Department of the Treasury, Assistant Secretary for Tax Policy

Department/Agency: Department of the Treasury

Position:

Assistant Secretary for Tax Policy

Executive Schedule: Executive Level IV - Presidential Appointment with Senate Confirmation

Major Responsibilities:

Advise the Secretary and Deputy Secretary on federal tax policies and programs
Provide official estimates of government receipts for the President's budget, fiscal policy decisions, and Treasury cash management decisions
Develop and review regulations and rulings to administer the tax code
Publish guidance interpreting the tax law to help taxpayers understand their obligations
Negotiate tax treaties with other countries
Provide economic and legal analysis for domestic and international tax policy decisions
Prepare congressionally mandated reports
Analyze and monitor the class "lives" of business assets for depreciation purposes

Key Competencies and Preferred Qualifications:

Expertise on tax law
Experience on Capitol Hill, within the Internal Revenue Service or elsewhere in government in writing, interpreting and administering tax law and regulations
Familiarity with the tax code and the IRS
Economics background
Understanding of international tax laws and treaties

Insight:

The Assistant Secretary of the Treasury for Tax Policy plays an important role both in helping Presidents and Treasury Secretaries formulate their administration's tax policies, and in explaining and arguing for those policies before Congress and providing guidance on thorny tax issues to the public. If and when the Obama White House and Congress muster the resolve to simplify and reform the convoluted tax code, the assistant secretary will have a major say and role to play in making that happen.

The assistant secretary, whose staff of 130 includes 50 economists and 40 attorneys, provides the official estimates for the President's budget and fiscal policy decisions; negotiates international tax treaties; works closely with the Internal Revenue Service and reviews regulations and rulings to administer the tax code, and appears frequently before Congress. When the House Ways and Means Committee or Senate Finance Committee marks up tax legislation, the assistant secretary for tax policy sits at the witness table to offer advice and articulate the administration's point of view.

Eric Solomon, assistant secretary for tax policy from December 2006 until January 2009, frequently made the short trip up Pennsylvania Avenue to testify on Capitol Hill on matters ranging from tax-exempt bond financing for sports stadiums to closing the tax gap (i.e., getting more taxpayers to pay what they owe) to how hedge funds are taxed on their profits (the so-called "carried interest" issue). The assistant secretary is called upon to testify when any change to the taxation of Social Security benefits is in the air, or when consideration is being given to let older Americans contribute more to 401(k) retirement accounts. In the final year of the Bush administration, as the problem in the sub-prime mortgage markets cascaded into a global financial crisis, the assistant secretary for tax policy was deeply involved in Treasury's internal deliberations and discussions on the tax aspects of the Troubled Assets Relief Program (TARP).

Pamela F. Olson, who was the assistant secretary for tax policy in President George W. Bush's first term, believes that after pushing its economic stimulus package through Congress, the biggest financial challenge for the new administration will be "dealing with the deficit and all the problems in the tax code." Olson, a Sadden, Arps partner who was the first woman to chair the American Bar Association's tax section, said, "A whole lot of things about the tax system are completely irrational and illogical .... At some point in the not too distant future, I think we have to fix them because things are just too messed up. The code is too complicated for people to comply with. We've got a system that rewards debt and leverage and punishes equity."

Recently, after New York broker/investment guru Bernard Madoff was accused of defrauding investors out of $50 billion in a massive Ponzi scheme, former New York Governor George Pataki wrote Solomon, in his final days as assistant secretary for tax policy, to ask that the Treasury issue guidance allowing the investors fleeced by Madoff to deduct their losses now instead of having to wait years. Tax experts told Forbes.com, which reported on Pataki's letter, that Treasury was unlikely to change the tax rules just for Madoff's victims. Pataki's letter was far from the only one written to Treasury and IRS officials seeking guidance on how to report losses from Madoff's purported scheme, which while not unusual in concept may have been unprecedented in scope. A response, and any official guidance, will await Solomon's successor

When Congress mandates that the Treasury produce reports on tax issues and compliance, it often falls to the assistant secretary for tax policy to prepare those reports. It is a job that typically attracts a tax lawyer with not only a sweeping command of the tax law but senior experience within the Treasury, on the tax-writing committees of the House and Senate, or within the Internal Revenue Service.

