Topline
After the release of a major investigation by ProPublica based on over 15 years of confidential data from the Internal Revenue Service showed that the wealthiest Americans often pay little to no federal income tax, the agency’s Commissioner Charles Rettig told lawmakers that internal and external investigators are working to determine whether the data ProPublica used was illegally obtained.
Internal Revenue Service (IRS) Commissioner Charles Rettig testifies during a Senate Finance ... [+]
Key Facts
Under U.S. law, it is a felony for an employee of the United States to leak a tax return or information about a tax return.
In response to a question from Sen. Chuck Grassley (R-Iowa) during a Tuesday hearing of the Senate Finance Committee, Rettig said that if the government’s investigation uncovers illegal activity, the person or people responsible will “absolutely” face prosecution.
“I share the concerns of every American for the sensitive...and confidential nature of the information the IRS receives,” Rettig added.
Crucial Quote
“We do not know the identity of our source,” ProPublica’s reporters wrote in their coverage published Tuesday. “We did not solicit the information they sent us.” ProPublica’s team noted that it had gone to “considerable lengths” to ensure the information it received was accurate. ProPublica’s reporters also noted that while federal law prohibits a person who receives a tax return or information about a tax return in an unauthorized way from publishing that information, they believe enforcing that law with respect to a story in the public interest would not be constitutional because they did not access the IRS records themselves or solicit them from another person.
Key Background
ProPublica’s reporters found that the 25 richest Americans (by Forbes’ tally) paid a “true tax rate” of just 3.4% on wealth growth of $401 billion between 2014 and 2018. ProPublica’s “true tax rate” is a measure of how much taxes an individual paid each year compared to how much their wealth grew during that same period, rather than compared to how much income they actually reported to the IRS. The “true tax rate” counts unrealized gains as taxable (current tax law does not).
What To Watch For
As part of his plan to pay for $1.8 trillion in investments in childcare, education and universal paid family and medical leave, President Joe Biden has proposed ramping up enforcement at the IRS to help close the tax gap and crack down on tax avoidance and the use of tax loopholes by the wealthiest Americans. Included in that enhanced enforcement is a proposal to require banks to report more information about account inflows and outflows to the IRS, but some Republicans have criticized that plan as an overreach. “How can the IRS assure Americans that the information they would receive under this proposal would be used for proper purposes,” Sen. Mike Crapo (R-Idaho) asked Rettig on Tuesday. “And in light of the ProPublica information...How can I protect people from that kind of violation of their own privacy?”
Further Reading
The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax (ProPublica)
Here Are The Biggest Winners And Losers In Biden’s Individual Tax Plan (Forbes)
IRS Commissioner Says Tax Gap Could Exceed $1 Trillion Per Year (Forbes)
