Donald Trump’s Nominee For Treasury Secretary Wants a Bigger IRS

Donald Trump’s oft-used excuse for not releasing his tax returns is that they are still under audit at the US Internal Revenue Service—no matter that this doesn’t prevent their release—but if his pick for Treasury secretary gets his way, the interminable audit may end sooner.

Steven Mnuchin, the investor tapped by Trump for the top job in US economic policy, told lawmakers at his confirmation hearing today (Jan. 19) that he would like to expand the workforce at the IRS and modernize technology there in order to collect more taxes.

“The IRS headcount has gone down quite dramatically, almost 30% over the last couple of years,” Mnuchin noted, pointing out that cutting a revenue-generating department was not exactly an efficient move. He made the observation in response to a question about the “tax gap,” or the difference between what should be collected and how much ends up in the government coffers.

He said that as Treasury secretary—whose remit includes tax collection—he would like to reverse those cuts and improve customer service, adding later that modernizing the agency would be “one of my great priorities.”

“I can assure you that the president-elect understands the concept of where we add people, we make money,” Mnuchin said. “That’s a very quick conversation with Donald Trump.”

Unspoken was that many of the lawmakers in the incoming president’s own party had voted in favor of the spending cuts that lead to those reductions in headcount. The IRS has seen its staffing reduced by some 13,000 employees since Republicans regained control of the House of Representatives in 2010. So far, Trump has promised to continue budget cutting at federal agencies.

Republicans also have been upset with the IRS over its scrutiny of conservative groups seen as potential violators of campaign finance and money laundering rules.

Trump’s Treasury nominee also faced tax inquiries of his own at the Senate hearing.

Mnuchin’s critics on the panel questioned his decision to operate a hedge fund through offshore financial entities in the Caribbean. He replied that his experience would allow him, as Treasury secretary, to be more effective at closing such loopholes, in the interest of simplifying the tax code and lowering overall rates. The current Treasury secretary, Jack Lew, was also criticized for his own offshore investments, made while working at Citigroup. Such measures, common among elite financiers, are formal structures that can be used to avoid various forms of US tax.

Mnuchin said he paid full US taxes on the profits from his offshore investments, and that he set up his companies outside the United States in order to accommodate the wishes of his pension fund clients.

But, as senator Bob Menendez of New Jersey noted, that’s an admission that Mnuchin, if not avoiding US taxes himself, was helping his clients avoid them.