▶ 0:09:44>> good morning. Subcommittee is going to come to order. Senator reed stepped out to take a quick meeting and with his permission I'm going to get started. This is the first hearing in the cycle for the subcommittee. I want to welcome senator john houston, who has recently joined the committee after the confirmation of secretary mullin.
▶ 0:10:07I would like to congratulate senator fischer, who has acquired the gavel in the legislative branch subcommittee. Sec. Scott bessent is with us here today to reputed the department of the treasury's budget request. Welcome back. Thank you for being here.
▶ 0:10:31The department's request proposes an 11.7% or $1.5 billion reduction from the amount provided in the prior fiscal year. This request appropriately acknowledges that resources are limited and makes deliberate trade-offs among competing priorities to advance this administration's pro-growth economic agenda.
▶ 0:10:50This budget west also reflect a thoughtful effort to balance responsible stewardship of taxpayer resources by continuing to strengthen america's economic and financial leadership and I appreciate the effort to strike this delicate balance. This budget request proposes solutions to difficult questions that too often some of our predecessors have avoided.
▶ 0:11:14Rather than responding to constraints by requesting additional funding this proposal reflects efficiency and making targeted decisions on where -- can have the most impact. I appreciate your leadership and your ability to make tough decisions and shaping leaner government without compromising the departments core mission. That is an important goal. In one I think most members share.
▶ 0:11:41As the department works with these resource constraints it will be important for congress to understand how treasury is prioritizing its activities and how performance outcomes are being measured. That understanding will help ensure that the subcommittee aligns resources with the areas of greatest need in greatest impact. This budget request also reflects the consequential legislation congress passed and congress signed into law last year. The working families tax cut act.
▶ 0:12:11Recent data shows that tax refunds this year are substantially higher than years prior. Putting more money back into the pockets of our working americans. The working families tax cut act also made adjustments to how certain income is treated, including relief on items like tips and overtime, as well as expanded deductions for seniors and working families. These changes require treasury and the irs to create new guidance, to update systems, and ensure taxpayers can easily imply with these changes.
▶ 0:12:41I was pleased to see this budget request does not focus on maintaining the status quo. Rather, it addresses the department's responsibility to implement major policy reforms and ensures that treasury has the tools needed to carry them out efficiently. Jan tax administration this budget reflects a broader effort to strengthen america's economic position globally. For far too long unequal, nonreciprocal trade policies have handicapped american businesses. Eating to persistent trade deficits and erosion of our industrial base.
▶ 0:13:14Decades of asymmetric policies have also undermined our nation's capacity to produce critical goods like ships and pharmaceuticals. It has made us increasingly dependent on competitors. This administration is resetting the global trade market by negotiating a multitude of international trade agreements and continuing to post an america-first agenda. Digital assets present new opportunities for economic growth. Capital formation and value storage.
▶ 0:13:43Properly deployed these digital technologies will facilitate secure and instantaneous payments. America must be the global leader in this sector if we want to retain our position as the reserve currency. Our nation has demonstrated that it can lead across any industry when it is provided with the regulatory certainty necessary to grow and invest. That is why lester president trump signed into law my stable kueng legislation, the genus act, which provided regulatory clarity to help the U.S.
▶ 0:14:11Remain a leader in digital assets and financial innovation. Your department, Mr. secretary, played a critical role in the success of this legislation, particularly luke pettit and williams, joined by jonathan greenstein on the implementation. President trump understands the crucial role this industry will play in our nation's economic development and international leadership.
▶ 0:14:34President has asked congress to provide clarity through technology having neutral regulations and transparent government decision-making to foster arab austin vibrant digital economy. I'm encouraged and I am grateful for your support for sensible stable coin policy as we promote U.S. leadership in digital assets and financial technology while protecting the economic liberty of americans. Our nation also benefits from constructive relationships with our allies.
▶ 0:15:04This subcommittee is grateful for your daily work negotiating tariffs that preserve our strong relationships with those allies. The other side of that coin is countering our adversaries through financial intelligence and sanctions. While treasury's role in the intelligence community is really in focus its unique capabilities help safeguard the american financial system and ultimately strengthen america's military power. Treasury response abilities today extend well beyond traditional finance.
▶ 0:15:30I appreciate your work and look forward to continuing to partnering with you to ensure that the department has the tools it needs to succeed. And illiquid to your testimony. But before you begin your testimony I'll want to turn to my colleague, the ranking member of the subcommittee, senator jack reed.
▶ 0:15:45Sen. Reed: Thank you very much, Mr. chairman. Mr. secretary, thank you for joining us today. I look forward to your testimony, which comes at a moment where the world is in a great deal of turmoil, prompted in part by the administration's this good policy on illegal tariffs and its decision to go to war with iran. All president trump upends the economic apple card americans are paying more at the pump and for other everyday necessities.
▶ 0:16:15Sen. Reed: At the start of the iran war gas prices averaged about two dollars 98 cents per gallon. Now americans are forced to shell out over four dollars a gallon. Inflation hit a near two month high in march while housing costs remain too high. The cost of living is simply not sustainable for the american people. Mr. secretary, it seems that president trump has abandoned the interest of giller americans .
▶ 0:16:45Sen. Reed: In your budget request -- and your budget request continues this trend. The fiscal year 2020 seven budget request for the treasury department totals $11.5 billion. A $1.5 billion, or roughly 12% decrease. While the request provides increases to several treasury offices, it cuts funding for the inspector general, grants for community development, and enforcement of our tax laws.
