As Republicans complain, IRS says it's looking into leak of data behind ProPublica article

The reason for concern is because taxpayer information is supposed to be confidential, and IRS employees face potential criminal charges if they or others are involved in releasing such data. 

As reported, ProPublica – a New York-based, non-profit investigative journalism organization – relied on IRS documents from the tax years 2014 through 2018 to show how little in the way of taxes such individuals as Amazon chief executive Jeff Bezos and Berkshire Hathaway chief executive Warren Buffett paid during this time period, in spite of having "income" that typically measured in the billions of dollars. According to the ProPublica, they and other wealthy Americans had taken advantage of loopholes in the U.S. tax code, such as by keeping their annual "income" to a minimum by holding their wealth instead in the form of homes, yachts, shares in companies that they run and so on. Wealth held in such a way is currently only potentially taxable at the point when the assets in which it's held are sold, and even then, if a gain is realized, there are other loopholes, according to ProPublica.  

In a letter to Rettig, dated June 9 – the day after the ProPublica article was published – Ways and Means Republican Leader Kevin Brady (R-Texas) and Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) said they had "serious concern about what appears to be an egregious and illegal breach of taxpayer privacy, stemming from the apparent leak of confidential taxpayer information to the media outlet ProPublica.

"The article states that 'ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years,' the two Republican congressmen added.

"ProPublica’s description of the data, and the nature of the information published, strongly suggests that the information could have only come from within the IRS.

"ProPublica’s use of tax data to effectively provide politicized advocacy for targeting classes of taxpayers for yet more IRS information scrutiny adds to concerns about the massive IRS data breach.

"Anyone accessing or releasing confidential personal tax information from the IRS without necessary approvals faces severe penalties and must be prosecuted."

They went on to note that the U.S. tax system "relies to a great extent on voluntary compliance, and the vast majority of Americans are compliant." 

For this reason, they continued a public violation of confidentiality, such as the ProPublica example, "does great damage to taxpayers’ confidence in the IRS and the tax system."

However, the IRS's Rettig assured lawmakers during a Senate Finance Committee hearing on June 8 that there were internal and external investigations beginning, with potential prosecutions to follow, the Wall Street Journal reported.

"I share the concerns of every American for the sensitive and private nature and confidential nature of the information that the IRS receives," he said during a Senate Finance Committee hearing that had been scheduled before the information was released. 

"Trust and cofidence in the Internal Revenue Service is sort of the bedrock of asking people and requiring people to provide financial information." 

The WSJ said ProPublica "didin't know the identity of its source and described the information it received as IRS data on thousands of people covering more than 15 years."

To read the WSJ article, click here.

As reported, the ProPublica report is being cited by certain Democrats, who are advocating a range of new taxes that would target wealthy American individuals and corporations, as evidence of the need for such measures. 

Massachusetts Sen. Elizabeth Warren, for example, who has spoken in the past about the "need" for a "wealth tax," reiterated this view in interviews with major U.S. media organizations after the ProPublica report was published. And on Twitter, she said: "Our tax system is rigged for billionaires who don't make their fortunes through income, like working families do. The evidence is abundantly clear: it is time for a #WealthTax in America to make the ultra-rich finally pay their fair share."

Another school of thought has been emerging, as a U.S. financial publication, Wealth Management, noted today, noted today, in an article that suggested that the ProPublica "attempt to reveal how the rich pay little in taxes might backfire". 

"In essence, the article is an 'Estate Planning for Dummies' of sorts," it points out.

"Arguably, the authors’ point could have been made without disclosing private Internal Revenue Service tax files in the name of “public interest” – the publication simply went for the wow factor by using actual numerical figures pulled from the files." 

The article then quotes Sandra Swirski, partner at Urban Swirski in Washington, DC, as saying, “If the intent of the ProPublica story was to further a political agenda, they might have shot themselves in the foot.”  

It then quotes Swirski as saying that the concern from Congress’s perspective is that an internal data leak is a bad look for the IRS at a critical time.