Treasury Sec. Scott Bessent Testifies Before Senate Appropriations Committee

[19:28] Good morning. Subcommittee is going to come to order. [19:31] Senator Reid has just stepped out to take a quick meeting, [19:34] and with his permission, I'm going to go ahead and get us started. [19:37] This is the first hearing of the fiscal year 2027 cycle [19:39] for the Financial Services and General Government Subcommittee. [19:42] Before we begin, I want to welcome Senator John Huster to the subcommittee, [19:45] who has recently joined the committee after the confirmation of our former colleague, Secretary Mullen. [19:50] And I'd like to congratulate Senator Fischer, a member of this committee, [19:54] who has acquired now the gavel of the Legislative Branch Subcommittee. [19:57] Congratulations to you, Deb. [19:58] Thank you, Deb. Secretary Scott Besson is here with us today [20:03] to review the Department of the Treasury's fiscal year 2027 budget request. [20:07] Welcome back, Secretary Besson. I thank you for being here. [20:11] The Department's request for fiscal year 2027 proposes an 11.7 percent, [20:16] or a $1.5 billion reduction from the amount provided in the prior fiscal year. [20:22] This request appropriately acknowledges that resources are limited, [20:26] and it makes deliberate tradeoffs among competing priorities [20:29] to advance this administration's pro-growth, pro-competition economic agenda. [20:34] This budget request also reflects a thoughtful effort [20:37] to balance responsible stewardship of taxpayer resources [20:40] while continuing to strengthen America's economic and financial leadership, [20:44] and I appreciate the effort to strike this delicate balance. [20:48] This budget request proposes solutions to difficult questions [20:51] that too often some of our predecessors have preferred to avoid. [20:55] Rather than responding to constraints by simply requesting additional funding, [20:59] this proposal reflects a focus on improving efficiency [21:02] and making targeted decisions about where resources can have the greatest impact. [21:08] Mr. Secretary, I appreciate your leadership [21:10] and your ability to make tough decisions that save taxpayers money [21:13] and shape a leaner, more efficient government [21:16] without compromising the Department's core mission. [21:19] That's an important goal, [21:20] and one I think most members share. [21:22] As the Department works with these resource constraints, [21:25] it will be important for Congress to understand [21:27] how Treasury is prioritizing its activities, [21:30] where efficiencies are being realized, [21:32] and how performance outcomes are being measured. [21:34] That understanding will help ensure that this subcommittee [21:37] aligns resources with the areas of greatest need and greatest impact. [21:41] This budget request also reflects [21:43] the consequential legislation Congress passed [21:45] and the President signed into law last year, [21:48] the Working Families Tax Cuts Act, [21:49] which was an incredible victory for all hardworking Americans. [21:52] Recent IRS data shows that tax refunds this year [21:56] are substantially higher than years prior, [21:58] putting more money back into the pockets of hardworking Americans. [22:02] The Working Families Tax Cuts Act also made adjustments [22:04] to how certain income is treated, [22:07] including relief on items like tips and overtime, [22:10] as well as expanded deductions for seniors and working families. [22:14] These changes require Treasury and the IRS to create new guidance, [22:17] to update systems, [22:18] and to ensure that taxpayers can easily comply [22:21] with these most welcome changes. [22:24] In that vein, [22:24] I was pleased to see that this budget request [22:26] does not focus on maintaining the status quo. [22:29] Rather, it addresses the Department's responsibility [22:31] to implement these major policy reforms, [22:33] and it ensures that Treasury has the tools needed [22:36] to carry them out efficiently. [22:38] Beyond tax administration, [22:40] this budget also reflects a broader effort [22:42] to strengthen America's economic position globally. [22:45] For far too long, [22:46] unequal, non-reciprocal trade policies [22:48] have handicapped American businesses, [22:51] leading to persistent trade deficits [22:52] and the erosion of our domestic industrial base. [22:56] Decades of asymmetric policies [22:57] have also undermined our nation's capacity [23:00] to produce critical goods, [23:01] like ships and pharmaceuticals, [23:02] and it's made us increasingly dependent [23:05] on competitors like China. [23:06] This administration is taking great strides [23:09] in resetting the global trade market [23:10] by negotiating a multitude [23:12] of international trade agreements [23:13] and continuing to push an American-first agenda. [23:17] Digital assets and their related technologies [23:19] present new opportunities for economic growth, [23:22] for capital formation, [23:23] and for value storage. [23:25] Properly deployed, [23:26] these digital technologies [23:27] will facilitate safe, secure, [23:29] and instantaneous payments. [23:31] America must be the global leader [23:33] in this sector [23:33] if we want to retain our position [23:35] as the world's reserve currency. [23:38] Our nation has demonstrated [23:39] that it can lead innovation [23:41] across any industry [23:42] when it's provided [23:43] with the regulatory certainty [23:44] that's necessary to grow and to invest. [23:47] That's why last year, [23:48] President Trump signed into law [23:50] my stablecoin legislation, [23:51] the Genius Act, [23:53] which provided regulatory clarity [23:54] to help the U.S. remain a leader [23:56] in digital assets [23:56] and financial innovation. [23:59] Your department, Mr. Secretary, [24:00] played a critical role [24:02] in the success of this legislation, [24:04] particularly Luke Pettit [24:05] and Tyler Williams on the development, [24:07] joined by Jonathan Greenstein [24:08] on the implementation. [24:10] President Trump understands [24:11] the crucial role [24:12] that this industry will play [24:13] in our nation's economic development [24:14] and international leadership. [24:16] The president has asked Congress [24:18] to provide clarity [24:19] through technology-neutral regulations [24:21] and transparent government decision-making [24:23] to foster a robust [24:24] and vibrant digital economy. [24:27] I'm encouraged by the efforts [24:29] underway at the Department of Treasury [24:30] to carry out this objective, [24:31] and I'm grateful for your support [24:33] for sensible stablecoin policy [24:35] as we seek to promote U.S. leadership [24:37] in digital assets [24:38] and financial technology [24:39] while protecting [24:40] the economic liberty of Americans. [24:43] Our nation also benefits [24:44] from constructive relationships [24:46] with our allies. [24:47] This subcommittee is grateful [24:48] for your daily work [24:49] negotiating tariffs [24:50] that preserve our strong relationships [24:52] with those allies. [24:53] The other side of that coin [24:54] is countering our adversaries [24:56] through financial intelligence [24:57] and sanctions. [24:58] While Treasury's role [24:59] in the intelligence community [25:00] is rarely in focus, [25:01] its unique capabilities [25:02] helps safeguard the integrity [25:04] of the American financial system [25:05] and ultimately strengthen [25:07] America's military power. [25:09] Treasury's responsibilities today [25:11] extend well beyond traditional finance. [25:13] I appreciate your work [25:14] and look forward to continuing [25:15] to partner with you [25:16] to ensure that the department [25:17] has the tools it needs to succeed. [25:20] And I look forward [25:20] to your testimony, Mr. Secretary. [25:22] But before you begin your testimony, [25:24] I now want to turn to my colleague, [25:25] the ranking member of the subcommittee, [25:27] Senator Jack Reed. [25:28] Well, thank you very much, [25:29] Mr. Chairman, [25:30] and Mr. Secretary, [25:31] thank you for joining us today. [25:32] I look forward to your testimony, [25:35] which comes at a moment [25:37] where the world is [25:38] in a great deal of turmoil, [25:41] prompted in part [25:42] by the administration's fiscal policy, [25:44] its illegal tariffs, [25:45] and its decision [25:46] to go to war with Iran. [25:48] While President Trump [25:49] upends the economic apple cart, [25:53] Americans are paying more at the pump [25:54] and for other everyday necessities. [25:57] At the start of the Iran war, [25:59] gas prices averaged about $2.98 per gallon. [26:04] Now Americans are forced [26:05] to shell out over $4 a gallon at the pump. [26:09] Inflation hit a nearly two-month high in March, [26:11] while grocery and housing costs [26:13] remain too high. [26:15] The cost of living [26:16] is simply not sustainable [26:17] for the American people. [26:20] Mr. Secretary, [26:21] it seems that President Trump [26:22] has abandoned the interest [26:25] of regular Americans [26:26] and your fiscal year 2027 budget request [26:29] continues this worrying trend. [26:32] The fiscal year 2027 budget request [26:35] for the Treasury Department [26:36] totals $11.5 billion, [26:39] a $1.5 billion, [26:41] or roughly 12% decrease [26:43] from the enacted level. [26:46] While the request provides increases [26:48] to several Treasury offices, [26:50] it cuts funding [26:51] for the Inspector General, [26:52] grants for community development, [26:54] and enforcement [26:55] of our tax laws. [26:57] The proposal slashes [26:58] IRS funding [26:59] by $1.4 billion. [27:01] This is on top [27:03] of the $1.1 billion cut [27:05] sustained in fiscal year [27:07] 2026, last year. [27:09] The IRS has pushed out [27:11] more than 28,000 employees [27:13] since the start [27:13] of the Trump administration, [27:15] and this proposal [27:16] would shrink the workforce [27:17] by another 4,000. [27:19] This is simply irresponsible. [27:22] You come from the business world, [27:24] and no successful company [27:25] would underinvest [27:27] in its revenue collection mechanism. [27:30] The IRS itself acknowledges [27:32] that every dollar [27:33] the agency invests [27:34] in enforcement [27:35] brings $11 back [27:37] from tax cheats. [27:38] So your own agency [27:40] admits that cutting IRS staff [27:42] and funding, [27:42] particularly its enforcement budget, [27:45] costs American taxpayers [27:46] and helps tax dodgers. [27:49] Indeed, cutting IRS funding [27:50] is a proven windfall [27:51] for the rich [27:52] and puts our country [27:53] on a dangerous fiscal path. [27:56] Yet the IRS's budget request [27:58] proposed is to cut [28:00] enforcement exams [28:01] on high-income individuals [28:03] by 50% in fiscal year 2026 [28:06] compared to fiscal year 2023. [28:09] This will help wealthy taxpayers [28:12] evade billions of dollars [28:13] in taxes each year. [28:15] The IRS should prioritize [28:17] providing better service [28:18] to American households [28:19] not help rich Americans [28:21] game our tax system. [28:24] Secretary Besant, [28:25] suffice it to say [28:26] the administration's policies, [28:27] including the IRS budget request, [28:29] are clearly putting our economy [28:31] and the economic security [28:32] of average Americans at risk. [28:35] I look forward to your testimony [28:36] and your candid answers [28:37] to our questions. [28:39] Once again, [28:39] I thank you, [28:40] Mr. Secretary, [28:41] for joining us today. [28:42] Thank you. [28:42] Now I'd like to recognize [28:44] Treasury Secretary Scott Besant. [28:45] Before becoming our 79th, [28:47] excuse me, [28:48] before becoming our 79th [28:49] Secretary of the Treasury, [28:51] Secretary Besant [28:51] had a successful career [28:52] as a fund manager [28:53] of one of the world's largest [28:54] global macro investment funds [28:55] before creating [28:56] his own investment firm. [28:58] Secretary Besant believes [28:59] America is unstoppable [29:00] because its economy [29:01] is unstoppable, [29:03] an economy built [29:04] on the deepest [29:04] and most liquid markets [29:05] in the world. [29:06] Secretary Besant, [29:07] if you could please [29:07] keep your remarks [29:08] to five minutes, [29:09] it'll allow more time [29:10] for questions. [29:11] Your full written statement [29:11] will be included [29:12] in the record. [29:13] Secretary Besant. [29:15] Chairman Hagerty, [29:17] Ranking Member Reed, [29:18] and members of the subcommittee, [29:19] I'm grateful to join you today. [29:21] Treasury is committed [29:22] to working with Congress [29:23] to protect our nation's [29:24] financial system, [29:25] spur job growth, [29:26] and strengthen the economy. [29:28] The fiscal year 2027 [29:30] President's budget request [29:31] for Treasury [29:31] demonstrates our commitment [29:33] to boosting growth, [29:34] promoting efficiency [29:35] with our agency, [29:36] and targeting illicit actors [29:38] that threaten [29:38] our national security. [29:40] Treasury's budget request [29:42] represents a 12% decrease [29:44] from the enacted level [29:46] while still building [29:47] on the success [29:48] of fiscal year 2026 [29:50] to continue strengthening [29:51] the U.S. financial system. [29:53] Along with managing [29:54] our own discretionary budget, [29:56] Treasury is charged [29:57] with managing [29:57] core financial functions [29:59] and payment operations [30:00] for the U.S. government. [30:03] I take that commitment [30:03] very seriously, [30:05] not only ensuring [30:05] that every dollar [30:06] in our budget [30:07] is thoughtfully executed, [30:08] but also that every dollar [30:10] collected, deposited, [30:11] or dispersed [30:12] through Treasury [30:12] is secure and timely. [30:15] I would like to begin [30:15] by highlighting [30:16] the Treasury Department's effort [30:18] to ensure accountability [30:19] and deliver results [30:20] for the American people. [30:22] There's no better example [30:23] of delivering meaningful change [30:25] for everyday Americans [30:26] than President Trump's [30:27] working families tax cuts [30:29] of which over 60 million returns, [30:31] 60 million, [30:33] claimed at least one [30:34] of President Trump's [30:35] signature new tax cuts [30:36] is filing season [30:37] by enacting no tax [30:39] and tips, [30:40] no tax and overtime, [30:41] and new tax cuts [30:41] for seniors [30:42] and Social Security. [30:43] We are delivering tax relief [30:45] to working families. [30:46] This season, [30:47] over 7 million filers [30:48] have claimed no tax and tips [30:50] with an average deduction [30:51] of over $7,000. [30:53] Over 28 million filers [30:55] have claimed no tax [30:56] and overtime [30:57] with an average deduction [30:58] of over $3,100. [31:00] And over 34 million seniors [31:02] have claimed the enhanced [31:03] deduction for seniors [31:04] with an average deduction [31:05] of over $7,500. [31:07] The legislation not only [31:08] delivered historic tax relief, [31:10] but also began building [31:11] long-term financial security [31:13] for future generations [31:15] through initiatives [31:16] like Trump accounts, [31:17] of which nearly 5.5 million accounts [31:19] have been opened [31:20] with over 1.3 million children [31:22] eligible for the $1,000 [31:24] pilot program contribution. [31:26] Trump accounts demonstrate [31:27] this administration's pledge [31:28] to invest in the workforce [31:30] of tomorrow, [31:31] giving them an ownership stake [31:32] in the success [31:33] of the nation. [31:35] As you know, [31:36] filing season ended [31:37] on April 15th. [31:39] I'm happy to report [31:39] that new leadership [31:40] at the IRS [31:41] has resulted [31:42] in improved business processes [31:43] and an increased focus [31:45] on meeting private industry [31:46] benchmarks for customer service. [31:48] Our increased focus [31:49] on digital-first [31:50] taxpayer experience [31:52] has resulted [31:53] in lower call volumes [31:54] as taxpayers increasingly find [31:56] the information [31:56] they need online [31:58] and increased adoption [31:59] of direct deposit, [32:00] which will expedite [32:02] the refunds [32:03] for years to come. [32:04] The budget request [32:05] continues to streamline [32:06] and modernize IRS operations, [32:09] funding to encourage automation [32:11] and technology investment, [32:13] while ensuring taxpayers [32:15] are met where they want to be [32:16] by offering multiple service options. [32:19] Although the request [32:20] for IRS represents [32:21] a modest decrease, [32:23] we are still able [32:24] to maintain current services [32:25] and implement new initiatives [32:27] aimed at improving [32:28] customer experience [32:29] and making tax compliance easier. [32:31] we have introduced [32:32] two new metrics [32:33] for modernizing [32:34] how IRS performance [32:36] is measured, [32:37] introducing assistor service rate [32:39] and enterprise service [32:41] completion rate [32:42] better aligns performance measurement [32:44] with how people interact [32:46] with the IRS today. [32:47] Additionally, [32:48] the budget request [32:49] targets inefficiency [32:50] and duplicative spending [32:52] through reductions [32:53] in areas that have been [32:54] operationally ineffective. [32:55] I want to ensure [32:56] that every dollar [32:57] of taxpayer funding [32:58] supports mission-critical work. [33:01] By making targeted reductions [33:02] in specific areas, [33:03] we can enhance investments [33:05] in national security [33:06] by bolstering critical cyber capabilities, [33:09] sanctions, [33:10] and combating illicit [33:11] financial activity. [33:13] Treasury's Office of Terrorism [33:14] and Financial Intelligence [33:15] is at the forefront [33:17] of America's fight [33:18] against foreign adversaries, [33:19] and the additional funding [33:21] would expand Treasury's ability [33:23] to trace, detect, [33:24] and sanction financial networks [33:26] acting in bad faith. [33:28] The request also includes [33:30] a small investment [33:31] to advance institutional expertise [33:33] in digital assets, [33:34] housing finance, [33:36] global financial