and making it possible for every American 

to get ahead is going to require strategies that are both bold and 

effective, and that is what this budget is about. It proposes a series 

of targeted investments that have been proven to make a difference. 

It invests in education by expanding student loans, strengthening tax incentives, and making community college free for those 

who earn it. It invests in America’s workers by starting apprenticeship grants, enhancing job training programs, and boosting the 

Earned Income Tax Credit. It invests in working families by increasing the child care tax credit, providing tax relief for families 

when both parents are holding down jobs, and allowing more working families to earn paid leave. 

It invests in retirement security by making it easier for employees to automatically save for the future and businesses to provide 

401(k)s to their employees. And it invests in innovation by creating 

more advanced manufacturing institutes, creating cutting-edge 

medical research initiatives, and bringing broadband access to 

more communities. 

In concert with these pro-growth strategies, this budget calls on 

Congress to send measures to the President’s desk that will help 

8 

our economy now and far into the future. This includes raising the 

minimum wage and fixing our broken immigration system. 

The President’s trade agenda is another important component of 

our strategy to grow the economy and strengthen the middle class, 

and I look forward to working with all of you to pass Trade Promotion Authority to expand the reach of America’s exports and create a level playing field for businesses and workers. 

The strategies I have described are part of the President’s plan 

to help improve the lives of millions of hardworking Americans 

while meeting our responsibilities to future generations. 

The task before us now is to put political brinkmanship aside 

and find areas of compromise and common ground. I am certain we 

can get this done, and I will work with each and every member of 

this committee so that we can deliver for the American people. 

I thank you and look forward to answering your questions. 

Senator THUNE [presiding]. Thank you, Mr. Secretary. 

[The prepared statement of Secretary Lew appears in the appendix.] 

Senator THUNE. I am going to start with a couple of questions 

here, and hopefully the chairman will return soon. I will use 5- 

minute rounds and see where it goes from there. 

I am particularly concerned about the administration’s proposal 

to raise the capital gains tax and apply the tax when an asset is 

transferred at death or by gift, not when the asset is sold, as is the 

case today. That proposal, if enacted, would have a devastating impact on family farms and small businesses in my State of South 

Dakota, and I want to give you an example. 

According to the South Dakota State University Agricultural 

Land Survey published last year, land values in South Dakota have 

more than doubled since 2010 and gone up 7 times since 2000. So, 

if you take a typical family farm in South Dakota that bought a 

section of land, which would be 640 acres, back in 2000 for 

$640,000, which would have been roughly the price at that time in 

certain areas of my State—and I would note that in South Dakota, 

that would be considered a small farm—today that same farm land 

is probably worth somewhere between $3.5 million and $4.5 million, depending on where it is located. 

So, under the current estate tax law, which excludes assets up to $5.43 million, that family farm is not taxed when it passes from 

one generation to the next. Now, under the administration’s proposal, that family farm would be hit with a significant tax when 

it is transferred to the next generation of family members. Now your proposal, as I understand it, exempts $100,000 in cap- ital gains or $200,000 per couple and raises the gains rate to 28 

percent. So in that example, this South Dakota family would suddenly find themselves facing a tax bill of $1 million or more. So 

most farms of this size would not have liquid assets to deal with 

that large of a tax bill. The only way that they would be able to 

pay Uncle Sam would be to break up the family farm and sell off 

portions of it. 

So I know the President likes to talk about loopholes and trust 

funds and the like, but this capital gains proposal that you all put 

forward, we really need to talk clearly about what it would do. It 

is a very punitive death tax on America’s family farms and family 

9 

businesses, especially in places like South Dakota, where we have 

seen significant price appreciation for land. 

So the question, Mr. Secretary, very simply is, what is the administration’s intent with regard to this tax? If it is to break up 

family farms, obviously, it is going to have that effect. Or is it simply an unintended consequence of your interest in imposing yet another layer of taxation at death, which I think, again, would be 

very unfortunate? 

Secretary LEW. Senator, let me step back and go to the reason 

for stepped-up basis and then get to the specific question about 

farms. 

Stepped-up basis is really meant to make our system work in a 

way that is more fair. Right now, if any of us take savings in 

401(k)s or IRAs for our retirement, we need to realize the income 

and pay income tax on that. For families that are able to accrue 

enormous fortunes that never need to realize the income, they are 

able to pass on, in stocks and bonds and other assets—without any 

taxes paid—the appreciated value. 

Stepped-up basis would treat those families the same as it treats 

all of us in middle-class families. We were very concerned that it 

not have an impact that was unintended on small businesses and 

family farms. So we do have exemptions that apply for the first 

$100,000 for an individual, $200,000 for a couple. We also have an 

exemption that applies if there is a modest income, and we also 

have provided 15 years for the payment of any of the capital gains 

so that it would not require a forced sale. 

And we would look forward to working with you and the committee on trying to refine this in any way we could to make this 

proposal, which we think is fundamentally fair, something that 

works well. 

Senator THUNE. Well, I guess the way that I look at this, I mean, 

these are non-liquid assets. This is not like somebody who is selling 

stocks or bonds. We are talking about—farmers tend to be land 

rich and cash poor, and you are talking about shifting the point, 

the time the gain is realized. You are talking about raising the 

rate, and what you are talking about is just a huge tax liability for 

a lot of people who, at a time when you want to see some of these 

assets transfer to the next generation—if you want to maintain 

family farming and ranching operations, most of those require 

intergenerational transfers. I mean, that is how we keep that economy sustainable in States like South Dakota. 

It strikes me at least that this is just a very punitive tax on family farms and small businesses. 

Secretary LEW. Senator, I would say, on the capital gains rate, 

what we have proposed is returning to the capital gains rate that 

was in effect under President Reagan, at a time when we went 

through a period of economic growth with that capital gains rate. 

So I do not think the capital gains rate is something that is an 

untested one. 

In terms of the impact on illiquid assets, we designed it so that 

it would not require a forced sale, and we would look forward to 

working with you to deal with issues that arise in the design of a 

provision—— 

10 

Senator THUNE. Even if the rate goes back to the 28-percent rate, 

which it was before, I mean, you are still talking about shifting the 

time at which the gain is realized and hitting people—essentially, 

I mean, it is a death tax. 

Normally, for a gain to be realized, somebody has to sell the 

asset. In this case, that does not happen. I mean, this just seems 

like a really strange proposal, particularly if you represent a constituency like I do in a farm-based part of the country. 

Secretary LEW. The problem with stepped-up basis under current 

law is that gains go untaxed forever in many cases, and I do not 

think that that is something that we would design the tax law to 

do. 

If you were talking about stocks and bonds and not a family 

farm, it would be very hard to defend having tens of millions of dollars of gains that effectively go untaxed from generation to generation. 

I understand the issue in terms of illiquid assets. We did put in 

the 15-year term to make it something that, for a working farm or 

a working business, would be something that could be managed in 

the normal conduct of the business. 

I would just point out that in the case of the estate tax, CBO did 

a study that concluded that only 65 farms in a given year would 

have been subject to the estate tax. So I think a lot of the concerns 

about the imposition of burden have been out of line with the actual impact, and if there are issues here that we need to fine-tune, 

we would look forward to working together. 

Senator THUNE. Again, you have a triple shot. You have an increase in the rate, you have a change in the time of realization, 

and you do away with stepped-up basis, all at the same time. 

Again, these are pretty dramatic changes. And I understand 

what you are getting at, under a normal circumstance, to try to ensure that like transactions are taxed in a like manner, but we have 

always treated farm land and assets that are transferred at death 

in a very different way. 

Anyway, my time has expired. 

Senator Wyden? 

Senator WYDEN. Thank you very much, Mr. Chairman. 

Let us talk about the middle class for a few minutes, Secretary Lew. You all put in a number of proposals—the $500 second earner 

tax credit, tripling the child care credit, expanding the American 

Opportunity Tax Credit—and all of them are going to be wellreceived. 

As you know, there has been pretty solid debate here that has 

already emerged, with people like the Tax Policy Center, about 

whether this is going to put more money broadly—broadly—into 

the pockets of middle-class wage earners or if it will be select 

groups like those with young children or college-aged children. 

I am of the view that we grow the economy from the middle out, 

that you have to get the relief to a broad spectrum of middle-class 

Americans. Did you all consider a proposal such as significantly expanding the standard deduction? Not only does this put a significant amount of money into the pockets of middle-class people, it 

has bipartisan support. Senator Coats has been interested in that; 

former Chairman Dave Camp was interested in that. 

11 

I want to know what you think is in the budget that would, for 

example, grow the paycheck for a 50-year-old auto worker whose 

children are already out of the nest. 

Secretary LEW. Senator Wyden, we designed a budget that was 

obviously very much intended to provide meaningful relief and support for middle-class families. I think that, from the education provisions that we have in the budget to the retirement provisions and 

the minimum wage proposal, we have shown that we want people 

who are in the middle class and who are aspiring to be in the middle class to have more opportunity. 

The proposal to increase the standard deduction obviously would 

be of help to filers who do not have a lot of itemized deductions 

and, in the context of individual tax reform, is something that we 

would think is something to be looked at. So we were taking the 

view that we needed to target the specific things that are the steps 

on the ladder to opportunity, and our budget was designed around 

that. 

Senator WYDEN. Let us continue this discussion, because, make 

no mistake about it, those kind of efforts, particularly in terms of 

education, they are absolutely key to repairing this pretty tattered 

ladder of opportunity. 

I just want us to keep in mind somebody like a 50-year-old auto 

worker whose kids are out of the nest, because a lot of those families are hurting too. 

Let me now turn to something you and I have talked about, and 

that is the question of tax simplification. The National Taxpayer 

Advocate—and, again, we are talking about the middle class—said 

that this year Americans are going to spend $168 billion and spend 

6.1 billion hours trying to comply with the American tax code. 

You have over 160 proposals in the Treasury Green Book, but to 

me, a lot of them look like add-on credits, deductions, new preferences, and it seems to me that, again, while I support very much 

this idea of getting relief to middle-class people, it looks like it is 

going to take taxpayers more time and more hassle. 

