Biden’s Treasury pick will have lengthy to-do list on taxes
Janet YellenJanet Louise YellenMnuchin to put 5B in COVID-19 relief funds beyond successor’s reach Biden soars as leader of the free world The Hill’s Morning Report – Presented by the UAE Embassy in Washington, DC – COVID-19 fears surround Thanksgiving holiday MORE, President-elect Joe BidenJoe BidenTrump says he’ll leave White House if Biden declared winner of Electoral College The Memo: Biden faces tough road on pledge to heal nation US records 2,300 COVID-19 deaths as pandemic rises with holidays MORE‘s expected pick for Treasury secretary, will have a number of tax issues on her plate if confirmed by the Senate, with some requiring immediate attention.
Coronavirus relief will be a top priority for Biden’s economic team early next year, and tax provisions are likely to be a component of any stimulus package. Yellen would also play a key role in crafting regulations implementing tax laws, IRS funding and House Democrats’ push for President TrumpDonald John TrumpVenezuela judge orders prison time for 6 American oil executives Trump says he’ll leave White House if Biden declared winner of Electoral College The Memo: Biden faces tough road on pledge to heal nation MORE‘s tax returns.
While best known for her role in shaping monetary policy as chair of the Federal Reserve, experts say Yellen is well-versed on a wide array of other economic issues.
“It’s hard to think of a more well-rounded, qualified person,” said Mark Mazur, a Treasury Department official during the Obama administration who now leads the Urban-Brookings Tax Policy Center.
Yellen worked on tax issues when she led the White House Council of Economic Advisers during the Clinton administration. She’s also taken public positions on certain tax issues in recent years, from expressing support for a carbon tax to criticizing the impact of Trump’s 2017 tax cuts on the federal deficit.
Additionally, Yellen has long been concerned about income inequality. Unlike a number of previous Treasury secretaries, Yellen does not have a background working on Wall Street, and progressives see her as likely to prioritize the interests of ordinary Americans over those of large financial institutions.
“The reason that so many progressive economic thinkers are so excited about Janet Yellen is she has a proven track record of challenging powerful interests, including the big banks,” said Adam Green, co-founder of the Progressive Change Campaign Committee. “And that willingness is key to any version of fulfilling Biden campaign promises and building back better.”
The most pressing economic issue that Biden’s administration will face will be the coronavirus-related downturn. Like Biden, Yellen has been supportive of the federal government providing more coronavirus relief. During a congressional hearing in July, she backed additional federal spending and said deficit concerns shouldn’t prevent Congress from providing a robust response to the worst recession since the Great Depression.
The record $2.2 trillion CARES Act that Congress enacted in March had several tax components to it, including a round of direct payments to Americans. But it remains to be seen whether Democrats and Republicans will be able to reach an agreement on a new COVID-19 relief package and what it might entail.
“One of the big challenges will be to get Congress to continue to stimulate the economy,” said Kimberly Clausing, an economics professor at Reed College.
Clausing said she thinks Yellen would do a good job making the case to Congress that more stimulus is needed. She also said Yellen is likely to support Biden’s goal of expanding the child tax credit during the pandemic.
Another issue that would be in Yellen’s portfolio as Treasury secretary would be tax regulations and guidance. It’s not an area where she has made many public comments.
Garrett Watson, a senior policy analyst at the right-leaning Tax Foundation, said how Yellen handles tax regulations is “the big set of question marks right now.”
Democrats have been critical of some of the major tax regulations the Trump administration has issued to implement the 2017 tax-cut law, arguing they are overly generous to businesses. Biden’s administration could look at revisiting those regulations.
Trump’s Treasury secretary, Steven MnuchinSteven Terner MnuchinOn The Money: Initial jobless claims rise for 2nd week | Dow dips below 30K | Mnuchin draws fire for COVID-19 relief move | Manhattan DA appeals dismissal of Manafort charges Mnuchin to put 5B in COVID-19 relief funds beyond successor’s reach The Hill’s Morning Report – Presented by the UAE Embassy in Washington, DC – Trump OKs transition; Biden taps Treasury, State experience MORE, has been known for being very hands-on with tax regulations. Several tax experts predicted that Yellen might be more hands-off and delegate some of that work to the IRS, as is more traditional for the Treasury secretary.
“I think there will be a return to a more normal thing,” Mazur said.
Many of Biden’s tax proposals during the campaign focused on raising taxes on wealthy individuals and corporations. The extent to which Biden makes progress on those plans depends in large part on the outcome of two runoff elections in Georgia on Jan. 5 that will determine which party controls the Senate next year.
One area where there is room for bipartisan agreement is increasing funding for the IRS. Tax experts see that as an opportunity for Yellen to champion a larger IRS budget that would enhance the agency’s customer service and enforcement.
“Getting more funding for the IRS is important for both the taxpayers and the government,” Clausing said.
IRS Commissioner Charles Rettig was appointed by Trump, but his term doesn’t end until 2022. The Biden transition did not respond to an inquiry from The Hill about whether the president-elect would seek to replace Rettig before his term ends.
Some progressives have called for Biden to remove Rettig, but doing so would be a departure from the kinds of norms the former vice president has embraced. Even Trump did not fire the IRS chief appointed by former President Obama, John Koskinen, despite calls to do so from some House Republicans.
House Democrats have indicated that they plan to renew their efforts to obtain Trump’s tax returns when Biden takes office. Yellen, if confirmed, could be involved in how the new administration handles their request.
A federal statute states that the Treasury secretary “shall furnish” tax returns requested by the chairs of Congress’s tax committees, but Mnuchin rejected Democrats’ request, arguing it lacked a legitimate legislative purpose.
Key to Yellen’s ability to help Biden implement his agenda on taxes will be the relationships she develops with lawmakers.
Steve Wamhoff, director of federal tax policy at the left-leaning Institute on Taxation and Economic Policy, noted that many Senate Republicans are up for reelection in 2022, and some GOP positions on taxes do not poll well with the public.
“I will be interested in seeing how [Yellen] works with lawmakers, including lawmakers in both parties,” Wamhoff said.