In an exclusive story on Wednesday, the Wall Street Journal reported on the Trump administration’s plans to weaponize the IRS, much as he has weaponized the Department of Justice, against his perceived enemies. “Sweeping changes” are planned, the Journal reported, citing anonymous sources, “that would allow the agency to pursue criminal inquiries of left-leaning groups more easily.” > A senior IRS official involved in the effort has drawn up a list of potential > targets that includes major Democratic donors, some of the people said. A key aspect of the changes is giving President Donald Trump’s political appointees control over the IRS’s criminal investigations division. Gary Shapley, an adviser to Treasury Secretary Scott Bessent, will take the reins, per the Journal. In April, Shapley, a former IRS agent, was named acting commissioner at the behest of Elon Musk, and then fired days later after Bessent objected. He will now reportedly work to weaken the role of career IRS lawyers in investigations, paving the way for politically motivated probes of people and groups Trump and his allies dislike. Shapley is already collecting a target list of progressive donors and groups, the paper reported, including, not surprisingly, billionaire George Soros, that bogeyman of right-wing conservatives, and groups with ties to his Open Society Foundations. > “I’ve been speaking to friends…who are just absolutely appalled at at this, > and in shock that this would materialize.” “This is, without doubt, a very troubling development,” John Koskinen, who served as IRS commissioner under President Barack Obama and at the beginning of Trump’s first administration, told me in an email. Such investigations could be used not only in pursuit of criminal cases, but also as a rationale for yanking a progressive organization’s tax-exempt status, eliminating the ability of its donors to take a tax deduction—a potential death knell for any nonprofit group’s ability to survive and support its mission. (During the 1980s, the Reagan administration tried doing this to Mother Jones. Spoiler alert: We won.) Partisan IRS enforcement also happens to be illegal. “Section 7217 of the US Criminal Code prohibits the president or anyone in the White House from suggesting or ordering an IRS audit,” Koskinen says. “Putting administration loyalists in charge of the IRS generally and the criminal division in particular with the expressed aim of auditing individual taxpayers or trying to eliminate the tax exemption of nonprofits the administration does not approve of certainly violates the spirit if not the letter of the Criminal Code.” “We’ve been talking about this a lot,” says a corporate lawyer who specializes in criminal tax defense and asked for anonymity to protect his clients from potential retribution by the administration. “I’ve been speaking to friends of mine who used to work in the government, who believed in the system, and who are just absolutely appalled at at this, and in shock that this would materialize.” If that lawyer were defending one of these liberal entities—especially one that Trump and his minions have threatened in the past, like the Ford Foundation—he would make the case that the government was practicing selective prosecution: “There is a slim line of authority a defendant could use to argue here, and of course, the danger here is that the government will forum shop.” That is, the Justice Department would file the case in a judicial circuit whose judges were more likely to side with the administration. “But this seems like a situation,” the attorney adds, “where a lot of juries might rebel at what might be perceived as an overreach of government authority,” even if they believe the defendant is guilty: We’re going to find this person not guilty, and F you for bringing this case! Even if the group or individual prevails in court, however, the time and money required to defend against such actions is a major drain on resources—and a distraction from a group’s charitable mission. So even if a vindictive government loses in the courtroom, it still wins by harassing its foes. This whole episode, assuming the administration moves ahead with its plans, represents a wild about-face. After taking over the House in 2010, congressional Republicans were so incensed by the IRS’s investigation of sketchy tea party groups under Obama that they set about gutting the IRS’s enforcement budget, and launched a series of dog-and-pony House hearings to justify further cuts. Representing the government at one 2015 hearing was Koskinen, who had described the evisceration of his budget as “a tax cut for tax cheats.” Indeed, those cuts decimated the taxman’s ability to conduct audits of wealthy, sophisticated individuals and businesses. A Democratic-led Congress finally restored ample funding under President Joe Biden—an effort Republicans tried to defeat by spreading disinformation. But the GOP has since succeeded in rescinding the lion’s share, not to mention the Trump administration’s layoffs of virtually all IRS employees hired under Biden, which included lawyers capable of tackling those high-level audits. If the IRS goes after liberal groups as promised, another former agency higher-up told me, it would fall upon the Treasury Department’s Office of the Inspector General (TOIG) to investigate complaints and determine whether there was, in fact, improper politicization of tax enforcement. But in this era of rampant abnormality, it’s unclear that the normal oversight process will stand. Soon after taking office, Trump unceremoniously fired inspectors general throughout the government. On the list for dismissal was Loren Sciurba, a career deputy inspector general then standing in at TOIG, which didn’t have a confirmed chief. When that office reached out to the White House for clarification on its intent, noting that Sciurba wasn’t even in an “acting” role, it got no reply, and Sciurba apparently stayed on—he’s still listed as IG on the office’s website. (Sciurba did not respond to a message left for him at home.) Regardless of the outcome, the mere appearance that the IRS is willing to do the administration’s bidding “will undermine the average taxpayer’s confidence that the IRS is acting solely on the merits of the case rather than pursuing a political vendetta when they are contacted by the IRS,” Koskinen says.   “The fear generated by this action is totally inconsistent with the goal of having a government that follows the law rather than doing whatever it pleases or is asked to do by the president,” he continues. And the administration’s goal, per the Wall Street Journal, of trying “to remove to the extent possible the Chief Counsel’s office from criminal enforcement indicates that following the law is not a goal.”