So tell me, if you would, what, in your view, is in the budget that 

would simplify taxes for middle-class people? And then I would like 

your thoughts on an approach I am looking at. I would like to see 

middle-class people get their March and April back rather than 

spending all this time and money, and I would like your thoughts 

on whether or not we ought to be looking at a tax reform system 

where many Americans could fill out a tax return on something 

that fits on a postcard. 

So what is in the budget that simplifies the tax system for 

middle-class people, and then, what do you think of this idea of our 

working together, again, on a bipartisan basis, to get the tax filing 

system for most people down to a postcard? 

Secretary LEW. Senator, we have tried, in areas like education, 

to simplify some of the provisions—there were multiple provisions—combining them to be easier for taxpayers to understand 

and take advantage of. 

I think the whole effort on individual tax reform is one where 

simplification is something that we very much aspire to. We obviously also think it is important to provide strong incentives for 

things like education and retirement savings and the like. 

12 

So there is a bit of a tension between the total simplification and 

having incentives for things that are very important for working, 

middle-class families. We would very much look forward to working 

together to try to make the tax code as simple as possible. 

Senator WYDEN. Would postcard-size be okay? 

Secretary LEW. I wish I could say that I thought that we could 

get it on a postcard. 

Senator WYDEN. Let us work for that. 

Secretary LEW. Not a bad goal, but it will be tough. 

Senator WYDEN. Well, you have the W–2s, so you have a lot to 

work with right there. So I think if we bear down—and I also want 

to note that Senator Stabenow, and I think colleagues on the other 

side, are going to be working on the individual portion of the tax 

code. 

There has to be a way to help the middle class who are hurting, 

like that auto worker, and get people out from under the bureaucratic water torture, which is what filling out all these forms is all 

about, as the Taxpayer Advocate noted. 

Thank you, Mr. Chairman. 

Senator THUNE. Senator Heller? 

Senator HELLER. Mr. Chairman, thank you. I look forward to the 

continuation of this particular hearing. 

Mr. Secretary, thank you for taking time. 

I want to just follow up briefly on what my colleague from South 

Dakota’s question was. Obviously, being from Nevada, we have 

similar concerns and problems with some of these small family 

farms and ranches. But in my State, there are over 230,000 small 

businesses. 

It is my understanding, and correct me if I am wrong, that generally no tax would be due on small family-owned businesses until 

sold. Can you clarify to me what that business threshold would be 

that defines what a small business is? 

Secretary LEW. Senator, there is a provision in our proposal that 

would exempt very small businesses, really small businesses. 

Senator HELLER. Right. Right. What is that threshold? 

Secretary LEW. The exemption, I believe, is $1 million in the proposal, and it was designed to ease the burden on family businesses, 

mom-and-pop stores. 

I think that, for larger businesses that are still medium-sized, 

the 15-year provision that I described for a working business is a 

way to take the incidence of the stepped-up basis and spread it 

over a very long period of time, which we think is a way of addressing the needs of a small business. 

Senator HELLER. Mr. Secretary, thank you. I do not believe people are always right—or always wrong for that matter—and when 

the President is right, I support him, but when he is wrong, I do 

not. 

But you made some comments in your opening statement that I 

appreciate, and they concerned the efforts for infrastructure and 

their priority for this administration. 

Obviously, I care quite a bit about infrastructure. Among the 

working group, with my colleague Senator Bennet, I look forward 

to moving forward on tax reform. I, like the chairman, believe that 

our tax code is too costly, too complex, and too burdensome. 

13 

But I still would really like to tackle this issue of infrastructure. 

I think that is good for the State of Nevada. We would bring more 

people in to portions of our State, and I think it is a core function 

of this government. 

I am sure that you are aware that Chairman Dave Camp— 

former Ways and Means chairman—introduced a tax reform discussion draft, and one of the proposals that he had was a repatriation proposal that was composed of two rates: one for cash and 

one for assets. 

Was there any reason why the administration did not look at this 

and impose two different rates? 

Secretary LEW. Senator, there are a lot of similarities between 

the approach that we have and the approach that former Chairman 

Camp had. We think that the rates we have put in in our international proposals make good sense. 

We have two rates. One would be a permanent rate of 19 percent 

and the other would be what we call a toll charge for earnings that 

have built up over years, and that would be 14 percent. In each 

case, there would be a credit for taxes paid overseas, calculated in 

an appropriate way. And we think that it would create a tax burden that would be very reasonable and would make it attractive for 

businesses to bring their taxes home. 

Senator HELLER. How were those rates decided? 

Secretary LEW. Excuse me? 

Senator HELLER. How were the rates decided? 

Secretary LEW. Well, the 14-percent rate is half of our—we have 

proposed a 28-percent rate, and we set the toll charge at half of it, 

14 percent. I do not want to overstate the scientific nature of it. 

Congressman Camp, when he put his proposal in, had a rate of 

8.5 percent. There are rationales for a number of different levels. 

The 19-percent number was in the zone of where we think it 

should be, and it was at a level that was revenue-neutral in our 

proposal. 

So I think that, if you look at the structure of our proposal and 

the structure of the Camp proposal, it shows that there is a lot of 

room to work together. And the important thing about the toll 

charge, with your interest in infrastructure, is that we use it to pay 

for a 6-year reauthorization with a higher level for our surface 

transportation program. We think that would be enormously important. 

If that toll charge were used for anything other than a one-time 

expenditure, for example, if it was used to lower rates permanently, it would not be revenue-neutral over time. So we think that 

it is a perfect combination of things that are important to American 

business and the future of our economy. 

Senator HELLER. One quick question, because my time is running out. Would the administration support voluntary repatriation 

to fund infrastructure? 

Secretary LEW. The experience in 2004 with a one-time voluntary 

repatriation holiday was not very good. It turns out to be a bad incentive because, after a repatriation holiday, you start to build up 

overseas with businesses waiting for the next holiday. 

Secondly, we did not see the reinvestment come from it. We 

think what we have proposed is the right way to do it, to have a 

14 

transition to a new system where, going forward, businesses will 

bring their earnings home and they will make their investments 

based on where they are most economical, not where the tax advantage is greatest. 

Senator HELLER. Mr. Secretary, thank you. Thank you, Mr. 

Chairman. 

Senator THUNE. Thank you, Senator Heller. 

Senator Schumer? 

Senator SCHUMER. Thank you, Mr. Chairman. And thank you, 

Secretary Lew. 

I want to applaud the good work you and the President and all 

your crew have done on the budget. I think its focus on the middle 

class is really excellent. I think in your efforts to find some common ground and yet stay true to your principles, you thread the 

needle extremely well. I was very impressed with the budget, and 

I thank you for your hard work on that budget. 

Obviously, one of the things you are all focused on, we are all focused on, is infrastructure. One of the ways you talk about paying 

for it is the one-time 14-percent tax on previously untaxed foreign 

income that comes back. I am very interested in that idea, with 

some variation of it. I think it makes a great deal of sense. It is 

something I have been talking about for a while, and I think you 

have refined it in a much better way than just about anybody has. 

But here is my question. Do you believe it is feasible to consider 

the toll charge deemed repatriation by itself or in coordination with 

other international tax reform, even if we cannot reach an agreement on a broader reform package? It is my view, probably different than some here, that it is going to be really hard to get to 

real reform, particularly getting the rate below 28 percent, which 

may not make too many people happy. 

But the idea of some kind of deemed repatriation for a broad infrastructure proposal, I think can get broad support on both sides 

of the aisle. So tell me what your thinking is on this. 

Secretary LEW. Senator Schumer, I would say that the best way 

to do it would be through broad business tax reform, because, if we 

do not do something about our high statutory rate, which is the 

highest in the developed world, if we do not eliminate the incentive 

for companies to move overseas, if we do not close the loophole for 

inversions, we are going to see a lot of the problems that we still 

have. That cannot all be fixed just with the international provisions. 

It is always hard to do broad tax reform. It was hard in 1986. 

It is going to be hard now because there are interests that very 

much value the deductions and credits that they have right now. 

Theoretically, could you separate out the international piece? You 

could—— 

Senator SCHUMER. I know that is not your preference. 

Secretary LEW [continuing]. But it would not solve the whole 

problem. 

Senator SCHUMER. I understand. Although, by the way, I have to 

say on inversions—and you guys do not get enough credit or take 

enough credit—the reforms that you have made internally have 

stopped most inversions in their tracks, and the financial people in 

15 

New York I talk to say, in most cases, it is not worth it anymore. 

So you have done an excellent job on that. 

Secretary LEW. Thank you. We went—I am sorry. 

Senator SCHUMER. I am sorry. We only have a short time, and 

I want to go to a less happy topic, at least one between you and 

me, which is the trade bill and currency manipulation. 

Look, overall on trade, my views have shifted some. I think the 

decline of middle-class incomes is the greatest problem America 

faces, bar none. We will have a different country if it keeps going 

for another 10 years. 

Obviously, it will be disputed by members on both sides, but if 

these trade agreements—even though they might increase GDP 

and even though they might increase corporate profits—serve to 

decrease middle-class wages—because a company makes money 

whether it makes the product here or in China, so they will make 

profits, and you might even get some GDP gain for a lot of reasons—I cannot support trade agreements like that anymore. I just 

cannot because of my value system, when middle-class decline in 

income has become so great. 

So I am looking—and I have talked to you about this, I have 

talked to the President about this—for something where we can 

counterbalance many of the things that you want to do in TPP, 

many of which are good. And the geopolitical stuff is indisputable 

that you want to do, and currency is the most logical one because 

it has broad support. A currency bill that I authored, along with 

Senator Brown, Senator Stabenow, Senator Graham, Senator Collins, and Senator Sessions, got 60 votes a while ago. 

And so what I am asking you is—now, we have heard some talk 

from the administration that currency is not going to be part of 

TPP, whether against Japan, which is part of TPP, or more important to me—although Japan is important to me—China, which 

takes more jobs away, does not play fair, steals our intellectual 

property. 

