Heaing of the House Ways and Means Committee: The President's Budget Proposals for Fiscal Year 2005

HEADLINE: HEARING OF THE HOUSE WAYS AND MEANS COMMITTEE

SUBJECT: THE PRESIDENT'S BUDGET PROPOSALS FOR FISCAL YEAR 2005

CHAIRED BY: REPRESENTATIVE WILLIAM M. THOMAS (R-CA)

LOCATION: 1100 LONGWORTH HOUSE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES:

JOHN W. SNOW, SECRETARY, DEPARTMENT OF THE TREASURY

BODY:
REP. RICHARD E. NEAL (D-MA): Thank you, Mr. Chairman.

Mr. Secretary, welcome. I had only intended to speak to alternative minimum tax but I want to follow up on what Mr. Portman said. We might disagree and bicker over the official date when the recession settled in but there is one fact that is not in dispute and that is that the Bush administration inherited record surpluses. And only in this institution, Mr. Secretary, could the majority party vote to rip $1.2 trillion out of the budget over the next 10 years and then complain about deficits. That's the predicament we're in today.

But let me speak specifically to this alternative minimum tax issue that you're going to do a study on?

MR. SNOW: Yes.

REP. NEAL: Well, I just want to tell you, if I can, politely, Mr. Secretary, that I have now filed legislation in the last recess of this Congress to repeal the alternative minimum tax and I've never had one call from a member of the administration that they were interested in working with me on any segment of that proposal. I would be delighted to participate in these discussions with you. I suspect that the reason that we're only studying the alternative minimum tax as opposed to doing something about it once again is because of its cost, isn't it, in part?

MR. SNOW: No, Congressman. It's not. It's much more than that. This is a tax which will affect many, many, many millions of Americans who aren't aware that they will be affected by it.

REP. NEAL: Mr. Secretary, there's nobody in this body and this committee that has looked at AMT more than I have. I'm well familiar with the point you're making but the truth is, and you know it, it gets worse year after year after year.

MR. SNOW: Mr. Neal, I would look forward to talking to you about this subject and looking at your legislation. We're going to need a lot of good ideas on how to deal with this problem and I look forward on drawing your counsel.

REP. NEAL: But let me just pursue it a bit. One of the difficulties that those of us have on this side is the suspicion that we're not fixing alternative minimum tax because it doesn't square with tax cut rhetoric here. And since it impacts middle income Americans and not lower income Americans and upper income Americans any longer, we really don't deal with it because of the fact that it's easier to stuff tax cuts into the budget than it is to deal with AMT. Is that a reasonable suspicion that some of us might hold?

MR. SNOW: We want to deal with AMT because it's a real issue, it's a serious issue. It has far reaching implications and effects on millions and millions of Americans who are unsuspecting about those effects and we want to do it in a way that makes sense and is sound. That means taking into account, as you know because you know the subject, the regular tax system as well because it has such dramatic interaction and effects on the regular tax system.

REP. NEAL: Well, would you agree with this statement, that if the Bush tax cuts are made permanent, the AMT issue gets worse?

MR. SNOW: No, I don't think I would agree with that.

REP. NEAL: Do you want to pursue that?

MR. SNOW: Well, I don't --

REP. NEAL: You can't give to the people on one hand, Mr. Secretary, and take it away on the other and call it a tax cut or tax relief.

MR. SNOW: You heard me say earlier that we would seek to find a solution to this problem working with the Congress in a budget neutral way.

REP. NEAL: We had an opportunity here a couple of years ago rather than to pursue just the discussion of tax cuts versus no tax cuts to find some middle ground on an issue like tax simplification which we could all buy into, all join hands and get together on it. That's what we ought to be having. That's just a quick suggestion.

But let me ask you about another question, Mr. Secretary, that I think is near and dear to the hearts of all of us who are watching those 134,000 American troops brilliantly perform every day in Iraq. It's those corporate tax evaders who have set up shop in Bermuda, what are we going to do about it?

MR. SNOW: Well, you'll see in our budget we have toughened up the enforcement significantly at the IRS. We're --

REP. NEAL: Do you think that they are really Bermuda corporations or do you think they are American corporations with fictitious addresses?

MR. SNOW: Well, I think it's a fact question obviously but we want to go after tax havens. We're dealing with the interest, the income stripping proposals that are in this budget. We're trying to negotiate treaties with a number of the tax haven countries. I think we're making real progress on it.

REP. NEAL: We could do more to promote the credibility of the American Tax Code by shutting down some of these loopholes and going after these evaders and we could all stand shoulder to shoulder on it and stand up and cheer for those kids that are in Iraq by saying that these groups that set up these phony post office boxes in Bermuda ought to pay their share like you and I do, Mr. Secretary.

MR. SNOW: Congressman, I am with you. We want to go after abusive tax shelters anywhere we find them.