Smoother wyden and minutes of the committee senator wyden and members of the committee, i wanted to briefly comment on the horrific terrorist attack in manchester. Americans are bound to our british friends by a common language, culture and many other things such as the common law. As a boy, i remember the strength it brought to us americans to witness the courage of the british people as they stood strong in the battle of britain. We resolve that the british people will once again vanquish a common foe. Today i think i can speak for all members of the committee when i say, god save the queen and god save great britain. We care a great deal for our friends overseas, and we wish them the best. Todays hearing has a dual focus. We will be, we will discuss the president s budget for fiscal year 2018 as well as ongoing efforts to reform our nations tax code. We are pleased to be joined here today by treasury secretary Steven Mnuchin who will provide the administrations perspective on these important issues. We welcome you back to the committee, mr. Secretary. As this is your first Budget Hearing before this committee, let me warn you these hearings tend to be pretty grueling, but that is a necessary part not only of the budget process, but also of the committees oversight function. But not to worry, i think youre up to the challenge. Let me begin by saying a few words about the president s budget. Obviously, were all still absorbing the finer details of this proposed budget, but at this point i can say definitively that i applaud the president for his focus on advancing progrowth policies to get our economy moving. And i share the administrations concerns about our debt which ballooned by nearly doubling during the previous administration. The president s budget envisions increased Economic Growth that eventually reaches 3 . As i understand it, that vision relies on implementation of a number of policies including progrowth tax reform, cutting unnecessary regulation, Building Infrastructure and some other, some other approaches as well. I think reforming health cares part of that, boosting energy production, reducing deficits. It would significantly improve the supply side of the economy. Of course, this is not unheard of that the administration places belief in the efficacy of its policy proposals. For example, in former president obamas fiscal year 2010 budget, growth was assumed to get as high as 4. 6 and was assumed to average higher over an extended period. While critics may want to criticize the optimistic nature of the budgets growth projections, it is, i believe, more realistic than a number of Budget Proposals than weve seen in the past, particularly some that came from the previous administration. I also shared the overall goal in the budget to reduce deficits without raising taxes, keeping in mind our nations debt nearly doubled during the previous administration. We have a number of difficult choices ahead of us as we work to address inefficiency and inefficiencies and reform wasteful agencies. And that difficultys reflect frequented in the budget. I look forward to continuing to examine the various proposals and to hearing secretary mnuchins insights about the items in the budget that were going to discuss today. Now, id like to spend just a few minutes discussing other element of todays hearing, and thats tax reform. For six years now, ive been beating the drum on tax reform. Ive sought to make the case here in the committee, on the senate floor in Public Forums and events and in private conversations. And i havent been alone. There has been a bipartisan recognition, one that i think is growing more by the day, that our current tax system doesnt work. And throughout this endeavor ive stated numerous times that its going to be successful if were going to be successful, well need to see engagement from the president. And before anyone writes that off as a political statement, let me make it clear that i wasnt simply advocating for the election of a republican president. On the contrary, i repeatedly implored president obama to engage with congress on tax reform but to no avail. The Current Administration put out a tax reform framework earlier this month, one that i think can serve as an outline as this effort moves forward, keeping in mind that as with any major undertaking, well need to be realistic and commit to practicing the art of the doable. I expect that youll get a number of questions about the tax plan here today, secretary mnuchin. In addition, i expect well hear a lot about the process by which tax reform will move through congress. On that point, weve already heard a few demands from my friends on the other side of the aisle stated as if they were preconditions for any serious engagement on tax reform. My hope is that these are, arent really preconditions, but still i do want to address one of them briefly here today. One of the demands weve heard that republicans abandon the use of budget reconciliation for tax reform. This [laughter] is an odd demand. Historically speaking, most major tax bills that have moved through reconciliation have had bipartisan support. In fact, in the past when republicans have controlled the house and senate along with the white house, all of our tax reconciliation bills have enjoyed some Senate Democrat support. If we can reach agreements on policy, there is absolutely no reason why democrats could not agree to support a tax reform package moved through the reconciliation process. I cant imagine a scenario in which my democratic colleagues would be more amenable to come compromising can compromisinn policy if reconciliation is taken off the table. And, in fact, the only thing wed accomplish by foreclosing the use of reconciliation would be to insure that the minority would be able to more easily block any bill from passing, which is a strange demand to make before beginning a good faith negotiation. In any event whether this is truly a precondition or simply a rhetorical point on the part of my colleagues, let me be clear. My strong preference is that our tax Reform Efforts be bipartisan. I have reached out to my colleagues on both sides of the aisle and sincerely hope that both parties can be at the table together. I think ive more than adequately demonstrated my willingness to work with my democratic colleagues on this committee and elsewhere. My intention to continue working with my democratic colleagues on tax reform so long as they are willing to engage. I dont want to speak for secretary mnuchin today, but i think its safe to say that he shares this desire and is similarly committed. And i think hes committed to working with our democratic colleagues on this effort. With that, let me once again thank the secretary for being here today. I look forward to a rigorous and thoughtful discussion of these and other issues. So with that, ill turn to my colleague and friend, senator wyden, for his opening remarks. Thank you, thank you very much, mr. Chairman. Let me say also that on our side we very much share your view with respect to these despicable acts in manchester. And a number of us are also on the intelligence committee, chairman burr, vice chairman warner is and myself. So we understand that your points are very well taken, and we share them. Thank you. Mr. Chairman and colleagues, what