April 5, 2006
JS-4158
Testimony of Secretary John W. Snow
U.S. Department of the Treasury
House Appropriations Subcommittee on Transportation,
Treasury, and Housing and Urban Development, the Judiciary,
District of Columbia
Chairman Knollenberg, Mr. Olver, and Members of the Subcommittee, I appreciate the opportunity to appear before you today to discuss the President's fiscal year 2007 budget for the Department of the Treasury.
The President's budget for Treasury in fiscal year 2007 reflects the Department's dedication to promoting economic opportunity, strengthening national security and exercising fiscal discipline. The budget supports activities that help ensure all Americans will have the opportunity to live in a nation that is more prosperous and more secure.
The Treasury appropriations request for FY 2007 is $11.6 billion, slightly above the FY 2006 enacted budget. This request is consistent with the President's overall goal of cutting our deficit in half by 2009. The Treasury Department is committed to fiscal austerity and to the most efficient and effective use of taxpayer dollars while at the same time boosting revenues through continued economic growth.
Mr. Chairman, we have provided the Committee with a detailed breakdown and justification for the President's fiscal year 2007 budget request for Treasury. I would like to take the opportunity today to highlight portions of our request and then I would be happy to take any questions you may have.
PROMOTING A PROSPEROUS AND STABLE
The Treasury Department plays a predominant role in the development and implementation of the President's goals for domestic and international economic growth, and the communication of his agenda. To reach our greatest potential, the economy must increase its rate of growth and create new, high quality jobs for all Americans.
The Budget addresses the need to consider the economy when considering tax policy with the proposed creation of a new Dynamic Analysis Division within Treasury's Office of Tax Policy. Understanding the full range of behavioral responses to tax changes, including how tax changes affect the size of the economy and, eventually, tax revenues, is critical to designing meaningful, effective tax policy, and tax reform. This small expenditure will have a substantial pay-off for the American taxpayer.
Treasury's Office of International Affairs also plays a key role in supporting growth by advancing our nation's interests in an increasingly complex world economy. The office improves access to foreign markets for
As globalization has progressed, Treasury's on-the-ground presence in international finance and economic centers has steadily receded. The $9.4 million requested to increase Treasury's overseas presence will enable the Department to carry out its international mission in the global economy more effectively. Treasury attachés will work in tandem with the Office of International Affairs and the Office of Terrorism and Financial Intelligence to build relationships with foreign officials and work with local
The Budget also seeks $7.8 million for the Community Development Financial Institutions (CDFI) Fund to administer the New Markets Tax Credit and manage the existing loan portfolio. The Budget proposes to consolidate CDFI's remaining programs into the Strengthening America's Communities Initiatives (SACI) within the Departments of Commerce and Housing and Urban Development.
FIGHTING THE GLOBAL WAR ON TERROR AND SAFEGUARDING OUR FINANCIAL SYSTEMS
While promoting financial and economic growth at home and abroad, Treasury performs a critical and far-reaching role in homeland security. The Department battles national security threats by coordinating financial intelligence, targeting and sanctioning supporters of terrorism and proliferators of weapons of mass destruction (WMD), improving the safeguards of our financial systems, and promoting international coordination to attack the financial underpinnings of terrorist and other criminal networks. To support these efforts, the President requests $388.7 million for fiscal year 2007.
The Office of Terrorism and Financial Intelligence (TFI) supports Treasury's national security efforts by safeguarding the
Financial intelligence exposes the infrastructure of terrorist and criminal organizations. It provides a roadmap for investigators to find those who help facilitate criminal activity. These investigations lead to the recovery and forfeiture of illegally obtained assets and create broad deterrence against criminal activity. Treasury plays a crucial role in linking law enforcement and intelligence communities with financial institutions and regulators. To support these efforts, Treasury requests an increase of $16.9 million for the Financial Crimes Enforcement Network to improve coordination with state and local regulators, strengthen regulatory training and outreach, and enhance Bank Secrecy Act collection, retrieval, analysis, and sharing.
