Transcripts For CSPAN3 Treasury Secretary Says Lackluster Growth Not Debt Is Biggest Threat To... 20170729

Secretary mnuchen first. Welcome to everybody. Good morning. Senator cons and senator langford he looked good earlier. Today we have the opportunity to review the budget requests of the department of treasury and the Internal Revenue service. As we begin this important hearing we welcome our Witnesses Today, treasury secretary Steven Mnuchen and irs john koskinen, and the treasury ig for Tax Administration russell george. Thank you for being here. The department of treasury has an important mission. Its work is to promote Economic Growth and stability and safeguard our Financial System which is critical to maintain a Strong Economy and create economic opportunity. Equally important is its work to combat terrorism. The proliferation of weapons of mass destruction, money laundering, Drug Trafficking and other National Security threats. The Internal Revenue service has the significant role of administering our nations tax laws. To carry this out effectively, taxpayers must have the faith that irs will do its job without regard to an individuals exercise of their constitutional rights. The irs must also protect taxpayers personal information and privacy as the irs continues to evolve and make changes in its Service Delivery systems there must be improvements in its ability to manage that change without adversely affecting taxpayers or compromising their personal information. We look forward to hearing from all of our Witnesses Today about the details of your budget requests as well as your plans to address cybersecurity threats and vulnerabilities within treasury and in our nations financial sector. In addition, we also want to learn more about treasurys plan to make a comprehensive approach to regulatory relief. Hopefully, those efforts will help spur Economic Growth and job creation. Thank you and i will now turn to my marching member, senator cons, for his opportunity statement. Thank you for convening this hearing. I appreciate the opportunity we have on the subcommittee to examine a wide, diverse range of interest across many agencies and in particular the department of treasury. I look forward to finding Common Ground and strengthening our partnership. I would like to welcome our witnesses, secretary mnuchen, commissioner koskinen and mr. George. Thank you for joining us. We are considering the budget request by the Treasury Department, a Department Central to our governments stability and operations, that helps sustain our countrys Fiscal Health and protect our National Security, from collecting taxes and processing over three trillion dollars in federal payments to pursuing financial crimes here in the United States and identifying individuals here and abroad that would promote terror. I am concerned the budget request were considering would undermine the departments ability to fulfill these bills. In the nonirs parts of treasury the request is 1. 3 billion, 26 less than current levels. To achieve that reduction, the bulk et would rely on staff cuts achieved through Department Wide hiring freeze. My concern is this might not result in a strategic realignment of resources but instead drain the departments best and brightest to meet an arbitrary budget goal. The budget also cuts common sense investment like cybersecurity improvements and upgrades to Financial System i think the entire federal government relies on for treasury services. I am concerned about proposed cuts to the office of terrorism and Financial Intelligence which helps enforce economic sanctions and reductions in the Financial Crimes Enforcement Network which combats domestic and International Money laundering. I think these are all areas of your department worthy of full investment. I have continually called upon in administration and its predecessor to crack down on iran and north korea and other regimes that support terror. Although there have been some mixed signals, i believe the administration shares and strongly supports these goals. I would be interested in hearing whether the requested funding levels are sufficient for these vital bureaus. The budget promise to eliminate grants to Community Development Financial Institutions which support development and create jobs in under served neighborhoods around our countries and cuts funds for entities created in the wake of the financial crisis, an 8 cut for fsoc, and 25 to the office of financial research, both of which i think have real value. Lets look at the majority of the budget before us, which is the irs. No Government Agency is more visible, more impactful to the American People than the Internal Revenue service which collects the revenue that fund more than 95 of the federal governments operations and public service. Each year more than 80,000 Public Servants at the irs make hundreds of millions of contacts with american taxpayers. There have been seven consecutive years of either budget freezes or budget cuts to irs. The proposal were reviewing today would continue that trend by cutting i think 260 million from an underresourced agency. My concerns are not based on the partisan politics of this. To put the scale of this proposed cut in context, President Trumps level for the irs falls 400 million short of what president bush asked for in 09. I think the predictable impact of in reduction would be the loss of more than 4,000 staff in Taxpayer Services, which would significantly diminish the services for taxpayers seeing prefiling and post filing guidance to timely and accurate meet their Tax Obligations. The level of service in the upcoming year if this cut is enacted would drop to nearly 40 45 during peak filing. That would mean more than six out of ten callers more than six of ten caller will not be helped on toll free lines as they seelk guidance. My office hears from constituents when their calls go unanswered or it takes a long time to connect with irs officials. I think the solution is to give the agency the resources to meet these constituent needs. I look forward to hearing more about why the department and the irs think it is a good idea to reduce Service Delivery rates and what we might do together to address that. We have a lot more to discuss today. Let me move to the end and say in the absence of a Funding Agreement on our committee, we will continue to work here. I am grateful for your service and look forward to your testimony, and i know that our respective constituents expect no less than a highly efficient and wellfunctioning irs and department of the treasury. I look forward to working with you, chair woman, capito, as we move forward in our 2018 process. Thank you. Thank you, senator coons. Secretary mnuchen, i invite you to present your remarks on behalf of the department of treasury. Thank you. Good morning. Chairwoman capito and ranking members of the subcommittee, thank you for inviting me today. I look forward to working with the subcommittee on funding key priorities for the benefit of the American People. One of the president as promise also to the american taxpayer was he would make sure that their money was spent wisely. A budget should not be an end in itself but a means of improving the lives of americans. More money does not necessarily translate into better policy. The president has challenged every agency and department to identify greater efficiencies and savings that can be realized both immediately and in coming years. The administration is proud to submit a budget that achieves this goal. This budget makes some difficult choices because of necessary constraints. We carefully evaluated the allocation of resources to each of the departments important functions and made reductions where needed. These choices in no way diminish our ability to operate the government effectively. The president made it clear, National Security is a top priority, and in accordance the treasurys request prioritizes National Security and cybersecurity programs. Another top goal of treasury is creating sustained Economic Growth. This muchneeded growth will be achieved through a combination of tax reform, Regulatory Reform and trade. We will work with congress to pass legislation that allows american taxpayers to keep more of their hardearned paychecks. If we develop the right policies today, we will secure a prosperous future for our children and grandchildren. The difference between recent sluggish growth and a return to 3 or higher gdp is trillions of dollars into if economy, making a meaningful difference in the lives of allamericans. This budget prioritizes funding for treasurys wide array of economic and financial tools, including sanctions. As our enemies have changed, so too have our weapons to combat them. We are honing the economic and financial tools in our arsenal to disrupt the Financial Resources and procurement capabilities of those who wish to do us harm. This includes actions against destabilizing regimes, terrorist kne networks and drug traffickers. Stopping the flow of funding to dangerous nonstate actors, working with foreign partners to keep their Financial Systems secure, protecting our own Financial System, these key programs are critical to the continued safety and stability of the nation. Protecting treasury and the Financial System from cyberattacks is critical to our financial stability. Cyberattacks against our agency or the Financial System have the potential to impact markets, the economy and our National Security. The cybersecurity enhancement account makes investments