Daily Tax Update - June 27, 2006

SENATE FINANCE COMMITTEE HOLDS HEARING ON NEW TREASURY SECRETARY'S NOMINATION:
Today, the Senate Finance Committee held a hearing on the nomination of Hank Paulson to become Secretary of the Treasury. Paulson said, "If confirmed, I will focus intensely on how the United States can maintain and strengthen our competitive position." On the issue of taxes, Paulson said that he thought it would be "a big mistake" to raise taxes to deal with the budget deficit. Senate Finance Committee Chairman Charles Grassley (R-IA) said he hoped that the full Senate would confirm Paulson's nomination by the start of the July 4th recess.

  • Paulson's remarks can be accessed here.
  • Ranking member Max Baucus (D-MT) offered the following comments to the Treasury nominee. Baucus said, "The Government should collect the taxes that people owe but do not pay. The Government should shut down abusive tax shelters. And the Government should close overly-generous corporate tax loopholes. The Treasury loses $300 billion a year in taxes owed but not collected. The cumulative tax gap over the last six years is $2 trillion. Yet the administration's budget has a plan that it says would raise just $3.5 billion of that, over ten years. That's one-tenth of one percent of the solution. Mr. Paulson, you will be able to do something about this. Today, I ask you to pledge to send this Committee in October a credible plan to reduce the tax gap. And on the same schedule, I also ask you for a plan to stem the proliferation of abusive tax shelters and offshore schemes. Chairman Grassley and I asked the IRS Commissioner, in consultation with Treasury, to submit such a plan by October 1 of this year. I expect that we will have a hearing shortly thereafter. I hope and expect the Treasury Department to be ready to tell the American people how it is going to collect the taxes that are owed." On the issue of tax reform, Baucus said, "The administration promised tax reform. Then the administration stacked its advisory panel. The panel reported to the Treasury, but we have yet to see the administration's plan. With your tenure comes a new opportunity to work together to modernize our tax system. I reach out my hand to work with you on this."
  • The Committee postponed the hearing originally scheduled for today on the nomination of Eric Solomon to be Assistant Secretary of the Treasury for Tax Policy. The hearing will be rescheduled at a later date.

IRS HEADQUARTERS STILL CLOSED TODAY:
The headquarters building of the IRS was closed again today due to continuing flooding and a power outage. The IRS did not issue any news releases or legal guidance today. IRS offices outside of the flood area were open as usual. The IRS headquarters building is expected to reopen tomorrow. Several other federal buildings, including the Department of Justice, and some museums also remained closed today.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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