markets [33:37] within Treasury's [33:38] departmental offices. [33:39] This is particularly important [33:41] with the implementation [33:42] of the Genius Act, [33:43] landmark legislation [33:44] that created the first-ever [33:46] regulatory framework [33:47] for stablecoins. [33:48] As I shared earlier, [33:49] I'm committed to working together [33:51] to continue building [33:52] on the success [33:52] of the last fiscal year [33:54] and look forward [33:54] to your questions. [33:56] Thank you very much, [34:04] Mr. Chairman. [34:05] Mr. Secretary, welcome. [34:08] You mentioned just now [34:10] in your testimony [34:11] the importance of consumer [34:14] customer service [34:17] and your efforts [34:19] to improve it. [34:21] Along with other members [34:23] of the main delegation, [34:25] I sent you a letter [34:26] last month [34:27] opposing the closures [34:30] of two taxpayer assistance centers, [34:34] one in Bangor, Maine, [34:36] one in Augusta, Maine. [34:37] The Presque Isle Center [34:40] in northern Maine [34:41] has already been closed [34:44] for some time. [34:46] These closures mean [34:47] that someone from my hometown [34:50] of Caribou, Maine, [34:52] who needs in-person service [34:55] faces a 10-hour-plus round-trip [35:00] to the nearest taxpayer assistance center [35:04] in Portland. [35:05] That's the last remaining TAC [35:09] in the entire state of Maine. [35:12] That's just not reasonable, [35:14] particularly when you consider [35:17] that Maine has the oldest population [35:21] by median age [35:23] in the country. [35:24] We have areas of the state [35:26] where internet service [35:28] is simply not available. [35:31] And we have older adults [35:33] who, even if it is available, [35:36] may not have access [35:38] to computers [35:40] or to the skills [35:43] that they need [35:44] to use that method [35:46] of getting help. [35:49] Has the, [35:50] and I will also mention [35:52] that I met recently [35:53] with the taxpayer advocate [35:56] in the state of Maine, [35:58] and he, too, [35:59] expressed his concerns [36:01] about what the closures [36:02] of these centers would mean [36:05] in terms of providing [36:06] customer service. [36:08] Has the IRS evaluated [36:11] what the impact [36:13] of closing down [36:14] all of the centers [36:15] of these taxpayer assistance centers [36:18] except the one [36:19] in southern Maine [36:20] would be on people living [36:23] in other parts of the state, [36:26] particularly our older adults [36:29] in rural areas. [36:33] Good. [36:33] Senator, thank you [36:34] for your leadership on this [36:36] and the entire Maine delegation. [36:38] I have instructed the IRS [36:41] to look into this, [36:43] and we will be getting back to you. [36:46] System-wide, [36:47] only 10 centers were closed. [36:50] I believe that one [36:51] of the centers that was closed [36:52] was already the unmanned, [36:55] but we will get back to you, [36:58] and we will remedy [37:00] this 10-hour problem. [37:03] So thank you [37:03] for bringing it to our attention. [37:05] We look forward [37:05] to working with you. [37:06] Thank you so much. [37:08] It really is a problem [37:09] given the size [37:11] of our state. [37:13] I want to bring up [37:14] another persistent problem [37:16] in the state of Maine, [37:19] and that is we have been [37:22] the location [37:24] for literally hundreds [37:27] of illegal marijuana growhouses [37:31] that are linked [37:33] to transnational criminal organizations [37:36] based in China, [37:38] and we really need [37:41] a whole-of-government approach. [37:44] Earlier this year, [37:46] I secured language [37:47] calling for a State Department-led report [37:50] on PRC-linked criminal syndicates [37:54] and the illicit drug trade. [37:56] Where Treasury comes in [37:58] is there's money laundering involved, [38:02] and I want to thank Treasury [38:04] for providing some expertise [38:06] through FinCEN, [38:09] through the IRS, [38:11] but it still remains [38:13] a huge problem, [38:15] and our sheriffs in Maine [38:17] have been terrific [38:18] in trying to close down [38:19] these growhouses, [38:21] but we need more federal help. [38:24] We've had some from Treasury, [38:26] some from the Justice Department, [38:29] DEA, [38:31] but this is, [38:33] we're talking about [38:34] over 200 of these illegal growhouses, [38:38] and as I said, [38:41] there is a link [38:42] to money laundering [38:43] and the fentanyl trade as well. [38:48] Could you talk a bit [38:50] about how the Department [38:52] is working to address [38:54] this dangerous operation? [38:57] Yes, Senator, [38:58] since you brought this [38:59] to our attention last year, [39:01] IRS criminal investigations [39:02] and FinCEN [39:03] are both involved [39:05] in supporting local law enforcement [39:07] and working with federal agencies [39:08] to combat [39:09] these problematic operations [39:12] in Maine. [39:13] Staff from these teams [39:14] have, as you said, [39:16] they have specialized [39:17] financial, forensic, [39:19] and intelligence expertise, [39:21] and we want to help [39:23] local law enforcement [39:25] dismantle [39:26] these money laundering operations. [39:28] So I look forward [39:29] to ongoing dialogue [39:30] and per your request, [39:33] I will personally [39:34] look into what is going on, [39:36] especially with IRS [39:38] criminal investigations [39:40] who are able to move [39:42] on operations like this [39:43] very quickly. [39:44] Thank you very much, [39:45] Mr. Secretary. [39:46] Thank you, Mr. Chairman. [39:48] Thank you, Chairman. [39:49] Thank you, Mr. Secretary. [39:50] That was very encouraging [39:51] to see your personal engagement [39:53] on this critical issue, [39:54] not just for Maine [39:55] but for the entire nation. [39:56] Senator Reid. [39:59] Mr. Chairman, [39:59] do you want to go first? [40:01] I'll let you go. [40:03] I'll come up to you. [40:04] Thank you, Mr. Secretary. [40:05] As I mentioned [40:06] in my opening statement, [40:08] your budget once again [40:10] cuts IRS enforcement activities. [40:13] Your own congressional [40:14] justification states [40:15] that every dollar spent [40:16] on enforcement [40:17] provides an $11 return [40:19] for the American taxpayer [40:21] so that given [40:23] that your own request [40:24] shows there's extraordinary [40:25] return on investment, [40:26] why does the budget [40:27] cut enforcement [40:28] by nearly $900 million? [40:33] Sir, the data [40:36] does not support that [40:38] because we cut the budget [40:39] and enforcement recoveries [40:42] were up 12% last year. [40:43] Well, if you increase [40:47] the budget, [40:49] you would presumably [40:51] have even more. [40:53] I mean, [40:54] the obvious point [40:56] at which I stress [40:57] in my testimony [40:58] is that you're basically [41:01] scheduling fewer [41:02] and fewer enforcement actions, [41:04] particularly against [41:05] those who are very well [41:07] endowed [41:08] and may have either [41:10] directly or indirectly [41:12] made mistakes [41:13] on the tax form. [41:14] So it seems to me [41:16] obviously that more effort [41:18] would produce [41:19] more resources. [41:20] Well, I think [41:21] that that may be [41:23] the one school of thought, [41:25] but we haven't seen [41:26] that in educational outcomes. [41:27] We haven't seen that [41:28] in health care outcomes, [41:30] that more money [41:30] equals better outcomes. [41:32] And at the IRS, [41:34] thus far, [41:35] we believe in outcomes. [41:37] We recovered [41:37] that in enforcement, [41:41] the top five enforcements [41:42] recovered $2 billion. [41:43] And as I said, [41:45] the enforcements last year [41:47] are up to almost $41 billion. [41:52] So I think that [41:54] during the Biden years [41:57] in the IRA, [41:58] that there was [41:59] a scoring gimmick [42:01] that was used [42:03] and brought in [42:03] a lot of enforcement officers. [42:05] And again, [42:06] the facts on the ground, [42:08] to get to be [42:09] a senior enforcement officer [42:10] takes 10 or 12 years. [42:12] And to bring in [42:13] the new officers [42:15] that at one year, [42:18] two years, [42:18] have almost no expertise [42:19] and don't result [42:21] in better outcomes. [42:23] What we have found [42:24] is meeting the taxpayers [42:25] where they are [42:26] and using technology, [42:29] we have pushed back [42:31] their tax returns [42:32] and said, [42:33] we believe there is [42:33] an error here [42:34] and you will be audited. [42:36] Why don't you fix it [42:37] in advance? [42:38] Well, [42:40] Mr. Secretary, [42:41] I think it's [42:42] not efficiency [42:44] or even more revenue [42:46] you're seeking. [42:47] You're seeking, [42:48] I think, [42:48] to disable [42:48] the ability [42:49] for the federal government [42:51] to reach all [42:53] who are not being [42:56] completely honest [42:57] with their tax returns, [42:58] particularly those [43:00] that have the most to pay, [43:02] the wealthiest [43:02] in the country. [43:04] As I mentioned [43:05] also in my testimony [43:06] or my statement, [43:08] I should