ProPublica published its first article Tuesday on "Secret IRS Files" it obtained from an anonymous source, showing how the wealthiest Americans "exploit the structure of our tax code to avoid the tax burdens borne by ordinary citizens." The leaked IRS documents highlight how relatively little the top U.S. billionaires pay in federal taxes — none, in some years — by using legal tax loopholes involving capital gains, donations, borrowing against their assets, and other tricks unavailable to most taxpayers.
The "Secret IRS Files" report spawned several federal investigations into who leaked that IRS data — ProPublica says it doesn't know the leaker's identity — and poured "rocket fuel" on the debate into how much billionaires should pay in taxes, Barron's reports. "The big picture is this data shows that the country's wealthiest, who profited immensely during the pandemic, have not been paying their fair share," said Senate Finance Committee Chairman Ron Wyden (D-Ore.). Some conservatives and libertarians argued legal tax loopholes keep money where it is best used: in the hands of wealthy business titans.
President Biden has proposed closing some of those loopholes, by doubling the capital gains tax, for example. But he also wants to juice the IRS's budget to go after people who don't pay the taxes they legally owe — which comes out to a lot of uncollected tax revenue. Five former Treasury secretaries — from the Obama, Bush, and Clinton administrations — endorsed Biden's plan in a New York Times op-ed published Wednesday.
"While we are not in agreement on many areas of tax policy, we believe in the importance of strengthening the tax system to do more to collect legally owed but uncollected taxes — which, left unaddressed, could total $7 trillion over the next decade," wrote Jacob Lew, Henry Paulson, Larry Summers, Robert Rubin, and Timothy Geithner. "We are convinced by the strength of our experiences that more can be done to pursue evasion," by upgrading the IRS's information technology, investing heavily in more IRS auditors, and allowing the IRS to verify income from third parties, among other changes.
"The Treasury's Office of Tax Analysis estimates that these initiatives will generate $700 billion over the 10-year budget window," the former Treasury secretaries write, but a more realistic estimate is $1.6 trillion. You can read their proposals for cracking down on tax cheats, willful or inadvertent, at The New York Times.