The Department of Justice seems on the brink of making some significant errors. It’s looking to dismantle the tax department, which is essentially America’s frontline defense against wealthy tax evaders.
With increasingly sophisticated tax frauds becoming more common, scaling back this enforcement will likely lead to even greater avoidance by the ultra-wealthy. The message here? If you’re at the top, you might just get away with complex evasion schemes.
It’s worth noting that tax enforcement in the US is already struggling; tax evasion costs approximately $447 billion every year—a figure that underscores the government’s waste issue. Yet, the number of successful prosecutions hasn’t gone up in the past ten years; it’s actually dropped by about 50% from 2014 to 2023. In 2023 alone, only 363 individuals were convicted of tax fraud. A former IRS investigator noted, “There was never a good time to commit tax fraud.” Without a dedicated department handling these cases, it could get even worse.
The stakes aren’t entirely obvious at first glance. However, recent successes from the tax department paint a different picture. In the case of Anderson Ark, they dismantled a major offshore tax avoidance scheme, recovering nearly $100 million and shutting down a fraudulent business that harmed thousands of Americans. They’ve also achieved substantial settlements, like the $2.6 billion plea deal from Credit Suisse in regards to helping wealthy Americans evade taxes.
There’s even a notable case involving billionaire Robert Brockman, with prosecutors seeking $1.4 billion in taxes and penalties related to alleged offshore income—marking it as the largest personal tax fraud indictment in US history.
These cases exemplify just how critical the Tax Department really is. It recovers far more than its modest budget of $106 million, making it one of the smartest investments the federal government could make. The settlement with Credit Suisse, for example, has returned more to taxpayers than the department has spent over the past two decades.
If we eliminate a centralized taxation unit, these intricate cases may become impossible to pursue and could fall into a backlog. For instance, wide-reaching cases like Anderson Ark may be overlooked by local US attorney’s offices that concentrate on other matters. The largest and most complex cases demand specialized expertise—which is something local offices generally don’t have. The Brockman case required five expert prosecutors over seven years.
Distributing expert tax litigators to regional offices is not likely to be efficient. Regional offices may handle cases outside their expertise, which can hurt morale. Some top tax prosecutors have already resigned, anticipating negative outcomes from the restructuring. This could, unfortunately, encourage tax evaders and result in billions of dollars lost in revenue. It also conveys a clear message: the Justice Department lacks the expertise necessary to tackle complex tax fraud effectively. If someone’s scheme is sophisticated enough, they might feel they can evade consequences.
Our tax system essentially relies on voluntary compliance and public trust, and weak enforcement undermines both. The wealthiest individuals already evade taxes at rates roughly three times higher than those at the bottom half of the income scale. The IRS’s automated systems aren’t equipped to catch billionaires; they mostly sift through simpler returns from middle-income individuals. To catch elusive tax evaders, enforcement needs to be just as sophisticated. That’s precisely what a strong and centralized tax department provides. Without it, wealthy tax cheats may increasingly see avoidance as a low-risk gamble, leaving the burden on ordinary Americans to make up the shortfall.
Congress and the Department of Justice need to grasp what’s truly at stake here. The tax department isn’t merely another bureaucratic entity; it is a key defense against intricate tax fraud and financial crime. Instead of dismantling it, it deserves bolstering. This isn’t just a political issue; it’s fundamentally about fairness. Supporting and enhancing the tax sector helps uphold justice, builds public trust, and ultimately saves taxpayers billions.
Corey Smith, who has a long history with the Department of Justice’s Taxation Department and served as a senior adviser in Brockman’s criminal prosecution, along with Jens Heycke, author of “Death, Taxes, Tarduckens: The Greatest Tax Robbery in History and the Broken System that Makes It Possible.”