When America has a good product, 80 percent of the time or so, 

they do not let it in, and we just shrug our shoulders. And it is estimated that millions of jobs have gone away. 

So my question is, because I know my time is running out, will 

you, will the administration, support some kind of rigorous controls 

on currency manipulation aimed at China alongside this bill, if not 

in the bill, and in the bill aimed at Japan? 

I have heard that we have said that currency should not be part 

of TPP, and that would be, I think, a really wrong move. Tell us 

about currency and its relationship, in your view, to TPP and TPA. 

When I say TPP, I mean both. 

Secretary LEW. Senator, may I respond? 

Senator SCHUMER. Yes. You get the last word. My time is up. 

Secretary LEW. I was asking the chairman if I could take a couple of minutes. 

Senator Schumer, let me start by strongly agreeing with you that 

if countries do things to intervene in a way that is designed to gain 

unfair advantage in trade, it is wrong and we oppose it. We do not 

just oppose it, we take very strong action in international bodies: 

in the G–7, in the G–20, in the IMF, and, most importantly, bilaterally. 

16 

I can tell you that when I meet bilaterally with countries where 

there is any question, it is the number-one topic that we raise. And 

when we push back, there is a response where we have, I think, 

been quite successful in the time that we have been here pushing 

back on even the hints of interventions that have those characteristics. 

I think the challenge in the context of a trade agreement is how 

to address the issue in a way that helps and does not hurt. I would 

be concerned that the effectiveness we have dealing through the existing channels could be diminished in some ways if some approaches were taken. 

I think that we need to make sure that we use every tool that 

we have to make sure that countries do not take the steps to intervene in ways that are unfair. And I think if you look at recent 

years, we have been quite successful. 

I mean, the G–7 agreement—— 

Senator SCHUMER. That is where we disagree. 

Secretary LEW. Well, I think if you—there certainly are historical 

problems if we go back, but I am talking about the immediate 

present. Two years ago, there was an agreement at the G–7 that 

we drove forward, which is that countries can only use domestic 

tools for domestic purposes. 

We had quantitative easing (QE) policies in the United States. 

The United Kingdom had QE policies. QE policies have been critical to getting economies moving after the Great Recession. 

I do not think any of us think that those kinds of policies should 

in any way be equated with unfair intervention. We have not seen 

the kinds of intervention that I think you are describing as much 

in recent times, and we have actually made progress pushing back 

on it. 

With that said, we want to work together as we go through the 

discussions on trade legislation to see if there is a way for us to 

build a bridge between the tools that we have and the trade discussion, and I would look forward to having that conversation. 

Senator SCHUMER. I would just say one sentence. We have not 

been very successful against China. I totally disagree with you. We 

need much more. 

Secretary LEW. Can I just say one thing, Senator, in response on 

China? I mean, since 2010, we have actually seen an appreciation 

in China’s currency that bounces around day to day, but is roughly 

at 10 percent. We have pushed hard to have China stop intervening in ways that they had been. They have agreed to limit their 

interventions to macroeconomic circumstances. 

We have pushed hard for transparency policies. They have 

agreed to subscribe to the IMF’s transparency policies. 

I am not going to say that there have not historically been 

issues. Our currency report makes it clear. But we have actually 

made progress working through these issues. 

Senator THUNE. All right. You guys can carry on this conversation outside the room. 

Senator Stabenow? 

Senator STABENOW. Thank you. To continue this conversation— 

welcome, Secretary Lew. And I do want to say, not to debate it but 

just for the record, before talking about another issue, that I appreVerDate Mar 15 2010 20:13 Sep 17, 2015 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 R:\DOCS\96062.000 TIMD
17 

ciate your efforts to address currency manipulation in international 

forums like IMF and the G–20, but these actions have not kept 

pace with increasing adverse impacts of currency manipulation and 

the impacts on U.S. businesses and workers, and we are seeing 

this. 

Economists across the political spectrum—the Economic Policy 

Institute, the Peterson Institute, former advisor to President 

Reagan Arthur Laffer—all agree that currency manipulation has 

cost the United States millions of jobs. 

And specifically on TPA and TPP, you know what is coming before us: Japan with the most closed auto market in the world and 

the importance to the middle-class economy in America of the auto 

industry—and I appreciate very much this administration standing 

with us in the auto industry. 

But as you know, the top financial executive at one of our U.S. 

automakers, Ford Motor Company, said recently that a weak yen 

gives Japanese competitors as much as $11,000 more profit per car 

per year. So $11,000 per car is a big deal in a very sensitive marketplace. 

I want to actually talk about something else. I know your concerns about this. I disagree that quantitative easing in domestic 

policy is the same as intervening in foreign currency. We will debate that more later, but this is a big deal. And with 60 of us in 

the Senate, in that bipartisan letter Senator Graham and I led, 

saying we want currency addressed in any trade agreement, I hope 

you understand that we are very serious about this. 

Secretary LEW. Senator, as we have discussed, we would look forward to working together to see if there is language that we can 

work through that would address the concern in a way that is consistent with our legal obligations and policy. 

But if I could just say one word about Japan. For 15 years, we 

had the view that it was bad for the U.S. economy and the global 

economy for Japan to be in an economic rut. They initiated monetary policies that were similar to those that our Fed put in place 

and they initiated fiscal policies, and they, for the first time, gave 

the Japanese economy a bit of a boost, which was good for the global economy and good for the U.S. economy. 

They are not growing as fast as they should be. They need to use 

all the tools. They need to use fiscal policy tools. They need structural reforms. But I think if you look at the monetary policy that 

they have put in effect, it does not meet the criteria of unfair practices in these last few years. 

That is different from what might have happened in the 1970s. 

I am not going to say that there was not bad behavior in the past. 

But I think that we just have to be careful not to define a standard 

that would lead to a set of rules that would make it impossible for 

monetary authorities to get economies out of recession. 

Senator STABENOW. And I appreciate that. But let me just say 

that, since they agreed through the IMF that they were not going 

to do this, they have done it like 300 times, something like that; 

I have seen the number. And all I will say is, we are an open market. Japanese companies benefit by everything, including what we 

have done in our monetary policy and quantitative easing, and yet 

they have the most closed market. 

18 

We cannot get into it. We cannot sell at an auto dealership in 

Japan. You cannot see an American-made vehicle. So this is a big 

deal. This is a big deal. 

Secretary LEW. We totally agree that barriers need to come 

down. 

Senator STABENOW. I want to change the subject for just one second to something that we agree more on, and just simply ask you 

to respond again to the big structure in terms of how we move forward in the economy, because I think we ought to talk about what 

works, and not just in theory. 

So when you look at the Clinton years, we actually raised the top 

two rates on Americans, asking them to pay a little bit more to 

help balance the budget, created 22 million jobs, and actually saw 

a robust economy, asking folks at the top to do a little bit more. 

The Bush years, which everybody seems to want to go back to, 

President Bush’s years only helped those at the top, left everybody 

else waiting and holding their breath—will it trickle down? You 

wage 2 wars, do not pay for them, have a reckless speculation 

going on on Wall Street, do not regulate it. We saw what happened: 

the Great Recession. 

Now, we are back. Again, in 2012, we asked those at the top to 

do a little bit more. Our friends said the world would end. It did 

not end. Not only that, we have reduced the annual deficit by twothirds and added 11 million jobs. 

So I wonder if you might just very briefly speak to the macroeconomics of actually putting money in people’s pockets, paying 

down the debt the right way, and growing the economy through a 

strong middle class. 

Secretary LEW. Well, Senator, I think we had an experiment. We 

saw what the tax rates and policies of the 1990s did, and we had 

the longest period of uninterrupted growth in history. And we saw 

what happened in 2001–2004, where we had policies that cut taxes, 

particularly at the top and, as you say, had wars and other things 

that we did not pay for, and we ended up with a financial crisis 

on top of that, producing the biggest deficits that we have had in 

history and the economic hole that we have been digging ourselves 

out of. 

So I think we have actually had a test of the two theories, which 

is why I am confident that the tax proposals that we put forward 

are good for the economy. 

Senator STABENOW. Thank you. Thank you, Mr. Chairman. 

Senator COATS [presiding]. I have only been on the committee 3 

weeks, and I have been sitting out there in the left field bleachers 

with my friend from Nevada, and I noticed Senator Warner in the 

right field bleachers had other things to do, and all of a sudden I 

am here at home plate with a gavel in my hand. Ron Wyden leans 

over and says, ‘‘I have been working 10 years to get to this spot. 

You have been here for 3 weeks.’’ And now I am in control. 

I feel like recognizing myself for a long speech, but they would 

never ask me back if I did that. [Laughter.] 

Senator Cantwell, you are up. 

Senator CANTWELL. Thank you, Mr. Chairman. [Laughter.] 

19 

Mr. Secretary, thank you for your comments this morning and 

your focus on the economic strategy moving forward, and for your 

emphasis on exports. 

My views are a little different than some that have been expressed by my colleagues, but we have a more integrated tradedependent economy in the Pacific Northwest. 

So I want to get your views on a couple of things that I believe 

are critical for this opportunity. Given that 95 percent of consumers live outside of the United States and that the doubling of 

the middle class around the globe in the next 15 years is a great 

economic opportunity for the U.S., what are the policies that we 

need to pursue to take advantage of that? 

So things on our agenda—I mean, I almost feel like our economic 

agenda should just have the word ‘‘export’’ on it—include freight 

mobility, improving our freight infrastructure so we can get product to market quicker, the State export assistance program, which 

is a key tool for small businesses to become exporters. 

But one of the stumbling blocks we are facing right now is the 

reauthorization of the Export-Import Bank. And if you could talk 

a little bit about what you think the importance of that structure 

is in this context, how important it is for the U.S. to not only have 

financing tools, but also the fact that if you actually have an export 

credit agency, then you can participate in a world dialogue of credit 

agencies around the globe for policies that are fair and transparent. 

If we do not have that, we also will not be participating in this international discussion. 

Secretary LEW. Senator Cantwell, I think you are totally right 

that exports are key to our economic future, and that is why we 

are pursuing Trade Promotion Authority. It is why we are negotiating the TPP. 

