'Millionaire tax cheats have run wild' in the last 7 years -- but there's something Biden's DOJ can do to stop it
Following the leak of IRS documents that shed additional light on the prevalence of tax dodging among the wealthiest Americans, a group of House Democrats on Thursday said President Joe Biden must swiftly appoint a new Assistant Attorney General for the Tax Division if he hopes to crack down on unlawful evasion tactics.
"Americans increasingly believe that their tax system is rigged against them. This belief has credence given the government's repeated inability to vigorously pursue and deter rich tax scofflaws."
—Letter
In a letter to Biden, the lawmakers note that it has been more than seven years since there was a Senate-confirmed Assistant Attorney General of the Tax Division at the Justice Department—a leadership void that, according to Rep. Bill Pascrell (D-N.J.), is "helping let millionaire tax cheats run wild."
"We share your goal of creating greater tax fairness in America by improving tax enforcement, particularly against wealthy tax cheats," reads the letter, which was led by Pascrell and signed by four other Democrats on the House Ways and Means Committee, the chamber's tax-writing panel.
The Justice Department's Tax Division is currently headed by David Hubbert, a longtime DOJ official who Biden appointed to serve in an acting capacity in late January. But the Democratic lawmakers warned in their letter Thursday that "continued reliance on an Acting Attorney General hinders the division's ability to promote voluntary compliance with the tax laws, enforce the nation's tax laws, and perhaps most importantly, maintain public confidence in the integrity of the tax system—the very prerequisites of the division's mission."
"That deterioration is evident in the enduring existence of America's two-tier tax system, documented in a seemingly endless litany of media stories and statistics highlighting the ability of our richest citizens to cheat on their taxes with impunity," the lawmakers continued, referencing a recent ProPublica report showing that the richest 25 billionaires in the U.S. paid a true federal tax rate of just 3.4% between 2014 and 2018.
The Democrats' letter comes as Biden is looking to close the so-called tax gap—the difference between taxes owed and taxes actually paid to the federal government—by increasing the IRS budget, which Republicans have cut repeatedly over the past decade. As the Wall Street Journal reported Thursday, talks over a White House-backed bipartisan infrastructure package have stalled amid Republican opposition to a provision that would boost the IRS budget by $40 billion over the next decade.
"Lawmakers and aides said the [bipartisan] group may abandon an effort to raise revenue through enhanced enforcement at the IRS after some Republicans said they were concerned about granting the tax agency new power," the Journal noted.
Insufficient funding has left the IRS without the staffing and resources necessary to audit the tax returns of wealthy Americans, who often use complex strategies to dodge their obligations. According to the Center on Budget and Policy Priorities, IRS audit rates for the biggest U.S. corporations and American millionaires fell by 51% and 61%, respectively, between 2010 and 2018.
Earlier this week, a Washington Post analysis of business filings found that the federal government now audits just half of all large company tax returns, leaving a huge opening for corporations to claim unwarranted tax breaks.
In their letter, the House Democrats wrote that "there can be little question that the underfunding and understaffing of the IRS jeopardizes our federal tax system."
"Americans increasingly believe that their tax system is rigged against them," the lawmakers noted. "This belief has credence given the government's repeated inability to vigorously pursue and deter rich tax scofflaws. It is impossible for the American people to have confidence in their tax system if the government itself does not demonstrate a sustained commitment to engage the machinery of that system and make it fair for all citizens."
"More broadly, the institutional atrophy that festered under your predecessor, particularly within the Department of Justice, must be reversed lest our nation become accustomed to decaying government capacity and outright corruption," the letter continued. "Consequently, we call on you to move with urgency to name an Assistant Attorney General in charge of the Tax Division."
Read the full letter:
Dear President Biden:
As members of Congress's tax-writing committee, we share your goal of creating greater tax fairness in America by improving tax enforcement, particularly against wealthy tax cheats. But, as of today, it has been 2,597 days—seven years and one month—since there was a Senate-confirmed Assistant Attorney General of the Tax Division at the Department of Justice. A fair tax system demands a full-time enforcement officer. So, as you enter the 176th day of your presidency, we write to urge you to nominate an official for this position as soon as possible.
The Tax Division is "responsible for handling or supervising most federal criminal tax prosecutions." The continued reliance on an Acting Attorney General hinders the division's ability to promote voluntary compliance with the tax laws, enforce the nation's tax laws, and perhaps most importantly, maintain public confidence in the integrity of the tax system—the very prerequisites of the division's mission.
That deterioration is evident in the enduring existence of America's two-tier tax system, documented in a seemingly endless litany of media stories and statistics highlighting the ability of our richest citizens to cheat on their taxes with impunity. The Commissioner of the Internal Revenue Service (IRS) recently estimated that the yearly tax gap may exceed a trillion dollars while openly acknowledging that his agency more readily pursues audits of the working poor than of wealthy tax cheats. We believe that your deliberation and selection of a respected and qualified candidate for Assistant Attorney General of the Tax Division is needed now.
Better enforcement of the tax system starts with providing the IRS with real support after years of deliberate underfunding. To that end, your proposal to increase the IRS budget by $80 billion over 10 years is a watershed measure that can lay the foundation for a truly fair tax system. But the IRS cannot do its job best without a completely engaged partner at the Justice Department.
There can be little question that the underfunding and understaffing of the IRS jeopardizes our federal tax system. Americans increasingly believe that their tax system is rigged against them. This belief has credence given the government's repeated inability to vigorously pursue and deter rich tax scofflaws. It is impossible for the American people to have confidence in their tax system if the government itself does not demonstrate a sustained commitment to engage the machinery of that system and make it fair for all citizens. More broadly, the institutional atrophy that festered under your predecessor, particularly within the Department of Justice, must be reversed lest our nation become accustomed to decaying government capacity and outright corruption. Consequently, we call on you to move with urgency to name an Assistant Attorney General in charge of the Tax Division.
Our window to act is narrow and, each day, closing further. We look forward to working with you in making the American tax system truly fair.