Senator Scott Calls Out Harms of Dem Spending, Inflation, IRS Proposal at Banking Hearing
WASHINGTON – Today, Senator Tim Scott (R-S.C.) had spirited exchanges with Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen at a hearing for the Senate banking committee. Senator Scott highlighted the impact of persistent, surging inflation on the most vulnerable Americans resulting from out-of-control Democrat spending and called out the Biden administration for doubling down on their IRS bank reporting scheme.
Read a full transcript of his exchanges below:
SEN. SCOTT: Thank you, Mr. Chairman, and thank you, Ranking Member, for holding this hearing this morning, and thank you to the guests for being here with us this morning.
I was thinking about the conversation I had over Thanksgiving with some South Carolinians about the consequences of elections. And we have heard over and over again that elections have consequences, elections have consequences.
Perhaps no finer point that elections have consequences is simply losing a single seat in Georgia, January 5th. The result of one lost seat in Georgia may cost taxpayers just this year $5 trillion in additional spending. One single seat—$5 trillion in additional spending. $1.9 trillion on a COVID relief package that had 1% for vaccines and less than 9% for COVID-related health. $1.2 trillion for an infrastructure package with only 10% of that $1.2 trillion going to roads and bridges in the next five years, and now we’re talking about overheating the economy with another $2 trillion. Elections have consequences. It’s stunning.
And what I’ve heard this morning is hard to process back at home in South Carolina. What I’ve heard so far is that the administration wants you to believe what they say and not what you see and are experiencing—what you see with your own eyes. They say [that] by putting another $2 trillion in the economy, it will make things more affordable for you. But what you see and are experiencing is inflation, in part caused by trillions of dollars of government spending and the anticipation of even more money.
In other words, when inflation is over 6%, and your wage growth is under 3%, your buying power is going down, not up. And they want you to believe that spending more money is going to solve this problem.
The South Carolinians on a fixed income like Social Security, averaging around $1,500 per month… their spending because of this “transitory inflation”—I don’t know what the definition of transitory is anymore—a third of their Social Security income [is spent] on putting gas in their cars, heating their houses, and fixing up the places they live in.
Chairman Powell, is it your impression that the Biden administration has a clear understanding that rising prices are hitting people the hardest who are on Social Security, families struggling paycheck-to-paycheck, and single moms?
CHAIRMAN POWELL: It’s not appropriate for me to comment on what the Biden administration thinks. I can talk about what I think…
I think that’s right. I think that, if you think about families that are living paycheck-to-paycheck, they’re feeling high gas prices, soon enough heating/oil prices, food prices. They’re certainly feeling that. And you know, this is our job. Our role is to make sure that this higher inflation does not become entrenched.
SEN. SCOTT: And part of the challenge that I see—I know that someone else may address this point—but I was trying to figure out the complexity of the labor force participation rate, and the fact of the matter is that since the pandemic, we’ve seen a loss of about 1.7% labor force participation rate. We celebrate a 4.6% unemployment rate, but what we sometimes miss is the fact that when you have fewer people looking for work, your unemployment rate goes down because your long-term unemployment goes up, which means that your labor force participation rate also goes down.
Before I run out of time, let me just follow up on Senator Hagerty’s point about expanding the power of the IRS and your response, Secretary Yellen. Giving the IRS more power to catch tax cheats by starting with the IRS bank reporting proposal seems far-fetched at best. Because the original proposal said that if you were a successful lemonade stand operator making $12 a week, putting $600 into your checking or savings account, [that] would cause [your] account to be reported to the IRS. Then, they revamped that proposal to $10,000. Said differently: If you’re making minimum wage working almost full time, your accounts would then also be available for heightened inspections by the IRS. If you’re looking to catch complex business partnerships in cheating their taxes, you don’t need the IRS bank reporting proposal.
Can you tell the American people today, Secretary Yellen, whether you still support any form of the IRS bank reporting requirements your department proposed earlier this year, which would provide the IRS with currently undisclosed taxpayer information for the purpose of targeting, essentially, every single American working at minimum wage or higher. Do you still support that or not?
SEC. YELLEN: I do support it. I think it’s important that the IRS have visibility into opaque income streams. And that’s an important way of improving tax of compliance—
SEN. SCOTT: Secretary Yellen, let me ask you a question. If you’re looking to catch tax cheats, why in the world would we start with something as low as $600 and then revamp it to $10,000? If you’re trying to find millionaires and billionaires, they’re not running lemonade stands—I don’t think they are—and they’re certainly not making minimum wage. So when you create a new approach to having the IRS search through our account records at our financial institutions, or compelling our financial institutions to forward our information to the IRS—
SEC. YELLEN: I’m sorry, it is not detailed information about what you’re doing in your bank account—
SEN. SCOTT: Aggregated information going to the IRS is the scariest proposal, and there’s no way that it has to be anywhere near the thresholds you’ve started with in order to find a way to take accountability for those complex organizations—
SEN. BROWN: Senator Scott, your time has expired. Secretary Yellen, please answer the question.
SEN. SCOTT: Chairman, if we’re going to have a conversation, we’re going to have to dialogue.
SEN. BROWN: Well you’ve had the dialogue.
SEC. YELLEN: We’ve worked carefully with Congress to narrow the scope of the reporting, and in particular to exempt wage-earners and federal beneficiaries. The initial proposal was intended to be comprehensive. The requirement asked for exactly two pieces of information: aggregate inflows and aggregate outflows over the course of the year for each account where financial institutions already report interest income earned if it exceeds $10. The burden on financial institutions was minimal, and there was no attempt to target income-earners whose actual incomes are below $400,000. But the low reporting requirement was meant to make evasion more difficult by opening multiple accounts.