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
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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 TrumpTrumps light 97th annual National Christmas Tree Trump to hold campaign rally in Michigan 'Don't mess with Mama': Pelosi's daughter tweets support following press conference comments 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 ThompsonOvernight Energy: Mark Ruffalo pushes Congress on 'forever chemicals' | Lawmakers spar over actor's testimony | House Dems unveil renewable energy tax plan | Funding for conservation program passes Senate hurdle House Democrats release renewable energy tax proposal Senate rejects Dem measure to overturn IRS rules on SALT deduction cap MORE (D-Calif.) asked a witness if the tax system is fair given the Times article.

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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 DoggettProgressive leader warns members could vote no on drug price bill as it stands White House talking new tax cuts with GOP On The Money: Lawmakers hammer Zuckerberg over Facebook controversies | GOP chair expects another funding stopgap | Senate rejects Dem measure on SALT deduction cap workarounds MORE (D-Texas) at Thursday's hearing.

Rep. Ron KindRonald (Ron) James KindCongressional authority in a time of Trump executive overreach Trump tax breaks for low-income neighborhoods draw scrutiny Alcohol industry races to save tax break by year-end deadline 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 PascrellOn The Money: GDP expanded 2.1 percent in third quarter | Dems want answers on Japan trade deals | Tax, loan documents for Trump Tower reportedly show inconsistencies Democrats demand answers on Trump trade deals with Japan More than 100 Democrats sign letter calling for Stephen Miller to resign 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 BradyLawmakers under pressure to pass benefits fix for military families How centrist Dems learned to stop worrying and love impeachment On The Money: Senate passes first spending package as shutdown looms | Treasury moves to roll back Obama rules on offshore tax deals | Trade deal talks manage to weather Trump impeachment storm 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.”