into enterprisewide cybersecurity capabilities that allow treasury to better defend against cyberattacks and more efficiently respond to recover when they do occur. This account also makes investments in Critical Infrastructure protection, allowing treasury to work collaboratively with Financial Services sector to increase their operational resilience. In recent months our office of terrorist and Financial Intelligence agreed with the gulf counterparts on the intent to establish a terrorist financi financing targeting center, a Bold Initiative to fight terrorist financing. It is a key outcome of the president and saudi arabia and will enhance cooperation with gulf countries. It will support the administrations priority to fight terrorism, counter irans influence and deprive terrorists globally of the access to gulf countries. As i mentioned earlier, tax and Regulatory Reform are marquise items for Economic Growth and job creation. It has been over 30 years since we have had comprehensive tax reform in this country. We are committed to changing that. Such reform means a simplified code that will provide simpler taxes and relief to middle income americans while making our business competitive again. We have taken a comprehensive approach to regulatory relief, meeting with hundreds of businesspeople across the financial industry including community, regional and large Financial Institutions, consumer advocacy groups, academics, think tanks, trailed groups and insurers. We have heard about what works and what does not. Our reforms will spur Economic Growth by increasing access to credit and providing relief for Community Banks and making regulations more efficient, effective and appropriately applied. We will do this while ensuring our Financial System is secure and stable and does not put taxpayers at risk. We have the opportunity to do great things for the American People, and i look forward to working with members of this subcommittee and on these important issues. Thank you very much, and im happy to answer any questions today. Thank you, mr. Secretary. At this time we will proceed to our questioning where each senator will have five minutes. So im going to begin the questioning, and i would like to welcome you and thank you also for the visit, recent visit to my office. I appreciate the opportunity to get to know you and see your vision of where the department of treasury is going to go. Lets talk about Regulatory Reform. You mentioned it in your remarks. I know that you have talked to stakeholders all around the country, independent regional and large banks, regulators, consumer advocates, academics, analysts and investors, the whole range, to get a clear picture of what the Regulatory Framework is now. What would you say is your most significant challenge that you have encountered to this point to getting real meaningful regulatory relief . Thank you very much. First of all, let me just say under the president s executive order weve examined regulatory changes for the Financial System. While this looks at many aspects of dodd frank, it goes much further than dodd frank. We are pleased we delivered the first report on banks and Credit Unions, and we look forward to delivering three more reports as it impacts other areas. I think for us the biggest challenge is making sure we deal with the issue of regulatory overlap and making sure that the regulators are working together, and thats something that as my chair of fsoc im very focused on. I am pleased to report we have had very good reception from both sides of the aisle on our suggestions in the report, and we look forward to working with congress on some meaningful changes, particularly for Community Banking. I think, as you know, the top institutions account for about 50 of the assets in the Banking System in the United States. We need to create a system where Community Banks and regional banks can thrive, and we also look forward to working with the regulators on many of the proposals. Thank you. I appreciate your emphasis on Community Banks as somebody from a smaller state where Community Banks really are the life blood of a small community, access to credit, familiarity with regions and areas, customers. We want to preserve that model for those of us who dont have large bank entities, you know, close by. I know as a former member of the financial Financial Services committee on the house side, this was a topic of great of great concern to all of us to make sure that we can provide flexibility and reasonable regulation and not a onesizefitsall. I appreciate that. I would like to first of all, we talked the other day, that im proud of the work being done in parkersburg, West Virginia at the bureau of Fiscal Service. We have 2,000 folks there doing a lot of great things. One of the things theyre doing is to promote government efficiency through a shared Services Model. I with like to first of all invite you to come visit parkersburg and the bureau of Fiscal Service there, but also like to see just a commitment from you that youre willing to kind of push this concept of shared services. I think it has been rather successful in the beginning, and we want we would like to see it grow for obvious reasons. Do you have any comments on that . Well, first of all thank you for the invitation. I will take you up on that. Great. I look forward to visiting the facility. It is a very important facility of ours, and i very much appreciate the model we have of Fiscal Services where it provides shared services across the government. I think that it is our obligation to look at other areas that we can use a similar approach. One of them, i believe, is technology. We have too many Different Technology departments in the different agencies. We dont have consistent technology, and i fully support a shared Services Model of for technology across the executive branch, amongst other ideas. Sounds great. Sounds great. Thank you very much. I know were going to have other questions on cybersecurity, so i would like to kick it off because i think were all very probably each one of us on the dais here has been affected by in some way a breach of our own personal information or our Financial Access to maybe one of the cards that we have. Very frustrating from a consumer standpoint, and at the same time can be very frightening and damaging to an individuals financial stability. I know youre doing a lot. Is there one particular thing you would like to highlight that might make us rest a little bit easier at night on this particular issue . Well, unfortunately i dont want to let you rest too easy on it because it is a significant issue. I will tell you it is something that i have spent a lot of time on. I do have experience in technology, having served as the cio of goldman sachs. I do Bring Technology experience to the treasury. I am very focused on two aspects of it. One is our internal infrastructure, whether it be at the irs or at treasury. We obviously are responsible for keeping many taxpayers information secure. So within the budget we have prioritized Technology Spending within the irs, and i have also worked very closely with the financial infrastructure of our Banking Systems, whether it is fibic or our other interagency processes. We are very focused on various mechanisms to make sure we can respond to a Technology Crisis within the financial sector. Thank you so much. Senator coons. Thank you, chair woman capito. I would like to ask unanimous consent a statement submitted by anthony reardon, president of the National Treasury employees union be included in the record. Without objection. Thank you. I want to ask five questions quickly if i might. First, just theres been some concern that the administration is directing cabinet secretaries to not respond to requests from the minority party, despite a long standing tradition upheld by both parties. Will you commit to responding to questions from both majority and minority . I will, and i believe weve been responsive to that already. We will continue to do so. Thank you very much, mr. Secretary. I want to talk about the office of terrorism and Financial Intelligence and the financial Enforcement Network and the tfc you mentioned in opening remarks. I view these as highly valuable. As we spoke about, think enforcing sanctions is a Critical Role your department plays. But the budget proposes modest but reductions in funding of these agencies. Do you think this budget provides sufficient funding for these two bureaus given their vital missions, and given theres places in the world where youre not currently prioritizing them because theres so many others, whether it is north korea or russia or sanctions that are currently being enforced against a whole range of other nations, do you think youve asked for sufficient funding for these two bureaus . Well, let me first comment. I very much believe in the sanctions, authorities and what we do within the treasury. I am probably spending 50 of my time on this area because it is so important and so critical to what were doing. When we submitted the budget and, again, we had to manage the president s priority, which was additional money for military and look for cuts where appropriate. When we did that, the intent was to keep tfi flat. I think actually it went down slightly because we got a little bit more money this year than we had expected at the time. So the intent was to keep it flat, was not to reduce it. Now, i might add, as i mentioned to you when we had the opportunity to meet, since weve submitted the budget we