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internal revenue service
Democratic Leaders Accused of Bowing to GOP Attack on IRS Funds
"For the second straight year, President Biden and the Democrats are poised to sacrifice a significant chunk of one of their biggest accomplishments," one critic lamented.
Dec 18, 2024
Economic justice advocates are urging House Democrats to do more to defend Internal Revenue Service funding after leaders of the minority party agreed to Republican draft legislation that would continue a freeze on more than $20 billion in IRS modernization and enforcement funds in order to avert a government shutdown.
The $20.2 billion freeze is part of a continuing resolution that would guarantee funding for the federal government through March 14. Although the Inflation Reduction Act signed into law by President Joe Biden in August 2022 allocated $80 billion in supplemental funding to the IRS, Congress subsequently rescinded $21.6 billion of that and added a rider for the $20.2 billion freeze in an earlier continuing resolution.
The freeze means that the funds are neither permanently rescinded nor available for use. According to the Institute on Taxation and Economic Policy, the effective $20.2 billion funding reduction would increase the federal deficit by $46 billion "due to a drop in the agency's capacity to enforce taxes on wealthy individuals owed under existing federal law."
As Dylan Gyauch-Lewis wrote Wednesday for The American Prospect, "For the second straight year, President Biden and the Democrats are poised to sacrifice a significant chunk of one of their biggest accomplishments: funding for the IRS to go after wealthy tax cheats."
"With the latest maneuver, more than 90% of the money invested to scale up IRS auditing and oversight could be gone before it can even be used," Gyauch-Lewis added. "Yet again, Democrats seem to have been outplayed by Republican leadership."
Conversely, the infusion of IRA funding has boosted IRS recovery of unpaid taxes.
"The IRS has collected $4.7 billion in back taxes from wealthy tax cheats thanks to funding from the Inflation Reduction Act," Groundwork Collaborative executive director Lindsay Owens said in a statement Wednesday. "But since its passage, Republicans have clawed back nearly half of the enforcement budget to make it easier for the ultra-wealthy to get away with not paying their share."
Democrats helped this happen. In order to secure a 2023 debt ceiling deal with then-House Speaker Kevin McCarthy (R-Calif.), Biden agreed to multi-year spending caps in the so-called Fiscal Responsibility Act, as well as the $21.6 billion IRS funding recision. Now it is uncertain whether the outgoing Biden administration or congressional Democrats will fight to defend IRS funding or once again acquiesce to GOP cuts in order to keep the government running.
House & Senate Dems told us they were fighting to add a provision in the CR to fix the frozen funding, but it didn't make the cut. Republicans have made no secret of targeting the expanded IRS funding from the IRA - an effort very likely to continue in 2025 under a GOP trifecta.
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— Cady Stanton (@cadystanton.bsky.social) December 18, 2024 at 5:10 AM
IRS Commissioner Danny Werfel warned during a recent media call that Republicans' proposed cuts to the agency's funding would "be critically damaging to our capacity to do the work we need to do to make sure that large corporations and complex partnerships are paying what they owe."
Owens said "it's clear congressional Republicans are paving the way for the Trump administration to make it open season for tax cheats."
Such fears mounted this month after Republican President-elect Donald Trump tapped former Rep. Billy Long (R-Mo.) to head the IRS. Long sponsored multiple bills to dismantle the IRS and legislation to repeal all estate taxes, which are overwhelmingly paid by the wealthiest Americans. He has also promoted a dubious pandemic-era tax credit that the IRS has called a magnet for fraud.
"Even before the new administration takes office, we are seeing Republicans take steps to hamstring the IRS to ensure the ultra-wealthy can continue to evade their taxes," Anna Aurilio, senior director of campaigns at Economic Security Project Action, said in a statement Wednesday.
"A well-funded IRS is vital to administering a fair tax code. Slashing funding for the agency, which recently collected nearly $5 billion from wealthy tax evaders and crime rings, only hurts the efficiency and efficacy of the government," Aurilio added. "By starving the agency that helps deliver vital tax credits to the American people, Congress will make it more difficult for people to file their taxes and get the credits they qualify for—all while making it easier for the wealthiest individuals and big businesses to avoid paying their fair share."
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New Campaign Urges Biden to Commute Sentence of 'Public Hero' Who Leaked Trump Tax Data
Patriotic Millionaires and Revolving Door Project are leading the push for Biden to reduce IRS whistleblower Charles Littlejohn's prison term.