Treasury exercises a full range of intelligence, regulatory, policy, and enforcement tools in tracking and disrupting terrorists' support networks, proliferators of weapons of mass destruction, rogue regimes and international narco-traffickers, both as a vital source of intelligence and as a means of degrading the terrorists' ability to function. Treasury's actions include:
- Freezing the assets of terrorists, drug kingpins, and support networks
- Cutting off corrupt foreign jurisdictions and financial institutions from the
- Developing and enforcing regulations to reduce terrorist financing and money laundering
- Tracing and repatriating assets looted by corrupt foreign officials
- Promoting a meaningful exchange of information with the private financial sector to help detect and address threats to the financial system
The FY 2007 President's Budget requests $7.8 million to enable Treasury to continue to enhance its abilities to identify, disrupt, and dismantle the financial infrastructure of networks of terrorists, proliferators of WMD, narco-traffickers, criminals, and other threats. Treasury will also improve its analytical capabilities, to provide actionable intelligence and to target, designate and implement sanctions against the financiers of WMD proliferation.
This budget request funds Treasury's national and homeland security mission at a level that provides increasingly effective support to the war on terror. Treasury will enhance this support with an increased international presence funded in this request. Treasury attachés located at critical embassies throughout the world will enable close liaison with the international financial institutions and foreign governments to promote the national and economic security interests of the
COLLECTING TAXES AND MANAGING THE GOVERNMENT'S FINANCES
Treasury's strategic goal to manage the U.S. Government's finances effectively is the largest part of the President's fiscal year 2007 request for the Department. The budget request of $10.9 billion – the majority of which is for the Internal Revenue Service – underscores Treasury's commitment to provide quality service to taxpayers and enforce
The Internal Revenue Service (IRS) provides taxpayers with top-quality services by helping them understand and meet their tax responsibilities through a commitment to integrity and fairness. The IRS supports the Administration's goal of reducing the federal deficit by increasing tax receipts collected through taxpayer services, enforcement compliance, and identifying improvements that will reduce the cost of revenue collection. Treasury's enforcement efforts yielded a record $47.3 billion in enforcement revenue in FY 2005. The fiscal year 2007 budget will provide funding to continue the IRS's dedication to service and maintain efforts to improve the enforcement of tax laws.
Increasing compliance with the tax code is at the heart of the Treasury's enforcement programs. The IRS will continue to expand enforcement efforts by targeting its casework and enforcement activities to deliver results more effectively. The IRS will continue to analyze tax information and data from compliance research studies to better understand and counter the methods and means of those taxpayers who fail to report or pay what they owe. The IRS is focusing on discouraging and deterring non-compliance such as corrosive activity by corporations and high-income individual taxpayers. In order to ensure funding for tax enforcement, the Administration is again proposing a program integrity cap adjustment. I am pleased that the Senate Budget Committee included this adjustment in their Budget Resolution.
To reinforce this effort, the budget proposes new tax legislation that will improve the ability of the IRS to identify underreporting and collect unpaid taxes, while minimizing the burden on those who comply with the tax code. These legislative proposals strategically target areas where research reveals the existence of substantial compliance issues. The improvements will burden the taxpayers as little as possible, and the changes support the Administration's broader focus on identifying legislative and administrative changes to increase compliance with the tax code.
The IRS continues to make progress with the Business Systems Modernization (BSM) program. BSM aims to modernize the tax system by providing real business benefits to taxpayers and IRS employees through new technology. In fiscal year 2006 and continuing in FY 2007, BSM is revising its modernization strategy to emphasize the incremental release of projects to deliver business value sooner and at lower risk.
The Treasury Inspector General for Tax Administration (TIGTA) continues to partner with the IRS in increasing compliance with the tax code by ensuring that the IRS can pursue the effective administration of federal tax laws without hindrance from internal and external attempts to corrupt the tax system. TIGTA serves to highlight opportunities for cost savings in IRS operations, protect taxpayer rights and privacy, and generally promote the economy, efficiency and effectiveness of tax administration.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) also works to ensure that taxes due become taxes collected. TTB is the nation's leader on regulating alcohol, tobacco, firearms, and ammunition excise taxes. The bureau is responsible for the collection of approximately $15 billion annually. TTB ensures that alcohol beverages are labeled, advertised, and marketed in compliance with the law. TTB's efforts assure the public that alcohol and tobacco products reaching the marketplace are unadulterated, thereby providing marketing and sales value to the industry. The budget proposes to establish user fees to cover a portion of the costs of these regulatory functions.