the American People demand of us is bipartisan cooperation on taxes, health care and the many other issues that affect their daily lives. Yet what the new administration has offered is a onepage tax cut proposal that is shorter than the typical drugstore receipt and a budget that looks like it was written by people who believe working families and seniors who are walking on an economic tight rope have life too easy. The onepager puts forward numbers that do not come close to adding up. The math behind this plan would make Bernie Madoff blush. So without realistic tax numbers to analyze, im going to focus my remarks in two areas. First, the administrations Economic Team says that the president s focus is on a middle class tax cut. If this trump plan was built for a middle class tax cut, then trump tower was built for middle class housing. On one side of the ledger, there isnt a lot of detail on how the trump tax plan would help working families or middle class. Just vague, openended promises. Contrast that with how it treats the very fortunate, very few; eliminating the estate tax and opening a new milewide loophole for the well hawaii to exploit wealthy to exploit passthrough status is a prescription for more inequality in america. Right here in this room mr. Mnuchin and i agreed on the nowlegendary mnuchin rule of no absolute tax cut for the rich. But after what weve seen in the tax plan and the budget, i guess weve got to throw that in the waste bin alongside the trump plan not to cut medicare. Their health plan reduces, makes it harder for us the keep the trust fund solvent. Theres the trillion dollars in medicaid cuts, and theres the 70 billion in cuts in Social Security disability. So the promise not to cut medicare, not to cut medicaid and not to cut Social Security disability also has not rung true. Now to the second point. The trump Economic Team is dusting off the old, disproven idea that tax cuts completely pay or for themselves. There is not a reputable economist out there who agrees with that. But you dont have to take my word for it, you can look back at history. Of just in the last few years, governor brownback of kansas zeroed cuts out this some cases saying it would launch the states economy into the stratosphere. Instead its revenues have cratered. Kansas is struggling to keep its schools open, and basic services running. Go back a little earlier to the early 2000s and the bush tax cuts. Those tax cuts didnt pay for themselves either. And then look back to the late president reagan. He passed a big, regressive tax cut in 1981, but lo and behold in 1982 and 84, he had to raise revenue to make up for the deficits that were cost. Bottom line, the payforitself argument behind this tax plan holds up as well as the flat earth society, except people still try to defend it. Now, i want to respond just briefly the my friend, the chairmans, point with mr. President to the process with respect to the process going forward. Because i think he knows that i very much share his view that to pass lasting, jobcreating tax reform that is more than an economic sugar high, its got to be bipartisan. Its not a haphazard exercise, just throwing a bunch of bullet points together because youve got an oped article written by some campaign advisers. It takes a lot of careful consideration to write a bipartisan tax reform bill, and i know something about it because i wrote two of them. One with our former colleague, senator coats, and one with one of our former colleagues that all of you remember, senator gregg. The focus has to be on writing an economically responsible proposal thatll create good paying red, white and blue jobs without heaping a new burden on the middle class. Thats the kind of reform that wins the support from both sides and will last. But the point with respect to reconciliation, and i think this is not a debate about the desire of my friend, the chairman orrin hatch, wanting to work in a biartisan way. There is such a strong feeling on our side about not using reconciliation and i want to make it a comment did not diminish my section for the chairman that would be a bipartisan bill having written two of them i would very much like in accordance to some of these principles ive outlined and i know my colleagues have said that too. It is a dysfunctional carcass. We understand that. But we have to ensure that we have a bipartisan process. Today i would like to extend more more to the secretary knutson. He was sworn in as the 77th secretary of the United States treasury. Prior to his confirmation he was the finance chairman. In addition to traveling with the president around the country in that role he also served as a senior Economic Advisor to the president in crafting the economic positions in speeches. The activities though he also served as founder, chairman and chief executive officer of dune capital management. He also founded the one west bank group. Until its sale to cit group. Earlier in his career. He worked at the Goldman SachsGroup Incorporation where he was a partner and served as chief information officer. He has extensive experience in Global Financial markets. In the u. S. Government security markets. He is committed to philanthropic activities and served as a member of the board. The Whitney Museum of art and the Sculpture Garden on the mall and Health Service board with the New York Presbyterian Hospital board. In the Los Angeles Police foundation. He was born and raised in new york city and earned a bachelors degree from yale university. We are grateful to have you here. We appreciate your willingness to serve your country and please proceed with your opening statement. It is an honor to be here today. I am looking forward to working with members of congress in this committee on passing important legislation for the American People. My number one priority as secretary is creating sustainable Economic Growth for all americans. The best way to achieve this is through a combination of tax reform, regulatory relief and protecting taxpayers in making some decisions with respect to our budget. We are currently bearing the cost of excessive government commitments and this has forced us into making hard choices. But the remarkable thing about Economic Growth is that it builds on its own. If we have the right policies today are children and grandchildren will reap the benefits of an ever growing economy indeed in the next ten years if we return to the modern historic average of above 3 annual gdp growth our economy will grow by trillions of dollars. This will be meaningful to every man, woman and child in this country in future generations. Tax reform will play a major role in our campaign for growth. It has been more than 30 years since weve had comprehensive tax reform in this country. This administration is committed to changing that. We have over a hundred people working at treasury on this issue. We are working diligently to bring the tax relief too lower and middle income americans as well as make American Business competitive again. All this comes as we simplify the tax code and make it easier for hardworking americans to file their returns. Finally, i like to speak about the importance of free and Fair International trade. If you doubt that it is a traditional component of Economic Growth but it disadvantages of the