This story was originally published by the Guardian and is reproduced here as part of the Climate Desk collaboration. Democratic lawmakers led by the Massachusetts senator Elizabeth Warren are pressing two energy companies about their efforts to “win a $1.1 billion tax loophole” in Donald Trump’s so-called One Big Beautiful Bill. The proposed exemption, which Senate Republicans inserted into their version of the reconciliation megabill this month, would exempt fossil fuel companies from paying a tax codified by Biden in 2022. “It’s an insult to working people to give oil companies a massive tax handout while slashing healthcare and raising energy prices for millions of families,” Warren, who was a major advocate for the tax, told the Guardian. > “Americans deserve to know if Big Oil paid for these Republicans in Congress > to carve out tax breaks just for them.” Enshrined within the Inflation Reduction Act, the corporate alternative minimum tax (CAMT) requires corporations with adjusted earnings over $1 billion to pay at least 15 percent of the profits they report to their shareholders, which are known as “book profits,” in taxes. The Senate Finance Committee’s proposal would shield domestic drillers from that tax by allowing companies to deduct certain drilling costs when calculating their income—a change that would allow some companies to pay zero dollars in federal taxes. Winning the tax tweak has been a major priority for fossil-fuel interests this year. The oil major ConocoPhillips and Denver-based petroleum company Ovintiv directly lobbied for the change, federal disclosures show. On Thursday morning, Warren, along with Senate Democratic colleagues Sheldon Whitehouse (Rhode Island), Ron Wyden (Oregon), and Minority Leader Chuck Schumer, sent letters to ConocoPhillips and Ovintiv pressing for answers on their role in shaping the CAMT change. “Your company’s lobbying disclosures explicitly prioritize this handout,” read the letters, which were shared exclusively with the Guardian. Both companies could “benefit tremendously from this provision,” read the letters, which are addressed to the ConocoPhillips CEO, Ryan Lance, and the Ovintiv CEO, Brendan McCracken, respectively. The Guardian has contacted ConocoPhillips and Ovintiv for comment. In their missives, the senators asked how much each company has spent on lobbying for the provision and will spend this year, how much each has donated to elected officials advocating for fossil fuel tax cuts, and how much of a reduction in taxes each company would see if the provision is finalized, requesting answers by July 9. “The rationale for CAMT was simple: for far too long, massive corporations had taken advantage of loopholes in the tax code to avoid paying their fair share, sometimes paying zero federal taxes despite earning billions in profits,” the signatories wrote. The proposed change, the letters note, closely resembles a bill introduced by the Oklahoma senator James Lankford this year, which would allow companies to subtract “intangible drilling and development costs” from their CAMT income calculations. Lankford accepted nearly $500,000 in donations from the fossil fuel sector between 2019 and 2024, making it his top source of industry funding. The Guardian has contacted the senator for comment. Deductions for intangible drilling costs—referring to costs incurred before drilling, such as for labor and equipment—have been on the books since 1913, making them the oldest, largest US fossil fuel subsidy, according to one report on the Lankford proposal. “Big Oil now wants this deduction to apply not only for purposes of their taxable income, but for book income purposes as well,” the letters say. “Put another way, if enacted, this provision would reduce or even eliminate tax liabilities for oil and gas companies under CAMT, allowing some to pay no federal income taxes whatsoever.” Other energy-related provisions in the draft reconciliation bill would phase out incentives for clean energy manufacturing and energy efficiency, causing utility bills to rise and jobs to be lost. This makes the tax break proposal “especially insulting,” says the letter, which was sent as temperatures spiked across much of the US. “Americans deserve to know if Big Oil paid for these Republicans in Congress to carve out tax breaks just for them,” said Warren. As drafted, the reconciliation bill would also jeopardize energy security by curbing the growth of renewable energy, Schumer told the Guardian. “The Republicans’ plan is a complete capitulation to Big Oil at the expense of clean energy and American families’ wallets,” Schumer said. “Republicans would rather kill over 800,000 good-paying jobs and send energy costs skyrocketing than stand up to their Big Oil billionaire buddies.”

This story was originally published by Grist and is reproduced here as part of the Climate Desk collaboration. People in affluent countries around the world are willing to tax themselves to address climate change and ease poverty. That idea defies conventional political wisdom, which typically holds that people hate taxes. It emerged in a survey of 40,680 people in 20 nations that found strong support for a carbon tax that would transfer wealth from the worst polluters to people in developing nations. Most of them support such policies even if it takes money out of their own pocket.  Adrian Fabre, lead author of the study published in Nature, wasn’t surprised by the results. He studies public attitudes toward climate policy at the International Center for Research on Environment and Development in Paris, and said this is the latest in a long line of studies showing that climate-related economic policies enjoy greater support, on the whole, than people assume. This study asked people how they’d feel about a global carbon tax: The larger an individual’s contribution to climate change, the more they’d pay. In exchange, everyone in the world would receive about $30 per month. “People with a carbon footprint larger than the world average would financially lose, and those with a carbon footprint lower than the world average would win,” Fabre said. The survey included 12 high-income countries and eight “middle-income” countries like Mexico, India, and Ukraine. The researchers surveyed at least 1,465 people in each nation over several weeks in May 2024. Japan showed the highest support, with 94 percent of respondents backing the idea of linking policies that combat inequality and climate change.  That said, the policy was least popular in the United States, where the average person is responsible for about 18 tons of CO2 a year. About half of Americans surveyed supported the tax. (Three in 4 Biden voters favored the idea. Among Trump voters, just 26 percent did. In contrast, support ran as high as 75 percent across the European Union, where per-capita emissions are 10 tons. “We found that people in high-income countries are willing to let go of some purchasing power if they can be sure that it solves climate change and global poverty,” Fabre said. Americans would end up foregoing about $85 a month, according to the study.  That’s not to say such policies would remain popular once enacted. Canada learned this lesson with its tax-and-dividend scheme, which levied a tax on fossil fuels and returned nearly all of that money to households—most of which ended up receiving more money in dividends than they lost to the tax. People supported the plan when the government adopted it in 2019. But support slid as fuel prices rose, and the government scrapped it earlier this year amid pressure from voters and the fossil fuel industry. “What matters ultimately is not the actual objective benefits that people receive,” said Matto Mildenberger, “but the perceived benefits that they think they are receiving.”  Mildenberger studies the political drivers of policy inaction at the University of California-Santa Barbara. In Canada’s case, the higher prices people paid at the gas pump weighed more heavily in their mind than the rebate they received later—especially when opponents of such a tax told them they were losing money. “One of the most critical factors in my mind that generates friction for these policies is interest group mobilization against them,” Mildenberger said. Regardless of whether carbon pricing is the answer to the world’s climate woes, the fact that people are more supportive of climate policies that also fight poverty is telling, he said.  “Inequality-reducing policies are a political winner, and integrating economic policy with climate policy will make climate policies more popular,” he said. “The public rewards policies that are like chewing gum and walking at the same time.” The question now is whether governments are listening. 

