(Bloomberg) -- Treasury Secretary Steven Mnuchin said it would be "unlawful" to give President Donald Trump's tax returns to Congress and asserted that a confidential IRS draft memo revealed on Tuesday didn't contradict him.
"If I had turned them over, I would have been violating the law," Mnuchin told the House Financial Services Committee on Wednesday.
The chairman of the House Ways and Means Committee, Richard Neal, has demanded six years of Trump's personal and business returns under a law allowing him to make such requests. The 10-page IRS memo, first reported by the Washington Post, concluded Treasury had no choice but to turn over the documents, unless Trump wanted to assert executive privilege.
Mnuchin said he relied on advice from the Justice Department, which told him Neal's request overstepped Congress's constitutional powers to investigate. He said the IRS memo was in draft form and hadn't been distributed to senior Treasury Department leaders.
"There's no smoking gun here," Mnuchin said.
The conflict reflects a broader standoff between the Trump administration and the House, as Democrats seek to build on Special Counsel Robert Mueller's Russia probe and delve into the the president's personal finances. The administration is stonewalling. Mnuchin has refused to hand over Trump's tax returns, and the White House has instructed some current and former officials not to appear for hearings, including former White House Counsel Don McGahn and Attorney General William Barr.
In response, Democrats have more seriously considered opening impeachment proceedings.
Mnuchin on Friday rejected Neal's subpoena for Trump's personal and business tax returns, setting up a potential court battle over the documents. The move prompted Representative Lloyd Doggett, a Texas Democrat, to conclude that Mnuchin should be arrested for "inherent contempt."
Earlier this month House Speaker Nancy Pelosi joked that there is a "little jail" on Capitol Hill for the Treasury chief, if needed.
The IRS memo obtained by the Post contradicts Mnuchin's justification for withholding Trump's returns. The memo concludes it is "mandatory" that the Treasury secretary release the information requested by chairmen of the tax-writing committees.
Mnuchin said Wednesday he didn't know of the memo before the department was contacted by the Post and that he didn't believe it addressed the same issues that led the Justice Department to advise him not to hand over Trump's tax returns. He said the memo was written by an IRS attorney, but that the department didn't know who it was or why it wasn't sent to more senior Treasury officials.
Mnuchin told lawmakers he was handed a copy of the memo on his way to Wednesday's hearing.
Mnuchin repeated that he had "no conversations ever with the president or anyone in the White House" about sending the returns to Congress.
Lawmakers asked the Treasury secretary about a range of other issues, including trade negotiations with China.
Mnuchin said the Trump administration is watching how tariffs on Chinese products will affect prices paid by consumers after he was asked about rising costs for diapers and others children's items.
Mnuchin said he spoke with Walmart Inc. Chief Financial Officer Brett Biggs after the executive said U.S. tariffs on Chinese imports would raise prices for consumers.
"I am monitoring this situation carefully," Mnuchin said. "I was on the phone with the CFO of Walmart, which obviously is one of the biggest sellers of the items that you've described specifically. I understand from Walmart what things they can source from other areas and what items they can't."
Mnuchin also warned that the U.S. government will face a default in "late summer" unless Congress increases the debt ceiling. He said he's confident lawmakers will raise the debt ceiling before the deadline.
(Updates with comment from Mnuchin starting in fifth paragraph.)
--With assistance from Joe Light.
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