We are looking at where the markets are growing, and we want 

American companies to have access to those markets. That will be 

a way to create good middle-class jobs in the United States. That 

is the only reason that we are focused so much on this trade issue. 

The Export-Import Bank is a critical component of our export 

strategy. In a world where nobody had export subsidies, one could 

have a conversation about whether or not we should have one. But 

in a world where our competitors have export programs and we 

might not, that is putting a burden on our exporters that is just 

not fair. 

In Washington State, I know aircraft are a big issue. If you are 

selling aircraft against companies that have export financing because of programs like the Export-Import Bank and we do not, that 

is something that you cannot make up for just by running a tighter 

operation. 

Now, we have discussions going on on an international basis to 

see whether we can, on a global basis, lower the export subsidy 

programs. In that kind of an environment, it would be a different 

question. But we cannot unilaterally put our companies in a position where exporters from other countries have export support and 

they do not. So I think the reauthorization of the Export-Import 

Bank is critical. 

20 

Senator CANTWELL. And what would the administration like to 

see as Congress—we are moving towards a period, I think it is May 

31st or something, to get that—— 

Secretary LEW. We have for a long time advocated a reauthorization that would provide longer-term certainty around the program. 

And I think the sooner it is enacted the better, because uncertainty 

is not a good thing. 

Senator CANTWELL. Thank you. Thank you, Mr. Chairman. 

Senator COATS. Thank you, Senator. 

Senator Menendez arrived just in the nick of time to secure the 

next spot. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Mr. Secretary, I want to raise an issue with you that has huge 

bipartisan support in the Senate and also the support of the administration, which is reforming the Foreign Investment in Real 

Property Tax Act so that foreign pension funds can put muchneeded capital into the U.S. commercial real estate market. 

We have talked about this before and how bringing this needed 

equity to the U.S. can create jobs right here at home. As you know, 

the current tax on real estate investment trust shares owned by 

foreign pension funds was due to an administrative action, not a 

legislative one. And indeed, up until Treasury issued a notice in 

2007, foreign pension funds investing in REITs were treated equally with their domestic counterparts. So it seems to me that since 

Treasury made this change in the first place, it could also undo 

this policy and eliminate a barrier to private infrastructure investment. 

I am pleased to see that, once again, the President agrees with 

me on the need for FIRPTA reform, as illustrated in his budget. So 

since we all agree that this is a bad policy and Treasury clearly has 

the authority to reverse this ruling, I hope that you would look at 

taking some sort of action on FIRPTA. 

So my question is, one, does it make any sense to create obstacles for foreign investment in the U.S., particularly considering our 

dire need for infrastructure investments, and will you commit to 

working with me and the bipartisan group of members of this committee and beyond who support this effort? 

Secretary LEW. Senator, we have discussed this before, and, as 

you acknowledge, we agree that this should be fixed. We believe it 

needs to be fixed through legislation. 

I actually hope that in the discussions we are having about business tax reform, it provides an opportunity for us to do this in a 

bipartisan way. And we have obviously put forward a legislative 

proposal again, and I would look forward to working with you on 

it. 

Senator MENENDEZ. So you are not going to deal with it administratively, obviously. But you do support—the administration supports—FIRPTA reform? 

Secretary LEW. We have a legislative proposal. Yes. 

Senator MENENDEZ. Let me ask you, in the same light, one of the 

main themes in the President’s budget is the need for extensive investments in roads, bridges, and other critical infrastructure. 

One of the most effective ways to help local municipalities—and 

I say this as a former Mayor—make these critical investments is 

21 

the private activity bond program. Unfortunately, the caps on 

water and wastewater infrastructure projects make it extremely 

difficult for local communities to take advantage of the program for 

these critical needs, and that is because, for example, water projects are often multiyear ventures, making them complex and difficult to fit under the annual caps. 

Now, I have legislation I plan to reintroduce that actually passed 

through this committee that would remove the caps for water and 

wastewater infrastructure projects, and I am pleased to see the 

President, in his budget, included positive reforms in this regard. 

Would removing the caps help local communities upgrade their 

antiquated infrastructure? 

Secretary LEW. Senator, we did put the new proposal in our 

budget to try to accomplish the same goal. Obviously, raising the 

caps would provide more room for local authorities. We think that 

what we have proposed really has a very similar theory behind it, 

and we would look forward to working together to get something 

enacted into law to enable local projects to go forward more easily. 

Senator MENENDEZ. And finally, we have record job growth, and 

the administration has done, I think, economically a great job: lowest unemployment in some long period of time, private-sector job 

growth for a long period of time, deficit as a percent of the GDP 

probably the lowest in 50 years, and a whole host of positive economic factors. But we still have a stagnant middle class, which you 

referred to in your opening statement. 

The long-term unemployment rate is still, however, far too high, 

leaving millions of Americans out of the recovery. They are stuck 

on the sideline. And while they do that, their skills and networks 

become out of date, which hurts them in trying to get back into the 

economy. 

I have introduced legislation, called the Better Education and 

Skills Training for America’s Workforce, that would provide a robust tax credit for businesses that pay for training for long-term 

unemployed workers and would create a competitive pool of tax 

credits for business clusters who come together to set up training 

programs at community colleges—and I see the President’s initiative on community colleges. 

Do you believe that designing a job training program focused on 

providing the long-term unemployed with skills in demand would 

help reduce the disproportionately high rate of long-term unemployed people in our country? 

Secretary LEW. Senator, we have, through the policies we have 

put in the budget, I think embraced very strongly the idea that we 

need to make sure training is available to help people get into or 

get back into the workforce. 

That is where our community college proposal comes in. It is 

where other training proposals come in. There are multiple ways 

one could accomplish it. We put in our budget the ways that we 

think would be most effective, but we would look forward to working together. 

Senator MENENDEZ. I will close by saying that we would like to 

work with you. I understand and support the President’s broader 

initiative. But how we deal with and focus on the long-term unemployed is a critical element. 

22 

Secretary LEW. I totally agree. And if you look at the kind of potential GDP in the medium term, getting people back into the labor 

force is not just something that is right for the individual, but it 

is a way to make sure our economy is growing more. 

Senator MENENDEZ. Well, I am thrilled to find at least three 

places where we can largely agree. 

The CHAIRMAN. Senator Carper? 

Senator CARPER. Thanks, Mr. Chairman. 

Welcome. It is good to see you. I just want to start off by thanking you and the administration for working so hard with us last 

year to try to find common ground on expatriate health insurance. 

If we can work that out, we can probably work out some of these 

issues as well. 

You mentioned when you started off, Mr. Secretary, the strength 

of the economic recovery. I will acknowledge it is not everything we 

would like, but for us, it is encouraging, even today. Today we received from the Department of Labor the latest unemployment filings. The numbers are averaging right around 280,000. The week 

that President Obama and Vice President Biden were inaugurated, 

that number was 628,000 people filing for unemployment insurance, and right now we are running around 280,000. What that is 

going to do is, as we know, it is going to tighten up the labor market and hopefully is going to have a positive effect on wages for a 

lot of people who have not had much of an increase in wages for 

a while. 

One of the things that I sought to do, coming out of the election, 

was to figure out what are some areas that we can agree on, and 

a number of those were touched on in your testimony and in the 

President’s State of the Union address. Although we on this committee are not 100-percent in agreement, my hope is that we can 

move forward on trade, including TPA. My hope is that we can 

move forward on cyber-security to better protect our intellectual 

seed corn and a lot of R&D work that is being done by companies, 

by colleges. 

And comprehensive tax reform—I would like very much to do 

that. You mentioned the need to do that. It is a tough nut to crack, 

but it is still important. Immigration reform—we need to take up 

immigration reform. It reduces the deficit. It raises, I think, the 

GDP very substantially over the next 5 to 10 years. We ought to 

just do that. Workforce—I like the President’s proposals with respect to community colleges and trying to encourage folks to continue their education coming out of high school. 

The last one I want to mention is transportation. Several of my 

colleagues have mentioned it. Senator Heller mentioned it. And we 

have jurisdiction over that. Environment and Public Works, as you 

know, is the authorizing committee, and we are the committee that 

has to figure out how to pay for these improvements. But we very 

much need to make them. 

I am intrigued by what the President has proposed, what the administration has proposed, and I am not an advocate of repatriating money. If we simply repatriate—lower the rates and repatriate money every 10 years—companies will continuously leave 

money parked overseas until we lower the rate again and give 

them a free pass. I do not think that is a very good idea. 

23 

I think the administration’s idea is intriguing. I think it will be 

difficult to achieve. But I am interested in exploring it with you 

and my colleagues. 

Over the last 6 months, I think I have talked with just about everybody on this committee, a lot of Republicans in the Senate and 

in the House, Democrats in the Senate and in the House. This is 

what I say: ‘‘What do you think we should do for transportation 

funding?’’ And I have gotten a number of interesting ideas that I 

have gathered, and I just want to mention them today. 

One of those is a user fee, 3 or 4 cents a year, 4 years indexing. 

It is essentially Bowles-Simpson and basically is a barebones approach that gives us about $100 billion, which is the minimum of 

what we need—$16 billion a year, $100 billion over 6 years. 

In talking to my Republican colleagues, a number of them say, 

why do we not open some additional areas for oil or gas exploration, and some of the revenues that could flow from that could 

go into a transportation trust fund? Well, as it turns out, the President has proposed that the areas off of Virginia, North Carolina, 

South Carolina, and Georgia be opened for exploration, and that 

could actually marry an administration idea with some ideas I 

have heard from our Republican colleagues. 

I have heard from a number of our Republican colleagues—and 

Democrats too—why can we not figure out how to do transportation 

projects less expensively? What are some ways we can get a better 

result for less money? As it turns out, USDOT last year entered 

legislation that outlined a number of ways. They have some new 

ideas to share with us this year. So that might be something the 

administration and Democrats and Republicans could agree on. 

Those are just some of the ideas that I have heard. I like to talk 

about energy policy. We like to talk about energy policies, an 

all-of-the-above approach, and I think there might be sort of an 

all-of-the-above, more comprehensive approach on transportation 

funding that I had a year or so ago. 