▶ 0:17:15Sen. Reed: The proposal slashes irs funding by one point $4 billion on top of the 1.1 billion dollar cut sustained in fiscal year 2026, last year. The irs has pushed out more than 28 thousand employees since the start of the trump administration, and this proposal would shrink the workforce by another $4000 -- another 4000. This is simply irresponsible.
▶ 0:17:40Sen. Reed: You come from the business world and no successful company went under-invest in its revenue collection mechanism. The irs itself acknowledges that every dollar the agency invests in enforcement rings $11 back from tax cheats. So, your own agency admits that cutting irs staff and funding, particularly its enforcement budget, cost american taxpayers and helps tax dodgers.
▶ 0:18:07Sen. Reed: Indeed, cutting irs funding is a proven wind for -- windfall and puts our country on a dangerous path. Yet the budget request is to cut exams on high income individuals in fiscal year 2026 compared to fiscal year 2023. This will help wealthy tax payers ebay billions of dollars in taxes each year.
▶ 0:18:32Sen. Reed: The rs should prioritize providing better service to american households, not help rich americans game our tax system. Secretary bessent, suffice it to say the administration's policies, including irs budget requests, are putting our economy and the economic security of average americans at risk. I look forward to your testimony and your candid answers to our questions. Once again, I think you for joining us today.
▶ 0:18:58Chair Hagerty: Now I would like to wreck eyes sec. Scott bessent. Before becoming our 79th secretary of the treasury secretary bessent has had a successful career as a fund manager for creating his own investment firm. Secretary bessent believes america is unstoppable because its economy is unstoppable. An economy built on the piston most liquid markets in the world. If you could please keep your remarks to five minutes it will allow more time for questions.
▶ 0:19:29Chair Hagerty: Your full written statement will be included in the record. Secretary bessent.
▶ 0:19:32Sec. Bessent: Chairman hagerty, senator reed, and members of the subcommittee, I am grateful to join you today. The fiscal year 2027 president's budget request for treasury states our commitment to boosting growth, promoting efficiency with our agency, and targeting illicit actors that threaten our national security.
▶ 0:20:00Sec. Bessent: Treasuries budget request represents a 12% decrease from the enacted level while still building on the success of fiscal year 2026 to continue strengthening U.S. financial system. Along with managing our own discretionary budget, treasury is charged with managing core financial functions and payment operations for the U.S. government. Take that commitment very seriously. Not only ensuring that every dollar in our budget is thoughtfully executed, but also that every dollar collected, deposited, or dispersed through treasury is secured and timely.
▶ 0:20:32Sec. Bessent: I would like to begin by highlighting the treasury departments effort to ensure accountability for the american people. There is no better example of delivering meaningful change for everyday americans then president trump's working families tax cuts, which over 60 million returns claimed at least one of president trump's signature new tax cuts this filing season.
▶ 0:20:55Sec. Bessent: Enacting no tax on tips, no tax on overtime and new tax cuts for seniors and social security are delivering tax relief to working families. This season over 7 million filers have claimed no tax on tips, with an average duction of over $7,000. Orb 28 million filers claim no tax on overtime with an average deduction above or $3100 and over 34 million seniors have claimed enhanced deduction for seniors with an average deduction of over 7500.
▶ 0:21:24Sec. Bessent: The legislation not only delivered historic tax relief but also began building financial security for future generations initiatives like trump accounts, which nearly 5.5 million accounts have been opened, with over 1.3 million children eligible the $1000 pilot program contribution. Trump accounts demonstrate this administration's pledge to invest in workforce of tomorrow, giving them an ownership stake in the success of the nation.
▶ 0:21:52Sec. Bessent: As you know, filing season ended on april 15. I'm happy to report that new leadership at the irs has resulted in pro-business processes and an increased focus on meeting private industry benchmarks for customer services. Our increased focus on digital-pers taxpayer experience has resulted in lower call volumes as taxpayers find the information they need online and increased adoption of deposit which will expedite refunds for years to come.
▶ 0:22:22Sec. Bessent: The budget request continues to streamline and modernize irs operations funding to encourage automation and technology investment. While taxpayers are met where they want to be by offering multiple service options. Although the request for irs present a modest decrease we are still able to contain current services and implement new initiatives aimed at improving customer experience and making tax compliance easier.
▶ 0:22:49Sec. Bessent: We have introduced two new metrics for modernizing how irs performance is measured, introducing a service rate and enterprise service completion rate that better aligns performance measurement with how people interact with the irs today. Additionally, the budget request targets in efficiency and duplicative spending through reductions in areas that have been operationally ineffective.
▶ 0:23:13Sec. Bessent: I want to ensure that every dollar of taxpayer funding supports mission-critical work by making targeted reductions in specific areas. We can enhance investments in national security by bolstering critical cyber capabilities, sanctions, and combating illicit financial activity.
▶ 0:23:31Sec. Bessent: Treasury's office of terrorism and financial intelligence is at the forefront of america's fight against foreign adversaries and the additional funding would expand treasury's ability to trace, detect, and sanction financial networks acting in bad faith. The request includes a small investment to advance institutional expertise in digital assets, housing, finance, and global financial markets within treasury's department offices. This is particular important with the information -- able mutation of the genus act.
▶ 0:24:02Sec. Bessent: And mark legislation that creed of the first-ever regulatory framework for stable clients. As I shared earlier I'm committed to working together to continue building on the success of the last fiscal year and look for to your questions. >> thank you very much, Mr. chairman. Mr. secretary, welcome.
▶ 0:24:27Sec. Bessent: You mentioned just now in your testimony the importance of consumer customer service and your effort to improve it. Along with other members that the main delegation, I see you a letter last month opposing the closures of two taxpayer assistance centers. One in bangor, maine, one in augusta, maine.