The assistant secretary's office includes deputy assistant secretaries for Tax Policy, for Tax Analysis, for International Tax Affairs, and for Tax, Trade and Tariff Policy (In a somewhat anomalous situation, three of the senior-most attorneys below them in the organization chart -- the directors of the Offices of Tax Legislative Counsel, International Tax Counsel, and the Benefits Tax Counsel -- are supervised by the General Counsel as part of Treasury's Legal Division). The Office of Tax Policy provides the official Administration estimates of all current and future levels of Federal Government receipts for the President's annual Budget and interim budget revisions, actual and proposed tax legislation, earmarked revenue that Treasury takes in but is required to allocate to various Federal trust funds (such as the Social Security old age and Medicare hospital insurance trust funds).

The Office of Tax Policy culls information from millions of tax returns and economic databases to perform complex, statistical analyses and prepare simulation models on the economic effects of alternative tax proposals. When the Treasury secretary testifies before Congress about the alternative minimum tax (AMT) - a complex feature of the tax code that originally was intended to ensure that the very rich paid income taxes, but now regularly threatens to bite middle-income taxpayers as well - the secretary comes armed with data and analysis from the Office of Tax Policy. The AMT was not indexed to inflation when it was created in the late 1960s, and every year its reach or potential reach grows larger. Indeed, under then-Treasury Secretary John Snow, the Bush administration estimated in March 2005 that it would cost the Treasury more to eliminate the AMT than it would to repeal the regular income tax in its entirety.

With the Obama administration confronting the most dire economic conditions that has confronted any new president since Franklin D. Roosevelt, the assistant secretary for tax policy will be called upon by President Obama and Treasury Secretary Timothy Geithner to help craft tax policies that will keep the tax code from impeding a recovery. President Obama promised throughout his campaign to cut taxes for 95 percent of Americans, but in these new fiscal straits he and Congress also must decide whether it makes sense to raise anyone's taxes - even the wealthiest 5 percent. Taxes on the wealthy will go up automatically unless a decision is made not to let the Bush tax cuts of 2001 and 2003 expire in 2010 as planned.

The original 1988 Prune Book quoted John E. Chapoton, assistant secretary for tax policy in President Ronald Reagan's first term, as saying that the central mission of this position was to "maintain a sound and objective analysis of the tax laws, somewhat devoid of political influence." That will be a challenge, too, for the new assistant secretary in the Obama administration.

Key Relationships – Within the Government:

Secretary and Deputy Secretary, U.S. Department of the Treasury
Under Secretary, Domestic Finance, Treasury
General Counsel, Treasury
Commissioner and Chief Counsel, Internal Revenue Service, Treasury
National Economic Counsel, The White House
Council of Economic Advisers, The White House
Council on Environmental Quality, The White House
Director and Deputy Director, Office of Management and Budget
Director and General Counsel, Pension Benefit Guarantee Corporation
Under Secretary, Economic Affairs, U.S. Department of Commerce
Other Senior officials at Cabinet Departments and Agencies including Energy, Homeland Security, State, Labor, Commerce and Transportation

Key Relationships – Outside the Government:

U.S. Chamber of Commerce
American Council for Capital Formation
Tax Executives Institute
National Federation of Independent Business
National Association of Manufacturers
American Bankers Association
American Institute of Certified Public Accountants
Financial Executives International
American Council of Life Insurers
Center on Budget and Policy Priorities
American Association of Retired Persons
Consumer Federation of America
Organization for Economic Cooperation and Development

Nomination Referred to:

Senate Committee on Finance

Current Position Profile:

1. Michael F. Mundaca, J.D., LL.M. (Confirmed: March 27, 2010). Former Deputy Assistant Treasury Secretary for International Tax Affairs. Former partner in the International Tax Services group of Ernst & Young’s National Tax Department.

Recent Position Profiles:

2. Eric Solomon, J.D. (2006-2009). Tax lawyer and political appointee in both Clinton and Bush administration; also held non-political regulatory affairs post in Office of Tax Policy. Former assistant chief counsel, Internal Revenue Service. Former partner, Ernst & Young , LLP, and Drinker Biddle & Reath. Practiced law at Cadwalder, Wickersham & Taft, LLP. Majored in classics at Princeton University.

3. Pamela F. Olson, J.D. (2002-2004). Former and current partner, Skadden, Arps, Meagher & Flom LLP. Senior economic advisor to the 2000 Bush-Cheney campaign. One-time IRS staff attorney. First woman to chair American Bar Association Section of Taxation.

4. Mark Weinberger, J.D., M.B.A. (2001-2002). Director of national tax practice, Ernst & Young. Appointed by President Bill Clinton to Social Security Advisory Board.