Your reaction, please. Thank you. 

Secretary LEW. Senator Carper, we obviously very strongly share 

the sense of urgency to get a long-term surface transportation bill 

enacted. There is no way to effectively plan infrastructure going 6 

months at a time or even a year at a time. You need to have the 

time to plan complicated projects. 

We put in our budget a proposal that I think has the basis for 

bipartisan support. We genuinely want to pursue it, and we think 

it is the best approach. If that were to turn out not to be the approach that could muster bipartisan support, we would work together to look at other creative options. 

But I actually think that there is a reason to be optimistic that 

we can get the President’s proposal or a form of it enacted into law. 

It draws on principles that are shared on both sides. It is in the 

best interest of the country, it is good for the economy, and it will 

create good middle-class jobs. 

So we are going to roll up our sleeves and try to get it done. 

Senator CARPER. Thanks so much. 

Mr. Chairman, I would just say to you and to our ranking member, States are beginning to shut down construction projects in the 

24 

spring and in the summer because of the lack of certainty and predictability. I think the President’s idea has merit. 

I think it is going to be hard to do. Sort of the question for us 

is, if we are not able to do that for a while, what are we going to 

do in the meantime? And the answer cannot be ‘‘nothing.’’ 

Thanks so much. Thanks, Mr. Chairman. 

The CHAIRMAN. Let us go to Senator Cardin. 

Senator CARDIN. Thank you, Mr. Chairman. 

Secretary Lew, thank you for your service. I very much appreciate your longstanding commitment to public service and the effective job you are doing as Secretary of the Treasury. 

I first want to talk about an area that I talked to you once before 

about, and that is our community banks. We are still seeing community banks in Maryland being challenged to be able to survive, 

not because of their viability individually, but because of the new 

regulations, et cetera. 

They were not the speculators that brought about the financial 

collapse, and they are trying to figure out a way to remain relevant 

in today’s banking world. One area where we could help is, since 

the TARP period, the preferred stock of community banks is held 

by Treasury, and they want to buy back that preferred stock, but 

there are certain obstacles in the way. 

I would just ask that you get that on your radar screen to see 

whether we cannot facilitate the viability of community banks 

through considerations at Treasury to make it easier for them to 

recoup their preferred stock. 

Secretary LEW. Senator Cardin, we share the view that community banks play a critical role in local economies in creating an engine for small business growth and local economic activity. 

We have, in the TARP program, worked with community banks. 

We will continue to. We obviously have certain constraints in the 

TARP program in terms of how we can dispose of assets, but I am 

happy to look into it again. 

Senator CARDIN. I appreciate it very much. I was very interested 

in your exchange with Senator Wyden in regard to the U.S. harmonizing with the international community on tax rates and the fact 

that we have high corporate tax rates. 

I also was interested in the exchange on simplification where 

Senator Wyden wants to get the code much more simplified, and 

I agree. So I would just at least put in a plug that you take a look 

at the progressive consumption tax that I filed. Taxpayers, joint 

taxpayers under $100,000, would not have to file any income tax, 

and we would have the lowest marginal tax rates in the industrial 

world, both on income and consumption. 

If we are going to harmonize, then let us take a look at where 

the rest of the OECD countries are receiving their revenues if we 

want to be competitive. I just urge you to take a look at it, because 

I think it would answer some of your questions. 

I want to get your comment in regard to the administration’s position on doing business tax reform. Along with Senator Thune, I 

will co-chair a working group that will be looking at the business 

tax issues, and we have concerns as to how small business is treated. If you deal just with corporate tax rates, then those who have 

pass-through entities or use S corporations would be at a competiVerDate Mar 15 2010 20:13 Sep 17, 2015 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 R:\DOCS\96062.000 TIMD
25 

tive disadvantage if that is all we do, because of the high individual rates. 

So I would ask, how can you really just do corporate tax reform 

and be fair to small businesses in our country? 

Secretary LEW. Senator Cardin, we have always talked about 

business tax reform, not corporate tax reform, because we think it 

is important that when we do business tax reform, we look at small 

businesses as well as the corporate side. 

We have in our proposal, for example, an expansion of the section 179 provision that allows for the taking of depreciation, so 

that, if you spend $1 million a year as a small business, you can 

take a full deduction in the year you make an investment. You do 

not have to do it over time. 

We have done an enormous number of simplifications to make it 

easier for small businesses. I think that we have designed provisions that are going to help small businesses. We are open to ideas. 

If there are ideas that come out of the conversations you and Senator Thune have, we would look forward to working with you. 

I would just point out that, one of the reasons businesses choose 

to file as individual businesses as opposed to corporations is that 

it is better for them to do. If it becomes advantageous, they can 

also switch back. 

Senator CARDIN. But it changes the current competitive situation, and small businesses are already challenged today. I understand they can make that choice back and forth. 

I want to get one last point in, if I might, and that is on retirement and savings. Once again, a progressive consumption tax 

would help reward savings and retirement. But one of the things 

that I have learned, working with Senator Portman when we were 

both in the House, is that the tax incentives alone are not enough 

for working middle-income families, and that is why the Saver’s 

Credit is important; that is why employer-sponsored plans, when 

they put money on the table, are important. 

I would just urge, as you look at your proposals for retirement 

securities, that we do not have the unintended consequence of adversely affecting employer-sponsored plans, where they have money 

on the table, where we would only be using the tax deferral as an 

incentive, because I do not think that is enough. 

Secretary LEW. We agree, and we actually have a proposal in our 

budget to make it more advantageous for firms to contribute, for 

small businesses especially to make a contribution into an employee’s retirement plan, and we look forward to working with you on 

that. 

Senator CARDIN. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Brown? 

Senator BROWN. Thank you, Mr. Chairman. 

Mr. Secretary, welcome. It is good to see you again. Just first a 

short statement. I know that Senator Schumer and Senator 

Stabenow asked you about currency. I want to echo their remarks. 

I also want to remind you and Ambassador Froman that there 

is strong, strong support in the Senate for real currency provisions, 

both in TPA and TPP, better and stronger than negotiating objectives—real enforceable currency standards. 

26 

I do not need you to comment on it now. I have heard your comments before. But I am hopeful that, as we move forward on that, 

we can bring you in our direction a little bit more. 

I want to walk through the country-by-country global minimum 

tax that you and the President have proposed—just a series of 

questions, because I think that it is often difficult to sort of process 

this. 

The global minimum tax you are proposing is 19 percent, correct? 

Secretary LEW. That is correct, Senator. 

Senator BROWN. So if corporations—again, corporations get a 

credit that is 85 percent of the effective tax rate that they have 

paid for the last 5 years in every country where they do business, 

correct? 

Secretary LEW. That is correct as well. 

Senator BROWN. So that means if a corporation shifts its profits 

to Bermuda, where the corporate tax rate is zero, that they would 

now owe 19 percent to our government on those profits, correct? 

Secretary LEW. Correct. 

Senator BROWN. But if the same corporation booked profits in 

South Korea, where the tax rate is slightly over 24 percent, or in 

India, where it is higher, or Germany, where it is in the high 20s, 

the corporation would potentially not owe a single dollar more in 

U.S. taxes, correct? 

Secretary LEW. That is also correct. 

Senator BROWN. So this is a proposal that fundamentally shuts 

down tax havens, as we have discussed before, and prevents a global race to the bottom. What is your opinion on that? 

Secretary LEW. I think that is a very accurate description, and 

when we are in international meetings, there is huge discussion of 

what is called base erosion and profit shifting, and there are two 

halves to that problem. 

One problem is the tax havens that have a race to the bottom. 

The other half is broken tax codes like ours that have these ridiculously high statutory rates. 

We put in a proposal that we think does what we need to do to 

solve the problem that pushes companies to tax havens, and we are 

going to be vigorous in the international setting to push against the 

tax haven race-to-the-bottom rates. I think we have an enormously 

better argument if we have done our part. 

Senator BROWN. So, to what do you ascribe the opposition to your 

proposal in Congress, among some in the business community here, 

not nearly all, but to what do you ascribe that? 

Secretary LEW. Look, I think that there will always be an argument for a lower rate if there is the possibility of getting a lower 

rate. So it is not surprising that we are hearing an argument that 

it should be lower than 19 percent or lower than 14. We have not 

heard arguments that undermine the basic integrity of the approach, and I actually do not think that we have heard arguments 

that suggest that there is not the basis for a bipartisan discussion 

to work through this. 

We do not think that the numbers that we have picked have kind 

of an absolute truth to them. We could have gone a little higher; 

we could have gone a little bit lower. This is the kind of thing that 

27 

we ought to be able to work out, and it would fix a broken tax system and keep American jobs here. 

Senator BROWN. Let us speak of something that we can work 

out—thank you for that—and that we have worked out bipartisanly 

for decades, and that is the Social Security Disability Insurance. 

The President’s budget supports a routine accounting measure 

called reallocation. We have had hearings on this. We had hearings 

last year when Senator Wyden was the chair and Senator Hatch 

was ranking member. We have had discussions with pretty much 

everybody on this committee on the issue of reallocation. 

It does not cost taxpayers money. It has been done 11 times before bipartisanly. Walk us through what you suggest, what the administration suggests, on reallocation and tell us, one, what will 

happen if we refuse to do it, and, two, why we should do it. 

Secretary LEW. Senator, we have a two-part proposal. One is, we 

do have proposals that would do things like continuing disability 

reviews and incentives to get people back to work, and pilot programs to help people get back to work from disability. 

But I do not think there are any experts who believe that any 

approaches that you could design would fix the Disability shortfall 

in the short-term. We saw a huge increase in the disability rate 

during the economic crisis, for a variety of reasons. 

The only short-term solution is a reallocation of the rates. I have 

been doing this long enough that I remember when we had to reallocate from Disability to the Old-Age and Survivors Trust Fund 

in order to get to the 1983 reforms. 