▶ 0:24:56Sec. Bessent: The press center in northern maine has already been closed for some time. These closures mean that someone from my hometown of caribou, maine, who needs in person service, faces a 10-hour round trip to the nearest taxpayer assistance center.
▶ 0:25:25Sec. Bessent: That is the last remaining tac in the entire state of maine. That is just not reasonable, particularly when you consider that maine has the oldest population by median age in the country.
▶ 0:25:40Sec. Bessent: We have areas of the state where internet service is simply not available and we have older adults who, even if it is available may not have access to computers or to the skills that they need to use that method of getting help.
▶ 0:26:05Sec. Bessent: As the -- and I will also mention that I meant -- I met recently with a taxpayer advocate in the state of maine and he too expressed his concerns about what the closures of these centers would mean in terms of providing customer service.
▶ 0:26:28Sec. Bessent: Has the irs evaluated what the impact of closing down all of these taxpayer assistance centers except the one in southern maine would be on people living in other parts of the state? Particularly our older adults and -- in rural areas?
▶ 0:26:50Sec. Bessent: Senator, thank you for your leadership on this and the entire main delegation. I have instructed the irs to look into this, and we will getting back to you. System-wide. Only 10 centers were closed. I believe one of the centers that was closed was already the unmanned, but we will get back to you and we will remedy this 10-our problem.
▶ 0:27:20Sec. Bessent: So, thank you for bringing it to our attention. We look forward to working with you.
▶ 0:27:23Sen. Collins: Thank you so much. It really is a problem, given the size of our state. I want to bring up another persistent problem in the state of maine. And that is, we have been the location for literally hundreds of illegal marijuana grow houses that are linked to transnational criminal organizations based in
▶ 0:27:54Sen. Collins: China. And we really need a whole of government approach. Earlier this year I secured language calling for a state department-led report on prc-linked criminal syndicates and the illicit drug trade. Where treasury comes in is there is money laundering involved and I want to thank treasury for providing some expertise.
▶ 0:28:25Sen. Collins: Through the irs, but it still remains a huge problem. And our sheriffs have been terrific in trying to close down these grow houses. But we need more federal help. We have had some from treasury, some from the justice department, dea. But this is -- we are talking about over 200 of these illegal grow houses.
▶ 0:28:56Sen. Collins: And, as I said, there is a link to money laundering. And the fentanyl trade. As well. Could you talk a bit about how the department is working to address this dangerous operation?
▶ 0:29:13Sec. Bessent: Yes, senator. Since you brought this to our attention last year irs criminal investigations are both involved in supporting local law enforcement and working with federal agencies to combat these problematic operations in maine.
▶ 0:29:30Sec. Bessent: A staff from this team, as you have said, they have specialized financial firm and sick and intelligence expertise and we want to help local law enforcement be -- dismantled these money-laundering operations. So, I look forward to ongoing dialogue and per your request I will personally look into what is going on. Especially with irs criminal investigations.
▶ 0:29:59Sec. Bessent: Who were able to move on operations like this very quickly.
▶ 0:30:00Sen. Collins: Thank you very much, Mr. secretary. Thank you, Mr. chairman.
▶ 0:30:04Chair Hagerty: Thank you, chairman. Thank you, Mr. secretary. He was encouraging to see you engagement on this issue. Not just for maine, but the entire nation. Senator reed.
▶ 0:30:15Sen. Reed: Mr. chairman, do you want to go first?
▶ 0:30:18Chair Hagerty: I will come after you.
▶ 0:30:20Sen. Reed: Thank you, Mr. secretary. As I mentioned, your budget once again cuts irs enforcement activities. Your own congressional justification states that every dollar spent on enforcement provides an $11 return for the american taxpayer. So, given that your own request shows an extraordinary return on investment, why does the budget cut enforcement by nearly 900 million -- $900 million?
▶ 0:30:49Sec. Bessent: Sir, the data does not support that, because we cut the budget, and enforcement recoveries were up 12% last year.
▶ 0:31:00Sen. Reed: Well, if you increase the budget you would presumably have even more. I mean, the obvious point, which I stress in my testimony, is that you are basically scheduling fewer and fewer enforcement actions, particularly against those who are very well endowed and may have either directly or indirectly made mistakes on their tax form.
▶ 0:31:33Sen. Reed: So, it seems to me obvious that more effort would produce more resources.
▶ 0:31:36Sec. Bessent: Well, I think that may be one school of thought, but we have not seen that in educational outcomes. We have not seen that in health care outcomes. That more money equals better outcomes. At the irs thus far we believe in outcomes. We recovered that an enforcement, the top-five enforcements recovered $2 billion.
▶ 0:32:02Sec. Bessent: As I said, the enforcement/dear, -- enforcement/geo were up to almost $41 billion. So, I think during the biting years in the ira there was a scoring gimmick that was used and brought in a lot of enforcement officers and, again, the facts on the ground to get to an enforcement officer takes 10 or 12 years and bring in new
▶ 0:32:33Sec. Bessent: Officers when year, two years have almost no expertise and don't result in better outcomes. What we have found is meeting the taxpayers where they are and using technology we have pushed back their tax returns and say, we believe there is an error here, and you will be audited. Why don't you fix it in advance?
▶ 0:32:55Sen. Reed: Well, Mr. secretary, I think it is not efficiency or more revenue you're seeking. You are seeking to disabled the ability for the federal government to reach all who are not being completely honest with their tax returns. Particularly those that have the most to pay. The wealthiest in the country.
