Democrats Latest Plan: Target Middle Class Americans with IRS Audits, Keep Billionaire Loopholes Open

WASHINGTON, DC - JULY 14: Senate Majority Leader Chuck Schumer (D-NY) and U.S. President Joe Biden speak briefly to reporters as they arrive at the U.S. Capitol for a Senate Democratic luncheon July 14, 2021 in Washington, DC. President Biden is on the Hill to discuss with Senate Democrats the …
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A bill backed by Senate Majority Leader Chuck Schumer (D-NY) and Joe Manchin (D-WV) would unleash the Internal Revenue Service (IRS) on middle class Americans while keeping tax loopholes open for billionaires and their multinational corporations.

The plan, which Schumer and Manchin have agreed to, would massively bulk up IRS audits and criminal investigations to the sum of tens of billions of dollars — nearly all of which will be dedicated to going after middle class Americans squeezed by inflation.

The Wall Street Journal editorial board details the scheme:

The bill earmarks $45.6 billion for “enforcement,” including “litigation,” “criminal investigations,” “investigative technology,” “digital asset monitoring” and a new fleet of tax-collector cars. The result will be far more audits, civil suits and criminal referrals. [Emphasis added]

The main targets will by necessity be the middle- and upper-middle class because that’s where the money is. The Joint Committee on Taxation, Congress’s official tax scorekeeper, says that from 78% to 90% of the money raised from under-reported income would likely come from those making less than $200,000 a year. Only 4% to 9% would come from those making more than $500,000. [Emphasis added]

The IRS knows the super-wealthy employ lawyers and accountants who make litigation time-consuming and risky. It also knows that Democrats would howl if the agency pursues fraud in the earned-income tax credit program, despite what the IRS has estimated are $18 billion in improper payments each year. [Emphasis added]

At the same time, tax provisions hugely benefitting billionaires and their multinational corporations would go untouched.

The Schumer-Manchin plan includes billions in green energy tax credits that would be swooped up by billionaires to cut their corporations’ annual tax burdens. Jeff Bezos’s Amazon notoriously employs this strategy to pay close to zero in corporate income taxes.

Breitbart News’s John Carney writes:

Amazon’s tax bills were part of the inspiration for a minimum tax. The company faced no federal corporate income tax liability in 2017 and 2018. In the years since, it has had an effective tax rate that is just a fraction of the 21 percent rate put in place by the Trump administration’s tax reforms. According to the calculations of Matthew Gardner of the Institute on Taxation and Economic Policy, over the past four years Amazon’s effective aggregate tax rate was just 5.1 percent. [Emphasis added]

While the alternate minimum tax would prevent companies from using deductions for capital investments or stock-based compensation, it continues to allow them to use tax credits, Daniel Bunn of the Tax Foundation told us. In fact, the bill includes hundreds of billions of dollars worth of new tax credits aimed at fostering green technology adoption. And Amazon plays in beast mode when it comes to using tax credits to reduce its tax bill. [Emphasis added]

Jeff Bezo’s retail giant said in its annual report that tax credits reduced the taxes it would have otherwise owed by $1.1 billion. The company has said that most of those tax credits are federal research and development credits, although it does not give much detail in its annual reports. The Manchin-Schumer tax bill would not touch this. Amazon will lose the benefit of the write-off for stock-based compensation, but the company will most likely at least partially offset that by using the green tech tax credits. The end result could be no change in Amazon’s tax rate. [Emphasis added]

President Joe Biden and House Democrats tried to pass a similar tax plan last year as part of the administration’s “Build Back Better” agenda that has failed to catch on in Congress.

That plan would have targeted an additional nearly 600,000 working and middle class Americans earning less than $75,000 a year with IRS audits. Of those new IRS audits, more than 313,000 would have targeted the poorest of Americans who earn $25,000 or less a year.

Similar to the Schumer-Manchin bill, Biden’s plan would have provided a $625 billion tax cut for the wealthiest Americans living in blue states — paid for by working and middle class Americans.

John Binder is a reporter for Breitbart News. Email him at jbinder@breitbart.com. Follow him on Twitter here

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