Dems highlight NYT article on Trump's business losses in 'tax gap' hearing

Dems highlight NYT article on Trump's business losses in 'tax gap' hearing
© Getty Images

Democrats at a hearing on Thursday raised questions about the fairness of the tax system by highlighting a recent New York Times article on President TrumpDonald John TrumpDemocratic senator rips Trump's 'let them fight' remarks: 'Enough is enough' Warren warns Facebook may help reelect Trump 'and profit off of it' Trump touts Turkey cease-fire: 'Sometimes you have to let them fight' MORE's business losses.

During a House Ways and Means Committee hearing about the "tax gap" — the difference between the amount of taxes owed and those paid on time — Democrats asked current and former IRS officials about the article, which said Trump’s tax papers show that he reported more than $1 billion in business losses from 1985 to 1994 and only paid income taxes in two of those years.

Rep. Mike ThompsonCharles (Mike) Michael ThompsonHere are the Democrats who aren't co-sponsoring an assault weapons ban House panel advances anti-gun violence legislation Pelosi asks Democrats for 'leverage' on impeachment MORE (D-Calif.) asked a witness if the tax system is fair given the Times article.

ADVERTISEMENT

Benjamin Herndon, chief research and analytics officer at the IRS, said he hasn’t seen data to assess the accuracy of the findings in the article, but said that maintaining a fair tax system is a “huge priority” for the IRS and its commissioner, Charles Rettig.

Trump responded to the article's publication by saying on Twitter that “you always wanted to show losses for tax purposes....almost all real estate developers did — and often re-negotiate with banks, it was sport.”

“What words from the president, when we want confidence in our tax system, to declare it ‘sport’ to underreport, to dodge your taxes,” said Rep. Lloyd DoggettLloyd Alton DoggettOvernight Health Care — Presented by National Taxpayers Union — House Dems change drug pricing bill to address progressive concerns | Top Republican rejects Dem proposal on surprise medical bills | Vaping group launches Fox News ad blitz House Democrats change drug pricing bill in bid to address progressive concerns A dozen House Democrats call on EU ambassador to resign amid Ukraine scandal MORE (D-Texas) at Thursday's hearing.

Rep. Ron KindRonald (Ron) James KindAmerica's workers and small business owners need the SECURE Act Blood cancer patients deserve equal access to the cure Democrats see whistleblower report as smoking gun MORE (D-Wis.) asked if there are red flags that the IRS looks for when a taxpayer reports multiple years of large business losses.

Kenneth Wood, a former IRS attorney, said it “happens all the time” that corporations would not pay taxes for several years because they have losses they can carry forward from previous years.

Kind also asked if there are any problems with tax preferences for real estate developers that Congress should examine.

“Sure there are,” Wood replied, noting that the tax code is very complex.

Rep. Bill PascrellWilliam (Bill) James PascrellLawmakers, social media users praise photo of Pelosi confronting Trump Lawmakers focus their ire on NBA, not China Hillary Clinton swipes at NBA over Hong Kong controversy MORE (D-N.J.) said that Trump “may not have paid taxes he owed” since the president appears to have deducted losses from borrowed money and that he didn’t pay taxes on loan amounts that weren't repaid.

The New Jersey Democrat predicted that if Trump did avoid taxes on unreported income, “Mr. Trump’s base is going to be very angry when they find out that, yeah, they probably have been had.”

“We are paying our fair share, and other people are not,” Pascrell added.

He also criticized the Trump administration for rejecting Democrats’ request for Trump’s tax returns from 2013 to 2018.

“Mr. Trump and his Treasury secretary are stonewalling us, defying the Congress of the United States,” Pascrell said.

Democrats and Republicans at the hearing also debated whether the IRS should receive more funding in order to help close the tax gap. The IRS estimated in 2016 that the average annual tax gap between 2008 and 2010 was $458 billion, adding that an updated estimate is expected in the near future.

Democrats are supportive of boosting the IRS’s budget. They criticized Republicans for significantly cutting the agency’s budget in the early part of this decade.

“We need more resources for the IRS to go after people in doing audits and encouraging voluntary compliance,” said Rep. Tom Suozzi (D-N.Y.).

Witnesses at the hearing said the IRS would benefit from having more resources. J. Russell George, the Treasury inspector general for tax administration, said the IRS had 1,600 fewer revenue officers in 2017 than it did in 2010, and each officer can bring in about $2 million.

That means that the IRS is collecting more than $3 billion less annually due to the staffing decline, George said.

“That’s striking,” he added.

The top Republican on the Ways and Means Committee, Rep. Kevin BradyKevin Patrick BradyOvernight Health Care — Presented by National Taxpayers Union — House Dems change drug pricing bill to address progressive concerns | Top Republican rejects Dem proposal on surprise medical bills | Vaping group launches Fox News ad blitz Top Republican rejects Democratic chairman's approach to stopping surprise medical bills America's workers and small business owners need the SECURE Act MORE (R-Texas), criticized the argument that the GOP gutted the IRS, saying cuts were made only when compared to the agency’s all-time peak funding level. He said the agency should focus on using its resources more efficiently.

"Before we discuss funding, let’s take a look at the IRS’s current standing,” Brady said. “The agency does need to continue to show us that it is capable of effectively managing its existing funds.”