American Workers and businesses can hardly be considered free or fear. In meetings with my International Counterparts i have stressed this dual importance. Two weeks ago i have productive meetings with the finance minister of the g7 earlier i met with the members of the world bank. They understand our concerns and we had approached our International Dialogue with a renewed spirit of mutual understanding. In the president enjoyed system to congress he spoke about what this country is capable of. Fundamental to that freedom is removing imprudent regulations and uncompetitive taxes to that freedom is removing imprudent regulations and uncompetitive taxes blocking their way. This has been a significant few months at treasury. We had been studying, developing and implementing policies that will put this country on the path toward sustained Economic Growth. In the coming months we will work with this committee and this congress and we will look back at an important time. Thank you and i look forward to answering your questions today. Were glad to have you here. We appreciate the way you have taken over. And doing your work. Mister secretary an oped was written by then senator obama Senior Advisor on the only argus 14th 2000 addition. I put that in the record here at this point. And they stated that that the then senator obama tax proposal would reduce revenue to 80 of gdp. That would be a target that they thought was desirable. That target certainly exceeded the long run average. The nonpartisan ceo tells us its about 17 over the last 50 years. The current in menstruations budget has revenues averaging 18. 2 percent of gdp over a ten year budget window exactly when the then senator obama was advocating. He is considering the taxes as a share of our economy and the they are projected to continue. And considering that the president s budget projects an average of 18. 2 in revenues as a share of the economy how we respond to critics that the president s budget does not raise enough revenue. You for pointing that out. I look forward to reading that that you are putting in the record. I believe as you pointed out we have a significant amount of revenue relative to gdp and particularly with Economic Growth we think the critical issue is that we had tax reform that simplifies personal taxes and provides the middle income tax cut and makes our business competitive again. Some of my friends on the other side have argued that congress has not passed the tax reform for the budget reconciliation process. In fact some head stated that the administration and the leaders in the house and senate should categorically take that off the table before beginning any bipartisan talks on tax reform. Four years ago the Democratic Senate have adopted a budget that included a reconciled tax increase of almost 1 trillion. That tax increase was tax reform. Despite my objections to increasing taxes at that time i agreed to work with than on an intense bipartisan tax reform process. There was no preconditions or demands made that the democrats abandon their constructions. Instructions. There are other relevant examples that played out for the same way. In fact i think its fairly safe to say that requiring that type of precondition the abandonment of reconciliation is without any substantive precedent. What are your thoughts on that. Is there any process related that you would like to make before youd you be willing to work with both sides of here on capitol hill on tax legislation. Mister chairman i have no process demands from my standpoint i am hopeful that we can work with both republicans and democrats i know weve have the opportunity to work with your staff i know that my step is can he beat sitting down senator white and the staff later in the week. We are hopeful. Particularly on the issue of making our business taxes competitive. We have a system that is highly uncompetitive. We need to put our workers back to work. In the budget. It has increased Economic Growth. As i understand. It relies on the implementation of a number of policies including progrowth tax reform. Building infrastructure and performing healthcare. Of course it is not unheard of that and administration places belief in the act of the sea of its policy. Growth was to get as high as 4. 6 percent. Into averaged 3. 8 percent over an extended eight your time. That was the ministrations belief. Particularly the impact of the stimulus. Could you sense a little bit of time why they believe this policy proposal included but not limited to tax reform can generate higher Economic Growth. We firmly believe that a combination of tax reform regulatory relief. And trade policies well richard noss to levels are long term projection is actually 2. 9 percent in the budget. I have heard a lot of economists tell us why and as i can be the case but we are committed to have policies to get us back to what our appropriate growth rate is in this country. Nothing shows tax unfairness more clearly than your proposal to let the fortunate few convert their ordinary income into business income without Strings Attached pay the lowest 15 tax rate and also avoid Social Security and medicare payroll taxes. We are creating a massive new tax loophole. Especially since you cant enforce the tax laws on the books books now. Your current Budget Proposal asks for even deeper cuts to tax enforcement. How do you expect the American People to believe you can prevent the fortunate few from exploiting this new loophole when you cant even stop the current tax cheat. Senator, thank you. Its a very good question. First let me assure you that i have said repeatedly i said this the other day at the banking. That we are absolutely committed to make sure that passthroughs in small and mediumsize businesses have the benefit of the business right that this is not just something for large corporations small and mediumsize businesses are the engine of growth in this economy. But we will absolutely make sure that rich people cannot use this as a loophole where they should be paid 35 taxes on wages and that they pay 15 instead. I assure you that will be in the code and we will have very clear ways to enforce that. I just dont think that cuts it. I dont doubt that you believe that you can absolutely make it happen and youre absolutely sure its only going to go for the little guy in the Small Business. But the reality is they thrive in the absence of clear tough enforcement principles. Then this proposal has been out there. The problem is even more serious. It assumes 3 growth. It is what pays for tax reform. Unless you make this clear to us are you double counting the same 2 trillion to pay down deficits that you claim will pay for tax reform. We were not ready to have a full blown tax reform plan. The new part tech to the tax plan. We are told sometime down the road you wont double count. I dont see how your plan doesnt blow the multitrillion dollar hole in the deficit and that is going to harm the ability to generate more high skill, high wage jobs and innovation. Senator grassley. Mine is more of a rifle type questions that i have not so general. I would like to bring your attention to your proposal that i have introduced. The america renewable fuel and job creation act is what its called. The switch ensures that the tax credit encourages that. With biofuel