January 19, 2021
Yellen hearing held at Finance Committee; 1/21 Floor vote eyed
The Senate Finance Committee January 19 held a hearing on the nomination of Janet Yellen to be Treasury Secretary and she called for action on Biden's $1.9 trillion stimulus proposal, telling the Committee, "Neither the President-elect, nor I, propose this relief package without an appreciation for the country's debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big." She also said, "Without further action, we risk a longer, more painful recession now — and long-term scarring of the economy later." Yellen also made comments regarding delaying tax increase proposals and the need for coordination with the OECD BEPS 2.0 project.
Chairman Chuck Grassley (R-IA) noted that the incoming Biden administration has expressed interest in raising taxes and said it would be a "big mistake" to raise taxes on individuals and businesses amid a pandemic and economic recovery. He noted the two-prong approach laid out, of stimulus followed by other bills, including on infrastructure, with tax increases as a revenue source. Senator Grassley further said he is opposed to other nations' efforts to try to tap into the US tax base through unilateral digital services taxes (DSTs), saying, "they don't have that right." (He submitted a DST question for Yellen to answer in writing.) Senator Grassley recognized that this was likely his last hearing as chairman, but he will remain on the Committee.
Ranking member Ron Wyden (D-OR) said his top economic priority is avoiding the mistake Congress made in the last recession, which is "taking a foot off the gas pedal" — not doing enough to help the economy in 2009 and prolonging a recovery. He said the good news is Yellen knows that going small on coronavirus relief would be a big mistake. Wyden further said there must be an effort to fix the "broken down, dysfunctional tax code," starting with the proposition that corporations and the wealthy must pay their fair share and considering that the 2017 Tax Cuts & Jobs Act (TCJA) caused some jobs to be shipped overseas. He referenced his mark-to-market proposal, under which capital gains income would be taxed at the same rates as wage income and applicable taxpayers would be taxed annually on unrealized gains. Revenue raised from the proposal, Wyden said, would go toward shoring up the finances of the Social Security program. Wyden said trade policies under the outgoing Administration drove away allies and said concerns about currency manipulation by other nations linger.
Toward the end of the hearing, Wyden said there is an agreement for Finance members to have questions for Yellen submitted by COB Wednesday and that he hopes for a Senate floor vote on Thursday, January 21 (a Committee vote will also be required).
Chairman Grassley requested assurance that American workers and businesses in rural America are not ignored. Yellen said it will be a core focus: the needs of workers, in cities and rural areas, to ensure the economy offers good jobs and good wages, and address the pandemic causing such "misery" for small businesses and the unemployed. Over time, she wants to work with Biden to "build back better" and invest in infrastructure, R&D, training and workforce development so the economy is productive and competitive, and workers and families can thrive.
Additional information can be found in the attached Alert.