Last week, President Biden’s son Hunter was indicted on nine counts of tax evasion by David Weiss, the special counsel leading an investigation into Hunter’s business dealings. The 56-page indictment alleges that, between 2016 and 2019, Hunter failed to pay at least $1.4 million in federal taxes, and instead used the millions he received in income over that period to fund an “extravagant lifestyle.”
Republicans who see the Biden family as public enemy number one had a field day when the news dropped. We wouldn’t say we were as thrilled as they were, but we recognize how important it is that anyone, especially a person in a position of privilege and power, who evades their taxes be held accountable, and we are hopeful for an honest investigation that leads to a just outcome. But from our view, Republicans’ cheers over the story are nothing short of hypocritical, as even a cursory look at their recent track record on funding the IRS proves that they couldn’t care less about criminal tax evasion.
For this week’s Closer Look, we’d like to walk through that track record with you and highlight the bigger questions that it raises about the modern-day GOP’s mission.
Let’s start with the Inflation Reduction Act (IRA). If you remember, in August 2022, President Biden and Democrats passed their signature healthcare, climate, and tax reform package, which, among other things, allocated $80 billion in additional funding to the IRS over the next ten years.
The $80 billion was desperately needed. Thanks to years of budget cuts over the last decade driven by Republicans, the IRS was in a pretty dilapidated state. Since 2010, the IRS lost a fifth of its staff and millions of phone calls went unanswered. Between 2010 and 2019, the overall audit rate dropped 58%, while the audit rate on millionaires specifically fell by a whopping 71%. This isn’t altogether surprising given how difficult and costly it can be to process returns from high-income earners, who usually have varied and complex income sources, not to mention armies of tax lawyers that help them reduce their tax bills as much as possible. In short, with the IRS crippled, America was left with an estimated $600 billion tax gap – i.e. the difference between taxes owed and paid – with $160 billion of it coming from just the top 1% of taxpayers alone.
It’s only been a little over a year since the IRS received its infusion of new funds from the IRA, but they have already made a substantial difference. This past filing season, the IRS answered nearly 90% of phone calls it received, reopened taxpayer assistance centers, and even began piloting a direct online e-file system. Perhaps the most significant difference that the funding made, however, is that it has enabled agents to go after wealthy tax cheats who previously were not audited. This year, thanks to those high-income audits, the IRS has collected $160 million in back taxes from just a few hundred wealthy evasion cases. According to one estimate, if the agency keeps these efforts going, it may collect up to $500 billion in additional revenue over the next decade.
We think it’s great that, with its new infusion of funds, the IRS is stronger, healthier, and better equipped to crack down on wealthy tax evaders. But, unfortunately, Republicans don’t agree with us. Ever since the IRA passed, Republicans have thrown everything against the wall to try to rip the $80 billion in new funding away from the IRS.
In April of this year, at the start of the now infamous debt ceiling negotiation fiasco, House Republicans voted to pass a bill that would raise the debt ceiling but also rescind most of the $80 billion in funding that the IRA granted the IRS. It didn’t pass the Senate or President Biden’s desk, but in order to pass a debt ceiling bill a month later, Democrats had to make a handshake deal to claw back $21.4 billion in the IRS’ new funding over the next two budget cycles. The Congressional Budget Office (CBO) estimated that this cut will ultimately result in $40.4 billion in lost revenue collection.
If that wasn’t enough, in early November, House Republicans, joined by a handful of Democrats, also voted to pass a military aid package with a poison pill amendment to strip the IRS of an additional $14 billion. The CBO estimated that this move would result in $26.8 billion in lost tax revenue, so it’s a relief that the Senate didn’t consider it and the President promised to veto it if it ever got to his desk.
At this point, you’re probably wondering: what do Republicans have against the IRS? Why wouldn’t they support fully funding the agency to enable it to better catch ultra-wealthy criminal tax cheats – not to mention better serve average taxpayers?
While we can speculate as to what that answer might be, here’s what we do know: anyone who evades taxes is a criminal, plain and simple. And anyone who supports efforts that will intentionally hamper the IRS’ ability to catch those criminals is a criminal apologist, plain and simple.
Republicans like to stake their claim as the party of “law and order,” and they’re certainly waving this flag around with the recent news breaking about Hunter Biden. But that couldn’t be further from the truth. In reality, the modern-day GOP is the party of criminal apologists and abettors.
We’d like to close by highlighting the difference between tax avoidance and tax evasion. Tax avoidance involves wealthy taxpayers reducing their tax bills by taking advantage of loopholes, exemptions, and lower rates specially designed for them. It’s bad, but it’s entirely lawful. Tax evasion, on the other hand, is 100% unlawful. It involves rich taxpayers lying and cheating the system to escape paying taxes that they owe by law.
The Patriotic Millionaires are trying to convince the public and lawmakers that it’s time to end tax avoidance by the ultra-rich. Until then, we don’t think it’s too much to ask that the rich be required to pay the taxes that are on the books now.