in sinks. With almost 1 billion gallons this change is critical to say that they are supporting the industry. They often already receive favorable treatment from their home country. Its not really a question but for you to understand that from argentina. They are subsidizing that import just like that. They were attempting to intending to incentivize that. We want to change it. It sounds like its a good plan. The question number two. I appreciate your in the presence dedication the key aspect that is that. It was the corporation for Economic Growth. The camp tax reform proposal. They were slowing the appreciation. As evidenced by the joint committee. They ended much if not all of the positive growth effects. They shed some light on where they stand on depreciation. They fully support the need. Thats what fuels the growth of this economy. They are looking for different alternatives. As they build a tax plan. I am not going along the lines of the same questions that senator wyden ask about. The 15 . It is a little bit more directed to how wide of a coverage that would be. The 15 rate on the past through businesses. Whether were talking about simple Family Partnerships or the small Family Partnership i said that wrong. The sole proprietorship. A small Family Partnership. A sub chapter s corporation. As i said we want to make sure that we put rules around this that can be easily managed by the irs. The wages are not abused in that system. In that Large Private Companies cannot abuse that. I appreciate that. Thats what you should try to do. My question is more related well thou be any types of Small Businesses that would be treated differently. They will have the benefit of that. While the tax reform approach. They go for full expensing. Part of the tradeoff. It is that the houseplant would generally limit interest as a deductible business expense. Do you view this as a acceptable tradeoff or do you support those imitations on the deductibility. This is something that we are looking at carefully. We are reaching out to lots of different groups. Ive heard some very strong concerns from very small and mediumsize businesses. That it is an important part of a business in the preferences to keep the deductibility. That is one of the issues that we are looking at. This is very encouraging. To hear the commentary about wanting to make things fair for Small Business. From your commentary and not become a part of the overall agreement at the end of the day at which you get the Small Business tax way down i would like for you to look at a bill that senator collins and i filed which make sure that Small Businesses dont have a higher tax. If you just change the existing tax code instead of them paying a rate much higher and an individual rate. They would pay one no higher than the corporate rate. I hope you will take a look at that. As a backstop. You are proposing something even further is that correct . I hope we dont need your backstop. And we do look forward to looking working with you. There is one bipartisan suggestion. In the president s budget there were large cuts to the Children Health insurance program. The medical research at nih. Housing assistance for low income especially with the disabilities. You eliminate and subsidize student loans. You eliminate the cd bg program they have that. With the meals on wheels. And there is not a full offset for taxes. I am afraid that whats can happen is you are going to starve these start these programs of their resources. Without a full offset how can we have confidence in the president s tax reform plan that isnt just what it looks like a failed attempt to transfer wealth from the least privileged to the most privileged. Senator, we look forward to working with you as we develop more details of the tax plan. We were not ready to release the details. There are lots of different issues that are critical to pay for. And we look forward to working with you. On the president s overall budget i think as you know the president s priority reflects a large increase in military spending. Because the president believes that we have under invested in the military and National Security and National Security is incredibly important. There were very difficult decisions on many hearts. I know we look forward to working with congress. I appreciate your attitude. What are we to think when we see these programs. Nih. Being savage there has to be balanced. Thats what i want you to consider. I would just point out florida, is the state that has on its license tag the orange the Citrus Industry is under threat of extinction because of an imported bacteria from asia that gets into the trees and kills the tree in five years. We have the research. They have a lot of the citrus as well. They are making progress but as we make this progress we havent found the magic here yet but what we have done is be able to hold off the effect of the killing of the tree for a couple of years. There are a lot of groves that are dead. What we need if organ have a Citrus Industry and the production of oranges is way down. Is less than half what was seven years ago. Thats how dramatic of a decline it is. The ability for the grower to go in there and plow the abandoned grove and replant. So that we could find the magic here. They need expensing. All in the first year. Instead of the expenses over a number of years because of the tremendous threat to the industry. I wish you would put that in your calculations. I assure you that i love florida orange juice and as we look at the tax code we will look at various Different Things that promote Economic Growth there and in other parts. Almost as much as oregon and potatoes. I love them both equally. While said. First i want to thank you for being here. You have made yourself very available to the senate in many different contexts. I appreciate that. I want to use the first part of my time not so much to ask a question but to set the record straight. On several items. When you were here at this committee previously and then last week at the Banking Committee you and the president were attacked by some who said your efforts to repeal obama care were a tax increase for the wealthy. I just want to set the record straight. When we debated the Affordable Care act president obama made a pledge that there would be no tax increases in the bill on the middle class. I brought an amendment to simply achieve that. Each time we considered obama care and it was rejected by the other side each time. There were a number of increases in the middle class. I just want to for you because you may hear this again with the members of the other side. He hit but with that argument. I just want set the record straight. Its very clear that the Affordable Care act has multiple taxes on that middle class. It will bring significant tax relief to the middle class. Im getting go on to talk with you about the budget projections. There has been criticism of the growth rate has been assumed. And that rate can you toss tell us what the growth rate is. Its an average of 2. 9 percent. The information i have in front of me is that president obama and the first budget have a 4 growth rate. And its the first four budget years assumed at least 4 . Would you be aware if this is correct . I believe that is correct. The 3. 