Biden’s tax hypocrisy: POTUS slammed over loophole that let him skirt $500k in taxes

President improperly avoided paying Medicare taxes before he took office, says Congressional Research Service, draft bill to end loophole introduced


                            Biden’s tax hypocrisy: POTUS slammed over loophole that let him skirt $500k in taxes
Joe Biden speaks about Covid-19 vaccines at the White House complex on August 23, 2021, in Washington, DC (Drew Angerer/Getty Images)

For years, Democrats have been complaining about Donald Trump's skirting of taxes, but it appears their President isn't any different. A new report from the Congressional Research Service (CRS) indicates that Joe Biden owes the IRS as much as $500,000 in back taxes. Reportedly, Biden has used a loophole in the tax system to avoid paying for Medicaid, which the GOP are hoping to shut via a new draft bill introduced in the Ways and Means Committee. 

Biden is currently running a massive campaign to increase taxes on the superwealthy, calling on them to "pay their fair share", while promising not to impact the middle class. As we reported in August, that isn't entirely true. The White House's new tax proposals would also increase taxes on small businesses by 7%, affecting 1.5 million c-corporations. Back in May, the President's taxes were in the spotlight after his tax returns were made public. On the other hand, Trump is still engaged in a legal battle over his taxes, most recently with The New York Times and niece Mary Trump.

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The CRS report doesn't directly name Biden or indicate he owns back taxes, but that's the allegation being made by Republicans after reviewing it. Rep. Jim Banks (R-Ind) requested the report, and after reviewing it believes the President is skirting on his taxes, through his S-corporation as outlined in the report.

The Internal Revenue Service (IRS) building stands on April 15, 2019, in Washington, DC. (Zach Gibson/Getty Images)

Biden's tax hypocrisy

The CRS report outlines cases of how people use S-corps to pay themselves suspiciously low salaries and make money as "distributions", thereby being exempt from the Medicare tax. Banks alleges that Biden used the same process, as outlined in a 2019 Wall Street Journal article. That article claimed Biden and the First Lady routed more than $13 million through S corporations and counted less than $800,000 of it as salary eligible for the Medicare tax. That money reportedly came from their book deals and speaking gigs.

To complicate matters, the report notes that presidential tax returns are subject to automatic audit only while the individual is in office. Since these allegations are from before Biden became President, it's unlikely the IRS will audit his tax returns. Earlier this year, the White House also claimed that the Bidens' S-corps are dormant, so they don't qualify for the automatic audit. 

Nonetheless, Banks has brought the matter to light once again, saying, "According to the criteria CRS provided to my office, he owes the IRS and the American people hundreds of thousands of dollars in back taxes. Every American should know about Joe Biden’s tax hypocrisy." Rep. Chris Jacobs has also weighed in, saying, "Given that the liberal Tax Policy Center and the non-partisan Congressional Research Service both have raised questions about the way Biden handled his taxes, why doesn’t he ask for his own taxes to get audited first?"

President Joe Biden and first lady Dr. Jill Biden wave as they arrive at the North Portico of the White House, on January 20, 2021, in Washington, DC. (Alex Brandon-Pool/Getty Images)

 

House contemplate bill to shut loophole

The loophole at the center of the controversy - how S-corps pay their employee shareholders - has now become subject to a new draft bill. Right now, how much shareholders can take, and the idea of a reasonable limit is very much up in the air, allowing some people to get away with thousands of dollars without having to pay tax. That's because distributions are tax-free up to the shareholder's investment. 

The House Ways and Means Committee has now drafted a bill to plug that loophole, which would be included in the $3.5 trillion social spending bill Biden is hoping to ram through Congress. However, there's the big question of whether it will pass at all. While the Democrat-controlled House has pushed several big-ticket bills this year, almost all of them have died in the Senate due to GOP opposition. Should the social spending bill pass, it would not only shut the loophole Biden used, but also give more teeth to the IRS to go after others who use the same tactic.

"There might be a half a million S-corporations that are playing this game. And the IRS doesn’t have anywhere near enough of a budget to bring half a million cases every year," noted John Bogdanski, a former member of the IRS Commissioner’s Advisory Group. Indiana University Bloomington's tax professor David Gamage also added, "This is not the sort of tax planning that should be going on as a matter of tax policy, but it’s very hard for the IRS to police."

That conclusion seems to be echoed in the halls of Congress, where the social spending bill also includes provisions to increase IRS funding by $80 billion over 10 years. Until then though, the loophole will probably continue to be exploited, as it has been by politicians for decades. Whether the President will own up, and pay up though, is something only time will tell. 

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