Im sure the significance of this position at this crucial time is not lost on you. Its not lost on any member of the committee. Its a major focus of the committee for some time now and we agreed to have you here to discuss your thoughts on these matters. On a number of occasions i stated the president ial leadership would be a key component to any successful tax reform effort. Just last week i quoted president obama at a speech on the senate floor back in 2012 he said things like the current Corporate Tax system is outdated, unfair and inefficient. The problem was he never got around to leading out of the tax reform and i expect more on tax reform. That expectation comes in large part because of knowing him and the way that he approaches these things are the. I have to say also because he and secretary have been talking about it so much thats more than that theyve engaged with congress and the public on these issues and i believe your nomination is another way the president has further demonstrated his commitment to reforming the burdensome job killing tax code and the experience that would be a crucial part of this endeavor. Before i finish up with my remarks i also want to address another important issue, one that i want to stress that all nominees that come before the committee. Talking about tax reform and existing tax policy it is critically important that we keep open minds delete the lines of communication between the parties in congress and executive branch. My todays u. S. Senate to providing timely and responsive answers submitted by members especially as they sit on this committee. That is the expectation and quite frankly anything short of that is unacceptable. I want to thank you for being here today and i will now turn to the senator for any remarks. Thank you mr. Chairman and colleagues. This is a tax policy doubleheader for the finance committee only at the halfway mark. Hes been nominated to serve as the treasury secretary for tax policy is. It is a very tough job and especially challenging when the congress is gearing up to work on major tax legislation where i pretty much share senator mccaskills views on the importance of it being bipartisan. In my view the challenge is guaranteeing that everybody in america has a chance to get ahead, not just the fortunate few. Tax reform becomes a partisan exercise slashing rates for just the wealthy, the biggest corporations. The American People will see this as a con job. Thats because it would lead in place the root causes of the appalling unfairness. The fact is the tax code in America Today is a tale of two systems. There is one system for cops and nurses and it is compulsory and strict, and basically their taxes come out of every single paycheck. Then theres another system for the lucky few that says you can pay what you want and when you want to. And it goes without saying that the nominees for the top jobs and tax policy needed to have the knowledge and experience to fix this unfairness. Its also vital to make sure nominees havent contributed to the problems in the first place. Now, i have real concerns mr. Connor and i have talked about this about several matters that took place during his time as the director of national tax of ernst and young. The firm did a great deal of work setting up tax shelters for wealthy clients. In the process, there were and whawereemployees who were convif fraud and obstruction for covering it up. Ernst and young paid more than 100 billion in settlements for the Justice Department and Internal Revenue service over the tax shelter market. In the vetting process for the nomination, it became clear that mr. Connor was regularly informed of the decisions that allowed ernst and young to profit on the tax gaming. He told me he had no direct role in the marketing of tax shelters or representing them to the federal auditors and i remain troubled that he was at the top of a department that engaged in these practices. I look forward to the discussion. Finally, the assistant secretary for tax policy is a job that requires close communication on both sides of the committee. Over the last few months, the administration has taken a lot of hits from republicans and democrats alike for its stated policy of ignoring questions that come from democrats. I am pleased chairman hatch has spoken out against the policy as has chairman grassley. And i want to be clear that it is completely unacceptable for an administration to just stonewall the inquiries from the members of congress. They dont do this for sport. We have an obligation on behalf of the billions of people that we represent. So i expect a commitment today to respond to questions regardless of whether or not they have a d. Or r. Next to their name. Thank you for being here and visiting with me and i look forward to your testimony. Thank you. Mr. Of any comments you wish to make . Chairman hatch, Ranking Member wyden and members of the finance committee, it is an honor to appear before you today. I feel both privileged and humbled to be recommended by the treasury is secretary and nominated by President Trump to serve as the assistant secretary of treasury for tax policy. As a former tax staffer for a member of the committee, i have deep respect both for this committee and the institution of the senate. I look forward to the opportunity of confirmed to serve this country again. I would like to take a moment to thank my family has been a constant source of information to the consideration and support. My wife cathy kathy, my two chin hillary and faith. Id also like to express thanks to the members and staff ive been able to visit with over the past couple of. If confirmed, i look forward to working with you in a bipartisan, collaborative and collegial manner. I grew up in a small move town by the name of plymouth in the coal mining region in northeastern pennsylvania. My father worked