2 growth rate for the entire decade. What is the average. So the trump budget proposer. It will be the same types of projections that the obama and menstruation projected. Lets talk about 3 growth rate. Unreasonable. To expect that the nine states of america could grow at a rate of 3 . I know that there are a lot of economists who will give us reasons why structurally we cant grow at that rate. But we firmly believe that with the right policies the economy can get back to what is more normalized growth rates. And when you talk about the normal growth rates. What is the average growth rate. And currently over the last eight or nine years we have seen roughly 2 . It seems to me that those who are saying we can get above that threshold. With the plodding along economy. It can even get back to grow at its historic average. I appreciate your unwillingness to accept that. And i want to work with you to develop progrowth qualities. I also want to thank you for the work you are doing at the treasury department. I look forward to you. To help reduce the drag on our federal government. I just want to thank you for working for and fighting for these policies. They will work with you to try to achieve the growth rates. Senator brown. Thank you mister chairman. Your party has a history of less than enthusiastic support. For unemployment. I was in youngstown one day and a woman stood up and said im 63 years old i hold two jobs i dont have insurance i just want to my goal is to live until im 65 until i have medicare. Not to see her grandchildren not to see the world that is what the system has done to her. I hear your secretary. And you are talking about raising the eligibility age. Lets meet let me go to tax reform. It came out with a very short and descriptive. Tax or farmville. The story about tax reform. On the op ed page. The godfather in and the real thinker behind. What he said. I will just read the poll out. Gradually increase the eligibility age can offset revenue. Despite what the administration said. You will grow out of these deficits from tax cuts. They have said it really wont work that way. We should pay for it with Social Security cuts. I want to ask you a series of questions about that. Im worried about you paying for this tax cut. No economic theory really says we will grow our economy to the point that we will remake all of the revenue. I just want to ask and want to clear this up. Im worried about cuts. Its clear you can do it for medicaid. They will not cut alter or privatize the so security and medicare. Which is in fact Social Security. Let me just assure you that the president wants to be absolutely clear that anybody who is eligible for disability will get their disability payments there are some savings in their as a result of people who can get off of disability. People that have a disability and head that are able to get that. I dont really believe the president when he said he would not go after medicaid. Would you commit to not raising the Social Security retirement age. It has been a very specific in what you want to do on the budget cuts. But much less significant when it comes to tax reform if said youre going to go with healthcare and disability. Lake superior. In the whole host of things you he said he would cut. Youre not at all specific on taxes yet. Its a single page of bullet points they will ask some very specific questions with the tax credit. The focus of ours at the moment. Are you considering changing the deductibility of interest. We are not considering that. Are you considering changing that. That is one of the many Different Things that could be looked at. We made no decision on it. The current time we are not. We have not gone through all of these. It is not something that we are considering at the moment. Again, as i said we are developing the overall plan. That specific one i havent seen. I just want to emphasize we are looking at those things across the board. Our precious our preference is the deductibility of state and local bonds. Are you with the tax credit. With the sharp deep cuts. Are you considering changing that. That is not something that i have seen. Take you for being here. A couple of questions on the tax cuts. The Census Bureau tells us that the average american salary is just about 502,000 per year. Bolton previous testimony and also conversation last week with members of the finance committee. You are careful about what you could guarantee in the final outcome versus what you would be proposing or the ministration. So in light of that. With the average american salary of 502000 can you guarantee in terms of the administrations proposal that millionaires and up will not receive a tax cut greater than that. Again, we are going through a process across the house in the and the senate and the administration taking in a lot of input. Our intent is to have a middle income tax cut i want to be careful and not guarantee anything like that. They go through multiple different areas. All im asking for is what will be the proposal of the administration. I realized that they could change things down the road. In the tax reform proposal. When its finalized in presented. Will it be the case that millionaires and up wont receive that. Our intent, opposed to the ministration coming in. They are working with the house and senate. We will come up with a combined proposal. When you come out with all the details it will obviously have all of the distribution and people will be able to make whatever comments and changes they want. Im not just personally guaranteed anything at the moment. It will be a middle income tax cut and is our priority. That is that not what we are looking for here. We have in pennsylvania almost 2 Million People who earn less than 23,000 per year. If you asked a similar question. For someone making a Million Dollars a year or more. What is your answer to those. We make a 23,000 a year. I believe with the standard they will be paying taxes. Thats at some of the make in a year. If the president s priority has been stated. They have not been cutting taxes for the highend. Why would you include a tax cut. In terms of the proposal. Thats what weve read in that proposal. With the exception of mortgage interest which we are incurring all those reductions. It is progrowth. It will create jobs. And we look forward to working with you and others as we get through the details. Lets go through the deductions. Do they plan to repeal that. Let me just state that we are looking at everything so i dont have all of the details im not prepared to go through that. Lets try again. Your neck and answer on student loan interest. How about higher interest. Higher education im just not prepared. Im more than happy to come back when we really supplant and then i would have it marked up. Im more than happy to do that. With what the priorities are. If you try to do on the bipartisan basis. The first is a letter i sent you. Based on your statement. That you allege and you sent a letter to hud on reverse mortgages. I ask you to find that letter and respond to it. The letter that senator brown and i sent. For closure data in one west bank. Most both nationally and statebystate. Mr. Secretary, nice to see you again. I dont expect you to respond since you dont have the budget here. First of all, director mulvaney, i was just up at budget, said the