This story was originally published by Grist and is reproduced here as part of the Climate Desk collaboration. Dig down about a mile or two in parts of the United States and you’ll start to see the remains of an ancient ocean. The shells of long dead sea creatures are compressed into white limestone, surrounding brine aquifers with a higher salt content than the Atlantic Ocean.  Last summer, ExxonMobil sponsored weeklong camps to teach grade school students from Texas, Louisiana, and Mississippi about the virtues of these aquifers, specifically their ability to serve as carbon capture and sequestration wells, where oil, gas, and heavy industry can bury harmful emissions deep underground. In one exercise, students were given 20 minutes to build a model reservoir out of vegetable oil, Play-Doh, pasta, and uncooked beans. Whoever could keep the most vegetable oil (meant to represent liquified carbon dioxide) in their aquifer, won.  This kind of down-home carbon capture boosterism is a relatively new development for the oil and gas giant. Over recent years, ExxonMobil and other fossil fuel companies have spent millions lobbying for government support of what they see as industry-friendly green technology, most prominently carbon capture and storage, which many scientists and environmental activists have argued is ineffective and distracts from eliminating fossil fuel operations in the first place. According to Exxon’s website, it’s evidence that they are leading “the biggest energy transition in history.”  Now that Congress has turned its attention to rolling back government spending on renewable energy, it appears that most of the climate “solutions” being left off the chopping block are the ones favored by carbon-intensive companies like Exxon. Corporate tax breaks for carbon capture and storage, for instance, were one of the few things left untouched when House Republicans passed a budget bill on May 22 that effectively gutted the Inflation Reduction Act, the Biden administration’s signature climate legislation. What remained of the IRA’s clean energy tax credits were incentives for nuclear, so-called clean fuels like ethanol, and carbon capture. > “The argument is, ‘This is a win for the climate, it’s a win for energy > dominance.’ [But] it’s really a budget buster with no guardrails at all.”  When the IRA was passed in 2022, there was immediate backlash against the provisions for carbon capture. “Essentially, we, the taxpayers, are subsidizing a private sewer system for oil and gas,” said Sandra Steingraber, a senior scientist at the nonprofit Science and Environmental Health Network. The tax credits for nuclear power plants, which produce energy without emitting greenhouse gases, are meant to spur what President Donald Trump hopes will be an “energy renaissance,” bolstered by a flurry of pro-nuclear executive orders he issued a day after the budget bill cleared the House. Projects will be able to use the tax credits if they begin construction by 2031; wind and solar companies, however, will lose access to tax credits unless they begin construction within 60 days of Trump signing the bill, and are fully up and running by 2028. That the carbon capture tax credit was never in danger of being revoked is a testament to its importance to the oil and gas industry, said Jim Walsh, the policy director at the nonprofit Food and Water Watch. “The major beneficiaries of these tax credits are oil and gas companies and big agricultural interests.”  The carbon capture tax credit was first established in 2008, but the subsidies were more than doubled when it was tacked on to the IRA in order to get former senator Joe Manchin of West Virginia’s vote. Companies now receive $60 for every ton of CO2 captured and used to drive oil out of the ground (a process known as “enhanced oil recovery”) and up to $85 for a ton of CO2 that is permanently stored. As roughly 60 percent of captured CO2 in the United States is used for enhanced oil recovery, detractors see the tax credit as something of a devil’s bargain, a provision that props up an industry at taxpayer expense.  How much carbon is actually captured by these projects is also a matter of debate. The tax credit requires companies that claim it to self-report how much CO2 they inject to the Internal Revenue Service. The Environmental Protection Agency, meanwhile, is in charge of tracking leaks. There are tax penalties if captured carbon ends up leaking, but those penalties only apply if the leaks occur in the first three years after injection. Holding companies accountable is made more complicated by the fact that tax returns are confidential, and Walsh cautions that there is very little communication between the EPA and the IRS. Oversight is “very, very minimal,” added Anika Juhn, an energy data analyst at the Institute for Energy Economics and Financial Analysis, a research firm. “You can keep some really played out oil fields going for a long time, and you can get the public to pay for it,” said Carolyn Raffensberger, the executive director of the Science and Environmental Health Network, explaining the potential impact of the budget bill. “So the argument is, ‘This is a win for the climate, it’s a win for energy dominance.’ [But] it’s really a budget buster with no guardrails at all.”  Existing carbon-capture facilities have been plagued by technical and financial issues. The country’s first commercial carbon capture plant in Decatur, Illinois, sprung two leaks last year directly under Lake Decatur, which is the town’s main source of drinking water. When concentrated CO2 hits water it turns into carbonic acid, which then leaches heavy metals from rocks within the aquifer and poisons the water. Although a certain level of public health concerns come with many emerging technologies, critics point out that all of this risk is being taken for a technology that has not been proven to work at scale, and may actually increase emissions by incentivizing more oil and gas production. It could also strain the existing electrical grid—outfitting a natural gas or coal plant with carbon capture equipment can suck up about 15 to 25 percent of the plant’s power.  The tax credits exist “to pollute and confuse people,” said Mark Jacobsen, a professor of civil and environmental engineering at Stanford University, who has argued that there is essentially no reasonable use for carbon capture. They “increase people’s [energy] costs and do nothing for the climate.” But the technology does have its defenders among scientists. The 2022 report from the Intergovernmental Panel on Climate Change called an increase in carbon capture technology “unavoidable” if countries want to reach net-zero emissions. Jessie Stolark, the executive director of the Carbon Capture Coalition, an umbrella organization of fossil fuel companies, unions, and environmental groups, contends that arguments like Jacobsen’s unnecessarily set the technology against renewables. “We need all the solutions in the toolkit,” she said. “We’re not saying don’t deploy these other technologies. We see this very much as a complementary and supportive piece in the broader decarbonization toolkit.”  Stolark said that carbon capture didn’t make it out of the budget process entirely unscathed, as the bill specified that companies could no longer sell carbon capture tax credits. So-called “transferability”—the ability to sell these tax credits on the open market—has been invaluable to small energy startups that have struggled to secure financing in their early stages, according to Stolark. The Carbon Capture Coalition is urging lawmakers to restore transferability now that the bill has moved from the House to the Senate. Still, the kinds of companies likely to claim carbon capture tax credits—often major players in oil and gas, ammonia, steel, and other heavy industries—are less likely to rely on transferability than more modest companies (often providers of renewable energy), whose smaller tax bills makes it harder for them to realize the value of their respective tax credits.  “A lot of the factories, the power plants, the industrial facilities deploying within the next ten years or so, are expected to be these really big [facilities] with the big tax burdens,” said Dan O’Brien, a senior modeling analyst at Energy Innovations, a clean energy think tank based in San Francisco. “They’re not the type of smaller producers—like small solar companies—that are reliant on transferability in order to monetize the tax credit.”  To some observers, keeping the carbon capture credit looks like a flagrant giveaway to the oil and gas industry. Juhn estimated that the credit could end up costing taxpayers more than $800 billion by 2040. Given the House bill’s aggressive cuts to social programs like Medicaid and the Supplemental Nutrition Assistance Program, Juhn finds the carbon capture credit offensive. “When we look at these other programs, where we’re nickel and diming benefits to folks that could really use them, what does that mean? It’s gross.” 

