[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                              HEARING WITH
                    TREASURY SECRETARY JANET YELLEN

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 30, 2024

                               __________

                          Serial No. 118-FC25

                               __________

         Printed for the use of the Committee on Ways and Means
         
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                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
56-868                  WASHINGTON : 2025                  
          
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                      COMMITTEE ON WAYS AND MEANS

                    JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida               RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska               LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania             MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona            JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois               EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio                  BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas               DANNY DAVIS, Illinois
DREW FERGUSON, Georgia               LINDA SANCHEZ, California
RON ESTES, Kansas                    TERRI SEWELL, Alabama
LLOYD SMUCKER, Pennsylvania          SUZAN DelBENE, Washington
KEVIN HERN, Oklahoma                 JUDY CHU, California
CAROL MILLER, West Virginia          GWEN MOORE, Wisconsin
GREG MURPHY, North Carolina          DAN KILDEE, Michigan
DAVID KUSTOFF, Tennessee             DON BEYER, Virginia
BRIAN FITZPATRICK, Pennsylvania      DWIGHT EVANS, Pennsylvania
GREG STEUBE, Florida                 BRAD SCHNEIDER, Illinois
CLAUDIA TENNEY, New York             JIMMY PANETTA, California
MICHELLE FISCHBACH, Minnesota        JIMMY GOMEZ, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio

                       Mark Roman, Staff Director
                 Brandon Casey, Minority Chief Counsel
                                 ------                                

                         C  O  N  T  E  N  T  S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Hon. Jason Smith, Missouri, Chairman.............................     1
Hon. Richard Neal, Massachusetts, Ranking Member.................     2
Advisory of April 30, 2024 announcing the hearing................     V

                               WITNESSES

Janet L. Yellen, United States Secretary of the Treasury.........     4

                    MEMBER QUESTIONS FOR THE RECORD

Members Questions for the Record to and Responses from Janet L. 
  Yellen, United States Secretary of the Treasury................   141

                   PUBLIC SUBMISSIONS FOR THE RECORD

Public Submissions...............................................   169

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                              HEARING WITH
                    TREASURY SECRETARY JANET YELLEN

                              ----------                              


                        TUESDAY, APRIL 30, 2024

                  House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:05 a.m., in Room 
1100, Longworth House Office Building, Hon. Jason T. Smith 
[chairman of the committee] presiding.
    Chairman SMITH. Thank you, Secretary Yellen, for appearing 
before this committee. I understand that it was 30 years ago 
this week that you were first nominated to a public sector role 
as a member of the Federal Reserve Board of Governors. It is a 
noteworthy record of service. I congratulate you, and I 
appreciate your willingness to answer our members' questions 
today. [Applause.]
    You have joined the recent chorus of economists who 
acknowledged that it was a mistake to call inflation 
``transitory.'' But it is worth noting the fundamental mistake 
of President Biden's reckless tax-and-spend policies that have 
sent the cost of living skyrocketing almost 20 percent since he 
took office.
    Families pay more today for pretty much everything than the 
day Joe Biden was sworn into office. Real wages are almost four 
percent lower than when he became President. The Federal 
Reserve has hiked borrowing rates to try to control inflation. 
Mortgage payments for the median-priced new home are now nearly 
$1,200 higher per month. Prices at the store are up. The cost 
of a gallon of gas is roughly 50 percent higher today than when 
President Biden took office. These are the facts. This is the 
reality that American families are living in President Biden's 
economy.
    Instead of allowing families hit by these high prices to 
keep more of their hard-earned money, President Biden wants the 
highest tax increase on families and small businesses in 
American history. Last week President Biden called for the 
Trump tax cuts to expire, promising, ``If I am reelected, it is 
going to stay expired.''
    So President Biden's plan is for the average family of 
four, making $75,000, to pay an extra $1,500 to the IRS each 
year. President Biden's promise is that the Child Tax Credit 
will be slashed in half. President Biden's promise is that 
small businesses will face a 43.4 percent tax rate. This will 
all happen when the Trump tax cuts all expire under his watch. 
Basic facts.
    President Biden's promise is that family farms will be 
forced to sell off to big corporations to pay the death tax. In 
his latest budget President Biden continues breaking his 
promise to not raise taxes on families making less than 
$400,000. Under the President's plan seniors will see more of 
their life savings captured by the Federal Government. Small 
businesses will be taxed on their sweat equity and face tax 
rates approaching 50 percent. Energy producers will pay more, 
weakening America's energy independence.
    Madam Secretary, your own Department's data shows that 
millions of Americans earning less than $400,000 will end up 
paying a portion of your proposed business tax increases. That 
is on top of the new audits that will be coming from the IRS, 
which you conceded in this committee last year. Over 90 percent 
of those audits will fall on middle-class earners and small 
businesses.
    To add insult to injury, under one-party rule Democrats 
spent billions of taxpayer dollars on welfare for the wealthy 
and well connected. They gave the wealthy tax credits for 
leasing or buying luxury electric vehicles, while working 
families got higher prices from the so-called Inflation 
Reduction Act. Under that same law, the Biden Administration is 
sending billions of taxpayer dollars to Chinese companies tied 
to their communist government, all in the name of climate 
change.
    China is an adversarial nation, spreading its influence 
around the world at the expense of American workers and 
producers. America should be standing up to China's unfair 
practices, not using tax dollars to make us even more dependent 
on China. The record of the 2017 Trump tax cuts could not be 
more different than the policies of this Administration. The 
Congressional Budget Office found that after the law went into 
effect the share of taxes paid by the top one percent of 
households increased, while the burden falling on lower-income 
earners decreased. Real median household income increased by 
$5,000, a bigger gain than the prior eight years combined. The 
officially reported poverty rate dropped to its lowest level in 
U.S. history, and Black and Hispanic unemployment reached 
historic lows. We reversed the decades-long trend of American 
companies picking up and moving their jobs, factories, and 
money overseas.
    Beyond our borders the Biden Administration has adopted a 
posture of surrender and retreat. The OECD global tax deal the 
Administration is trying to negotiate would surrender America's 
tax revenue and jobs to foreign countries. Congress writes the 
laws, not bureaucrats negotiating behind closed doors. This 
deal has no path forward in this Congress.
    I hope today we can get some answers on why President Biden 
insists on tax hikes for working families, while the wealthy 
and well connected receive cash handouts for their Green New 
Deal spending.
    Thank you for appearing today, and I look forward to your 
testimony.
    I now recognize the Ranking Member Neal for his opening 
statement.
    Mr. NEAL. Thanks, Mr. Chairman.
    Madam Secretary, we are honored to have you in our presence 
today. We also want to highlight what has been a remarkable 
career: chairman of the Council of Economic Advisers; chairman 
of the Federal Reserve Board; and a successor to Hamilton as 
Secretary of the Treasury. We are honored by your presence.
    Your team has been hard at work electrifying our nation, 
ushering in a new era at the IRS, and implementing Joe Biden's 
record-breaking economic agenda, all with the American people 
at the center of the work. Even the Wall Street Journal 
recently noted that our economy is the envy of the world. It is 
a well-deserved recognition for an administration that has 
created 15 million jobs, spurred a small business boom, and 
rebuilt an economy from the bottom up, the middle out, and 
breaking record after record.
    Four years ago, this success was unimaginable, and it 
certainly was never guaranteed. Millions were without a job at 
no fault of their own. The grocery shelves were bare, and we 
had no answers for the mysterious virus taking the country by 
storm. And then President Joe Biden took office, returning our 
nation to one of science, sensibility, and, for sure, 
stability.
    Starting with the American Rescue Plan and most recently 
with the Inflation Reduction Act, which came from this 
committee, Democrats' legislative successes have helped to 
transform the nation. We are bringing down healthcare and 
household energy costs. The clean energy economy has created 
over 270,000 jobs, and everywhere you travel you can tell that 
infrastructure projects are underway across the country.
    Thanks to our multi-year investment, the Internal Revenue 
Service has had another outstanding filing season. I am pleased 
with how, in such a short order, the agency has stood up to 
secure a way to file tax forms. I know many folks in the 
Commonwealth were able to use this program to ease their filing 
experience this year, including a state senator who mentioned 
it to me yesterday. And after years of underfunding at the 
hands of our Republican colleagues through their budget cuts, 
returns are being processed faster, and more Americans are 
getting the service they deserve. And already, $500 million in 
taxes owed from very wealthy people have been recovered.
    Looking ahead, the President's budget supercharges this 
progress and will finish the job for our people. The 
President's budget ensures that they have the supports 
necessary to not only fully participate in our workforce, but 
also to raise families and care for loved ones as we have 
witnessed wages going up, and the responsibility that we have 
to hold the well-connected accountable.
    Amid all of this success, our colleagues on the other side 
have had difficulties trying to use their gavels for the work 
of the American people. The amount of time that has been wasted 
in this Congress on chaos, conspiracies, impeachments--and we 
have been fielding questions about this expiration of their tax 
scam for next year. There are still over eight months left in 
this Congress and many more until these provisions expire. But 
it seems as though legislative opportunity is well already 
being considered by the Congress. I have seen their former 
leader calling for the devaluation of the dollar, stunting and 
even, in some cases, repealing much of our legislative progress 
in the name of politics. It is deeply unpopular, and it puts 
the health of our economy and countless paychecks on the line.
    While we expand what is possible and build the economy of 
the future, our colleagues plot the next round of trickle-down 
economics with another round of tax cuts for the wealthy. I 
didn't ever believe that advisers to the former President would 
be suggesting that we manipulate our currency, or we subtract 
from the independence of the Federal Reserve Board that is 
now--has a chairman who is a Republican. This is unheard of, 
that these sorts of--our economy would be jousted with in the 
coming months.
    I have said it before and let me say it once more: The 
majority is a threat to the health and economic security of our 
American people. Time to get past the chaos. Time to get past 
the conspiracies and get on with our work.
    We look forward to hearing you as you set the record 
straight, and pleased that you are joining us again.
    Let me yield back the balance of my time.
    Chairman SMITH. Thank you, Ranking Member Neal.
    Today's sole witness is United States Secretary of the 
Treasury, Ms. Janet Yellen.
    The committee has received your written testimony, and it 
will be made part of the formal hearing record.
    Secretary Yellen, you may begin when you are ready.

