Treasury Secretary nominee Scott Bessent warned that the U.S. faces an economic crisis that will hammer middle- and working-class people if the 2017 Republican tax cuts aren’t extended when a swath of them expire at the end of this year.

“This is the single most important economic issue of the day — this is pass/fail,” Bessent said in answering questions at his Senate Finance Committee confirmation hearing Thursday.

In a wide-ranging series of questions during the hours-long session, Bessent, 62, also said that the federal government “is not going to default” on its debt under his watch and that he respected the Federal Reserve’s independence over monetary policy. Further, he indicated support for expanded sanctions on Russian oil companies and blasted China for attempting to export its way out of a deep domestic economic slump.

With his comments on taxes, Bessent drew an immediate contrast with outgoing Treasury Secretary Janet Yellen, who said on Wednesday that policies including a full extension of the 2017 cuts enacted under Donald Trump “could undermine our country’s strength, from the resilience of the Treasury market to the value of the dollar, even provoking a debt crisis in the future.”

Trump’s pick for the Treasury, a veteran hedge fund investor, said that “if we do not fix these tax cuts, if we do not renew and extend, we will be facing an economic calamity. And as always with financial instability, that falls on the middle-class people.”

Spending cuts

In his prepared remarks, Bessent also emphasized the importance of addressing the budget deficit, saying the U.S. “must work to get our fiscal house in order” by adjusting domestic discretionary spending. He said that discretionary spending — outlays aside from entitlements including Social Security and Medicare — had soared by an “astonishing 40% over the past four years.”

Bessent underscored that the popular entitlement programs for older Americans aren’t going to end up on the chopping board. “I want to emphasize that President Trump has said that Social Security and Medicare will not be touched,” he said.

“One of the tragedies of this blowout in the budget deficit is that we have to get our short-term house in order,” Bessent added.

But Bessent didn’t specify what areas of spending he’d support cutting, and refused to be nailed down on particular programs. Asked, for example, if he would recommend cutting Medicaid — a federal health program for lower-income households — he said that “it’s the business of Congress to do the budget. And I am in favor of empowering states and I believe that for some states that will be an increase, for some states that will be a decrease.”

Bessent also declined specifically to endorse Democratic Senator Elizabeth Warren’s call to eliminate the federal debt limit. He said that if Trump wanted to get rid of it, he would then work with the president and Warren on that idea. Meantime, he committed that “the United States is not going to default on its debt if I am confirmed.”

The debt ceiling kicked back in on Jan. 2, and the Treasury is expected to begin taking special accounting measures to avoid breaching it within the coming days.

Bessent said he wanted to conduct a survey of market participants on debt, in a potential hint that he would canvass with them on any change in the Treasury Department’s issuance strategy. Its next quarterly update on deciding what types of securities to sell in what amount comes Feb. 5. 

When asked about the possible inflationary impact of Trump’s economic policy plans, Bessent said he believed the incoming administration’s policies will increase real wages and bring inflation closer to the Fed’s 2% target. He said he couldn’t think of any Trump policy that would push up inflation — despite some economists’ estimates that tariff hikes would generate at least a one-off step up in the inflation rate.

Bessent also sought to dispel notions that he or the president-elect would seek to tamper with the Fed’s independence. Trump last fall suggested he wanted to have a “say” on monetary policy.

“I think, on monetary policy decisions, the FOMC should be independent,” Bessent said, referring to the Fed’s rate-setting Federal Open Market Committee.

If confirmed as Treasury secretary, as is widely expected, Bessent will oversee U.S. policy on areas ranging from financial sanctions and currency policy to the U.S. fiscal outlook and management of the $28 trillion Treasury market. He will also be a key U.S. envoy abroad.

In his remarks, Bessent stressed that maintaining the dollar as the world’s reserve currency is critical to U.S. economic health and the nation’s future.

He also during the hearing painted the budget deficit as a national security issue, arguing that in the past, the Treasury has been called upon to use its borrowing capacity to help save the U.S. and the world in times of crisis like the Great Depression, World War II or COVID.

“What we currently have now, we would be hard pressed to do the same,” he said.

The Internal Revenue Service released guidance on the income and employment tax treatment of contributions and benefits offered under state paid family and medical leave programs, along with the reporting requirements. 

Rev. Rul. 2025-4 includes guidance for the District of Columbia and states that have mandatory paid family and medical leave programs and for employees working in and employers operating in those states. The guidance, which was released Wednesday,  comes in response to requests to clarify the federal tax treatment of state paid leave programs that help pay employees who can’t work due to non-occupational injuries to themselves or their family members, in addition to sickness and disabilities.

The document discusses multiple tax treatment scenarios for contributions to and benefits paid in certain situations under these programs, plus the related reporting requirements.