Dec 16, 2024
Update:
Patriotic Millionaires senior vice president for tax policy Bob Lord and Revolving Door Project senior researcher Kenny Stancil on Wednesday published commentary in Rolling Stone highlighting the campaign urging Biden to commute Littlejohn's sentence. This, a day after the campaign launched a website where people can add their voices to the chorus of calls for commutation.
Earlier:
With just over a month left in U.S. President Joe Biden's term, a pair of advocacy groups this week launched a campaign urging the outgoing Democrat to commute the sentence of an Internal Revenue Service contractor serving five years in prison for exposing tax dodging by wealthy Americans including Republican President-elect Donald Trump.
The campaign, which is a collaboration between the Revolving Door Project and Patriotic Millionaires, is planning a week of action to push Biden to commute the five-year sentence of Charles Littlejohn—who was also ordered to pay a $5,000 fine after pleading guilty in October 2023 to unauthorized disclosure of tax returns and return information to media outlets—to 10 months, the maximum term of imprisonment he was supposed to receive under the federal guidelines.
On Monday, the campaign letter to Biden from four tax law professors calling on Biden reduce Littlejohn's sentence, which the experts called "particularly harsh in comparison with some recent sentences meted out to blatant tax evaders."
The letter asserts that Littlejohn—who gave The New York Timesinformation on Trump and shared with ProPublica data on Jeff Bezos, Michael Bloomberg, Warren Buffett, Bill Gates, Rupert Murdoch, Elon Musk, Mark Zuckerberg, and others—acted "out of a sincere belief in the public's right to know."
"I've been a tax lawyer for 40 years. For the past decade, I've been pretty outspoken about the various maneuvers that the ultra-rich deploy to avoid tax," Bob Lord, the senior vice president for Tax Policy at Patriotic Millionaires, said in a statement. "But despite my best efforts, I fully recognize that no technical explanation that I could give about any of the myriad tax loopholes that the rich exploit would ever stick in the public conscience the same way that Charles Littlejohn's leaks did about billionaires like Donald Trump, Elon Musk, and Jeff Bezos paying $0 in income tax."
"Littlejohn did break the law, but at the end of the day, he actually did the country a great service by exposing the full degree to which our tax code privileges the wealthy and well-connected," Lord added. "And if lawmakers are inspired by Littlejohn's leaks to finally take meaningful steps to reform our tax system and rein in extreme wealth, he will have undoubtedly done more to save American democracy than harm it."
University of Michigan law professor Reuven Avi-Yonah, the letter's lead signer, has called Littlejohn a "public hero."
According to the professors:
There are many cases that involve massive tax evasion and do not lead to a criminal indictment. Consider for example the case of Alon Farhy, who transferred more than $2 million to a sham foreign entity, which then transferred the funds to a bank account in the name of a Belize-based corporation Mr. Farhy created solely for that purpose. Mr. Farhy's scheme violated a variety of tax-related obligations beyond his duty to correctly report and pay the income tax he owed. The [U.S. Department of Justice] entered into a nonprosecution agreement with Mr. Farhy immunizing him from criminal prosecution in exchange for paying his taxes plus interest and penalties.
"Many other cases involving tax evasion do not result in jail time," the letter notes. "For example, Raj Mukhi ran a business that manufactured and sold professional uniforms in many countries. He was indicted in 2014 for hiding the proceeds in a private bank based in Zürich. He pleaded guilty to one count of filing a false tax return and one count of failing to disclose a foreign bank account and was sentenced to three years of supervised release."
"Even if there is a prison sentence, it is usually much shorter than five years," the professors stressed. "To mention just some cases from this year, an Oklahoma man who instructed a payroll company working with his business to falsely characterize over $2.6 million as reimbursements rather than income was sentenced to 30 months."
"An Indiana woman who electronically filed false income tax returns for clients that reported fictitious businesses and also filed a false tax return for herself that underreported gross receipts from her business was sentenced to 21 months," the letter adds. "A New Jersey man was sentenced to 29 months for evading taxes and not filing income tax returns while earning over $2.5 million in wages. All of these cases involve conduct that is much more culpable and less public-spirited than Mr. Littlejohn's."