                 STATEMENT OF JANET L. YELLEN,
            UNITED STATES SECRETARY OF THE TREASURY

    Secretary YELLEN. Thank you, Chairman Smith, Ranking Member 
Neal, and members of the committee. Thank you for the 
invitation to testify.
    The Biden Administration has driven an historic economic 
recovery over the past three years. GDP growth has been strong, 
growing three percent over the past four quarters. Inflation 
has decreased significantly since its peak, though we have more 
work to do.
    The labor market is also remarkably healthy, with the 
unemployment rate below 4 percent, for the longest stretch in 
over 50 years. Real wages and household median wealth have 
increased since before the pandemic, and families are putting 
their additional income and accumulated savings back into the 
economy. Consumer sentiment is up 21 percent from 1 year ago. 
President Biden and I are taking additional actions to bring 
down the costs of key household expenses like energy, 
prescription drugs, and housing.
    We are also focused on expanding our economy's capacity to 
create good jobs while reducing the deficit. As we implement 
the Bipartisan Infrastructure Law, the CHIPS and Science Act, 
and the Inflation Reduction Act, we are creating economic 
opportunity for Americans across the country, including those 
without college degrees and in communities that had 
historically been overlooked or left behind.
    Companies have announced over $675 billion in clean energy 
and manufacturing investments since the start of this 
Administration, some of which I have gotten the opportunity to 
see firsthand.
    The modernization of the Internal Revenue Service, made 
possible by the IRA and discretionary appropriations, has 
enabled us to combat tax evasion by the wealthiest Americans 
that costs our country over $150 billion a year. And it has 
made it easier for taxpayers to file their taxes and get the 
credits they are owed.
    We met or exceeded all the goals we set out for this filing 
season, including reaching an 88 percent level of service, 
saving taxpayers over 1.4 million hours of hold time, and 
providing an additional 11,000 hours of in-person assistance 
compared to last year.
    We also successfully launched the Direct File Pilot 
Program, an easy, free, and secure way to file taxes on a 
computer or mobile device with over 140,000 accepted returns in 
the first year.
    The President's budget proposes additional investments to 
lower costs for workers and families, and strengthen our 
economy while reducing the deficit, including making permanent 
the expansion of tax credits for health insurance premiums 
enacted in the American Rescue Plan and extended in the IRA, 
and expanding the Earned Income Tax Credit, Child Tax Credit, 
and Low-Income Housing Tax Credit. These proposals would help 
make health care more affordable, reduce child poverty, and 
give working families more breathing room in their household 
budgets.
    We can make these investments while reducing the deficit by 
$3 trillion over a decade through a combination of smart 
savings and tax proposals. President Biden and I have proposed 
implementing a billionaire minimum tax so that the top 100th of 
a percent pay their fair share, raising the tax on corporate 
stock buybacks to encourage businesses to reinvest profits in 
their workers and grow their companies, and closing estate and 
gift tax loopholes that allow wealthy Americans to pay less 
than they would otherwise owe.
    As a whole, the President's budget will enable us to 
address costs that families face right now and to bolster our 
country's economic strength for the years ahead.
    [The statement of Ms. Yellen follows:]
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    Secretary YELLEN. I will now be happy to take your 
questions.
    Chairman SMITH. Thank you. We will now proceed to the 
question-and-answer session.
    Madam Secretary, in all four of President Biden's budgets 
he plans to hit middle-class families with a multi-trillion-
dollar tax increase, starting in 2026. He has promised to let 
the Trump tax cuts expire. Isn't it true that President Biden 
is promising a $1,500 tax hike on a family of four earning less 
than 75,000 by that action?
    Secretary YELLEN. The President has been very clear that no 
family earning less than $400,000 will face a tax hike. He has 
not proposed such a thing since he took office, and he is not 
proposing to allow that to happen when parts of TCJA expire.
    Chairman SMITH. So----
    Secretary YELLEN. He----
    Chairman SMITH. When you testified at the Finance Committee 
last month, you said, ``The President does not have a plan to 
address the coming tax hikes.'' That was at the Senate Finance 
Committee last month. Isn't it true that, without a plan, the 
President would slash the Child Tax Credit in half, which means 
parents lose $1,000 from their pocketbooks for each child each 
year?
    Secretary YELLEN. The President has principles that will 
guide his negotiations with Congress over how to handle this, 
and his principles--he has made clear that he opposes 
increasing taxes on people earning less than 400,000. He 
supports cutting taxes for working people and families with 
children----
    Chairman SMITH. So does that----
    Secretary YELLEN [continuing]. To give them more breathing 
room----
    Chairman SMITH. Madam Secretary, does that mean that he 
will support the Child Tax Credit to be made permanent at 
$2,000 that was put in the Trump tax cuts? Would the President 
support that? Because that affects working families.
    Secretary YELLEN. The President has proposed in his most 
recent budget expanding the Child Tax Credit, and has supported 
the Wyden-Smith legislation that would increase the Child Tax 
Credit now, as well.
    Chairman SMITH. Would you say that it would be true that 
leaving the Trump tax cuts expired means President Biden would 
roll back Republicans' guaranteed deduction, resulting in a tax 
increase of $3,373 for a family earning less than $75,000?
    Secretary YELLEN. What I said, what the President has 
clearly articulated, is that no family earning under $400,000 
will see their taxes go up in any set of proposals that the 
President is willing----
    Chairman SMITH. So I appreciate that. We have looked at 
every budget that has been presented, and you have called for 
the expiration of the 2017 tax cuts, but there is no plan, as 
you testified before the Senate Finance Committee, saying that 
the President has a plan with regards to how to make sure there 
is no tax increases less than $400,000.
    I would love and welcome, and I think the American people 
would welcome, a plan from the President. In fact, he loves to 
interject in all kinds of policies. I would think he would want 
to, there.
    In testimony before the committee, former Senator Phil 
Gramm called the Biden Administration's decision to cut out 
Congress and unilaterally negotiate a tax deal with bureaucrats 
in Europe, ``The greatest abuse of the Constitution of the 
United States,'' was Senator Phil Gramm's comment when he 
testified here.
    Each of the Biden Administration's failures at the OECD can 
be traced to its decision to act unilaterally and without 
Congress. Will you commit to reject any OECD profit 
reallocation plan that disproportionately impacts American 
companies or allow U.S. tax revenues to be stolen away by 
foreign governments?
    Secretary YELLEN. Well, let me say that the Administration, 
the Biden Administration, has worked very closely with Congress 
to inform and get input on Congress's priorities to guide these 
negotiations over the last three-and-a-half years, and will 
continue to do that. And I strongly believe that the Pillar Two 
agreement that has been reached is very much in support of 
goals that are good for this country.
    The United States has been the only country, until this 
agreement was signed, to impose a tax on the overseas profits 
of its multi-nationals. And with this agreement secured is that 
all countries now will tax the profits of their multi-lateral--
multi-national companies, which creates a level playing field 
for American companies and will stop the race to the bottom. 
And the United States will benefit by adopting the minimum tax 
that is consistent with----
    Chairman SMITH. So Secretary Yellen----
    Secretary YELLEN [continuing]. The Pillar Two agreement.
    Chairman SMITH [continuing]. The communication from the 
very first time we ever had a conversation, I raised the issue, 
for example, of the research and development tax credit not 
being accounted for during OECD, but direct government 
subsidies of the Chinese Communist Party get much more credit 
than our research and development tax credit.
    You have said that you have worked with Congress. We have 
been raising that from day one. We have been providing how 
detrimental that would be to U.S. companies by empowering the 
Chinese, which you have visited that country several times in 
your tenure, which has empowered them, but you have done 
nothing with regards to that.
    Secretary YELLEN. I am sorry, but we have.
    Chairman SMITH. What have you done?
    Secretary YELLEN. We are negotiating with other countries 
right now to try to get favorable treatment for the R&D tax 
credit, and I am hopeful that these negotiations will be 
successful.
    And I would point out that other tax credits, including the 
green tax credits and credits affecting the Low-Income Housing 
Tax Credit have been codified as continuing under Pillar Two.
    Chairman SMITH. So I will just reiterate again, our concern 
is with almost $200 billion leaving American companies and 
going to foreign nations under the plan that this 
Administration negotiated with Europeans, and we are adamantly 
opposed to that.
    The Democrats' so-called Inflation Reduction Act that was 
supposed to prevent electric vehicle tax credits from going to 
foreign entities of concern in China and adversarial nations. 
But Treasury has created multiple loopholes that will send 
American taxpayer dollars to Chinese billionaires and Chinese 
manufacturers. Isn't it true that the foreign entity of concern 
rules written by your Treasury Department are more China-
favorable than the same foreign entity of concern standards 
from Biden's Commerce Department for semiconductors?
    Secretary YELLEN. I believe that they are similar. These 
are very strong restrictions that, beginning this year and then 
continuing next year, preclude companies from receiving the 
$7,500 credit if this year they contain battery components that 
are--have originated in a foreign entity of concern. And next 
year it will affect critical minerals and processing.
    We have worked very closely with the Department of Energy 
and the Department of Commerce, other--it has been an 
interagency work to formulate these FIAC rules in a way that 
will certainly restrict China from profiting from the tax 
credit.
    Chairman SMITH. I think it is pretty clear that Treasury's 
version of these rules would allow Chinese billionaires to 
receive hundreds of millions of taxpayer dollars, as confirmed 
by the non-partisan Joint Committee on Taxation. So in 
response, this committee recently passed the End Chinese 
Dominance of Electric Vehicles in America Act, led by 
Congresswoman Carol Miller, which would close those egregious 
loopholes and protect the American taxpayer. Treasury must do a 
better job of pushing back against our foreign adversaries.
    I now recognize the ranking member for questions.
    Mr. NEAL. Thanks, Mr. Chairman.
    Great job on China. You were firm. You were very strong, 
very assertive.
    IRA has worked. How about the harmonization of 
international tax rates so people don't seek the lowest tax 
jurisdiction, even though that is not where profits have been 
earned?
    Good work on the CHIPS Act. Really good work on the 
infrastructure bill. Certainly, the American Rescue package. 
This is a great story for us to tell.
    So I want to give you some time to talk, Madam Secretary. 
Implementation of the Inflation Reduction Act is really 
important. Let me give you a couple of minutes to talk about 
that.
    Secretary YELLEN. Well, let me just start by saying that 
although there is still more work to do, we have made 
tremendous progress implementing it. We have completed more 
than 60 guidance projects, and these are all on critical and 
complex issues. And we have been focused on getting the issues 
right. This involves collaboration with the Department of 
Energy, with EPA, and other experts to make sure that we are 
implementing the law effectively and as intended.
    It is also tremendously important, the impact that the IRA 
clean energy credits are having. We can see that they are 
catalyzing hundreds of billions of dollars of investment in 
cutting-edge, clean energy technology and strengthening our 
supply chains. and at the same time lowering emissions in line 
with our climate goals and creating good jobs across the 
country, and particularly in parts of the country that really 
have not seen a lot of burst of economic activity.
    Treasury has been doing research on the impact of the Act, 
and what we find is that investment is especially strong in 
communities that have not seen a lot of investment, that have 
lower income and a smaller fraction of college-educated 
workers. So this is making a huge difference. The response has 
been enormous, and I have had the privilege of seeing many of 
the projects that are being spurred, as well as training that 
is taking place. I have had the privilege of visiting many 
workforce training programs that have been started to give our 
workers the skills to fill the good, high-wage jobs that are 
being created by this IRA.
    Mr. NEAL. Thanks. And could you speak to labor 
participation rates?
    Secretary YELLEN. Yes. Labor force participation rates 
actually have moved up substantially for adult workers, male 
and female. They have now exceeded the--where they were pre-
pandemic. They are moved up a great deal and overall have moved 
up, as well.
    And there is a downward trend that we see in labor force 
participation due to demographics, but this is really 
offsetting that. And this means not only more people working--
and also in response to higher real or inflation adjusted 
wages. It also alleviates supply constraints, and it is one of 
the factors that has enabled our economy to grow last year, for 
example, at 3 percent and to create more than 200,000 jobs a 
month on a consistent basis.
    Mr. NEAL. Nine million jobs every day in America go 
unanswered, as we know. And that is part of the skills 
alignment that you have just spoken to. A better job for all of 
us has required perhaps community colleges.
    But just as I close out--and I thank you for your 
testimony--I also want to point out something else. Everybody 
on this committee during my time objected to Chinese efforts to 
manipulate currency. So hearing now that the former 
administration is talking about the idea that they might 
manipulate currency, they might threaten the independence of 
the Federal Reserve Board, I never thought the day would come 
when it would be Democrats standing up for the independence of 
the Federal Reserve Board before our Republican colleagues. And 
consistently, both parties stood up against Chinese currency 
manipulation, and you were a very remarkable part of that.
    So we thank you for your testimony; delighted you are here.
    Secretary YELLEN. Thank you so much.
    Chairman SMITH. Thank you. I now recognize the vice 
chairman of the committee, Mr. Buchanan.
    Mr. BUCHANAN. Thank you, Mr. Chairman.
    And thank you, Madam Secretary, for being here. We 
appreciate your service. A lot of us have had an opportunity to 
work with you over the years. I want to touch on two things and 
have a little bit of a conversation.
    IMF came out a couple of days ago with a report. They are 
very concerned about where we are at financially. My background 
before I got here, 30 years in business, a lot of entities, you 
know, basically hundreds and hundreds of balance sheets and 
income statements. I am very concerned, as well, because at 
some point, you know, 49 out of 50 governors have to balance 
the budget. You can't continue down this road.
    Now, they are concerned because our deficit this year went 
from 1.4 trillion last year to 1.7. Interest on the debt, as 
you know, is close to a trillion. I have been here long enough, 
not quite 20 years, but been here long enough to clearly know 
that in the last 20 years it is over $20 trillion in debt. And 
now there is a lot of finger-pointing going on, but we need to 
find a way to work together. It has got to be dealt with at 
some point.
    I know you have laid something out, but I have heard these 
stories--not so much from you, but others--about pretty 
pictures down the road. But I look around the room here, and I 
have 10 grandkids, and I look around the room, and there are a 
lot of kids in here under 30, and we are spending their money 
and we have got to get very real about it.
    If you are in the State of Florida, one thing they have to 
do is pass a balanced budget amendment. That is the only thing 
they have to do, but they have to do that. And by the way, 49 
out of 50 governors have to do the same thing.
    So I guess I ask you, what is your feeling about the IMF 
and their report a couple of days ago, where they are very 
concerned about where we are at financially and where we are 
going?
    Secretary YELLEN. Well, I would say I am not terribly 
concerned about where we are, but I do have concern about where 
we are going unless we undertake some significant steps to 
reduce the budget deficit. And if you look at the President's 
2025 budget, you will see that he has proposed $3 trillion in 
measures to reduce the deficit over the next decade. I think 
that is important, and----
    Mr. BUCHANAN. Let me ask you, Madam Secretary----
    Secretary YELLEN [continuing]. What it does is it keeps 
the--a key metric of the burden of the debt, which is real net 
interest that we have to pay on the debt
    Mr. BUCHANAN. I am limited on my time, and I want to get to 
this other question.
    You have talked about nobody paying any taxes above 400. I 
was chairman of the Florida Chamber, 130,000 businesses in the 
Chamber, and I would say 95 percent were pass-through entities. 
You are talking about letting that sunset. So what that means, 
so you understand, if someone has got 200 or 300 employees, or 
50 employees, you could very well be at 53 percent, 54 percent 
taxes all in, because the pass-through rate would go back to 
39.6, there is a 3.2.
    And then, if you look at states--I hate to say it, 
California and New York and some of the other states--they are 
great states, but they have another 10, 15 percent tax on top 
of it. So pass-through entities could very well--and then you 
are looking to get rid of 199A--could very well be north of 50 
percent.
    What are your thoughts on that?
    Secretary YELLEN. Well, the President is committed to 
ensuring that no family, including those with pass-through 
businesses, making under $400,000 would see their tax increase. 
But he does believe, for the sake of tax fairness, that it is 
appropriate----
    Mr. BUCHANAN. Well, let me----
    Secretary YELLEN [continuing]. For wealthy individuals----
    Mr. BUCHANAN. Let me just show you----
    Secretary YELLEN [continuing]. And corporations to pay 
more.
    Mr. BUCHANAN. I have been in the real world in terms of 
building businesses and everything else. You might have 60, 80, 
90 employees. You make 600, but then you have got to give up 
half of it or a good portion of it. Just 400 is nothing if you 
are trying to build a business, small and large. I am not 
talking about large corporations, I am talking about small 
businesses. And it will be a huge burden on these entities, you 
know, from that standpoint.
    So I am just telling you, if I look across Florida, a lot 
of these small and medium-sized businesses, yes, they do make 
600, but they don't take home 600. They take home 100, 150, 
200. They leave the capital in there to grow and build their 
business. That is the reality about where that is at.
    What are your thoughts?
    Secretary YELLEN. Well, as I said, I think the President 
feels it is important to tax those who are earning very high 
incomes at higher rates.
    Mr. BUCHANAN. One big thing is 199A. Where are you at on 
that, in terms of whether you are going to let that sunset, 
199As, a 20 percent for a pass-through entity?
    Secretary YELLEN. I am not sure, I need to get back to you 
on that.
    Mr. BUCHANAN. Yes. Well, let me know, because that is very 
critically important. We went from corporate rates, 35 to 21, 
but you can't have pass-through rates at 40 percent. It makes 
no sense because everybody is going to move to a C Corp.
    Mr. BUCHANAN. With that I yield back.
    Chairman SMITH. Mr. Doggett is recognized.
    Mr. DOGGETT. Thank you so much for your testimony today 
about a budget that demonstrates that we can put our country on 
sound financial footing, reduce our deficit, and make some new 
investments so long as we demand that the well-connected and 
large corporations pay their fair share, and that we begin to 
close some of the loopholes in a tax code that is so full of 
holes it looks like Swiss cheese.
    In contrast, what the chairman has been urging the Biden 
Administration to do is to embrace an extension of all of the 
very inequitable Trump tax breaks that I have seen estimates 
would cost $3.5 trillion in additional debt. At the same time 
that they express all this concern about the debt, they seem to 
be about building more of that debt. And I appreciate the fact 
that the President and you certainly understand the 
ramifications of that.
    They also spend a lot of time defending corporations that 
like to hide their profits on American sales in foreign tax 
havens. And I appreciate the leadership that you have shown the 
world at OECD and elsewhere to stop this race to the bottom.
    Why is it important that the United States implement fully 
the agreement that the European countries are already 
implementing to stop this global race to the bottom in 
corporate taxation?
    Secretary YELLEN. Well, thank you. I believe that this race 
to the bottom in corporate tax rates took place over decades 
around the world, one jurisdiction competing with others to 
attract investment, and the only beneficiaries from that were 
really the companies themselves. Workers in all the countries 
where this was taking place ended up bearing more of the tax 
burden, and countries found it increasingly difficult to tax 
corporations to raise the funding that we need to support 
middle-class families and to invest in our country.
    And so stopping the race to the bottom means multi-
nationals based in every country around the world will all face 
the same minimum tax. Some countries will charge more than the 
minimum tax. We have proposed and believe that the United 
States can--given the environment for business in our country, 
we can afford to do that, and we have proposed a minimum rate 
of 21 percent. Also, that would be in line with our proposal 
for the corporate alternative minimum tax.
    Mr. DOGGETT. As you know, some of the Republicans that 
really don't believe in taxing corporations at all have said, 
well, if you go above 15 percent, which they don't support 
either, and you go to a higher level, that this will reduce 
American competitiveness.
    How is it that our corporations, our multi-nationals would 
remain competitive if they pay a rate on their foreign profits 
that is higher than 15 percent?
    Secretary YELLEN. Well, competitiveness really has to do 
with differentials in incentives across countries. And prior to 
Pillar Two the United States was the only country that taxed 
the overseas earnings of its multi-nationals. We have the GILTI 
tax. It is a lower tax rate, and it is not country by country, 
but our companies did just fine with that. The rest of the 
world had nothing. Now the rest of the world will go to a 
country-by-country 15 percent minimum, which would leave the 
United States with the lowest rate. And we can--even if we go 
up to 21 percent, the differential is substantially smaller 
than it was before.
    Mr. DOGGETT. Thank you. I have also heard increasing 
concern that we place our cleaner domestic production on a more 
even playing field, the fact that we are importing steel and 
aluminum and some other products that are made in a very dirty 
environment abroad. What do you think should be done about 
trying to see that American companies are competitive, are not 
being subject to anti-competitive practices with this dirty 
production?
    Secretary YELLEN. Well, President Biden proposed, I believe 
last week or the week before, to actually raise taxes on--
tariffs on Chinese steel. Our firms are cleaner and China, in 
steel, suffers from tremendous overcapacity, which leads it to 
really sell it on fairly low prices globally. And I think it is 
appropriate to do that.
    Mr. DOGGETT. Thank you for your leadership.
    Secretary YELLEN. Thank you.
    Chairman SMITH. Mr. Kelly is recognized.
    Mr. KELLY. Thank you, Mr. Chairman.
    And Secretary, thank you for being here again and for 
spending so much of your life in working in this body to try 
