• Monte Silver, Tax lawyer

Biden's Secretary of Treasury emphasizes help to small businesses

Updated: Feb 9, 2021

Yellen Pledges Targeted Tax Relief As US Treasury Secretary

By Stephen Cooper · January 19, 2021, 5:48 PM EST

Former Federal Reserve Chair Janet Yellen promoted the economic and tax policies of President-elect Joe Biden during a Senate hearing Tuesday to confirm her nomination as Treasury secretary, pledging targeted small-business tax relief and higher tax rates for corporations. In Senate testimony Tuesday, Janet Yellen, nominated by President-elect Joe Biden as his choice for Treasury secretary, emphasized the need for training and workforce development to keep the economy competitive. (AP Photo/Andrew Harnik) During more than three hours of testimony before the Senate Finance Committee, Yellen told lawmakers that small businesses are failing, especially those in the service sector, while their minority and female workers disproportionately bear the impact of the coronavirus pandemic. She promised to efficiently implement the nearly $900 billion in relief signed into law in December. "We need to invest in our infrastructure. We need to invest in R&D," Yellen testified. "We need to invest in training and workforce development so that we have an economy that is productive and competitive, and workers and families can thrive." Yellen, 74, would be the first woman to serve as secretary of the U.S. Department of the Treasury and also the first ever to have chaired the Federal Reserve and the White House Council of Economic Advisers. Sen. Chuck Grassley, R-Iowa, the outgoing chair of the Finance Committee, indicated to reporters that he expected the full Senate to quickly confirm Yellen to the top post at Treasury. Sen. Ron Wyden, D-Ore., who will lead the Finance Committee, said Yellen demonstrated why no one is more qualified to be Treasury secretary in the midst of this pandemic, and he's pushing to have her confirmed on Thursday. "She understands the financial pain millions of working families are experiencing, and will put them first as she works to rebuild our economy," Wyden said. Yellen defended Biden's plans for revamping large swaths of the GOP's Tax Cuts and Jobs Act , especially the 21% corporate tax rate, as well as the law's global intangible low-taxed income regime, which targets income earned from intangible assets such as patents or other intellectual property in jurisdictions with low tax rates. Idaho Republican Sen. Mike Crapo told Yellen that the 2017 tax law made American corporations internationally competitive by lowering the federal tax rate, but Biden's plan to raise it above 21% during the pandemic would harm businesses during the pandemic. Yellen said the higher tax rates on large corporations would come later as part of a larger package that includes significant spending and investment proposals. While Biden wants to reverse the law's incentives for companies to move operations and profits overseas, he doesn't support a complete repeal of the 2017 tax law, she said. Yellen said the Biden administration would negotiate with other countries through the Organization for Economic Cooperation and Development on taxes on multinational corporations to stop the "disruptive, global race" to the bottom on corporate taxation. "In that context, it would ensure the competitiveness of American corporations, even with a somewhat higher corporate tax," she said. On the issue of repealing the 2017 tax law's $10,000 cap on deducting state and local taxes, Yellen told Grassley that she favored studying the impact of the cap on the ability of state and local governments to provide critical services. But Sen. Bob Menendez, D-N.J., said state and local governments had laid off 1.3 million workers who are on the front lines of responding to the coronavirus pandemic. He noted that wealthier states like New Jersey and New York, which are the country's economic engines, send their tax revenues to states like Florida and Kentucky, which receive more in federal taxes than they pay. "It's economic malpractice, from my perspective, what is happening," he said, noting that the federal government should adequately address the fiscal crisis facing states and local governments. Yellen also addressed GOP concerns that a proposed additional economic stimulus payment of $1,400 for individuals isn't targeted precisely enough because some of the recent $600 checks were disposable income for individuals or invested in the stock market. Moreover, those checks were sent out in addition to unemployment insurance payments, said Sen. Bill Cassidy, R-La. Yellen said that Biden's proposal capped the payments at individuals and families earning $75,000 and $150,000, respectively. She also noted that some workers had to quit their jobs to take care of children or other family members. "It is less targeted, but there are many families that are bearing real financial burdens that are not addressed by unemployment compensation," Yellen said. Senators also questioned Yellen's willingness to make changes to combat childhood poverty, included in Biden's $1.9 trillion COVID-19 relief proposal called the American Rescue Plan. Earlier this month, Biden proposed a one-year expansion of refundable child care tax credits as well as expanded child tax credits and earned income tax credits. Biden's plan would expand the child care tax credit up to $4,000 for one child and the child tax credit to $3,000 per child up to age 17. The earned income tax credit would be expanded for childless adults from roughly $530 to close to $1,500. Yellen told Sen. Sherrod Brown, D-Ohio, that she agreed with his idea of having the Internal Revenue Service pay the refundable credits into no-fee checking accounts each month at a community bank or credit union. She told Brown she would work to get the proposal adequately funded in Biden's budget and to have the IRS implement it as fast as possible. Sen. Michael Bennet, D-Colo., told Yellen that he and Brown had been working to expand these tax credits for nearly a decade. "If this manages to make it through the Congress, we will have cut childhood poverty in America by 45%," he said. Yellen noted that one of the best ways to reduce childhood poverty is to provide refundable child tax credits at a level that "gives families the ability to invest in their children and to give them the kinds of tools that they need to succeed in this economy." --Editing by Vincent Sherry.

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