Urging Biden to Build Back (Ethics) Better
Newsletter 53: RDP staff pay more income taxes than POTUS
We, like you, have seen the story of the day. All we can say is, the title of our February piece -- “The Trump Administration’s Contemptuous, Pro-Corporate Response to Coronavirus” -- has only appeared more fitting with each passing day. For a more detailed accounting of what this all might mean, we encourage you to read David Dayen’s newest Unsanitized.
2020 (and potentially 2021)
Whether you actually subjected yourself to the torture of Tuesday night’s debate or not, it was impossible to escape talk of the spectacle the following day. And it was, likely not coincidentally, into this frothing stream of jokes, replays, reactions, and earnest horror, that the Biden team quietly released its much anticipated transition code of ethics. With so much other agitation, it hardly made a splash.
But the Revolving Door Project, as ever, was paying attention. And we’re here to tell you: folks, it’s not great.
Before we dive into our overall gloomy take, it’s important that we acknowledge one significant bright spot. The Biden transition’s code of ethics bars those who have “been leaders at fossil fuel or private prison companies” from serving on the team because they are not “aligned with [the Vice President’s] values and policy priorities.” That is a historic commitment worth celebrating. This seems to be the first time that the principles underlying the campaign season’s many finance pledges -- money and input from leaders’ of some industries corrupt the election and governing processes -- is being put into practice in real governance.
Sadly, while the transition team established a more stringent standard for two particular industries, it put forward a more lenient one for corporate America more broadly. Whereas both the Barack Obama and Hillary Clinton transition teams barred currently registered lobbyists from serving, Biden’s pledge merely asks that lobbyists’ participation be cleared by the General Counsel. This is being credulously reported as a lobbyist “ban,” but with no commitment to make transition team membership public (thus subjecting the granting of exceptions to public scrutiny), it seems to us that this is likely to be a rather porous prohibition.
Adding to our dismay is the fact that the transition team’s ethics arbiter is Jessica Hertz who, until recently, was a shadow lobbyist for Facebook. She joined the tech behemoth in the spring of 2018, just as Mark Zuckerberg was finally testifying before Congress about the Cambridge Analytica scandal and admitting that the breach actually affected 87 million users (i.e. 37 million more than originally reported). From that illustrious beginning, Hertz stuck with the company and defended it from regulatory scrutiny through countless data breaches, innumerable misinformation scandals, a handful of cases in which Zuckerberg allegedly lied to Congress, and a few more acquisitions. And of course God knows how many “Proud Boys” and QAnon adherents were recruited within Facebook’s nursery for right wing lunacy while Hertz was helping Facebook fend off long overdue small-d democratic scrutiny.
Needless to say, we’re not confident in Hertz’ ethical judgment at the transition team’s helm. (As an aside, while it’s not explicitly stated in the code of ethics, it seems safe to assume that Hertz will also be weighing on such questions as what constitutes a “fossil fuel company” and who qualifies as a “leader.” Trust us when we suggest that BigLaw legal alums like Hertz likely interpret those phrases differently than our compatriots in the environmental movement.)
As we have made crystal clear, this pales in comparison to the blatant corruption that permeates the Trump administration. And yet, it is precisely because of that horrifying example, that this underwhelming ethics plan seems like such a missed opportunity. After the fantastical display of the last few years, many people are ready for a clean break, not only from Trump but the status quo that preceded him. Instead, Biden offered a plan that is in most ways substantially similar to the ones his recent predecessors released and, in a few ways, actually weaker. On ethics in government, we urge Biden to Build Back Better.
Governance
It’s easy to forget, but before Tuesday night’s debate stole the show, all anyone was talking about was the New York Times’ story on Trump’s taxes. One major takeaway from the piece is that our system of tax enforcement is severely broken.
The New York Times’ reporters themselves did not explicitly point to the systemic failures that have underlain Trump’s extraordinary record avoiding taxation. But those failures were, nonetheless, burgeoning forth from between the lines at every one of the story’s many twists and turns. Without more information, it is impossible to say for certain if any one of Trump’s maneuvers crossed the (admittedly fuzzy) line from aggressive but legal avoidance into the realm of illegal evasion. Nonetheless, a preponderance of available evidence definitely suggests that they have on more than one occasion.