and make policy that actually makes sense.
    That is why I still keep trying to figure out Pillar One 
and Pillar Two, the possible loss for us of almost $200 
billion. What is the offset for that?
    So how do we replace that lost revenue? How does that work 
into the whole idea of this?
    Secretary YELLEN. Well, that revenue estimate--you are 
referring to JCT, I believe, and that is an extreme negative 
case in--they indicated in their analysis that the outcome 
overall is uncertain. And in the most likely cases the outcome 
in terms of tax collections would be positive, not negative.
    Mr. KELLY. Now, I know that is all debatable, and I keep 
wondering why in the world the United States is so hell bent on 
giving up market to foreign countries and saying that this 
isn't the best interest globally of what we want to do. I am 
more interested in a very strong United States that remains the 
strongest country on the face of the Earth, that we don't have 
to depend on anybody else.
    Now, I understand that the U.S. is going to be presented an 
agreement on Pillar One to sign in the next two months. So does 
Treasury commit to work with Congress before signing the OECD 
Pillar One agreement?
    Secretary YELLEN. We have been in touch with Congress 
throughout this process.
    One of the things we heard from Congress on Pillar One is 
that there needed to be an opportunity for public comment. We 
heard that certainty around what is called Amount B that has to 
do with transfer pricing is very important to Members of 
Congress, and it is something where we need to make sure we get 
firm commitments from other countries.
    We also heard from Congress that getting a very clear 
definition of digital service taxes, what they are and what is 
ruled out, all this is very important and we agree. And those 
are our red lines, and it is what we are negotiating for in the 
final months of negotiations on Pillar One.
    Mr. KELLY. And I agree with you on everything you have 
said, that on its best day this can be--this whole scenario, 
what we are going through--can be considered unbelievably 
complicated, and how at the end of the day it is in the best 
interest of the United States.
    I have always thought that, you know, we seem to be getting 
into a push and pull on what constitutional authority lies with 
which body, and the idea that somehow Congress will be the 
afterthought in a process that absolutely it is supposed to 
control.
    So I am really interested, as you go forward on this, the 
sharing of that, all that information--I just don't understand 
the negotiations and the constitutional authority. And I know 
you can do certain things, and there are other things that you 
have to run through the Congress. My concern is that the 
Congress seems to be an afterthought now, and not the main 
consideration when we do these negotiations. And it is like, 
well, this is what you gave us some authority to do, so we are 
going to go ahead and do it. I just don't understand at all how 
we sell this to the people we represent, that somehow this is 
in the best interest of the United States.
    I still want to dwell on the fact that we have been losing 
market share because of policies that we have initiated. Not so 
much that we have strong foreign competition, it is that we 
have weak policy when it comes to maintaining our own market 
share. And for whatever reason, we seem to have become a global 
entity as opposed to the strongest country the world has ever 
known and a nation that is the first responder in everything 
that goes bad in the world. We are the first ones to be there, 
and we keep ceding off all of these different things that we 
have, all of these different abilities that we have.
    And so, no, I think it is more important to act globally 
right now. I would just suggest that I am looking at the globe 
right now, and the globe is looking at us to see--I wonder when 
the Yanks are going to show up. I just hate to see us keep 
giving up authority, and the negotiations taking place from the 
executive branch, and then being run through the Congress at a 
later date.
    So all I am asking you to do is commit. We need to know 
what is going on and what is taking place. I don't like giving 
anybody a pen to go ahead and sign on to something in an 
international trade and a global tax initiative. It just 
doesn't make sense to me. And I think it is totally 
unconstitutional. And in fact, it is just not the right way to 
do things.
    Secretary YELLEN. We have consulted with Congress 
throughout over the last three-and-a-half years.
    Mr. KELLY. Yes, yes. Well, I appreciate what you are 
saying.
    Secretary YELLEN. And any agreement would need to be----
    Mr. KELLY. Yes, yes, it depends----
    Secretary YELLEN [continuing]. Legislated and----
    Mr. KELLY. Ms. Yellen, excuse me, just to reclaim my--my 
time is up, but it depends on how you identify ``We have 
consulted with Congress.'' I like to be consulted before 
something happens, not after, where it just happened and--you 
guys are willing to sign on.
    Listen, thank you for your service to the country. I think 
it has been incredible. And thank you for being with us today.
    Mr. Chairman, I yield back.
    Chairman SMITH. Thank you.
    Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman, and thank you, 
Secretary Yellen, for being here today. But more important, for 
your tremendous leadership and your steady handedness in your 
position not only now, but over the years.
    I would like to start by noting a couple of data points, a 
few data points: 15 million jobs have been created under 
President Biden; more Americans have health insurance than ever 
before; Democrats expanded Child Tax Credit, cut child poverty 
by over 40 percent and benefitted over 35 million families; the 
IRS is holding wealthy tax cheats accountable, and has already 
recovered over $500 million in taxes owed; wages are outpacing 
inflation; and our economy is outperforming the rest of the 
advanced countries around the world. And Madam Secretary, you 
are in large part responsible for those successes, so thank you 
very much.
    I would like to start with a couple of things that you 
mentioned in your testimony. First is the implementation of the 
Inflation Reduction Act. As you mentioned, there were a host of 
provisions in that bill designed to create jobs, boost 
renewable energy, and lower costs for consumers. Can you talk a 
little bit more about the implementation of the clean energy 
tax credits in that Act?
    And are those incentives working?
    And what sort of investment are you seeing in renewable 
energy, manufacturing jobs, et cetera?
    Secretary YELLEN. Thank you. First, thank you for your kind 
words.
    So we are working around the clock to write the regulations 
that will provide certainty to households and businesses around 
the credits. We are seeing the ERA clean energy credits 
catalyze investment in clean energy technologies.
    We are concerned about our supply chains, particularly 
being over-reliant on China for many aspects of our clean 
energy, whether it is solar panels or batteries. We want to 
make sure that we are strengthening our supply chain at the 
same time we are creating good jobs and lowering emissions. And 
we are seeing many good jobs, and the wage and apprentice 
requirements to receive that large bonus really ensure that the 
jobs that are being created are good jobs.
    We are seeing investments in many parts of the country, 
especially places that are in need, whether they are areas of 
the country that were dependent on fossil fuels and have seen 
coal mines or plants close, areas that just haven't benefitted 
from very much investment. We are especially seeing good 
results there.
    And we are making sure that people know who can benefit 
from this law. It has unique features that non-profits and 
state and local governments can actually benefit from this law 
through the direct pay feature. We are working hard to make 
sure that potential beneficiaries understand how this can 
positively affect them.
    Mr. THOMPSON. Thank you very much. I would also like to ask 
about 2025 and the upcoming expiration of the 2017 Republican 
tax bill. I appreciate the President reiterating that no one 
making under $400,000 a year will see a tax increase.
    One of the things that has been left out by my friends on 
the other side of the aisle in talking about this is that it 
wasn't paid for, their bill was not paid for. And that, by 
definition, is inflationary.
    So in your view, what are some of the more responsible ways 
that we might offset the costs of any of the TCJA extensions?
    Secretary YELLEN. Well, the President has proposed a very 
large number of raisers in his budget, and all of them could be 
used for this purpose. He is proposed raising the stock buyback 
tax; raising the corporate alternative minimum tax; enacting 
Pillar Two, which would bring in substantial revenues; 
raising--we would raise--proposed to raise the corporate income 
tax to 28 percent--still a cut relative to pre-TCJA, but 
substantial revenues; a billionaires tax that would ask those 
extremely high-income individuals, wealthy individuals to pay 
something more in line with what nurses and firefighters pay in 
their taxes. And there are a wealth of ideas there on how we 
can finance this.
    Mr. THOMPSON. Thank you, Madam Secretary.
    I yield back.
    Chairman SMITH. Mr. Schweikert.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    Madam Secretary, first in this discussion, conversation, my 
basic principle is at the scale we must borrow at we want 
stability. We want liquidity. You know, we don't need any 
hiccups out there. And if some of this is a little off, you can 
pass me off to staff.
    But first I want to touch on cash balances. And part of 
this is there are a couple of reports out there that basically 
say statutory mechanics, when the current authority for 
borrowing starts to run out we should be doing an operating 
cash balance of around $23 billion. That seems dramatically too 
low. You know, in previous years you would run--the Treasury 
would in 2023--a $600 billion cash balance.
    Secretary YELLEN. That is right.
    Mr. SCHWEIKERT. Today you are running over 900 billion.
    This is actually more of a mechanical, technical question. 
Do you need us, as the Ways and Means Committee, to update any 
statutory authorities or mechanics of what type of operating 
balance do you need to maximize stability?
    You know, you saw the blip we had yesterday when you did 
your, you know, refunding announcements, and that was only, 
what, a $41 billion tick up for that quarter. What do we do to 
maximize interest rate efficiency? Do you need any additional 
authorities?
    Secretary YELLEN. I don't think we need legislation. We 
have standing policy on operating cash balances. And I believe 
around 500 billion would be a normal level, given the volume.
    Mr. SCHWEIKERT. Well, but you have been running 
dramatically higher than that traditional 500, 600 billion.
    Secretary YELLEN. Well----
    Mr. SCHWEIKERT. You know, I think in the previous quarter 
you were running in the mid-800s; now you are running over 900.
    Secretary YELLEN. I think it depends on what our flow of 
expenses are. It can vary over time. And, of course, it has ups 
and downs as we--you know, tax collections are bunched around 
April 15th.
    But what caused our cash balances to run to exceptionally 
low levels in the past was the failure of Congress to raise the 
debt limit.
    Mr. SCHWEIKERT. Well, but where I was going with that is 
there is an analysis that the statutory authority actually 
requires you to go down to 23 billion, and that may be one of 
your legal team saying, okay, you have the authority to ignore 
that interpretation of the statute.
    So, look, this is not a gotcha question. I want to know 
what we can do to help maximize stability.
    Secretary YELLEN. I would be glad to get back to you with 
details on that. But I would say during my time the major 
threat I have seen to our cash balance is that when Congress 
fails to raise the debt ceiling----
    Mr. SCHWEIKERT. The trigger dates.
    Secretary YELLEN [continuing]. In a timely way, we have 
absolutely no alternative but to run down our cash balances. 
Otherwise, we would be unable to pay our bills.
    Mr. SCHWEIKERT. Yes, understood. I have a whole chart on 
your extraordinary measures and what is in your balances.
    I was just sitting here playing, and I have smart, much 
smarter, people on staff--like your billionaire tax. Okay. 
Great politics. Do I read it properly in your testimony, it is 
a .01 percent? Okay, fine. But that works out to, over the next 
10 years, on an average of 0.143 percent of GDP. This year our 
burn rate is close to 9, 9.6 percent of GDP.
    My fear is the politics of theatrics and the actual math. 
We do a crappy job telling each other the truth and telling the 
public the truth of the fiscal--because you gave some brilliant 
speeches when you were Federal Reserve chairwoman on this type 
of debt future. And we are hitting numbers that we weren't 
supposed to hit for 10 years.
    When we did a quick analysis of some of the President's tax 
proposals, we were coming up--when we did the economic 
effects--of about a point and a half, 0.6 percent of GDP. Okay. 
But if we are burning over nine percent of GDP in borrowing, 
and this is in the time this year where tax receipts are up, 
what, seven percent?
    Secretary YELLEN. I am not sure just how much they are----
    Mr. SCHWEIKERT. My fear is, as a committee, we are not 
telling each other the truth of the scale of the borrowing 
stress. We are basically, the United States and China, we are 
consuming much of the world's available capital. I really wish 
we could have a more adult conversation of the scale of----
    Secretary YELLEN. I----
    Mr. SCHWEIKERT. This is almost hitting dystopian levels of 
numbers.
    And with that, Mr. Chairman, I yield back.
    Chairman SMITH. Mr. Larson.
    Mr. LARSON. Thank you, Mr. Chairman.
    And Madam Secretary, welcome to the committee. I want to 
associate myself with the remarks of Mr. Neal in saluting, I 
think, what every member on this committee knows: Your 
remarkable and incredible tenure of service to this great 
nation of ours, we are blessed to have you with us today.
    We are also blessed to have with us today another great 
woman who is in the audience with us today, Elsie Pascrell. And 
I think every member of the committee would join with me in 
recognizing that she gets a direct shot to heaven. [Laughter.]
    Mr. LARSON. Elsie, welcome here to the committee.
    Madam Secretary, I want to commend the Biden 
Administration. I think Mr. Thompson went through the list of 
accomplishments, et cetera, but I especially want to focus on 
what you have repeatedly said, that the President--and he has 
been rock solid on this--has said that he is not going to raise 
taxes on anybody who is making under 400,000.
    And he has also been out there as a champion of both not 
only protecting but preserving Social Security. And again--and 
let's do the reality check here by saying that people making 
over $400,000 ought to be paying what people making 35, 50, 75, 
100,000 are paying. And currently, because I think this comes 
as a surprise to most Americans, most earning above that level 
pay little or nothing. Millionaires end up finishing 
contributing to Social Security in February, but zillionaires 
and wealthy people pay little at all or they circumvent the tax 
code all together and don't pay into the nation's number one 
anti-poverty program for the elderly and the number-one anti-
poverty program for children.
    I commend President Biden for not only saying that we want 
to protect Social Security, but we want to expand its benefits, 
and we can do so by having all Americans pay their fair share. 
He couldn't have been clearer in his State of the Union message 
that this is what it is about.
    Of course, as you know, Madam Secretary, it is Congress 
that has to make these moves, and Congress hasn't done anything 
to enhance Social Security in more than 50 years.
    And talk about numbers, with 10,000 Baby Boomers a day 
becoming eligible for Social Security, it is long overdue that 
Congress take action. I applaud the President for doing so in 
such a straightforward, dramatic way, and paying for it.
    So my brief question to you, Madam Secretary, could you 
discuss the importance of Social Security and why the President 
has adhered to making sure that we are not taxing people below 
400,000?
    Secretary YELLEN. I would be happy to. Every year Social 
Security lifts tens of millions of seniors out of poverty. It 
is the Federal Government's most important anti-poverty 
program, and it is a guarantee that generations of Americans 
have counted on. Namely, after working hard throughout one's 
life, that you will be able to retire with security and with 
dignity.
    And for those reasons, President Biden feels very strongly 
that we need to preserve the benefits and even extend the 
benefits of Social Security and honor the commitments that we 
have made to the nation's seniors. He has committed to working 
with Congress to protect Social Security for this generation 
and future generations.
    Mr. LARSON. I thank you, Madam Secretary.
    And I yield back.
    Chairman SMITH. Dr. Wenstrup.
    Dr. WENSTRUP. Thank you, Mr. Chairman.
    Thank you for being with us today, Secretary Yellen. I 
appreciate it. Much of our conversation today has been focused 
on the future of our nation's tax code, of course, as we 
approach the expiration of many key policies from the Tax Cuts 
and Jobs Act next year.
    You know, when I think about tax policy, I think about 
making America the best place in the world to do business and, 
for that matter, the best place to work. And right now we are 
in a fierce global, economic, political, and strategic 
competition. It is not the same as after World War II. Our 
adversaries, like China, want to dominate the world markets, 
and they are doing that. And they want to make America and our 
allies dependent on key industries and supply chains. I know 
you know that. Keeping our tax code globally competitive is a 
crucial part of strengthening our domestic manufacturing base 
and reducing our dependance on unreliable supply chains or 
those that can be used as weapons, if so desired, by our 
adversaries.
    Secretary, I know you have spoken at length about the need 
for de-risking--I agree with you on that--when it comes to our 
economic relationship with China, and your desire to see more 
friendshoring of our critical supply chains.
    I also know you recently visited China--thank you for doing 
that--to discuss economic issues, including the massive 
subsidy-driven industrial overcapacity that China has built, 
which is distorting global markets. I am not sure that we can 
always change what they do and their practices, but we can and 
should see what we can do to counter that, and I am glad you 
focused on the risk of China and what they pose to our 
security.
    But I am concerned that the Administration's tax policy 
proposals would take us in exactly the wrong direction when it 
comes to our economic security and our national security, for 
that matter. The Tax Cuts and Jobs Act was a huge step towards 
making our tax code globally competitive, bringing more 
business investment back to the United States. Since it passed, 
we have seen zero corporate inversions, and instead we have 
seen American businesses bringing back their overseas earnings 
to fuel investment and wage growth here in the states.
    So now, more than ever, we need to be working together to 
build on that type of progress, not reverse it by imposing 
crippling tax hikes on American families and businesses. I 
believe that is exactly what will happen if we do not act to 
renew key provisions of the 2017 tax reform law when they 
expire next year.
    Meanwhile, the negotiators from your department 
representing us at the OECD are preparing to give away the U.S. 
tax base and allow foreign countries to impose discriminatory 
taxes on U.S. companies. This does not help us. Anyone who runs 
a business would understand that. I believe that tax increases 
proposed by the President's budget and the failed global tax 
negotiations being supported by this Administration would 
severely harm our efforts to rebuild our domestic manufacturing 
and bring home critical supply chains.
    Secretary, the President's budget proposes increasing the 
corporate tax rate--it is one of the highest in the world, even 
higher than Communist China--which will make it much harder to 
bring manufacturing home from China and to meet your desire to 
de-risk from the PRC.
    One example: The Chinese have a monopoly on generic 
medications, all the way down to the Active Pharmaceutical 
Ingredients. How do we break that monopoly and reduce our 
health risk, our national security risk by increasing corporate 
tax rates, making us unable to compete?
    I mean, are you against or are you for domestic supply 
chain production to enhance our national security and our 
national health security for our critical needs? Because I just 
don't see how increasing corporate tax rate, making us less 
competitive in the world is going to bring business back to the 
United States, where we need it most.
    Secretary YELLEN. I certainly agree with the goal of having 
resilient supply chains. The idea of friendshoring means we 
will work with trusted allies.
    And in addition to sourcing domestically, in the case of 
critical drugs, certainly I think that is an area where it is 
important that we have domestic capacity and are not totally 
reliant on China and other countries that may not prove 
dependable in the future.
    Dr. WENSTRUP. But----
    Secretary YELLEN. And there are a variety of ways to 
promote this.
    Dr. WENSTRUP. Excuse me, though, who are we going to depend 
on, then?
    If we are increasing our corporate tax rate, that doesn't 
make us more competitive. And are we going to rely on our 
allies to reduce theirs? Is that the idea?
    I mean, this just makes no sense.
    Secretary YELLEN. Well, we----
    Dr. WENSTRUP. We have had no one leave.
    Secretary YELLEN. I would point out that the Pillar Two 
agreement does impose taxes on China, that regardless of what 
their subsidies are or how they choose to tax, the United 
States and other countries that adopt Pillar Two will have the 
ability to place taxes up to this minimum tax on China to try 
to level the playing field.
    So China will not gain any advantage if it chooses--it has 
said it will implement the deal.
    Dr. WENSTRUP. I doubt that----
    Secretary YELLEN. But if it doesn't do so, we will 
implement the deal on Chinese multi-nationals that compete with 
ours through a provision called the Undertaxed Payment Rule.
    Dr. WENSTRUP. Well, you had conversations with them. I 
would doubt that they said that they would cut their subsidies.
    I yield back.
    Chairman SMITH. Mr. Pascrell.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Welcome, Madam Secretary. So unemployment is at an historic 
low. Interrupt me when I say something that is not correct or 
can't be proven by data. Wages are rising. I want to come back 
to that in a minute. Inflation has plummeted. We got work to 
do. Factories are booming. America's economy is the envy of the 
entire world. There is no two ways about it.
    So I am proud of our efforts to make big business and rich 
tax cheats finally pay their fair share. What the heck is wrong 
with that? And we have made progress.
    We have not made progress in the area of the income gap 
that still exists, even when wages increased four to five 
percent. We have got to do something about the code, the tax 
code, the very tax code.
    You can draw a straight line from these winds to the 
policies enacted by President Biden and, yes, Democrats.
    Secretary Yellen, I am glad the budget includes finally 
closing the carried interest loophole, maybe the worst loophole 
in the entire tax code. My Ending Wall Street Tax Giveaway Act 
mirrors your proposal to ensure Wall Street executives and 
private equity tycoons pay their fair share. We came very close 
to closing that loophole, if you remember, in the Inflation 
Reduction Act. And I am not giving up because if we don't do 
that we continue to send the wrong message to the taxpayers. 
Now, you talk about competition, that is what we need.
    Madam Secretary, as the Congress continues to consider 
future tax legislation, can you commit to making carried 
interest fairness a top priority?
    Secretary YELLEN. Yes.
    Mr. PASCRELL. Question two. Early this year the GAO 
released a report. I requested that report on ways to crack 
down on wealthy tax cheats. It found that good enforcement 
returns $12 for every dollar spent. You remember that report?
    But identifying high-dollar cheating is a big challenge. 
They got every trick and every lawyer in the trade as rich tax 
cheats use sophisticated and brazen tactics to obscure their 
earnings. That is nothing new over the last 45 years.
    Madam Secretary, can you expand on plans to address gaps in 
the IRS hiring, training, and tech so that the agency has the 
tools to close the tax gap?
    Secretary YELLEN. The IRS is doing exactly that using the 
funding provided in the Inflation Reduction Act. Its budget was 