do have other requirements. One of them, as i mention, is the terrorist Financing Center where we are seeking additional funds for that. I think it is a very, very important investment over the next ten years, and very effective, and this is something that secretary tillerson and secretary mattis fully support. Thank you. I look forward to exploring that further. But i think we have a shared enthusiasm for vigorous sanctions enforcement in partnership with our allies, both here and in other parts of the world. Let me move to the Community Development Financial Institutions, cdfis. The fund that supports them has strong bipartisan support because cdfis have a record of creating jobs in underserved communities. They leverage federal funds roughly 12 to 1 in the last oversight analysis. Thats why last years appropriation bill increased their funding 6 , but the fy18 budget proposes to eliminate them. Would you commit to following congressional intent and fully utilizing all of the funds we provided in the fy17 appropriations . And help me understand why you would eliminate a program with a proven record of Economic Growth. Was this making tough choices in the context of a difficult budget environment or do you think they actually should not be funded . This was, as i mentioned, in the context of making difficult choices. So i do agree that cdfis have played an Important Role in the community. This was merely a function of us making difficult decisions across. Now, the one thing i would also add, that when we came out with our recommendation on financial reforms, one of the areas that i recommended that we look at is the Community Reinvestment act. So one of the things we want to make sure is as banks are dedicating significant money under the cra, that it is being used appropriately. We want to make sure we meet with Community Groups and advocates because thats a big area of investment that we think can be more effective. Two quick questions if i might, mr. Secretary. First, i want to make sure you have answered the question. Will you commit to follow congressional intent . Yes. Thank you. Theres also a proposed cut to the alcohol and tobacco tax and trade bureau, an area actually strongly support by industry because it helps them get their products to market faster. Are you concerned that those budget cuts would reverse in an area where the industry actually supports more action by the Treasury Department . Well, again, let me just emphasize, i have met with that group. I think they perform a very important function. It is actually quite effective what they do. They manage it under a very reasonable budget and, again, we scaled back their budget slightly. This is in no way intended to signal that it is not important. It is, quite frankly, very important what they do. Thank you, mr. Secretary. As we spoke about, the u. S. Reached the debt limit in march and youre using extraordinary measures to avoid default. Do you agree allowing the government to default on its debts is a terribly de that would have significant consequences for our market and economy, and even the let of default has the potential for costly implications for the government and undermines our credibility . Senator, yes. Thank you for asking that question, which is on one of my favorite subjects and has also been one of the previous secretarys favorite subjects. So let me again emphasize that the United States credit is of utmost importance. We are the reserve currency, and we must pay our bills on time. So as i have suggested in the past, based upon our best estimate at the time, we do have funding through september, but i have urged congress to take this up before they leave for the recess. I appreciate your leadership on that. I will ask one last question, if i might, or should i you are the ranking member. Im the fillin chairwoman. The fillin chairwoman for the moment. I will ask one last question about level of service for the irs. As you heard in my opening remarks, im concerned that the cuts proposed to the irs would reduce Service Levels. Do you think it is acceptable to provide a level of service where more than four out of ten callers wont connect to an account representative as theyre trying to meet their legal obligations to pay their taxes . Let me just comment on that. First of all as i think you know, tax reform is a major focus of ours. On the personal side, our objective is to simplify tax reform, cutting down the number of brackets. Under our proposed plan 95 of americans will be able to fill out their taxes on a simple post card. So while i agree with you the Service Levels are an issue, my view, the solution is two fold. One is lets simplify our tax system so not as many people need to call and, two, how do we use technology more effectively as opposed to having to use call centers . How can we communicate with the taxpayers electronically. Thank you, mr. Secretary. Senator langford. Thank you. Let me ask you a couple of questions. I want to pick up where senator coons left off on the issue of debt ceiling. Do extraordinary measures have a cost to the taxpayer . Yes, they do. Give me a good guess of what extraordinary measures cost the taxpayer when we most past the debt ceiling limit time period and wait and delay the decision on that action . Well, there is a significant cost, and it is two fold. So the first cost is a real cost which is right now effectively as opposed to boroughing borror rates, we are borrowing and making our trust funds whole at slightly higher rates. Theres a real cost to doing that. Theres also an implied cost of uncertainty into the market, and the longer we wait the more that uncertainty been. So, again, i fully urge congress to deal with this issue as soon as possible. So talk through a couple of things on that. The best guess i have in working with your team and trying to get an accurate number of the cost of extraordinary measures is around 2 1 2 billion dollars to the taxpayer in real dollars that we pay in because were covering our own interest to be able to do that. Thats a significant cost and a loss to the taxpayer. Second thing is as you and i have spoken about before, we should and will do a debt limit issue because thats taking care of already when budget decisions are made. Theres something that has to be resolved at that point. My request to you is to be able to work with congress, to be able to figure out a way that when we get to a debt limit moment we do address the issue of debt, because we cant just ignore that and continue to be able to pile on debt and assume there is no consequence. But those key moments should be with the fiscal year decisions that we make and how we resolve those issues, and to be able to find some sort of consistent calendar. What i have recommended is a twoyear debt limit time period, that every two years we have to address this and it has to come up and try to determine do we have the deficit going up or down. If the deficit is going down, then the president has the authority to be able to make the decision on the debt limit. If the deficit is rising or is static, then congress has to debate it. That forces us to get back to how are we dealing with the issue of deficit. For me, we have half a trillion dollars in overspending this year. We cant just pretend thats going to go away. We do have to address it and i believe a debt ceiling moment is a moment to address it. But if were actually cutting away at the deficit, i think it should be a process thats ongoing and very, very predictable. The only time it is not predictable is the moment when the deficits are rising or static, because then something has to be addressed at that moment and we have to take it on. We will have further conversations on this. Let me ask you a question, following up on what senator coons was saying as well about the international actions. Outline the steps treasury is taking right now to deal with the finances of hezbollah. This has been a focus in previous administrations that i think needs continued attention. What are we doing currently to be able to deal with finances of a known terrorist organization like hezbollah and what are we doing to limit their access to the world market . Let me just ashir ysure you a major focus of ours. I dont want to go through in this public environment, the specifics of what were doing, but im happy to meet with you privately and have you have a classified briefing. Great. I can assure you that it is a major focus of mine and this administration. Terrific. Well get a chance to visit another time in a closed session on that. You had mentioned to senator capito as well some of the actions you are taking to deal with Community Banking. I would like to ask two specific issues on that. If we are going to release the economy and some of the regulatory issues that you have mentioned both in public statements and in your written statement today, one much the things thats going to be Community Banking and Community Lending again. What recommendations would you make to congress of actions that we need to take you are limited on and cant respond to the issues with Community Banking that we need to respond to . The second one is the qualified mortgage issue, what can be done to be able to help . In my state there are very few banks now that do mortgage lending anymore, which used to be the anchor for real estate like oklahoma, but very few banks can do it anymore because of the qm rules. So recommendations you would make to congress that we need to do for Community Banking and the qm rules. Thank