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Rep. Ro Khanna (D-Calif.) is seen on the House steps of the Capitol during votes on Friday, December 4, 2020. (Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images)

Rep. Ro Khanna (D-Calif.) is seen on the House steps of the Capitol during votes on Friday, December 4, 2020. (Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images)

Ro Khanna Introduces Bill to End 'Runaway Tax Evasion' by US Millionaires and Billionaires

"The wealthiest 1% are responsible for roughly 70% of the 'tax gap,'" said the California Democrat. "It's time every American pay their fair share."

Jessica Corbett

Congressman Ro Khanna on Thursday unveiled legislation to help the Internal Revenue Service "put an end to runaway tax evasion by the ultra-rich and largest corporations in the U.S."

"We know our tax system is broken, and it's long past time we start fixing it."
—Rep. Ro Khanna

The California Democrat introduced the Stop Corporations and Higher Earners from Avoiding Taxes and Enforce Rules Strictly (CHEATERS) Act, which would provide $100 billion in additional funding to the IRS over a decade—$70 billion for enforcement, $20 billion for taxpayer services, and $10 billion for IT and operations support.

Every $1 spent would generate over $11 in greater tax collection, totaling $1.2 trillion in revenue, according to Khanna, who serves as deputy whip of the Congressional Progressive Caucus and on the House Committee on Oversight and Reform.

"We know our tax system is broken, and it's long past time we start fixing it," Khanna said, emphasizing that "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," he added. "Right now, the wealthiest 1% are responsible for roughly 70% of the 'tax gap'—the difference between taxes owed and taxes paid. It's time every American pay their fair share."

Khanna's bill would codify a proposal put forth in Tax Notes late last year by University of Pennsylvania law professor Natasha Sarin, former Treasury Secretary Lawrence Summers, and former IRS Commissioner Charles Rossotti.

The Stop CHEATERS Act (pdf) would upgrade the IRS' decades-old systems and require audits of 95% of corporations with over $20 billion in assets as well as half of individual tax return filers with income exeeeding $10 million per year. In a bid to stop the wealthy from hiding income, the law would also require additional reporting for "pass-through" businesses.

The IRS would be required to submit to Congress reports detailing revenue loss by income levels and from offshore tax evasion as well as the agency's efforts to recruit and retain auditors equipped to deal with cases involving wealthy people and businesses. The bill would also boost penalties for millionaires who are caught cheating on their taxes.

"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 (CAP).

"Rep. 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," he added. "It is an important step toward economic, social, and racial justice, and an economy that works for all Americans."

The bill was also welcomed by Americans for Tax Fairness executive director Frank Clemente, who noted that "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."

The IRS, declared Patriotic Millionaires chair Morris Pearl, is currently "no match for the amount of criminal tax evasion being committed by the top 1%."

"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."
—Morris Pearl, 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," Pearl said. "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."

CAP, Americans for Tax Fairness, and Patriotic Millionaires joined with 85 other groups on Thursday for an open letter (pdf) to President Joe Biden and the Democrat-controlled Congress calling for stronger tax enforcement for rich individuals and corporations in the United States.

"Fair and adequate tax enforcement is critical for ensuring a tax system and an economy that works for ordinary Americans, not just the wealthy and powerful," wrote the groups, including Public Citizen.

Susan Harley, managing director of Public Citizen's Congress Watch division, said in a statement announcing the letter that "Americans of every political stripe are outraged that tax cheats are getting away scot-free."

"Having been starved for resources for years, the IRS is in desperate need of an influx of funding and orders to take on increased auditing of the very wealthy and large corporations. And increased investment in the IRS would also allow it to work better for the people of the United States," she said. "It's far past time for Congress to make this a top priority."

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