so limited after decades of cutting its budget as the economy 
grew that enforcement and the ability to hire competent tax 
lawyers, accountants, data scientists, and the like, that audit 
rates fell to exceptionally low levels on wealthy individuals, 
complex partnerships, and large corporations.
    And with the infusion of funds that the IRS has received in 
addition to, and importantly, improving consumer service 
dramatically, it is going after all of those tax cheats who are 
responsible for what is estimated as a $7 trillion tax gap over 
the next decade. And it has had an early success in going after 
1,000 individuals making more than $1 million who owed back 
taxes. It has already collected $500 million.
    But there is much further to go, and that is where the 
enforcement dollars are going. No increase, as I have promised 
and as the commissioner has promised, on households or small 
businesses earning under $400,000. It is all going to the areas 
that you named.
    Mr. PASCRELL. Thank you, Madam Secretary. Welcome to the 
neighborhood.
    And I yield back.
    Chairman SMITH. Dr. Ferguson.
    Dr. FERGUSON. Thank you, Mr. Chairman.
    Madam Secretary, thank you for being here. I want to see if 
you can help me understand some math, if you don't mind.
    With OECD proposals, Joint Tax said that Pillar Two is 
going to cost us $120 billion in tax revenue over a 10-year 
period. And OECD would--Pillar One would cost just $40 billion 
over 10 years. This is JCT. So you know, we have to use this. 
So you are looking at $160 billion, probably on the 
conservative side, of lost revenue coming into the Treasury 
because we are turning that revenue over to other countries.
    All right. If that is the case, and we are going to lose 
that revenue, that is one thing. But I can just point to two 
Georgia companies that will tell you that their analysis of 
Pillar One will cost them combined about $1 billion in sales. 
Now, if a company is going to lose $1 billion in sales, that 
means they are going to start cutting back, which means that it 
is going to put my fellow Georgians out of work. That doesn't 
make a whole lot of sense to me.
    So again, according to JCT, between Pillars One and Two, 
about $160 billion in lost revenue. Now, just laying the 
groundwork there, you made mention that you were going to 
propose or work with the President and our colleagues on the 
other side of the aisle to raise the corporate minimum tax, 
AMT, the corporate tax to 28 percent, implement a new 
billionaire tax. You had a laundry list of items, correct, that 
you believe we should be raising taxes on?
    Okay, so let me ask you something. If a company owes the 
Treasury $200 million in taxes, and you would like to collect 
those taxes to help with the deficit or spending, correct, but 
then they can turn around and write off all of that by buying 
green energy tax credits, how much of that money, then, of that 
$200 million is going to come into the Treasury?
    I mean, if I can wipe out my tax liability by buying green 
energy tax credits, what good does that do in coming into the 
Treasury?
    Secretary YELLEN. Well, if the firm is using the 
transferability feature to buy these tax credits, then another 
company that we want to benefit from those credits, the 
stimulus, and incentive that they offer but that lacks----
    Dr. FERGUSON. But that----
    Secretary YELLEN [continuing]. Sufficient tax liability, 
this is a way in which we provide----
    Dr. FERGUSON. But we are giving a pass to--I mean, analysis 
has shown that about 90 percent of these tax credits are going 
to go to companies with over $1 billion in revenue.
    And again, if you are looking to bring revenue into the 
Treasury to pay for whatever----
    Secretary YELLEN. Look, it is really the same thing as 
essentially making the tax credits refundable, which would have 
been----
    Dr. FERGUSON. How would we----
    Secretary YELLEN [continuing]. An alternative. That is a--
--
    Dr. FERGUSON. Why would we do that? Why would we give----
    Secretary YELLEN. Because----
    Dr. FERGUSON [continuing]. Companies like Amazon and 
Walmart, these major corporations----
    Secretary YELLEN. Because----
    Dr. FERGUSON [continuing]. Refundable credits to go spend 
money in the green energy sector?
    Secretary YELLEN. Because many of the companies that are 
responding to the IRA and building the clean energy economy we 
want to see are companies that lack sufficient tax liability to 
be able to benefit from these----
    Dr. FERGUSON. Wait a minute, wait a minute.
    Secretary YELLEN [continuing]. Tax incentives.
    Dr. FERGUSON. Madam Secretary, reclaiming my time, if you 
are going to go down that road, and you are going to say 
companies lack that tax liability, why are we doing it on green 
energy and not looking at pharmaceuticals, not looking at other 
technology?
    But bottom line, why wouldn't we just say to Amazon, okay, 
not to pick on them, but they are a highly profitable company--
why not just say, ``You have got to pay your taxes, and then 
you go buy a fleet of battery-powered vans if you want to''? 
You are cutting revenues, you are giving a tax break to the 
very people that my colleagues on the other side of the aisle 
are saying, they want them to pay their fair share. But they 
are not going to pay their fair share because they are going to 
go down this green energy deal----
    Secretary YELLEN. And----
    Dr. FERGUSON [continuing]. That absolutely undermines our 
competitiveness. It doesn't make sense. The math doesn't add 
up.
    Mr. Chairman, I yield back.
    Chairman SMITH. Thank you.
    Mr. Davis.
    Mr. DAVIS. Thank you, Mr. Chairman.
    Welcome back, Madam Secretary. Thank you for your work.
    Let me begin by offering my sincere appreciation to your 
staff, who are helping my office with a number of very complex 
constituent issues. Your staff is top notch, and for that I am 
grateful.
    In addition, I thank Treasury for its effort to work 
collaboratively with states to identify the owners and 
beneficiaries of the $30 billion in unclaimed savings bonds.
    And I know that you cannot comment because the rule is not 
final, but I wanted to share concerns that Representative Estes 
and I and others on this committee have raised about the 
proposed rule. Given that most of these unclaimed bonds come 
from the middle of the last century, when African Americans and 
others were excluded from banks and often turned to Treasury 
bonds as a key investment, I suspect that a high percentage of 
unclaimed bond holders will be Blacks and people of other 
minority group identities. Given these concerns and given the 
success of state treasurers in helping people find unclaimed 
property, I worry that the proposed rules would greatly limit 
the ability of states to help Americans get back their missing 
savings bonds. My hope is that the final rule will allow 
Treasury to work more collaboratively with states, as we 
intended when we enacted the law.
    And finally, in my remaining time, I would like to thank 
you for your hard work implementing the increased energy 
investment credit for solar power, especially in low-income 
communities, and ask if you could share any updates to this 
program.
    Secretary YELLEN. Thank you very much.
    And on the savings bonds issue, I appreciate your comments 
and we will make sure that they are adequately considered 
before final regs are finalized.
    And on the bonuses for low-income communities, we have 
worked hard to clarify the rules and make sure that there is--
that low-income communities--that is a special focus of the 
IRA--to make sure that they are able to benefit, especially 
from the credits for solar, wind, and other renewable energies. 
We are working to finalize a set of regulations on this, and 
there are also allocated credits for low-income communities 
that the Department of Energy is--has accepted applications and 
awarded funds.
    Mr. DAVIS. I thank you very much. And let me just ask, are 
these proven to be effective in terms of job creation?
    Secretary YELLEN. I think overall are--the data that we 
have amassed shows that the green energy--the green credits 
have been very effective at stimulating investment resulting in 
job creation. And those jobs are disproportionately in lower-
income communities with lower college graduation rates, also in 
rural communities and in communities that have been dependent 
on fossil fuel and seeing that--seeing job loss there.
    Mr. DAVIS. Thank you very much.
    And Mr. Chairman, I yield back the balance of my time.
    Chairman SMITH. Mr. Estes.
    Mr. ESTES. Thank you, Mr. Chairman. And thank you, 
Secretary Yellen, for joining us today.
    [Chart.]
    Mr. ESTES. As you know, last month the inflation came in 
hotter than expected for the third month in a row, which is a 
hit to American families by itself. But it is not just a one-
time impact. Inflation is cumulative. And hardworking Kansans 
have been suffering for three years now, as this chart behind 
me indicates.
    You know, since Joe Biden took office inflation is up over 
19 percent. The Joint Economic Committee estimates that Kansans 
are paying an average of nearly $1,000 more per month for the 
same goods and services, the same food, the same clothes, the 
same gas, the same rent that they did in January of 2021. And 
since then, in total, the average Kansan household has spent 
$23,600 more due to inflation. At the same time, net income is 
down almost four percent.
    I know your boss and his Administration like to point to 
rosier numbers, but the fact is for everyday Americans the 
chart behind me is the epitome of Bidenomics, and it is a 
complete failure.
    You know, several years ago, Secretary, you called 
inflation transitory. And since you have said that, I think 
that is the wrong word, but I guess I would like to ask you 
what you would call inflation now. What word would you use?
    Secretary YELLEN. Well, inflation has come down 
considerably, and the consensus of thinking among economists is 
that it was largely due to supply shocks that are mitigating. 
And our inflation has been quite similar to that in other 
advanced countries around the world, which suggests it was due 
to supply shocks connected with the pandemic.
    Mr. ESTES. I think you will have----
    Secretary YELLEN. Inflation has come down----
    Mr. ESTES. I think you will have a difference of opinion in 
economists. I mean, we even had Democrat and Republican 
economists in 2021 talking about the extra spending that was 
coming proposed by the Administration that was actually going 
to result in this inflation. And actually, that is what we have 
seen.
    Secretary YELLEN. Well----
    Mr. ESTES. You know, I think most Americans would use 
phrases like ``crippling,'' or ``painful,'' or ``hindering 
their pursuit of the American dream.'' In fact, my constituents 
tell me about the challenges they face when they fill up their 
cars, or buy their groceries, or pay the rent or mortgage. And 
the numbers show the pain behind me that is still continuing to 
increase to this day as a result of Bidenomics and the policies 
that have been increased by the Democrats over the last three 
years.
    Secretary YELLEN. I think Americans care----
    Mr. ESTES. I also want to switch gears a little bit before 
I run out of time. You mentioned earlier in a discussion with 
Chairman Smith that President Biden was not going to increase 
taxes on people making less than $400,000. In fact, I have a 
tweet here from Joe Biden dated one week ago today in talking 
about the Trump tax cuts. And he said, ``This tax cut is going 
to expire. If I am reelected, it is going to stay expired.''
    I did some quick calculations. And basically, what that 
means is that there is going to be a 25 percent increase in the 
tax rate on people that make less than $44,000. There is going 
to be an additional $14,000 tax increase on people making less 
than $95,000, and additional increases on others up until 
making the $400,000. So if this tweet is right that came from 
President Biden, he is going to increase taxes on people making 
less than $400,000.
    Secretary YELLEN. President Biden has repeatedly issued a 
set of principles that will guide his negotiations, and he has 
repeatedly said that----
    Mr. ESTES. I can send you the tweet.
    Secretary YELLEN [continuing]. He will not support 
increases on families making under $400,000. And I haven't 
looked at the tweet myself, but----
    Mr. ESTES. I am sorry, I really want to get to one other 
point----
    Secretary YELLEN [continuing]. That is not what he----
    Mr. ESTES [continuing]. I really want to get to one other 
point before we run out of time, but I can send you this tweet 
if you would like to see that later, after the committee.
    Secretary YELLEN. Well, I----
    Mr. ESTES. But I do want to talk a little bit about OECD. I 
know it has been brought up before, particularly Pillar One and 
Pillar Two.
    I mean, I have stated several times in the hearing room 
that, in principle, Republicans and Democrats are in favor of 
eliminating the discriminatory digital services taxes and 
provide tax simplicity and consistency for businesses in the 
growing digital economy.
    However, despite the ongoing discussions, we are still 
seeing more and more countries like Canada enact DSTs, and the 
proliferation of Pillar One and Pillar Two has provided foreign 
countries the opportunity to raid our tax base. In fact, Pillar 
Two, as pointed out by the Joint Tax Committee on Taxation, is 
going to cost the U.S. Treasury tax revenue--Pillar Two itself, 
as pointed out by my colleague, Representative Ferguson--that 
it is $120 billion.
    And earlier this year JCT reported on Pillar One and noted 
that the plurality of in-scope countries would be from the 
U.S., and likely that the U.S. Treasury would forego between 
100 million and $4.4 billion per year in tax receipts. In fact, 
I recently heard from one Fortune 100 company that they would 
be required to send between $100 and $500 million from the U.S. 
Treasury to countries like France and Germany and Japan.
    I think these policies that have been negotiated with OECD 
are dangerous for our U.S. tax base. We are already struggling 
to collect enough revenue, and I think we need to change 
course.
    I am sorry, I am out of time. I would like to talk more 
about this with you.
    But I will yield back, Chairman.
    Chairman SMITH. Thank you.
    Mr. Smucker.
    Mr. SMUCKER. Thank you, Mr. Chairman.
    Good afternoon, Secretary. I am over on this side. There we 
go. Fooled me, too.
    I would like to just clarify with you for those listeners 
watching this today the impact of your budget on the debt. Can 
you tell me the current level of our debt? What is the current 
debt amount?
    [Pause.]
    Mr. SMUCKER. It is about 34 trillion----
    Secretary YELLEN. Yes.
    Mr. SMUCKER [continuing]. Which includes debt held by the--
intergovernmental debt, as well.
    Secretary YELLEN. That is right.
    Mr. SMUCKER. And can you also tell me what the projected 
debt will be at the end of this budget period, at the end of 10 
years?
    Secretary YELLEN. So normally we look at debt held by the 
public, which----
    Mr. SMUCKER. Okay, we can use that number if you would 
like.
    Secretary YELLEN [continuing]. Which is currently about 28 
trillion.
    Mr. SMUCKER. Right.
    Secretary YELLEN. And in 2034, under our budget, I believe 
it would be around 45 trillion.
    Mr. SMUCKER. Yes, the----
    Secretary YELLEN. But GDP also grows, and the ratio to GDP 
would be a few percentage points more----
    Mr. SMUCKER. Well, it would be----
    Secretary YELLEN [continuing]. Than it is now.
    Mr. SMUCKER. It would be at 128 percent, and now it is at 
97. That is more than a few points.
    Secretary YELLEN. No, it would be at 105 percent in 2034.
    Mr. SMUCKER. Okay, that--debt held by the public. But it 
will be significant increase in----
    Secretary YELLEN. It is now about 100 percent, so----
    Mr. SMUCKER. Yes. Now 97, it would be about--it would be 
increasing. So it would be a significant increase in the debt.
    Secretary YELLEN. A small increase in the debt.
    Mr. SMUCKER. Yes, a significant increase in the debt.
    I want to refer also to your report on the fiscal health 
that came out just a month or two ago of the country. And you 
show that, given current financial policies, including that in 
your budget within 75 years we will just continue to see that 
increasing, it would be at 513 percent, or above 500 percent of 
GDP at the end of a 75-year period. You say in that report the 
current policy is not sustainable, and the cost of delaying 
policy reform is significant, will make it much harder to 
implement changes that will affect that trajectory.
    Do you think that is a real threat to the country going 
forward?
    Secretary YELLEN. Are you referring to the Social Security 
report there?
    Mr. SMUCKER. No, I am referring to your report on the 
nation's fiscal health done by the U.S. Treasury, signed by 
you.
    Secretary YELLEN. Okay. So we need to enact policies to 
make sure that the debt stays sustainable and we are on a 
fiscally sustainable path. And the President has proposed over 
$3 trillion----
    Mr. SMUCKER. So let's----
    Secretary YELLEN [continuing]. Of deficit reduction----
    Mr. SMUCKER. Let's talk about that. We have already 
established that the debt will increase significantly under 
this budget. So where do you get the three trillion in savings? 
Where does that come from?
    Secretary YELLEN. Well----
    Mr. SMUCKER. Because you are not decreasing spending.
    Secretary YELLEN. Well, in some areas there are spending 
decreases.
    Mr. SMUCKER. Not overall.
    Secretary YELLEN. But most of it comes from additional tax 
revenues----
    Mr. SMUCKER. Because we are allowing----
    Secretary YELLEN [continuing]. Because revenues have been--
--
    Mr. SMUCKER. Because we are allowing the Tax Cuts and Jobs 
Act rates to expire. Correct?
    Secretary YELLEN. Partly, but not----
    Mr. SMUCKER. About two trillion of three trillion. About 
two trillion----
    Secretary YELLEN. But not for----
    Mr. SMUCKER. You are projecting an additional two trillion 
in revenue----
    Secretary YELLEN. We are projecting----
    Mr. SMUCKER [continuing]. And counting that towards debt--
--
    Secretary YELLEN. We are projecting, in addition to that, a 
higher corporate income tax, moving that up to 28 percent, 
putting in place Pillar Two----
    Mr. SMUCKER. So Mr. Chairman, I would like to submit for 
the record an article from the Washington Post that shows the 
$2 trillion and talks about that being included in the budget, 
and then shows a significant portion of that will be taken by 
families who are earning less than 400,000.
    Secretary YELLEN. He is explicitly----
    Chairman SMITH. Without objection, so ordered.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Secretary YELLEN. He has explicitly said that he will not 
agree to raise taxes for people making under $400,000.
    Mr. SMUCKER. So I think it is more important----
    Secretary YELLEN. And that is not any proposal of his. He 
has not said----
    Mr. SMUCKER. So I think it is----
    Secretary YELLEN. He would allow everything to expire.
    Mr. SMUCKER. It is more important to look at----
    Secretary YELLEN. That is just wrong.
    Mr. SMUCKER. I think it is more important to look at what 
he has proposed, rather than what he said. And very clearly, 
the $3 trillion in revenue, or in reduction, what you are 
calling a reduction in debt, includes a significant amount 
coming from families who are earning under 400,000 per year.
    Secretary YELLEN. Well, that will have to be paid for.
    Chairman SMITH. Thank you.
    Ms. Sanchez.
    Ms. SANCHEZ. Thank you, Mr. Chairman.
    And Secretary Yellen, it is always an honor to have you 
here. I want to thank you for your testimony and for taking the 
time to answer our questions today.
    With you at the helm, Treasury has helped the Biden 
Administration rebuild and strengthen our economy for the 
benefit of American workers and families. Together we have made 
real progress in terms of lowering costs for American families, 
from childcare to health care to housing, not to mention 
creating 15 million jobs on President Biden's watch.
    The President's latest budget shows that this 
Administration is committed to building out a fairer, more 
level playing field in our tax code. We need to recalibrate our 
nation's tax system to drive benefits towards working families 
who need the most, instead of the wealthy who benefitted for 
the most part, under the TCJA.
    I want to hone in on a small but very powerful way that 
Treasury recently helped families navigate our tax system. This 
tax filing season the IRS launched a key cost-saving tool with 
Inflation Reduction Act funding. For the first time, certain 
eligible taxpayers could choose to file their returns online 
directly with the IRS for free. More than 33,000 Californians 
opted into that pilot program, and it is pretty clear that 
Americans are hungry for an efficient, free, and direct filing 
option with the IRS.
    Because for a lot of Americans and a lot of my 
constituents, filing their taxes is confusing, it is 
frustrating, and it is time-consuming, and often times very 
expensive. Not everybody has the time or the disposable income 
to work with a paid tax preparer, and I think that all of our 
constituents can benefit greatly from a free and easy-to-use 
tool that helps them file accurate returns but, more 
importantly, make sure that they aren't leaving tax credits on 
the table.
    Secretary Yellen, I understand that the initial Direct File 
pilot was limited in scope, and I can understand how, when you 
have got a pilot project, keeping it small and nimble would 
allow the IRS to carefully track uptake, as well as the 
participant feedback. What has Treasury been hearing from 
taxpayers who actually took the opportunity to file their taxes 
online for free and directly with the IRS?
    Secretary YELLEN. So what I can tell you today--we haven't 
completely analyzed the information--is that the pilot was very 
successful. There was increasing interest from taxpayers during 
the five-week interval it was available, and taxpayers shared 
that they found Direct File easy to use, completed the process 
in about an hour. And on average, taxpayers have been spending 
an average of 13 hours and $270 preparing their taxes each 
year. So the preliminary evidence suggests that this has been a 
very successful experiment.
    Ms. SANCHEZ. It warms my heart to hear that. Can you talk 
to how the Direct File can help families understand their 
eligibility for and their ability to claim certain tax credits 
like the Child Tax Credit or the Earned Income Tax Credit?
    Secretary YELLEN. So I believe I have--you know, I have not 
been through the entire--I have seen a demonstration. But the 
program, I believe, walks people through those areas to make 
sure that they are alerted to it and understand their 
eligibility.
    Ms. SANCHEZ. Yes, I know that often times people aren't 
even aware of certain tax advantages that they can claim, and 
the Direct File helps them to understand those.
    I want to give you in the last minute that I have of my 
time an opportunity to respond to the--somebody talked about 
inflation and costs going up. And unfortunately, inflation is a 
real thing. But how does our inflation rate compare with that 
of most modernized countries around the world?
    And can you talk to the fact that, if we allow certain 
provisions of the TCJA to expire but keep in place other 
provisions, how that is going to benefit working families?
    Secretary YELLEN. Well, with respect to inflation, 
inflation has come down considerably. And the measure that the 
Federal Reserve focuses on most over the last 12 months ran at 
2.7 percent.
    But what is important to households, of course, they see 
that the prices of many goods they bought pre-pandemic are 
higher--not all, but some--is that their wages have gone up by 
more than that. So their purchasing power, their inflation-
adjusted incomes are higher, not lower.
    And for example, even this morning we saw new data come out 
on the employment cost index that measures compensation. And it 
was up in nominal terms and in inflation-adjusted terms it 
showed that, over the last year, compensation on average his 
increased just under a percentage point for most families. So 
people in--generally are better off in spite of the price 
increases.
    But we know we have more work to do. And President Biden is 
very focused on areas where he can lower costs, whether it is 
health care premiums, household energy expenses that will come 
down as a--because of the Inflation Reduction Act, drug prices, 
and the like. And so this remains a concern to many households, 
and it is something that is a high priority, getting costs down 
further.
    Ms. SANCHEZ. I thank you for your time.
    I yield back.
    Chairman SMITH. Mr. Hern.
    Mr. HERN. Thank you, Mr. Chairman.
    Madam Secretary, thank you for being here today.
    Mr. Chairman, I would like to enter for the record an 
article from Tax Notes titled, ``Gain and Little Pain from New 
Bermuda Corporate Tax.''
    Chairman SMITH. Without objection.
    [The information follows:]