▶ 0:33:26Sen. Reed: I should say, gas prices are up more than 40% and are above four dollars a gallon. And the nonpartisan tax foundation estimates that president trump's tariffs were essentially a $1000 tax on american households. That is a nonpartisan organization. You have a situation in which health care is usually expensive for people.
▶ 0:33:56Sen. Reed: About 17 million americans are seeing increases because of the big, beautiful bill. Consumer sentiment is at a record low. You recently claimed that in their heart of hearts they -- consumers -- feel-good. But that is not supported by holding. That is inaccurate.
▶ 0:34:18Sen. Reed: The idea that consumer spending is up does not recognize, I think, that the top 10% of the richest families account for 50% of consumer spending. So, how does all of this help families solve the key price of affordability in the united states today?
▶ 0:34:37Sec. Bessent: Senator, I agree. After the biting years and the 25% cpi increase americans were reeling. We talk about gasoline the crude market is currently in what is known in the energy business as a very steep backwardation, which means that future prices are much lower than we aren't present. I think the conflict will end.
▶ 0:35:06Sec. Bessent: I think gasoline prices will come back to where they were or even perhaps lower. As they did. President trump has shown he is good at getting energy prices down and that our energy dominance agenda has lowered prices.
▶ 0:35:22Sen. Reed: How fast will the prices of gasoline come down?
▶ 0:35:26Sec. Bessent: "that is path-dependent on when the war and conflict end.
▶ 0:35:31Sen. Reed: Well, from the perspective of the armed services committee, it is not likely to end soon. Thank you.
▶ 0:35:39Chair Hagerty: Mr. secretary. Again, welcome. I would like to stay on the topic that the ranking member raised. With respect to technology deployment. Your extensive business career, I'm sure you have made a number of investments over your career. You have made technology investments. You expect to pay back the don't you?
▶ 0:36:01Sec. Bessent: Yes, senator.
▶ 0:36:03Chair Hagerty: That payback would come in the form of higher service levels, wouldn't it?
▶ 0:36:08Sec. Bessent: That would be one of the appropriate metrics.
▶ 0:36:11Chair Hagerty: Greater productivity, perhaps?
▶ 0:36:14Sec. Bessent: Greater productivity, higher customer satisfaction.
▶ 0:36:18Chair Hagerty: And lower cost to execute?
▶ 0:36:20Sec. Bessent: Yes.
▶ 0:36:21Chair Hagerty: I applaud your efforts in investing in ways that would expect a payback. Assuming the technology is deployed effectively. Now I would like to turn to a topic that is one we worked together. Closely on. That is the genius act. Effective implementation of this law is vital for strengthening U.S. leadership in digital financial technology. I want to commend the treasury department from moving quickly to propose its first regulation this month.
▶ 0:36:51Chair Hagerty: The proposed bill is on the advanced notice of proposed rulemaking. That notice saw it wide, and a range of matters. In your budget request I was pleased to see targeted resources dedicated to carrying out the genius act. To support this work department officers are requesting $1.8 million and six full-time employees. These funds are focused on rulemaking and governance.
▶ 0:37:18Chair Hagerty: Additionally, the financial enforcement is seeking 10 full-time employees to drive innovation and establish national leadership. If you could just take a moment to comment on why these funds are necessary to implement the genius act?
▶ 0:37:33Sec. Bessent: To meet our obligations under the genius act treasury has already made two public request for comment, published under two notices up her polls -- of proposed rulemaking and continue to work effectively internally and with our regulatory partners and other agencies. We have requested this additional funding.
▶ 0:37:55Chair Hagerty: Makes total sense. As the genius act as implement to that I want to make sure the treasury department works with my stuff on any necessary fixes as rulemaking is carried out.
▶ 0:38:07Sec. Bessent: Yes.
▶ 0:38:09Chair Hagerty: Thank you. I want to now turn the discussion to your decision to cancel contracts with booz allen hamilton regarding concerns about how poorly they safeguarded sensitive taxpayer information. I appreciate your leadership on this matter and I want to better understand how treasury and the federal government should be addressing contractor accountability. If you could just walk us through the factors that lead to your determination that contract termination was the most appropriate response in this case?
▶ 0:38:38Sec. Bessent: Again, this was one of the largest data breaches in irs history. As I have repeatedly said, my priorities at the irs our customer service, collection, and privacy.
▶ 0:38:54Sec. Bessent: And this was an egregious attack on the privacy of the thousands of american taxpayers, any of whom this was presented as a leak of the very richest taxpayers, when in fact their employees' tax returns were also leaked.
▶ 0:39:17Sec. Bessent: He think the vetting process for this contractor who got into the irs, I believe he went in with the determination this was premeditated and his employer failed to screen them. We no longer have confidence in that firm's ability to screen that and deploy contractors within the irs or the entire treasury department.
▶ 0:39:42Chair Hagerty: I would agree with you. The cancellation of these contracts is warranted and given booz allen's breaches of sensitive information it is a disgrace that firm obviously failed miserably. If you think about it, this is not the only time employment of a government contractor has done something delicious, politically motivated, with the -- the intent to weaponize the information they have access to.
▶ 0:40:11Chair Hagerty: I'm going to continue to work with officials across the administration to ensure that safeguards are in place to prevent this type of politically-motivated public trust. Further, we are going to have to ensure that outside contractors, as well as career personnel, are held accountable when they violate the public trust or otherwise attack or undercut america's elected representatives. Now I would like to turn to another topic.
▶ 0:40:37Chair Hagerty: That is the working families tax cuts act and the refunds in the economic interest that have been promoted there. The act delivered to put more money into the pockets of americans not only prevented the largest tax increase in our nation's history, it also deliver the largest tax cut. Now we are a week past the conclusion of the filing season.