So it is many times that there have been reallocations, and they 

have gone in both directions. I think we do need to work together 

on kind of a longer-term solution, but I do not see any alternative 

but to have there be a reallocation to deal with the upcoming challenge. 

Senator BROWN. My recollection is, we have known for some 

time, actuarially, about a fairly accurate prediction, right, of when 

this would happen? 

Secretary LEW. Yes. 

Senator BROWN. We have known this for some time. 

Secretary LEW. The exact month shifts as you do updated projections, but we have known it was in the zone of the next year for 

some time. 

Senator BROWN. Thank you. Mr. Chairman, thank you. 

The CHAIRMAN. Thank you, Senator. 

Senator Bennet? 

Senator BENNET. Thank you, Mr. Chairman. Thank you for holding the hearing. 

Mr. Secretary, thank you for being here. Just when things could 

not possibly get worse, the Congress distinguished itself at the end 

of the last Congress by passing a tax extenders bill that, among 

other things, included an extension of the wind production tax 

credit for 21⁄2 weeks. 

In that context and understanding that context, in your answer 

to Senator Brown, you, the Secretary of the Treasury of the United 

States of America, described our tax code as broken and ridiculous. 

And there is not any thinking person on this committee who does 

not agree with that characterization of the tax code. 

28 

And you have been around here for a long time and I think have 

acquired a lot of wisdom over that period of time, and I think the 

people of Colorado would like to know what are the conditions that 

are required to actually fix this tax code, to reform the tax code. 

What do we have to do to put this committee in the position to actually do the people’s business, to not do this insanely minor and 

ridiculous legislating, but actually get to a place where we can fix 

this code and allow the private sector to compete in this global 

economy? 

Secretary LEW. Senator, I could not agree more that short-term 

extenders are a terrible way to do business. For a company that, 

at the beginning of 2014, wanted to know what their tax status 

would be, waiting until the last week of the year does not help you 

plan your business. 

So it is all retroactive for decisions that were made when people 

did not know what the tax code would be. So it could not possibly 

have the incentive effect that it would have if it was a permanent 

tax law. 

We have proposed dealing with the extenders in the context of 

tax reform so that we pick the ones that should be made permanent and make them permanent, pay for them in the context of tax 

reform, and have a tax code that has stability and certainty to it. 

I think the answer of what we have to do—we learned in 1986 

what the answer on tax reform is. We have to work together, and 

we know there are going to be interests that oppose losing whatever special privilege they have, but on a bipartisan basis, we have 

to say it is worth broadening the base, closing loopholes, lowering 

the rate, having an international system that makes us competitive, and, if we do it together, we can get it done. 

I am more optimistic than many because it just makes such profound sense to do it, and I also think that if we do not do it, it is 

going to lead to an economy where we see more companies doing 

things we do not like, and that is not a good outcome. 

Senator BENNET. I want to thank the chairman for putting us in 

these working groups, because I think that at least presents a bipartisan start for our efforts. 

I remember a principal of a charter school in my school district. 

I once asked him—you could hear a pin drop in this place—and I 

said, ‘‘How do you create these conditions where you can actually 

get this done?’’ And he said, ‘‘I visualize the conflict in advance and 

then, when it comes, I know it is going to be there, and we can get 

through it.’’ And I think that is what we need to do on this issue. 

It is not going to be easy to do, but we can do it. 

Secretary LEW. And, Senator, I have offered to both the chairman and to Senator Wyden that we look forward to working with 

the bipartisan working groups to help, technically and with our 

ideas, and we look forward to working with you. 

Senator BENNET. I think there are a number of us on both sides 

of the aisle, my colleagues here today, who feel the same way. 

I wanted to ask you an education question—actually, two. The 

GAO found that in 2009, 1.5 million students failed to take a credit 

or a deduction for which they were eligible, and another study 

found that one in four taxpayers failed to take the maximum education tax benefit when they were eligible for multiple credits. 

29 

* Free Application for Federal Student Aid. 

So I was really pleased to see that the budget simplifies our system of education tax expenditures and makes the American Opportunity Tax Credit more refundable. 

I wonder whether you could discuss some of the limitations of the 

current patchwork of credits and deductions in more detail, and 

also describe how simplification and better targeting might actually 

increase overall college affordability. 

Secretary LEW. Senator, we share the concern that the current 

patchwork of benefits—tax benefits and grants—makes it very difficult for a family to take full advantage of everything that is available to them. One of the reasons that we put together this approach was to simplify it, to make it so that families would understand what it is that they have available and to take it into account. 

We have consolidated the education tax credits into an expanded 

AOTC. We have simplified taxes for Pell Grant recipients. We have 

improved reporting of tuition and related expenses for scholarships. 

Part of this is that, if the reporting is more straightforward, it will 

be easier. 

We have repealed the student loan interest deduction for new 

students but allowed debt forgiveness to be excluded from income, 

and we have reduced the tax benefits of education savings accounts 

that—well, we have actually said we are not going to do that, so 

I take that back. 

Senator BENNET. I am out of time, Mr. Chairman. But I also 

want to call your attention, Mr. Secretary, to a bill that Senator 

Alexander and I have that would reduce the questions on the financial aid form, the FAFSA* form, from 108 questions to 2 questions. I think that would align with the work that you are trying 

to do, and I hope you are paying some attention to that. 

The CHAIRMAN. Thank you, Senator. 

Senator BENNET. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Scott? 

There is a vote that just started. Senator Wyden is headed over 

so he can come back to continue. We would like to finish it so you 

do not have to sit around, Mr. Secretary. 

Senator SCOTT. Thank you, Mr. Chairman. I promise not to take 

more than 30 minutes. I appreciate it. [Laughter.] 

The CHAIRMAN. You are the only one who could get away with 

that I think right here right now. 

Senator SCOTT. And I am smart enough not to try. 

The CHAIRMAN. You sure are. 

Senator SCOTT. Secretary Lew, I will say this. You have done 

something that I am very surprised at, and it almost bewilders me. 

You have actually answered questions, which is a remarkable experience for a new Senator from a witness. So, thank you very much. 

I have not liked your answers consistently, but at least you have 

provided true and clear direction for this committee, and I really 

appreciate that. 

I want to go back to a question that you heard from Senator 

Thune and Senator Heller related to the inheritance tax. I started 

a small business a number of years ago and grew that business 

30 

from zero accounts, no cash, to being worth some real money, from 

my perspective. And let us say that business ended up being worth $2 million. So I know there is a $1-million threshold where, if you are a small 

business owner, you do not pay taxes or inheritance on that. So I 

pass that business on to my nonexistent child. They get that business, a $2-million value. What is the tax that is owed? 

Secretary LEW. Senator, we do have the $1-million exemption. 

Senator SCOTT. So the first $1 million is gone. 

Secretary LEW. I am sorry. Are you asking about the estate tax 

or stepped-up basis? 

Senator SCOTT. Stepped-up basis. 

Secretary LEW. So for stepped-up basis, we have a $1-million exemption. 

Senator SCOTT. Yes. 

Secretary LEW. And then we also have—— 

Senator SCOTT. The 15 years. 

Secretary LEW [continuing]. A 15-year payment period. 

Senator SCOTT. Yes. 

Secretary LEW. And it would be taxed at the rate of the individual’s income. So, if they were not earning a lot, they would pay a 

very low rate. If they were earning more, they would pay a higher 

rate. 

Senator SCOTT. So a couple hundred thousand dollars, likely. 

Secretary LEW. Over 15 years, yes. 

Senator SCOTT. Right. The real challenge is, anytime that you 

have a non-liquid asset that you are required to sell and/or leverage in order to get the resources to pay the government, you reduce 

the actual value of that asset. For small business owners, and specifically minority business owners, the way that you create wealth 

in this Nation is by being in a position to create a profit. Creating 

a profit only happens a couple ways through the market that we 

talked about: through business ownership and the real estate. 

So, in the area of business ownership, when you are in the position to create that profit, you have to be able to pass it on generation to generation, hence the Fords and the Chevys and all these 

big businesses. Well, the proposal from the President actually impedes the ability for small and minority business owners to transfer wealth so you actually create wealth. 

I would love to see you guys go back to the drawing board and 

be at least a little malleable in this area, because a $1-million 

threshold on a non-liquid asset really is worth about $600,000, in 

my experience. 

Secretary LEW. Senator, we obviously, through the exemptions 

we put in, tried to be sensitive to the issue through the long period 

of payment. We tried to make it not be overly burdensome. 

I think if you look not at the illiquid assets, but things like 

stocks and bonds, it is much harder to make the case, and most 

of the money that is involved in stepped-up basis is in those kinds 

of assets, because that is where substantial wealth is transferred 

from generation to generation. 

Senator SCOTT. I am trying not to take the 30 minutes I promised not to take. I will tell you that perhaps there is a part of the 

narrative that is factual. There may be only 65 farms that are imVerDate Mar 15 2010 20:13 Sep 17, 2015 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 R:\DOCS\96062.000 TIMD
31 

pacted by this conversation, but there are hundreds and thousands 

of small and minority business owners who would be impacted severely and negatively by this conversation. 

But let me ask you a separate question in a different direction. 

I think it is section 165 of the Dodd-Frank Act that really gives the 

Fed unlimited discretion to make sure that banks and financial institutions are not taking on too much risk. Yet the President, in his 

budget, includes a new tax or a fee on banking liability supposedly 

designed to curb excess of risk-taking. I believe that any new tax 

on banks ultimately finds its way to the consumer. 

Mr. Secretary, does the request for this new bank tax or fee suggest that the President believes that the Dodd-Frank Act, a law 

that was passed entirely, it seems, on party lines, does not provide 

ample tools for reining in excessive risk? 

Secretary LEW. Senator, we think that the Dodd-Frank Act is 

working very well and has very much reduced the risk in the system. We think the tax proposal we put forward is entirely consistent with the Dodd-Frank Act. It is designed to make it a bit 

more expensive for firms to be highly leveraged, and that is one of 

the factors that contributes to risk. 

I think that if you look at our overall tax proposals, by reducing 

the corporate tax rate, that is going to also have a benefit for financial institutions and those other companies. I think, if you look on 

balance, we treat financial institutions quite fairly. 