   [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. HERN. Thank you.
    Madam Secretary, as you might be aware, Bermuda is 
introducing its new corporate income tax that will take effect 
in 2025. Bermuda entities will be able to mark up their 
intangible assets to their estimated market value, and under 
the new law they can amortize those assets over 10 years for 
tax purposes.
    Madam Secretary, this creation of a new deferred tax asset 
also results in the deferred tax expense. As you know, under 
general guidelines provided by the OECD for Pillar Two that you 
negotiated, deferred tax expense or these amortized deductions 
will not trigger minimum tax liability that could be imposed by 
other globe-participating countries.
    Bermuda has no intention of giving up its ability to 
attract business through the tax code. Other countries are 
adopting similar measures to maintain their status as an 
attractive jurisdiction at the expense of United States multi-
nationals. We know about Singapore. We know about Ireland, the 
things they are doing to maintain their ability to use their 
tax code to lure companies there.
    Madam Secretary, are you concerned about the fact that 
Pillar Two is creating a new tax subsidy race where countries 
enact Pillar Two taxes, but offset the higher tax costs with 
tax subsidies in the form of qualified refundable tax credits 
and other incentives like what Bermuda is doing?
    Secretary YELLEN. Well, the idea of Pillar Two is to level 
the playing field. And countries that refuse to raise their 
tax, corporate tax, rate up to the minimum, countries that 
participate and enact the minimum can, in effect, tax companies 
in tax havens that haven't done it.
    Mr. HERN. But Madam----
    Secretary YELLEN. You have cited an example. I am not aware 
that this is something that is broad-based, but if it is it 
would certainly concern me, and it is something that I would be 
prepared to look into.
    Mr. HERN. Well, Madam Secretary, we have all seen what 
Ireland has said about putting a cap on recurring revenues. We 
have seen what Singapore said in refundable tax credits. We 
have seen what China does in direct tax payments or direct 
access--or cash payments to their companies to be able to 
offset the taxable income so that they, in effect, from the 
look at it, that the minimum tax level would be hit. But 
companies in those countries are getting subsidies through 
direct credits that offset that and take it backwards, where 
ours aren't direct. Ours are not refundable. We have to 
actually earn income to be able to utilize those.
    Question two: Is this Administration concerned that Pillar 
Two incentivizes subsidy warfare that puts our adversaries like 
China at a competitive advantage?
    Secretary YELLEN. It would concern me if it has incented 
that, but I am not aware that that is broad based at this 
point.
    And in our case, many of our tax credits such as the green 
tax credits, the LIHTC credit, are being treated as refundable. 
As I have emphasized previously, we are working to make sure 
that the R&D tax credit also will be something that firms can--
--
    Mr. HERN. But----
    Secretary YELLEN [continuing]. Benefit from.
    Mr. HERN. But Madam Secretary, I think you just validated 
that countries have the ability to make certain credits 
refundable to offset the minimum tax that other countries or 
OECD can lie claim to. China can do it. I think that you are 
going there evidences the fact that they are not always 
transparent in what they do, since all of their companies are 
basically owned by the CCP.
    Madam Secretary, I have got a longer question here, but it 
pertains to the same thing. I think there is a lot of work to 
be done. As you know, the committee, the Republicans on the 
committee, went to the OECD and expressed our concern and made 
it very clear that Pillar Two is not going to take place under 
a Republican-led Ways and Means Committee, and we are not going 
to give away our tax dollars. In fact, it is said time and time 
again about how many tax dollars, U.S. taxpayer dollars would 
go around the world, upwards of 200 billion. I know you said 
that was JCT's outward look.
    But I think it is important for everyone to know--and you 
know this to be certain--corporations don't pay taxes. The 
people that work for the corporations, the consumers of the 
products of those corporations, and the owners of those 
corporations pay the taxes to increase pricing for whatever the 
commodities are. In fact, Forbes, Brookings, Tax Foundation, 
Cato, and many, many others have said that consumers pay 31 
percent of the new taxes, workers pay 38 percent of the taxes. 
All of those people, for the most part, make less than $400,000 
a year. So they are going--about 70 percent of the tax increase 
will be paid by people making less than $400,000 a year, some 
portion of that.
    So I think it is disingenuous, as my colleague from 
Pennsylvania said, to say that no one is going to pay a single 
cent, as outlined in the White House's conversation about 
policy, going forward. It is just disingenuous. It is not 
factual, and it is not honest with the American people.
    One other thing that you said is that the labor 
participation rate was better today than it was pre-COVID. I 
know you----
    Secretary YELLEN. For adults.
    Mr. HERN. I know you selectively picked an area.
    Secretary YELLEN. For adults.
    Mr. HERN. It was 63.3 percent on March 2020. Today it is 
62.7, overall workforce.
    Secretary YELLEN. I said----
    Mr. HERN. When you don't have the luxury as an employer, as 
I did for 35 years, saying I am only going to hire people 
working--you have got to be 25 years old or 54 years old.
    Secretary YELLEN. We have an aging population. And as 
people retire, we know that labor force participation overall 
will decline over time.
    Mr. HERN. Mr. Chair, I yield back.
    Chairman SMITH. Thank you.
    [Pause.]
    Chairman SMITH. You are good?
    Ms. CHU. Yes.
    Chairman SMITH. Ms. Chu.
    Ms. CHU. Secretary Yellen, I heard your comments earlier 
about the success of the Direct File pilot program, and I was 
so glad to hear why it was a success.
    And I especially want to have you address some things that 
Republicans and the private tax prep industry are saying. They 
are attacking the numbers of the filers, 140,000 filers, to 
show that the pilot was a waste of money because there are 19 
million who were eligible and that this was unnecessary. And 
yet, what I see is that there were a lot of obstacles to the 
program that the IRS was able to overcome. And actually, I 
would have called it a resounding success.
    So can you tell us why it was considered a resounding 
success, considering the obstacles that there were?
    And what considerations will go into the decision to extend 
the pilot?
    Secretary YELLEN. Well, let me say that this was an 
experiment, and it was deliberately introduced in a phased way, 
starting at small scale. It was only available to most filers 
for five weeks in a subset of states that decided to 
participate. So for that amount of time 140,000 people using it 
and expressing positive reactions to the experience I would 
certainly call a success.
    Additionally, because it is an experiment, only relatively 
simple tax situations could use it. If an individual went on 
and it turned out they had the kind of income that wasn't 
incorporated into the first iteration of this program, they 
were directed to do something else.
    But this saved a lot of taxpayers, even in this first 
stage, a lot of money that they normally spend and a lot of 
time. And there was customer service available for anybody that 
needed it. And so overall, I believe we will see that the 
experience was a very positive one.
    Ms. CHU. So it was deliberately at a number that could 
ensure its success, actually.
    Secretary YELLEN. That is right, to start in a phased way.
    Ms. CHU. Yes, and I want to also express appreciation 
because you also made it available in both English and Spanish. 
My district in the San Gabriel Valley includes many limited 
English proficient taxpayers who speak not only Spanish, but 
also Tagalog, Korean, Chinese, Japanese, and Vietnamese.
    If the Treasury and IRS decide to renew the Direct File 
pilot, can you talk about how it could reach more taxpayers by 
expanding to possibly even more languages?
    Secretary YELLEN. Well, I am sure that would be something 
that would be considered over time. There are other things that 
could be incorporated in addition to expanding the kinds of 
income and deductions that are considered.
    You know, eventually, the information that the IRS gets on 
W-2s and other information reporting could be used to pre-
populate returns, making it even easier. But these are things 
in the future if it is decided to continue with free file.
    Ms. CHU. Secretary Yellen, also I heard you talk earlier 
about the proposals that the Administration has to end tax 
breaks for the wealthy, and instead restore tax credits for 
workers and families like the Expanded Child Tax Credit and the 
Earned Income Tax Credit of the American Rescue Plan. We know 
about the powerful effects of these tax credits on reducing 
poverty, but can you talk about how these programs will impact 
the American economy and improve things for everybody?
    Secretary YELLEN. Well, I mean, a very good example would 
be the Child Tax Credit, which in 2021 lifted 5.3 million 
people, including 2.9 million children, out of poverty. We saw 
a 46 percent decline in child poverty in 2021. And this is not 
only beneficial to the children and their parents in the short 
term, but we know from many studies that when poverty is 
reduced for children, it redounds to their benefit over the 
remainder of their lives.
    Ms. CHU. Thank you.
    I yield back.
    Chairman SMITH. Thank you. There are several votes on the 
floor. The committee stands in recess until immediately after 
the conclusion of this vote series.
    [Recess.]
    Chairman SMITH. The hearing will come to order. Mr. Carey 
is recognized.
    Mr. CAREY. Thank you, Mr. Chairman.
    Secretary Yellen, as you know, low carbon hydrogen can 
reduce carbon emissions and create much-needed American jobs. 
Ohio is well positioned to lead on hydrogen, given the state's 
proximity to the end markets, as well as its access to low-
cost, abundant, and diverse energy feedstocks. I believe Ohio 
can be a leader in hydrogen production from natural gas, with 
carbon capture and sequestration, sometimes known as blue 
hydrogen. Our state has abundant storage capacity, carbon 
capture emissions, and unparalleled access to low-cost natural 
gas.
    But most importantly, we know hydrogen made with natural 
gas while using carbon capture and sequestration can produce 
very low emissions. Unfortunately, the Administration's 
recently proposed regulations for hydrogen production, tax 
credit 45V, could halt several of the proposed Ohio projects.
    Last fall, DoE selected the Appalachian Regional Clean 
Hydrogen Hub centered around the Ohio River Valley, an area 
that I know very well, as the official hydrogen hub. Natural 
gas will play a major role in the overwhelming majority of 
these projects. This hub alone would create up to 18,000 
construction jobs, with about 3,000 of those jobs being 
permanent. Without a workable, flexible 45V guidance, many of 
the projects within the hub will be uneconomical.
    Clear, inclusive tax guidance can help increase much-needed 
economic certainty that there will be adequate supply of 
hydrogen to meet the needs of Ohio's industries that are 
already making investments to use hydrogen in their businesses. 
I recommend that the Treasury permit taxpayers to use actual 
EPA-verified greenhouse gas emissions data to calculate an 
accurate tax credit value, rather than being forced to use a 
baseless national average, as laid out in the proposed 
regulations.
    Companies investing in lower methane intensity natural gas 
to produce hydrogen should be able to demonstrate the low-
carbon intensity of the produced hydrogen with EPA-verified 
data, then use the data to calculate the corresponding tax 
credit value. The proposal of the tax credit and the intent of 
Congress is to drive the incremental and continual reductions 
in the carbon intensity of hydrogen. Without this change to the 
proposed rule to permit hydrogen producers to prove the actual 
carbon intensity of their hydrogen, the 45V tax credit will 
drastically be--mischaracterize carbon emissions' intensity, 
which will stifle the development of low carbon hydrogen 
products and impede the Administration's goal at reducing the 
overall emissions.
    And I know this is probably not something that a lot of 
people talk about, but given the fact that Ohio does have the 
aquifers to hold carbon, it is something that is very important 
to our state. I only have a minute and 30 seconds. If you have 
a second, I wouldn't mind your response.
    Secretary YELLEN. Well, the hydrogen provisions of IRA are 
very important, and we have worked hard to put out a notice of 
proposed rulemaking that will provide some clarity and 
flexibility to let projects advance with the appropriate 
environmental safeguards.
    We have worked very closely with the Department of Energy 
and with EPA on the proposed regs, given their technical 
expertise, but this is very complex, and it requires evaluating 
lifecycle emissions. We have received many, many comments--I 
believe over 40,000 comments--on the proposed rule.
    I appreciate your comments, and we promise that we are 
sifting through them and need to reconsider what the 
appropriate response is. So what I can say is that we will take 
this input seriously as we work to revise the regulations.
    Mr. CAREY. Well, I do appreciate that. I just want to say, 
again, with the developments that we have in place, Ohio looks 
to get 18,000 construction jobs, 3,000 permanent jobs. This 
could be a very big, very big economic factor for the State of 
Ohio.
    With that, Mr. Chairman, I yield back.
    Chairman SMITH. Thank you.
    Ms. DelBene.
    Ms. DelBENE. Thank you, Mr. Chairman.
    And thank you, Madam Secretary, for taking the time to be 
with us here today. And thank you for your attention to the 
needs of working families and struggling Americans, and for the 
work that you do to keep America globally competitive.
    Secretary YELLEN. Thank you.
    Ms. DelBENE. Madam Secretary, I first want to give you a 
chance to clarify the Administration's position on the Child 
Tax Credit, something I am a big supporter of. I know that some 
assertions were made, and you didn't have a chance to respond. 
So I want to give you a chance to respond.
    Secretary YELLEN. The President is supportive of the Child 
Tax Credit, and he has proposed to extend it in his 2025 
budget, and has been supportive of Wyden and Smith also, the 
provisions on the Child Tax Credit that are included there.
    Obviously, it has made a tremendous difference when it was 
in effect in 2021, reduced child poverty by 46 percent, and is 
very important, and an important provision that really helps 
working families.
    Ms. DelBENE. Absolutely. And I would love to see us put 
that in place and make that permanent. So that is work we are 
going to continue to focus on.
    The Inflation Reduction Act also included a historic $80 
billion investment in the IRS, 20 billion which was rescinded 
by my Republican colleagues. But one of the key needs addressed 
by these funds was modernizing the agency's core technology 
infrastructure.
    As this technology is updated, I wondered if you could 
speak about how emerging technologies like artificial 
intelligence are being integrated into the IRS's work to 
provide services to taxpayers and to enforce tax laws.
    And how is the IRS addressing data privacy and security 
concerns inherent with such technologies?
    Secretary YELLEN. So the IRS certainly has already begun to 
use AI in its work. I am not an expert on this, but I know that 
they see great potential in terms, on the enforcement side, in 
being able to sift through tax returns of high-income filers 
and complex partnerships and corporations, and to identify 
which ones would be good candidates for audits and trying to 
uncover fraud and close the tax gap.
    You know, Treasury has a governance process where we are 
employing AI increasingly in Treasury's work, and we have put 
in place oversight and a governance process around that to make 
sure that it is used responsibly in accordance with the 
President's executive order.
    Ms. DelBENE. Also, under your leadership, Treasury recently 
closed a loophole in our Russian seafood ban that previously 
allowed fish caught in Russia to still get to the U.S. if 
processing occurred in a third country like China. The ban is 
working, but unless our allies act in concert, American seafood 
will remain at a competitive disadvantage to Russian seafood in 
foreign markets.
    Madam Secretary, I wondered how can Treasury push our 
allies, who are also large seafood importers, including Japan, 
Canada, the EU, and the UK, to cut off seafood trade with 
Russia?
    Secretary YELLEN. So I must admit I am not intimately 
knowledgeable in what we are doing on this particular aspect of 
sanctions.
    Ms. DelBENE. Okay.
    Secretary YELLEN. But we are constantly working with our 
allies to try to coordinate our sanctions so that they are 
effective.
    Ms. DelBENE. And then one I know you will have--and I 
probably won't give you enough time on this--but I wondered if 
you could talk about how suggesting the U.S. will never 
implement Pillar Two makes it more difficult to get the changes 
that we would like to see.
    Secretary YELLEN. In----
    Ms. DelBENE. Pillar Two of the OECD.
    Secretary YELLEN. To see the changes, how does it make it 
more difficult to----
    Ms. DelBENE. About how, when folks are suggesting that we 
are never going to implement Pillar Two, how that makes it more 
difficult for us to get the changes that we would like to see.
    Secretary YELLEN. Well, this was a global agreement. The 
United States led the push on this, and we have argued since 
day one that Pillar Two is something that is good for the 
entire world. We have pushed our allies now on the order of 40 
countries have adopted it, most major countries, and I think 
they see it as a failure on our part not to be willing to adopt 
it ourselves. And so it does undermine our ability to exhibit 
leadership with our allies.
    Ms. DelBENE. Thank you. My time has expired. Thank you, 
Madam Secretary.
    I yield back, Mr. Chairman.
    Chairman SMITH. Ms. Malliotakis.
    Ms. MALLIOTAKIS. Thank you very much for being here. I am 
proud to represent Staten Island and Brooklyn, where you are 
from, and----
    Secretary YELLEN. Thank you.
    Ms. MALLIOTAKIS [continuing]. Fort Hamilton High School 
says hello.
    Secretary YELLEN. Thank you.
    Ms. MALLIOTAKIS. And I wanted to speak with you 
specifically about fentanyl and the involvement of the 
Communist Chinese Party. I know you recently returned from a 
trip from fentanyl (sic). You specifically talked about the 
money laundering that is involved. We know that Communist China 
is subsidizing the production of these fentanyl analogues that 
are now illegal in the United States and in China, but yet they 
are exporting it, killing, as you know, 100,000 Americans 
annually. A lot of it is going through the drug cartels in 
Mexico, in particular when they are subsidizing the production 
of this fentanyl in China. NPP and ANPP are two fentanyl 
precursors that we know specifically the Mexican drug cartels 
are using.
    So according to the Congressional Research Service, U.S.-
destined illicit fentanyl appears to be produced clandestinely 
in Mexico using these chemical precursors from China.
    Earlier this month you reported on your trip that you were 
creating a joint Treasury-People's Bank of China cooperation 
and exchange on money laundering. So I just wanted to know 
where this group is at, what you think we will be able to 
derive from this to help save these American lives that are 
being lost, sadly, because of this interaction between the CCP 
and the Mexican drug cartels.
    Secretary YELLEN. So I think fentanyl is a critical issue, 
as you have indicated, and Treasury is doing everything that we 
can to stem the flow of precursors from China to Mexico and the 
illegal sale of fentanyl from Mexico into the United States. I 
have also visited Mexico to discuss the fentanyl issue and to 
enhance our cooperation with them.
    In the case of China, President Biden and President Xi, 
when they met--I guess it was in November in Woodside--agreed 
to jointly tackle fentanyl, which was a very good development. 
Meetings have been taking place. As you noted, in my recent 
trip--I guess it was two weeks ago--to China, we agreed to 
establish a special work--sort of dialogue or work plan around 
illicit finance. We have had one meeting so far that has been 
devoted to that topic, and fentanyl certainly is one of the key 
issues, although we are looking more broadly at illicit finance 
beyond fentanyl. But China has agreed to cooperate with us to 
try to stem the sale of these precursors into Mexico and other 
places, and this is an area of cooperation.
    Ms. MALLIOTAKIS. So it is your understanding that these 
money laundering organizations in the PRC are acting outside of 
the CCP's control?
    Secretary YELLEN. I think so. It is not my understanding 
that the CCP is positively directing this activity, but that it 
is taking place among Chinese firms. And we need their 
cooperation to clamp down on those firms. We have sanctioned 
some, but there are many smaller firms in China that I believe 
are involved in producing these precursors and other equipment 
that is needed.
    Ms. MALLIOTAKIS. The U.S. Department of Treasury and the 
Office of Foreign Assets Control has so far sanctioned more 
than 65 mainland China or Hong Kong-based persons for illicit 
fentanyl trafficking. And we also seen the DoJ take some action 
indicting three of the PRC-based companies. So I am glad to see 
that we are having some action taken.
    These--any of these firms--again, everything in China 
obviously has the government's involvement in it. So my concern 
is more that the manufacturers of this fentanyl are being 
subsidized by the government. They obviously control the banks 
in China. And then, on top of it, these PRC-based companies. So 
I am just wondering how much we can trust them as partners. I 
am hoping that you are making some progress in that.
    But the reality is that, you know, we are seeing this 
increase, not decrease. More Americans are dying as a result of 
this fentanyl that is streaming from the PRC to the Mexican 
cartel. Part of it is because of our open southern border, 
thanks to the President's 60-plus policy changes when he came 
in. So I just hope that you will work diligently, and I trust 
that you are, to really try to hold China accountable for this 
type of activity that we are seeing that are killing so many 
Americans.
    Secretary YELLEN. It is a real American tragedy, and we 
will do everything and are doing everything we can to stem the 
flow of these drugs into our country.
    Ms. MALLIOTAKIS. Thank you very much.
    Chairman SMITH. Thank you.
    Ms. Sewell.
    Ms. SEWELL. Thank you, Mr. Chairman.
    And Secretary, Madam Secretary, welcome again to our 
committee. I want to talk to you about equity and the 
President's charge to his cabinet at the very beginning of his 
Administration to really, really try to level the playing field 
and have equity be one of the hallmarks of that.
    And I had an opportunity to sit with you. I think we had 
breakfast together. During the last Congress Congressman Richie 
Neal put together a racial equity initiative within Ways and 
Means, and had a chance to talk to you about some of the things 
that you were thinking about doing in terms of equity.
    The budget is truly a reflection of what we value. We spend 
money on those things that we value. I want to commend this 
Administration and yourself for including in this budget 
expanding the Earned Income Tax Credit, the Child Tax Credit, 
the Low-Income Housing Tax Credit. I was a bond lawyer before I 
was a Member of Congress, and new market tax credits are a way 
to really help depressed and distressed communities.
    Can you talk a little bit about how the Earned Income Tax 
Credit and the Low-Income Housing Tax Credit will seek to level 
the playing field and our equity initiatives within Treasury, 
frankly?
    Secretary YELLEN. Thank you. I think all of the initiatives 
that you mentioned, the New Markets Tax Credit, which we are 
proposing to make----
    Ms. SEWELL. Permanent.
    Secretary YELLEN [continuing]. Permanent, and also add a 
track that would be particularly focused on the most distressed 
communities, the Earned Income Tax Credit would be extended to 
single individuals with low incomes. It was done in the ARP.
    Ms. SEWELL. Yes.
    Secretary YELLEN. And this would make that permanent.
    Of course, the Child Tax Credit has been critically--when 
it was expanded in 2021, critically important in reducing child 
poverty, reduced it by 46 percent. And----
    Ms. SEWELL. Amazing.
    Secretary YELLEN. Yes.
    Ms. SEWELL. And so that in the fiscal year 2025 budget, 
