Yellen Leaves Door Open to Tax Increase on Wealthy Americans
(Bloomberg) — Treasury Secretary-designate Janet Yellen refrained from making specific pledges on boosting individual tax rates in responses to questions from U.S. senators, pledging only to work with lawmakers on the issue of whether households earning up to $400,000 a year would face increased levies under Biden administration proposals.
Topics spanned climate change to sanctions policy and what she might do to maintain the dollar’s status as the world’s main reserve currency. Following are some highlights from Yellen’s comments:
- Yellen promised to “work with members of Congress” on whether households earning less than $400,000 a year will be protected from any reversal of President Donald Trump’s 2017 tax cuts — something Biden pledged on the campaign trail
- She dodged the question of whether a repeal of the cap on state and local tax deductions, as proposed by Biden, would affect wealthy Americans while doing next to nothing for those in the bottom half of income distribution
- She was more direct in responding to criticism of Biden’s plan to reduce the threshold for the federal estate tax, saying “about the wealthiest six out of every thousand estates would face any tax” under the plan
- Yellen suggested that she won’t mount a fresh fight to revive several Federal Reserve lending facilities that were phased out by her predecessor. “The Federal Reserve will continue to provide support to the economy through its ongoing programs and the use of its available tools but as mandated by Congress, the 13(3) facilities funded by the Cares Act will not be available,” she wrote, referring to a section of the law governing the Fed
- At the same time, she said, “Right now, taking too little action poses the greatest risk to the health of our economy.”
- Yellen reiterated that there will be no immediate lifting of tariffs on China and that the Biden administration will be monitoring China’s adherence to pledges made in the Trump administration’s “phase one” bilateral trade deal
- She repeated that the administration will use the “full array of tools” to counter China’s “abusive” economic practices. The strategy will include working with allies to take on China’s “unfair” actions
- Yellen said that it’s important to ensure that aid from the IMF, World Bank and other entities aimed at combatting Covid-19 internationally does not get diverted to repaying Chinese loans
- More broadly, Yellen said the U.S. needs to compete with China’s “economic statecraft” around the world, building partnerships
- Yellen said the Treasury would “conduct a careful review of sanctions to ensure that they are targeted, effective, and minimize unintended consequences.” The Trump administration imposed a wide range of sanctions on companies, individuals and even oil tankers tied to Iran, North Korea, China, Venezuela and Russia — often unilaterally.