On Friday evening, Moody’s downgraded the United States’ overall credit-rating—from the highest level of AAA—to one notch lower, AA1, based on years of rising debt and Donald Trump’s tax cut plan, which the non-partisan Committee for a Responsible Budget has calculated could add $2.5 trillion more in debt. The rating is important because it is a marker of how stable the US economy is, and how likely the US is to be able to pay back its debt to lenders. Moody’s is the last of the three major credit rating agencies to lower the U.S. rating—Fitch Ratings and S&P Global Ratings lowered theirs in 2023 and 2011, respectively. On one level, the change is monumental: Since 1919 Moody’s has consistently assigned the U.S. government it’s highest credit rating and has held the U.S. as a gold standard. Any downgrading is a major symbol that global investors no longer trust the United States as much as they have for more than 100 years. Practically, the change doesn’t mean much in terms of the country’s ability to borrow money—with a rating off AA1, the U.S. is still miles above anything resembling a credit risk for most lenders. However, the most concrete implications are likely to be for consumers: While lenders will still offer the US loans, they may ask for higher returns, which will likely get passed down the line into the consumer lending markets. That could mean higher interest rates for everyday people trying to borrow money for homes, cars, and more. According to Moody’s, the rating was downgraded for a simple reason: Congress keeps cutting taxes, which means the government is bringing in less money but still spending heavily. “Over more than a decade, U.S. federal debt has risen sharply due to continuous fiscal deficits. During that time, federal spending has increased while tax cuts have reduced government revenues,” Moody’s statement reads. “As deficits and debt have grown, and interest rates have risen, interest payments on government debt have increased markedly.” Moody’s cited the administration’s plans to extend it’s 2017 tax breaks even further while continuing to spend as reason for the downgrade. The silver lining, if there is one, is that Moody’s said the U.S. economy is unique in its power and resilience, and did not see any changes to the U.S. system of checks and balances. The Trump administration’s initial response suggested they weren’t taking the downgrade very seriously. Steven Cheung, a White House spokesman, responded by posting a rant on X, assailing an analyst for Moody’s Analytics who is frequently critical of Trump. > Mark Zandi, the economist for Moody’s, is an Obama advisor and Clinton donor > who has been a Never Trumper since 2016. Nobody takes his “analysis” > seriously. He has been proven wrong time and time again. > https://t.co/l1dUFM5BRY > > — Steven Cheung (@StevenCheung47) May 16, 2025 Cheung was apparently unaware that Moody’s Analytics is a separate company from the credit rating agency and Zandi had no involvement with the downgrade.

The “nonprofit killer” is back—this time tucked into congressional Republicans’ aggressive new tax proposal, which they’ve dubbed the “One, Big, Beautiful Bill.” For those who forgot: In November, the House of Representatives passed HR 9495, or the “Stop Terror Financing and Tax Penalties on American Hostages Act,” which would give the Secretary of the Treasury the power to strip a nonprofit’s tax-exempt status on the suspicion of giving or receiving any backing from a ‘terrorist supporting’ group or person—as defined by the White House. The legislation started with widespread bipartisan support that waned as experts and constituents voiced outrage; it waned further after Donald Trump’s election. Rep. Lloyd Doggett (D-Texas), initially a backer, is one of dozens of House Democrats who flipped their vote. Doggett, as Sophie Hurwitz reported for Mother Jones, was less concerned about the bill’s text than the way Donald Trump was likely to use it: > One of the organizations whose nonprofit status Trump wants to terminate, > Doggett said, “has protested one of my speeches.” > > “Protests are inconvenient,” he said. “The one I had was inconvenient. [But] > America is stronger when we protect dissent in all its forms, as long as it is > done in a proper way.” > > > “There has been much made in this debate of the fact that some of us have been > switching positions,” he said. “Well, we listen to our constituents.” Kia Hamadanchy, the ACLU’s senior policy counsel, says the measure grants the Secretary of the Treasury “broad and unilateral discretion” to strip organizations of their tax-exempt status “without any due process”—or any evidence beyond the “accusation that they support terrorism.” Hamadanchy calls that an authority that no administration of any party should have, one that “could be weaponized against people across the political spectrum,” particularly by the Trump administration. “They’ve already shown,” Hamadanchy says, “that they want to weaponize things like nonprofit status.” Nonprofits are taking note, too. Dom Kelly, who heads the disability rights group New Disabled South, characterized the legislation as “a continued attempt to silence those who work in opposition to the Trump administration and the right’s extreme agenda.” The bill’s vague, expansive language, Kelly explains, “means that this administration can go after organizations for any reason they want.” Still, Kelly isn’t backing down: “If they come for us,” they said, “we will fight them with everything we’ve got.” For most nonprofits, especially smaller ones, that fight won’t be easy. “Even having to litigate is a huge mess, takes time, causes all sorts of headaches,” Hamadanchy says, offering the example of universities targeted by the Trump administration over student protests. > “If they come for us, we will fight them with everything we’ve got.” “A lot of people in Congress conflated student protesters with Hamas, without really any evidence,” he says. “You can imagine a world where the Trump administration tells a university: ‘You let these people protest on your campus? You are providing material support to Hamas.'” Indeed, the Trump administration has already stripped Columbia’s research funding to the tune of $400 million, ostensibly motivated by allegations of antisemitism following pro-Palestine protests last year. Harvard University has lost more than $2.5 billion in federal support since April, when it balked at Trump’s demands—again largely citing antisemitism claims—for sweeping power over its campus, curriculum, and personnel. Hamadanchy doesn’t think every application of the bill will survive legal challenges, but harm would be done simply by its becoming law: “It basically serves a larger purpose,” he says, “of chilling speech.”

One particularly surreal aspect of Donald Trump threatening the tax-exempt status of Harvard, one of the nation’s oldest and foremost educational institutions—and excluding it from federal research funding for refusing to heed the administration’s oversight demands—is the fact that even some of the nation’s most hateful and antidemocratic entities qualify as tax-exempt charities. As I explain in my book, Jackpot: > A 501(c)(3) nonprofit corporation is broadly defined as an organization with > religious, charitable, scientific, literary, or educational purposes. There > are charities dedicated to “fostering appreciation” for camellias and > “promoting the medium of American mime.” (The latter, last I checked, had more > than $6 million in assets.) In 2017, according to one investigative outlet, > the National Christian Foundation—one of the largest faith-based donor- > advised funds—distributed more than $19 million of its donors’ money to > tax-exempt charities that were anti-LGBTQ, anti-Muslim, and anti-immigrant. > > Among the NCF’s leading recipients is Alliance Defending Freedom, a network of > Christian lawyers that the Southern Poverty Law Center has designated a hate > group for its antigay activities. The Alliance collects tens of millions in > tax-exempt donations each year. It has expressed support for foreign laws > criminalizing sodomy, represented business owners in court who refuse to serve > LGBTQ customers, opposed transgender troops, and even disputed that the 1998 > murder of Matthew Shepard, a young gay man, in Laramie, Wyoming, was a hate > crime. I bring this all up because acting US Attorney Ed Martin, Trump’s ill-fated pick for permanent US Attorney for the Washington, DC, district, apparently had a cozy relationship with the white nationalist group VDare. According to a 2024 report from Media Matters, Martin has called himself a “big