as an accountant for the coal mines and my mother was a high school teacher. I spent the majority of my career as a tax practitioner and leading the Tax Department so currently i am a partner in charge of the national tax office. I also ran the American University tax writeoff and prior to that i spent 30 years with ernst and young and finally, i am proud to say i was the senators tax accountant for over three years. Ive always be grateful to the senator for the lessons i learned and the values that he instilled in all of us on his staff. He set a standard for excellence in service that has been a source of inspiration of my entire career. Through these Career Opportunities ive worked on many aspects of the tax code. I focused on Small Business and middle income individuals. My current is focused on the middle Market Companies. Ernst and young specialized in the compensation and witnessed firsthand the challenge of keeping the companys Competitive Internationally. Comprehensive tax reform is the challenge before us. The code isnt necessarily complex and anticompetitive it takes winners and losers. America needs a simpler system filing their taxes. The middle class needs a tax cut. U. S. Businesses need a tax code that allow them to prosper domestically and at an international marketplace. Youve made great progress in identifying the policies to achieve these goals. The magnitude of the tax reform work in terms of the hearings, working groups and legislative proposals this indeed is impressive and as a result, america is on the verge of its comprehensive tax code overhaul in the general issue. Treasury has an Outstanding Team of the most talented Tax Professionals in the world. Working together with you and your staff i believe we can get tax reform over the finish line and if confirmed it would be an honor to strive to do so. Thank you, senator we are grateful that you are willing to serve. I have some questions im going to ask that i ask all of our nominees. First, is there anything you are aware of in your background that might present a conflict of interest with the duties of the office for which youve been nominated . Does not. Okay. Do you know of any reason for the store or otherwise that would in any way prevent you from fully fulfilling and honorably discharging the responsibilities of the office to which you have been nominated . No sir. Do you agree without reservation to respond to any reasonable summons to appear and testify before any constituted committee and the congress if you are confirmed . No sir. Finally do you commit to providing the response to any questions addressed to you by any senator of the committee . Yes mr. Chairman. Youve been in the tax business for many years, tax policy to Tax Consulting and compliance. Youve worked with congress and the administrations, tax practitioners, academics and other taxpayers. What is it you would like to achieve under this tax policy at the Treasury Department and how in your years of experience and interaction with all facets of the Tax Committee prepared you to do so . Mr. Chairman, one of the things ive learned over the years that sent the taxes to impact decisionmaking on businesses and individuals having an Internal Revenue code that is fair and simple should be a high priority and having a globally competitive tax is important for american businesses. If confirmed, i would focus on increasing Economic Growth through the tax code, creating good paying jobs, middleincome tax cuts and simplicity. What are some of the important Things Congress can do to help americans save their hard earned time and of course their hard earned money as well by con playing with this overly complex tax code i think a broadbased witch means eliminating certain tax productions that exist today would be very hopeful. No one can comprehend that and so the broadening the base and lowering the rate is essential for americans to feel good about the Internal Revenue code. Most americans have no understanding whatsoever of the tax laws and how they work when 90 of the population hires the tax return preparer for purchases software to prepare their returns a. I think we need to dramatically simplify as a part of tax refo reform. In the facilitation and enforcement act of 2015 the customs and Border Protection that the treasury is responsible for approving some of them is the statutormisstheir statutory. We have the commitment to ensure the regulations the deadlines thats not an issue im familiar with but the executive branch if confirmed i would do everything in my power to make sure the treasury meets the required deadlines. What are some of these businesses telling you is important to tax reform . What are the major themes in the Small Businesses alike they tend to be more globally active and so the focus tends to be on a globally competitive tax system. They are less concerned as a general matter of competitiveness of the u. S. System they are so concerned with simplicity. One of the things that surprised me most i than the current firms the middle Market Companies in how few businesses in the market have a tax professional. Businesses with revenue of 50, 60, 70 million have no one on their stafthe staff that focusee staff consequences of different positions they make. So i think having a simple straightforward Internal Revenue allows the businesses to make decisions to them without being unduly influenced by the tax law would be a very good place to be. So different, again, at different ends of the spectrum. It was intended to address concerns of the countries and profits shifting to sign onto thon tothe final reports to move together on peace fun. However, not long after the reports were finalized certain countries decided to go their own way and went further than the measures described. For example one of them dealt with the tax documentation that would be prepared on a country