administrations policy is to make tax reform revenue neutral, and that is the president s the administerings proposal. I said it would be paid for with Economic Growth and base broadening. Well, im going to come back to that in a moment. That could mean also cooking the books. In your budget on page 13, one of the proposal you bake into your sewageses is your assumptions is repeal of the feet stacks which would help you and me not nobody else. You also have a like item that has estate and gift tax revenues still coming in. That appears to be double accounting. As you know when we talk when i was in your confirmation hearings, i applaud your effort to make the tax code more rational and lower corporate rates through repatriation. Spent a couple years in the process and took some arrows from my own team in terms of entitlements and also looking at net revenues. I have to tell you sir, its estimated that your tax cuts and outline would add 5 trillion to the deficit that over the coming decade, and with what you have answered to senator casey and some senator brown when you take charitable home mortgage, retirement accounts and others off the table, you cant get 5 trillion in savings. Market of fact you have to take on at least bun not going through the whole list but the largest remaining tax expenditure, when you take the big ones off, this deductibility of Employer Healthcare plans. Is that on the table . Thats 200 billion a year. That could get you some real revenues but would dramatically disrupt the health care system. Let me first assure you that our plan is not going to add 5 trillion, and i dont understand why they would have scoredded since they dont have the details, people look the Tax Foundation others have not scored, and when we come out with the details this will be scored by joint tax as well as lots of outside groups as well as well provide our own view of the scoringment we have over 100 people in the Tax Department looking at different scenarios, and we are working hard on that. We have no intention of doing something that would add trillions of dollars to the debt. Specially since right now at 20 trillion, as Interest Rates go up, we discussed this before that adds an Additional Debt service, 140 billion a year in additional payments right off the top. So, i would argue you balloon the debt, and whatever benefit you get from the a tax cut is erailsed by the additional deficit payments. Senator, i assure you we appreciate the significance of the debt having all from both sides bare responsibility. All i would say, sir, ive spent a couple years looking through these numbers pretty closely. I think based on reasonable, normal assumptions, with anything close to traditional scoring, if even if you do a little bumping on dynamic scoring, you cant get to 5 trillion tax expenditures without going after the largest ones like employerbakessed health care. I really fear that this becomes a lot harder than it looks, and i am worried if you around the 3 growth rate assumptions. Im worried as well about dynamic scoring that has to include the tax cut assumptions, and yet then theyre not countered in the budget so seems to be double accounting, and also very worried were taking domestic Discretionary Spending down 3 of the gdp, lowest its ever been and we were both business guys. You invest in a business, invest in ocandidate, plant and equipment and staying ahead of the competition. A government does by investing in education, infrastructure, and restarch and development, and unfortunately your budget slayed investment in education, research and development and infrastructure and that wont lead to the growth. One thing that you said that i have applauded during your confirmation hearings was you felt the irs to do it job needed appropriate staff resources, yet your budget cuts the irs. Want to address that . Sure. Let me first say, i know you have tremendous business expertise and we hope we, work with you and your staff on suggestions for the business tax. I know you appreciate the system we have is just very complicated, the concept of worldwide income and deferral leaves trillions of dollars offshore which makes no sense and we need to get that money back to build jobs. We hope youll work forward with us on ideas to move forward on that. On the irs, as i did say, have spent now a bunch of time with the irs, looking at things. I will tell you one of my biggest focuses i do have a Technology Background is upgrading the technology at the irs. We are very, very focused, that we have underinvested in technology, and i am pleased to record that within the budget we will protect what are big increases in technology in the irs, and we will offset them . What we hope are savings and other areas, and obviously we were looking to cut government spending, and im pleased that we protected the irs. There will other people who wanted to cut it more, and were very comfortable with the spending level and some save examination Big Technology investments there. Senator isaacson. I want to associate myself with the confidence mr. Crappo made about your willingness to come to this committee testify and your job has been a breath of fresh air and we appreciate it. And also to acknowledge that Sherrod Brown is the best yes or no question asker and one question is about Social Security. And want to follow up by making a point. We have a 20 trillion debt today. Is that correct . Yes. Under most math, which is conservative, ten kearse from how to its going to be 134 trillion. Principally because of the growth and the obligation of Social Security and other meb measures that are benefit programs. Is that not direct. Any dont hey have the exacted numbers. None of us want to raise the cost of Social Security to anyone but if you look at 1983, when reagan and tip oneill, democrat, raised the eligibility age from 65 to 66, they raisedded i lost a year of Social Security because i was 39 years old in 1983 and didnt turn 66 until 25 years later 26 years later. My point is, by recalibrating the formula in the outyears you can recover that debt over time and amortize it under the time value of money, which is good for everybody if just want to point out none of us want to raise the cost to anyone or prevent people from being eligible but recalibrating the formula for those who will beneficiaries in the future that can lower the obligation we have short of a decade from now. Second, budget documents and messaging instruments i want to message of three things quickly. One, we were disappointed that there was no inclusion by the in the corps of engineer for the funding for the savannah port. The state overgoes haute 248 million n the port in a joint ven at the partnership with the United States government. Were in process of deepening notice and all of a sudden theres no additional money in there for the budget. Without the additional money in there puts that at a higher cost. I appreciate with you looking at that and see if theres not a way to reprioritize to see it to the port gets funding. Thats a parochial issue and funding. Well follow up with your staff. And also is section 45 of the tax code, production tax credits for nuclear. Is that not correct, al . The Southern Company is building two Nuclear Reactors in georgia and South Carolina. The two Nuclear Reactors in the