say, [43:08] the gas prices [43:10] are up more than 30%, [43:11] and they're above [43:12] $4 a gallon. [43:14] And the nonpartisan [43:17] tax foundation [43:18] estimates that [43:19] President Trump's tariffs [43:21] were essentially [43:22] a $1,000 tax [43:24] on American households, [43:25] and that's [43:25] a nonpartisan organization. [43:28] So you have a situation [43:29] in which also [43:32] health care [43:32] is hugely expensive [43:34] for people. [43:37] About 17 million Americans [43:39] are seeing increases [43:41] because of the big, [43:42] beautiful bill. [43:43] Consumer sentiment [43:44] is a record low. [43:46] You recently claimed [43:47] that in their heart of hearts [43:49] consumers feel good, [43:52] but that's not supported [43:56] by polling. [43:57] That is constant [43:57] and accurate. [43:59] And the idea [44:01] that consumer spending [44:02] is up [44:03] doesn't recognize. [44:04] I think that [44:05] the top 10% [44:07] of the richest families [44:10] account for 50% [44:11] of consumer spending. [44:13] So how does all this [44:14] help families [44:16] solve the key price [44:17] of affordability [44:18] in the United States today? [44:20] Senator, [44:21] I agree. [44:22] After the Biden years [44:23] and the 21.5% [44:25] CPI level increase, [44:27] the Americans [44:28] were reeling. [44:29] I can tell you [44:31] that it is my belief [44:32] that when we talk [44:33] about gasoline [44:34] that the crude market [44:36] is currently in [44:37] what is known [44:38] in the energy business [44:39] as very steep backwardation, [44:41] which means [44:41] that the future prices [44:43] are much lower [44:44] than we are at present. [44:46] I think the conflict [44:47] will end. [44:47] I think gasoline prices [44:49] will come back [44:50] to where they were [44:51] or perhaps lower. [44:53] As they did, [44:54] President Trump has shown [44:55] that he is good [44:56] at getting energy prices down [44:58] and that our [45:00] energy dominance agenda [45:02] has the lowered prices. [45:06] How fast will the prices [45:08] of gasoline come down? [45:10] Again, [45:11] that is path dependent [45:12] on when the war [45:13] and the conflict end. [45:16] Well, [45:17] from a perspective [45:18] of the Armed Services Committee, [45:20] it's not likely to end soon. [45:22] Thank you. [45:24] Mr. Secretary, [45:25] again, welcome. [45:26] I'd like to stay [45:27] on the topic [45:28] that the ranking member raised [45:30] with respect [45:30] to technology deployment. [45:32] Your extensive business career, [45:34] I'm sure you've made [45:35] a number of investments [45:36] over your career. [45:39] When you've made [45:40] technology investments, [45:41] you expect a payback, [45:42] don't you? [45:45] Yes, Senator. [45:46] That payback would come, [45:48] for example, [45:48] in the form of higher [45:49] service levels, [45:50] wouldn't it? [45:51] That would be [45:52] one of the appropriate metrics. [45:55] Greater productivity, perhaps? [45:57] Greater productivity, [45:58] higher customer satisfaction. [46:00] And lower cost to execute. [46:01] Yes. [46:02] I just think that fits in, [46:03] and I applaud your efforts [46:05] to invest in ways [46:06] that would generate a payback. [46:07] And I fully expect [46:08] to see the type of decrease [46:09] in terms of outlays [46:11] over time, [46:12] assuming the technology [46:13] is deployed effectively. [46:14] So thank you for that. [46:15] Now I'd like to turn [46:16] to a topic [46:16] that is obviously [46:18] one that we've worked together [46:19] very closely on. [46:20] That's the Genius Act. [46:22] Effective implementation [46:23] of this law [46:24] is vital for strengthening [46:25] U.S. leadership [46:26] in digital financial technology. [46:28] I want to commend [46:28] the Treasury Department again [46:29] for moving quickly [46:30] to propose its first [46:32] implementing regulation [46:33] earlier this month. [46:34] That proposal builds [46:35] on the advance notice [46:36] of proposed rulemaking [46:37] that Treasury issued [46:38] last September. [46:40] That notice sought [46:40] public comment [46:41] on a wide range of matters [46:43] related to implementing [46:43] the Genius Act. [46:45] In your budget request, [46:46] I was pleased to see [46:47] targeted resources [46:47] dedicated to carrying out [46:49] the Genius Act. [46:50] And to support this work, [46:51] Department offices [46:52] are requesting [46:53] $1.8 million [46:54] in six full-time employees. [46:55] These funds are focused [46:56] on rulemaking [46:57] and governance [46:57] with an emphasis [46:58] on efficiency. [46:59] Additionally, [47:00] the Financial Crimes [47:01] Enforcement Network, [47:02] FinCEN, [47:03] is seeking $3 million [47:04] in 10 full-time employees [47:05] to drive innovation [47:06] and establish national leadership [47:08] in digital assets [47:09] and stablecoins. [47:10] Secretary Besson, [47:11] if you could just [47:11] take a moment [47:11] to comment on why [47:12] these funds are necessary [47:13] to implement [47:14] the Genius Act. [47:16] Senator, [47:17] to meet our obligations [47:18] under the Genius Act, [47:19] Treasury has already [47:20] made two public requests [47:21] for comment, [47:22] published under [47:23] two notices [47:24] of proposed rulemaking [47:25] and a written report [47:26] we have delivered [47:27] to Congress, [47:27] and to continue [47:29] to work effectively [47:30] internally [47:31] and with our regulatory [47:32] partners and other agencies, [47:34] we have requested [47:35] this additional funding. [47:39] That makes total sense. [47:41] As the Genius Act [47:42] is implemented, [47:43] I want to make certain [47:44] that you'll ensure [47:44] that the Treasury Department [47:45] works with my staff [47:47] on any necessary fixes [47:48] as rulemaking [47:49] is carried out. [47:52] Yes. [47:53] Thank you. [47:54] I want to now turn [47:56] to the discussion [47:56] to your decision [47:58] to cancel contracts [47:59] with Booz Allen Hamilton [48:00] regarding concerns [48:02] about how poorly [48:03] they safeguarded [48:04] sensitive taxpayer information. [48:06] I appreciate your leadership [48:06] on this matter, [48:07] and I want to better understand [48:08] how Treasury [48:09] and the federal government [48:10] more broadly [48:11] should be addressing [48:12] contractor accountability. [48:13] If you could just walk us [48:14] through the factors [48:15] that led to your determination [48:17] that contract termination [48:18] was the most appropriate response [48:20] to deal with Booz Allen [48:21] in this case. [48:22] Again, [48:23] this was one of the largest [48:25] data breaches [48:25] in IRS history. [48:27] As I have repeatedly said, [48:31] my priorities at the IRS [48:32] are customer service, [48:34] collections, [48:35] and privacy, [48:37] and this was an egregious [48:39] attack on the privacy [48:41] of the thousands [48:43] of American taxpayers, [48:46] many of whom, [48:47] this was presented [48:48] as a leak [48:49] of the very richest taxpayers [48:52] when, in fact, [48:53] their employees' tax returns [48:54] they were also leaked. [48:57] And we think [48:58] that the vetting process [49:00] for this contractor [49:01] who got into the IRS, [49:03] I believe he went in [49:05] with the determination. [49:07] This was premeditated, [49:08] and his employer [49:10] failed to screen them, [49:11] and we no longer [49:13] have confidence [49:14] in that firm's ability [49:16] to screen, vet, [49:18] and deploy contractors [49:20] within the IRS [49:22] or indeed [49:22] the entire Treasury Department. [49:24] Well, I would [49:25] absolutely agree with you. [49:26] The cancellation [49:26] of these contracts [49:27] is wholly warranted, [49:29] and given Booz Allen's role [49:30] in facilitating [49:31] politically motivated [49:32] criminal acts, [49:33] breaches of sensitive information, [49:35] it's a disgrace. [49:36] That firm [49:37] obviously failed miserably. [49:40] And if you think about it, [49:42] this isn't the only time [49:43] an employment [49:44] of a government contractor [49:45] has done something malicious, [49:47] politically motivated, [49:48] with the intent [49:48] to weaponize the information [49:49] that they have access to. [49:51] And I think building [49:52] on your leadership [49:53] at Treasury, [49:53] I'm going to continue [49:54] to work with officials [49:55] across the administration [49:56] to ensure that adequate safeguards [49:58] are in place [49:58] to prevent this type [50:00] of politically motivated [50:01] breach of public trust. [50:02] Further, [50:03] we're going to have to ensure [50:04] that outside contractors, [50:05] as well as career personnel, [50:07] are held accountable [50:08] when they do violate [50:09] the public trust [50:10] or otherwise attack [50:11] or undercut [50:12] America's elected representatives. [50:15] Now I'd like to turn [50:16] to another topic, [50:18] and that's the Working Families [50:21] Tax Cuts Act [50:22] and the refunds [50:23] and the economic interest [50:24] that have been