you. Those are very important issues and i look forward to working with you on it. So we do have a laundry list of items that we recommended to congress. Some of them i would highlight are raising the 50 billion threshold so that we can have regional banks that can continue to grow. I think thats too low of a limit under the current dodd frank rules. I know theres been bipartisan support for raising that, so i look forward to working with congress on that. You also mentioned the qualified mortgage exemption. Thats also something we think needs to be looked at. More importantly, housing reform. So right now we have fannie mae and freddie mac that have existed in conservativeship. As ive said publicly before, im committed we have a longterm solution to housing and that these are not controlled by the government for the next four years, and also looking at fha as part of that. Im concerned fha has gone from a 10 market share to a 20 market share and has displaced prove bank lending. Community banks know how to make loans. They should be encouraged to make loans and keep them on their Balance Sheet and not forced to make loans to be securitized or turned into fha orphany or freddies. I would completely agree they can keep it on their books and thats a safe way to protect the economy and what is happening within that bank. 40 of the banks in oklahoma no longer make Mortgage Loans anymore, 40 and rising because of the qm rules put on them. Thats very toxic for those communities. Thank you. Thank you. Senator manchin. Thank you, madam chairman, and secretary for being here. First of all the National Debt is almost 20 trillion now, 100 of gdp and no end in sight. I think it is projected by 2027 we would have an annual debt of 1. 5 trillion. I know you all have worked on a proposal, tax proposal overhaul which i agree wholeheartedly. I am concerned about the seriousness of working on this debt. I mean that debt will eat us alive. The question i asked the first time i was here in senate was of mike mullens, who was head of joint chiefs of staff, what was greate greatest threat the United States faces. I thought he would say china, one of the countries. He said the National Debt will be the greatest threat we face. You have a 15 corporate throughout your talking about you had three rates of 10, 25, 35, and there was no rate on repatriation. It was kind of vague, but i know thats i could follow the path yall were going. But everybody scored that as adding tremendous amount of more debt to us. I know you will probably be you are probably looking more of dynamic scoring on that to hope raise that or change that, which we cant score dynamically. What is your thought process on the debt load were carrying . Well, senator, first of all thank you. I think thats a very important question that youve raised. First of all, i do share your concern about the National Debt. The fact that it has gone from 10 trillion to 20 trillion is very concerning. I think it is critical for congress to look at this in the longterm issues. Thats one of the reasons why the administration has submitted a budget that eventually gets to a balanced budget. So i think thats critical. I would say that the number one threat is not the debt. The number one threat is Economic Growth. If we continue to vla have lackluster Economic Growth, it will not fund our economy and opportunities for americans and our leadership in the world. We are very focused on creating Economic Growth. Having said that, we are also sensitive to increasing the debt. I look forward to working with you and other senators. We are very close to releasing a detailed plan, and i can assure you that we believe that that detailed plan will be responsible as we look at the impact on the economy and the cost to the debt. The bull simpson movement a few years back was one that went indepth i think in trying to find a pathway forward bipartisan. It failed. But it was close. Im thinking some type of a commission. Do you all support some type of a bull such son or call it whatever you may, a commission that would look at this to try to support the movement you are having, to gain more support here might be a help. I dont have a view as to whether it should be a commission or not a commission, but i have a view of getting towards a balanced budget is something thats an important goal. Let me ask another question. Marketplace fairness. Im sorry . Marketplace fairness, which is basically the taxation through the internet, probably 50 or more of the goods being sold or purchased in states, and we receive no income from that to support our local state functions, but we expect every Small Business and every established business in our state to collect that tax for us. Do you all support fair taxation on Internet Sales for state by state, which is marketplace fairness . So this is an issue that we have been looking at very carefully within the administration, and we expect to come out with a position shortly. I will tell you that i think, as you know, many states do have a use tax that goes along with the sales tax. So this is really more of a function of collection. I am encouraged that amazon is now charging tax, i believe, on their own sales but not the marketplace. Im not sure i understand the consistency. Right. On that. But, you know, i respect the states ability that theres an awful lot of money thats not being collected, that is in fact due to them under a use tax, and this could be a very important means for the states to fund infrastructure, which is critical. It is going to be almost salvation to most of the states, especially rural states dont have the expertise or the farranging ability to chase down all of these Internet Sales that are coming in. But if it was a state if it was a national movement, we think it would give us the support we need to make sure that collections would be made. I would hope that you would look at that seriously for the salvation of our states. The final question i have is on sifis. You all just you have oversight on it. It is a committee that examines the National Security implications of certain foreign investment. You all just recently approved the sale to a chinese conglomerate of the chicago stock exchange. Could i have your thoughts on that . Again, let me assure you that i take my role as chair of sifis very seriously. I have examined many transactions since i have been in office. Theres many transactions that have been withdrawn. It is a confidential process so im not comfortable talking about any one transaction, but i can assure you it is something i take very seriously. Now, one other thing i may advocate is i have had the opportunity to meet with members in congress about talking about certain changes to the legislation of sifics that think are important to consider. One of the areas in particular are joint ventures are not covered and i think they should be. Theres other areas. I know theres many people in congress who want us to look at a lot more transactions. One of the things i think perhaps as we get through the next budget cycle is perhaps sifcs should have central funding because it is a very important function that can be doled out on the interagencies. Again, we fully support the sifcs function and think it is something we need to work with congress to review. I was just concerned about sifcs taking the approach of mabel not National Security, but maybe a chinese gon glom rat having all of the information into our Financial Economic wherewithal. It is very concerning to me. Again, i can assure you when we look at sifcs cases we take into account National Security very seriously. Again, in this setting i cant comment on any particular transaction, but look forward to working with you. Maybe we can talk further on that in closed session. Thank you. Thank you. Senator moran. Thank you, chairwoman. Mr. Secretary, thank you for joining us. I would join senator mankmins correspondence about sifcs. I corresponded with you and you responded. Im pleased to hear how seriously you take those responsibilities. I applaud the seriousness behind me request. I would follow up with the chairwomans comments about the Community Banks. I visited with your predecessors and all of the variety of regulators that affect our Financial Institutions, Credit Unions and banks in particular, but i would highlight how important it is, so at least you have heard from a third senator this morning, senator language forward talked about lack of mortgage lending. Thats one of the most egregious examples of over regulation. Banks dont make loans because it is not a credit worthy borrower. They dont make loans because of the overregulations, the burden and costs and associated penalties of a minor error. Thats not anything that Rural America in particular can withstand. We have looked to our local lenders to be the pillars of our community, to provide that funding for someone who wants to buy or remodel or build a home, and it is not happening. Secondly, particularly today with commodity pries y prices ie Agriculture Sector they are, i have concern that what has happened in the past when times are tough is that longtime relationships between lenders and farmers and ranchers, know the family, know the business plan, have a sense of their character, that has been a part of the decisionmaking that has occurred when loans are made. If we get to the point in which Community Banks are making loans based upon some kind of Computer Program and you punch in the numbers and none of the other factors are taken into