At the center of the whole saga is the most consequential, allegedly illegal maneuver: a $72 million refund for taxes paid between 2005 and 2008. That refund rested on Trump’s decision to renounce his stake in an Atlantic City casino and use the losses to retroactively reduce his tax bill. That strategy is only legal if the taxpayer receives nothing of value and Trump, it seems, got a 5 percent stake in the company that was formed after the casino’s bankruptcy, making him ineligible for the refund after all. This is the key question at the center of an IRS audit that has been ongoing for over ten years. If they determine that he claimed the refund fraudulently he will owe approximately $100 million (the original balance plus interest).
Why, you might ask, has the process been going on for so long? Simply put, the IRS is outgunned. When the ultra-wealthy face IRS scrutiny, they inevitably call upon teams of expensive lawyers to delay and challenge the IRS’ every move during the audit process. While exorbitant, these legal teams cost much less than actually having to pay the tax bill. With its budget and workforce shrinking, the IRS struggles to keep up. As these resource constraints have become more existential, the agency has simply stopped auditing as many ultra-wealthy taxpayers. (Did you get that, kids? Bullying works!)
Of course, the agency’s dire financial straits are no accident. The GOP has been gleefully attacking the IRS’ budget since the 1990s. Democrats have hardly mounted a rousing opposition to this assault, but maybe after witnessing the outrage over Trump’s tactics they will finally start to make it a priority?
Sadly, the IRS is far from the only agency that is crying out for an infusion of money and staff. As Revolving Door Project visiting fellow Yevgeny Shrago wrote for The American Prospect last week, staffing levels at the EPA have failed to keep pace with population growth. Worse still, thanks to the sequester and Trumpian attacks, the workforce has actually contracted over the past decade. Although the costs of this attrition are not as easy to measure as “fewer dollars spent on tax enforcement equals fewer dollars collected after tax audits,” look to the fact that an understaffed EPA failed to stop the Flint water crisis and it becomes clear that many in the country have paid a heavy price for this neglect.
Congressional Oversight
After years of waiting, we finally have some insight into Donald Trump’s taxes, no thanks whatsoever to Richie Neal. After having thoroughly and repeatedly whiffed on the simple task of requesting Trump’s returns, it would be the least Neal could do to actually pursue what the New York Times’ reporting revealed. We’re not under any illusions, however, that that will actually happen anytime soon.
Happily, the Ways and Means committee’s oversight subcommittee chair, Bill Pascrell, is going where Neal will not. He has already called on IRS commissioner Charles Rettig to testify. This is a good start, although we would suggest expanding the request to include the agency’s general counsel, Michael Desmond, who has not testified since his confirmation hearing (improbably enough, Desmond’s confirmation was once a higher priority for Trump than even installing his top henchman Bill Barr--if Desmond is more critical than Barr to Trump… the secrets he must be guarding!). We must understand what role both officials have played in this whole mess. What involvement have they had in the President’s supposedly annual audit? And what might they have done to interfere with the audit that pre-dated Trump’s election? Whether through partisan interference or plain negligence, these figures are in some way implicated in this story.
The committee must also train its sights on the systemic implications of the New York Times article. That must include a thorough investigation into the consequences of perpetually underfunding the IRS. But the Ways and Means committee should not just stick to understanding the scope of illegal tax evasion, it must also draw attention to the ways that the tax code has been written for people like Trump. Perhaps the mostshocking aspect of the Times’ story is how much of Trump’s behavior was likely legal. This line of inquiry is obviously a much tougher sell for members of Congress who helped write those unjust rules but, as this bombshell reporting reveals, it really can’t wait any longer.
Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week:
The Debate We Had vs. the Debate We Needed
Fed’s Lael Brainard Seen at Top of Biden’s Treasury Secretary List
The women Joe Biden could name to the Supreme Court
Biden will allow lobbyists to join transition team
Progressives embrace 'Settle for Biden' rallying cry, wait to fight him once elected
Biden wrestles with role K Street will play on transition team
Joe Biden hires Facebook executive Jessica Hertz for transition team
Biden transition debuts ethics rules
Biden transition elevates former Facebook exec as ethics arbiter
Despite President’s Comments, Transition Efforts Required By Law Are Underway
Amazon and Big Tech cozy up to Biden camp with cash and connections