by country basis and shared with other governments. However, there is a Strong Movement to make that information public. If they collectively agreed to do one thing but then do another is the benefit of participating in these tax discussions for the consensus if you think the United States should maintain a presence of the tax discussions what font do you have on actions that can be taken to encourage jurisdictions or go further than the agreedupon framework . Its important to have a seat at the table and these discussions and i think its important for the United States to make sure those agreements we enter into our complied with so how we deal with each work. But i dont know how we could have a globally Competitive InternationalPlaying Field. When you were the director at ernst and young. It costs taxpayers millions of dollars. Your job to count the money as a part you benefited financially as the money poured in. Youve also had a handle designing the tax opinions that allowed this. It was a process that led to people going to jail. Yet up until now you have taken no responsibility for the dark chapter and in effect you said it wasnt my job to complain or blow the whistle. Now it takes courage to stand up when people around you are breaking the law so the question i want to ask is in hindsight at the feast do you wish he would handle this matter differently . I wasnt involved in the decision and i never designed or drafted one myself. Every time i think about the activity i wish that i had done things differently. At the time the firm agreed to get involved they set up the structure that didnt involve the national tax and when i took over that was the system that continued until it was dissolv dissolved. It wasnt until i was doesnt need to get the point of contact in the permanent subcommittee on investigations when i had a chance to review it in detail an email that group. What i saw greatly disappointed me and i felt members of the group that had used the level of trust. I think i should have been more vocal. I didnt speak up as forcefully as i wish i had, and i feel bad about that. Im looking at all these documents that you were seeing on. Not one, but lots of them. And im going to have to consider your answer as we go forward because when we look at what happened and the fact that you were copied on all of this as the head of the department is a major front and i may need to talk with you more about this. My next question is also on a matter that was very troubling to me. You said you would respond by phone requests made by the committee however when you spoke with these people sitting behind me. Not to respond to democratic members, and yo she would follow that directive and ignore our request. So, which would it be . Are you going to be responsive for the Committee Democrats even if directed not to do so o where are you going to break the pledge that you made the committee . It cant be both, it has to be one or the other. When they are going to pay it , what do you see as you are priority to close these kinds of loopholes and get us to a system that gives everybody a chance to get ahead rather than two systems that end up being hard on working families. Youve got some expertise here because ernst young was doing it on your watch. What would you do to stop those kinds of practices. Two things. First the activity by ernst young was a small part and only constituted less than 1 . What led to that is the complexity of the Internal Revenue code. Its all the gray in the tax law and that is not unique. There are many tax advisers who engage in similar activity , and it leads to that. My time is up. There is a lot more to this than blaming it on complexity. This is a question of whether, in this job, you will have the political will to take on these powerful interests but did so well at ernst young and are still out there today. I will need to ask more questions about that. Thank you. Senator grassley. Thank you and congratulations on your nomination. My first question deals with the whole issue of whether we ought to have lower rates and which is more important. How do you see the tradeoff between expensing and appreciation on lower rates. Do you view it as acceptable, length and depreciation to help finance a lower rate . Senator, i think different businesses prefer different things. Professional Service Businesses with low Investment Capital would prefer the lower rate. Capital intensive businesses would prefer more rapid write offs of their equipment. I think theyve developed innovative proposals with regard to writeoffs that are somewhere between current law and expensing and i think trying to simplify the rules for expensing and writing off Capital Equipment would be a good thing to do. They are exceedingly complicated and simplifying them and consolidating some of the existing rules would be a very good thing to do. What, if any restriction should be imposed on the ability to deduct interest. As you know house blueprint makes it a business expense in exchange for going to full exchange on capital assets. You view this as an acceptable tradeoff, should any restriction on interest be considered to finance lower rates were faster depreciation . I think as part of tax reform, everything should be on the table. We should look at the deductibility of interest. There is concern among many that the Current Treatment of Interest Deductibility leads businesses to excessive leverage. If something is done with respect to interest expense, i dont think it would be wise to do it is a simple acrosstheboard change. I think there are some aspects of the economy that depend very heavily on interest and its critical they have availability. The interest to debt and the deductibility of other interest expense. A key simplification of the income tax being considered is increasing the standard deduction. For example, the ministr