Finance

Republicans open new line of attack on IRS

The IRS is back in Republicans’ crosshairs following a ProPublica report based on the confidential tax records of the wealthiest Americans.

Republicans have long disliked the tax-collection agency, and have been critical of President Biden’s proposal to give the IRS significantly more resources. Now, GOP lawmakers are amplifying their attacks on the IRS in light of an unauthorized disclosure of tax data to ProPublica, arguing that it undermines taxpayers’ ability to have confidence in the agency.

“This is an astonishing breach of trust that should make taxpayers very concerned,” Rep. Kevin Brady (Texas), the top Republican on the House Ways and Means Committee, told reporters Friday.

He said he expects to bring up the disclosure this coming week with Treasury Secretary Janet Yellen, who is scheduled to testify at an annual hearing on the president’s budget.

ProPublica published a report Tuesday detailing how prominent U.S. billionaires like Jeff Bezos and Elon Musk in certain years have paid little-to-no federal income taxes. The article also found that the richest Americans paid little in taxes when compared to their wealth gains.

It is unclear who provided the tax information to ProPublica or how it was obtained.

“We do not know the identity of our source. We did not solicit the information they sent us,” ProPublica wrote. “The source says they were motivated by our previous coverage of issues surrounding the IRS and tax enforcement, but we do not know for certain that is true. We have considered the possibility that information we have received could have come from a state actor hostile to American interests.”

It is illegal for federal employees to make unauthorized disclosures of tax-return information. Administration officials said the matter has been referred to several agencies, including the inspectors general for the Treasury Department, the FBI and the U.S. Attorney for the District of Columbia.

While lawmakers on both sides of the aisle have raised concerns about the nature of the disclosure, Republicans in particular have been hammering the issue.

Prior to the ProPublica report, Republicans had been criticizing proposals in Biden’s $1.8 trillion American Families Plan to increase compliance with tax laws by providing the IRS with an additional $80 billion over a decade and to increase the amount of information that financial institutions report to the agency about account activity. Republicans are using the ProPublica article to step up their criticisms of those proposals.

“This most recent publication of taxpayer data is especially concerning in light of the Administration’s proposal to provide the IRS with a massive amount of unprecedented mandatory funding aimed partly at mandating collection of additional private and personal information from everyday Americans through financial institutions, including detailed information about their checking and savings accounts,” Senate Finance Committee Republicans said in a letter Friday to the Treasury Inspector General for Tax Administration (TIGTA).

Conservatives predicted that the disclosure of the tax documents would doom Biden’s IRS enforcement proposal.

“I think this kills the effort,” said Americans for Tax Reform President Grover Norquist.

Brady said the disclosure to ProPublica has “close to dealt a death blow” to the White White House’s plans.

Republicans said that the recent disclosure of wealthy Americans’ tax records is not the first time that there has been an unauthorized disclosure of tax information.

GOP lawmakers also speculated about the motivations behind the disclosure, given that the article comes as Democrats are pushing to increase taxes on the wealthy and corporations to pay for Biden’s infrastructure proposals. Republicans generally are opposed to Democrats’ proposals to raise taxes on the rich and corporations.

“It looks political at this time when this information is being used even today to advance the Democrats’ narrative that the wealthy individuals don’t pay enough of their taxes,” Rep. Lloyd Smucker (R-Pa.) said at a Ways and Means Committee hearing on Thursday.

It’s not new for Republicans to criticize the IRS, particularly when a Democrat is in the White House.

The agency was a major target of conservatives during the Obama administration following a 2013 report from TIGTA that found the agency had subjected Tea Party groups’ applications for tax-exempt status to extra scrutiny.

A subsequent report in 2017 from the inspector general found that there were also left-leaning groups subjected to extra scrutiny.

Republican strategist Ford O’Connell said the Tea Party controversy of the Obama era is still on the minds of many GOP voters, and that attacking the IRS in the wake of the ProPublica report makes sense politically for Republicans.

“If the goal is to fire up the base before 2022, certainly just uttering the letters I-R-S will do that,” he said.

Many working-class Republicans are no fans of the rich, but “they do believe it’s only a matter of time before the taxman cometh for them,” O’Connell said. 

Democrats have also expressed concerns about the disclosure of tax information, and are supportive of investigations. But they have also sought to put a focus on the contents of the ProPublica article, arguing that its findings highlight the need to raise taxes on the rich.

Administration officials have defended the White House proposal to increase the amount of information banks report to the IRS, saying it would help collect more of the taxes already owed.

Mark Mazur, deputy assistant secretary for tax policy at Treasury, said at Thursday’s Ways and Means hearing that the proposal would help the IRS better focus on “situations of gross noncompliance that deserve some attention.”

Democrats also pushed back on GOP suggestions that there was a politically motivated leak of tax data.

“This fits a pattern of trying to stoke distrust of the IRS and limit its ability to fully and fairly administer the tax laws,” House Ways and Means Committee Chairman Richard Neal (D-Mass.) said in a statement.

“It is disheartening that such unsubstantiated accusations are being made at a time when we are seeking to provide the IRS with funding and staffing to address noncompliance by the wealthiest taxpayers.”

Tags billionaires Elon Musk Internal Revenue Service Janet Yellen Jeff Bezos Joe Biden Kevin Brady Lloyd Smucker Mike Crapo Richard Neal tax agency taxes unauthorized disclosure

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