‘It’s Just Disingenuous’: Kevin Hern Lays Into Sec. Janet Yellen Over Biden Admin’s Tax Promises

5 months ago

During a House Ways & Means Committee hearing last week, Rep. Kevin Hern (R-OK) questioned Treasury Sec. Janet Yellen about tax policies around the world and in the US.

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Transcript

00:00Thank you, Mr. Chairman. Madam Secretary, thank you for being here today.

00:04Mr. Chairman, I'd like to enter for the record an article from Tax Notes titled

00:08Gain and Little Pain from New Bermuda Corporate Tax.

00:11Without objection.

00:12Thank you.

00:14Madam Secretary, as you might be aware,

00:16Bermuda is introducing its new corporate income tax that will take effect in 2025.

00:21Bermuda entities will be able to mark up their intangible assets to their estimated market value,

00:26and under the new law, they can amortize those assets over 10 years for tax purposes.

00:31Madam Secretary, this creation of a new deferred tax asset also results in a deferred tax expense.

00:38As you know, under general guidelines provided by the OECD for Pillar 2 that you negotiated,

00:43deferred tax expense or these amortized deductions will not trigger minimum tax liability

00:48that could be imposed by other globe-participating countries.

00:52Bermuda has no intention of giving up its ability to attract business through the tax code.

00:57Other countries are adopting similar measures to maintain their status as an attractive jurisdiction

01:03at the expense of United States multinationals.

01:05We know about Singapore, we know about Ireland,

01:07the things they're doing to maintain their ability to use their tax code to lure companies there.

01:13Madam Secretary, are you concerned about the fact that Pillar 2 is creating a new tax subsidy race

01:19where countries enact Pillar 2 taxes but offset the higher tax costs with tax subsidies

01:24in the form of qualified refundable tax credits and other incentives like what Bermuda is doing?

01:32Well, the idea of Pillar 2 is to level the playing field,

01:37and countries that refuse to raise their corporate tax rate up to the minimum,

01:47countries that participate and enact the minimum can in effect tax companies in tax havens that haven't done it.

01:59You cited an example. I'm not aware that this is something that's broad-based,

02:07but if it is, it would certainly concern me, and it's something that I'd be prepared to look into.

02:14Madam Secretary, we've all seen what Ireland has said about putting a cap on recurring revenues.

02:18We've seen what Singapore has said in refundable tax credits.

02:21We've seen what China does in direct tax payments or direct cash payments to their companies

02:26to be able to offset the taxable income so that they, in effect, from the look at it,

02:33that the minimum tax level would be hit, but companies in those countries are getting subsidies

02:38through direct credits that offset that, take it backwards, where ours aren't direct.

02:42Ours are not refundable. We have to actually earn income to be able to utilize those.

02:47Question two, is this administration concerned that Pillar 2 incentivizes subsidy warfare

02:54that puts our adversaries like China at a competitive advantage?

02:58It would concern me if it's incented that, but I'm not aware that that is broad-based at this point,

03:06and in our case, many of our tax credits, such as the green tax credits, the LIHTC credit,

03:14are being treated as refundable.

03:17As I've emphasized previously, we're working to make sure that the R&D tax credit

03:23also will be something that firms can benefit from.

03:26Madam Secretary, I think you just validated that countries have the ability to make certain credits refundable

03:31to offset the minimum tax that other countries or OECD can claim, lie claim to.

03:37China can do it. I think your going there evidenced the fact that they're not always transparent

03:45in what they do, since all of their companies are basically owned by the CCP.

03:50Madam Secretary, I just want to talk about, I've got a longer question here,

03:55but it pertains to the same thing. I think there's a lot of work to be done.

03:59As you know, the committee, the Republicans on the committee, went to the OECD and expressed our concern

04:04and made it very clear that Pillar 2 is not going to take place under a Republican-led Ways and Means committee.

04:11We're not going to give away our tax dollars.

04:13In fact, it's said time and time again about how much tax dollars, how many tax dollars,

04:18the U.S. taxpayer dollars would go around the world, upwards of $200 billion.

04:22I know you said that was JCT's outward look, but I think it's important for everyone to know,

04:27and you know this to be certain, corporations don't pay taxes.

04:31The people that work for the corporations, the consumers of the products of those corporations,

04:36and the owners of those corporations pay the taxes to increase pricing for whatever the commodities are.

04:42In fact, Forbes, Brookings, Tax Foundation, Cato, and many, many others,

04:46have said that consumers pay 31% of the new taxes, workers pay 38% of the taxes.

04:51All of those people, for the most part, make less than $400,000 a year.

04:55So about 70% of the tax increase will be paid by people making less than $400,000 a year, some portion of that.

05:02So I think it's disingenuous, as my colleague from Pennsylvania said,

05:05to say that no one is going to pay a single cent, as outlined in the White House's conversation about policy going forward.

05:12It's just disingenuous. It's not factual, and it's not honest with the American people.

05:17One other thing that you said was that the labor participation rate was better today than it was pre-COVID.

05:23I know you selectively picked an area.

05:27For adults.

05:28It was 63.3% on March 2020, today it's 62.7%.

05:34Overall workforce, you don't have the luxury as an employer, as I did for 35 years,

05:38to say I'm only going to hire people, you've got to be 25 years old or 54 years old.

05:43We have an aging population, and as people retire,

05:47we know that labor force participation overall will decline over time.

05:53Mr. Chair, you're back.

05:55Thank you.

‘It’s Just Disingenuous’: Kevin Hern Lays Into Sec. Janet Yellen Over Biden Admin’s Tax Promises

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