that you would actually make permanent the Earned Income Tax 
Credit--and some of those are very, very important.
    Secretary YELLEN. Very----
    Ms. SEWELL. I noticed also that the President's budget 
provides a new mortgage relief credit. Can you talk a little 
bit about what that one is?
    Secretary YELLEN. Well, home ownership for people who don't 
already own homes, first-time buyers, is almost prohibitively 
expensive.
    First of all, mortgage rates have been so low for so long 
that it has created a kind of lock-in across much of the 
country, where people don't want to sell their homes to buy new 
ones because they will lose the benefit of the low mortgage 
rates they have locked in.
    And then, with house prices having gone up, and now with 
much higher interest in mortgage rates, it is almost impossible 
for first-time buyers.
    So the President has proposed a pair of tax credits. One 
would go--$10,000, I believe--to purchases of new homes, and 
the other would go to individuals who are willing to sell their 
homes to try to get rid of some of that lock-in.
    But we know that affordable housing, and especially starter 
homes, is an area where we really need to do a lot to increase 
availability.
    Ms. SEWELL. Increase availability and also access, as well 
as making sure that we are leveling the playing field so that 
all Americans have an opportunity to live the American dream.
    Secretary YELLEN. Yes.
    Ms. SEWELL. Going back to the New Market Tax Credits, I 
represent my home district, Alabama's 7th district, and we have 
utilized New Market Tax Credits to help underserved urban but 
also rural parts of my district to actually--we are 
beneficiaries of this. As you know, New Market Tax Credits 
really let cities and counties and non-profits to give an 
opportunity to really help a distressed area.
    Can you talk a little bit about why that permanency with 
New Market Tax Credits is so critical?
    Secretary YELLEN. I think it--because this is intended to 
generate private investment and is very successful in doing it, 
knowing that the program will be there over time, I think, 
generates much more interest in the part of the private sector.
    Ms. SEWELL. And more certainty, yes.
    Secretary YELLEN. Right.
    Ms. SEWELL. Absolutely. Thank you so much.
    I yield back the balance of my time.
    Chairman SMITH. Mrs. Miller.
    Mrs. MILLER. Thank you, Chairman Smith and Ranking Member 
Neal.
    And welcome here today, Secretary Yellen. I am going to be 
on a little different track than my friend from Alabama. I am 
deeply concerned about many of the actions that the Treasury 
Department and President Biden's Administration are taking.
    Unfortunately, every American is feeling the constant pinch 
of inflation, higher interest rates, and lower purchasing 
power. Despite this, the Treasury and the IRS appear to be only 
trying to make our constituents' lives worse instead of better. 
For example, the IRS has continued to illegally delay the 
implementation of the Democrats draconian 1099-K threshold. The 
Treasury Department has issued weak foreign entity of concern 
definitions to that which fail to protect American tax dollars 
from flowing to Chinese companies.
    Guidance coming from the Treasury Department on energy tax 
incentives are blocking traditional energy communities from 
participating in the future energy economy and leaving them 
behind. You have led an unprecedented attack on American 
taxpayer privacy by overseeing the expansion of IRS snooping, 
and yet are failing to crack down on the leaks of sensitive 
taxpayer documents.
    Furthermore, the IRS has wasted millions of taxpayer 
dollars on its unauthorized Direct File program. The Biden 
Administration has shockingly announced its plan to raise taxes 
by over $7 trillion next year. You said last month under oath 
that there is no plan to protect middle-class taxpayers from 
these planned increases.
    On the world stage we have surrendered the U.S. tax base to 
unelected global bureaucrats at the OECD and failed to protect 
the American tax system from what I think of as a heinous 
international interference.
    On every front the American taxpayer loses, our nation 
becomes weaker, and our global adversaries are rewarded and 
emboldened.
    Secretary Yellen, I am deeply concerned about our domestic 
industry's reliance on Chinese technologies and investments. As 
the recently appointed chairwoman of the supply chain's Tax 
Team, I look forward to working with my colleagues to improve 
upon the broken IRA's energy credits, protecting a competitive 
corporate rate, and ensuring that the United States is the best 
place to invest as it was under President Trump's historic tax 
cuts.
    I have introduced two bills, the Protecting American 
Advanced Manufacturing Act and the End Chinese Dominance of 
Electric Vehicles Act, to improve on the foreign entity of 
concern definitions for the 45X and the 30D tax credits, 
respectively. The current agreements establish a dangerous 
precedent that will take the U.S. decades to reverse by 
creating a future where our automotive and other industries are 
heavily reliant on foreign technologies. Without immediate 
passage of both of my bills, Chinese entities will receive 
billions of American tax dollars every single year.
    Secretary Yellen, yes or no, does the Biden Administration 
support taxpayer dollars funding Chinese entities?
    Secretary YELLEN. Well, when it comes to electric vehicles, 
the IRA, which obviously the Administration supports, has 
foreign entity of concern restrictions coming into effect this 
year and next, which will severely curtail--almost prevent 
entirely--participation of Chinese firms in producing 
components or minerals or processing----
    Mrs. MILLER. That is not yes or no.
    Secretary YELLEN [continuing]. That go into batteries.
    Mrs. MILLER. That is not----
    Secretary YELLEN. So that is a very significant restriction 
that will protect our supply chain.
    With respect to 45X, that is a credit that Congress 
directed to go to any company that undertakes certain advanced 
manufacturing----
    Mrs. MILLER. Reclaiming my time----
    Secretary YELLEN [continuing]. In the United States.
    Mrs. MILLER [continuing]. By allowing these Chinese 
companies to maintain control of the technologies, the 
intellectual property, and the supply chains, all the while 
receiving American taxpayer subsidies, how will this encourage 
U.S. companies to develop the technologies to become less 
dependent upon China and our adversaries?
    It doesn't. Does the Biden Administration share any of my 
concern that China is using various IRA credits to deepen its 
influence on our domestic manufacturing industries?
    Secretary YELLEN. The United States is doing everything we 
can in Treasury in implementing the IRA to strengthen our 
supply chains and make them less vulnerable to China.
    Mrs. MILLER. Well, I continue to remain skeptical on the 
environmental and economic benefits behind your decision-
making, and I do urge swift passage of my bills to further 
protect the United States manufacturing.
    And I yield back my time.
    Mr. SMUCKER [presiding]. Ms. Moore.
    Ms. MOORE of Wisconsin. Thank you, Mr. Chairman.
    And of course, Secretary Yellen, it is always good to be in 
your presence with your just wise experience. This committee is 
really blessed. I want to ask you a couple of questions related 
to domestic violence, sexual violence.
    The 2013 amendments to the Violence Against Women 
Reauthorization Act, which I had the privilege and the 
opportunity to lead, really made some changes to prohibit 
housing providers who have used the Low-Income Housing Tax 
Credit from using domestic violence, dating violence, or sexual 
assault and stalking as grounds for evicting the victim, or 
denying subsidies or admissions due to an abuser's act.
    The IRS, of course, is not just the administrator of the 
housing tax credits, it has a duty to ensure that the Low-
Income Housing Tax Credit program's compliance is with VAWA.
    I think we have had some informal communication with the 
Treasury Department in this past decade where the Treasury has 
disavowed any responsibility to set out some sort of guidance 
on this. And in fact, in 10 years we have not seen that done. 
And so, I was wondering--and I am joining Ms. Tenney. She and I 
are writing you a letter to try to find out what the status of 
why you don't feel that you need to comply or, if you do, if 
you will.
    Madam Secretary.
    Secretary YELLEN. Well, first, let me thank you for your 
work on this very important initiative, which I think is 
critically important for domestic violence victims, and the 
reauthorization explicitly extended VAWA's protections to 
applicants and tenants in LIHTC properties.
    Now, if there is specific issues or guidance that you think 
is necessary, I would like to put you or your staff in touch 
with people at the Treasury or/and IRS, and we would be glad to 
work with you.
    Ms. MOORE of Wisconsin. Well, thank you with that, because 
the national housing authorities have put together some sort of 
guidance that seems to be working, and we will share that with 
you.
    Mr. Smucker and I, as an extension of this discussion, I 
want to talk about something we think is extraordinary, and 
that is judgments that are made for victims of sexual assault. 
If you are a victim of sexual assault and you get a settlement 
or an award, you will be able to get a settlement and not pay 
taxes on it if you can prove that there is some physical harm.
    But as an example, I mean, if you were put in a situation 
where you were forced to strip naked and parade, you know, 
through a gang of perpetrators, and no one penetrated you, you 
might get a judgment out of that, but you would have to pay 
taxes on it. And we don't think that that is fair.
    And so we are looking, Mr. Smucker and I, to changing the 
law so that there is a presumption of a physical abuse that 
would meet the requirements for some kind of income exclusion. 
And so we are hoping that you will see this in the positive 
light that we see it.
    Secretary YELLEN. We would be glad to work with you on 
that.
    Ms. MOORE of Wisconsin. I have one question with my 
remaining time, just to sort of understand what your stance is 
on minerals. You just had a previous discussion with Mrs. 
Miller that I thought was very compelling, and she talked about 
China, our subsidizing China in minerals. And I guess I didn't 
really understand that discussion.
    What I am concerned about is that there is a tremendous 
cost to extract and process critical minerals domestically. And 
by denying the monies to this domestic activity, are we in fact 
subsidizing or enabling minerals from other places?
    Secretary YELLEN. Well, I mean, we are making it really all 
but impossible to get the $7,500 subsidy if the minerals they 
are processing take place in China, and the IRA contains 
incentives to produce and process these either domestically or 
among friends----
    Ms. MOORE of Wisconsin. Well, Madam Secretary, why aren't 
we allowing the credit----
    Mr. SMUCKER. The gentlewoman's time has expired.
    Ms. MOORE of Wisconsin. Okay. Why aren't we allowing the 
credit when it is produced domestically? Could we do that and 
still prevent outsiders?
    Secretary YELLEN. The credit is available when the minerals 
are processed domestically or in countries with whom we have a 
free trade agreement.
    Mr. SMUCKER. The gentlewoman's time has expired. Ms. Tenney 
is recognized for five minutes.
    Ms. TENNEY. Thank you, Mr. Chairman.
    And also, thank you to Secretary Yellen for your service 
and for being here today and this long session today. I just 
wanted to kind of go back to a couple of things that 
Congresswoman Sewell said, and go back to the New Markets Tax 
Credit issue, and the authority which ends in 2025. And we 
teamed up and wrote a note, a letter to you, about six months 
ago indicating why it has taken so long to get this underway, 
why we can't do what the Treasury has done in the past, doing 
this as a lump-sum program when it was authorized in 2015 and 
2016.
    And as you know, as we are coming down to a deadline, the 
deadline is the end of 2025, and obviously, this is an urgent 
issue so we can make sure that we get the monies directed to 
these needy communities we have. Representative Sewell and 
others on the committee are also very concerned about this, but 
also to get to other parts of my district. I have a very rural, 
sprawling district in upstate New York, and this New Markets 
Tax Credit has been a help.
    We did get a response from Acting Assistant Secretary Corey 
Tellez, but it was six months later, and really just said, ``We 
are working diligently.'' So it wasn't, you know, a progress 
report of any substance. And we are just wondering if there is 
any way you can give us an update today.
    Where are we with this? Can we get it done in a way that we 
did in 2015 and 2016 to get these credits expedited as time is 
running out on this program, and very much needed program, in a 
bipartisan way?
    Secretary YELLEN. So you are talking about previous credits 
that would qualify this year?
    Ms. TENNEY. No, we are talking about the current credits 
that haven't been--you have indicated that some of them, in the 
letter that we received in February in response to our 
September 2023 letter, you have indicated that you have made a 
number of awards, but the program isn't completed and there are 
a lot of rewards outstanding. And we have people out all across 
the country waiting to be able to get approved through 
Treasury.
    What is the holdup? Can we get an expedited--I mean, we 
really just want a simple answer. Can we get your attention on 
that, and make sure this comes out?
    Secretary YELLEN. I will look into it. I am assuming that 
we will award these, but I don't know the timetable when we 
will----
    Ms. TENNEY. Right. As you know, construction projects, they 
are very----
    Secretary YELLEN. We will try to get back to you.
    Ms. TENNEY. Thank you. They are very expensive, very--and 
we want to--you know, these investments are made, and then the 
credits aren't out, and we have got people willing to come into 
our rural and needy communities to invest, and we just want to 
make sure that they have the certainty that they need to do 
that.
    The second question I have for you--and I just wanted to 
check on Treasury's progress--as you know, these horrific 
attacks on Israel by Hamas on October 7, we have seen a 
dangerous rise in anti-Semitism across the country. Notably at 
universities, we are seeing this play out every day today, 
including my own home state of New York, even upstate New York, 
where I have nearby Cornell University, Syracuse University, 
and many other campuses there. We are seeing these anti-Semitic 
demonstrations, support of terrorist groups like Hamas, and 
there are even reports indicating that numerous U.S. charities 
are suspected of funneling this money to Hamas, or from Hamas 
to various ties to organizations that we have designated as 
financiers of terrorism by the Treasury Department.
    I just wanted to know where we are with Treasury today, and 
what are we doing to make sure that we are cracking down on 
Iran and other groups with sanctions, with support for cutting 
down their ability to fund these groups that we think are 
coming here.
    And I just wanted to just say thank you to Chairman Smith. 
Earlier this year we did do--or earlier, I think, or later last 
year we did a hearing on what is happening on our campuses, and 
a deep dive into where this money is coming from. A lot of it 
looks like it is coming from Iran, coming through, you know, 
not-for-profits, whether they are 501(c)(3)s, (4)s, and using 
our IRS structure, but also Treasury may be backing off on 
sanctions on Iran. And I want to know where we are with that 
today.
    And if you could, quickly comment on are we going to 
continue to press Iran in its ability to be a state sponsor of 
these things?
    Secretary YELLEN. Well, it is really at the absolute top of 
our agenda to crack down on Hamas and Iran. We have taken a 
large number of actions. I would be glad to detail them all out 
for you, but----
    Ms. TENNEY. Can you just give me a----
    Secretary YELLEN [continuing]. Both against Iran and 
Hamas----
    Ms. TENNEY. Can you--yes, can I just reclaim my time? Just, 
like, clarify my question, if you would, please. How are we 
increasing sanctions on Iran again now, as we see what is 
happening, and we know that there has got to be some kind of 
linkage? Are we cracking down on sanctions on Iran right now? 
Is that something Treasury is continuing to press?
    Secretary YELLEN. Absolutely. We took a set of sanctions--I 
believe it was just last week--to crack down on oil sales by 
Iran's military to China. We have cracked down on their 
provision of UAVs that are going to Ukraine and other places 
and being used by terrorist groups against Israel.
    We have taken numerous, numerous actions to go after Hamas 
financing, using every channel we are aware of, and we are 
working jointly with our allies to do this.
    Ms. TENNEY. Thank you. Well, we appreciate that. My time 
has expired, but we really need to crack down and get the 
sanctions in place to really put a dent
    Secretary YELLEN. We are----
    Ms. TENNEY. Into Iran's ability to fund this. We know that 
this is what is probably happening, and where the money is 
probably coming from, somehow using the channels of our good-
intentioned, not-for-profit laws. So----
    Mr. SMUCKER. The gentlewoman's time has expired.
    Ms. TENNEY [continuing]. I appreciate that. Thank you.
    Mr. SMUCKER. Mr. Kustoff is recognized for five minutes.
    Mr. KUSTOFF. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, for appearing today. I am over 
here to your left. If I could, Madam Secretary, you have got a 
unique position. You have chaired the Federal Reserve. You have 
got the position you have got now. Is the Fed's target rate for 
two percent inflation, is that still a real number? Is that the 
goal, and is that attainable?
    Secretary YELLEN. Well, the two percent inflation target 
was codified as part of the Federal Open Market Committee's 
policy a number of years ago, and it remains the goal. And 
more, as Chair Powell has said, the committee is absolutely 
committed to achieving that.
    At this point, inflation using the metric that they use is 
2.7 percent. It has come down substantially from its peak, and 
they continue to put in place a policy that they consider to be 
restrictive to move it down further.
    Mr. KUSTOFF. Well, let me ask----
    Secretary YELLEN. I believe it is definitely obtainable.
    Mr. KUSTOFF. Let me ask you about that, because you have 
used the word ``substantially decreased'' several times during 
this hearing.
    Your predecessor, Lawrence Summers, in an interview on 
April 10 on Bloomberg TV, said, ``You have to take seriously 
the possibility that the next rate move will be upwards rather 
than downwards.'' This morning he released a statement that 
said this morning's ECI, Employment Cost Index, and housing 
price inflation figures confirm what I have suspected and 
feared: Inflation is not securely trending to target levels.
    He goes on to say, ``Note that the ECI has accelerated from 
previous quarterly, semiannual, and annual levels. I suspect it 
has been understating labor cost inflation of late because of 
reduced work requirements associated with the WFH. The home 
price inflation figures are also a cause for concern that 
shelter inflation is not durably declining. With higher 
interest rates and higher unit prices, rents will at some point 
reaccelerate. Note that, as many have pointed out, bottlenecks 
have been easing over the last year or so, reducing inflation 
momentum. This will not forever--this will not be forever and, 
given geopolitics, may reverse. Financial conditions are now 
loose by historical standards, all reasons why the Federal 
Reserve is in a treacherous environment. Should have been more 
careful about easing signals, and now should be very cautious 
about possible rate cutting.''
    It is really hard to disagree with anything he said, isn't 
it?
    Secretary YELLEN. Well, he is a person who has been wrong 
in the past. He said that it would absolutely take a recession 
to bring inflation down, and that turned out to be a serious 
misjudgment.
    I don't want to talk about appropriate monetary policy.
    Mr. KUSTOFF. Fair enough.
    Secretary YELLEN. That is not my job; it is up to the Fed.
    But on house prices I would say I consider it highly likely 
that over the next year house price inflation, shelter 
inflation will come down considerably. And the reason I believe 
that is that, if you look at the market for new rental 
apartments and rentals of new single-family houses, those 
rental prices have stabilized or, in some cases, declined. And 
the reason that shelter costs continue to increase as much as 
they are is because tenants who have leases, when the leases 
end and their rents are renegotiated, they come up to market.
    So it takes a while----
    Mr. KUSTOFF. Thank you. Let me reclaim my time just to ask 
you----
    Secretary YELLEN [continuing]. But it will come down.
    Mr. KUSTOFF [continuing]. Do you not agree with anything 
that former Treasury Secretary Summers said in that statement?
    Secretary YELLEN. I agree with some of it, but I can't go 
through it with you.
    Mr. KUSTOFF. Okay. Fair enough.
    Secretary YELLEN. Yes, I don't disagree with everything in 
there.
    Mr. KUSTOFF. Let me, if I can, in my remaining seconds--in 
2018 we passed the Economic Growth, Regulatory Relief, and 
Consumer Protection Act. I think that the bill was critical 
because it fixed a one-size-fits-all regulatory structure.
    Obviously, you are chairman of the Financial Stability 
Oversight Council. I know that you all meet soon. My concern is 
with that bill, which is Senate Banking Bill 2155, it allowed 
financial regulators to tailor or calibrate regulations for 
certain banks based on their respective characteristics and 
risk levels. The one I am particularly concerned is I am 
concerned about the Basel III framework, the rules relating to 
Basel III and long-term debt requirement proposals, especially 
as it relates to regional banks.
    My ask of you is, when you chair, you will pay particular 
attention to the concerns of regional banks as it relates to 
these rules.
    Secretary YELLEN. Well, this is really under the purview of 
the banking supervisors, the Fed, the FDIC, and the OCC. FSOC 
doesn't have jurisdiction.
    Mr. SMUCKER. The gentleman's time is expired.
    Secretary YELLEN. But they have said they are reconsidering 
the rules that they put out.
    Mr. SMUCKER. Mr. Kildee is recognized for five minutes.
    Mr. KILDEE. Thank you, Mr. Chairman, and thank you, 
Secretary Yellen, for your presence here and for the work that 
you have been doing on behalf of the American people.
    I have been proud to work with this Administration on 
implementing some, I think, monumental pieces of legislation: 
CHIPS and Science Act, Inflation Reduction Act. Both laws are 
supporting American workers, creating American jobs, 
particularly in manufacturing.
    And I have been especially focused on manufacturing more 
solar panels and solar components here in the United States, 
rather than having such a reliance on China for these goods as 
we do now. And I know you understand that. In fact, recently 
you said, and I quote, ``China's overcapacity distorts global 
prices and production patterns, and hurts American firms and 
workers, and I could not agree with that statement more. That 
is exactly right. China's state-backed solar industry is 
flooding the global market with cheap products, undercutting 
our American workers at a time when we are trying to build that 
capacity.
    So to meet this challenge, of course, we need policy that 
drives demand for U.S.-manufactured solar products across the 
solar supply chain. And we can do this with strong domestic 
content rules. And so my question to you comes out of a concern 
that domestic content guidance may leave out some critical 
pieces of the solar supply chain.
    And so I am curious what Treasury's plan is to ensure that 
the final domestic content guidance for solar facilities 
incentivizes onshoring of the full U.S. solar supply chain and 
reduces our dependance on China for components like, for 
example, polysilicon or wafer. Can you comment on that?
    Secretary YELLEN. Sure. Well, we put out some initial 
guidance on domestic content. It was an interagency effort, and 
we relied heavily on advice from the Department of 
Transportation in applying the Buy America rules that are 
referenced in the text of the IRA in determining the 
categorization of clean energy products. We also consulted with 
the Department of Energy.
    Now, we have gotten a lot of public feedback. Some of it--
much of it is from stakeholders throughout the solar supply 
chain, and this is feedback we will take into account as we 
revise the regulations.
    Mr. KILDEE. I do very much appreciate that, and I think it 
is such an important element to make sure that we are looking 
at the entirety of that supply chain because there is a lot of 
American jobs that could be stood up simply on some of those 
