DEPARTMENT OF THE TREASURY

FOCUSING ON THE NATION�fS PRIORITIES

Leading the Charge for a Strong Economy

    The Department of the Treasury promotes global economic growth and stability and advocates for greater economic opportunity and prosperity for U.S. citizens and people around the world. Treasury has taken the lead in reducing the tax burden on working Americans and ensuring that financial regulatory regimes are flexible and effective. Treasury is also leading efforts to reform the major entitlement programs, Medicare and Social Security, to ensure they continue to meet their missions without placing undue burden on future generations of Americans. Treasury supports trade liberalization and fiscal discipline by negotiating and implementing international agreements that open markets and create new opportunities for U.S. exporters.

Improving Tax Fairness through Better Compliance

Source: Internal Revenue Service.

    Most taxpayers comply with the law by filing and paying their taxes on time, resulting in a compliance rate of approximately 86 percent. In total, those who do not comply with the law underpay their taxes by $290 billion per year (based on 2001 data). While this tax gap can never be entirely eliminated, the current compliance level is too low and non-compliant taxpayers impose an unacceptable burden on the rest of the taxpayers and on the economy. Treasury published an ambitious strategy in 2006 to reduce the tax gap while recognizing that this should not impose unacceptable burdens on taxpayers or hurt our economic competitiveness (www.ustreas.gov/press/releases/hp111.htm).

    The President�fs 2008 Budget:

• Proposes 16 legislative changes to implement this plan, such as expanding third party information reporting and requiring brokers to report the cost basis for stock sales, which will raise an estimated $29 billion over the next 10 years through improved compliance with existing tax laws (see the Stewardship chapter of the Analytical Perspectives volume of the Budget for more information); and

• Invests an additional $410 million in programs at the Internal Revenue Service to reduce the tax gap including research, technology, enforcement, and taxpayer service. These investments will help the bureau increase revenue, determine and implement new ways to help taxpayers, and improve compliance among the minority of taxpayers who do not willingly pay their fair share.

Maintaining the Competitiveness of U.S. Capital Markets

    The challenge facing U.S. regulators today is preserving the public interest while preventing excessive regulatory burden on financial markets and institutions. In an effort to encourage a responsible and measured approach, Treasury initiated a review of the issues affecting the competitiveness of the U.S. capital markets. Treasury advocated for the Financial Services Regulatory Relief Act of 2006, which reduced regulatory burdens for a number of financial institutions, and has begun implementing the Basel II capital accords, which will allow U.S. banks to continue to compete effectively in the global marketplace. Treasury has also worked to implement the Bank Secrecy Act in ways that reduce the burden of compliance for financial institutions while maintaining robust controls to prevent money laundering. Treasury will host a conference on capital markets and economic competitiveness in early 2007.

In 2007, Treasury will release the George Washington, John Adams, Thomas Jefferson, and James Madison $1 Coins.

Furthering International Economic Dialogue

    The United States encourages other countries to build consumer-driven economies rooted in open markets, to foster freedom, democracy and free enterprise, and to promote free trade. For example, in September 2006, President Bush and the President of China agreed to create a bilateral Strategic Economic Dialogue. The Dialogue is a forum for addressing issues such as maintaining sustainable growth without large trade surpluses, continued opening of China�fs markets, and environmental policy. President Bush has designated the Secretary of the Treasury to lead the Dialogue for the United States. The 2008 Budget provides resources to support Treasury�fs role in furthering U.S. discussions with foreign countries, including China. Treasury also provides resources for other international programs, including the U.S. contribution to international financial institutions and multilateral development banks.

Combating Terrorist Financing

    The President�fs Budget places a priority on detecting and disrupting terrorist financing, the proliferation of weapons of mass destruction, drug-trafficking, money laundering, and other financial crimes. In 2006, the Treasury Department worked closely with the Departments of State and Justice and the intelligence community to disrupt targets related to al Qaeda, Hizballah, Jemaah Islamiyah, as well as to disrupt state sponsorship of terror. Treasury has also been a driving force in influencing more than 170 nations to commit themselves to adopt and implement strict anti-money laundering standards and to be evaluated against them.

Creating an All-Electronic Treasury for the 21^st Century

    Treasury issues 85 percent of the Government�fs payments, valued at nearly $1.5 trillion annually, including Social Security benefits, tax refunds, and veterans�f benefits. In 2006, the Financial Management Service at Treasury continued the transition from paper checks to electronic transactions by issuing 77 percent of its 964 million civilian payments electronically, up from 72 percent in 2001. Each check converted from paper to electronic format saves taxpayers 80 cents. The Department is also collecting more of the $2.9 trillion in payments to the Government electronically, saving 19 cents for each $1,000 collected. The Budget continues investments in technology at Treasury that will increase electronic payments and collections.