16 January 2025

Treasury nominee Bessent appears before Senate Finance Committee

The January 16 Senate Finance Committee hearing with Treasury Secretary nominee Scott Bessent largely focused on partisan differences of opinion regarding the extension of Tax Cuts & Jobs Act (TCJA) provisions expiring at the end of 2025 as well as President-elect Trump's intention to implement new tariffs.

Chairman Mike Crapo (R-ID) focused on TCJA extensions: "The next Treasury Secretary will have to work with Congress to preserve and build on pro-growth Republican tax policies that have greatly benefitted all Americans, as well as improve our global competitiveness through trade deals that create market access."

Ranking Member Ron Wyden (D-OR) criticized the incoming President's intention to use tariffs to pay for TCJA extensions, and discussions among House Republicans about spending cuts: "How do Trump and Republicans plan to pay for their multi-trillion-dollar giveaways to the rich? For starters, with across-the board tariffs — and let's be clear about what that means — trillions in new taxes paid by Americans. And on top of that, the ultimate distillation of the Trump agenda is paying for tax breaks for the top by increasing child hunger, booting tens of millions off their health insurance and laying off hundreds of thousands of manufacturing workers."

Bessent has summarized his goals as 3-3-3: sustained 3% growth rate for gross domestic product, a federal fiscal deficit no more than 3% of GDP, and an increase in domestic oil production of 3 million barrels a day. In testimony, Bessent said, "We must make permanent the 2017 Tax Cuts and Jobs Act and implement new pro-growth policies to reduce the tax burden on American manufacturers service workers and seniors."

The following table paraphrases select Q&A between members and Nominee Bessent.

Topic

Senator question

Bessent answer

TCJA

Chairman Crapo: The attack on the TCJA is that it was a tax cut for the wealthy. There will be a $4t+ tax increase if we do not extend this law. If that happens, it won't just impact the wealthy — the majority falls on those earning less than $400,000 annually. One of our pivotal tasks is to make sure this doesn't happen. What would be the effect if it did?

This is the single most important economic issue of the day. If we do not fix the tax cuts, renew and extend them, we will be facing an economic calamity with financial instability that falls on middle- and lower-income people.

We saw the power of tax cuts in 2018–2020 before they were interrupted by COVID.

IRA energy credits

Ranking Member Wyden: The Inflation Reduction Act (IRA) was a transfer to clean energy in a technology-neutral manner, and the Trump administration wants to reverse it to the detriment of the US and benefit of other nations.

"There is not a clean energy race, there is an energy race." The IRA, as scored by the CBO, is wildly out of control in terms of spending.

TCJA

Michael Bennet (D-CO): The Trump tax policy has burdened the nation with debt and the TCJA distribution was deeply unfair. Republicans want to give money to the rich and suggest that it trickles down to those with lower incomes. The former Treasury Secretary (Mnuchin) said tax cuts would be paid for with economic growth, but that wasn't true. The GOP focus on cutting spending is unwarranted. There is a better idea for using revenue than cutting taxes for the rich.

Disagreed with the assertion that TCJA benefits mostly accrued to the richest Americans.

R&D

Maggie Hassan (D-NH): Do you support restoring the full R&D deduction?

I am not fully versed in this. I will get back to you.

OECD

James Lankford (R-OK): What will the new Administration do regarding Pillar Two of the OECD project, and what is your message to other countries if they try to implement taxes on US businesses.

Any country that adopts Pillar Two before Monday will find it a grave mistake. I will work with you to undo a terrible policy.

TCJA

Steve Daines (R-MT): We are facing a $4.3t tax increase if we don't act this year. One key theme is permanency, which I support along with a current policy baseline. How does permanency affect growth? The passthrough deduction is important for jobs.

It is incentives that drive everything in tax policy. Many small business owners, many of whom are passthroughs, are optimistic about the tax cuts. Employers want to keep, train, and expand their workforce.

ACA

Catherine Cortez Masto (D-NV): An Affordable Care Act (ACA) Premium Tax Credit enhancement was provided in 2021 but expires this year. Would you oppose renewing the enhancement?

I will get back to you.

Tariffs

Todd Young (R-IN): Expressed concerns about tariffs inflating costs.

People should think about tariffs as a remedy for unfair trade practices by an industry or country; a more generalized tariff is a revenue raiser; and that Trump will use tariffs as a negotiating tool.

TCJA

Tina Smith (D-MN): You have said your first priority would be to extend Trump tax cuts, and that they have resulted in economic growth that has trickled down. I view it as resulting in wealth concentration. That is not good, nor is it lowering prices for average Americans.

She commented on Bessent's support for privatizing as a way to cut costs/save money and talked about the problem of privatizing health care and the problems of private equity and big corporations buying up health care businesses and causing spikes to health care costs.

I believe that President Trump is committed to addressing the affordability crisis. Inflation is one of the great killers for working families.

TCJA

Ron Johnson (R-WI): The TCJA was not the primary cause of deficits. We need to take CBO scores with a grain of salt. Is there any justification for the US keeping spending levels the same?

The ~$4 trillion CBO score for extending the TCJA makes no sense.

The US doesn't have a revenue problem, we have a spending problem.

Tariffs

Maria Cantwell (D-WA): Focusing on innovation and building supply chains is a good thing to do. Tariffs get the attention of my constituents, and may raise costs. What will you do to open markets?

I think we're going to see retaliatory tariffs.

Free trade must be balanced against fair trade.

TCJA

Raphael Warnock (D-GA): The benefits of the TCJA tilted toward the top of the income scale.

In 2013, Congress extended the Bush tax cuts for all but those with the highest incomes. Would a similar approach, limited to $400,000 in income or lower, reduce the debt?

Lower incomes experienced a greater wealth increase in the wake of the TCJA.

No. You would capture a large amount of small business owners.

It's important to put in incentives for businesses to invest.

TCJA

Marsha Blackburn (R-TN): We have had much discussion with the Biden administration over how the $400,000 income number works, and they came up with total positive income. Section 199A is vital to small businesses and must be made permanent so we can have a main street revival.

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45Z

Roger Marshall (R-KS): Section 45Z is important to rural America but should not offer any benefit to foreign entities.

I look forward to working with you.

Debt limit

Elizabeth Warren (D-MA): President Trump supports eliminating the debt limit, as do I.

Republicans in Congress want to raise the debt ceiling and give new benefits to the wealthy. The 2017 tax cuts mostly benefited the wealthy and corporations. Republicans want to extend them. Would you end them for any group?

The debt limit is a very nuanced convention. I would like to survey market participants with this amount of debt. If Trump wants to do that, I will work with him.

Insurance

Sheldon Whitehouse (D-RI): The biggest risk of economic collapse is with the insurance industry, because without insurance you can't get mortgages, etc. I ask you to review a report on insurance unavailability. All of us need to be alert regarding this climate-change driven insurance problem in light of recent events.

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Testimony from the hearing is available here.

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Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young

  • Any member of the group, at (202) 293-7474.

Document ID: 2025-0259