As the new House GOP majority tries over and over again to elect a Speaker, the already-glaring dysfunction of the 118th Congress is hard to miss. But as we watch the GOP caucus fight amongst itself and paralyze our government, we should be preparing for something even worse – House Republicans working together.
They may disagree on who should be their leader, but House Republicans agree on one thing: rich people shouldn’t have to pay taxes. They’ve already revealed that their first planned act would be to repeal the vast majority of the $80 billion in funding that the Inflation Reduction Act (IRA) allocated to the IRS last year, undercutting the Biden administration’s attempts to identify and hold accountable wealthy criminal tax cheats.
The ‘Family and Small Business Taxpayer Protection Act,’ an incredibly deceptively-named piece of legislation, seeks to cut 90% of the IRA’s allocated funds for the IRS. In prioritizing the continued sabotage of the IRS, House Republicans are showing that, to them, the most important thing they can do for our country is to make it easier for wealthy criminals to cheat on their taxes illegally.
A Defanged Agency
We’ve written in length about how the GOP has sabotaged the IRS over the years and, in the process, opened the floodgates for rich people with complicated taxes to get away with the most egregious of tax avoidance and evasion. By 2018, when Donald Trump was in office, the IRS had been so incapacitated that only 0.03% of individual returns for taxpayers making $10 million and above were audited; that number was 23% just eight years prior.
Between 2010 and 2018, Republicans blatantly crippled the IRS by cutting its budget by $2.9 billion, causing the IRS to lose a fifth of its staff. This dropped its overall audit rate by 58% (and its millionaire audit rate by a whopping 71%). Between 2010 and 2017, it lost 43% of its tax technicians and 44% of its revenue officers, leaving the IRS with the same amount of enforcement officers as it had in the 1950s when our economy was one-seventh the size it is now. Things haven’t been much better since. Over the last ten years, the agency has lost roughly 13% of all full-time employees.
The Inspector General for Tax Administration stated in 2020 that, between 2014 and 2016, the IRS didn’t have the resources to collect taxes from 880,000 high-income non-filers, of which the 300 biggest delinquents owed an average of $33 million.
Trump’s Tax Returns Prove How Important IRS Funding Is
In light of Trump’s tax returns recently being made public, we can see the desperate need for IRS funding now more than ever. The IRS’s lack of resources to go after the complicated tax returns of rich people has done nothing but embolden them to play the system as much as possible to avoid paying their fair share. Donald Trump himself said in a 2016 debate that avoiding paying income taxes was just being smart, and his tax returns show what that attitude leads to.
A recent article in the Washington Post explains in detail how Donald Trump and his army of lawyers and tax specialists gamed the system to evade taxes illegally. In one case, his own lawyers, when going over his filing strategies, encouraged this behavior and pointed out that even if the IRS challenged the massive amounts of unreported income, they likely wouldn’t have what it took to enforce the laws anyway. Like many other rich people would do and have done, Trump took the gamble and won – the IRS never challenged his taxes.
Trump also took advantage of the complexity of pass-through businesses and partnerships to discourage the IRS from using their scant resources to go after him, since the IRS struggles to audit these types of businesses. The work papers of the audit noted that “the resources needed to examine would far outweigh any potential benefits,” and an internal memo released by the House Ways and Means Committee this week said that the sheer number of returns reported made it impossible to examine all potential issues with their current resources.
The most troubling thing about the Trump tax returns isn’t that they’re uniquely bad: it’s that they’re all too normal for the ultra-rich. Wealthy Americans can push the boundaries of legal tax avoidance into straight-up illegal tax evasion, and be confident that the IRS can’t do anything to stop them. Democrats tried to fix this with increased IRS funding, but now Republicans want to go to bat to protect these wealthy criminals.
It’s no accident that the Republican crusade against the IRS has led to rich people being able to break the law with impunity – it’s the point. The Republican party’s central guiding tenet is that rich people shouldn’t have to pay taxes, and if they can’t get rid of taxes legally, then the next best thing is to make tax enforcement so weak that paying taxes as a rich person is essentially optional.
Trump is by no means the only member of the Republican elite taking advantage of the IRS’ weakness. Allen Weisselberg, the former Chief Financial Officer at the Trump Organization, recently pled guilty to a 15-year tax fraud scheme. Governor Rick Scott’s big-time donor and would-be campaign fundraising host, Jim Batmasian, was a known and convicted tax evader. And who could forget Robert Brockman – just last year, the software executive and prolific donor to the Republican party was charged with running one of the biggest tax fraud schemes in US history.
This Should Be a Political No-Brainer
Spending money on IRS enforcement is a net positive investment. It brings in significantly more money for each dollar spent, meaning that restoring over $45 billion in funds cut from the IRS enforcement budget over the past decade would more than pay for itself. The projected return on investment would bring in $204 billion over ten years; that amounts to a $4.50 per dollar return on investment. You’d think conservatives who claim to care about the deficit would be jumping at the chance to tackle it in such a fiscally responsible way. But they aren’t because it’s never been about the deficit – it’s about helping rich people.
For the rest of the country, defunding the IRS would be a massive mistake: it would increase processing times, delay refunds, and make it much more difficult for regular taxpayers to contact the IRS with questions. Equally as important, it would be an open endorsement of allowing millionaires and billionaires to commit tax fraud without consequences.
That’s all this week. Thanks for reading!
The Patriotic Millionaires
Background Reading and Resources
Trump’s taxes are Exhibit A in the case for why the IRS needs a big upgrade | The Washington Post
The IRS Finally Got Some Funding. Now Republicans Want It Back | Mother Jones
Joint Committee on Taxation’s report on Trump’s taxes | CNN Politics
Wyden Unveils Proposal To Close Loopholes Allowing Wealthy Investors, Mega-Corporations To Use Partnerships To Avoid Paying Tax | Senate.gov
Protecting Trump’s $916 Million of NOLs | Tax Policy Center
GOP groups quiet as billionaire donor stands accused of running biggest tax fraud scheme ever | CNBC
Top Trump executive pleads guilty to fraud in New York | POLITICO
Reducing the Tax Gap: 5 Key Points on Information Reporting | The Center on Budget and Policy Priorities
Right-wing media’s conspiracy theory of a militarized IRS is really about protecting wealthy donors and sponsors from paying higher taxes | Media Matters
How big is the problem of tax evasion? | The Brookings Institution
Not Enough Cops on the Beat: IRS Cuts Have Benefited Wealthy Tax Cheats | Center for American Progress