Biden's first step on taxes may be cracking down on cheats, Democrats say
By David Lawder
WASHINGTON (Reuters) - Joe Biden will undo Republican tax cuts for the rich and corporate on "day one" if he wins the November election. His Democratic colleague, Senator Kamala Harris, swore during Wednesday night's vice-presidential debate.
However, other Washington Democrats say the timing seems too ambitious. A new Biden government set to inaugurate January 20, 2021 is likely to face a still-raging coronavirus pandemic and an economy deeply in recession.
His first move on taxes might be easier, say some Democrats, including advisers from Biden: Strengthening the enforcement of the Internal Revenue Service (IRS) to prosecute wealthy tax evaders who make the United States hundreds of billions of dollars in revenue each year costs.
Tackling major tax reform, and in particular the repeal of the 2017 Tax Cuts and Employment Act, a signed Trump policy to cut corporate taxes, will depend on several factors, said Jared Bernstein, Biden's chief economist as vice president, who is now an outside advisor to him acts campaign.
"I don't think there is any way to determine the timing at this point," he said in an interview days before the vice-presidential debate. "There is still a lot to be done before then, including winning," said Bernstein.
However, he and other prominent Democrats are happy to speak at length about what they think needs much stronger enforcement at the IRS, which has suffered for a decade from budget cuts and hiring freezes imposed by Republicans in Congress.
Bernstein said Biden would "seek significant improvements in IRS enforcement and auditing, especially for those with complex business structures" like Trump.
Senator Maggie Hassan, a senior Democrat on the Senate Finance Committee on Tax Letters, said at a subcommittee hearing on Wednesday that her top tax priority is new coronavirus aid to households and businesses, followed by reducing what is known as the tax gap for businesses and billionaires who avoid taxes by reporting revenue to the Treasury. "
'STUPID' TAX PAYERS
After a Democratic primary that saw heated debates over a progressive wealth tax, Biden and his advisors have emphasized tax "fairness" on tax code details.
His tax plan would repeal elements of the 2017 Republican Tax Act and increase tax rates to 39.6% for Americans with incomes over $ 400,000 and tax rates on capital gains for those with incomes over $ 1 million. The corporate tax rate would rise from the current 21% to 28%.
Biden's proposal to reduce the $ 11.6 million estate tax exclusion has already sparked an argument among wealthy Americans about revising their estate planning before the end of the year.
A New York Times report last week that President Donald Trump paid only $ 750 in taxes in 2016 and 2017, and nothing in years, has put the spotlight back on who pays what.
Trump said during the presidential debate last week that he paid millions in taxes in the years in question, but also made deductions that he was entitled to as a real estate developer.
"Like any other private individual, they go through the laws unless they're stupid," said Trump.
Trump's tax returns "clarify for our side of this debate what tax law should look like and how you should reform it on the basis of fairness," said a Democratic Senate adviser. "It's a question of wages versus wealth."
Nevertheless, the legislature would have to have "very complicated discussions" to clarify how things should proceed, said the adjutant.
A tax gap of $ 441 billion
Individual tax returns fuel the US government budget of more than $ 4 trillion.
Individuals reporting large business losses but no income pose a "significant compliance risk," which adds to a $ 441 billion annual tax gap - the difference between taxes owed and taxes collected, said the US Treasury Inspector for Tax Administration on September 28th with test report.
It said the IRS should investigate individuals who have business losses of $ 100,000 or more and no income. The IRS rejected this recommendation, saying it would require "redirecting resources from other areas".
An IRS spokesman did not immediately respond to a request for comment.
Tax compliance reform is also complicated.
Former President Barack Obama's creation of a "fortune squad" within the IRS to scrutinize the rich drew the ire of Republicans in Congress who cut the IRS enforcement budget, which cut tax agents, over the next decade.
Now the agency's assertiveness is at a "crisis point" and rebuilding would require a massive investment in technology that will hire and train thousands of new agents, said Robert Gardner, who worked for the IRS for 39 years and left in 2013.
"More IRS agents intruding into people's lives is never a politically popular move," added Gardner, who is now a tax whistleblower adviser.
However, nearly two-thirds of Americans believe the rich should pay an extra share of taxes, a Reuters / Ipsos poll in January found.
The IRS enforcement cuts have effectively acted as "shadow tax cuts for high-end avoiders and outliers," Bernstein said. "The Democrats I speak to are not at all happy about that."
(Reporting by David Lawder; Editing by Heather Timmons and Rosalba O'Brien)
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