The massive leak of billionaires’ tax data has imperiled what support there might have been from Republicans to back President Joe Biden’s plan to give more money and authority to the IRS.
On Tuesday investigative nonprofit organization ProPublica released details about the tax returns of thousands of the nation’s wealthiest people, a leakso expansive it covered some 15 years. While there is speculation that the timing of the leak was political — Biden is seeking support to hike taxes on the wealthy — it also came out as Biden has suggested infusing billions of dollars into the IRS, a move that faces increasing headwinds from the scandal.
Sen. Mike Crapo, the ranking member of the powerful Finance Committee, told the Washington Examiner on Thursday that after the tax leak, changes to IRS funding must be preceded by guarantees that taxpayer data is indeed secure.
“This data breach comes at a time when the administration is proposing additional funding for the IRS to massively and intrusively expand its access to data on individuals and companies,” the Idaho Republican said in a statement. “Taxpayers should be incredibly concerned about this breach, because if this information can ‘leak,’ anyone’s can.”
“Before even considering additional funding, Congress and the American people need assurances that existing data at the IRS is guarded and secure,” he added.
The scope of Biden’s proposed IRS overhaul is vast. The White House plan is to allocate $80 billion to the IRS to hire more staff and give it increased authority to crack down on tax cheats. The administration has anticipated that it can raise $700 billion in revenue over the next decade. It would also increase the sensitive info the IRS has access to by requiring banks to report annual account inflows and outflows.
Sen. Pat Toomey, the top banking committee Republican, called the release of the tax documents, whether by theft or leak, an “egregious violation of the public trust” in the IRS and said that while the Biden administration’s commitment to holding those accountable is appropriate, “damage has already been done.” He called upon IRS Commissioner Charles Rettig and Treasury Secretary Janet Yellen to keep lawmakers apprised of what is being done to address the matter.
“It is incumbent upon Commissioner Rettig and Secretary Yellen to detail to Congress the changes they will make at the IRS to try and ensure this does not happen again,” the Pennsylvania senator told the Washington Examiner.
Republicans have worked in recent years to limit IRS funding, especially in the aftermath of the controversy over the agency’s admission in 2013 that it had targeted conservative nonprofit organizations for added scrutiny. And many Republicans were already wary of Biden’s IRS overhaul plan prior to the leak.
Still, GOP antipathy toward the IRS had thawed in recent years somewhat, thanks to the endorsement of added funding by Trump Treasury Secretary Steven Mnuchin and the 2019 enactment of bipartisan reforms.
Some Republicans expressed some degree of openness toward increasing IRS funding. Crapo, who told the Washington Examiner that assurances of security would have to be in place to consider more funding after the leak, has nonetheless expressed a willingness to help the IRS close the tax gap.
“There are useful, bipartisan issues worth pursuing regarding IRS funding, enforcement of our tax laws and taxpayer responsibilities, and the tax gap,” he said in a May letter to the IRS.
But now, the path to increased funding is narrower.
On a phone call with reporters on Friday, Rep. Kevin Brady, the top Republican on the House Ways and Means Committee, was asked about what the impact of the leak has on Biden’s plans to increase funding to the IRS.
The Texas Republican said the IRS leak “has already come close to killing” Biden’s IRS expansion proposal, adding, “This has close to dealt a death blow to their efforts to become more invasive and intrusive into Americans’ lives.”
On Wednesday evening, several leading Republicans expressed their concerns about the tax returns being leaked in letters sent to Rettig and acting Treasury Inspector General Richard Delmar.
“Regrettably, it appears personnel with access to American’s personal and confidential information are again misusing protected information for political reasons,” five GOP senators wrote in a letter to Delmar. “Treasury and the IRS must hold accountable any and all individuals who broke federal law by inappropriately sharing the confidential tax information and tax returns of multiple Americans.”
Douglas O’Donnell, the IRS’s deputy commissioner for services and enforcement, told the House Ways and Means Committee on Thursday that the matter has been referred to several investigative bodies, including the Treasury Inspector General for Tax Administration, the FBI, and the United States Attorney’s Office for the District of Columbia. He said the IRS fully supports any investigations.
Still, even with investigations, the leak has shaken Republicans on Capitol Hill, who see the breach as an erosion of public trust. Some Democrats have upped their calls for increased taxes for the wealthy, given that ProPublica reported that many of the 25 richest people went years payingvery little or nothing in federal income taxes. Sen. Chuck Grassley expressed disdain for how the leak has been interpreted.
“The fact that these private tax records spilled into the public and were contorted by Democrats and an uninformed press to make a political point is particularly disturbing,” he said in a statement to the Washington Examiner. “Make no mistake: if this sort of breach can happen to one American, it can happen to any American.”
The Biden administration’s plan to raise taxes, the scope of which might encounter some resistance from more centrist Democrats, includes raising the top individual income tax rate to 39.6% and taxing capital gains for households making more than $1 million as ordinary income.