Democrats seek investigation into wealthy Americans' tax-avoidance strategies

Democrats seek investigation into wealthy Americans' tax-avoidance strategies
© Greg Nash

Sens. Elizabeth WarrenElizabeth WarrenFederal Reserve officials' stock trading sparks ethics review Manchin keeps Washington guessing on what he wants Warren, Daines introduce bill honoring 13 killed in Kabul attack MORE (D-Mass.) and Sheldon WhitehouseSheldon WhitehouseDemocrats draw red lines in spending fight What Republicans should demand in exchange for raising the debt ceiling Climate hawks pressure Biden to replace Fed chair MORE (D-R.I.) on Wednesday called for the Senate Finance Committee to investigate tax-avoidance strategies used by wealthy Americans, following reporting from ProPublica finding that a number of prominent U.S. billionaires have paid little to no federal income taxes in certain years.

"The Finance Committee has an obligation to investigate these matters, hold hearings, and develop legislative policies that address the methods and strategies used by ultra-millionaires and billionaires to avoid paying taxes, and its impact on the nation’s finances and ability to pay for investments in infrastructure, health care, the economy, and the environment," the senators, who are both members of the Finance Committee, wrote in a letter to Committee Chairman Ron WydenRonald (Ron) Lee WydenWant a clean energy future? Look to the tax code Democrats brace for toughest stretch yet with Biden agenda Lawmakers lay out arguments for boosting clean energy through infrastructure MORE (D-Ore.). 

ProPublica last month started publishing a series of articles, based on confidential tax data it obtained from an anonymous source, that detail how billionaires have paid little in federal income taxes in recent years, particularly when compared to their wealth gains.

ADVERTISEMENT

"A key finding of the ProPublica investigation is that the vast majority of the tax avoidance is legal: the nation’s wealthiest individuals and families are able to take advantage of loopholes and use complex investment and income strategies to avoid taxable income – all while they reap billions from their investments and live lives of privilege that are beyond the imagination of most families," Warren and Whitehouse wrote.

Warren and Whitehouse called for part of a Finance Committee investigation to focus on the role that financial institutions play in wealthy Americans' tax avoidance, saying that "access to enormous lines of credit is a key component of these financial strategies."

The senators said that the committee should look at how lending activities can help individuals avoid claiming taxable income, and that if the panel considers it appropriate, it should hold a public hearing with top executives from financial institutions.

"The use and potential abuse of tax avoidance schemes by the wealthiest Americans is not occurring in a vacuum – it involves the nation’s largest financial institutions and wealth management firms that help develop these tactics and provide the financial infrastructure that allows them to be effective," Warren and Whitehouse said.

"Because the majority of tax avoidance loans and other tax avoidance tactics are not disclosed to the IRS, an effective investigation of these tactics must involve the institutions that aid and abet them."

ADVERTISEMENT

Wyden said in a statement Wednesday that he's "on the same page" with Warren and Whitehouse and shares their concerns about tax avoidance by wealthy Americans.

Wyden added that he's working to ready legislation that would require wealthy Americans to pay taxes on their investment gains annually, and said he's "going to work with my colleagues on other ways the committee can tackle this issue.”

updated at 4:36 p.m.