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House Ways & Means Subcommittee Hearing on Taxpayer Fairness

House Ways & Means Subcommittee on Oversight

“Taxpayer Fairness”

Tuesday, October 13, 2020

Witnesses

Opening Statements 

Subcommittee Chairman Bill Pascrell (D-N.J.)

In his opening statement, Pascrell emphasized the importance of the voluntary tax system and criticized President Trump for refusing to disclose his tax returns. He also criticized IRS Commissioner Rettig for declining to appear before the subcommittee at this hearing.

Subcommittee Ranking Member Mike Kelly (R-Penn.)

In his opening statement, Kelly outlined the responsibilities of this subcommittee, highlighting the need to make government more transparent, efficient and accountable to the American people. He noted that he, along with Ranking Member Kevin Brady (R-Texas), has written to the Department of Justice and the IRS asking them to launch investigations to determine whether any federal laws were broken in the release of President Trump’s taxpayer information to the New York Times.

Testimony 

Ambassador Norm Eisen (ret.), Senior Fellow, Brookings Institution

In his testimony, Eisen stated that the recent New York Times reporting on the President’s taxes highlights the unfairness of the U.S. tax system. He continued on to criticize the 2017 Tax Cuts and Jobs Act for in his words, “making things worse for regular people and even better for the rich.” Eisen spent the rest of his testimony criticizing President Trump’s tax practices as well as his decision not to release his tax returns. He concluded that the current tax code allows excessive tax avoidance and tax evasion and thereby must be amended.

Kathleen Clark, Esq., Professor of Law, Washington University in St. Louis, School of Law

In her testimony, Clark discussed: 1) the conflict faced by IRS employees who audit the President’s taxes and how increased transparency can mitigate that conflict; 2) why there is a need to know how much the President owes and to whom he owes it; and 3) the need for new legislation to address gaps in our financial disclosure system for the President and other federal officials. She highlighted four legislative recommendations to address several gaps in the current system of financial disclosure for the President and other high-level government officials. These include: 1) Require disclosure of a President’s tax returns and the IRS’s audit of those returns; 2) clarify that business-related debts must be disclosed; 3) increase the maximum threshold for amount of assets and liabilities; and 4) require disclosure of business partners.

Leandra Lederman, Esq., Professor of Law, Indiana University Maurer School of Law 

Lederman took the opportunity to make four key points in her testimony: 1) Audits deter noncompliance; 2) the IRS needs adequate funding; 3) some taxpayers have more opportunity than others for noncompliance; and 4) enforcement of the tax laws is an important part of taxpayer fairness. She discussed each point in turn, specifically highlighting the critical need to adequately fund the IRS so that it can better enforce the laws and fairness of the tax system.

Steven M. Rosenthal, Senior Fellow, Urban-Brookings Tax Policy Center

In his testimony, Rosenthal focused on examining tax fairness by discussing the fairness of the amount of taxes President Trump reportedly paid, the fairness of the President’s reported business losses, and the fairness of the IRS audit of the President’s income taxes. He outlined his belief that the President’s tax payments are not fair when judged via horizontal and vertical equity. Rosenthal echoed the need for more IRS funding to ensure that enough enforcement tools are effectively in place.

Andy S. Grewal, Professor & Joseph F. Rosenfield Fellow in Law, The University of Iowa College of Law

In his testimony, Grewal addressed the issues raised by the recent New York Times article on President Trump’s tax and financial information. He encouraged Congress to examine how increased mandatory public disclosure of tax return information might reduce, rather than enhance, the public’s confidence in the tax system. Grewal continued that should Congress adopt a bill requiring tax return disclosures from elected official within the executive branch, it should extend the new disclosure regime to the legislative branch. Grewal concluded with a broad recommendation that as this subcommittee pursues its work, that it should consider how arbitrary rules in the tax code lead to taxpayer confusion.

Question & Answer

President Trump’s Tax Returns

The Democrat members of the subcommittee all criticized President Trump for failing to disclose his tax returns as well his tax planning strategies.

Specifically, Reps. Brian Boyle (D-Pa.), Terri Sewell (D-Ala.), and Lloyd Doggett (D-Texas) stated that the New York Times article on President Trump’s tax information demonstrates the need to reform the tax code and increase fairness and compliance in the system.

IRS Funding & Auditing

Reps. Suzan DelBene (D-Wash.) Linda Sanchez (D-Calif.), Tom Suozzi (D-N.Y.), and Judy Chu (D-Calif.) all discussed the funding and staffing challenges facing the IRS and how this impacts IRS enforcement efficacy.

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