united United States under construction. They i will not be finished as as soon as was we thought. The production tax credit ends in 2020. Were asking you to look at extending eligible out a fewyearold. Doesnt cost you anymore more but the federal government gets us a way to finish the plant, otherwise lieu the money hut into them and lose the opportunity to do so. Well be happy to look at it with you. Time is of the essence. Lastly, for low and moderate income people, i have worked on the Free File Program for a long time. Are you familiar . I am. Very important we continue that. It ended in 2020. Or some odd year. I would protect you taking the time to see if we can make that program for the federal taxpayers, the get free assistance to file their tax reforms. Its a great program. We have look at that and agree with and you look forward to working with you on that. Thank you for the job youre doing, mr. Secretary. Senator scott and then senator ben net and then close this down. The leader the democratic leader will have a couple of questions. Thank you very much. You have to excuse me. Have to leave, but i think thank you, chairman. I expect you to be treated fairly. Mr. Chairman, if we have not had any finance members either on the democratic side or republican side who have not had their five minutes, i assume it would be acceptable to let them ask questions. Thats right. Senator scott. Thank you, mr. Chairman. Ranking member, good to see you. A couple questions. I do want to associate myself with senator isaacsons comments about the importance of 45j, the Nuclear Production catastrophe credit. Its a commitment the country made to encourage stayed to look at ways to get back in the Nuclear Energy business, South Carolina and georgia both said yes. It seems like the federal government is not honoring its commitment to those projects and thats what it boils down to, and theyre seems to be a suggestion that the administration through treasury and the irs may be able to provide a bridge from 2020 to 2022 in that process. If i were an average person at home looking at this conversation around tax reform, it would be difficult to discern where that average person finds the benefit in the conversation around tax reform because we have done such a poor job of having a conversation that seems to go back home. The only real comment that was glossed over that i thought was really important is when you answered senator bob from pennsylvania answered his question he asked you a question about the impact of your tax reform package on that person earning 23,000 a year. Your answer was that person would officially pay no taxes. There was a moment of silence there its important to note that as we have a discussion about tax reform, what were the direction were heading in, is that the person who is the lowest in the economic ladder really would have no Tax Liability in your tax reform package. Is that correct . That is correct. By increasing the standard deductions, a huge chunk of people who cant afford to pay taxes, wont and 59 of 59 of americans we think will be able to file tacks on a simple large post card without having to itemized. Simplification. Yes. The second part of the conversation that the average person would enjoy newspapering and appreciating because it takes time for us to get here in this committee, folks are farther than we give them credit for but we dont talk to them. We talk about them. When we have the conversation. The Corporate Tax rate, both republicans and democrats, conservative and liberal economists come to the same conclusion. The Corporate Tax rate is borne by three goops of individuals. Groups of individual, one is the employees who experience lower wages. So if were looking for a way to have a conversation with Middle America about getting a raise at work, the Corporate Tax rate is one of the fastest ways to get to that higher income for the folks we care about if we were to lower that rate, we could assume that some of the benefits, some of the savings would go to employees. The second group that would benefit would be the consumers buying the products because imbedded in actual price of it, the tax for it. The third group are those folks in a position to make further investments so as to create more Economic Activity and those folks who are shareholders n company. Those three groups of individuals are the folks that bear the burden of Corporate Taxes. Is that about right. It is and most multiple economic tiedded show that 40 of the corporate tacks are borne by the worker. So a major part of reforming the Corporate Tax system is in an effort to increase wages and opportunities for workers. My final point relates to the folk is care most about. South carolina and around the country who are like my mary, hardworking, single mom, struggling to make ends meet, working 16 hours a day and needed more opportunity. One thing we see in this conversation about reform is if we lower the Corporate Tax rate, allow for repatriation, go from. A global system to territorial system include the past, through entities and create a mechanism to make sure thats right not a perverse incentive to move income and that pass, through entity from income to profits, which was a question of our ranking member, we can figure that out and create a way of having a mechanism stop that and with Regulatory Reform we should have a robust Economic Activity that leads to Economic Growth 2. 9 over ten years. And the final part that would help the folks back home would be emphasis on the work force reinstretch. Gig to technology will displace workers but if we have that in our sights through the Economic Activity we could design a Work Force Readiness program that would marry the workers looking for work with the jobs where they lie if we have that kind of synergy in focus and activities. Is that accurate. It and we believe job training is part of the Economic Growth and making sure workers are prepared. My final question for the record. I appreciate you answering later. A question about the facta. I am familiar. Those regulations, the reporting regulations being imposed on the property and Casualty Companies witch international exposeure, theyre not trying escape taxation. Its an onerous burden on those mr. Secretary a position to i want to finish this real quick yes. In a pigs to follow up and see if thats something we do now. My staff made me aware of this issue and well follow up with you. Thank you, senator Scott Mitchell colleagues have been very patient. First senator mccaskill and senator bennett. I have been trying to make three hearings at one time so he has been here a long time. You get a halo. Claire mccaskill out of 100 senators my favorite senator. She is my favorite senator before she did that and the graciousness, i cant tell you how much i appreciate that. Thank you, claire. Uhhuh. Mr. Mnuchin, thank you so much for your service. Were all grateful that youve taken the job you have. Are you aware that we collect in revenue roughly 18 of our Gross Domestic Product . Yes. Chairman hatch made that comment at the beginning. Are you also aware that we spend a little over 21 of our Gross Domestic Product . Yes. So what you have presented is a budget that im saying this so the Tea Party Folks in america can hear it that youre presenting a budget