Report on Revolving Door and Tax Policy Sparks Calls for Federal Probe and Reforms

As congressional Democrats are working out tax hikes targeting corporations and rich individuals for the Build Back Better package they hope to pass in the coming weeks, The New York Times on Sunday shone a spotlight on the revolving door between accounting firms and the U.S. government that benefits companies hoping to avoid taxes.

"If any of the officials had arrangements for future employment with their former employers while meeting with the employers, they committed a crime under the conflict of interest law."
--Walter Shaub, POGO

Based on public records and interviews with both government and industry sources, the Times reports that "the largest U.S. accounting firms have perfected a remarkably effective behind-the-scenes system to promote their interests in Washington."

"Their tax lawyers take senior jobs at the Treasury Department, where they write policies that are frequently favorable to their former corporate clients, often with the expectation that they will soon return to their old employers," reporters Jesse Drucker and Danny Hakim explain. "The firms welcome them back with loftier titles and higher pay."

Drucker and Hakim found that "in the last four presidential administrations, there were at least 35 instances of round trips from big accounting firms through Treasury's tax policy office, along with the Internal Revenue Service and the Congressional Joint Committee on Taxation, and back to the same firm."

In nearly half of those cases, officials were promoted to partner when they returned to their previous accounting firms, securing sizable bumps in pay. While industry giants--KPMG, EY, PwC, Deloitte, and RSM--declined to comment, the journalists provide some specific examples, including Audrey Ellis, who went from PwC to the Treasury Department, then back to the firm.

Though some experts argue the importance of the government hiring from such firms to get officials with relevant real-world experience, the Times highlights the risk that they won't serve the public interest, noting that "from their government posts, many of the industry veterans approved loopholes long exploited by their former firms, gave tax breaks to former clients, and rolled back efforts to rein in tax shelters--with enormous impact."

Walter Shaub, a senior ethics fellow at the Project on Government Oversight (POGO) who previously directed the U.S. Office of Government Ethics, responded to the Times' findings by calling for a probe by the House Committee on Oversight and Reform.

"This is an example of terrible management in the Treasury Department across multiple administrations," Schaub tweeted with a link to the reporting. "Tax lawyers who left a few top accounting firms and then returned to those firms captured a tax office and wrote rules favorable to their former/future employer's clients."

"If any of the officials had arrangements for future employment with their former employers while meeting with the employers, they committed a crime under the conflict of interest law. If not, it's still terrible management," added Shaub, who resigned from his government watchdog post in 2017 after months of clashing with then-President Donald Trump's White House.

Felicia Wong, president and CEO of the Roosevelt Institute, declared that "industry tax lawyers should not write their own rules," and highlighted some proposed reforms.

"In case you are wondering why the [institute] cares about unstacking the deck--it's because we care about democracy," Wong tweeted Saturday, sharing a 2018 report (pdf) from the think tank that offers a "new agenda to tame corruption in Washington."

The report's four key recommendations to "unstack the deck," which the report details over several pages, are:

• Create a new agency to police corruption and promote government transparency;
• Raise ethical standards to ensure public service is not pursued for private gain;
• Slow down the revolving door; and
• Empower the public to more easily influence government agency action.

"Confronting the role of money in elections is important, but it is equally important to combat corruption within our government agencies," the institute's report concludes. "A new, dedicated agency to ensure public integrity, along with other critical reforms, can safeguard our democracy and economy from further corrosion."