admirer” of the nonprofit group. (His nomination appears doomed, albeit for unrelated reasons.) Media Matters wrote: > Martin also repeatedly hosted VDare leader and white nationalist Peter > Brimelow on his now-defunct radio program The Ed Martin Movement. During an > episode that aired on November 29, 2018, Martin praised Brimelow as “a guy > worth listening to” and told him, “I’m always glad to give you a voice, you’re > always welcome here.” VDare, which suspended its activities last July, was an active tax-exempt charity during Trump’s first term. In 2018, too, the Trump administration reinstated the tax-exempt status of white nationalist Richard Spencer‘s National Policy Institute, which had its status revoked automatically for failing to file mandatory 990 tax returns for three years running. It is telling that a president who never questioned the tax-exempt status of white nationalist groups is now suggesting his IRS might take a hard look at Harvard’s. Of course, even that simple suggestion would seem to violate federal law, which states explicitly (emphasis mine): “It shall be unlawful for any applicable person”—the president, vice president, any of their staffers, or any cabinet member—”to request, directly or indirectly, any officer or employee of the Internal Revenue Service to conduct or terminate an audit or other investigation of any particular taxpayer with respect to the tax liability of such taxpayer.” (The law was passed post-Watergate to ensure that no administration could weaponize the IRS as President Richard Nixon sought to do.) Even if Harvard has some issues to work out related to alleged antisemitism, US taxpayers continue to subsidize nonprofits that exist largely to stoke anti-immigrant and religious hatred. If we are compelled to support these kinds of groups in the name of “education,” we’d best be compelled to also support legitimate institutions of higher learning. As I wrote in the book: > Dylann Roof, the white supremacist who slaughtered those Black parishioners in > Charleston, wrote that he was motivated by “black on white” crime propaganda > he discovered on the website of the nonprofit Council of Conservative > Citizens, one of whose former board members, a self-described “race realist” > named Jared Taylor, runs the like-minded New Century Foundation, another > tax-exempt nonprofit. VDare Foundation, a vehemently anti-immigrant journalism > nonprofit, has collected more than $5 million over the past decade. Its > website features headlines such as “Milwaukee Shooting: Six Out of Eleven > Mass Shootings in 86% White Wisconsin Are by Minorities or Immigrants” and > “NYPD Releases Pic of Suspect in Tessa Majors Killing. Guess What? He’s > Black.”  Taylor’s New Century Foundation also appears to be inactive these days, and an entirely unrelated nonprofit exists under the same name. When I reached Taylor by phone circa 2020, he told me he disagreed with Roof’s motive of starting a race war (“that’s immoral”), but said “his grievances were understandable.” Taylor also disputed the Southern Poverty Law Center’s characterization of the Council of Conservative Citizens and New Century as white nationalists, saying, “I call myself a ‘race realist’ and a “white advocate.’ ” Alas, our current, Orwellian, administration—with its nasty scapegoating of immigrants and clumsy attempts to erase the historical contributions of women, LGBTQ people, and nonwhites from the public commons under the guise of eliminating “DEI”—has proved itself a “white advocate” at the expense of just about everyone else.

The Internal Revenue Service, as the New York Times reported this week, is mulling Donald Trump’s request to revoke the tax-exempt status of Harvard University after Harvard refused to cave in to the president’s demands for a sweeping right-wing overhaul. The Times also reported, just yesterday, that a Treasury official had emailed a high-level official at IRS to find out whether Mike Lindell, a wealthy supporter of the president and spreader of Trump’s Big Lie, was “inappropriately targeted” for an audit. John Koskinen is appalled. As the tax agency’s commissioner from 2013 through 2017, he understands, more than most, the importance of an independent IRS, and that no president has the right to weaponize the agency to curry favor or settle grudges. We haven’t witnessed this sort of nonsense since, well, Richard Nixon—and look how well that worked out for him. > “This has to be the worst time for the agency I can remember.” Harvard was just the latest salvo. Republicans have waged an all-out war on the IRS since 1994, calling for its abolition and slashing its budgets—which is not how you behave if you are legitimately concerned about deficits and the national debt. Koskinen, appointed by President Barack Obama, has been hauled before Congress to defend his agency and its employees against an onslaught of tea party–fueled attacks. House Republicans even tried to impeach him, albeit unsuccessfully. But what he’s seeing now is on another level. Trump is gutting the IRS workforce without congressional consent, and has grown increasingly brazen in his attempts to have the agency do his bidding. IRS is now sharing taxpayer information with Homeland Security to aid in Trump’s deportation efforts, a breach of privacy and independence Koskinen never would have abided. Now 85 and (finally) retired—”I’ve flunked retirement a couple times,” he says—Koskinen was appointed commissioner at a time when federal agencies were, for the most part, still run by competent and experienced people, and not, to quote Thomas Friedman, “knuckleheads.” Over a long and illustrious career, he has served under mayors, senators, judges, and presidents. He was a high level staffer for the Kerner Commission, ran the US Soccer Foundation, and chaired the 1994 World Cup host committee. He held a high position in President Bill Clinton’s Office of Management and Budget and chaired Clinton’s council on the “Y2K problem,” so successfully that nothing happened—which was the point. As the deputy city administrator of Washington, DC, from 2000 to 2003, “I was there for 9/11, for anthrax, for the sniper,” he told me. “I thought, ‘People are gonna think this guy’s got a black cloud, like Joe Btfsplk in the old Andy Capp comic.'” He also spent decades in the private sector as a fixer, working to get tottering entities such as the Penn Central company, Levitt and Sons, and the Teamsters Pension Fund, back on track. One of his retirement “flunks” came about in 2009, when he was tapped to chair Freddie Mac—in the midst of a global mortage meltdown. (Black cloud indeed.) As for who runs the IRS now, well, what day is it? Commissioner Daniel Werfel, a Biden appointee, stepped down shortly after Trump’s inauguration and well before the end of his five-year term. To replace him, Trump tapped Billy Long, a former congressman from Missouri who has yet to be confirmed by the Senate. Acting Commissioner Doug O’Donnell, a career employee, quit after about a month on the job, when he was asked to share IRS data with Elon Musk’s so-called Department of Government Efficiency. He was replaced by Melanie Krause, who pledged to cooperate with DOGE, only to resign after Homeland got its mitts on private taxpayer information—a development that prompted the exodus of a number of other IRS officials with “chief” in their titles, who probably didn’t want to be associated with whatever came next. The speed and scope of the staff cuts, tens of thousands to date, could well make the next tax season a “disaster,” Koskinen says. And while Republicans often say that the government should be run like a business, what company in its right mind would deliberately alienate customers, encourage cheating, and undermine its own ability to collect revenue? “A lot of these people come out of the private sector; you would think they would understand that,” Koskinen says. “Instead, they are barreling ahead. And the only explanation is that they think it’ll be good for them—they won’t get audited. It really is nonsensical if you’re concerned about the deficit.” This interview has been edited for length and clarity. The IRS has been under siege for decades, including on your watch. Does what’s happening now feel fundamentally different? Yes, this feels more like a total frontal attack, and not only the budget—it’s the attempt to get access to protected data. And from the president suggesting that Harvard’s tax-exempt status ought to be reviewed, it’s just a small step to start ordering audits, even though that’s illegal, and we start moving back toward the Nixon “enemies list.” It also seems that this is an