What ever happened to the IRS leak scandal?
In the news cycles typical of the social media era, breakfast’s outrages are typically lunchtime’s old news. Manufactured scandals are America’s most plentiful natural resource, and there’s typically another one coming your way on the hour. If any savvy spinmeister wants to keep a story alive for more than half a day, it might be best to give it to Kyrie Irving or Nicki Minaj’s eternally newsworthy friend.
The rapid-fire scandal machine muddles our memory of true outrages that quickly disappeared. For instance, in June, ProPublica issued a report claiming America’s wealthiest individuals were “underpaying” their taxes, based on a formula created by themselves to calculate rich folks’ “true tax rate.” Only their report was based on Internal Revenue Service records leaked to the publication by a source for whom ProPublica claimed to have no identifying information.
A serious system of inequity
The reaction to the story was swift.
“Any unauthorized disclosure of confidential government information by a person with access is illegal, and we take this very seriously,” said White House spokeswoman Jen Psaki.
“People are entitled, obviously, to the greatest privacy with respect to their tax returns,” said U.S. Attorney General Merrick Garland, adding, “I very well remember what President Nixon did in the Watergate period – the creation of enemies lists and the punishment of people through reviewing their tax returns.”
“This was a very serious situation,” said Treasury Secretary Janet Yellen, vowing to get to the bottom of it.
“Trust and confidence in the Internal Revenue Service is sort of the bedrock of asking people and requiring people to provide financial information,” said IRS Commissioner Charles Rettig.
But some progressives needed only the length of one morning shower to wash away their feelings of guilt to pounce on the opportunity to express anti-rich sentiment. Democratic Sens. Elizabeth Warren of Massachusetts and Sheldon Whitehouse of Rhode Island sent a letter to Finance Committee Chairman Ron Wyden of Oregon asking for a hearing on the “deeply troubling allegations” in the ProPublica report.
“This report ‘demolishes the cornerstone myth of the American tax system: that everyone pays their fair share and the richest Americans pay the most,’” Warren and Whitehouse wrote, quoting the report.
But for those willing to be honest about how wealth and taxation works, the exposé itself was a dud. ProPublica tried to reverse engineer a scandal by conflating two piles of money that are taxed differently: “income” and “wealth.”
The net worth of many “billionaires” is tied up in ownership of their business – their wealth exists primarily on paper and will be realized only at the time they decide to sell their ownership. Many “rich” people collect very little in annual income, although their net worth remains high due to the value of their assets – stocks, properties, etc.
And of course, as with most investments, the worth of those assets can go up or down. A “rich” person who invested all their money in Theranos blood machines a few years back is now likely giving their own blood on a weekly basis to scare up extra cash.
Finding the leaker
Further, the businesses these individuals create generate wealth – and thus tax revenue – in amounts that never would have materialized had they not taken on the risk and initiative to do something new. Without the income taxes and sales taxes generated by some major corporate giants, for instance, governments would be likely gasping for new revenue sources.
And, of course, contra Rep. Alexandria Ocasio-Cortez’ conversation-starting Met Gala dress, the rich are taxed in America. The top three percent of wage earners in America pays more than 50% of the taxes in America; meanwhile, the bottom 50% of wage earners pay about three percent of the country’s taxes.
Like a bank robber who pulls of a major heist only to realize he has stolen a truck full of “Michael Bolton’s Greatest Hits” albums, the ProPublica story was likely made possible by a criminal act with underwhelming results.
It should be noted that the ProPublica leak is different than the recent “Pandora Papers” leak, in which over a dozen financial firms leaked information about how wealthy people often (legally) shield their assets in foreign countries. In that case, it was private companies doing the leaking – although the principle is the same. Regardless of your income, would you want your personal information surreptitiously passed to the public?
Perhaps, true to his word, Merrick Garland’s Department of Justice is working hard to find the presumed IRS leaker (I contacted the DOJ to find out and received no response).
Or maybe, like thousands of other scandals, this one has faded into history.
Christian Schneider is a member of USA TODAY’s Board of Contributors. Follow him on Twitter: @Schneider_CM
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