▶ 0:41:04Chair Hagerty: I would like for to share with us how the refund for 2025 compares to last year and what that means for americans.
▶ 0:41:11Sec. Bessent: The average refund, as we collate the final numbers, was up 13%. We do not have the numbers now, but my inclination is going to be that those filers who use schedule a, that their refunds would be up more than the average, and just to give you some numbers, senator, this year we received over 100 -- 155
▶ 0:41:42Sec. Bessent: Million returns. Over 60 million filers used schedule lay for one of the signature policies. Also via the deductibility on interest for auto loans for american-made cars, the average tax cuts for filers benefiting from the tax cuts was $800. Over 7 million filers received an average deduction of over $7,000. No tax on overtime, over $3100.
▶ 0:42:11Sec. Bessent: Car loan interest adduction, 1800. In the seniors deduction, 7500 dollars. Importantly, we are now up to 98% of taxpayers who file electronically, and those who file electronically, 90% of them received these refunds within 21 days.
▶ 0:42:28Chair Hagerty: That is great news. Senator coons.
▶ 0:42:33Sen. Coons: Thank you, secretary bessent. I will have three questions for you this morning about sanctions, cdf fis, and direct file. We are about seven weeks into the war with iran. And I wondered, given that your department enforces sanctions if you have a sense how much iran has gained through sanctions since the war began. I will tell you estimates are $14 billion.
▶ 0:43:01Sen. Coons: President trump has described the obama iran deal as a disaster and scandal because of the money iran god, which was about $1.7 billion. I don't know how you described $14 billion, but you don't have to read "the art of war," to know that helping your adversaries gain money while you are at war is a terrible idea, and it is shocking to me that the countries currently profiting from the release of sanctions are enemies. No country has profited more from this war than russia.
▶ 0:43:29Sen. Coons: Oil and gas prices are up nearly 50% since february and it would be bad enough if russia were profiting from higher global oil prices. But you're treasury department lifted sanctions on russian oil, giving them an extra $150 million a day in revenue. Those funds are going not just to kill ukrainians, but russia is using profits to support iran with drones and intelligence to kill our troops. So, look.
▶ 0:43:59Sen. Coons: To summarize, I find it hard to believe that we are continuing to relieve sanctions pressure on russia and iran. I was encouraged when last week you said the department would not extend the sanctions relief for russia, yet the next day that was reversed. Can you give me any brief idea why it is a good idea to relieve sanctions on iranian and russian oil?
▶ 0:44:24Sec. Bessent: With pleasure. The $14 billion is a myth and a dnc talking point I have been subjected to many times. If anyone would like to show me where that $14 billion comes from --
▶ 0:44:36Sen. Coons: Ira -- I look for to an exchange of details on that, Mr. secretary. I am not the dnc, I am the senator from delaware.
▶ 0:44:45Sec. Bessent: Well, on every talk show seems to --
▶ 0:44:49Sen. Coons: You disagreed that iran has received significant revenue because of sanctions relief?
▶ 0:44:56Sec. Bessent: I could not disagree more.
▶ 0:44:58Sen. Coons: Do you disagree that russia has received revenue from the sanctions relief?
▶ 0:45:02Sec. Bessent: Could not disagree more.
▶ 0:45:05Sen. Coons: Why did you relieve the sanctions against russian and iranian oil?
▶ 0:45:09Sec. Bessent: Think of it this way. There is the strait of hormuz.
▶ 0:45:13Sen. Coons: Familiar with it.
▶ 0:45:15Sec. Bessent: There is oil.
▶ 0:45:17Sen. Coons: Took a left into the right.
▶ 0:45:20Sec. Bessent: That treasury was able to -- just as you are concerned about gasoline prices for the american consumer and our asian allies -- as are we, treasury was able to create more than 250 million barrels on the water. In the way to think about this is, as they came in today the oil prices are at $100. If we had not done that sanctions relief they might have been at $150, because the world became very well-supplied.
▶ 0:45:51Sec. Bessent: So, if russia was selling their oil added 20% discount, I can tell you that 100% of $100 is less than 80% of $150 and the american consumer has been
▶ 0:46:03Better Off To Sen. Coons: Look, the folks in delaware are buying four dollars a gallon gas today. I don't see that we have seen a significant reduction in the price of the palm, but I have two more questions I want to get to and I look forward to disputing the details. I believe russia and iran have benefited from the release of sanctions and when you said you're not going to extend the sanctions relief and then we reversed it, I was deeply disheartened, because we should not be funding putin's war machine.
▶ 0:46:31Sec. Bessent: That was as the result -- last week was world bank and imf weekend on wednesday april my belief we would not do it. I was approached by more than 10 of the most vulnerable and poorest countries in terms of the energy, and they asked us to extend that sanction and it is only for 30 days.
▶ 0:46:51Sen. Coons: 30 days, 4.5 billion dollars to putin's war machine. The cfi funds. I was encouraged by your comments in support of cdf I lasted. I am one of 32 bipartisan senators who are cosponsors of the danes-warner afford act, which strength is the fund. Delaware has a housing affordability crisis.
▶ 0:47:18Sen. Coons: Every dollar provided by treasury crowds in eight dollars of private investment. I think they are a proven, effective way to help build affordable housing in rural and urban communities. I am perplexed by your budget proposal, which would cut over 200 million dollars of more than 60% cut to the -- this successful program. Why?
▶ 0:47:41Sec. Bessent: That was an omb apportionment.
▶ 0:47:45Sen. Coons: So, you don't support it?