account, we will not survive the agriculture crisis that we face today with low commodity prices. Well have a financial crisis as well, particularly damaging to places like my home state. So im pleased to hear you reiterate and you dont need to do it a third time the efforts that are underway to alter. I am here to encourage and insist, demand. I have asked every regulator thats been in front of me, give me an example of something you have done that reduces the burden to a community bank, and without exception no regulator has been able to give me an example. They will talk about how they have a committee, a task force, someone who advise them on Community Banking, but nothing seems to happen much at the fed, at the fdic or the office of the comptroller of currency. So i would ask you to redouble your efforts in that regard. On a. More specific topic, let me turn to a question that i asked the sec chairman, clayton, in a similar setting here just a few days back. Im concerned that the about the negative impact that the European Unions regulations could have on the ability of u. S. Firms to provide investment, research in the eu. Many small and mid Cap Companies depend on that research to attract investment, and eu rules that impede the provision of research could have a direct impact on job creation here in the United States. I wanted to gauge your awareness of that issue, and given your broad responsibilities at treasury, would you commit to me that you are willing to work with the eu and with the sec to find a path forward that could prevent negative impacts to investments in u. S. Markets and companies . Do you see a role for the Treasury Department potentially brokering some kind of agreement so that u. S. Entrepreneurs and innovators are not excluded from this important analysis . Thank you. Well, let me first say i will take an opportunity to mention for the third time how much i appreciate the support for Community Banking that there is from this committee. This is an area that i have had personal experience in, having managed banks, and i look forward to working with this committee and others to making sure that we get the right regulatory balance that Community Banks can lend and that theyre safe. Particularly in the agricultural communities, these are the parts of our country that need to have access to credit, and Community Banks know how to lend. They do this. It is not a function of just relationship lending. It is a function of they understand the agricultural market. These are not loans that should be securitized and sold off. These are loans that should be on the books of the banks and be held. I liked your previous two answers and i especially appreciate your third. Thank you, mr. Secretary. Okay. Now, on the eu issue, i very much look forward to working with you and treasury is happy to be helpful in brokering a solution. Thank you very much. Thank you. Senator van hollen. Thank you, madam chairman. Mr. Secretary, good to see you here. In appropriations weve had a chance to talk a little bit in the Budget Committee and banking committee, and i hadnt plan to say anything about the jouovera budget but you made the statement that the trump budget balanced in ten years. I think it is important that the we know that the cbo looked at that and said it isnt so and you are way off. I want to say i appreciate your efforts on the debt ceiling, and i think it is really important that the congress not engage in political games with something that has such an impact on our economy. So thank you for your voice in that debate. I want to reinforce the comments that senator coons made regarding cdfis. I was pleased to hear it was not a cut made on the merits, but it just didnt i guess it just didnt meet your overall priority list in the budget. I would say in maryland, i think many communities around the country, cdfis have played a really Important Role in local economic development. So i hope this committee will work to restore those cuts. Just on inversions, and senator urban has been very involved in this, i know you are looking to tax reform. In the meantime i hope we can do Everything Possible to prevent people engaging in inversions, and the Obama Administration put in place some provisions, some rules to reduce that. I hope you will preserve those rules. I think we would like to go further in shutting down some of these inversions. Let me say a word about north korea. First, i want to thank your team at treasury. Senator toomey and i have been working on bipartisan le legislation. In fact, we introduced a bill on north korea sanctions that will be in the banking committee, and we appreciate the input we have gotten from your team on that. As you know and theres another report in the Washington Post today about the north korea icbm program moving at a faster pace than people previously anticipated. They already have nuclear weapons. I appreciate the action that the administration took with respect to the bank of dangdon. We know from the february report of a u. N. Panel of experts theres incredible leakage in the International Sanctions regime against north korea. China is clearly the number one culprit in this effort. I think were going to need to move much more aggressively with respect to letting china know that if theyre going to continue to evade the International Sanctions that theyre not going to have such access, their banks to our markets. I understand the challenges there. Let me ask you this. The house has passed a sanctions bill on north korea. Does the Administration Support that part of the bill . So, again, thank you for your comments. I do want to just comment first on the cbo scoring. And i think the issue of the cbo they just believe in lower group than we do mr. Secretary, its not a question of belief. Its a question of reasonable projection. And your projection i was going to let that but your projections are out of line with the projections of every institution in our country and over seas with respect to growth rates. And yooknow crur going to say all thepologyacies you guys are going to put forward to going to change that trajectory. All we have is one page document. Can we just go to north korea . I just want to say well note for the record well respectfully disagree on this. Ill just comment our projections for growth are significantly lower than what the Obama Administration used. So i hope we all have a goal to get back to 3 gdp and can Work Together on it. In any event, with regard to north korea, i will tell you ive spent a lot of time on this issue. Weve had very significant discussions in the cocouncil. I participated with a trilat with the president in hamburg and japan and the republic of south korea. And i can tell you this is a very big issue the president is folktsed on. The bank of dangdon was a very significant effort. It was something considered previously and concerns about doing. When this action came to my attention, we moved forward with it very quickly, i can assure you. Without highlighting what well do Going Forward, there are lots of things. And well continue to use sanctions the maximum amount allowable by law. If i could, does the Administration Support the north korean sanctions legislation passed by the house, which i actually think is not as strong as it should be but important first step in and do you also support the russian sanctions passed by the house . We have certain concerns about the region to executive powers and certain limitations. But we fully support sanctions on north korea, on russia, on iran. We will use these super aggressively. Will the president sign the legislation passed by the house, adopted by the senate and sent to the president . I dont know the answer to that. I havent had that discussion with the president , but i cant comment on it. Again, there is concern about limitations on the executive authority on sanctions, which through both democrat and republican president s they have previously had. Thank you. Thank you, madam chair. And thank you for holding this important hearing. We appreciate you being here. I appreciate also your obvious knowledge of Community Banks and what they represent. We hear a lot about Small Business being the backbone of america. But the backbone of Small Business is the community bank. So again, like i said, thank you for understanding and continuing to work on that. Id like to talk a little bit about iran, and tell us the steps the treasury is trying to respond to in the sense of, you know, theres listed activities with all the things we know, terrorism, trafficking, et cetera. Can you tell us what youre doing in that regard . Sure. Let me first comment, the activities on iran are very concerning. And as the president has said and i agree with him, we have significant concerns about the jcpoa. My opinion is that sanctions worked. Thats the only reason why they came to the table. And i wish we had held out for a significantly better deal. Having said that, at the moment we are working within the constraints of the agreement, which allow us to do sanctions outside of the nuclear efforts. Weve just continued to rollout sanctions on areas of ballistic missiles, on areas of terrorism. So we will continue to aggressively pursue sanctions. Ive also had conversations with all my foreign counterparts about this and our view of working together. And i can assure you as youve heard from the president , the agreement is top of mind. Every time it comes to the certification, theres a lot of discussion. And we will aggressively pursue our