RELEASE: KHANNA INTRODUCES THE STOP CHEATERS ACT, MAKING ULTRA-RICH PAY THEIR FAIR SHARE
Washington, DC – Following the colossal Robinhood/GameStop fiscal chaos, Rep. Ro Khanna (CA-17), Deputy Whip of the Congressional Progressive Caucus & Member of the House Committee on Oversight, has introduced the Stop Corporations and Higher Earners from Avoiding Taxes and Enforce Rules Strictly (CHEATERS) Act to bring back tax enforcement on the ultra-rich.
“We know our tax system is broken, and it’s long past time we start fixing it,” said Rep. Ro Khanna. “Today’s hearing is just one example among thousands of the ways in which the ultra-wealthy play by different rules than the rest of us. Wall Street has been able to act like high rolling gamblers with almost zero consequences for far too long. Right now, the wealthiest one percent are responsible for roughly 70 percent of the ‘tax gap’—the difference between taxes owed and taxes paid. It’s time every American pay their fair share.”
Without raising taxes on anyone, the Stop CHEATERS Act would raise an estimated $1.2 trillion in revenue over 10 years, by investing $100 billion into the IRS over the next decade while imposing auditing and reporting requirements to prevent tax cheating from the wealthiest corporations and individuals. This proposal was recently laid out in a proposal in Tax Notes by Dr. Natasha Sarin, University of Pennsylvania Law Professor, Dr. Lawrence Summers, former Treasury Secretary, and Charles Rossotti, former IRS Commissioner.
Over the last 25 years, IRS enforcement resources have been cut 28 percent, while individual returns have increased 31 percent and business returns have increased 80 percent. Khanna’s bill would provide the IRS the funding it needs with strings attached, to ensure that additional money goes toward enforcement and audits of the ultra-wealthy and the wealthiest corporations in America.
The bill does not add any burdensome new requirements on small business owners, who would continue to prepare and pay their taxes like normal. Individuals with business income, or who own S-corporations or Partnerships, and who have total income in the top 3 percent of taxpayers will receive a new 1099 Form to prepare a more accurate tax return and ensure that business income for the wealthy isn’t hidden from the IRS.
"Thanks to over a decade of underfunding, the IRS in its current state is no match for the amount of criminal tax evasion being committed by the top 1%,” said Morris Pearl, Chair of Patriotic Millionaires. “We've almost reached the point where the rich and powerful can simply decide not to pay their taxes and face no consequences for their misbehavior. By giving the IRS the tools it needs to properly tackle wealthy criminal tax evasion, the Stop CHEATERS Act will finally hold millionaires and billionaires to the same standard as normal, hardworking taxpayers."
“IRS budget cuts have decimated the agency’s ability to ensure that wealthy individuals and large corporations are paying the taxes they owe, stacking the deck even more in favor of the wealthy and powerful and draining hundreds of billions of dollars in revenue,” said Seth Hanlon, Senior Fellow at the Center for American Progress. “Representative Khanna’s Stop CHEATERS Act provides additional resources and tools to crack down on tax dodging by millionaires and large corporations and enable the agency to better serve ordinary, honest taxpayers. It is an important step toward economic, social, and racial justice, and an economy that works for all Americans.”
"After years of Republican budget cuts and skewed priorities, the IRS now audits those who make $20,000 at about the same rate as the top 1%, even though the vast majority of unpaid taxes are attributable to wealthy tax cheats,” said Frank Clemente, Executive Director of Americans for Tax Fairness. “Rep. Khanna's bill would go a long way towards making things right. It mandates minimum audit levels for the wealthy and large corporations and gives the IRS the funding it needs to help make sure that those at the top are paying their fair share of taxes."
The Stop CHEATERS Act will unrig America’s tax system by giving the IRS the resources it needs to put an end to runaway tax evasion by the ultra-rich and largest corporations in the US. Specifically, it would:
- Provide $100B in additional funding to the IRS over 10 years, generating $1.2 Trillion in revenue. $70B would go toward enforcement, $20B toward taxpayer services, and $10B toward IT and operations support. Every $1 spent would generate more than $11 in greater tax collection. Most of this funding would go toward hiring and training specialized enforcement professionals who will be focused on tax compliance of those with gross income of $1 million or more.
- Improve IRS Technology by using $10B of the total $100B to upgrade decades-old systems. Pilot projects have suggested the return on investment from revenue gained could be as high as 50:1.
- Require IRS Audits of the Wealthiest Corporations and Individuals, including 95% of corporations with more than $20B in assets, 50% of individual tax returns with income over $10 million/year, and 20% of individual tax returns with income between $1-10 million/year.
- Prevent the ultra-Rich from hiding their income by requiring additional reporting for their “pass-through” businesses. Individuals whose taxable income is above $400,000 (top 3% of AGI) AND who have received additional income from sources not previously disclosed to the IRS would have to disclose their income on a new 1099 report. They would use this info to prepare an accurate tax return that discloses all of their income, much as other taxpayers use 1099’s and W-2’s.
- Mandate Regular Reporting to Congress to Enhance Oversight. IRS would be required to submit regular reports to Congress on its progress to recruit and retain auditors with the skills to audit high-income earners and report on revenue loss grouped by income levels and from offshore tax evasion.
- Require IRS Audits of the Wealthiest Corporations and Individuals, including 95% of corporations with more than $20B in assets, 50% of individual tax returns with income over $10 million/year, 20% of individual tax returns with income between $1-5 million/year, and 33% of individual tax returns with income between $5-10 million/year.
- Increased Penalties on Tax Fraud for Millionaires Cheating on their Taxes. Millionaires who falsify their tax returns would pay an additional penalty of 20-40% of the underpayment depending on their income.
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About the Office
Congressman Khanna represents the 17th District of California, which covers communities in Silicon Valley. Visit his website at khanna.house.gov. Follow him on Facebook, Instagram and Twitter @RepRoKhanna.