▶ 0:47:47Sec. Bessent: The funding is now 280 million dollars and I support the new $100 million program on the rural areas and I can tell you that part of the cdfi program had lost its way in terms of a partisan agenda, and we can see, for instance --
▶ 0:48:03Sen. Coons: Mr. secretary, I have one last question for you and I don't think funding affordable housing as a part -- is a partisan agenda. We spoke about making the irs easier to access, more efficient, yet you shut down the direct file program. I was very disappointed by that. Within 300,000 taxpayers used it last year. It is a quick, free U.S. government-provided way to file taxes.
▶ 0:48:29Sen. Coons: The average american who has simple tax filings spends $270 and 13 hours filing their taxes through paid services. Direct file saved the average participant $160, 90% rated it favorably, and the alternatives are run by for-profit companies designed to steer filers towards paid alternatives. Why did you shut down direct file when it was free and easy to use?
▶ 0:48:55Sec. Bessent: Well, it wasn't free, and the --
▶ 0:48:59Sen. Coons: Direct file was free to taxpayers.
▶ 0:49:02Sec. Bessent: Not to the american people. It was $138 per person. So, $72 million for, as you said, about 300,000 taxpayers. As an alternative, which is a public-robert partnership free file, which is free to the american people. Over 3 million people use that. For direct file, more than 60% of the people who started their application did not finish it.
▶ 0:49:31Sen. Coons: Thank you for those answers, Mr. secretary.
▶ 0:49:34Chair Hagerty: Thank you. I would now like to turn it to senator fischer.
▶ 0:49:38Sen. Fischer: How much time do we have for questions? Thank you. Welcome, Mr. secretary. I know that treasury and die have been busy working on new guidance for the many great policies that are contained in the working families tax cut act. One of those policies is my paid family medical leave program act.
▶ 0:50:03Sen. Fischer: This credit provides a general business tax credit to employers to meaningfully offset the cost of providing paid family medical leave to their employees. And I was proud to champion this back in 2017. As the first federal paid family and medical leave policy in this country, in the united states, I also was particularly proud that it happened under republican leadership.
▶ 0:50:34Sen. Fischer: I was also proud that the working families tax cuts, I was able to enhance it and make it permanent now. This is a big deal and I think we should tout it. My team has been working with yours and we are eager for the updated irs guidance to be released. That will be critical to ensuring that employers can accurately claim tax credits and deductions and employers are willing eagerly awaiting the deployment of this guidance. Mr.
▶ 0:51:02Sen. Fischer: Secretary, do you have an estimate on when this guidance be published and can you work to ensure it is prioritized to expand access to paid family and medical leave for american workers?
▶ 0:51:14Sec. Bessent: Senator, thank you for your leadership on this fantastic program. It is part of the working families tax cuts, so am -- implementing the guidance, paid family medical leave credit, is a treasury and administrative priority. As you mentioned, our office of tax policy worked very well with your staff on section 45.
▶ 0:51:44Sec. Bessent: We have also met with the various stakeholders and we are working diligently and hope to issue guidance via early this summer.
▶ 0:51:56Sen. Fischer: I know our teams have been in touch with each other and we need to have a meeting on that. Do you think our teams can work to get something set up on that?
▶ 0:52:04Sec. Bessent: With pleasure.
▶ 0:52:06Sen. Fischer: Thank you. I recognize the department's budget request. It decreases funding for the community development financial institutions. The cdfi fund that is they are. And I want to take a moment to point out the good work that the 11 cdfi's in my state do in investing in those rural communities in the vastness of the state of nebraska.
▶ 0:52:35Sen. Fischer: The institutions take on the risk to serve those who are otherwise often overlooked or cannot be served by eager financial institutions. They are sustaining daycare's in small communities of just over 300 people.
▶ 0:52:53Sen. Fischer: They are keeping retail stores in rural downtowns during initiating businesses on the winnebago and the omaha reservations in northeast nebraska and they are supporting efforts to increase that rural housing development, which is so needed. Last year treasury certified cdfi's programs were statutory, and earlier this month announced plans for a new program rules to ensure compliance with federal law.
▶ 0:53:26Sen. Fischer: Could you talk about your plan for cdfi moving forward?
▶ 0:53:32Sec. Bessent: Again, we want to make sure it is doing what it is designed and not loaded with a partisan wish list. We also want to make sure that the -- that the cdfi program is free of waste, fraud, and abuse. There is a cdfi trichlor, which turned out it was fraud, auto lending to minority communities, so, we want to avoid that.
▶ 0:54:05Sec. Bessent: And I think what would be -- what will be very engaging for the people in nebraska will be the new $100 million that has been allocated for rural areas.
▶ 0:54:17Sen. Fischer: I appreciate your focus on that, because many times these rural communities are left out, so I appreciate that focus and your acknowledgment of that, sir. Anchor.
▶ 0:54:28Sec. Bessent: Senator, I am from a rural community.
▶ 0:54:33Sen. Fischer: You have a good understanding of what is involved. As you know, my colleagues on the other side of the aisle provided irs with $80 billion in a one-time funding as part of the inflation reduction act. However, since then congress has agreed on a bipartisan basis to rescind over half of those funds. Most recently in january, with the mac and of the fy 2020 bills.
▶ 0:55:02Sen. Fischer: Your budget request notes that the irs expects to exhaust the funding in fy 2028. Can you talk about the department's plans for transitioning back to a place where the irs is budgeting and relying on the regular appropriations process rather than through this one-time, really, massive infusion of funds?
▶ 0:55:27Sec. Bessent: It was really a scoring gimmick for the misnamed ira, inflation acceleration act. And we are bringing it down. A large part of it, we have found, was in the data processing system, which is $50 billion. The upgrade is $50 billion over budget.
