Treasury

DEPARTMENT OF THE TREASURY
Since 2001, the Administration:

• Implemented a series of major economic policy changes—including the Economic Growth
and Tax Relief Reconciliation Act in 2001 and the Jobs and Growth Tax Relief Reconciliation
Act in 2003—which have helped the economy generate more than seven million new jobs.
Since early 2003, real GDP has grown at an average annual rate of 3.6 percent;
• Improved taxpayer service by increasing the percentage of calls answered by the Internal
Revenue Service from just 56 percent in 2001 to 82 percent in 2006, and by providing a new
web-based service, which 25 million people use to easily check the status of their refunds;
• Helped protect the financial markets and their critical infrastructure following the attacks on
September 11th;
• Led the international community in fighting the financial War on Terror, including efforts to
safeguard the financial system from illicit abuse by North Korea and Iran; and
• Promoted knowledge about each of the 50 States, their history and geography, and the rich
diversity of the national heritage through the 50 State Quarters® Program and the newly
launched Presidential $1 Coins Program.
The President’s 2008 Budget:
• Supports Treasury’s efforts to maintain the strength and competitiveness of the U.S. economy,
including U.S. financial markets and institutions;
• Invests in increased tax enforcement and makes targeted changes in the tax code to improve
tax compliance—reducing the “tax gap”;
• Continues to improve taxpayer service by expanding volunteer tax assistance and increasing
funds for research to determine the most effective means to help taxpayers;
• Provides additional funding to support Treasury’s efforts to address critical economic
challenges and opportunities with foreign countries, including China; and
• Provides the resources necessary to continue fighting the financial War on Terror by disrupting
the support structures of terrorists, narcotics smugglers, and proliferators of weapons of mass
destruction.
113
114 DEPARTMENT OF THE TREASURY
FOCUSING ON THE NATION’S 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 liber-
alization 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
Most taxpayers comply with the law by Percent of Individuals Filing

filing and paying their taxes on time, resulting Electronically
in a compliance rate of approximately 86 60
percent. In total, those who do not comply 54%
with the law underpay their taxes by $290 47%
51%
billion per year (based on 2001 data). While

this tax gap can never be entirely eliminated, 40
40%
36%
the current compliance level is too low and
31%
non-compliant taxpayers impose an unac-
ceptable burden on the rest of the taxpayers
and on the economy. Treasury published 20
an ambitious strategy in 2006 to reduce the
tax gap while recognizing that this should
not impose unacceptable burdens on tax-
payers or hurt our economic competitiveness 0
2001 2002 2003 2004 2005 2006
(www.ustreas.gov/press/releases/hp111.htm).
Source: Internal Revenue Service.
The President’s 2008 Budget:
• Proposes 16 legislative changes to implement this plan, such as expanding third party infor-
mation 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
THE BUDGET FOR FISCAL YEAR 2008 115
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.
Furthering International Economic

Dialogue
In 2007, Treasury will release the George
The United States encourages other countries to Washington, John Adams, Thomas Jefferson,
build consumer-driven economies rooted in open and James Madison $1 Coins.
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’s 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’s 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’s Budget places a priority on detecting and disrupting terrorist financing, the pro-
liferation 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 21st Century
Treasury issues 85 percent of the Government’s payments, valued at nearly $1.5 trillion
annually, including Social Security benefits, tax refunds, and veterans’ 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.
116 DEPARTMENT OF THE TREASURY
Department of the Treasury

(In millions of dollars)
2006 Estimate
Actual 2007 2008
Spending
Discretionary Budget Authority:
Internal Revenue Service .................................................................................. 10,546 10,438 11,095
Financial Management Service ....................................................................... 234 233 235
Departmental Offices .......................................................................................... 228 228 269
Bureau of the Public Debt ................................................................................. 175 176 173
Inspectors General ............................................................................................... 149 149 159
Alcohol and Tobacco Tax and Trade Bureau .............................................. 90 90 94
Financial Crimes Enforcement Network ....................................................... 73 71 86
Community Development Financial Institutions Fund ............................. 54 41 29
All other .................................................................................................................... 133 — 4
Total, Discretionary budget authority ................................................................. 11,416 11,426 12,136
Memorandum:
Budget authority from enacted supplementals .......................................... 2 — —
Additional funding requirements .................................................................... — 3 —
Total, Discretionary outlays ................................................................................... 11,359 11,299 12,010
Mandatory Outlays:
Payment where earned income exceeds liability for tax ........................ 36,166 36,461 37,573
Legislative proposal ........................................................................................ — — 337
Payment where child credit exceeds liability for tax ................................. 15,473 14,931 14,367
Payment where health care credit exceeds liability for tax .................... 94 102 110
Payment where alternative minimum tax credit exceeds liability for
tax .......................................................................................................................... — — 349
Interest payments on advances to the black lung disability fund trust
fund ....................................................................................................................... 695 717 739
Legislative proposal ........................................................................................ — — 2,315
Continued Dumping Subsidy Offset Act ....................................................... 226 452 440
Internal revenue collections for Puerto Rico ............................................... 360 448 408
All other .................................................................................................................... 2,229 1,213 632
Total, Mandatory outlays ........................................................................................ 49,395 50,464 49,249
Total, Outlays .............................................................................................................. 60,754 61,763 61,259
Credit activity
Direct Loan Disbursements:
Community Development Revolving Loan Fund ....................................... 7 5 5

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Treasury

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DEPARTMENT OF THE TREASURY

Since 2001, the Administration:

FOCUSING ON THE NATION’S PRIORITIES

Leading the Charge for a Strong Economy

Improving Tax Fairness through Better Compliance

Most taxpayers comply with the law by Percent of Individuals Filing

billion per year (based on 2001 data). While

Maintaining the Competitiveness of U.S. Capital Markets

competitiveness of the U.S. capital markets. Treasury

Furthering International Economic

Combating Terrorist Financing

Creating an All-Electronic Treasury for the 21st Century

Department of the Treasury

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