Apparently, the Internal Revenue Service (IRS) doesn’t listen to my advice. Last summer, as Congress prepared to ram through a spending spree that included funding for nearly 87,000 IRS employees, I noted that if Democrats were interested in tracking down wealthy tax cheats, they should instead demand that the tax agency audit the current occupant of the White House to study his own dodgy tax history.
Now come claims from the White House that the IRS examined President Biden’s taxes yet raised no red flags. That apparent development was enough to prompt an analyst at a liberal think tank to say Congress should investigate what he views as the IRS’s abdication of its duties regarding Biden’s returns. But the question remains whether Republicans will get off their proverbial tails and actually do something about it.
White House Claims
To give a brief background, in 2017, Biden and his wife, Jill, devised a scheme to funnel most of their book and speech income through two S-corporations, using a loophole that Biden’s own administration now wants to eliminate. Taking most of that income as corporate profits rather than wages allowed the Bidens to avoid paying 3.8 percent in payroll taxes — the first 2.9 percent assessed by Medicare and a 0.9 percent levy imposed by Obamacare — on the corporate profits. Overall, the strategy netted them over $500,000 in tax savings.
However, numerous tax experts have raised questions about whether Biden not only used this loophole but abused it. The question is whether Biden paid himself such a low salary in 2017 and 2018 — because he wanted to avoid paying Medicare and Obamacare taxes on most of his income — as to violate IRS guidelines for “reasonable compensation.” I filed a whistleblower complaint with the IRS about this issue last February, a complaint that the service dismissed within weeks of receiving it.
Now, in response to recent questions about whether Biden “cheated” on his taxes, the White House released a new statement to fact-checking organizations about this issue, claiming the IRS has examined the matter and found no fault with Biden’s returns.
This development comes with two noteworthy ironies. First, the White House has not publicly released any evidence, via some type of communication from the IRS, to substantiate its claims — yet the “fact-checking” organizations apparently took the White House’s statements at face value and failed to check the White House’s “facts.” Second, anyone who dares contradict the White House’s statements could face criminal penalties for disclosing tax return information. It’s a very nice way for the White House to control the information flow, in which its statements can go unchallenged.
IRS Didn’t Investigate Enough
The White House’s statement claims, in essence, that the Bidens’ book and speech income represents royalties from the licensing of their works, to which the 3.8 percent Medicare tax does not apply, and that the IRS has blessed the Bidens’ interpretation of the tax law. But the White House’s statement fails to distinguish between the Bidens’ tax situation now — when Joe Biden is president and his wife is first lady — from their tax situation when the S-corporations were first established in 2017 and 2018.
Both of the experts interviewed by factcheck.org said they weren’t “buying the argument” put forward by the White House. Steve Rosenthal of the liberal Tax Policy Center said the Bidens’ situation was far different in 2017 and 2018 when writing and speaking engagements represented their full-time job. He specifically questioned, “why, when it was doing the 2021 audit, didn’t the IRS go back to 2017 and 2018 and require the Bidens to make an adjustment” by increasing the Bidens’ salaries and requiring them to pay the 3.8 percent tax on the higher salary amounts.
The White House statement added that “during the first routine audit of this administration, tax years 2017 and 2018 were discussed with the IRS” and that the service “challenged nothing.” The Tax Policy Center expert told factcheck.org that he disagreed with this development:
Rosenthal would like to know why [the IRS didn’t challenge the 2017 and 2018 returns], and he said that if he were the Chairman of the House Ways and Means Committee, he would seek IRS records related to discussions of the 2017 and 2018 returns and the S-corporations to find out why the IRS didn’t think an upward adjustment [to the amount the Bidens owed] was warranted.
In short, an analyst at a left-of-center think tank believes Joe Biden “didn’t pay his fair share” of taxes in 2017 and 2018, questioned why the IRS let him off the hook, and said Congress should investigate. The only question is, why hasn’t the new Republican majority in the House begun doing exactly that?
Conservatives on Capitol Hill should be outraged by this latest development on several levels.
It demonstrates a double standard in which elite politicians get treated with kid gloves, allowing their mistakes (or malfeasance) to be swept under the rug. Does anyone in middle America believe that, if they had problems in prior years’ tax returns like the Bidens do, the IRS would fail to challenge their questionable behavior?
It also illustrates how the new IRS funding will be weaponized against ordinary Americans — including the middle class and small businesses — while Washington elites get off scot-free. And it shows the hypocrisy of both Biden and the Democrats in Congress; Biden is going around claiming Republicans want to undermine Medicare while going out of his way — using methods that tax experts believe violate IRS guidelines — to avoid paying Medicare taxes himself.
Newly armed with the House majority, Republicans in both chambers of Congress should absolutely investigate and demand answers. They should ask the Joint Committee on Taxation (JCT), Congress’s nonpartisan research arm, to determine whether the Bidens violated “reasonable compensation” guidelines for 2017 and 2018.
If JCT believes the Bidens did violate the IRS guidelines in 2017 and 2018, Congress should direct JCT to investigate the audit of the Bidens’ returns. Why did IRS employees not raise this issue? And, just for good measure, why did the IRS ignore my whistleblower complaint about this issue?
Republicans in the Senate should turn the pending nomination of Daniel Werfel as the next IRS commissioner into a referendum on how the service handled the Bidens’ returns. All Republicans should refuse to vote for the nominee unless and until the IRS provides more information about why the service did not investigate the Bidens’ 2017 and 2018 tax returns. If Republicans can persuade Senators like Joe Manchin, D-W.Va., or Kyrsten Sinema, I-Ariz., to vote against the nominee on those grounds, they could slow the nomination or stop it outright.
After completing these initial steps, the House majority can go further. For instance, it could compel the IRS employee who let the Bidens off the hook to testify publicly about those actions, or it could subpoena the records of the Bidens’ accountant, Walter Deyhle, to determine whether the accountant was acting in good faith or aggressively trying to exploit a loophole.
But at minimum, Republicans in Congress need to start asking some hard questions about why a politician with such questionable tax behavior got off scot-free. Conservative lawmakers have spent the past year railing against the new authorities and funding the IRS received in the Democrats’ spending spree last summer — it’s time for them to use this issue to take action on the matter.