▶ 0:55:54Sec. Bessent: So, using common sense, lowering the number of outside contractors, and refocusing the efforts, we now have data processing under control. About $2 billion of the reduction is in that area. So, we think it is going to be more efficient. We are meeting the taxpayers where they are and the online inquiries are up 60% this year.
▶ 0:56:19Sen. Fischer: Thank you for your work on that. Thank you, Mr. chairman.
▶ 0:56:23Chair Hagerty: Senator van hollen.
▶ 0:56:25Sen. Van Hollen: Thank you, Mr. chairman. Mr. secretary, I wanted to ask you about your recent conversations with folks in the government of the uae. As I'm sure you probably know, president trump and his family have done a very brisk business with the uae over the last few years.
▶ 0:56:46Sen. Van Hollen: There was the $500 million that the uae's national security advisor and brother of the president invested in world liberty financial, which is the trump family crypto venture, right before the presidents inauguration.
▶ 0:57:03Sen. Van Hollen: There was the $2 billion in world liberty stable coin used to invest in binance, a deal that handed world liberty $2 billion in cash at the same time the U.S. government relaxed our export controls on high end ai chips to uae companies. And now I understand that the uae is looking for a swap line.
▶ 0:57:36Sen. Van Hollen: The war in iran has already cost us most dearly. In my view it has been a huge mistake, made us less safe, and a lot more -- a lot worse off. In addition to lives lost, we are talking about over $1 billion a day in taxpayer money.
▶ 0:57:57Sen. Van Hollen: We are talking about higher gas prices, higher prices overall, and now we understand that the uae is asking you to provide them a swap line through the exchange stabilization fund. Mr. secretary, can you talk about this request and whether or not you expect to support it?
▶ 0:58:17Sec. Bessent: Senator, I would dispute much of what you early said and any linkages to this swap line. Many of our gulf allies have requested stock -- requested swap lines. You would have just read about the uae, and swap lines, whether it is from the federal reserve board treasury, are to maintain order in the dollar funding markets and to prevent the sale of the U.S.
▶ 0:58:43Sec. Bessent: Assets in a disorderly way. So, the swap line would both benefit the uae and the U.S., and as I said, numerous other countries, including some of our asian allies also requested them.
▶ 0:59:05Sen. Van Hollen: Mr. secretary, you said you disputed some of the facts are presented. You dispute the fact that the sheik, through his company, invested $500 million in world liberty financial just before the president was inaugurated? Do you contest that?
▶ 0:59:25Sec. Bessent: I'm not aware of that.
▶ 0:59:27Sen. Van Hollen: You are not aware of that?
▶ 0:59:30Sec. Bessent: I dispute your linkages.
▶ 0:59:32Sen. Van Hollen: Are you aware of the other transaction I mentioned?
▶ 0:59:36Sec. Bessent: I am not.
▶ 0:59:37Sen. Van Hollen: Seriously? It has been so widely reported and been the subject of lots of questions. I believe I have ask you about this in the past. Let me go back to the issue of how funds are being used at the irs, because part of the purpose for providing the irs with some additional funds was specifically to go after.
▶ 1:00:06Sen. Van Hollen: High end individuals, taxpayers who are not paying their taxes. Not paying what is due to the good of the country. And as a result of that, according to cbo, we are going to see deficits go up. Deadbeat rich people will get away not paying their taxes. Deficits go up.
▶ 1:00:29Sen. Van Hollen: But the direct file was intended to give working people a little bit of relief, and it did save on average $160 and got very good reviews in terms of people's experience with it. It does go to the larger question of the irs, which has lost 27,000 employees through actions such as the deferred resignation program and early retirement.
▶ 1:00:57Sen. Van Hollen: 27,000 employees left because of those actions, right?
▶ 1:01:02Sec. Bessent: Yes, which there was quite a bit of bloat during the biden years.
▶ 1:01:08Sen. Van Hollen: Really?
▶ 1:01:09Sec. Bessent: We are getting back to a normalized level.
▶ 1:01:12Sen. Van Hollen: You had to hire a bunch of those people back, right?
▶ 1:01:15Sec. Bessent: We hired some people back in specific areas.
▶ 1:01:19Sen. Van Hollen: How much did it cost to both, first let people go, and then go back and have to re-a bunch of them?
▶ 1:01:28Sec. Bessent: Again, it was not a bunch of them. We have made very large gains in technology.
▶ 1:01:37Sen. Van Hollen: The inspector general for tax relief released a report showing the irs service delivery has declined because of these changes. Have you seen that?
▶ 1:01:53Sec. Bessent: What I had seen, senator, is the democrats said the filing system is going to be a disaster. It has been a home run and what you are nitpicking me on now is the difference between answering a call in six minutes and nine minutes, and let me tell you -- tell you the way the calls used to work. The irs under the biden would answer the call in six minutes and a taxpayer would be on hold for 20 or 30 minutes.
▶ 1:02:20Sec. Bessent: Now when the taxpayer's call gets answered they get serviced right away, so it is a false equivalence.
▶ 1:02:24Sen. Van Hollen: Mr. secretary, what you have done is provided a windfall to very wealthy people who don't pay their taxes.
▶ 1:02:31Sec. Bessent: Senator, why would I do that? What is your theory? What is your theory of the case?
▶ 1:02:40Chair Hagerty: The senator's time has expired.
▶ 1:02:42Sen. Van Hollen: Time after time, you have tilted the tax code in the favor of very wealthy people. >> thank you, Mr. secretary. I am a big proponent of using technology to make our lives more efficient, improve customer service, get your outcomes, more compliance, all of those things, and certainly the irs is a place that could happen.