elements.
    And I wonder if you could also comment on another subject 
that you and I have discussed before, and that is the 48D 
semiconductor investment tax credit. Making sure that we expand 
the U.S. supply chain for semiconductors starts with 
polysilicon--and again, you and I have discussed this--a 
substance that is 99.5 percent of semiconductor chips.
    The U.S. has a technological advantage on polysilicon 
production, but China and other countries are catching up, and 
that is one of the reasons that the new tax credit in the CHIPS 
and Science Act is intended to spur that investment in the 
semiconductor supply chain.
    And so I wonder if you might comment on your willingness of 
Treasury to continue to work with us on final guidance for the 
48D tax credit that supports those critical elements of the 
semiconductor supply chain. And as you know, for me it is 
important that that include American-made chip-grade 
polysilicon.
    Secretary YELLEN. So again, I would say that we put out 
some proposed rules and received a lot of feedback. We 
explicitly asked questions about the appropriate scope.
    I would also say that the Department of Commerce that 
administers a grant program, we are coordinating closely with 
them to make sure we cover the entire supply chain. I can't 
preview the likely final rules, but we have been very attentive 
to comments that we have received on this.
    Mr. KILDEE. I very much appreciate that. And as you know, 
Congress takes these actions, we have an interest in the 
implementation process. It is the responsibility of the 
Administration, but we have an interest, as the authors of the 
legislation, to ensure that congressional intent is being 
realized.
    So I appreciate your willingness to work with us, and I 
particularly appreciate your service to our country in the 
various roles that we have worked together. You do a fine job 
and are doing a particularly fine job at this hearing.
    Secretary YELLEN. Thank you so much, Congressman Kildee. I 
appreciate that.
    Chairman SMITH [presiding]. Mr. Steube.
    Mr. STEUBE. Thank you, Mr. Chairman.
    Madam Secretary, on March 6, 2024, the Committee on 
Judiciary and Select Committee of the Weaponization of the 
Federal Government released a staff report on the financial 
surveillance in the United States. Have you had a chance to 
review that?
    Secretary YELLEN. I am aware of it, but I haven't reviewed 
it in detail.
    Mr. STEUBE. Well, I would encourage you to read it because 
it is pretty appalling to the American people.
    Last week Chairman Jordan sent you a letter regarding the 
financial surveillance without a warrant of American citizens. 
The date--actually, let me go back.
    So Mr. Chairman, can I add that report to--I ask unanimous 
consent to add that report to the record.
    Chairman SMITH. Without objection.
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    Mr. STEUBE. Last week, April 24, Chairman Jordan sent you a 
letter regarding the financial surveillance without a warrant 
of American citizens. Are you in receipt of that letter?
    Secretary YELLEN. We are in receipt.
    Mr. STEUBE. Have you read it?
    Secretary YELLEN. I have looked at it.
    Mr. STEUBE. You have looked at it? Does that mean you have 
read it, or is that----
    Secretary YELLEN. Yes.
    Mr. STEUBE. Okay. Do you intend to provide the committee 
with the SARs, as requested in that letter?
    Secretary YELLEN. We will respond to the committee.
    Mr. STEUBE. Are you going to provide the SARs, as requested 
in the letter?
    Secretary YELLEN. Well, those reports are strictly 
confidential under the law, and I am not prepared to discuss 
any one in particular.
    Mr. STEUBE. I am just asking if you are going to comply 
with the letter that Chairman Jordan who has oversight over 
your Department and the cabinet, if you are going to comply 
with the letter.
    Secretary YELLEN. We will respond to the letter, and I 
don't really have more to say about that.
    Mr. STEUBE. Under the Biden Secrecy Act, the Financial 
Crimes Enforcement Network, an agency under your control at the 
Department of Treasury receives vast amounts of data covering 
millions of financial transactions involving everyday 
Americans. Is that correct?
    Secretary YELLEN. Through FinCEN receives reports.
    Mr. STEUBE. And is it correct that FinCEN received 20.6 
million currency transaction reports in 2022?
    Secretary YELLEN. I am not sure. It could be.
    Mr. STEUBE. It could be, roughly, more, less?
    Secretary YELLEN. I don't know the number.
    Mr. STEUBE. But you would agree that it is millions of 
reports?
    Secretary YELLEN. Probably, yes.
    Mr. STEUBE. It is also true that FinCEN received 4.3 
million suspicious activity reports in 2022, which was nearly 
double the amount received by the agency in 2019.
    Secretary YELLEN. I don't know.
    Mr. STEUBE. You don't know at all, even though it is an 
agency----
    Secretary YELLEN. I don't know if they received double the 
previous year, I really don't know.
    Mr. STEUBE. But SARs typically gets millions of reports. 
You would agree with that statement?
    Secretary YELLEN. I don't know if it doubled, though.
    Mr. STEUBE. Okay, well, I am sure your staff can provide 
you with that information.
    Secretary YELLEN. I am sure they can.
    Mr. STEUBE. That is an agency under your--so you don't know 
is what you are telling me.
    Secretary YELLEN. I could look into it, but I don't happen 
to know.
    Mr. STEUBE. Okay. Doesn't the data in these reports include 
important and sensitive private and financial data?
    Secretary YELLEN. Well, these are private data only 
available to law enforcement.
    Mr. STEUBE. But it includes data of American citizens, 
their private financial data. Correct?
    Secretary YELLEN. Well, on transactions that are regarded 
as suspicious.
    Mr. STEUBE. And their data, correct.
    Secretary YELLEN. And potentially illegal.
    Mr. STEUBE. The sensitive personal financial data included 
in this report is held in a database. Correct?
    Secretary YELLEN. Yes.
    Mr. STEUBE. Neither FinCEN nor any Federal law enforcement 
agencies need to get a warrant to access this private financial 
data. Is that correct?
    Secretary YELLEN. I don't think you need to get a warrant, 
but it is only shared subject to strict confidentiality.
    Mr. STEUBE. But you don't need to get a warrant.
    Secretary YELLEN. Not to the best of my knowledge.
    Mr. STEUBE. Are you aware that in 2021 FinCEN emailed 
financial institutions suggesting search terms including, and I 
quote, ``America first,'' ``Trump,'' and ``MAGA'' to use in 
identifying transactions that may indicate, and I quote, 
``involvement in riots or potential violence''?
    Secretary YELLEN. This is activity that took place under 
the previous administration, not under the Biden 
Administration, in close proximity----
    Mr. STEUBE. No, this is 2021.
    Secretary YELLEN. This is----
    Mr. STEUBE. Twenty-twenty-one.
    Secretary YELLEN. This is before President Biden's 
inauguration.
    Mr. STEUBE. No, it is after.
    Secretary YELLEN. And after January 6, there was concern 
about potential disruption of his inaugural. And FinCEN worked 
as it is instructed to do with financial institutions to try to 
uncover who was involved in January 6----
    Mr. STEUBE. So were you aware of the FinCEN emailing the 
financial institutions with those search terms?
    Secretary YELLEN. I am now aware that there were 
communications that took place. In some cases, I believe 
financial institutions suggested to this group search terms 
they had used that had been helpful in identifying potential 
perpetrators of January 6.
    Mr. STEUBE. FinCEN also worked with the FBI in early 2021 
to determine certain transaction thresholds for SARs. These 
include certain weapons-related transactions. Do you know how 
many SARs were filed as a result of the FBI and FinCEN's 
coordination at that time?
    Secretary YELLEN. No. The only reason that--I believe that 
weapons were involved.
    It is never a search term used on its own that results in 
anything. It is a way of trying to narrow the scope of search 
for individuals who, based on other information available to 
the financial institution, may have been guilty of illegal 
behavior.
    Mr. STEUBE. Without a warrant.
    Mr. Chairman, I ask that the letter from Chairman Jordan to 
Secretary Yellen dated April 24 is added to the record.
    Chairman SMITH. Without objection.
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    Chairman SMITH. Mrs. Fischbach.
    Mrs. FISCHBACH. Thank you, Mr. Chair, and thank you, 
Secretary, for being here today.
    The Tax Cuts and Jobs Act, passed by President Trump, 
provided tax relief to millions of middle-class Americans and 
their families. The doubling of the standard deduction, the 
doubling of the Child Tax Credit, and the adjusting of 
individual tax rates saved working-class people significant 
money on their tax bills.
    President Biden's comments have already been mentioned 
several times today, and he told the American people flat out 
that he intends to let the Trump tax cuts expire and remain 
expired. You have repeatedly said today that the President has 
no tax plan, only principles from which he will negotiate. Let 
me just say that allowing the Trump tax cuts to expire on 
middle-income Americans seems like a misguided principle to me.
    So let me ask you this, Madam Secretary. If the Trump tax 
cuts expire, and President Biden fails to pass his tax plan, 
which actually currently doesn't exist, which Americans will 
pay less in taxes?
    Secretary YELLEN. President Biden has made absolutely clear 
that he opposes increasing taxes on people earning less than 
$400,000, and he supports cutting taxes for working people and 
families with children to give them more breathing room. And--
--
    Mrs. FISCHBACH. Reclaiming my time----
    Secretary YELLEN [continuing]. He will work with Congress 
to try to achieve that.
    Mrs. FISCHBACH. Ma'am, reclaiming my time, thank you, isn't 
it true that nearly all middle-income individuals and families 
would pay more with the expiration of the Trump tax cuts?
    Secretary YELLEN. Some individuals would, but President 
Biden has said he would oppose allowing tax cuts to expire for 
people making under $400,000.
    Mrs. FISCHBACH. But my understanding, though, is that he 
doesn't really have a tax plan, he just has ideas. And so how 
are you going to translate that into----
    Secretary YELLEN. There will be a negotiation over what to 
do when these tax cuts expire. And the President, as he does in 
many other situations, will negotiate with Congress.
    Mrs. FISCHBACH. But I think that, if you let these expire, 
you are going to see increases, you are going to see increases. 
And without an alternative, I mean, we just--right now what you 
are saying is there is just an idea out there.
    Secretary YELLEN. There are principles.
    Mrs. FISCHBACH. Right now there are principles, okay, 
principles. Same thing. There is no real plan. And you are 
going to let these--he is going to let these tax cuts that--
people are recognizing that there are--they are seeing right 
now expire with just principles that are----
    Secretary YELLEN. There will be a negotiation.
    Mrs. FISCHBACH [continuing]. Hanging out there.
    Secretary YELLEN. And in that negotiation he will oppose 
any tax increases on families earning under $400,000 at the 
same time that he will oppose keeping in place benefits that 
went to the wealthy.
    Mrs. FISCHBACH. And maybe you addressed this earlier, but 
is he going to tell us what these principles are? Is he going 
to give us some concrete----
    Secretary YELLEN. He has told you what the principles are.
    Mrs. FISCHBACH. Okay, all right.
    Secretary YELLEN. I am telling you what the principles are.
    Mrs. FISCHBACH. Well, then, there is just not--I mean, we 
are supposed to rely on these ideas, principles, whatever you 
want to call them, when we have solid tax cuts right here, and 
they shouldn't be allowed to expire because just, you know, a 
single parent making $52,000 a year with two kids would pay an 
average of $1,474 more in taxes if these expire. A married 
couple with two kids making $85,000 a year would pay an average 
of $1,661 more in taxes if these expire. A retired married 
couple making $48,000 a year would pay an average of $340 more 
in taxes if these expire.
    That is real dollars to these people and--you know, that 
are paying these taxes, and are recognizing and are seeing 
these breaks under the Trump tax cuts. And so to just say that 
they--you are going to--for the President just to say he is 
going to let them expire doesn't seem very responsible because 
these are real people that are paying these--that would pay 
more taxes. And so I guess we just are supposed to rely on the 
principles and the idea that he will come up with something 
through negotiation to help these people.
    So with that I yield back.
    Chairman SMITH. Mr. Schneider.
    Mr. SCHNEIDER. Thank you, Mr. Chairman.
    And Madam Secretary, thank you for being here. As others 
have said, thank you for your work on behalf of our country and 
the American people. I am just briefly going to pick up on some 
of the things we have been hearing.
    But, you know, when we talk about--and you mentioned we 
laid out principles, and I think the principles have been very 
clear. What Democrats are trying to do is try to bring down 
costs for working families to help them make ends meet.
    In the American----
    Secretary YELLEN. Exactly.
    Mr. SCHNEIDER. In the American Rescue Plan, we cut child 
poverty in this country by 50 percent through the child tax 
cut. And I think next year, given the chance, we are going to 
do that and not just try to cut it by 50 percent, but in the 
wealthiest country in the world no child in this country should 
be living in poverty. And we shouldn't be willing to accept 
that.
    We are investing in housing. The Low-Income Housing Tax 
Credit that addresses a critical need for families and workers 
around this country to have access to quality housing.
    And R&D, we grow our economy by investing in innovation, 
and these are things that the 2017 tax law didn't do. So I 
could spend my whole five minutes on that. I don't want to 
spend my time, I really want to hear more from you.
    But one of the things that we did with the Inflation 
Reduction Act, among many great accomplishments, was we made 
the single largest investment in climate change. It was truly 
remarkable. And part of that was a tax credit for Sustainable 
Aviation Fuel that I was proud to lead on. And I am working to 
make sure that we implement that and extend that for the 
future.
    So at the risk of asking a question you may not be able to 
answer, but can you give us any sense of the criteria or 
objectives that Treasury is using in thinking about how to 
issue the rule for Sustainable Aviation Fuel, and any update on 
forthcoming guidance that we might be expecting?
    Secretary YELLEN. Absolutely. First of all, I want to thank 
you so much for your leadership on the SAF credit, and I want 
to tell you that today is the day that--we are releasing a 
notice today that will catalyze innovation in the aviation 
industry and incentivize the production of cleaner and more 
sustainable aviation fuels. And I think it will make the United 
States a leader in decarbonizing aviation. So we are announcing 
the release today of a notice that will provide clarity around 
eligibility for the SAF credit.
    And at the same time we will also be releasing an updated 
model of the GREET model, which is applicable--will enable 
firms to determine exactly the credit that they are eligible 
for under the SAF. I think it will provide the clarity that 
people have been looking for, and this should occur this 
afternoon sometime.
    Mr. SCHNEIDER. Great. Well, thank you. I am so excited to 
hear that not only is it forthcoming, but it is coming today. I 
know that is critically important.
    Aviation accounts for more than two percent of greenhouse 
gas emissions. Through Sustainable Aviation Fuel we have the 
possibility of doing more than a 50 percent reduction and maybe 
getting it down further from that. So I can't emphasize how 
important this is.
    I also know that you have a hard out, so I am going to 
yield back the balance of my time so that more of my colleagues 
will have a chance to ask questions. But I thank you for your 
time.
    Secretary YELLEN. Thank you, Congressman.
    Chairman SMITH. Mr. Moore.
    Mr. MOORE of Utah. Thank you, Chairman.
    Secretary Yellen, thank you for being here. I remember our 
visit last time. I appreciate these days. I know they are long 
days for you, with a lot of questions coming from multiple 
directions, but this one of the more important hearings that we 
will do all year.
    So this is going to sound like a gotcha question to start 
off with. It is not. I want to expound on it and have a really 
thoughtful discussion on the corporate tax rate, because it is 
based on our conversation last time and a continuation of that. 
But would you agree, can we at least say that we agree that tax 
policy does have an impact on our economy?
    Secretary YELLEN. It can, yes.
    Mr. MOORE of Utah. Tax policy does have an impact. So this 
is the part that is frustrating me as I hear from my Democratic 
colleagues today about, you know, A, we have got such a great 
economy today, and we have had such a great, strong recovery, 
and all this kind of--the bare bones of our economy are still 
in place from the 2017 Tax Cut and Jobs Act. We saw strong 
economic growth. We saw real wage growth come from the 2017 Tax 
Cut and Jobs Act. And I can speak so favorably about it, I 
wasn't even in Congress then so I am not even boasting about 
this.
    As I watched COVID hit and throw everything off in the 
world, and then, when Democratic control took over in 2021, 
there was massive spending but the same tax code, the same tax 
rate still existed. Some things were starting to trail off. I 
hope to be able to reestablish the R&D tax credits, as well as 
everybody on this committee, basically. But we have seen a 
strong economic recovery. Unemployment is low, and I can 
absolutely point that to the fact that we have had a 
consistent, simpler tax code that strengthened middle class and 
lower-income Americans since 2017.
    The part that concerns me is a book that I recently read. 
It is called, ``Never Split the Difference.'' The tax rate was 
35 percent. In 2017 we lowered it to 21. And now President 
Biden just wants to do 28. It almost feels like lazy to me that 
we are just going to say, well, okay--because you admitted last 
time you were here when we were having our conversation, ``I do 
believe it was too high, and now I believe it is too low, so we 
are just going to split the difference.''
    But the part that I want to hit on here is, according to 
the Tax Foundation, the top combined marginal rate on corporate 
income under current law is actually 25.6 percent. And the 
President's proposal would increase that to 32.2, a corporate 
tax rate that would be the second highest in the OECD, behind 
Colombia. The Joint Committee on Tax has shown that most of the 
cost of a 28 percent corporate tax rate would be borne by 
Americans making less than $500,000.
    What specific analysis can you point to demonstrating that 
raising the corporate tax rate won't impose burdens on low- and 
middle-income Americans?
    Secretary YELLEN. Well, I think all of the analysis I am 
familiar with shows that TCJA, including the corporate tax cut, 
was a regressive tax cut that disproportionately benefitted the 
wealthy and the large corporations, and the corporate tax cut 
enriched corporate shareholders at the expense of the 
alternative, which would have been benefits to middle-class 
families.
    Mr. MOORE of Utah. So if I could jump in----
    Secretary YELLEN. It promised an investment boom, and that 
certainly never materialized.
    You said that the economy did well, but I don't believe it 
did well because of that piece of legislation.
    Mr. MOORE of Utah. Okay, thank you.
    Secretary YELLEN. It simply busted the deficit----
    Mr. MOORE of Utah. And I will reclaim my time, because I 
don't believe you can argue. And if you want to come to Utah's 
1st district, you can hear from companies in that district 
where their real wage income grew for their frontline 
employees. This wasn't just for all of the shareholders like it 
is often times communicated.
    We will see that, as we just try to split the difference on 
this tax policy, that that cost will go directly to the 
consumer. Take a----
    Secretary YELLEN. Well, there is----
    Mr. MOORE of Utah [continuing]. Retail company or a Home 
Depot or a Lowe's. If we put that extra tax burden on them, 
there is only one place to put it. They still have to pay their 
employees. They are going to have to raise income--they are 
going to have to raise prices on consumers. And I don't know of 
any analysis that would refute that.
    Secretary YELLEN. Well, there is an interesting recent 
paper that shows that there were some benefits that went to 
wage earners from the corporate tax cut, but it was almost 
exclusively to the highest-income earners within corporations, 
that virtually none of it went to the massive workers at these 
firms.
    Mr. MOORE of Utah. And that hasn't been my experience 
talking to actual companies in my actual district. I know it is 
considered a strong talking point from my colleagues on the 
left, but that hasn't been the experience. Companies had extra 
income that they could reinvest in their companies, they would 
keep it onshore.
    And this is the part that I just dig into that frustrates 
me so bad. And I am already over time, and I appreciate the 
conversation. And I believe next time we will continue to talk 
about the corporate tax rate.
    Secretary YELLEN. Thank you.
    Chairman SMITH. Mrs. Steel.
    Mrs. STEEL. Thank you, Mr. Chairman. I want to highlight 
the provision from TCJA that has been bipartisan: support 
Foreign Derived Intangible Income deduction, or FDII, 
incentives for companies to keep intellectual properties here 
in the United States. This allows companies to invent and make 
new creative works here, including my home state of California.
    We are also competing with countries who provide massive 
tax incentives to attract innovative companies, and FDII 
ensures that United States remain the best place to develop 
global solutions and technologies for the future, and we must 
protect this provision created in TCJA. This is the reason why 
I am introducing Growing and Preserving Innovation in America 
Act. This bipartisan legislation will permanently preserve the 
current FDII deduction rate.
    Secretary Yellen, you have been here for such a long time, 
and I really appreciate it. And I just want to do the follow-up 
question that Congressman Wenstrup asked you about China and 
the OECD, that under TCJA that U.S. corporate tax lowered to 21 
percent. And China is 25, but there are actually certain 
companies up to 15 percent. So they are--kind of like corporate 
tax rate is low.
    If the United States raises corporate tax rate to 28 
percent, and we adopt a new global minimum tax rate, the U.S. 
will forfeit tens of billions of dollars that we have been 
talking about. That Pillar One, we are going to lose about $120 
billion. And Pillar Two, about $40 billion. And, you know, we 
did the CODEL trip to France and Germany. The French government 
didn't even want to meet us because they are gaining about $4 
to $5 billion from Pillar One and Pillar Two. So this will hurt 
the U.S. economy, I believe.
    And the plan being discussed fails to hold China 
accountable. I am on Select Committee on China, so we have been 
really watching it, you know, what is going on with China. So 
if I heard right that you assumed earlier that China will join 
the OECD agreement, what assurances do you have that they would 
truly comply with the rules, and not continue to abusing the 
system like they have done so many times on the international 
level?
    And why should we give the CCP economic advantages on the 
back of American taxpayers?
    Secretary YELLEN. Okay, well, you covered a lot of 
different things, but let me respond on China and Pillar Two.
    You know, this is an agreement that contains an enforcement 
mechanism. That is one of the reasons it is so powerful. If a 
country doesn't go along with it, doesn't raise their minimum 
tax rate on their multi-nationals to the agreed-upon level, 
other countries that have complied and put it into effect can 
tax firms based in countries that are not going along with it. 
That applies to China.
    If China doesn't raise taxes on its multi-nationals and 
they operate in the United States, the U.S. will impose taxes 
by--it is called the Undertaxed Payment Rule. We will impose 
taxes on those Chinese corporations and we will collect the tax 
revenue. And we will make sure that those companies do pay a 15 
percent minimum tax so that they don't have unfair competition 
with our companies.
    Now, if China imposes the tax, they can collect the tax 
revenue. But if they won't do it, we are going to collect the 
tax revenue and we are going to tax the Chinese firms. And this 