options against iran. So part of omnibus appropriations bill that many of us supported requested that you review all sanctions designations over the past two years and determine whether these agencies have engaged in any prohibited activities since the removal of sanctions. Then also treasury was requested to either sanction in entities engaged in such activities or not. Are you committed with that process then the. Again, were committed to working with you whether the bill is processassed or not. We will come back for additional funding to work with you. But we believe in the sanctions as ive said to the maximum amount available. Right. So that is current law, though . Im sorry. So that is current law . Yes. And under the current law we will continue to work with you as we are, absolutely. Do you have an estimate as what has treasury done an estimate of what sanctions relief, the impact thats had on their economy . Again, we have done analysis on both the impact of the jcpoa and other areas of their economy. And again, in a classified session were happy to come and talk to you about some of the intelligence issues. Thank you very much. And again thank you for being here. Thank you, madam chair. Thank you, senator durbin. Thank you, madam chair. Let me say on the outset with you on the chair seat and the acting ranking this is the boldest move by werj since robert byrd left the appropriations committee. Are you saying it takes the two of us . Ill let you i got it. Passed in the senate, bogged down in the house. The use text problem you can imagine compliance is very low. So if you have collection at point of sale its dramatically different. And i may also add that amazon does collect sales tax on their sales, on third party vendors, no. On their sales, yes. So i hope youll take a look at that. Its very important. I can assure you we are looking at it. Weve had a lot of discussions on it. And again where i may be one of the few people in the world to actually file use tax. So i am aware of that. And again, im not sure why amazon is not collecting it on the marketplace. They can voluntarily start doing that. They did voluntarily under their own director sales. But its a policy. But they support the bill in fairness to them as i said, the administration is looking very closely at this issue. We look forward to having discussions with you. And we understand the issue. And we do think that the states getting more money in one form or another is very important. Thank you. Id like to hit two issues and i have three minutes. So it may not be possible, but ill try. Economic growth. Heres the reality, corporate growth in United States of america as a share of gdp has never been higher. Corporate taxes as a share of gdp has never been lower. Now were talking about cutting Corporate Tax rates. What were missing in this conversation is an element of growth that really touches people. And its this. Despite the growth in corporate profits in america, there has not been a parallel growth in earning power and wages of the people who are working for these corporations. Simply devising a strategy to reduce Corporate Taxes and increase corporate profits and ceo salaries is no guarantee that the average working family in america will feel this growth. And they havent for more than a decade. So i urge you as you take a look at Economic Growth, look at it not in terms of the boardroom but of the families. I hope youll transform your thinking of the Economic Growth in that area. Thank you, senator. And i assure you i am. I had the opportunity to travel extensively with the president during the campaign, and i did see that. So the last eight years have been a terrific time for rich people and financial markets. But the average american has not seen their wage increase, and that is something we are very, very focused on with Economic Growth. I will just tell you the problem we have with the Corporate Tax system, we have one of the highest Corporate Taxes in the world. But the effective rate is much, much lower. Many of our corporations leave money offshore because they get to defer the tax and not pay anything here. And our main priority is to change that system to a territorial system so trillions of dollars come back, can be invested here and will benefit workers. And our last experience and repatriation proved unless you are careful how you do that, the money profits will be repatrioted and go out the back door in dividends and corporate salaries instead of what you just said, reinvestment in our economy. If i could, id like to raise one last issue which has already been noted. Corporate inversions. When corporations decide to move their headquarters, strickly a paper transaction to some foreign capital to avoid paying u. S. Taxes, its hurtful to our revenue, our economy and fundamentally unfair. Theyre still doing business in the United States, still have the best market in the world, still use our infrastructure. They still count on our national defense. They just dont want to pay taxes. So the Obama Administration decided to go at that head on. So they ranged regulations and made it more difficult for these inversions to take maplace, and they slowed down dramatically. President trump on the campaign trail was out spoken on this issue, i think he may have tweeted about it. So how do we explain the executive order from this administration which really weakens the regulations and changes from the last administration when it came to inversions . Look, senator, i look forward to working with you on this. And first of all, let me say that i assure you that the president is very focused on us fixing the problem. Not just through a regulation, but as i mentioned to changing the tax system. Now, i can tell you this may be the first president thats ever picked up the phone and called ceos when factories move. So i can assure you it captures his attention when headquarters move. So hes going to do everything iphis power whether its in our trade regulations can i stop you there . Excuse me, everything in his power . Why would he weaken it . If hes using everything in his power, it would not be in his Regulatory Authority but in his statute limitations. Were going to do everything to assure you Companies Stay here. Nothing is more iconic of selfdefeating policy than our tax code. And i say that as somebody who has spent most of my professional career in the private sector, most of that time running global operations. Nobody in congress will standby the status quo. From base erosion, the tax code seven bracket over all rate simply arent competitive in the global century. I spent six years living in china, just was over in april. Tell you what, if more americans need to go and see whats going on around the world, we need to wake up as a nation and recognize it is game on in terms of Global Competitiveness for American Companies to win. And i applaud your efforts Going Forward here on reforming our tax code. Tax code has a tremendous priority on appropriations. We are one of the few countries with an over all tax rate in excess of 35 . In fact 75 countries have Corporate Tax rates between 0 and 20 . How much Economic Growth do you estimate will accrue by reducing ov overall rates to 20 . Thank you, senator. I think significantly. And my comment youve highlighted although our tax rate is 35 , many, many Multinational Companies dont pay anything close to that as i mentioned either because of the issue of deferales or tax havens. We look forward to working with you on that. And now that you said you spent six years in china, i look forward to coming with you and working on that in working on our china team. Thank you, id be happy to do that. In the 90s when we first moved there their gdp was 11 million. Today 5. 5 trillion. Question is what place does overall tax rate reduction play in President Trumps efforts and administration to retain a 3 tax Economic Growth . Tax reform is an enormous part of that. As i mentioned, its a combination of tax reform, regulatory relief and trade. Tax reform is critical. I look forward to very soon working with congress. As i mentioned weve been working since january on coming out with a combined plan with the house and the senate. And we look forward to working with you and getting this passed this yeers. One of your observations which i completely agree with is high tax rate drives behaviors in to get a lower effective rate. And one issue of particular interest to me is certainly keeping us competitive and doing that by having a territorial tax system. Were the only, only developed country with a worldwide tax system which incentivizes foreign take overs. Since 2015 alone at least 12 corporations have inverted overseas. In your discussion with the house, where is the stransition in territorial tax system in your priorities . Very, very, very high. I like the additional two veries on that, thank you. We have over 100 people working on the tax plan in treasury. We are scoring lots of different scenarios, and yes, were working closely on that. Thank you for the three veries. My last question relates to an issue i have back in montana. Winter wheat is one of our biggest crops. Low grain prices are dogging our farmers in this country. And think about who put President Trump in the white house, it was hardworking American People fighting day to day where the month is often longer than the paycheck. And that includes our farmers and our ranchers. One of the provisions in the house Tax Blueprint was immediate exexpensing. And it can achieve two tax