promoted there. [50:27] The act delivered [50:29] on the President's commitment [50:30] to put more money [50:31] into the pockets [50:31] of hardworking everyday Americans. [50:33] It not only prevented [50:34] the largest tax increase [50:35] in our nation's history, [50:36] it also delivered [50:36] the largest tax cut on record. [50:39] It advanced President Trump's agenda [50:40] by removing taxes on tips, [50:42] overtime, [50:42] and Social Security benefits. [50:44] Now we're a week past [50:45] the conclusion [50:46] of the filing season. [50:47] I just would like you [50:47] to please share with us [50:48] how the average refund [50:49] for calendar year 2025 [50:50] compares to the prior year [50:52] and what that means [50:53] for hardworking Americans. [50:55] Well, the average refund, [50:57] as we collate the final numbers, [50:59] is up between 11% and 13%. [51:01] We do not have the numbers now, [51:04] but my inclination [51:04] is going to be [51:05] that those filers [51:10] who use Schedule A, [51:11] that their refunds [51:12] would be up more than the average. [51:15] And just to give you [51:16] some numbers, Senator, [51:18] this year we received [51:20] over 155 million returns, [51:25] over 60 million filers [51:27] used Schedule A [51:28] for one of the President's [51:30] four signature policies. [51:32] You also, [51:33] they have the deductibility [51:34] of interest on auto loans [51:36] for American-made cars. [51:37] The average tax cut [51:39] for filers benefiting [51:40] from the signature tax cuts [51:41] was $800. [51:43] Over 7 million filers [51:45] via no tax and tips [51:47] received an average deduction [51:48] of over 7,000. [51:50] No tax and overtime [51:51] over 3,100. [51:52] Car interest loan deduction, [51:54] 1,800. [51:55] And the seniors' deduction, [51:56] 7,500. [51:58] So, and importantly, [52:00] we are now up to 98% [52:02] of taxpayers [52:03] who file electronically. [52:05] And those who filed electronically, [52:07] 90% of them received [52:09] these refunds within 21 days. [52:13] That's great news. [52:14] Senator Coons. [52:15] Thank you, Chairman Hagerty, [52:16] Ranking Member Reid. [52:16] Thank you, Secretary Besant. [52:18] I'll have three questions [52:19] for you this morning [52:20] about sanctions, [52:21] CDFIs, [52:22] and direct file. [52:23] We're about seven weeks [52:25] into the war with Iran. [52:26] And I wondered, [52:29] Mr. Secretary, [52:30] given that your department [52:31] enforces sanctions, [52:32] if you have a sense [52:33] just how much Iran [52:35] has gained [52:36] through sanctions relief [52:37] since the war began. [52:39] I'll tell you, [52:39] estimates are $14 billion. [52:43] Now, President Trump's [52:44] described the Obama-Iran deal [52:46] as a disaster [52:47] and a scandal [52:47] because of the money [52:48] Iran got, [52:50] which was about $1.7 billion. [52:52] I don't know how you describe [52:53] $14 billion, [52:54] but you don't have to read [52:55] The Art of War [52:56] to know that [52:56] helping your adversaries [52:58] gain money [52:59] while you're at war [53:01] is a terrible idea. [53:02] And it's shocking to me [53:03] that the countries [53:04] currently profiting [53:05] from the release of sanctions [53:07] are our enemies. [53:09] No country has profited more [53:10] from this war than Russia. [53:12] Oil and gas prices [53:13] are up nearly 50% [53:14] since February. [53:16] And it'd be bad enough [53:17] if Russia were just profiting [53:18] from higher global oil prices. [53:21] But your Treasury Department [53:22] lifted sanctions [53:24] on Russian oil, [53:25] giving them an extra [53:25] $150 million a day [53:28] in revenue. [53:30] And those funds [53:30] are going not just [53:31] to kill Ukrainians, [53:33] but Russia's using [53:34] its profits [53:34] to support Iran [53:35] with drones [53:36] and intelligence [53:37] to kill our troops. [53:39] So, look, [53:41] to summarize, [53:43] I find it hard to believe [53:44] that we are continuing [53:46] to relieve sanctions pressure [53:48] on Russia and Iran. [53:50] I was encouraged [53:50] when last week [53:52] you said [53:52] that the Department [53:53] would not extend [53:54] the sanctions relief [53:56] for Russia, [53:57] yet the next day [53:58] that was reversed. [54:00] Can you give me [54:00] any brief idea [54:01] why it's a good idea [54:03] to relieve sanctions [54:04] on Iranian [54:05] and Russian oil? [54:07] Good. [54:07] With pleasure, Senator. [54:08] The $14 billion [54:09] is a myth [54:10] and unfortunately [54:11] a DNC talking point [54:13] that I've been subjected [54:14] to many times. [54:16] If anyone would like [54:17] to show me [54:17] where that $14 billion [54:19] comes from... [54:20] I look forward [54:20] to an exchange of details [54:21] on that, [54:22] Mr. Secretary. [54:22] We can exchange it [54:23] in a very public forum. [54:25] I'm not the DNC, [54:25] I'm the senator [54:26] from Delaware. [54:27] Well, [54:28] on every talk show [54:29] and every senator [54:31] seems to have... [54:32] Do you disagree [54:32] that Iran has received [54:33] significant additional revenue [54:35] from their sales of oil [54:36] because of sanctions relief? [54:38] I couldn't disagree more. [54:39] Okay. [54:39] Do you disagree [54:40] that Russia has received [54:42] significant additional revenue [54:43] from the sanctions relief? [54:45] I couldn't disagree more. [54:47] Okay. [54:47] Why did you relieve [54:49] the sanctions [54:49] against Russian [54:51] and Iranian oil? [54:52] Think of it this way, sir. [54:54] There's the Strait of Hormuz. [54:56] Familiar with it? [54:57] There is oil to the... [54:59] Yep. [54:59] Left and to the right. [55:01] There is to the right. [55:02] The Treasury was able to... [55:05] Just as you are concerned [55:07] about gasoline prices [55:08] for the American consumer [55:09] and for our Asian allies, [55:11] as are we, [55:13] Treasury was able to create [55:15] more than 250 million barrels [55:18] on the water. [55:19] And the way to think about this [55:20] is as I came in today, [55:22] the oil prices are at $100. [55:25] If we had not done [55:26] that sanctions relief, [55:27] they might have been at $150 [55:28] because the world [55:31] became very well supplied. [55:32] So if Russia was getting... [55:35] Selling their oil [55:36] at a 20% discount, [55:38] I can tell you [55:39] that 100% of 100 [55:40] is less than 80% of 150 [55:43] and the American consumer [55:45] has been better off. [55:46] Well, the folks in Delaware [55:48] are buying $4 a gallon gas today. [55:51] I don't see that we've seen [55:52] a significant reduction [55:53] in the price of the pump [55:54] or the price on the world markets, [55:55] but I have two more questions [55:57] I want to get to. [55:58] And I look forward [55:59] to disputing with you [55:59] the details. [56:00] I believe that Russia and Iran [56:02] have benefited [56:03] from the release of sanctions. [56:04] And when you said [56:05] we're not going to extend [56:07] sanctions relief [56:08] and then we're reversed, [56:09] I was deeply disheartened [56:11] because we shouldn't be funding [56:12] Putin's war machine. [56:13] I would like to tell you [56:14] that was as a result. [56:16] Last week was Bank Week, [56:17] World Bank, [56:18] and IMF Week. [56:19] And on Wednesday, [56:21] it was my belief [56:22] we would not do it. [56:23] I was approached [56:24] by more than 10 [56:26] of the most vulnerable [56:27] and poorest countries [56:28] in terms of energy. [56:31] And they ask us [56:32] to extend that sanction [56:33] and it's only for 30 days. [56:36] 30 days, [56:36] $4.5 billion [56:37] to Putin's war machine. [56:39] Two quick more questions. [56:40] The CDFI funds, [56:41] I was encouraged [56:43] by your comments [56:44] in support of CDFI [56:45] last year. [56:47] I am one of 32 senators, [56:49] bipartisan senators, [56:50] who are co-sponsors [56:52] of the Danes-Warner-Afford Act, [56:54] which strengthens [56:55] the CDFI fund. [56:57] Delaware, like most states, [56:58] has a housing affordability crisis. [57:00] Every dollar provided [57:01] by Treasury to CDFIs [57:03] crowds in $8 [57:04] in private investment. [57:07] I think they are a proven, [57:09] bipartisan, effective way [57:10] to help build affordable housing [57:12] in rural and urban communities. [57:14] I'm perplexed [57:15] by your budget proposal, [57:17] which would cut [57:17] over $200 million, [57:19] a more than 60% cut [57:21] to this successful program. [57:22] Could you tell me briefly why? [57:24] First of all, [57:25] that was an OMB apportionment. [57:28] The funding... [57:28] So you don't support it? [57:29] The funding is now $280 million, [57:32] and I do support [57:33] the new $100 million program [57:35] on the in rural areas. [57:38] And I can tell you [57:39] that part of the CDFI program [57:41] had lost its way [57:41] in terms of a partisan agenda. [57:44] And we can see, [57:45] you know, for instance... [57:46] Mr. Secretary, [57:46] I have one last question for you, [57:48] and I don't think funding [57:49] affordable housing [57:49] is a partisan agenda. [57:51] Direct file. [57:52] You spoke compellingly [57:54] about an interest [57:54] in making the IRS [57:55] easier to access, [57:57] more efficient, [57:58] yet you shut down [57:59] the direct file program. [58:01] I was very disappointed by that. [58:03] More than 300,000 taxpayers [58:05] used it last year. [58:06] It is a quick, free, [58:08] U.S. government-provided way [58:10] to file taxes. [58:11] The average American [58:12] who has simple tax filing [58:14] spends $270 [58:15] and 13 hours filing [58:18] their taxes [58:18] through paid services. [58:20] Direct file saved [58:21] the average participant [58:22] $160, 90% rated it favorably. [58:27] And the alternatives [58:29] are run by for-profit [58:30] tax prep companies [58:31] designed to steer filers [58:33] towards paid alternatives. [58:36] Why did you shut down [58:36] direct file [58:37] when it was free [58:38] and easy to use? [58:40] Well, it wasn't free. [58:42] And the... [58:43] Direct file was free [58:44] to taxpayers. [58:45] Not to the American people. [58:47] It was $138 per person. [58:51] So, $72 million [58:53] for, as you said, [58:55] about 300,000 taxpayers. [58:58] There is an alternative, [58:59] which is a public-private partnership, [59:01] free file, [59:02] which is free [59:02] to the American people, [59:04] and filers. [59:05] Over 3 million people use that. [59:07] And for a direct file, [59:09] more than 60% of the people [59:10] who started their application [59:13] didn't finish it. [59:14] Thank you for those answers, [59:16] Mr. Secretary. [59:17] Thank you. [59:18] Thank you. [59:18] I'd now like to turn it [59:19] to Senator Fisher. [59:21] Thank you, Mr. Chairman. [59:22] How much time do we have [59:23] for questions? [59:25] Thank you. [59:26] Welcome, Mr. Secretary. [59:28] I know that Treasury [59:30] and IRS have been busy [59:32] working on new guidance [59:33] for the many great policies [59:35] that are contained [59:36] in the Working Families [59:37] Tax Cut Act. [59:39] And one of those policies [59:41] is my paid family [59:42] medical leave program, [59:44] that tax credit. [59:45] This credit provides [59:46] a general business tax credit [59:48] to employers [59:49] to meaningfully offset [59:51] the cost of providing [59:52] paid family and medical leave [59:54] to their employees. [59:56] And I was proud [59:57] to champion this back in 2017 [59:59] as the first federal [1:00:02] paid family and medical leave policy [1:00:04] in this country, [1:00:06] in the United States. [1:00:08] And I also was particularly proud [1:00:11] that it happened [1:00:12] under Republican leadership. [1:00:15] I was also proud [1:00:16] that the Working Families Tax Cuts, [1:00:19] I was able to enhance it [1:00:21] and make it permanent now. [1:00:22] This is a big deal, [1:00:23] and I think we should tout it. [1:00:25] My team's been working [1:00:26] with yours, [1:00:27] and we are eager [1:00:28] for the updated IRS guidance [1:00:31] to be released. [1:00:32] That'll be critical [1:00:33] to ensuring that employers [1:00:35] can accurately claim tax credits [1:00:38] and deductions, [1:00:39] and employers [1:00:40] are eagerly awaiting [1:00:41] the publication of this guidance. [1:00:44] Mr. Secretary, [1:00:44] do you have an estimate [1:00:46] on when this guidance [1:00:47] will be published, [1:00:49] and can you work [1:00:50] to ensure it is prioritized [1:00:52] to expand access [1:00:53] to paid family and medical leave [1:00:56] for American workers? [1:00:58] Senator, [1:00:58] thank you for your leadership [1:00:59] on this fantastic program, [1:01:02] and it's an important part [1:01:06] of the Working Families Tax Cut. [1:01:08] So issuing the guidance [1:01:09] to implement [1:01:10] the Section 45S, [1:01:12] the paid family medical leave credit, [1:01:15] is a treasury [1:01:16] and administrative priority. [1:01:18] As you mentioned, [1:01:20] our Office of Tax Policy [1:01:21] have worked very well [1:01:22] with your staff [1:01:23] on outstanding [1:01:24] Section 45S issues. [1:01:27] We've also met [1:01:28] with the various stakeholders, [1:01:29] and we are working diligently [1:01:31] and hope to issue guidance [1:01:33] early this summer. [1:01:36] Thank you. [1:01:36] I know our teams [1:01:38] have been in touch [1:01:39] with each other, [1:01:40] and I'd like to have a meeting, [1:01:42] if we could, [1:01:42] as soon as possible on that. [1:01:44] Do you think our teams [1:01:45] can work to get something [1:01:46] set up on that? [1:01:48] With pleasure. [1:01:48] Thank you, sir. [1:01:50] I recognize [1:01:51] the department's budget request. [1:01:53] It decreases funding [1:01:55] for the Community Development [1:01:56] Financial Institutions, [1:01:59] the CDFI, [1:02:00] fund that's there, [1:02:02] and I want to take a moment [1:02:04] to point out [1:02:05] the good work [1:02:06] that the 11 CDFIs [1:02:08] in my state do [1:02:09] in investing [1:02:10] in those rural communities [1:02:12] in the vastness [1:02:14] of the state of Nebraska. [1:02:16] The institutions, [1:02:18] they take on the risk [1:02:19] to serve those [1:02:20] who are otherwise [1:02:21] often overlooked [1:02:23] or cannot be served [1:02:25] by bigger financial institutions. [1:02:28] They're sustaining daycares, [1:02:30] in small communities [1:02:32] of just over 300 people. [1:02:35] They're keeping retail stores [1:02:37] in rural downtowns, [1:02:40] initiating new businesses [1:02:42] on the Winnebago [1:02:43] and the Omaha reservations [1:02:45] in northeast Nebraska, [1:02:47] and they're supporting efforts [1:02:49] to increase that rural housing developments, [1:02:52] which is so needed. [1:02:53] Last year, [1:02:55] Treasury-certified CDFI's programs [1:02:58] were statutory, [1:03:00] and earlier this month [1:03:01] announced plans [1:03:03] for new program rules [1:03:04] to ensure compliance [1:03:06] with federal law. [1:03:07] Can you talk about [1:03:09] your plan for CDFI [1:03:11] moving forward? [1:03:13] Sure. [1:03:14] So, again, [1:03:15] we want to make sure [1:03:17] that it is doing [1:03:18] what it is designed [1:03:19] and not loaded [1:03:21] with a partisan wish list. [1:03:24] We also want to make sure [1:03:26] that the CDFI program [1:03:31] is free of waste, [1:03:33] fraud, and abuse. [1:03:34] There's a CDFI trickle law, [1:03:37] which has been a very, [1:03:39] turned out it was fraud, [1:03:41] auto lending [1:03:42] to minority communities, [1:03:44] so we want to avoid that, [1:03:47] and I think [1:03:48] what would be, [1:03:49] what will be [1:03:51] very engaging [1:03:54] for the people in Nebraska [1:03:55] will be the new 100 million [1:03:57] that has been allocated [1:03:59] for rural areas. [1:04:01] I appreciate your focus on that [1:04:03] because many times [1:04:04] these rural communities [1:04:05] are left out, [1:04:07] and so I appreciate that focus [1:04:09] and your acknowledgement [1:04:11] of that, sir. [1:04:12] Thank you. [1:04:12] Senator, [1:04:13] I'm from a rural community, [1:04:14] so I appreciate it. [1:04:14] I know that. [1:04:15] You have a good understanding [1:04:18] of what's involved. [1:04:20] As you know, [1:04:21] my colleagues [1:04:21] on the other side [1:04:22] of the aisle, [1:04:23] they provided IRS [1:04:24] with $80 billion [1:04:25] in a one-time funding [1:04:27] as part of [1:04:28] the Inflation Reduction Act. [1:04:30] However, [1:04:31] since then, [1:04:31] Congress has agreed [1:04:32] on a bipartisan basis [1:04:34] to rescind [1:04:35] over half of those funds, [1:04:37] most recently in January [1:04:38] with the enactment [1:04:40] of the FY26 [1:04:42] appropriations bills. [1:04:44] Your budget request [1:04:45] notes that the IRS [1:04:47] expects to exhaust [1:04:48] the IRA funding [1:04:51] in FY28. [1:04:52] Can you talk about [1:04:53] the Department's plans [1:04:55] for transitioning [1:04:56] back to a place [1:04:58] where the IRS [1:04:59] is budgeting [1:05:00] and relying on [1:05:02] the regular appropriations [1:05:03] process [1:05:04] rather than through [1:05:06] this one-time, [1:05:07] really massive [1:05:08] infusion of funds? [1:05:10] It was really [1:05:10] a scoring gimmick [1:05:11] for the misnamed IRA, [1:05:16] the Inflation Acceleration Act, [1:05:21] and we are bringing it down. [1:05:23] A large part of it, [1:05:25] we have found, [1:05:26] was in the data processing system, [1:05:30] which is $50 billion. [1:05:32] The upgrade is $50 billion [1:05:34] over budget. [1:05:35] So using common sense, [1:05:38] lowering the number [1:05:39] of outside contractors [1:05:41] and refocusing the efforts, [1:05:45] we now have the data processing [1:05:47] under control, [1:05:48] about $2 billion [1:05:50] of the reduction [1:05:51] that is in that area. [1:05:53] So we think it is going [1:05:54] to be more efficient. [1:05:55] We are meeting the taxpayers [1:05:56] where they are, [1:05:57] and the online inquiries, [1:06:00] they are up 60% this year. [1:06:02] Thank you for your work on that. [1:06:05] Thank