Senator SCOTT. I will tell you that the seven basis points that 

you increase it by may mitigate risk, but at the same time, it really 

passes on a greater burden to the consumer, which makes it even 

more difficult for small business owners to borrow money. 

I am looking at, as my time is running out, the proposal on the 

corporate tax restructuring. I would note that a 28-percent rate 

would be a positive rate, and it would put us in a position to be 

globally competitive. 

However, for us to get there, the 14-percent repatriation deemed 

rate is, you must know, a non-starter in a conversation about actually bringing home—I guess you do not even have to bring it home. 

You are going to get taxed on it whether you bring it home or not. 

You must know that that has to be a non-starter on our side of 

the aisle. So it would be helpful to go back to the drawing board 

and have a conversation that actually has a realistic expectation 

and/or opportunity to make progress. 

Secretary LEW. Senator, I would just say that the structure of it 

is similar to the proposal put forward by the former Republican 

Chairman of the House Ways and Means Committee. So we view 

it very much as being in the realm of an issue that we could have 

a good constructive, bipartisan conversation on. 

Senator SCOTT. Conversation, yes—— 

The CHAIRMAN. Senator, thank you. 

Senator SCOTT [continuing]. Progress, probably not. Thank you. 

The CHAIRMAN. Senator Portman? 

Senator PORTMAN. Thank you, Mr. Chairman. I appreciate the 

fact that tax reform gets so much notice here today, because I do 

think it is an opportunity in this budget for us to try to make 

progress. I think Senator Scott is right. I think it is one where we 

have differences in terms of what the deemed repatriation rate is 

32 

and, for that matter, the prospective international rate, which 

would be a minimum tax, but I do think the structure is consistent 

with what many of us have talked about on this side of the aisle. 

Look, we need to do it. In Ohio, as you know, we just had another company choose to invert, meaning buy a small company 

overseas and move the domicile from Ohio to one of our global trading partners in developed countries. And this is happening all over 

the country. More importantly, I think a lot of companies that are 

U.S. companies cannot compete, U.S. workers cannot compete, so 

foreign companies are buying them. 

There is a study coming out from Ernst and Young soon that 

says that over 9,000 U.S. companies have been acquired by foreign 

companies in the past 10 years alone. And finally, it is just tougher 

to compete. So, even if you are not taken over by a foreign company, you tend to have a difficult time expanding, and I have heard 

this testimony from all kinds of Ohio companies. 

One small business came in recently and said they completed a 

deal, all the negotiations in Korea, to buy a subsidiary there, and 

a German company walked in and said, we will pay 19 percent 

more, because they can afford to—their after-tax profits are higher—and they lost the ability to expand. 

So this is happening, and it is American workers who are taking 

the brunt of it. So I want to commend you for putting into the 

budget—I have big concerns about the budget, as you know. Both 

of us used to be in the budget job, and I do not think it takes on 

the challenge of our time, which is the mandatory side of the 

spending. 

But with this particular provision, I think it gives us a chance 

to try to do something that will help American workers and, therefore, not just increase economic growth but actually create those 

middle-class jobs that we are always talking about, because these 

jobs are the very ones that are at stake right now, and that is who 

loses out if we do not lower the rate. 

There is a great study done by the Congressional Budget Office 

that shows that. This is not about the boardroom. It is about the 

workers. So we need to work on this. 

I guess the one question I would have for you today—just to be 

sure that we understand where we are on this notion of helping the 

highway trust fund, because this came up with a lot of the different 

members. There has been discussion of saying, why do we not just 

do a tax holiday, in other words, as we did 10 years ago and 20 

years ago, tell folks, you can bring money back to this country at 

a lower rate and then, therefore, we will be able to fund the highway trust fund. 

Have you looked at that issue, if we did not do tax reform but 

rather just did a tax holiday, what would be the impact on revenues? 

Secretary LEW. Senator, we have looked at it with both the Joint 

Tax Committee and our estimators at the Office of Tax Policy and 

have determined that it costs money, it does not save money. 

Senator PORTMAN. So it would not create additional revenue for 

the highway trust fund? 

Secretary LEW. Not through conventional scoring. And I think as 

a structure, as we were discussing a little bit earlier, a one-time 

33 

tax holiday, a voluntary tax holiday, does not solve the structural 

problem. What it does is, it tells companies, keep all your earnings 

overseas until the next tax holiday. It does not regularize the tax 

treatment in any meaningful way. 

By putting in place a new structure with a minimum tax and a 

toll charge, I think we accomplish the goal of having our tax system work properly so that business decisions will be made on economic terms, not on tax-determined terms. And I think that it will 

create a better climate for creating jobs in the United States. 

So, while I do not think the one-time voluntary tax holiday works 

well and accomplishes the goal, I do think that the proposal we put 

in structurally does. And, as you and I have discussed, the question 

of where you set the rates is something that people can disagree 

about. 

If you start with the structure making sense, I think there is a 

basis for a bipartisan conversation. 

Senator PORTMAN. Well, I hope you will reiterate today for the 

record what you have said publicly and at some of our meetings, 

that this is a starting point for you all in terms of the rates, because I do think—Senator Scott mentioned this—we are going to 

have some differences in terms of the rate. 

We want to be sure this actually works to make our workers 

more competitive, and, if we end up with a rate of 19 percent, for 

instance, some would argue that we have not accomplished that, 

because, when you look at the comparable rates around the world 

now, the effective rate has to be, in my view, in the mid 20s in 

order for us to be competitive. 

If you look at the tax rate here plus the 19-percent minimum, the 

average rate actually is above the average of the OECD countries. 

So we hope you will work with us on the rate and also to ensure 

that we do have the ability to help on the highway trust fund. I 

think we have to come to some understanding on how we are going 

to deal with the extenders. As you said earlier, maybe those could 

be part of this, which would make all the sense in the world, and 

let us be sure that we are working together to find a baseline that 

works. 

If you did do the deemed repatriation, which is part of overall tax 

reform, do you think there could be some revenue for the highway 

trust fund? 

Secretary LEW. Yes. I do think there could be revenue for the 

highway trust fund. And just to be clear, we think that as we deal 

with the expiring provisions, we need to deal with the individual 

provisions that expire as well, not just the business provisions. 

Senator PORTMAN. Mr. Chairman, I would like to put in the 

record—— 

Senator WYDEN [presiding]. Without objection, so ordered. 

Senator PORTMAN [continuing]. Two letters I got recently from 

the UAW and from the Ford Motor Company back in Ohio, two different plants. They are about this issue of currency. 

[The letters appear in the appendix on p. 119.] 

Senator PORTMAN. I do think that currency manipulation does affect trade. I hope that you, Mr. Lew, in your work on this issue, 

will help us to try to put in some enforceable standards on curVerDate Mar 15 2010 20:13 Sep 17, 2015 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 R:\DOCS\96062.000 TIMD
34 

rency. I think it makes a lot of sense, because it does affect the way 

American workers can compete globally. 

Thank you, Mr. Chairman. 

Senator WYDEN. Senator Grassley, are you ready, or would you 

like me to go? I am happy to have you go. 

Senator GRASSLEY. No. If we are limited to 5 minutes, you go 

ahead. 

Senator WYDEN. Great. Secretary Lew, let me kind of walk 

through what look like the transportation choices we have, because 

I think that is an important part of this debate. To me, there are 

sort of three entrants in the discussion. 

There is the gas tax issue, and we got a sense last year that it 

would be hard to build significant bipartisan support for a major 

hike in the gas tax. 

Then there is the repatriation issue, and I am certainly open to 

looking at this. As to the question of taxes and transportation infrastructure, there is clearly a nexus there because we have, of 

course, trust funds and we have excise taxes. So there is a clear 

nexus there. I think we also have learned from the 2004 experience 

that there is no repatriation rainbow out there, and, in fact, my 

sense is that, if you make it voluntary with respect to the whole 

process, the Joint Committee on Taxation or the scorekeeper will 

not score it. So that is certainly a path worth debating. 

The path that we know works, because we have done it, is the 

bond question—the question of getting some of this vast sum of 

money off the sidelines and into infrastructure—because it is a 

good investment and bonding works. 

It was in this room close to 6 years ago, after a decade’s worth 

of bipartisan efforts, Chairman Baucus talked about Build America 

Bonds. People wanted to know what might happen, and I told people we might sell $3 billion to $5 billion worth of Build America 

Bonds. And in a year and a half, $183 billion worth of Build America Bonds were sold all up and down the eastern seaboard. And 

Senator Casey, Governor Rendell, and others are major supporters 

of Build America Bonds. 

You can debate what kind of bonds they ought to be as well. In 

other words, there are different types, and I think we understand 

that. But to me, (A) because it has actually worked and helped us 

get more revenue, and (B) because there is a bipartisan history 

there, I think it would be very helpful. 

You all have been interested in something that you call Qualified 

Public Infrastructure Bonds. As you are aware, I have a great interest in a variety of new approaches here that will draw more private investment into the country’s infrastructure. Give us your 

thoughts on how the approach that you all are talking about would 

lend itself to a bipartisan alliance to get more private funding into 

infrastructure. 

Secretary LEW. Senator, as you and I have discussed, this is an 

area that we violently agree on. 

Senator WYDEN. Violent agreement. Oh, my goodness. 

Secretary LEW. Yes, violent agreement. Your leadership in the 

design of bond provisions here has been extremely important. We 

have worked with you on these. I hope we can work on a bipartisan 

basis to get either the Qualified Public Infrastructure Bonds or you 

35 

can name it any number of things, whether you call them Build 

America Bonds or America Fast Forward Bonds or Qualified Public 

Infrastructure Bonds. 

The idea is to create opportunities for private capital to be invested in infrastructure. One thing we know for sure is that, even 

if we are successful in extending our surface transportation bill for 

6 years at a higher level, that will only meet a fraction of the infrastructure needs that we have in this country. So this is not a case 

where we should do an either/or. We need to do both. And we also 

need to pursue public-private partnerships as a third avenue. Our 

infrastructure deficit is one of the really serious economic challenges for us to deal with in order to make sure that the future of 

our economy is as bright as it has been in the past. 