attempt to make the IRS less effective. And this is one federal agency with a positive return on investment. It’s never been disputed that if you give money to the IRS, you get more money in return. It goes the other way, too. If you take money away from the IRS, you lose multiples of whatever it is you think you’re saving. In my days, even the Freedom Caucus never disagreed with that. The New York Times reports that about 22,000 IRS employees accepted a buyout. What happens when you eliminate so many people so quickly? I am confident that includes a significant number of very experienced managers and executives. Over 30 percent of the IRS has always been eligible for retirement, but they don’t retire, because they’re committed to the mission. When, literally overnight, you lose that many people, you’re losing leadership. You’re losing guidance and mentoring. You really are disabling the IRS. What people don’t understand is the IRS starts preparing for the next tax season in June or July. There’s a tremendous amount of reprogramming that has to go on. And then you have to make sure it works. And the underfunding? A lot of that money is coming out of IT. What do the mass resignations tell you about agency morale? Well, it has to be a problem. My theory has always been, if you want to know what’s going on in an organization, go talk to the people doing the work. When I was there, I went to two large IRS offices a week for three and a half months, holding town halls and lunches, and was just delighted with the level of [commitment]. > “If the money is short, that’ll be a good reason to cut social programs—’We > just don’t have the funds.‘” The IRS was under tea party attack and people’s primary concern—these were employees, not managers—was how to get the work done with fewer people. We lost about 20,000 in the four years I was there because of the budget cuts, but that happened over time; we just didn’t replace people who left. Now, with the rattling of the cage that’s gone on, and the demeaning of government workers and attacks on the IRS, it’s not nearly as much fun to work there. This has to be the worst time for the agency I can remember. Do you think Trump’s people will succeed in making the IRS a tool of his retribution? They’re trying. I mean, they started out wanting access to all sorts of information about taxpayers, and they got pushback from the interim commissioners. So then we got [the shareable information] down to a narrower category. But even that is a broad category, and nobody seems to have paid attention to the documents: It’s criminal prosecutions and those under criminal investigation—without any explanation of what that means or how they’re measuring it. Everybody is subject to being under criminal investigation as a way of getting access to your tax materials. As for Harvard, that’s just the first step. This is an administration priding itself on revenge, and the FBI director and the Department of Justice people are out there saying, in effect, “We’re going to get our opponents.” They’re talking about investigating every member of Congress on the January 6 panel. It’s one thing to have the agency not collect taxes well enough. It’s another if the administration doesn’t like me or my views, so the next thing I know I could be audited. And even if I don’t have any problem, being audited takes time and money, and you need a CPA or a lawyer or somebody to represent you. They’ll make your life hell. Yeah, and the threats to law firms and the press will be designed to intimidate people. You know George Orwell, right? You intimidate lawyers, you intimidate the press, and you intimidate universities. You try to make it so people do what you want, so their view of life is yours. Then the administration can put out facts and information and there’s nobody to disagree. The head of HHS can say, well, we really do think autism is caused by vaccines, and people will say, Gee, if I object, I’ll lose my contract or grant or I’ll get audited. This is not beanbag anymore. What do you mean? This is not kid’s play. This is serious—a threat to the country and the democracy as we know it. What do you hear from current IRS staffers? It’s interesting. I hear from almost no one because they are so ingrained to protect taxpayers and their returns and the agency. Even at the executive level—and I know a lot of those people extremely well—they’ve all been very careful not to send me emails or complain or reveal anything. It’s to their great credit. Michael Lewis just published a book called Who Is Government? Hes says that’s a default trait of federal employees: They aren’t clock-watchers. They tend to work obsessively, for low pay, and never seek credit. It’s just so different from the picture painted by guys like Elon Musk and Russell Vought. And Republican lawmakers, too. When Biden was working to boost IRS funding, they unleashed a propaganda campaign falsely claiming the agency would hire 87,000 new agents—basically jack-booted thugs—to harass ordinary people and small business owners. They were going to come and get everybody! Yeah, it was just a stunning exaggeration. The overwhelming majority of the layoffs to date have been probationary employees—Biden hires. Many of them actually had special skills, right? Yes. They were easier to terminate. But probationary sounds like they’re just out of college. A lot of them came with very sophisticated backgrounds and experience in technology and tax law management. They weren’t 25-year-olds. They were filling important positions. When you lose them, that’s not good. The Washington Post said almost half of the planned job cuts would come from the compliance division, which oversees audits and criminal investigations into tax fraud and money laundering. What message does that send? As I used to say, “It’s a tax cut for tax cheats.” I mean, you encourage people not to file, because they’re not going to get caught. You encourage people to take deductions they aren’t eligible for—they figure, well, the worst that happens if I ever get audited, which I probably won’t, is they charge me interest or a penalty. About 85 percent of Americans try to be compliant, because if you aren’t, the IRS will get you. If word starts to spread—and it will spread first among wealthy people with sophisticated CPAs and attorneys—that the audit rate has gone down by 80 percent, a lot of people are going to try to take advantage of that. Say more about who benefits, and who pays the price. When revenue agents and revenue officers were cut by 30 percent or 35 percent while I was there, large partnerships basically didn’t get audited. Everybody knew who was involved in those: usually wealthy investors and Wall Street types advised by sophisticated counsel. And those people knew the audit rate had to be cut. You can’t just go after rich people—even though you’d get more money that way—because you need to encourage compliance across the board. So ultimately you lose billions of dollars in collections. Then at some point the politicians raise taxes, and the compliant people pay for the taxes not paid by wealthy people. Or…the politicians use the lower revenues to justify more budget cuts. That exactly! If the money is short, that’ll be a good reason to cut social programs—we just don’t have the funds. Do you think that’s the administration’s end game? I don’t know whether they started out that way, but that’s clearly where it’s going to end up. A number of these people, historically, have thought the best government is no government. Is there anything about these cuts you’ve found surprising? The scope of them has surprised me. The irony is, those of us who have spent a lot of time in the government would say you can always find—and it’s important!