you, Mr. Chairman. [1:06:06] Senator Van Hollen. [1:06:07] Thank you, Mr. Chairman. [1:06:10] Mr. Secretary, [1:06:11] I wanted to ask you [1:06:13] a little bit [1:06:14] about your recent conversations [1:06:16] with folks [1:06:17] in the government of the UAE. [1:06:20] As I'm sure you probably know, [1:06:22] President Trump and his family [1:06:24] have done a very brisk business [1:06:26] with the UAE [1:06:27] over the last few years. [1:06:29] There was the $500 million [1:06:30] that Sheikh Ta'o Noon, [1:06:33] the UAE's [1:06:34] national security advisor [1:06:35] and brother of the president, [1:06:37] invested in World Liberty Financial, [1:06:39] which is the Trump family [1:06:41] crypto venture, [1:06:42] right before the president's [1:06:43] inauguration. [1:06:44] There was the $2 billion [1:06:45] in World Liberty stable coin [1:06:48] that Sheikh Ta'o Noon [1:06:50] used to invest in Binance, [1:06:52] a deal that effectively handed [1:06:54] World Liberty $2 billion [1:06:56] in cash [1:06:57] at the same time [1:06:58] that the United States government [1:06:59] relaxed our export controls [1:07:01] on high-end AI [1:07:03] and ships [1:07:04] to UAE companies. [1:07:08] And now, [1:07:09] I understand that the UAE [1:07:12] is looking [1:07:13] for a swap line. [1:07:18] The war in Iran [1:07:19] has already cost us dearly. [1:07:23] In my view, [1:07:23] it's been a huge mistake, [1:07:26] made us less safe [1:07:27] and a lot worse off. [1:07:31] In addition to lives lost, [1:07:32] we're talking about [1:07:33] over a billion dollars a day [1:07:35] in taxpayer money. [1:07:36] We're talking about [1:07:38] higher gas prices, [1:07:41] higher prices overall. [1:07:43] And now, [1:07:43] we understand that the UAE [1:07:46] is asking you [1:07:49] to provide them [1:07:50] a swap line [1:07:51] through the [1:07:52] Exchange Stabilization Fund. [1:07:54] Mr. Secretary, [1:07:55] can you talk about [1:07:56] this request [1:07:57] and whether or not [1:07:57] you expect to [1:08:00] support it? [1:08:01] Senator, [1:08:03] I would dispute [1:08:04] much of what you [1:08:05] early said [1:08:06] and any linkages [1:08:07] to this swap line. [1:08:09] Many of our Gulf allies [1:08:11] have requested swap lines. [1:08:13] You would have just read [1:08:14] about the UAE. [1:08:16] And swap lines, [1:08:17] whether it's from [1:08:18] the Federal Reserve [1:08:19] or the Treasury, [1:08:20] are to maintain order [1:08:22] in the dollar funding markets [1:08:24] and to prevent [1:08:26] the sale [1:08:26] of the U.S. assets [1:08:29] in a disorderly way. [1:08:37] So the swap line [1:08:38] would both benefit [1:08:40] the UAE [1:08:40] and the U.S. [1:08:43] And as I said, [1:08:44] numerous other countries, [1:08:46] including some of our [1:08:47] Asian allies, [1:08:47] have also requested them. [1:08:49] Mr. Secretary, [1:08:50] you said you disputed [1:08:51] some of the facts [1:08:51] that I presented. [1:08:53] Do you dispute the fact [1:08:54] that Sheikh Tanun, [1:08:57] through his company, [1:08:58] invested $500 million [1:09:01] in World Liberty Financial [1:09:05] just before the president [1:09:06] was ignored? [1:09:07] No, you contest that. [1:09:08] I'm unaware of that. [1:09:09] You're not aware of that? [1:09:10] I'm not aware of that. [1:09:11] Okay. [1:09:12] I dispute your linkages. [1:09:14] Are you aware [1:09:16] of the other transaction [1:09:17] I mentioned? [1:09:18] I am not. [1:09:19] Essentially, $2 billion? [1:09:20] Seriously? [1:09:20] I am not. [1:09:22] I mean, it's been [1:09:22] so widely reported, [1:09:24] Mr. Secretary, [1:09:24] and been the subject [1:09:25] of lots of questions. [1:09:26] In fact, I believe [1:09:27] I've asked you about this [1:09:28] in the past. [1:09:30] Let me go back [1:09:31] to the issue [1:09:33] of how funds [1:09:36] are being used [1:09:36] at the IRS [1:09:38] because part of the purpose [1:09:40] for providing the IRS [1:09:41] with some additional funds [1:09:43] was specifically [1:09:45] to go after [1:09:46] very high-end individuals, [1:09:51] taxpayers who are not [1:09:52] paying their taxes, [1:09:53] not paying what is due [1:09:55] to the good of the country. [1:09:59] And as a result of that, [1:10:00] according to CBO, [1:10:02] we're actually going to see [1:10:03] deficits go up. [1:10:04] So deadbeat, [1:10:06] rich people will get away [1:10:07] not paying their taxes. [1:10:09] Deficits go up. [1:10:11] But the direct file [1:10:12] was intended to give [1:10:14] sort of working people [1:10:15] a little bit of relief, [1:10:18] and it did save, [1:10:19] on average, [1:10:19] $160 and got very good reviews [1:10:23] in terms of people's [1:10:26] experience with it. [1:10:28] It does go to the larger question [1:10:30] of the IRS, [1:10:31] which has lost 27,000 employees [1:10:34] through actions, [1:10:35] such as RIFs, [1:10:36] the Deferred Resignation Program, [1:10:38] and early retirement. [1:10:40] 27,000 employees left [1:10:42] because of those actions, right? [1:10:46] Yes, sir, [1:10:47] which there was quite a bit [1:10:48] of bloat during the Biden years. [1:10:50] Really? [1:10:50] So we were just getting back [1:10:52] to a more normalized level. [1:10:53] So, Mr. Secretary, [1:10:55] you had to hire [1:10:56] a lot of those people back, right? [1:10:57] We hired some people back [1:10:59] in specific areas. [1:11:01] Not a lot of those, sir. [1:11:02] But how much did it cost [1:11:05] to both first let people go [1:11:08] and then go back [1:11:10] and have to rehire [1:11:11] a bunch of them? [1:11:12] Again, it was not a bunch of them, [1:11:14] and we have made [1:11:16] very large gains in technology. [1:11:19] Are you aware of the fact [1:11:20] that the Treasury Inspector General [1:11:22] for Tax Administration [1:11:23] released a report in January [1:11:25] showing how the IRS service delivery [1:11:31] has declined because of these changes? [1:11:35] Have you seen that? [1:11:36] What I've seen, Senator, [1:11:38] is that the Democrats said [1:11:40] that the filing system [1:11:41] was going to be a disaster. [1:11:42] It's been a home run. [1:11:44] And what you are nitpicking me on now [1:11:46] is the difference between [1:11:47] answering a call in six minutes [1:11:48] and nine minutes. [1:11:50] And, sir, let me tell you [1:11:51] the way the calls used to work. [1:11:53] That the IRS, [1:11:54] under the Biden administration, [1:11:55] would answer the call [1:11:57] in six minutes [1:11:58] and a taxpayer would be on hold [1:12:00] for 20 or 30 minutes. [1:12:01] Now, when the taxpayer's call [1:12:03] gets answered, [1:12:04] they get serviced right away. [1:12:06] So it's a false equivalent. [1:12:07] Mr. Secretary, [1:12:07] what you've done [1:12:08] is provided a windfall [1:12:11] to very wealthy people [1:12:13] who don't pay their taxes. [1:12:14] Senator, why would I do that? [1:12:16] Why would I do that? [1:12:17] What is your theory of the case, Senator? [1:12:19] Because this... [1:12:20] What is your theory of the case? [1:12:21] Because I am committed to collect... [1:12:23] No, because this... [1:12:25] Senator's time has expired. [1:12:26] Senator Houston. [1:12:26] ...as time after time... [1:12:28] Mr. Secretary... [1:12:28] ...tilted the tax code [1:12:29] in favor of very wealthy people. [1:12:30] Senator Houston. [1:12:31] Thank you, Mr. Secretary. [1:12:34] I am a big proponent [1:12:37] of using technology [1:12:38] to make our lives more efficient, [1:12:42] improve customer service, [1:12:44] get better outcomes, [1:12:45] more compliance, [1:12:46] all of those things. [1:12:47] And certainly the IRS [1:12:48] is a place that can happen. [1:12:49] I can tell you when I was... [1:12:51] Secretary of State of Ohio, [1:12:52] we did business filings [1:12:53] and ran elections. [1:12:54] And we took a paper process [1:12:57] and turned it [1:12:57] into a digital process [1:12:59] and improved customer service. [1:13:03] What you... [1:13:04] Forming a new business in Ohio [1:13:05] used to take four days now [1:13:06] and then it took four hours. [1:13:09] Over the course of six years [1:13:11] with attrition [1:13:12] and early retirements, [1:13:13] we cut the size [1:13:14] of the staff in half, [1:13:16] reduced fees by 21%, [1:13:18] and no longer needed [1:13:23] any tax dollars [1:13:24] to finance our agency. [1:13:26] So I know firsthand [1:13:27] how you can use technology [1:13:29] to reduce head count [1:13:31] and improve outcomes. [1:13:33] And government needs [1:13:35] to do more of this. [1:13:36] So thank you [1:13:37] for your willingness to lead [1:13:40] and put technology [1:13:41] in place to do this. [1:13:42] I know that in looking [1:13:44] at your budget request [1:13:45] at the IRS, [1:13:47] that it is reduced, [1:13:48] but you have seen [1:13:49] the evidences, [1:13:50] as you said in your testimony, [1:13:52] that revenue is up 12%, [1:13:54] even though the amount [1:13:55] of expenditure was down. [1:13:57] Okay, so I know [1:14:00] from my experience [1:14:01] and from your experience, [1:14:03] we're seeing how technology [1:14:04] can improve