Home Tax Planning Richie Neal and Trump's Taxes – The American Prospect

Richie Neal and Trump's Taxes – The American Prospect

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Tom Williams/CQ Roll Call via AP Images

Representative Richard Neal leaves a meeting of the House Democratic Caucus in the Capitol.

As most House Democrats enthusiastically jump on the long-dormant congressional oversight train, one senior lawmaker has conspicuously chosen to stay on the platform. Under the leadership of Representative Richard Neal, the House Committee on Ways and Means has shown none of the zeal for oversight exhibited by its counterparts.

The announcement two weeks ago that Neal would finally request Trump’s tax returns, after a good deal of pressure from the Democratic Caucus, might have appeared to be a welcome reversal. But look at the fine print and you’ll see that the committee’s strategy is basiclly a continuation of Neal’s obstinate refusal to deliver on Democrats’ 2018 campaign promises. 

Not only is Neal’s request still set for some uncertain timein the nearish future (approximately two and a half or more months too late), the request he is contemplating is wildly inadequate

That is because Neal plans to disregard tax law experts and request only the president’s personal returns. 

Neal’s lame excuse is that business returns for Trump’s over 500 Limited Liability Corporations (LLCs) are too complex. Neal is right that understanding Trump’s finances will be unjustifiably arduous, but as one of the few people in the country with the power to gather the resources and expertise to conquer this task, surrender in the face of this complexity is a cowardly dereliction of duty. 

Trump’s personal tax returns will show how much money he is earning from each of his LLCs, but not how the LLCs came to possess that money or what machinations the funds may have gone through before reaching the President. Without this information, we will make little headway in learning specifics about Trump’s conflicts of interest, including international entanglements and alleged tax evasion. 

Failing to request the business returns not only compromises Congressional investigations into this president, but also the Committee’s potential oversight of society’s wealthiest tax cheats. Neal reportedly likes to boast of his committee’s historical significance, and yet he is failing to seize his opportunity to be a part of that vaunted history by reforming the corrupt system that created the likes of Donald Trump and those surrounding him.  

Looking back over Neal’s 30 unremarkable years in Congress, it appears that he has long been more concerned with rising through the ranks than actually accomplishing anything. For three decades Neal has quietly waited his turn, neither making waves nor attracting national scrutiny. Unfortunately, Democrats’ deference to seniority in committee chair assignments can allow a low energy, risk-averse politician to rise to power, even as it can also yield activist Chairs like Representative Maxine Waters of the House Financial Services Committee. 

Neal has faced very few real challenges throughout his career. In the last 4 elections—since Massachusetts lost a congressional district and Neal began representing the state’s 1st congressional district in the very liberal far western slice of the state, Neal has faced a primary challenger twice and faced an opponent in the general election only once. 

Last year, he faced a primary opponent, Tahira Amatul-Wadud, who had little funding and had never run for office. She managed to get 29 percent of the vote. Next time, Neal is likely to race a serious primary challenge.

He handily outraised both primary challengers by a factor of 6-to-1 in 2012 and 24-to-1 in 2018, thanks to big hauls from PACs. Although he represents a progressive district, Neal’s fundraising relies to a remarkable degree on corporate PAC contributions. Neal was one of the top eightcorporate PAC recipients in either party in the House for the 2018 election cycle. Only a fraction of his contributions (2.1 percent in 2012 and 0.73 percent in 2018) came from small dollar donors. 

This paints a picture not of a deeply popular politician with a committed base, but of one whose corporate fundraising prowess successfully suppresses challengers. This is a shame, because Trump’s tax practices cry out for a serious investigation.

While it is cheap and easy to set up an LLC, the services of those that can help you use it add up quickly, meaning that the parallel world of accounting tricks and loopholes is only available to those that can pay the price. Many of the country’s wealthiest individuals pay millions of dollars for expert advice on how to escape tens or hundreds of millions of dollars in obligations. 

The authorities charged with punishing those that cross the line from “aggressive tax planning” to tax evasion simply cannot keep up. The IRS, for instance, has decreased the rate at which it audits the country’s wealthiest individuals by almost three quarters over the last decade. Due to the complexity of these individuals’ finances, these audits require a tremendous outlay of time, resources, and expertise. And yet decades of effective lobbying by some of the richest and most shameless people and corporations have ensured that the IRS budget is paltry compared to its needs.  

