Senator Elizabeth Warren (D-Massachusetts) and Representative Pramila Jayapal (D-Washington) ask for information on “corrupt schemes” to cover the profits of accounting firms involving the Treasury Department, the Internal Revenue Service (IRS) and other government agencies.
Lawmakers have sent letters to five major accounting firms asking them to detail their revolving door relationship with the government. The request comes after a September New York Times report expose how the staff and leaders of accounting firms like PwC take positions within the Treasury Department and other agencies to help draft tax codes that will benefit their old businesses – then return to those businesses with raises or promotions.
The New York Times discovered 35 examples of the practice over the past four presidential administrations, calling it “a remarkably effective behind-the-scenes system to promote [accounting firms’] interests in Washington. Even veterans of the accounting industry admit revolving doors are one of the main reasons the rich can benefit from and exploit the American tax code.
“The accounting giants abuse public trust and take advantage of the turn between public service and private profit”, Jayapal and Warren wrote in letters to Deloitte, PwC, EY, KPMG and RSM.
Lawmakers went on to quote the Law on the fight against corruption and public integrity. “Americans are fed up with these corrupt schemes,” they continued. “The decades-long scam in which major accounting firms abused the revolving door between government and the private sector to help their high net worth clients avoid paying their fair share of taxes demonstrates precisely why this legislation is necessary.”
Law on the fight against corruption and public integrity would draw stricter lines between the private and public sectors. It prohibits private companies from immediately hiring people who have just left a government post, and prohibits them from inducing executives to enter the public sector by offering them high salaries, or “golden parachutes”. The bill would also establish a separate government office to monitor ethics and corruption in government.
Lawmakers then asked companies to disclose whether, since 2001, any employees had held positions in the Treasury Department, the Internal Revenue Service (IRS), or elsewhere in government, and then returned to the company through the following. They also asked for details about this job, including the positions they have held, their clients, and their compensation over time.
In at least 16 of the cases where the New York Times Discovered in September, the former government officials were promoted to partners and rewarded with double their salaries when they returned to their private sector companies.
Lawmakers have drawn a direct line between revolving doors and the tax code. “Major accounting firms have spent decades unethically abusing the revolving door between government and the private sector to help high net worth clients avoid paying their fair share of taxes. It is corruption. Jayapal wrote on Twitter.
“The unethical revolving door of staff enters [the Treasury Department] and the biggest accounting firms must stop ”, said Warren. “Americans should be confident that our policies are working for them, not the wealthiest corporations.”
A report from the Institute on Taxation and Economic Policy released earlier this year found that 55 large companies, including FedEx, Nike and American Electric Power, paid $ 0 federal income tax in 2020. In fact, the effective tax rate was negative for many of these businesses, in part thanks to the 2017 tax cuts implemented by former President Donald Trump and the GOP.
Recent plans tax corporations by lawmakers like Warren have been met with coldness by congressional conservatives, however. Many of them – like Senator Kyrsten Sinema (D-Arizona) – have close relationships with deep-pocketed lobbyists. And despite the fact that big accounting firms like Deloitte and PwC have a revolving door relationship with the government, which skews tax policy in their favor, they are still spending hundreds of thousands or even millions of dollars on lobbying.