WASHINGTON (Reuters) - U.S. Treasury nominee Janet Yellen underscored in writing on Thursday the Biden administration’s intent to remake tax and trade policy after conquering the coronavirus pandemic and making domestic investments in workers and infrastructure.
The Senate Finance Committee plans to consider her nomination for Treasury Secretary for 10 a.m. EST on Friday.
Following are some of Yellen’s written responses to additional questions from committee members, according to a copy of the responses obtained by Reuters:
STATE LOCAL TAX DEDUCTION:
* Yellen said it was critical to evaluate the effect of a 2017 cap on deductions of state and has on state and local governments and their residents. “I will work with those at Treasury and throughout the administration in evaluating those impacts, as well as other aspects of this issue.”
* Yellen said she agrees with Biden’s proposed increase of the U.S. corporate tax rate to 28%.
* Yellen said Biden’s proposal for a 15% minimum tax on booked income, rather than taxable income, would recapture tax revenue lost to tax avoidance by companies with low or zero tax liabilities.
* On international and digital tax disputes Yellen said: “We are committed to the cooperative multilateral effort to address base erosion and profit shifting through the OECD/G20 process, and to working to resolve the digital taxation disputes in that context.”
* Yellen said a global minimum tax agreed within the OECD would stop a “destructive global race to the bottom on corporate taxation”
* Yellen sidestepped questions on whether to raise the 20% tax rate for “pass-through” small businesses including sole proprietorships, saying the 2017 provision needed to be studied “to determine the extent to which it is helping to improve the prospects of America’s small business owners.”
WEALTH, CAPITAL GAINS TAXES:
* Yellen said Biden has not proposed a specific wealth tax but would “tax the investment income of families making more than $1 million at the same rate they pay on their wages and to tax some previously untaxed capital gains on the final return of wealthy taxpayers.
* Yellen said she would work with IRS and the Congress to focus enforcement activity on the largest sources of the gap between taxes owed and taxes aid.
TREASURY SECURITIES PORTFOLIO:
* Yellen said she would analyze the mix of debt securities now issued by the U.S. government, including the weighted-average maturity of the U.S. debt, which was 65 months as of December, five months shorter than at the end of 2019 because of the volume of short-term T-bills issued to finance COVID-19 relief measures.
* Yellen did not directly respond to a question about how she would coordinate with the Federal Reserve in the event the central bank adopts yield curve control measures.
* Yellen signaled no rush to pursue a 100-year maturity Treasury bond. “Today, the demand for existing Treasury instruments remains robust and is sufficient to meet U.S. financing needs. Introducing new, ultra-long-term instruments would add new complexities to this market and deserves further study in light of the many factors that determine U.S. Treasury market policy.”
* Yellen said she believes strongly in upholding the norms of an independent Federal Reserve. “Given my prior leadership at the Federal Reserve, I understand deeply why it is so important to maintain the tradition of the independence of the Fed in monetary policy. In areas where it will be appropriate and necessary for coordination between the Treasury and the Fed, I, if confirmed, will certainly take those responsibilities seriously and will be well-positioned to work seamlessly with Chairman Powell.”
* Yellen said the Fed’s Main Street Lending program and other expired coronavirus Fed 13(3) lending facilities will not be available. She did not commit to reviving them, saying she would work to ensuring that “additional support particularly gets to small, mid-size businesses that have been hardest hit during the crisis.”
* Yellen said the COVID-19 pandemic has highlighted the need for U.S. unemployment insurance system to be updated and expanded and a system of automatic stabilizers “is an important step to take now so that we can minimize the negative impacts of any future recessions.”
INTERNATIONAL MONETARY FUND:
* Yellen left the door open to an allocation of IMF Special Drawing Rights for all member countries. Said she would analyze ways to strengthen support for the most vulnerable countries. “I look forward to studying the issue further and pledge to adhere to the legal requirement to consult with Congress before making a decision on the U.S. position on an SDR allocation.”
* Yellen said “we cannot solve the climate crisis without effective carbon pricing.”
* She reiterated her support for using financial regulation to combat risks from climate change, in response to a question asking her to commit not to do so.
* Yellen said she will advise Biden on achieving net-zero emissions no later than 2050 “based on the principle that polluters must bear the full cost of the carbon pollution they are emitting.”
THE DOLLAR AND CURRENCY MANIPULATION:
* Yellen reiterated her commitment to allow the dollar’s value to be determined by market forces. “The world can be certain that the United States will not seek a weaker currency to gain competitive advantage.”
* She also committed to pressuring countries suspected of devaluing their currencies. “The Biden-Harris Administration will be examining how Treasury, Commerce and (the U.S. Trade Representative) can work together to put effective pressure on countries that are intervening in the foreign exchange market to gain a trade advantage.”
* Yellen said she plans to work with other authorities for an approach to regulating bitcoin and other cryptocurrenices. “I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities. If confirmed, I intend to work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations.”
Compiled by Andrea Shalal, David Lawder, Ann Saphir, Jonnelle Marte and Dan Burns
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