that cuts more taxes so were now going to be lower than 18 , particularly with the Economic Growth. Lower than 18 and at the same time a budget that actually spends more money. Were cutting taxes and spending more money. Is that not correct. The budget doesnt model our tax changes because are you not cutting taxes. We are cut thank you. The difference or difference between the 18 that were collecting revenue of gdp, and the more than 21 that were spending in this government in gdp, all the promised have been made to the tea party and balancing the budget are broken because well collect less in taxes and spend more money. Is that correct. I dont think thats create over at the ten year period of time. One way you deal with that is cutting domestic spending north military or defense but domestic spending by 40 . Thats the proposal that you have made. Isnt that correct. The president s priority is to grow the military iunderstand the president wants to grow the military. Off set grow the military cut taxes and wont touch medicare. By the way, everybody tea party people, listen to this. For every medicare dollar you pay in, 3 are taken out. So, were going to continue to have a deficit in medicare. Well have a deficit in the government, were going spend more in military spending. Were going to tax rich people less, and were going to cut domestic Discretionary Spending by 40 . Thats the plan. Thats our plan. While the front page of the New York Times has tunnels that china is building through seven Different Countries in asia, our plan is that were going to cut our domestic Discretionary Spending by 40 . Thats your plan. Right . Whats to what the president told people in ohio and wisconsin and pennsylvania, going to cut that domestic Discretionary Spending by 40 so he can finance tax cuts for the health e wealthiest americans. Thats not the case at all. The tax reform not just tax cuts tax reform will pay for itself and when we have a the details were more than happy i know, would love to go through the again, were just not mr. Sect. Go to through the details. Let me ask you a question. You said you werent prepared to talk about details and you have put out a tax proposal. And i accept the fact that things will be modified and changed in the congress and i appreciate that. But will you say today that the Trump Administration will not accept the tax reform bill that cuts taxes on average for a high income taxpayers. Again nope. Nope. Ive said is, our priority is about a middle income tax cut and to lower the top tax rate and offset it with a reduction of will you tell the American People today that your administration you get to sign a bill or tivo a bill your administration will not accept a tax reform bill from the congress that cuts taxes on average for a high income taxpayer . Again, i had some of these questions earlier. And i will repeat you didnt answer them earlier. Im asking you to aint now. What i said is were working closely with the house and senate on an overall tax reform package. Were taking in lots of input, and when we have the details, we are happy to go through them with you. Our objective is to create Economic Growth let me skit this way. And mr. Secretary, will the president veto a bill, a tax reform bill, that cuts taxes on average for highincome taxpayers that violates the mnuchin rule. The president will look at the overall mr. Chairman, hope hope that people that voted for this personning listening to the answer. The last question i know im out of time. I just want ask one question about medicare medicaid. The healthcare bill you endorsed and the president endorsed not a Health Care Bill but the bill passed the house cuts medicare by roughly 850 billion. This budget seems to propose is it another 600 billion in medicaid cuts . Are we up to 1. 4 trillion in medicaid cuts . I dont have the numbers okay. Those are the numbers. As i understand them. Thats a cut to medicaid over over 25 thursday. In my state 50 people are children. People are told they need to go to work. Are the children supposed to go to work . People in Nursing Homes going to work . People already working at wage that wont allow them to have private insurance supposed to go to work . Where is the quarter of medicaid who is going to cover these people . As much as i share senator bennetts currents has to be the last response. Did you want to respond, mr. Secretary . We are slowing the rate of medicaid and i can assure you that children will be taken care of. Its not our this holiday weekend, on American History tv, on cspan3, sad at 10 00 p. M. Eastern, on real america, the 1977 documentary, men of braun birth the allblack 369th u. S. Infantry regiment during world war i. Approximately 24 germans attacked. Roberts got slugged almost immediately and johnson fought them off. He shot and he cut and he swung his rifle around and the defeated the 24 germans. Those that werent wounded or killed cut out. He had 21 wounds in his body, but he refused to die. On sunday, the women telephone operators of the u. S. Army signal corps. In france before they got this entirely american lineupup this, local operatoras to speak to a french operator, par speak french and most dough boys didnt speak french. So they began recruiting women not because they were as good as men, otherwise you just would use men. But because at least at this job they were better than men. On monday, at 9 00 a. M. Eastern, well visit the National World war i museum and memorial in kansas city, missouri, and talk with the museums senior curator and the museums president and ceo. We seek to tell the story through the lives of people, ordinary people, men and women, volunteers as well as those who served in the armed forces, from all sides. For our complete American History tv schedule go to cspan2. Org. Tonight on q a. I had friend who was vaporized and a sixman Security Team i had built together and sent to the airport, and it took three weeks to separate them all. War is not a game. Its not a funny thing. Former counterterrorism and Intelligence Officer malcolm nance on his computer and recent books, the plot to hack america. How putins cyber skies wikileaks tried to steel the 2016 election and isis. America came out of hacking isis. Well, while we were writing hacking isis we found there were two hacks that were done against one tv in france and another in the german government. Which were attributed to isis and we learned the methodologies this malware and the place where the servers terminating that were stealing the information, were certainly not isis. They are what is now known at atp28. Cozy bear. Cozy bear was the name that crowdstrike, the Cyber Security company, gave for their interpretation of this malware package that belongs to Russian Military intelligence. The dru. Tonight on cspan2, three congressional hearings on president trumps fiscal year 2018 federal budget. First, white house budget direct or Mick Mulvaney teas before the budget committee, then education secretary bet betsy devos as a House Appropriations subcommittee hearing, and later Steven Mnuchin appears before the Senate Finance committee. Next, white house budget director Mick Mulvaney testifies about the president s fiscal year 2018 Budget Proposal. Director mulvaney defended the proposal at this two hour and 15 minute hearing