Treasury also works to disburse, manage, and account for the nation's monies as it distributes payments, finances public services, and balances the government's books.
The Financial Management Service (FMS) is the government's financial manager and as such administers the government's payments and collections systems. In fiscal year 2005, FMS issued over 952 million non-defense payments valued at $1.5 trillion, of which 76 percent were made electronically. The President's Budget includes proposed legislation that would enhance non-tax debt collection opportunities, including allowing FMS to collect an estimated $3.8 billion in past due unemployment compensation debts over the next ten years.
The Bureau of the Public Debt (BPD) facilitates Treasury's debt financing operations by issuing and servicing Treasury securities. BPD will continue its goals of increased efficiency and achieve its mission to borrow the money needed to operate the federal government and to account for the resulting debt.
STRENGHENING FINANCIAL INSTITUTIONS
Treasury, through the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), maintains the integrity of the financial system of the
The United States Mint and the Bureau of Printing and Engraving (BEP) share the responsibility of meeting global demand for the world's most accepted coins and currency. Neither the U.S. Mint nor the BEP receive any appropriated funds from Congress. In fiscal year 2005, the Mint returned $775 million to the Treasury's General Fund. The U.S. Mint continues its work to streamline operations and remain highly effective, while providing coins for circulation and numismatic purposes. BEP continues its work of developing new methods of designing our currency to guard against counterfeiting. The bureau plans to release the redesigned $100 dollar bill later this year.
MANAGING TREASURY EFFECTIVELY
The President has requested $219.8 million to ensure proper stewardship of the Department. Treasury is committed to using the resources provided by taxpayers in the most efficient manner possible.
The Departmental Offices and Department-wide Systems and Capital Investments Program (DSCIP) account funds technology investments to modernize business processes throughout Treasury, helping the Department improve efficiency. In fiscal year 2007, the President's budget requests $34 million for ongoing modernization and critical information technology projects and to invest in other new technologies that will improve efficiency and service. Included in this request is $21.2 million to complete the redesign and modernization of Treasury's Foreign Intelligence Network (TFIN), a Top Secret/Sensitive Compartmented Information system critical to the support of Treasury's national security mission.
Included in this budget request is $17.4 million to fund the Department's Office of Inspector General (OIG) audit and investigative programs. The budget also includes $136.5 million for the Treasury Inspector General for Tax Administration (TIGTA) and its efforts to oversee the nation's tax administration.
The Treasury Franchise Fund, recognized as a Financial Management Center of Excellence, is a self-supporting business-like entity that provides common administrative services to other Federal agencies on a fully reimbursable basis. The Fund will continue to support Treasury's stewardship of the Department by promoting excellence in its management and increase competition for government and financial services.
TREASURY AND THE PRESIDENT'S MANAGEMENT AGENDA
Treasury is meeting the President's challenge to improve the management of the Department's people and resources. On the most recent President's Management Agenda (PMA) scorecard, the Department achieved a Green progress score in five out of six initiative areas, indicating that plans are in place and implementation is progressing to accomplish the PMA objectives.
The Office of Management and Budget's Program Assessment Rating Tool (PART) is intended to improve program performance. Treasury made a strong commitment to improve its program performance, and PART scores subsequently have improved. Currently, 70 percent of Treasury's PART evaluations have scored "adequate" or better and Treasury has set a target of 76 percent scoring "adequate" or better in fiscal year 2006.
Treasury will continue to work closely with the Office of Management and Budget and other stakeholders to make improvements in implementing the initiatives set forth in the President's Management Agenda.
CONCLUSION
Mr. Chairman, I loo
Thank you again for the opportunity to present the President's Budget for the Treasury Department today. I would be pleased to answer your questions.