Meanwhile, that “aggressive tax planning” goes almost entirely unscrutinized. While these tactics are currently legal, it is not clear that they are fair, nor that they should continue to be permissible. Consider, for instance, last year’s New York Times report about the Trump family’s extensive efforts to avoid inheritance taxes. While those tactics might have seemed shocking to you or I, tax law professor Lee-Ford Tritt told Vox that 85 percent of those maneuvers would have been “a yawn for the uber-wealthy estate planners.” 

That this type of behavior is routine for a select few, however, should not distract from the severe consequences that it has for the rest of our society. Between 2008 and 2010 (the last years for which it released figures) the IRS estimated that it lost $458 billion annually to tax evasion. It does not release estimates for how much revenue is lost to legal, but questionable maneuvers like many of those described in The New York Times report. Based on the fact, however, that the Trump heirs alone avoided (through mostly legal but probably also some illegal tactics) $500 million dollars in taxes in 1996 dollars (just under $800 million today), it is likely a significant sum.

This is exactly the sort of injustice that Democrats should be interrogating through aggressive oversight. Democrats’ win in 2018 was a repudiation of Trump, but it was also a rejection of the system that created him. That system aggressively pursues people who dare to claim the Earned Income Tax Credit, while turning the other cheek as the ultra-wealthy spirit millions of dollars out of the government’s reach. 

If House Democrats are serious about fixing the system that produced Donald Trump, they will need to understand its architecture, which means they cannot throw up their hands in the face of its complexity. Instead, Ways and Means should gather the tools necessary for the task. That starts with hiring enough staff, including experts who have the specialized knowledge needed to decode Trump’s tax returns. Other committees have boasted of expert hires in areas such as ethics (Norm Eisen), banking misconduct (Bob Roach), and antitrust (Lina Khan) while Ways and Means has announced no such oversight-targeted employment decisions. 

March is the month when Committee chairs go before the House Administration Committee to make the case for their budget requests for the coming two years. Rather than bemoaning the complexity of oversight, Neal must recognize that current resources are adequate for investigating Trump’s returns, but not for the breadth of issues his Committee should be overseeing. Neal should take this opportunity to obtain the funds that his committee will need to do its broader job, because the oversight that the American people demand starts, but does not end, with the president’s tax returns. 

The Committee also has jurisdiction over trade policy, as well as Medicare and Social Security.

Viewing Trump’s financial records will inevitably raise other questions for which Ways and Means should also seek answers and begin developing remedies.  

For example, if President Trump is guilty of tax evasion on the scale that is alleged, why was he not caught sooner? Who else has benefited from this weak enforcement? Minority-bound Democratic senators on the Banking Committee have already been seeking answers to precisely these questions, but lacking subpoena power, are unable to do more than send a letter to the IRS questioning enforcement priorities. In contrast, Ways and Means can, and should, force Executive Branch officials to furnish answers to these important questions. 

By shining a light on uneven enforcement and chronic understaffing, Ways and Means could build support for increasing the agency’s budget. Not only would this be one of the most effective ways to increase revenue (for each dollar in additional funding that the IRS receives, it regains between $6 and $9) it would also likely enjoy bipartisan support, if not among lawmakers than among the general populace, a majority of whom view the agency favorably

Fixing enforcement, however, will only be the start. A thorough investigation of Trump’s tax returns will also certainly make clear that there are structural deficiencies in our laws that allow the wealthy to consistently achieve better outcomes. Why, for example, should income from LLCs receive a 20 percent deduction? Why should individuals be able to hide their identity behind anonymous shell companies, allowing them to violate the law without consequences?  

The Ways and Means Committee must not only investigate Trump because he is a corrupt president, but because Trump’s celebrity make him a worthy vehicle for highlighting the unjust and corrupt system that created him. Failure to request the business returns demonstrates a lack of seriousness about understanding and dismantling this rigged system. It is not only Trump, but every rich tax evader in America who is breathing easier with Richard Neal as Chairman.

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