We cannot have ports that are not adequate to take the deep 

draft ships that are going to be coming through. We cannot have 

airports that are subpar and behind their international competitors. We cannot have roads that make it take hours longer to get 

from one place to another than it should. That costs time, it costs 

money, and it is a drag on economic growth. So we believe that, 

obviously, there are short-term benefits of job creation in infrastructure. Long-term, for the entire history of our country, it has 

been one of the keys to our economic success that we build the infrastructure we need for the future. 

Senator WYDEN. My time has expired. 

Senator Casey is next, Senator Grassley, both in order. I know 

colleagues have been very patient, and I appreciate it. 

Senator CASEY. I want to thank the ranking member. 

I want to apologize that I was not here earlier, Mr. Secretary. I 

did not have a chance to hear your testimony. It was one of those 

conflicted mornings. But we are grateful that you are here. 

Secretary LEW. If you cannot sleep tonight, you will probably get 

another chance. [Laughter.] 

Senator CASEY. That is right. So maybe we can watch the video 

later. But we are grateful you are here and certainly grateful for 

your work at a difficult time. 

As you know, we had Ambassador Froman here just a number 

of days ago. And one of the parts of his testimony, and then the 

back-and-forth of questions, clearly indicated that an issue that you 

and I have talked about a lot over the years, as well as others, currency manipulation, has not been addressed in the TPP negotiations. 

He directed questions to you, and that is the reason I raise it, 

first and foremost. I raise it as well, obviously, because of the concern I have, and that concern is rooted in the economic and often 

devastating economic impact of currency manipulation. 

As you and I have discussed, my main concern has been about 

China. But with these negotiations, of course, some of our potential 

TPP partners, including Japan, cause us concern as well. The other 

concern, of course, is down the road, were China to be a part of the 

TPP. That is of great concern on currency manipulation. 

Just in terms of some data—and then I just want to ask you 

maybe two questions about this. Just as it relates to Japan, the 

Economic Policy Institute recently found that currency manipulation was the main driver of our growing deficit with Japan and 

36 

that this growing deficit displaced 896,000 jobs nationwide in 2013, 

including 40,100 jobs in Pennsylvania. Now, not every one of those 

is directly attributable only to currency manipulation. It is the 

broader measure of the trade deficit. But they did find that currency manipulation was a driver. 

So it is very frustrating, when we have raised this issue a number of times—and I know that you have worked on this—that in 

the negotiations this does not have a primacy or a priority that I 

would argue that it should. 

I think currency manipulation is both unfair and very damaging, 

and it is kind of a double insult if it is not raised and then TPP 

goes forward and TPA goes forward, and we have not addressed it. 

I just want to get your response to that, the first part. 

Secretary LEW. Senator, first of all, I want to agree with you that 

if countries pursue policies that are designed to gain unfair advantage on exchange rates for the purpose of trade advantage, it is 

wrong. We should push back. We do push back in the current international forums—the G–7, the G–20, the IMF—but even more importantly, bilaterally. 

I think that the EPI study on Japan is not entirely accurate. 

There is no evidence that in the last several years Japan has intervened in a way that would meet the standard that you are describing. I think that the activity that that report is pointing to is not 

government activity, but it is the investment of funds in the private pension fund. 

Private pension funds in the United States, as well as other 

countries, have mixed portfolios. I think if you did the analysis, the 

United States invests in other countries as much as other countries 

invest in the United States. And I do not believe that there is any 

evidence of any manipulative investment. 

I will say that I have raised the issue of currency with our Japanese counterparts more times than I can count. We do not just hold 

them accountable for their actions. We hold them accountable for 

their words. If their language even suggests that they are deviating 

from using domestic tools for domestic purposes, we come down 

very hard. And I must say, in all the bilateral engagements I have 

had, if we do that, we see change in language and a restraint on 

policy. 

I do think that the question of kind of looking at macroeconomic 

tools is a very important one. If you look at our QE policy, to other 

countries, it was very disruptive, but without QE, we would not 

have been able to dig ourselves out of the recession. 

I think Japan has the right to use quantitative easing as well. 

So we cannot compare situations that are macroeconomic to unfair 

manipulative practices. 

Senator CASEY. I would just say this in response. I think both 

of us agree that whether there is a dispute, whether you raise a 

dispute about one particular study, we can agree that currency manipulation has been damaging to our economy. I do not think there 

is any question about that, number one. 

Number two is, I am not willing to kind of let Japan off the hook 

on this. We can debate that. But the broader question goes even 

beyond Japan. I get the sense—and this is one of my real frustrations—that it is raised, it is prioritized. I remember talking to your 

37 

predecessor, Secretary Geithner, about it. And I understand that it 

is raised, I understand that it is asserted in bilateral discussions 

or even negotiations. 

But the problem I see is, we never seem to get something tangible, a result that would put our workers at least on a level playing field or our companies on a level playing field. That is the frustration, and I get the sense that the administration does not place 

the priority that I place on the issue. 

Secretary LEW. Well, I actually think that we are second to none 

in terms of pushing back on what are unfair practices. And I know 

I have raised it, not in just an occasional, offhanded way, but I 

make it central to our relationship with another country, and I 

have seen it have effect. 

So I think we have been aggressive, and, as I said earlier, we are 

open to a discussion of how to build a bridge between trade discussions and trade legislation and the processes for dealing with currency through the current authorities, and I would look forward to 

that conversation. 

Senator CASEY. And I would as well. I am sorry, we are over our 

time, but thank you. 

Senator GRASSLEY [presiding]. I want to start out by telling you 

that I agree with Senator Casey, and I probably would have not 

ever gotten around to asking that question. But this is how I will 

phrase the question that I was going to ask along that line, and 

I will give you my opinion. I do not expect you to—I do not even 

want you to take time to answer it. 

Following our meeting a week or two ago with Ambassador 

Froman, he said, like Senator Casey did, that it was up to the Secretary of Treasury, who was negotiating this or dealing with this 

subject. My question would have been, specifically: is the administration doing anything of consequence to address the currency manipulation by our trading partners around the world? 

And my feeling is, not just watching the Obama administration 

but previous Republican and Democratic administrations, that everybody is afraid to tackle it. And I do not know why, because, if 

there are not consequences, there is not going to be any change of 

behavior. And particularly it is frustrating for me that we do not 

take on China, because they are such a—they are not involved in 

TPP, but they are involved in this whole business of currency manipulation. 

I think we are afraid to take them on, because, every time you 

mention something about it, they say, you are interfering with our 

internal affairs. 

Secretary LEW. Well, Senator, I know you did not want me to respond, but we have taken China on. The President has taken the 

President on. I have taken on the Senior Vice Premier and the 

President and the Finance Minister on this issue. 

They have actually responded to our pressure. They have 

changed their policy, and I think we have—I am not saying that 

there is not a need for ongoing vigilance and pressure, but we have 

taken it very seriously, and I think we have made progress. 

Senator GRASSLEY. I would not want to say that you are not— 

I know that those steps have been taken. But you know what the 

38 

Chinese say. They would never admit that you had anything to do 

with it. 

Secretary LEW. But they have actually said this year that they 

would refrain from intervening. They did not used to admit that 

they intervened. They now say they will refrain in many circumstances, most circumstances, from intervening. 

They have never been willing to abide by the transparency requirements of the IMF. In response to repeated pressure, they have 

now said that they are going to abide by the IMF transparency so 

we can see what they are doing in intervention. 

I am in no way saying it is not a serious issue. It is a very serious issue. But we are very actively engaged, pushing very hard on 

China on this issue. 

Senator GRASSLEY. Well then, let me say ‘‘thank you’’ if you are 

doing more than what I perceive you are doing. 

I want to follow up on something that you discussed with Senator Thune and then more specifically with Senator Scott. You 

spoke about a $1-million issue as far as the way the President’s 

plan was going to work. When speaking with Senator Scott, you 

mentioned that $1-million threshold. 

Now, specifically, is this an exemption, or is it a dividing point 

between determining what is or is not a small business? Then more 

specifically, if the business is over $1 million, are they taxed on the 

whole gain or is it a $1-million exemption? 

Secretary LEW. It is a dividing point. So it is definitional. And 

as I now think of Senator Scott’s question, I may have to revise my 

response, because I think I may have treated it as if it were the 

other, and I apologize if I did. 

Senator GRASSLEY. So then to clarify, there will be a $1-million 

exemption. 

Secretary LEW. No. It is the dividing line. It is definitional. 

Senator GRASSLEY. So if you are over $1 million, then the first 

$1 million is taxed too. 

Secretary LEW. So the $1 million gets to the size of the business, 

not the size of the gain. And for a larger business, the provisions 

would apply. For smaller businesses, they would not. 

Senator GRASSLEY. So you have to be under $1 million. If you are over $1 million, then the first $1 million is taxed. That is my question. 

Secretary LEW. Well, you still get the—for a couple, there is a 

$200,000 exemption; for an individual, a $100,000 exemption. And 

you still get the 15 years to pay any taxes that are due. 

Senator GRASSLEY. Yes. 

Secretary LEW. And you are only taxed on the gain, not on the 

base value. So if the gain were $500,000, you would be paying on 

the $500,000 gain, not on the value of the whole property. 

Senator GRASSLEY. I think, rather than take any more time, I 

will put a statement I have on this issue in the record. But I think 

it is very detrimental to family farming. That is the summation of 

it. 

I think that if you want to keep a family farm in the family, it 

is going to be very destructive. 

[The prepared statement of Senator Grassley appears in the appendix.] 

39 

Senator GRASSLEY. So, for the committee, I want to thank Secretary Lew for appearing today. I also want to thank all the Senators who participated. It has been a good hearing. 

Any questions for the record should be submitted by no later 

than Thursday, February 12th. 

The hearing is adjourned. Thank you, Secretary Lew. 

Secretary LEW. Thank you, Senator. 

[Whereupon, at 12:04 p.m., the hearing was concluded.] 

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