▶ 1:03:10Sen. Van Hollen: When I was the secretary of state of ohio we ran elections and we took a paper process and turn it into a digital process. In improved customer service. Forming a new business in ohio used to take four days. Then it took four hours.
▶ 1:03:27Sen. Van Hollen: For the course of six years with attrition and early retirement week cap the size of the staff in half, reduced fees by 21%, and no longer needed any tax dollars to finance our agency. So, I know firsthand how you can use technology to reduce headcount and improve outcomes. And government needs to do more of this.
▶ 1:03:53Sen. Van Hollen: So, thank you for your willingness to lead and put technology in place to do this. I know that in looking at your budget request in the irs that it is reduced, but you have seen the evidence, as you have said in your testimony, that revenue is up 12%, even though the amount of expenditure was down.
▶ 1:04:16Sen. Van Hollen: Ok, so, I know from my experience, from your experience we are seeing how technology can improve outcomes and improve customer service compliance and friendliness to the consumer. Can you give us a little more insight on how analytics and ai and new emerging technologies can do this at the irs, and maybe even suggest other areas in the government we could do more work like this?
▶ 1:04:48Sec. Bessent: We only have five minutes in terms of the other areas of the government and, senator, I want to congratulate you, because much of what you did in iowa I think iowa is kind of a sleeper state --
▶ 1:04:58Sen. Husted: It is ohio, but we are just one of those midwestern states.
▶ 1:05:02Sec. Bessent: Ohio. Ohio too is a sleeper state in terms of the manufacturing that is growing there. And what we are doing at the irs is a -- turning it into a digital-first agency. 98% of the returns will be filed online now.
▶ 1:05:24Sec. Bessent: And the efficiency there is paper processing costs have gone from $45 million to $20 million and we are facing in more electronic payments for faster and more secure electronic payments. As I told the senator from maryland, the other thing we are doing is that we actually -- using electronic filing can go back to a taxpayer and say that you will likely be audited if you submit this tax return.
▶ 1:05:53Sec. Bessent: Would you like to redo it in advance? And it comes back in a much more satisfactory status and prevents an audit, increases revenues, and, as you brought up, the enforcement actions are up 12% this year, over $40 billion. The top five enforcements resulted in more than $2 billion.
▶ 1:06:19Sen. Husted: Nobody wants somebody to cheat on taxes. Everybody was to have a better experience with the irs. These technologies seemingly are, pushing that. Do you think that we are at the beginning of this? Much more efficiency can we get?
▶ 1:06:37Sec. Bessent: I think $50 billion has gone down the drain, and in terms of overspending on technology at the irs the upgrade program has been going on since the 1990's. I think we finally have a handle on it and I think that between new technologies, between the upgrades and getting the 12 -- I believe there are 12 irs systems that we are not able to talk to each other, will result in better collections, better
▶ 1:07:08Sec. Bessent: Privacy -- because this is how things leak outcome is old data systems, how things leak out his systems, how things leak out hid data systems. And a better taxpayer experience.
▶ 1:07:21Sen. Husted: With the working family tax cut act, school scholarships from organizations -- can you tell me how many people we expect to use this? How are the scholarship granting organizations chosen?
▶ 1:07:45Sec. Bessent: They apply and are certified by the irs. I will get back to your office on that.
▶ 1:08:00Sen. Husted: I really want to understand how the scholarship granting organizations are chosen.
▶ 1:08:10Sec. Bessent: We have worked with many states like yours to coordinate the state effort with the federal.
▶ 1:08:31Sen. Boozman: We appreciate you being here. We also appreciate your responsiveness when we have a problem. I want to thank you all for your leadership, and I agree with your recent op-ed on the senate agriculture committee. I look forward to working with my colleagues on that.
▶ 1:09:02Sen. Boozman: We are still working to address important issues to make sure there are adequate resources. I believe we can address those in a bipartisan way. Can you talk about why it is so important that congress passed digital asset legislation?
▶ 1:09:23Sec. Bessent: When the united states leads in best practices in the financial world, whether it is our securities are no digital assets, it is important for the U.S. to lead for several reasons. One, U.S. leadership over the long term secures the primacy of the dollar as a currency.
▶ 1:09:51Sec. Bessent: Two, our best practices will emanate to the rest of the world. What had happened in digital assets -- they were in dark, unregulated places. They will come into the U.S. and we will be able to use our anti- money laundering, and have a much better handle on digital assets for payments.
▶ 1:10:19Sec. Bessent: And I think this is going to be a very important payment rail. The U.S. has to lead. We are a technological leader in the world. We should be a payments leader in the world.
▶ 1:10:30Sen. Boozman: And we appreciate your time. I have heard concerns from commodity groups about 24/7 trading, that that will hurt the liquidity and pricing on the commodity markets. Will you commit to working with all stakeholders and financial regulators on the issue? Thank you very much.
▶ 1:11:08Sen. Boozman: I also want to talk about the designation of clearinghouses as systemically important financial market utilities. As you know, they have access to fed deposits, which give protections. However, not all clearinghouses are designated.
▶ 1:11:33Sen. Boozman: Is the federal reserve looking at new ways to provide access to non-bank firms? Will you work with the fed to look at whether clearinghouses might be considered?
▶ 1:11:47Sec. Bessent: Yes, sir come up with pleasure. I think it is important that the integrity of those clearinghouses be maintained.
▶ 1:12:03Sen. Boozman: That is all I have. Thank you very much. >> we appreciate your time, your attention. Members will have one week to submit questions for the record. We would appreciate if the department handles those questions as quickly as possible. The subcommittee is adjourned.