Author: Brad Heath and Sarah N. Lynch
WASHINGTON, Dec 10 (Reuters) – Federal tax prosecutions fell to their lowest level in decades this year, down more than 27% from the previous year, as the Trump administration slashed the ranks of lawyers and agents pursuing these cases, a Reuters investigation found.
President Donald Trump’s administration has overhauled U.S. law enforcement this year, expelling dozens of lawyers and focusing much of the Justice Department on tracking immigrants. Its retreat from tax enforcement illustrates the toll that shift is taking on other crime-fighting efforts.
The administration made deep cuts to the Internal Revenue Service’s criminal investigations division, and some who remained were ordered to start working on immigration cases or anti-crime patrols in Washington, according to government records and officials, who spoke on condition of anonymity because they are not allowed to discuss their work publicly. Meanwhile, the Justice Department closed its tax division, and officials said a third or more of the criminal attorneys working there resigned.
The government estimates that it collects nearly $700 billion less in taxes each year than it owes. Criminal prosecution seeks to recover only a fraction of that, but the threat of jail time or huge fines is one of the government’s key tools to deter cheating. Experts, including former IRS and Justice Department officials, worry that weakening the tool could encourage more cheating.
“Reducing criminal enforcement against all categories of taxpayers would demonstrate indifference to cheating and insult the millions of honest taxpayers who pay the taxes they owe,” said David Hubbert, a senior fellow at the Tax Law Center at New York University School of Law and a former top tax department official.
Reuters used federal court dockets to count the number of Justice Department lawyers who represented the government in court between January and early November. Last year, about 420 people did so. There are about 160 this year.
Senior Trump administration officials told prosecutors earlier this year that the tax probe was not a priority, according to three people familiar with the matter who spoke on condition of anonymity discussing the department’s internal deliberations. A person familiar with the matter recalled that attendees concluded that the department’s new management was “very skeptical about white-collar crime and whether we should be handling these cases.”
Justice Department spokeswoman Natalie Baldassar said closing the central tax crimes office “will not impact the ability of its civil litigators and criminal prosecutors to advance the mission of fair and consistent enforcement of the nation’s tax laws.” The IRS confirmed that its criminal enforcement staff decreased by 330 this year but declined to comment.
The slowdown in tax prosecutions comes as the government is reviewing past investigations for signs of previous political influence or what some officials have called “weaponization” by former President Joe Biden in the White House. They provided no evidence to support the allegation.
In one such case, cryptocurrency investor Roger Ver, also known as “Bitcoin Jesus,” posted a video claiming he was being targeted by a weaponized Justice Department over pending criminal charges over unpaid tens of millions of dollars in taxes.
Vail hired defense attorneys with ties to Donald Trump, including Chris Keys, to lobby the Justice Department to drop the case. In October, Kaiser and a senior Justice Department official who had represented Ivanka Trump reached a deferred prosecution agreement that allowed Ver to avoid a conviction in exchange for paying the government nearly $50 million.
Abolish tax enforcement
This fall, the Trump administration dismantled the department’s tax division, which had overseen tax prosecutions since the 1930s, and moved attorneys and other staff who worked there to other offices.
Two officials familiar with the office’s staffing said at least a third of the roughly 80 criminal prosecutors working there at the beginning of the year chose to resign rather than be reassigned.
Reuters examined the extent to which the Justice Department’s enforcement of tax cases has declined by gathering files from Westlaw for every open federal criminal case since the 1990s. Westlaw is an online legal research service that, like the news service, is a division of Thomson Reuters.
Reuters compared the number of people charged with crimes between January 1 and November 1 this year with the same period in previous years. In some cases, Reuters uses artificial intelligence to help classify the charges people face. A review of a random set of records revealed an assessment accuracy of 98%.
The rate at which governments bring such charges has dropped sharply this year. Reuters found that as of November 1, federal prosecutors had charged 251 people with tax violations, a 27% decrease from the same period last year.
The U.S. attorney’s office, which could fill some of the gaps, also lost prosecutors experienced in white-collar cases, current and former Justice Department officials said. More than 1,000 attorneys have left the U.S. attorney’s office this year, department records show, roughly double the number who resigned or were expelled in previous years.
Valerie Makarewicz left the U.S. Attorney’s Office in Los Angeles last month to work at a law firm. She said the office is one of the few known for having experts on tax cases, but their ranks have shrunk from 10 people to “three or four,” and replacing them won’t be easy.
“This is a niche area and developing expertise takes time,” she said.
Layoffs and redeployments
Former officials say the slowdown in tax enforcement is partly due to the Trump administration’s deep cuts to IRS spending this year. The tax agency’s criminal division lost more than 10% of its staff between January and June, according to a report by the IRS ombudsman, the National Taxpayer Advocate. The report said overall staffing at the IRS, a frequent political punching bag for Republicans who now control the government, has been reduced by more than a quarter.
The White House referred questions to the Treasury Department, which said in a statement that “the IRS is fully staffed and prepared for next tax filing season.”
A former Justice Department official who has witnessed the changes said IRS investigators who remain “are being pulled in a lot of directions,” some of which have nothing to do with taxes. “The damage done is enormous.”
In Washington, IRS investigators’ new duties include patrolling with city police as part of a show of force ordered by Trump this year to combat what he calls a crime crisis in the capital.
The IRS’s Washington office initially sent only a handful of about 60 agents to assist with patrols. But after Trump aide Stephen Miller filed a complaint, the office increased that number to more than 20 agents patrolling the streets, two people familiar with the matter said.
(Reporting by Brad Health and Sarah Lynch; Editing by Nick Ziminski)