Former Internal Revenue Service commissioner Danny Werfel testifies before the House Appropriations Committee on Capitol Hill on May 07, 2024 in Washington, D.C. (Kevin Dietsch/Getty Images)
Kevin Dietsch / Getty Images
Melanie Krause, the acting head of the Internal Revenue Service, told staff she’s resigning. She was reportedly blindsided by an agreement between the Treasury Department and Homeland Security to share tax data from immigrants without legal status.
The agreement was revealed this week in a court filing that was part of a lawsuit brought by immigrant rights groups to prevent the tax information sharing.
In a statement, the Treasury Department defended the move: “As we focus on IT modernization and re-organize the agency to better serve the taxpayer, we are also in the midst of breaking down data silos that for too long have stood in the way of identifying waste, fraud, and abuse and bringing criminals to justice. We believe these goals are critical to a more efficient government and safer country. We wish Melanie well on her next endeavor.”
Krause had replaced interim IRS head Doug O’Donnell, who left the agency out of frustration with both the Department of Government Efficiency and immigration officials who wanted access to confidential tax data.
O’Donnell replaced Biden appointee Danny Werfel, who resigned as IRS commissioner after incoming President Donald Trump nominated former Republican Congressman Billy Long to lead the agency. We spoke to Werfel about the plan to share the tax.
3 Questions for Danny Werfel
Federal law protects tax information so that we will all file our taxes free of fear. But this agreement repeatedly refers to this law that penalizes migrants who haven’t left the U.S. despite having received a judicial order to do so. Is the Trump administration correct that this agreement might apply to some immigrants who entered the country illegally?
“This is where I go back to how the Internal Revenue Code has been interpreted. First of all, was it intended for more specific criminal investigations or something like a broad swath of 7 million impacted taxpayers? Are the immigration actions underway more civil in nature than criminal in nature?
“But here’s the most important question that I think is worth posing. Very recently, the Supreme Court did something profound. They reversed something called the Chevron Doctrine. The Chevron Doctrine said that federal agencies can interpret these broad provisions of law and create these kind of specific applications to them. But the Supreme Court said, ‘No, federal agencies. You’re not allowed to do this anymore. We have a new doctrine under this new decision, the Loper decision.’
“And it says that the government can’t read something into the law that isn’t explicit in the law. So I think an important question is raised that if you have an exception that’s broad for criminal investigations, does this new Supreme Court doctrine under Loper allow the federal government to take a broad set of language and apply it to a very specific situation in a way that has a significant impact?”
The Yale budget lab estimates that in the year 2023, immigrant workers without legal status paid $66 billion in federal taxes. What impact could this agreement have on tax revenue?
“We have made a decision in this country through the various laws and procedures and policies that we’ve set up to try to make sure that people are paying their fair share of their tax responsibilities, regardless of their situation. It’s a safe harbor. You can pay your taxes, and we won’t send the information to immigration. We will just collect the revenue. And that will be the deal.
“With this new arrangement, the concern is this now we will disincentivize this type of payment of taxes, and the bottom line of the federal government will be damaged by it. So it’s an important implication. You know, we started this conversation by asking the question, is this legally allowable? And that will play out in court. And the other question should be, what are the other implications of this type of data sharing? And one of them will be less revenue coming in, because we will now disincentivize these individuals, these non-citizens, from participating and paying their taxes.”
Around 7,000 workers have already been cut from the IRS, with more to come. What impact could that have for tax collection overall?
“So the two implications of concern with a reduced IRS capacity is a worse financial bottom line for the US government and more unfairness in our tax system. I always try to make it clear that when you cut IRS resources, you’re not cutting taxes. It means you are just reducing the ability of the IRS to collect the taxes that have been enacted. And what that means is that those that don’t play by the rules are more likely to get this free ride.”
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James Perkins Mastromarino produced and edited this interview for broadcast with Peter O’Dowd. Perkins Mastromarino also adapted it for the web.
This article was originally published on WBUR.org.