works to our advantage, not to China's.
    Mrs. STEEL. I am not really sure that--you know, China has 
been always, like, you know, for them, that stealing is much 
cheaper than, you know, researching, and it just takes longer 
time. It is much faster. So I don't know they can really follow 
the rules and then they are going to raise taxes to comply with 
the, you know, global minimum tax.
    So having said that, I want to go to my question that 
another expiring provision in the TCJA is enhanced standard 
deduction. This is a guaranteed tax deduction for hard-working 
Americans who want to file simple tax returns. And you are 
talking about actually simple tax returns and about 140,000 
people filed it because the IRS's system that has been changed. 
If this provision expires, taxes will go up on hard-working 
families.
    Do you support the increased standard deduction created by 
TCJA, and support keeping these individual tax cuts for hard-
working Americans making less than $400,000 who do not want to 
maneuver a more complex tax system that exists----
    Mr. HERN [presiding]. The gentlelady's time is expired.
    Secretary YELLEN. The President supports no tax increases 
on families making under $400,000.
    Mrs. STEEL. I'll just make just one statement, because most 
of new audits from IRS are targeted more on taxpayers making 
under just $200,000, so that $400,000 are kind of like assumed 
numbers.
    But you know what? Having said that, I have a few 
questions, and I am going to submit them in writing.
    [The information follows:]
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    Mr. HERN. Thank you. The gentleman from Pennsylvania, Mr. 
Evans, is recognized for five minutes.
    Mr. EVANS. Thank you, Mr. Chairman.
    Mr. HERN. Will the gentleman suspend?
    We have about 28 minutes left of your time, Madam 
Secretary, so we are going to try to keep it on time going 
forward here. And I would appreciate all of the members to 
respect that time. Thank you.
    Secretary YELLEN. I don't have----
    Mr. HERN. Go ahead, Mr. Evans.
    Mr. EVANS. Thank you, Mr. Chairman.
    Secretary YELLEN. I have to leave at 2:15.
    Mr. HERN. Two-fifteen? We had better talk fast, then. 
[Laughter.]
    Mr. EVANS. Thank you, Mr. Chairman.
    I thank you, Madam Secretary, for being here today. I 
wanted to thank you for--I wanted to talk about Social 
Security, one of the most foundational anti-poverty programs 
that our country has ever created. Something I want to stress, 
that it is an earned benefit.
    So the question I want to ask, Madam Secretary, the House 
Republican Study Committee proposed Social Security budget 
would cut Social Security by $1.5 trillion over the next 
decade. Can you please describe how this plan would impact the 
recipients for whom Social Security makes up either the 
majority or the entirety of their income for retired years?
    Secretary YELLEN. Well, Social Security is a critical 
program that keeps millions, tens of millions of people who are 
retired or seniors out of poverty. And President Biden has made 
it clear he would never support cuts in benefits to those 
individuals.
    Mr. EVANS. So what exactly in your mind that you think this 
House Republican Study Committee is attempting or suggesting? 
Do you have any idea what you think they are trying to suggest?
    Secretary YELLEN. I am not sure exactly what they are 
suggesting, but they may be suggesting benefit cuts, raising 
the retirement age. I am not sure what is in their list of 
suggestions.
    Mr. EVANS. That is basically what I want to get an 
understanding. If you don't have any idea, we don't have any 
idea. So I want to be very clear.
    We thank you for all that you have done, and we thank for 
the service that you have done. We really appreciate and value 
that. Thank you.
    Secretary YELLEN. Thank----
    Mr. EVANS. I yield back to the chairman.
    Secretary YELLEN. Thank you, Congressman.
    Mr. HERN. I thank the gentleman from Pennsylvania.
    By the way, I chair that committee. So if you need the help 
on what that policy is doing, I would love to sit down and chat 
with you.
    With that I recognize the gentleman from Pennsylvania, Mr. 
Fitzpatrick.
    Mr. FITZPATRICK. Thank you.
    Thank you, Secretary Yellen. Thank you for testifying here 
today on the President's budget for fiscal year 2025. Secretary 
Yellen, in the current budget plan outlined by this 
Administration it assumes that the tax cut and jobs provisions 
will expire at the end of 2025. And under that plan the Child 
Tax Credit and the standard deduction both would be cut in 
half.
    So my first question, Secretary Yellen, could you walk me 
through this decision by the Administration, and how you plan 
to protect the economic security of Americans who qualify, as 
it is, Americans on the lower end of the economic scale that 
benefit the most from these two provisions?
    Secretary YELLEN. Well, the President's budget is built on 
a baseline that assumes, as is in current law, that features of 
TCJA expire. And he makes a number of proposals, but he hasn't 
offered a detailed plan for how he would meet his pledge to 
make sure that none--no family earning under $400,000 would see 
an increase of their taxes when that occurs.
    He has articulated principles that he would take into a 
negotiation. He has made clear he stands ready to work with 
Congress, and what the principles would be, that no family 
making under $400,000 should see an increase in their taxes. 
Because that is costly to implement relative to his budget, he 
will work with Congress to agree on a set of raisers that would 
cover the cost of that.
    Mr. FITZPATRICK. So turning to free trade agreements, this 
Administration has been interpreting the term ``free trade 
agreements'' so broadly that they have expanded it to include 
critical mineral agreements. Specifically, we saw the USTR 
brokered a CMA with Japan without any congressional approval 
for such a deal.
    So my next question, Secretary Yellen, is why did the 
Administration proceed in brokering this agreement without any 
input from Congress, which it is required to do?
    And what plans are there in the future, as far as you are 
concerned, that the Administration intends to take to ensure 
that Congress is notified of any FTA between the U.S. and any 
other country?
    Secretary YELLEN. Well, certainly, the Administration 
agrees that Congress has an important role here.
    I think our objectives align in that our objective is to 
reduce our dependence on China and other foreign countries of 
concern, and to have more resilient supply chains by producing 
more at home and importing more from our partners and friends. 
And in that regard, especially when it comes to critical 
minerals that we are short of or lack, we are looking to expand 
sources of supply among our friends.
    We have consulted closely with Congress over the last year-
and-a-half, with leaderships and staff members of this 
committee on these matters. We want to be sure that we are 
working with you and that our incentives are in alignment.
    Mr. FITZPATRICK. And lastly, Madam Secretary, I need to 
address China. I know it has been a topic of robust discussion 
today.
    China currently controls up to 50 percent of the electric 
vehicle battery supply chain. Troubling, to say the least. Your 
Treasury Department put out a rule this past December that 
defined battery component in a way that effectively favors 
Chinese manufacturers. Specifically, under this rule a foreign 
entity of concern can produce all materials and parts of the 
battery component, and the electric vehicle can still remain 
eligible for a tax subsidy. I know this was raised earlier.
    So Madam Secretary, just lastly, can you please speak as to 
why the Treasury decided to define battery components this way?
    And can you explain what your Department is doing to help 
U.S. manufacturers and not Chinese manufacturers?
    Secretary YELLEN. I mean, I would be glad to get back to 
you and try to understand better what you are focusing on here, 
but the FIAC rules are very strong, and indicate that battery 
components starting this year made by a foreign entity of 
concern can't be included in any car that receives the $7,500 
credit. Next year that expands to critical minerals and their 
processing.
    Mr. FITZPATRICK. I have a follow-up with you, Madam 
Secretary. We will do that, but my time has expired.
    Mr. Chairman, I yield back.
    Mr. HERN. I thank the gentleman. The gentlelady from Texas, 
Ms. Van Duyne.
    Ms. VAN DUYNE. Thank you very much.
    Secretary Yellen, earlier today you committed to closing 
the carried interest loophole. Unfortunately, this has become a 
popular punch line that is just not true.
    For a lot of new and emerging entrepreneurs across the 
country who don't come from Wall Street or wealthy backgrounds, 
carried interest is the sweat equity that they have put into 
their business. It is the work that they have put into growing 
their business. And I look forward to working with my tax team 
colleagues to better educate Members of Congress on the 
opportunity that carried interest provides, and the 
longstanding tax policy principles that it is based on.
    Last year you testified and said, ``Progress has been made 
on inflation, but there is still work to be done.'' 
Unfortunately, not much has changed in the last year. Inflation 
hasn't gotten any better. Energy prices haven't gotten any 
better. And we continue to see housing prices at record highs. 
Under this Administration prices have increased nearly 20 
percent and real wages have fallen by nearly four percent. That 
affects people who are making less than $400,000. And yet the 
President's budget put out earlier this year continued growth 
policies that exacerbate this problem.
    In your testimony you claim the Administration is taking 
actions to bring down the cost of key household expenses like 
energy. But that is not true. The Biden Administration's desire 
to harm American energy continually through tax increases on 
domestic energy production is the weaponization of the tax code 
against all Americans, including those making less than 
$400,000.
    During your Senate Finance hearing, you said traditional 
energy companies have had significant tax benefits that tilted 
the scales. In the Treasury Green Book, the Administration's 
tax proposal says, ``These traditional oil, gas, and coal 
preferences encourage more investment in the fossil fuels 
section that would occur in a neutral system, and this market 
distortion is detrimental to long-term energy security.''
    Do you really believe that oil and natural gas production 
is detrimental to the long-term energy security?
    Secretary YELLEN. Well, to give preferences right now, when 
we understand the----
    Ms. VAN DUYNE. Aren't you doing that with green new policy 
deals, giving preferences, picking winners and losers?
    Secretary YELLEN. Well, we pick winners and losers, but 
they have to be ones that are positive for what is an 
existential threat, which is climate change.
    Ms. VAN DUYNE. Okay. So you believe, then, that oil and gas 
natural production is an existential threat, and that that is 
somehow better to cut all of that production for our----
    Secretary YELLEN. No----
    Ms. VAN DUYNE [continuing]. Long-term energy security?
    Secretary YELLEN. No one is saying to cut all that 
production.
    Ms. VAN DUYNE. So some is----
    Secretary YELLEN. There is no--we will be dependent on this 
for----
    Ms. VAN DUYNE. I reclaim my time. This Administration's 
goal----
    Secretary YELLEN [continuing]. A long time, but there is no 
reason----
    Ms. VAN DUYNE [continuing]. To shut down--the 
Administration's goal to shut down energy companies and change 
the rules to basically make it impossible to operate 
profitably.
    Secretary YELLEN. It is not--that is not the 
Administration's objective, but there is no reason why we 
should be giving tax preferences----
    Ms. VAN DUYNE. But is tilting the scales toward green 
energy worth the security risk by buying oil from adversaries 
such as Venezuela?
    Secretary YELLEN. We are promoting clean energy and 
renewables----
    Ms. VAN DUYNE. We are buying it from countries----
    Secretary YELLEN [continuing]. In order to----
    Ms. VAN DUYNE. We are buying it from countries that produce 
it in a much dirtier manner than any place in the U.S. And that 
is----
    Secretary YELLEN. We are going to switch to renewables.
    Ms. VAN DUYNE [continuing]. What your policies are forcing 
us to do right now.
    Earlier you talked about the corporate rate in the U.S., as 
my colleague, Congressman Moore, has alluded to, the U.S. has 
been at a ``race to the bottom.'' Did the Tax Cut and Jobs Act 
lower the corporate rate to the lowest in the OECD?
    Secretary YELLEN. It is among the lower in the OECD.
    Ms. VAN DUYNE. I fail to see how this is the bottom, then.
    I mean, under the President's budget, according to the Tax 
Foundation, the U.S. would have the second--not the lower to 
the bottom, but would have the second--highest corporate rate 
in the world. Is this something that the Treasury is proud of?
    Secretary YELLEN. Over decades, corporate tax rates have 
declined----
    Ms. VAN DUYNE. It would be the second-highest----
    Secretary YELLEN [continuing]. Around the world.
    Ms. VAN DUYNE [continuing]. Corporate rate in the world.
    Secretary YELLEN. I don't believe that 21 percent is the 
second-highest----
    Ms. VAN DUYNE. I have other questions, but I also want to--
--
    Secretary YELLEN [continuing]. In the world. That is 
certainly not----
    Ms. VAN DUYNE [continuing]. Make sure that some of my other 
colleagues have an ability to ask them.
    With my one minute left, I yield.
    Mr. HERN. Madam Secretary, I know we are close to your 
time, but I would ask for your indulgence to our Democrat on 
this side over here, Mr. Beyer from Virginia.
    Mr. Gomez, okay, from California.
    Mr. GOMEZ. Thank you so much, Mr. Chairman. Mr. Beyer and I 
will be splitting this five minutes, so I will be quick. We 
took care of Jimmy Panetta so he couldn't get back in time, so 
we get the last five.
    One of the things is--first, let me just say I recognize 
that the President's budget proposal for fiscal year 2025 
invests in working and middle-class families by making child 
care and housing more affordable. And these are two issues that 
I don't think we give a lot of attention to.
    Last year, during a retreat with the Ways and Means 
Democrats, Jack Lew came by and said there is two issues that 
in the near and long term will be dragging down the growth of 
our GDP: child care and housing. And it makes sense when you 
see almost those 2 issues combined eat up about 60 percent of a 
family's income, pre-tax.
    So one of the things we are trying to do through two 
caucuses I started was--the Congressional Dads Caucus--is child 
care, the Child Tax Credit. How do we focus on that? And then, 
at the same time, when it comes to more housing affordability. 
So I am going to kind of go out of order since we have limited 
time on my questions.
    But Secretary Yellen, can you detail actions the 
Administration is taking to provide desperately needed relief 
for America's renters?
    Secretary YELLEN. We are really looking to expand through 
any number of tax proposals and through expanding LIHTC, the 
supply of affordable housing. It is a critical problem facing 
America.
    Mr. GOMEZ. And one of the things that we see in my 
district, 78 percent of my district is renters. We know that 
this is getting worse. And also, even on the other side of the 
aisle, I have conversations with a representative from 
Nebraska, and I asked him, what is the number one issue facing 
your district? And he said housing affordability. So I think it 
is an issue that we need to tackle.
    Additionally, we know the Child Tax Credit had such an 
impact when it came to reducing child poverty in this country 
by making it fully refundable but also advanceable. I believe 
that advance ability is not given a lot of attention that it 
should get and should receive because, as a working-class 
person, $200, $300, $500 a month means that you can use that 
for formula, diapers, all those monthly expenses.
    Would you agree that paying the CTC on a monthly basis, 
which I know that we can do, rather than yearly, would help 
maximize the CTC's power to help working families?
    Secretary YELLEN. Yes, it would. I think it was very 
important, and the Internal Revenue Service worked very hard to 
make sure they implemented that right away. It was in the 
middle of the pandemic, and it required an heroic effort, but 
it made a big difference and we are very supportive of it.
    Mr. GOMEZ. Thank you. And with that I will yield the rest 
of my time to Mr. Beyer.
    Mr. BEYER. Thank you, Mr. Gomez.
    Madam Secretary, I greatly appreciated seeing your proposal 
for a minimum income tax of 25 percent on the ultra-wealthy. I 
was proud to work with Steve Cohen to turn this into 
legislation. Many cosponsors.
    It is ridiculous that the wealthiest 0.001 percent of 
Americans, on average, pay effective rates in the single 
digits. Many of them pay nothing. Can you talk to us about how 
that minimum tax would work?
    Secretary YELLEN. Yes. The President's budget would impose 
a minimum tax of 25 percent on total income, and income would 
include unrealized capital gains. It would only apply to 
taxpayers with more than $100 million in wealth, and it would 
not require, for those taxpayers who have highly illiquid 
assets, they could defer payment of it. Others could pay in 
installments so that it wouldn't be a huge hit in the first 
year.
    But right now, many wealthy people really never pay taxes 
on that during their lifetime. They borrow against it, live 
very well, and often can pass it on with step up of basis at 
death so that no one ever pays taxes on that, on those gains.
    Mr. BEYER. Thank you very much. One last question in 25 
seconds. Are you thrilled with Direct Files so far?
    Secretary YELLEN. It is going great. It has gone really 
well. We are going to provide a thorough assessment, but all 
the anecdotal evidence we hear, people have really appreciated 
it, found it easy to use. It saved them, on average, $270 and 
something like 12 hours of work to file their taxes. And it is 
a great option.
    Mr. BEYER. Thank you very much.
    And I yield back.
    Mr. HERN. Thank you.
    Madam Secretary, this is your option. We have one member 
left. He can submit his questions, and he will give you those 
questions, or he can go now and----
    Secretary YELLEN. Go for it. Go for it.
    Mr. HERN. Thank you for your indulgence.
    Secretary YELLEN. Last one.
    Mr. FEENSTRA. Thank you, Secretary Yellen. I truly 
appreciate you being here and at least giving me some grace and 
giving me some time. Thank you very much.
    So last week I sent you a letter on the decision by USTR to 
reverse digital trade policy at the WTO, which I would like to 
submit for the record. With the decision, the USTR determined 
that it will no longer defend against foreign governments' 
demands for American businesses to locate facilities, 
equipment, employees, and intellectual properties in those 
countries.
    In the Pillar One negotiations, market countries have 
sought taxing rights over companies selling into them, but 
those taxing rights are allocated on paper only, as we know. 
The local data storage requirements that would proliferate 
around the world do the opposite, reallocating taxing rights 
not on paper, but instead reallocating real economic assets 
that create a taxable presence in those countries.
    So in this year's Green Book, the President notes the 
concern of undesired incentives to locate certain economic 
activities abroad. But if local data storage requirements are 
allowed to proliferate, U.S. businesses will face not only an 
incentive to invest abroad, but will require to do so. This 
newly allowed method of discriminatory targeting of the U.S. 
companies for tax revenue is going to cost us, obviously, jobs 
and investment and IP transfers.
    So my question is, Secretary Yellen, did the Department of 
Treasury consult with USTR on the likely tax and economic 
impacts of this decision?
    I mean, did you guys work together? Did you talk about it 
at all?
    Secretary YELLEN. Well, this was really USTR's decision, 
and I honestly have to defer to USTR when it comes to 
Ambassador Tai's position that she has taken on the--you are 
talking about the WTO situation with digital trade.
    When it comes to Pillar One, we have had interagency 
coordination, and our position on this really remains 
completely unchanged. We are trying as hard as we can to get 
rid of digital service taxes that we regard as discriminatory 
against U.S. firms.
    Mr. FEENSTRA. And thank you for that. But you know it very 
well. If you look at it, I mean, obviously, our multi-nationals 
will have to build infrastructure, and that, obviously, will 
costs these companies jobs, and costs taxes that could be paid 
here.
    I mean, how do we square that up?
    Secretary YELLEN. You mean because of the WTO position?
    Mr. FEENSTRA. Yes.
    Secretary YELLEN. I am sorry. You know, I really just 
can't--I haven't been involved in that at all. We have 
generally opposed data localization requirements, and I don't 
think that has really changed significantly. But I honestly 
have to defer to USTR on that issue.
    Mr. FEENSTRA. Okay, and I appreciate that. I mean, it just 
seems like everybody is at odds here. The USTR is at odds with 
the Treasury. I mean, I just--and the WTO, I mean, I don't 
quite--I think we are going in two opposite directions.
    And I think the thing that we don't want is where our 
multi-nationals are paying taxes to other countries, and other 
countries are using us for a piggy bank. And I just feel like 
we are swaying that direction. Do you see that at all? I mean--
--
    Secretary YELLEN. Well, we are really trying to oppose that 
in the Pillar One negotiations. We are trying to get rid of 
digital service taxes that are being imposed on our firms.
    Mr. FEENSTRA. Well, I would really appreciate that. I mean, 
but continue to look at that. Please do a deep dive into this, 
because what is going to happen is we are going to lose a lot 
of dollars when these infrastructures get moved to other 
countries, and losing jobs and IP transfers. So if you could.
    With that I will close down my comments. Thank you for 
being here.
    Mr. HERN. Madam Secretary, we would not want you to leave 
here without getting high praise and accolades from the 
gentleman from California, because I am sure that is what he 
wants to heap upon you on your way out.
    So Mr. Panetta, you are recognized.
    Mr. PANETTA. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Madam Secretary, I will be quick. I will focus on just one 
issue, and it is one that is important to me and my 
constituents in the 19th Congressional District, and that is 
housing costs.
    As you know, researchers have found that high housing costs 
can strain a local economy by slowing employment growth. If 
housing is unaffordable, local companies can struggle to 
attract and recruit workers. I have long advocated, especially 
on this committee, for building of more workforce housing, for 
making sure that there is a first-time home buyer's tax credit, 
for doubling the capital gains tax on home sales. We want to 
make sure that there is these types of tax credits to bolster 
housing.
    Can you explain how investment in housing, like the areas 
that I have talked about, can support the economy?
    And would the Department of Treasury support these types of 
investments, especially in workforce housing?
    Secretary YELLEN. Well, we are very concerned about 
shortage of affordable housing in places like California, but 
also many parts of the country. The President is doing 
everything he can to promote affordable housing. There are many 
proposals in the Green Book, including expansion of LIHTC and 
credit for first-time buyers and sellers of houses to get rid 
of some of the lock-in that has occurred because of the 
increase in mortgage rates.
    Mr. PANETTA. And I agree with you on the LIHTC, and I am a 
big supporter of LIHTC. However, what I found, especially in 
the 19th Congressional District, you have a number of people 
who work in our district, but they don't qualify for low-income 
housing. That is why I believe workforce housing is very, very 
important to ensure that people who work in the district can 
afford to live in the district. And so I am hoping that 
workforce housing is something that the Department of Treasury 
would be interested in.
    Secretary YELLEN. We would be glad to work with you on 
that. We are trying to do everything we can in this area.
    Mr. PANETTA. And I will take that as a closing answer. 
Thank you, Madam Secretary.
    I yield back.
    Secretary YELLEN. Thank you.
    Mr. HERN. I thank the gentleman.
    Madam Secretary, thank you for your time here before the 
committee, and thank you for extending your time.
    We stand adjourned, without objection.
    Members will have two weeks to submit questions in writing.
    Madam Secretary, thank you.
    [Whereupon, at 2:27 p.m., the committee was adjourned.]    

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