—ways to be efficient and effective. The administration has missed a great opportunity to do that appropriately. Having spent 20 years doing turnarounds of large, failed enterprises, the last thing I ever thought was, well, let’s starve the revenue arm. The salespeople—cut them back! No, your goal was to maximize revenues to give them the running room to do what was needed. The IRS is easy to scapegoat, because Americans are kind of conditioned to hate the agency and hate paying taxes. What would you say to change their minds? I would say the vast majority of people rely on social programs, some of which they don’t even realize are funded by the federal government. All of those are at risk. When you cut park rangers, suddenly there are long lines trying to get into a park. People are gonna say, “I didn’t mean get rid of a program I rely on.” > “If you cut the IRS by 40 percent, you’re at a minimum going to cut revenue > collection by $500 billion a year.” At the IRS, my approach was to be available and transparent and to try to get people to understand that we spent a lot of time and money trying to help people be compliant. If you had financial difficulties, we could arrange payment systems. You could do offers and compromise. If you’re trying to be compliant, I used to say, we’re here to help you. If you’re trying to cheat or not file or not pay your fair share, then I’m happy to chase you to the ends of the Earth. I would hope that more people would understand you’ve got to protect the agency, because it’s how the government funds itself and it’s a way of making sure everybody pays their fair share. I don’t want to pay my fair share and have rich guys get away with not paying. Speaking of helping people, the IRS recently rolled out free online tax filing. But now Trump, who took a $1 million inaugural donation from Intuit, which makes the TurboTax software, reportedly aims to kill it. DirectFile is a good example of the government providing an important service, allowing people to file at no cost. Since most people aren’t thrilled about paying taxes, making it as easy and inexpensive for them as possible was a great goal. It’s a shame that this option has been arbitrarily taken away from them.   Another blow for compliance. Even when they get through disabling all these agencies, they won’t have dealt with the deficit problem significantly, especially if they’re collecting less revenues. Just the undocumented immigrants pay almost $70 billion a year in taxes—or they did. Now that Homeland Security has negotiated [with IRS] to find out who they are, where they live, the estimate is half of that money is not going to get paid. And that’s a tiny slice of what won’t be coming in. Yes, there are estimates that, if you cut the IRS by 40 percent, you’re at a minimum going to cut revenue collection capacity by 10 percent—$500 billion a year. And encourage cheating. Yeah. There are people today who don’t file because they think the chances getting caught haven’t been large for the last 15 or 20 years. So, does it worry you to see the DOGE kids mucking around in IRS systems? It certainly does. These are people have no idea about how the place runs. Somebody told me that they had decided on Monday, the day before the tax filing deadline, to fiddle around with the website, and parts of it either had bad spelling or didn’t work. Who in their right mind would touch anything in the last week—or month—before the filing season ends? You really are fixing the plane while you’re flying it. You can’t just shut down for a couple months and say nobody can file. Filing season ended on Tuesday, but a lot of people filed extensions and there’ll be returns, and the system will have to operate through October 15—and by then they’ll be testing the system to get ready for January 1. After cutting so many people, I gather it would take quite a while to put things right. Yes. Part of the problem is Trump’s people have no background in government and how things operate, and they tend to come from the private sector. They think, Well, they’re all fungible. We’ll cut them and then, if we need them, we’ll hire some new people back. But the level of complexity of these programs and agencies is such that you just can’t hire people off the street who, like people at the IRS, understand the IT systems and the processes for dealing with complicated tax situations and dealing with things internationally. When you lose experienced people, you can’t replace them overnight. They are going to destroy the efficiency of agencies, and it’ll take years to build it back. Too bad we don’t all know someone who works there, to put a face on the IRS. When I was talking to these thousands of employees, I’d say I understand how, when people ask what you do, you say, “I work for the government.” And where in the government? “Well, the Treasury Department.” And where in the Treasury Department? “Well, I actually work for the IRS.” > “They are going to destroy the efficiency of agencies, and it’ll take years to > build it back.” I’m not saying you should wear an IRS hat to the grocery store, but people know you personally through the PTA or church or the soccer team, and they know you’re a good person. And if you work for the IRS and like it, it must be okay. We needed 80,000 ambassadors to say, “I work at the IRS and I love it!” Reminds me how Harvard people would always say, Oh, I went to college in Boston. Well, I went to law school at Yale. I’ve never been a Harvard guy, but you’ve got to hand it to them that they took the position they did. It’s like with the law firms caving. There’s strength in numbers, and if you get picked off one at a time, it’s hard to fight back.

This story was originally published by Inside Climate News and is reproduced here as part of the Climate Desk collaboration. If the only things certain in life are death and taxes, you might say corporate lobbyists spend much of their time trying to avoid at least one of the two. Few industries understand this better than oil and gas, which has benefited for at least a century from some tax rules that save them billions of dollars in payments annually. The world’s nations have agreed to phase out fossil fuel subsidies globally. The Biden administration pledged to axe them domestically. Still, they persist. Now, with Republicans in Congress and the Trump administration determined to enact $4.5 trillion in tax cuts and desperately looking for revenue and spending cuts to pay for them, some environmental advocacy groups are highlighting the tax benefits that flow to one of the world’s most profitable industries, which the Biden administration estimated at $110 billion over the decade ending in 2034. The oil and gas industry, meanwhile, is playing both offense and defense, trying to maintain the benefits it has while working to enact at least one new one, which would shield some oil companies from a tax enacted as part of the Inflation Reduction Act of 2022. > “They make huge payments to governments around the world, including to some in > some pretty shady places.” One of the biggest sources of new revenue from the IRA was a corporate alternative minimum tax, which was meant to prevent companies that reported large profits to investors from using loopholes to pay little to no taxes. The minimum tax applies to all industries. For oil and gas, it has hit some of the large independent drillers in particular (as opposed to the “integrated” majors like ExxonMobil and Chevron). The money involved is significant: According to a new analysis by United to End Polluter Handouts, a coalition of environmental and progressive groups, at least three companies—EOG Resources, APA Corp. and Ovintiv—reported paying nearly $200 million collectively to the Treasury under the minimum tax since it was enacted in 2022.  Sen. James Lankford (R-OK) has introduced a bill that would change the calculus by allowing oil companies to deduct some of their largest expenses against the minimum tax. Lankford’s bill is included as a priority in the policy blueprint of the American Exploration & Production Council, which represents large independent oil and gas companies.  Lukas Shankar-Ross, an author of the new minimum-tax analysis and deputy director of the climate and energy justice program at Friends of the Earth, pointed out that the Lankford bill would either deepen deficits or force more cuts to programs like Medicaid or other assistance for low-income Americans. “I think it is as shameful a thing for me to imagine as is possible now,” Shankar-Ross said. The oil and gas sector is the top industry contributor to Lankford’s campaigns in recent years, giving more than $546,000 since 2019, according to OpenSecrets.  