incentives. Simplification as well as helping ranchers and farmers bottom lines. How likely is it that immediate expensing would be included . Well it is something that were having active discussions on. And although no decisions have been made, i will tell yowl were very sensitive to this as it relates to farms and agricultural and Small Businesses. So we are very focused on that issue. Even more so than we are on that issue for giant multinationals. Thank you, secretary mnuchin. Well, thank you for your testimony today, secretary mnuchin. Were going to excuse you and call forward our next panel. Thank you so much for your testimony. Given our time constraints, i ask you summarize your statements so we can have an opportunity to proceed with questioning. Thank you very much, mr. Secretary. All right lets get started. Commissioner kausken thank you for coming. And i now ask you to summarize your remarks on the Internal Revenue service. Thank you for the opportunity to appear before you today for the last time to discuss the budget. Im happy to summarize my Opening Statement. But ill let my full Opening Statement submitted to the record if that would be appropriate. Well submit that without objection. Thanks. As you know my term as irs commissioner ends in november, so all but a few weeks of the agencys fiscal year 2018 budget will cover the term of the next irs commissioner. I feel its my obligation to do everything i can to make sure the new commissioner starts with sufficient resources for the agency to meet its responsibilities to the government and to taxpayers. President s fiscal year 2018 budget request for the irs is 10. 97 billion, a 260 million cut. Its important to note the years of sustained fundsing reductions have left the irs with critical purse thel and infrastructure requirements. Our budget is now 900 million below the level eight years ago in 2010. We are now 18,000 full time employees fewer than we had in 2010. And under the proposed budget we expect to lose another 3,000 employees this year. The effect has been felt throughout the agency. By not hiring a significant number of new employees since 2010, we now have only 3,000 employees under age 30 in a work force of 80,000. Weve lost over 5500 revenue officers, revenue agents, and criminal investigators resulting in a proposed audit rate for the 2014 rate at a decline of hundreds of criminal investigations and prosecutions. The irs fiscal 2018 budget seeks less costly ways of delivering Taxpayer Service using technology, training, and internal eficiencies. However, the irss budget would need to be 220 million level above just to schedule pay raises and inflation costs. In that regard the irs for several years has achieved major savings and efficiencies in a number of areas. For example, tax return processing as more people file returns electronicically, weve reduced the number of locations where we process tax returns from ten to five. Over the next several years we will further reduce those locations from five to two. It has reduced its space inventory by approximately 300,000 square feet. Weve been increasing options for taxpayers to get information and interact with us online. We have hundreds of millions of hits on our irs set and our application, wheres my refund. Online resources also has significant savings. It costs us about 50 to answer a question on a phone with a person and less than 50 cents to answer a question online. When i began as commissioner about four years ago the amount of Identity Theft and the filing of false refund claims. Through the contributions made through our new partnership the number of taxpayers identifying themselves as victims of identify theft for tax season 2016 dropped by 46 from the previous year. We were delighted and somewhat amazed to see the number of victims drop another almost 50 . So the overall decline of victims over the two years has been reduced by about twothirds. Congress can also help the agency bypassing the legislation stooimprove tax legislation. The president s budget request retains a number of critical requests. That concludes my statement. Ill be happy to take your questions after you hear from the inspector general. I now invite you to summarize your statement. Thank you for the opportunity to appear today. My testimony addresses the fiscal year 2018 irs budget request and significant cybersecurity challenges confronting that agency. The proposed irs budget is a decrease of 260 million from the fiscal year 2017 enacted level. In a request the irs realigned approximately 17 billion from the system appropriations to the options support appropriations to address needed technology, hardware and software updates. There are many challenges facing the irs. The top challenge of which is protecting security over taxpayer data. The irs processes and stores a vast amount of taxpayer data that is a prime target for domestic and international criminals. For example in march 2017 because of significant suspicious activities, the irs deactivated the online free application for the federal stupidity aid data retrieval tool. This tool is design today be used by students and parents to retain Tax Information used to complete a student made application. This incident is just the latest by brazen attempts to file fraudulent tax returns and receive ilegitimate tax refunds. The irs has experienced breaches to its transcript and identifying taxpayer application. The irs has a difficult task of balancing the need toa thent kalt a taxpayers identity with the need to make information assessable when taxpayers need them. The Threat Landscape against the irs is ever changing. Bad actors consistently seek different ways to take advantage of systems and processes. Therefore, the irs must continually update its systems and processes to combat the threat. The risk of unauthorized access to tax accounts will continue to be significant as the irs increases its effort to deliver new online tools to taxpayers. Its also highlighted the need to seek the capability to build or improve better systems. The irs is stream lined Critical Pay Authority expired at the end of 2013. We reviewed whether the irs has subsequently used a government wide critical pay government authority, which laeb available since 1990 to fill technical positions such as though within cybersecurity operation. We found the irs had not used this authority which could uhuh cyst highly qualified experts continues to be concerned about cybersecurity in general at the irs. Our audits have shone some problematic areas. Also shown significant improvements are needed. We also found that improvements are needed to ensure that all sm systems have secure configurations and security vulnerabilities are addressed on a timely basis. Were also concerned about the infrastructure at the irs thats beyond its youthful life. Such hardware is prone to failure over time. More over, Older Technology brings unnecessary security risks to an organization because manufacturers may not provide backer support and hackers have a longer period to identify and exploit vulnerabilities. We have an audit to evaluate how effective the irs is addressing challenges in replacing the outdated computer area. This concludes my statement. Thank you for the opportunity to share my views. Thank you both very much for your Opening Statement. And ill begin the question portion. In your Opening Statement, commissioner, you talked about Taxpayer Services and the ease of which to do an automated reply as opposed to a person replying to an individual request for assistance how on online reply is much cheaper, obviously we know that. Senator mnuchin and i are from a very rural state. We have implementation rules of our challenger on deep access. And i would put a plugin for that person to person assistance still being a vital part of our Taxpayer Services. How do you view this, and how do you balance and what do you see for the future in being able to maintain that personal its an important issue. As i said while were trying to give the taxpayers an online equivalent of what they have already with their bank or Financial Institutions, were not a bank or financial institution. We have an obligation we hapfully accept we deal with every american to provide them opportunities in a way they desire. We try to make it clear as were moving to make people who want to be online with us in a digital environment, what that does is not do away with call centers or Taxpayer Assistance Centers but allows us to provide Better Services on the phone or in person for those people who need to be there but also those people who want to be there or need to be there. Weve received well over 15 to 18 million paper returns. And if thats the easiest and most appropriate way for people to file, were happy to have them do that. We recognize all of us know people who either dont have the availability to the internet or have really a great concern about using it. And we are always willing and able to provide them other services. So Going Forward, i would just stress well always have Call Services available, always have inperson services available. Because whatll happen is well be able to provide those much bet, if for instance where is my refund, the application, we had 300 million hits on it. Those used to be calls. Let me just say that i would like to say the Taxpayer Advocate am the Assistance Center we have in parkersberg, West Virginia as soon as we call them they have been responsive. And youre the head of the ship there, so i want to thank them on my behalf