(The Center Square) U.S. Treasury Secretary Janet Yellen testified before the House Ways and Means Committee Friday where she took tough questions on the tax increases and new IRS funding in President Joe Biden’s proposed budget.
“The budget before us today calls for $4.7 trillion in new taxes and $6.9 trillion in new spending, during a staggering debt crisis,” House Ways and Means Chairman Jason Smith, R-Mo., said in his opening remarks.
Biden’s budget has also taken fire for increasing the national debt. The White House has touted that the budget cuts $3 trillion in deficits over the next decade.
The White House has defended the budget, pointing to those deficit cuts while also spending on Social Security, Medicare and more. Presidents release these budgets annually, but they serve more as symbolic and set priorities for their agenda since there is little hope the budget will be accepted by passed wholesale by Congress.
“It’s built on four key values: lowering costs for families, protecting and strengthening Social Security and Medicare, investing in America, and reducing the deficit by ensuring that the wealthiest in this country and big corporations begin to pay their fair share, and cutting wasteful spending on Big Pharma, Big Oil, and other special interests,” Office of Management and Budget Director Shalanda Young told reporters on a press call.
The budget includes several proposed tax increases, as The Center Square previously reported, including a billionaire’s tax, a minimum 25% tax on anyone with more than $100 million, an increase of the top marginal income tax rate to 39.6%, a hike of the corporate tax rate from 21% to 28%, and more.
“The President’s budget means more pain, with $1.8 trillion in new taxes on Main Street businesses, many of which still have ‘Help Wanted’ signs hanging in their windows because of the Democrat-fueled worker shortage,” Smith added.
Yellen also warned lawmakers about the coming debt ceiling. As The Center Square previously reported, lawmakers only have a few weeks to raise the debt ceiling or default on U.S. debt obligations, an unprecedented occurrence that would send shockwaves through the global economy. Some Republicans have indicated they want to use the coming cliff to negotiate, but Biden has said he will not negotiate, arguing the stakes are too high.
The Committee for a Responsible Federal Budget released a full analysis of the proposed budget, which reports that under the plan, debt would rise to 106% of Gross Domestic Product by 2027, a new record.
“Spending and revenue would average 24.8 and 19.7 percent of GDP, respectively, over the next decade, with spending reaching 25.2 percent of GDP and revenue totaling 20.1 percent by 2033,” the group said. “The 50-year historical average is 21.0 percent of GDP for spending and 17.4 percent of GDP for revenue.”
The group’s analysis also said Biden’s forecast relies on rosy economic assumptions such as strong long-term growth and interest rates that are lower than those projected by the Congressional Budget Office.
“The budget assumes 0.4 percent growth this year, 2.1 percent growth next year, and 2.2 percent by the end of the decade – compared to CBO’s 0.1 percent, 2.5 percent, and 1.7 percent, respectively,” the group said. “The budget also assumes ten-year interest rates fall to 3.5 percent by 2033, compared to CBO’s 3.8 percent.”
Yellen oversees the Internal Revenue Service, which has come under scrutiny recently after the Inflation Reduction Act allocated about $80 billion, part of which will be used to hire an army of auditors to raise revenue by auditing Americans. That move was controversial as critics point to recent IRS abuses and targeting of conservatives.
Biden’s budget raised eyebrows by allocating to the IRS over $43 billion for fiscal year 2024, a 15% increase.
“After Democrats handed the IRS an $80 billion raise last year, taxpayers are now asked in this budget to hand the IRS another $43.2 billion?” Smith said in his opening statement. “I have to ask: Is this a joke?”
Yellen defended the IRS spending, pointing to better customer service. The IRS has taken fire for poor customer service in recent years.
“Taxpayers are getting drastically improved customer service this year,” Yellen said in her testimony. “For example, we’ve answered hundreds of thousands more phone calls during this filing season than at this time last year.”