outcomes [1:14:05] and improve customer service, [1:14:08] compliance, [1:14:08] and friendliness [1:14:10] to the consumer. [1:14:11] Can you give us [1:14:12] a little more insight [1:14:13] on how analytics [1:14:14] and AI [1:14:15] and new emerging technologies [1:14:17] can do this [1:14:19] at the IRS [1:14:20] across and maybe even [1:14:22] suggest other areas [1:14:24] in the government [1:14:25] that we could do [1:14:25] more work like this? [1:14:28] We only have five minutes [1:14:29] in terms of the other areas [1:14:30] of the government. [1:14:31] And Senator, [1:14:32] I want to congratulate you [1:14:33] because much of what [1:14:36] you did in Iowa, [1:14:38] I think Iowa [1:14:39] is kind of a sleeper state. [1:14:41] It's Ohio, [1:14:42] but we're just one [1:14:43] of those Midwesterns. [1:14:44] Sorry, in Ohio, [1:14:45] but the Ohio, too, [1:14:47] is a sleeper state [1:14:48] in terms of the manufacturing [1:14:50] that is growing there. [1:14:53] And what we are doing [1:14:56] at the IRS [1:14:58] is turning into [1:15:00] a digital-first agency. [1:15:02] 98% of the returns [1:15:04] will be filed online now, [1:15:06] up from 97. [1:15:07] And the efficiency there [1:15:09] is vast paper processing costs [1:15:11] have gone from $45 million [1:15:12] to $20 million. [1:15:14] And we're phasing in [1:15:16] more electronic payments [1:15:17] for faster, [1:15:17] more secure electronic payments. [1:15:19] As I told the senator [1:15:21] from Maryland, [1:15:22] the other thing [1:15:23] that we are doing [1:15:24] is that we actually, [1:15:26] using electronic filing, [1:15:29] can go back to a taxpayer [1:15:30] and say that you will [1:15:32] likely be audited [1:15:33] if you submit this tax return. [1:15:36] Would you like to redo it [1:15:38] in advance? [1:15:39] And it comes back [1:15:41] in a much more satisfactory status [1:15:43] and prevents an audit, [1:15:45] increases revenues. [1:15:48] And as you brought up, [1:15:50] the enforcement actions [1:15:53] are up 12% this year, [1:15:55] over $40 billion. [1:15:56] And the top five enforcements [1:15:59] resulted in more [1:16:00] than $2 billion. [1:16:01] Nobody wants somebody [1:16:03] to cheat on taxes. [1:16:04] Everybody wants to have [1:16:05] a better experience [1:16:06] with the IRS. [1:16:08] These technologies seemingly [1:16:10] are accomplishing that. [1:16:12] Do you think that we're, [1:16:14] at just the beginning of this, [1:16:16] how much more efficiency [1:16:17] can we get? [1:16:18] Sir, I think that $50 billion [1:16:21] has gone down the drain [1:16:24] in terms of overspending [1:16:26] in technology. [1:16:27] At the IRS, [1:16:28] the upgrade program [1:16:30] has been going on [1:16:31] since the 90s. [1:16:32] I think we finally [1:16:34] have a handle on it. [1:16:35] And I think that [1:16:36] between new technologies, [1:16:39] between the upgrades [1:16:40] and getting the 12, [1:16:41] I believe there are 12 IRS systems [1:16:44] that we're not able [1:16:44] to talk to each other, [1:16:46] will result in better collections, [1:16:50] better privacy, [1:16:51] because this is how things leak out, [1:16:53] is old data systems, [1:16:54] and a much better [1:16:55] taxpayer experience. [1:16:58] And then finally, [1:16:59] thank you for that. [1:17:00] we have a $1,700, [1:17:03] 100% tax credits [1:17:04] of donations up to $1,700 [1:17:06] under the Working Family Tax Cadet [1:17:09] for vouchers, [1:17:11] school scholarships, [1:17:13] to scholarship granting organizations. [1:17:16] Can you tell me [1:17:17] how many people [1:17:18] do we expect to use this, [1:17:20] and how are the scholarship [1:17:22] granting organizations chosen? [1:17:24] They apply and are certified [1:17:32] by the IRS. [1:17:34] We do not have [1:17:34] the total data on that yet, [1:17:37] but I will get back [1:17:38] to your office on that. [1:17:39] But I think this is [1:17:40] a very important new program. [1:17:42] Yeah, it would be important. [1:17:43] I really want to understand [1:17:45] how the scholarship [1:17:46] granting organizations [1:17:47] are chosen, [1:17:48] what the rules are around that. [1:17:50] I want to understand that. [1:17:51] So thank you, [1:17:51] and thank you for your service. [1:17:52] And we've worked [1:17:54] with many states [1:17:55] like yours [1:17:56] to coordinate [1:17:58] the state effort [1:17:59] with the federal effort. [1:18:02] Senator Bozeman. [1:18:06] Thank you, [1:18:07] Mr. Chairman, [1:18:07] and thank you, [1:18:09] Senator Reed, [1:18:09] for having this [1:18:10] very important hearing. [1:18:12] We appreciate you being here. [1:18:14] We also appreciate [1:18:15] your responsiveness [1:18:17] when we have a problem, [1:18:19] you and especially [1:18:20] your staff [1:18:21] that do a great job. [1:18:22] I want to thank you all [1:18:25] for your leadership [1:18:26] on digital asset policy. [1:18:28] And I agree [1:18:29] with your recent op-ed [1:18:30] that we need [1:18:31] to pass legislation. [1:18:33] On the Senate [1:18:35] Agriculture Committee, [1:18:36] I'm pleased with the bill [1:18:38] that we reported [1:18:39] out of committee [1:18:40] and look forward [1:18:41] to working [1:18:41] with my colleagues [1:18:42] in banking. [1:18:43] While we're still working [1:18:44] to address important issues [1:18:46] like ensuring the CFTC [1:18:47] is fully constituted [1:18:49] and has adequate resources, [1:18:51] I believe we can address [1:18:53] those issues [1:18:54] and reach a bipartisan agreement, [1:18:55] which is very, very important. [1:18:57] Can you talk about [1:18:58] why it's so important [1:18:59] that Congress [1:18:59] pass digital asset legislation? [1:19:04] Senator, [1:19:05] when the United States [1:19:06] leads in best practices, [1:19:09] safety, and soundness [1:19:11] in the financial world, [1:19:13] whether it's our banking system, [1:19:16] our securities, [1:19:18] or now digital assets, [1:19:20] it's important for the U.S. [1:19:21] to lead for several reasons. [1:19:22] One, [1:19:23] U.S. leadership [1:19:25] over the long term [1:19:26] secures the primacy [1:19:28] of the dollar [1:19:28] as a reserve currency. [1:19:30] Two, [1:19:31] our best practices [1:19:33] will emanate [1:19:34] to the rest of the world [1:19:35] because what had happened [1:19:37] is digital assets [1:19:39] were in dark, [1:19:41] unregulated places, [1:19:43] and they will come [1:19:44] into the U.S., [1:19:45] and we will be able [1:19:46] to use our anti-money laundering [1:19:50] and the KYC [1:19:53] and have a much better handle [1:19:55] on digital assets, [1:19:58] both for payments, [1:20:00] and I think this is going [1:20:01] to be a very important payment rail, [1:20:04] and again, [1:20:05] the U.S. has to lead here. [1:20:07] We are the technological leader [1:20:08] in the world. [1:20:09] We should be the payments leader [1:20:10] in the world. [1:20:11] Very good, [1:20:13] and we appreciate your help [1:20:14] in pushing that forward. [1:20:16] I've heard concerns [1:20:17] from commodity groups [1:20:19] about 24-7 trading [1:20:21] in commodity derivatives [1:20:23] that that will hurt [1:20:25] the liquidity [1:20:25] and price discovery [1:20:27] in the underlying [1:20:28] real world commodity markets. [1:20:31] Will you commit [1:20:32] to working [1:20:32] with all stakeholders, [1:20:34] especially commodity end users [1:20:35] and financial regulators, [1:20:37] on the issue? [1:20:38] Yes, sir. [1:20:39] Thank you very much. [1:20:52] I also want to talk [1:20:52] about designation [1:20:53] of clearinghouses [1:20:55] as systemically important [1:20:57] financial market utilities, [1:20:59] SIFMUs. [1:21:00] As you know, [1:21:01] SIFMUs have access [1:21:02] to Fed deposit accounts, [1:21:04] which gives protections [1:21:05] from margin money [1:21:07] collected from farmers [1:21:08] and hedgers. [1:21:09] However, [1:21:10] not all clearinghouses [1:21:11] are designated [1:21:12] as SIFMUs, [1:21:13] as the Federal Reserve [1:21:15] has been looking [1:21:15] at new ways [1:21:16] to provide access [1:21:17] to deposit accounts [1:21:19] to non-bank firms, [1:21:22] will you work [1:21:23] with the Fed [1:21:24] to look at whether [1:21:24] the needs [1:21:25] of non-designated [1:21:26] clearinghouses [1:21:27] might be considered? [1:21:30] Yes, sir. [1:21:31] With pleasure, [1:21:31] because I think [1:21:32] it's very important [1:21:33] that the integrity [1:21:34] of these clearinghouses [1:21:35] be maintained. [1:21:36] Very good. [1:21:38] That's all I have. [1:21:39] Thank you all [1:21:40] very, very much. [1:21:41] I want to thank you, [1:21:45] Mr. Secretary, [1:21:46] for appearing [1:21:46] before this subcommittee. [1:21:47] We appreciate your time, [1:21:48] your attention. [1:21:49] Members will have one week [1:21:50] to submit their questions [1:21:51] for the record. [1:21:52] Mr. Secretary, [1:21:52] we'd appreciate [1:21:53] if the Department [1:21:54] could answer those questions [1:21:55] as promptly as possible. [1:21:57] The subcommittee meeting [1:21:58] is adjourned. [1:21:59] Thank you.