A spokesperson for Lankford said, “Promoting American energy independence is a reversal of the Biden Administration’s policies. Strong domestic energy production makes us less reliant on adversaries, and empowering oil and gas producers makes the United States stronger. Nobody is looking at cutting Medicaid benefits in order to pay for tax cuts, but fraud, waste, and abuse in the program should be examined.” When it comes to the largest oil and gas companies, however, their focus might be elsewhere. When the American Petroleum Institute issued its five-point policy roadmap for the Trump administration and Congress in November, it highlighted a need to maintain what it called “crucial international tax provisions.” Just one of those provisions, the so-called dual capacity taxpayer rule, is expected to save oil and gas companies $71.5 billion over a decade, according to Biden administration estimates. Broadly speaking, federal tax law allows corporations to credit taxes they pay to foreign governments on overseas income against their US tax bills to avoid being taxed twice. The dual capacity taxpayer rule allows oil companies wide latitude in defining what exactly constitutes a tax payment, with the result being that they can count royalties and other payments as taxes, said Zorka Milin, policy director at the Financial Accountability & Corporate Transparency Coalition, which works to combat harmful impacts of illicit finance. In fact, in some cases U.S. oil and gas companies might pay more in taxes and other payments to foreign governments than they do to the United States. Exxon paid billions in overseas royalties alone in 2023, including $1.8 billion to the United Arab Emirates, $1 billion to the Canadian province Alberta, and $761 million to Nigeria. Chevron paid about $2 billion in royalties to foreign governments.  Milin said it is unclear how much of these royalty payments Exxon, Chevron and other oil companies might have claimed as credits against their US taxes, but it could run into the billions of dollars annually. “They make huge payments to governments around the world, including to some in some pretty shady places, and what is adding insult to injury is a lot of those payments are used to offset payments they pay here in the US,” Milin said. “That’s one way in which our tax code is subsidizing these companies to go abroad and drill, baby, drill, but not domestically.” Exxon, Chevron and the American Petroleum Institute did not respond to requests for comment. Alex Muresianu, a senior policy analyst at the Tax Foundation, which supports pro-growth tax policies, said many of the oil industry-specific tax rules do not qualify as subsidies. Several of the rules, such as one that allows oil companies to deduct their drilling costs upfront, rather than over a well’s productive life, put the industry on an equal footing with other sectors, he argued. Oil companies often have high costs upfront that generate returns over many years, which can put them at a tax disadvantage with other industries, Muresianu said. When it comes to royalties, these payments to mineral owners are generally tax deductible. But the dual capacity taxpayer rule offers a far better deal by turning them into a credit, an important distinction. Say Company A earned $100 million in profits, paid $5 million in royalties and paid the full 21 percent corporate income tax. Taking the royalty payments as a credit rather than a deduction would save it nearly $4 million. (US tax laws are complex, so limitations might apply.) Milin argued that Congress ought to look at the foreign tax breaks, especially as they are searching for more revenue, because these benefits effectively subsidize oil companies to drill overseas. “When we have a more explicitly America First international economic policy on trade, on other issues, I think they are likely to look at the ways in which the tax code as it stands is inconsistent with that,” Milin said.

In December, Mother Jones published a roundup of seven things Donald Trump’s so-called Department of Government Efficiency could target if Elon Musk and his “Muskrats”—as critics have dubbed them—truly wanted to cut wasteful spending. On January 23, Sen. Elizabeth Warren (D-Mass.) sent Musk a letter with a long list of additional waste-cutting ideas. Musk will almost certainly ignore both lists. But both cited a gratuitous provision of the 2017 Tax Cuts and Jobs Act (TCJA) that Sens. Ron Johnson of Wisconsin and Steven Daines of Montana insisted upon in exchange for their votes. Set to expire this year, this generous deduction, which appears to have benefitted Johnson personally, is a windfall for the owners of “pass through” entities. A Democratic aide who works with the House Ways and Means Committee told me that extending this deduction is a must-have for the panel’s Republicans, who hope to renew most, if not all, of the expiring TCJA provisions—and more. Indeed, the budget resolution that House Republicans released on February 12 sketched called for the gutting ofr federal expenditures and instructed Ways and Means to identify up to $4.5 trillion in tax cuts—which, if history is any indication, will come nowhere near paying for themselves. As for the pass-through break, well, most US private businesses are pass-throughs. Sole proprietorships, partnerships, limited liability companies (LLCs), and S-corporations fall under that umbrella, which includes major accounting, law, and wealth management firms; medical practices; private equity partnerships; hedge funds; and real estate companies like the Trump organization. > “They are not contemplating, nor are we expecting them to contemplate, any > kind of bipartisan tax bill.” Pass-throughs are not subject to a corporate income tax. Instead, owner-partners are taxed on their share of the proceeds at ordinary individual rates. The 2017 provision signed by Donald Trump allows them to deduct up to 20 percent of their business income from the personal taxable earnings they report to the IRS. It’s a very lucrative break, which is why K Street’s usual suspects are lining up behind bills pending in the House and Senate to make the pass-through provision, Section 199A, permanent. The backers, a who’s who of pro-business groups, make it sound downright un-American to not support an extension of the break, which S Corporation Association president Brian Reardon deemed “critical for millions of small- and family-owned businesses.” But such language is misleading. By the government’s definition, a “small business” can have as much as $47 million in revenues and as many as 1,500 employees. As for “family-owned,” well, that includes, for example, the Trump Organization (which was convicted of tax fraud in 2022) and Uline, the Wisconsin pass-through business operated by billionaire Trump supporters Elizabeth and Richard Uihlein. “The pass-through deduction is emblematic of the tax reform package as a whole: More tax cuts for the rich, masquerading as tax cuts for the little guy,” says attorney Steve Rosenthal, a tax expert and former senior fellow at the Urban-Brookings Tax Policy Center. The Uihleins have been enthusiastic supporters of Sen. Johnson, whose advocacy for the pass-through deduction has saved the couple enormous sums over the past eight years. Ditto Diane Hendricks, one of the nation’s richest women and owner of the pass-through company ABC Supply. Hendricks, also a loyal Trump donor, pocketed an extra $36 million the very first year the deduction took effect, ProPublica reported. Contrary to the pro-business propaganda, Section 199A is primarily a giveaway to America’s most wealthy. In 2019, according to an analysis by the nonpartisan Joint Committee on Taxation (see Table 12), nearly two-thirds of the $43.6 billion break that year went to households with incomes of at least $410,000, and more than half of the total went to families making $819,700 or more—putting them squarely within the top-earning 0.5 percent of the population. Only 13 percent of the break’s value went to households earning less than $164,000. These handouts add up. Extending the current pass-through deduction will cost the federal government $684 billion over 10 years, the Congressional Budget Office projects (p. 13). The nonprofit Committee for a Responsible Federal Budget puts the figure even higher: $780 billion. Wasteful as it is, the Republicans are not inclined to end this gravy train. Indeed, a broad menu of options distributed to Republican members of the House Budget Committee didn’t even raise it as a deficit-cutting possibility. Johnson—who reported between $100,000 and $1,000,000 in rental income from his family’s commercial real estate LLC for 2023—is hardly the only tax committee member who would gain from extending the break. Based on an analysis of 2023 financial disclosures shared with Mother Jones by a progressive economic think tank, at least a dozen Republicans serving on the House Ways and Means and Senate Finance committees reported $50,000 or more in what could potentially qualify as pass-through income—some reported millions of dollars in such income. A smaller number of Democratic members also stand to benefit from the break, but an aide who works with Ways and Means told me the Republicans are drafting their “big, beautiful bill” without the Democrats’ input. “They are not contemplating, nor are we expecting them to contemplate, any kind of bipartisan tax bill,” the aide said. “They are going to do this on their own.”