"There is a big difference between leaking tax information and tax evasion in the size of the universe of potential violations and the number of violators escaping punishment," the professors said. "The universe of potential violators leaking tax information is infinitesimal compared to the universe of potential tax evaders. And the number of potential violators escaping punishment for leaking tax information is close to zero, whereas the number of evaders escaping punishment is huge."
As his term winds down, Biden has issued approximately 1,500 commutations and 39 pardons, including controversial clemency for his son Hunter Biden and Michael Conahan, a former Pennsylvania judge convicted in a "kids-for-cash" scheme in which he and a colleague funneled thousands of juveniles into private detention centers in exchange for millions of dollars in kickbacks.
With the looming return of Trump—who presided over more federal executions during his first term than numerous presidents did over several preceding decades—advocates are pushing Biden to commute the sentences of 40 federal death row inmates. Advocates are also calling on Biden to pardon figures including Indigenous activist Leonard Peltier and environmental attorney Steven Donziger.
Earlier this month,
Politico Magazinereported that Biden is weighing preemptive pardons for numerous public officials who could be targeted by Trump—who has vowed to exact revenge on his political enemies—during his second term. Kash Patel, Trump's pick to head the Federal Bureau of Investigation, has threatened to prosecute the president-elect's political opponents and journalists.
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Doing For-Profit Tax Industry's Bidding, GOP Calls On Trump to Cancel Direct File Program
"This is the most efficient way and cost-efficient way for millions of people to pay their taxes," said one advocate.
Dec 11, 2024
Responding to the "absurd" news that more than two dozen U.S. House Republicans are calling on President-elect Donald Trump to end the Internal Revenue Service's Direct File program, Rep. Gerry Connolly came to one conclusion: "Republicans want to make your lives more difficult."
The Virginia Democrat wasn't alone in denouncing a letter penned by Reps. Adrian Smith (R-Neb.) and Chuck Edwards (R-N.C.) and signed by at least 27 other Republicans who called on Trump to sign a "day-one executive order" to end the free tax-filing program that allowed roughly 140,000 taxpayers to save an estimated $5.6 million in filing costs this year.
Direct File, which was introduced as a pilot program in 12 states in the last tax filing season and is set to be expanded to 24 states and more than 30 million eligible taxpayers this year, is "a free, easy way for people to file their taxes directly online with IRS," said Sen. Elizabeth Warren (D-Mass.).
The software allows taxpayers to keep their entire tax refund "rather than paying $150 to a sleazy tax prep company," said the senator, adding that Republicans evidently want Americans "to keep wasting money on TurboTax," the popular tax filing program run by Intuit, which reported a net income of $2 billion in 2023 and spent $3.5 million on federal lobbying the previous year. The private tax filing industry has spent decades lobbying to ensure a system like Direct File wouldn't be made available to Americans.
In the letter, the Republicans claim the Direct File system is "unauthorized and wasteful" and that "the program's creation and ongoing expansion pose a threat to taxpayers' freedom from government overreach."
The Republican lawmakers also sent the letter to billionaire businessmen Elon Musk and Vivek Ramaswamy, Trump's nominees to lead the proposed Department of Government Efficiency (DOGE).
In the letter they claim to want to protect "hardworking Americans" from the "overreach" of the IRS, but as In the Public Interest founder and executive director Donald Cohen told Common Dreams on Wednesday, the Direct File program is "incredibly popular" with those who have used it.
"This is the most efficient way and cost-efficient way for millions of people to pay their taxes," Cohen said. "So what the Republicans want to do is make it more costly, more complicated, and more profitable for the big tax software vendors."
Cohen also questioned how Smith and Edwards could argue, as they do in the letter, that Direct File is a "clear conflict of interest."
"It is in all of our interests for the federal government to... collect taxes in the most efficient and cheapest way," he told Common Dreams.
On the contrary, he said, private tax software companies like Intuit and H&R Block are incentivized to fight against Direct File, which keeps them from collecting about $1 billion in filing fees as well as users' data.
At the Center on Budget and Policy Priorities, vice president of tax policy Chuck Marr said Republicans who signed Wednesday's letter are essentially pushing for "a tax on paying taxes."
Ernie Tedeschi, director of economics at the Yale Budget Lab and the former chief economist of the White House Council of Economic Advisers, argued that Direct File "does what policymakers should be in favor of: It makes a core government function more efficient and user-friendly, in a way that's accessible for everyone."
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