President Donald Trump has done an admirable job at defanging the IRS, which was converted into a weaponized agency targeting their political enemies.
Chief Justice John Marshall famously pronounced early in our nation’s history that “the power to tax is the power to destroy.”
The Democrats inside the Biden IRS took that to heart. They hired thousands of new IRS agents to harass businesses, rich people, and, in some cases, Republican donors. Some of the lieutenants to the infamous IRS enforcer Lois Lerner, the woman who aimed her agency’s auditing guns at conservative groups, are still active at the tax agency.
One of the most noxious of Biden’s left-over regulatory rules applies to partnerships – an increasingly common form of business organization and expansion. Microsoft’s revenues/profits flow down through its business partners.
Business partnerships are vital contributors to the U.S. economy. A 2024 study by Ernst and Young for the Small Business Entrepreneur Council found that 10 million Americans work for these partnerships, and they generate $1.3 trillion in GDP.
The IRS evidently thinks they are TOO successful.
A gang of holdovers from the Biden administration and the ranking Democrat on the Senate Finance Committee, Ron Wyden of Oregon, are trying to administratively change the taxation of pass-throughs and partnerships and subject these entities to “guilty until proven innocent” audits. The changes would alter the “economic substance doctrine” which determines how the taxes on a business’s profits are applied to the partners. If the entities are found liable for increased tax assessments, they could face a giant tax bill AND a confiscatory 60% strict liability penalty.
These partnership rules are admittedly murky and may need updated protections against potential tax evasion abuses. But this rewrite of the tax laws would be applied WITHOUT CONGRESSIONAL APPROVAL. The Trump admin promised to end this illegal rewrite of the tax laws, but because of the turmoil at the IRS – with a revolving door of IRS Commissioners – the Biden-era rules still stand.
Meanwhile, Wyden has introduced legislation to codify these new rules into law. Get this: the Joint Committee on Taxation scores these IRS “reforms” as a potential $730 billion business tax increase over the next decade.
If the IRS isn’t told to cease and desist, they could be the perpetrators of the largest non-congressionally approved tax increase in American history.
The Trump administration is supposed to be easing the tax burden on our businesses and employers to make them more globally competitive, not handing them a three-quarter trillion-dollar tax INCREASE.
Trump or Treasury Secretary Scott Bessent should fix this tax raid on business before it reverses some of the job-creating benefits of Trump’s Big Beautiful Bill.
Stephen Moore is a visiting senior fellow at the Heritage Foundation and a co-founder of Unleash Prosperity.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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