Employers can generally deduct the amount they contribute to mandatory paid family and medical leave programs as an excise tax payment. Similarly, an employee can deduct the amount they contribute as a payment of income tax, if the employee itemizes deductions, to the extent that the employee’s deduction for state income taxes does not exceed the state income tax deduction limitation.

An employee who receives state paid family leave payments needs to include those amounts in the employee’s gross income, the IRS noted. An employee who receives state paid medical leave payments must include the amount attributable to the employer portion of contributions in the employee’s gross income. This second amount also is subject both to the employer’s and employee’s shares of Social Security and Medicare taxes. The amount attributable to the employee’s portion of the contributions is excluded from the employee’s gross income, and this amount is not subject to Social Security or Medicare taxes.

The revenue ruling provides more guidance on other situations. In addition, it offers transition relief to the District of Columbia, states and employers from certain withholding, payment, and information reporting requirements for state paid medical leave benefits in 2025.

The guidance will affect the District of Columbia and states administering paid family and medical leave programs, employers and workers contributing to such programs, and those who receive payments from these programs.

The IRS is asking for comments on other situations and aspects of state paid family and medical leave programs that aren’t covered in this revenue ruling electronically via the Federal eRulemaking Portal at https://www.regulations.gov.  Commenters can type IRS-2025-0012 in the search field on the https://www.regulations.gov home page to find the revenue ruling and submit comments). Or they can send comments by mail to: Internal Revenue Service, CC:PA:LPD:PR (Revenue Ruling 2025-4), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

Many accountants and financial professionals estimate corporate value using criteria related to property, plan and equipment; yet, in today’s quickly changing market, these visible assets may represent just a part of a corporate underlying engine for growth. Intellectual capital, representing a corporation’s knowledge, skills and creativity, is one of the largest and most elusive sources of value.

Intellectual capital includes not just human capital but also internal and external capital that shape a corporate unique competitive advantage. While certain types of intangible assets, such as patents or trademarks, are recognized under existing accounting rules, they frequently fail to represent the dynamic knowledge flows that constitute a modern corporation.

Public accounting practitioners and corporate finance management increasingly account for nontraditional assets influencing performance and strategic outcomes. Intellectual capital can influence a corporate resistance to market shocks, form innovation pipelines, and determine whether it remains competitive. However, traditional financial statements typically ignore the full extent of what this represents. GAAP provides a framework for some acquired intangibles, but institutional knowledge that emerges organically within a corporation is often hidden from view. This gap in disclosure poses a challenge for both preparers and users of financial statements.

The potential risk here is obvious: if a key group of employees leaves or a critical research process is lost, a corporation’s true value can vanish virtually instantly. Traditional tangible asset valuations would stay unaltered, giving investors and other stakeholders an imperfect picture of the corporation’s true risk exposure. Accountants, auditors and financial advisors can help bridge this gap by advising on measuring, conveying and preserving intellectual capital within the framework of established accounting guidelines.

It is one thing to assign a fair value to a newly acquired trademark but another to measure institutional memory or collaborative synergy among teams in a multinational corporation. Much intellectual capital cannot be properly capitalized, but its absence from the balance sheet presents a gap for corporations looking to manage their long-term viability. Accountants can assist corporations with internal methods for tracking and nurturing intellectual capital. Although the results may not always be reflected in reported asset totals, these initiatives can help to influence management decisions and identify potential areas for future growth.

The accounting profession has the opportunity to advance by emphasizing intellectual capital in engagements. Voluntary disclosures, management discussion sections and investor presentations may include human, internal, and external capital references. Such expanded reporting could prevent misaligned market valuations and allow for more detailed discussions about how a company intends to sustain its competitive advantage. Rather than seeing intellectual capital as a nebulous idea, accountants can employ analytical tools and key performance indicators to ground talks in acceptable measures, even if those figures do not appear directly on the property, plant, equipment, or goodwill line items.

Corporations that neglect this intellectual capital risk underinvesting in what drives them ahead. Corporations that document and promote intellectual capital, on the other hand, can acquire a better understanding of where resources should be allocated for research, product development and important personnel retention. If accountants assist clients in formalizing these efforts, they will be able to detect early warning indications of talent migration or failures in essential processes, allowing them to reduce risks before the consequences are obvious on the bottom line. By incorporating these insights into financial reporting and strategic direction, corporations can stay on track with stakeholder expectations and lessen the likelihood of unexpected surprises.

Intellectual capital is not a buzzword or a passing trend. It represents the hard-earned expertise, routines and collaborative structures that keep a corporation at the forefront of its field. For accountants, it is critical to consider how to capture this intellectual capital best. Whether through improved internal controls, voluntary disclosures or integrated advisory services, showcasing intellectual capital can assist corporations and stakeholders in better grasping their genuine potential and weaknesses. By adapting our expertise to these domains, we reaffirm accounting’s role as the bedrock of informed business decisions and sustainable performance.