for West Virginians. Or was able to convince someone in a different form completely to provide names, Social Security number, date of birth, they in the past have had ability to gain information from the irs or engage in transactions that they should not have or should not have been able to. The irs have learned through trial and error that they need to do more checking than just name, date of birth, Social Security number. There has oo be a multifactor way of gaining information to confirm that the person theyre giving information to or ultimately giving refunds to is the person that deserves that information. So the bottom line is the more the irs does, great. But again the fact guys are still very aggressive, and its an international problem. Thank you. What can congress do to support the mitigation of these risks . Thats a massive area of which to address your question. You have about 30 seconds. Well, then i would then point to a to authentication. Its imperative that taxpayers be able to comply with their tax obligation. And if the tax codes too complicated or they cant through to the irs to get a simple question answered, then theyre less likely to comply. In Rural America, rural West Virginia sometimes broadband is not what it could be and should be. And people are unfamiliar or not comfortable, elderly population. So i appreciate you all still understanding the importance of us receiving the mail and working through the traditional lines of communication. I understand. Chairman, i grew up in kentucky, not far from here. Youre right across the river. Those are people i understand and its still frustrating to me the way we communicate by mail. 10 of our irs notices dont reach their intended audiences which represent the total failure of communication at roughly twice the industry average. When a taxpayer receives a notice, it is often an indecipherable amount of tax language. So my recommendation for what it would be worth from the irs is to learn from the best practices as used in industry. When we all get statements from credit card or our utilities, they use a common in the best interest for all of us for me to be able to understand the information. So as the interest have plans to implement color and a chromographic in order to make its notices more notable . Weve had a more plain english goal, when you get a letter from the irs, be clear why youre getting the letter. Again, its a resource issue. We have an application were returning when John M Kennedy was president , but it is critical when people get a notice from us, it should not be unsesinarily confusing or unnecessarily frightening. It should be to say youre getting this letter for a reason. Our experience is when were send\ing just an update notice to people, theyve had a mistake or they should ignore it we expect that half the people who get any communication willcall. And thats appropriate. But whats appropriate is for the letter to be clear, understandable by anyone. What about the 10 that arent even receiving their notice said by mail . Well, your biggest problem is people move. They will often leave a forwarding address by the post office, but we never quite get that notice. So it is a problem especially when were trying to provide information to the taxpayers where knowing where they are and where they were the last year is important to us. My final question about the economy, because its a whole another challenge. And many people who were freelance drivers with uber or lift or with airbnb, we must also find a way to classify this time of work that addresses the portions that engage in this work. So how does the treasury or irs plan to ensure fair tax treatment for those engaging . Its an important question. Its a growing era of the economy. Many people in that economy in airbnb, uber, lift, whatever it might be dont realize they are nagt taxpayers. And if you make money, youre supposed to pay taxes on it. So we put up here are obligations, advice to make sure you have good records, youre nafgt meeting those obligations. One of things were looking at is reg for people who are regularly in that business or an irregular basis, if they got a 1099 at the end the year. Most people want to be compliant, so part of our job to help them understand what their Tax Obligations are and then try to make it as easy as we can for them to meet those obligations. I know were out of time here. But since its just the two of us, maybe i have some exception here. Lets say some of them just dont know, just dont understand. They have to get a license obviously . Youve to have a license to be an uber driver, is that correct . They have to have a drivers license, obviously. But we dont have control over youre going to hit the big boys i would think. We obviously track that. But in terms of licensing, thats really a state and local issue as to what business if youre renting your house out its a question as to what the business regulations and local requirements are. If i want to be part of airbnb and i have to have a license and filing and we actually are happy to have you file whether youre properly licensed or not. Our job is i know that. But, again, its coming from a rural state. Sometimes we would prefer not to. I understand that. So thats again why one of our thoughts is with the coordinating bodies, uber and outofstate, they provided 1099s to you, they preprovided 1099s to us as well. Woo we do have a reasonable people every year who are nonfiler nonfilers thing on thing i would say to that is when i was the governor of the state of West Virginia and we had budget constraints, i never would cut back on my auditing staff. I always would increase their budget. I made sure we were auditing and targeting and making sure those guys were paying. Im using the uber or lift or airbnb, because its one of my great concerns. And as im leaving, im trying to make sure everyone understand that concern. People want to me compliant, but part of the reason people are compliant is because they think the system is fair. Fair in the sense that everyone is paying. To the extent our rates drop from 1. 2 to 2. 5 if i could add to what the commissioner has stated, weve had numbers that demonstrated that when income is reported by a third party, by a 1099 or other source, compliance rates are in the upper 90 . But when people operate on a cashonly basis the compliance rate falls dramatically, meaning 20 around that area. Onc. I thank you for participating and preparing for this. I will have to say as a recipient of the letter from the irs, we all recognize that, black and white print and the little envelope, who its from. So i appreciate your service to the irs, to this country. And if we dont meet again, i want to thank you for your service. I appreciate hearing from the top officials at treasury, irs, Inspector Generals Office and have an opportunity to explore a number of important issues. Todays discussion will pea helpful as we look at 2018 funding. At this point that a statement by nina olson be included for the hearing record. Since im the only one here, ill give myself consent. Itll remain open until august 2nd at noon for subsequent questions by subcommittee members who can submit questions and statements to the witnesses for the record. I thank you and this subcommittee is hereby adjourned. Sunday on American History tv on cspan 3 we look at two u. S. President s. At 6 00 p. M. Eastern john f. Kennedys photos from the Smithsonian Art Museum images that conical the life of the 45th prez dependent. Wonderful thing about the kennedys they never pushed photographers or reporters away. They didnt care whether the tie was fixed, whether the coat was on, this or that. They knew if they made themselves accessible to the media, they would be published. And of course it was a ground swell. Theres no question about it that the Media Coverage of jfk was just the seventyfirst time wed ever seen anything like that. And thatll be followed at 8 00 with Ronald Reagans relationship with the pope and the extraordinary untold story of the 20th century. Interesting john paul 2 pd sent a cable to reagan when reagan was shot im praying for you. And then reagan send a cable that im praying for you. As for moskow if theyre worried at this point about a kinship between the pope and the president , well now they better really worry about it. American history tv, all weekend, every weekend on cspan 3. Dr. Kirk newman on his book healing children, a surgeons stories from the frontiers of pediatric medicine. The conversations i hear are about cutting things like medicaid and cutting the nih and doing all these things when were on the cusp of such terrific discoveries. And when you think about half of the people half of the on medicaid half are beneficiaries are children. Why do we want to do that . Were not doing that to the elderly on medicare. In fact we ought to double down and put more on our children. Watch it 7 00 p. M. Eastern. And also david good heart on his book. You see this in the contempt that the people change after brexit. You have left wing professors saying why do we give these people a vote at least without some kind of iq test the. For more go to booktv. Org. Thank frz talking with cspan. Delighted to be here. Youve been in washington for a couple of weeks. What heb has it been like . Its been a whirl wind, but an extraordinary opportunity to represent the sixth district of georgia. What was the most surprising thing you picked up in the last two weeks . Not too much was surprising. Its definitely a fast pace,