February 15, 2023

ICYMI: At Hearing, IRS Nominee Agrees with Senator Warren that Republican Plans Help Wealthy Tax Cheats

Warren: “Responsible lawmakers should flat out refuse to cut a single dollar of support for hard-working Americans while House Republicans refuse to help unrig the tax system”

Video of Exchange (YouTube)

Washington, D.C. — At a hearing of the Senate Finance Committee, U.S. Senator Elizabeth Warren (D-Mass.) questioned Daniel Werfel, President Biden’s nominee to be Commissioner of the Internal Revenue Service (IRS) about Republicans’ decades-long plan to rig our tax system and make it easier for billionaires and giant corporations to cheat their taxes, including by slashing IRS funding so it lacks the resources to take on wealthy tax cheats. Senator Warren also asked Mr. Werfel about the potentially disastrous implications of House Republicans’ so-called “Fair Tax” proposal to replace existing taxes with a 30% national sales tax, lowering taxes for the wealthy, raising taxes for everyone else, and helping wealthy tax cheats by abolishing the IRS.

Transcript: Hearing, “Hearings to examine the nomination of Daniel I. Werfel, of the District of Columbia, to be Commissioner of Internal Revenue, Department of the Treasury.”
U.S. Senate Committee on Finance
Wednesday, February 15, 2023

Senator Elizabeth Warren: Thank you, Mr. Chairman. Mr. Werfel, welcome.

For decades, Republicans in Washington have pursued a three-step plan to rig our tax system and run up the deficit.  Number 1, shovel tax cuts to the wealthy and the giant corporations whenever they’re in charge.  Number 2, slash funding at the IRS, so that they can’t take on rich tax cheats. Number 3, pretend to care about fiscal responsibility when there’s a Democrat in the White House so that the Republicans can hold our economy hostage.

And, let’s face it. This scam has worked.  The audit rate for millionaires has plummeted, and for years corporations have contributed a declining share to national revenue to make this country run. 

That’s why the Inflation Reduction Act that Democrats passed last year imposes a new 15% minimum tax on billionaire corporations, and provides the IRS with new funding to track down wealthy tax cheats.

But the very first thing that House Republicans did when they took power this year was to repeal that new IRS funding.

Mr. Werfel, let me just ask, if that funding went away, would it make it harder or easier for billionaires to get away with cheating on their taxes?

Daniel Werfel, Nominee to be IRS Commissioner: Senator I think it would make it harder. The goal is to increase the IRS’s capacity today to unpack these various returns you’re referring to so if the funding is repealed we wouldn’t have that lever to increase our ability to unpack those returns.

Senator Warren: Okay, so in other words, if Republicans succeeded in repealing IRS funding, we’d have more billionaire tax cheats and that sounds like it’s going to cost us money.

So let me ask the rest of that question. Mr. Werfel, would the Republican bill to defund the IRS increase or decrease the deficit?

Mr. Werfel: It would increase the deficit. I typically look to CBO in terms of how they score legislation. They scored the Inflation Reduction Act as a saver –

Senator Warren: Meaning reducing the deficit.

Mr. Werfel: – reducing the deficit. So if they repealed it, it would increase the deficit. I don’t know the exact figure, but if I recall, they said it would increase the deficit by more than $100 billion.

Senator Warren: Yeah and actually the Treasury has estimated it would cost even more if we don’t do this, about $400 billion. And then there’s the latest Republican scam – the so-called “Fair Tax.”  House Republicans plan to vote on this to slap a 30% national sales tax on everything that Americans buy – from gas to groceries, to housing to health care.  At the same time, it would scrap all the taxes designed around people pay according to how much money they have.

Mr. Werfel, how do sales taxes generally impact lower-income folks versus how they impact the wealthy?

Mr. Werfel: Sales taxes are regressive –

Senator Warren: Meaning?

Mr. Werfel: Meaning that they impact the low-income in a more substantial way. It’s kind of a share of a wallet. The more tax you have on a common good or service, a low-income person is going to feel that in their wallet more than a high-income taxpayer.

Senator Warren: In fact, one analysis of the Republican tax plan found that average tax bill for the bottom 80% of Americans under this Republican plan would increase by 50%, while the top 1% would save hundreds of thousands of dollars on their taxes.  

And then just last little piece – the cherry on top. The Republican tax plan would completely abolish the IRS and make the states do the dirty work of increasing the price of everything by 30%.  

But I want to go back to the question about billionaires cheating. If this Republican plan were in place, and billionaires buy and sell their mega-mansions, their mega-yachts, their private art collections, Mr. Werfel, would they have more opportunities to cheat on their taxes if the IRS were abolished and we had nothing but the Republican so-called “Fair Tax” law?

Mr. Werfel: Senator, I think you’re raising a good point. In this world that this act envisions where it’s all sales tax rather than income tax, yes you’d have very large, complicated transactions whether it’s a boat or a business and if there’s no IRS to make sure that we’re assessing what the right sales tax is to pay, you would have significant risk of evasion I think. 

Senator Warren: Okay. So a tax plan that basically will cut taxes for billionaires and for billionaire cheats. I don’t think there’s anything fair about that.

So I get it. The Republicans are going to make a lot of noise about the debt ceiling. But this is theater. The debt ceiling crisis is entirely made up.  If the Republicans hadn’t pushed through the massive Trump tax cuts and slashed the audit rate for billionaires, our country wouldn’t even hit the debt ceiling in the first Biden term.  

Americans shouldn’t buy the Republican debt ceiling scam and responsible lawmakers should flat out refuse to cut a single dollar of support for hard-working Americans while House Republicans refuse to help unrig the tax system.