Van Hollen, Warren, Whitehouse, Sanders Urge Treasury to Use Rulemaking Authority to Close Loopholes, Make Tax System Fairer

U.S. Senators Chris Van Hollen (D-Md.), Elizabeth Warren (D-Mass.), Sheldon Whitehouse (D-R.I.), and Bernie Sanders (I-Vt.) sent a letter to Treasury Secretary Janet Yellen and Internal Revenue Service (IRS) Commissioner Daniel Werfel, urging them to proactively use the Treasury Department’s rulemaking authority to close tax loopholes that create inconsistency and unfairness in the tax system and threaten the government’s ability to raise important revenue.

“We commend the Treasury Department for taking action to implement President Biden’s legislative achievements – including the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) – which lower costs and invest in America while making our tax code fairer. However, to build on these successes and continue to strengthen tax fairness, the Treasury Department should also use the full extent of its existing rulemaking authority and address inequities in implementation of other parts of the tax code,” wrote the senators.

In the letter, the senators note that the Biden administration has taken important actions through the Inflation Reduction Act to increase tax fairness and fight decades of corporate lobbying for tax cuts and loopholes – implementing a minimum federal income tax rate of 15 percent for all corporations that report at least $1 billion in profits, establishing a tax on corporate stock buybacks, and providing significant funding for the IRS to go after wealthy and corporate tax cheats. 

The senators also commended President Biden’s current proposals to make the wealthy and large corporations pay their fair share, including reversing the Trump administration's 2017 tax cuts, closing tax loopholes used by billionaires, and his leadership in establishing a 15 percent global minimum tax.

“These are important steps to ensure our tax code works for everyone, not just those at the top. But while Congressional Republicans continue to obstruct these important tax reforms and instead clamor for even more tax giveaways for the wealthy, the administration should focus on additional tools at its disposal to strengthen tax fairness. Administrative action is critical for implementation of new tax laws, but it should also be used to improve the implementation of previously-passed legislation and eliminate loopholes,” continued the senators. 

The senators suggested actions Treasury can take to improve tax fairness using existing statutory authority: 

• Regulations and other guidance to address abuses for ultra-wealthy families and dynastic wealth, including to police valuation games, perpetual dynasty trusts, and transfers of foreign assets
• Regulations and other guidance to ensure that large multinationals pay their fair share on the subsidiaries’ passive earnings
• Regulations and other guidance to ensure that fund managers and other business owners pay their fair share of payroll taxes

The senators concluded by noting that Treasury advancing tax fairness through its existing statutory rulemaking authority would build on the Biden administration’s strong history of using its executive authority to advance policies helping working families and increasing economic fairness, including providing relief to student borrowers, strengthening worker protections, banning junk fees, and lowering prescription drug costs. The senators are asking Treasury to provide their staff a briefing on its authority to act to make the tax system fairer and its rulemaking agenda for doing so by November 2, 2023.  

Full text of the letter can be found here and below.

Dear Secretary Yellen and Commissioner Werfel,

We write to urge the Treasury Department (Treasury, The Department) to proactively use its rulemaking authority to close tax loopholes that create inconsistency and unfairness in our tax system and threaten our government’s ability to raise important revenue.

We commend the Treasury Department for taking action to implement President Biden’s legislative achievements – including the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act – which lower costs and invest in America while making our tax code fairer. However, to build on these successes and continue to strengthen tax fairness, the Treasury Department should also use the full extent of its existing rulemaking authority and address inequities in implementation of other parts of the tax code. We urge the Biden Administration to lay out a clear, proactive regulatory agenda to advance his commitment to making the tax system fairer, beyond the critical work taking place to implement recently-enacted legislation.

The Biden Administration has taken important actions to increase tax fairness. For decades, thanks to intense corporate lobbying for tax cuts and loopholes, the largest and most profitable corporations have paid less in taxes than small business and middle-class families, or even paid nothing at all. With the IRA, President Biden and Congressional Democrats took a stand against this corporate welfare by requiring all corporations that report at least $1 billion in profits to pay a minimum federal income tax rate of 15 percent, establishing a tax on corporate stock buybacks, and providing significant funding for the Internal Revenue Service to go after wealthy and corporate tax cheats. As a result, this monumental legislation is already funding critical investments that will rebuild the country’s infrastructure and lower costs for American families. Clean energy tax credits passed in the IRA, for example, are cutting energy bills for families and igniting a clean energy boom that is on track to create over 1.5 million American jobs and significantly reduce greenhouse gas emissions. We appreciate the Treasury Department’s diligent work to implement the significant tax reforms in the IRA and other recent legislation.

In addition, the Biden Administration continues to advance bold tax proposals to ensure the wealthy and large corporations pay their fair share, including closing tax loopholes for billionaires, reversing the giveaways in the 2017 Trump tax cuts, and establishing a 15 percent global minimum tax to address giant multinationals who offshore jobs and profits.

These are important steps to ensure our tax code works for everyone, not just those at the top. But while Congressional Republicans continue to obstruct these important tax reforms and instead clamor for even more tax giveaways for the wealthy, the administration should focus on additional tools at its disposal to strengthen tax fairness. Administrative action is critical for implementation of new tax laws, but it should also be used to improve the implementation of previously-passed legislation and eliminate loopholes. For instance, after passage of the 2017 Trump tax cuts, corporate lobbyists swarmed Washington and secured “creative” corporate friendly regulations that lacked sound statutory basis and added new loopholes worth tens of billions of dollars for giant multinational corporations and their wealthy shareholders. The Treasury Department has clear authority to revisit prior rulemaking to ensure the law is correctly implemented and the wealthy do not receive further unmerited tax giveaways. Actions that the Treasury can take to improve tax fairness using its existing statutory authority include:

• Regulations and other guidance to address abuses for ultra-wealthy families and dynastic wealth, including to police valuation games, perpetual dynasty trusts, and transfers of foreign assets;
• Regulations and other guidance to ensure that large multinationals pay their fair share on the subsidiaries’ passive earnings; and
• Regulations and other guidance to ensure that fund managers and other business owners pay their fair share of payroll taxes.

We appreciate the Treasury Department’s work to implement recent tax legislation and to continue to advance new legislative tax proposals that address these loopholes and strengthen tax fairness; however, the agency can also help advance these goals through its existing statutory rulemaking authority. In doing so, the Department would build on the administration’s already strong history of using its executive authority to push policies that help American families and increase economic fairness, including providing relief to student borrowers, strengthening worker protections, banning junk fees, and lowering prescription drug costs. With Congressional Republicans determined to defend and expand tax breaks for the wealthy and large corporations, the Biden Administration must use all its existing statutory authority to make our tax code fairer. To ensure attention to this matter, we respectfully request that you provide us with a staff-level briefing on the Treasury’s authority to act to make the tax system fairer and its rulemaking agenda for doing so by November 2, 2023.

Sincerely,