This week, the Internal Revenue Service (IRS) made a rare and surprising statement, apologizing to billionaire Ken Griffin. The apology came in response to the agency’s leak of sensitive information about a group of wealthy Americans, including Griffin. This unexpected act of contrition is remarkable because the IRS has a history of not admitting wrongdoing or apologizing, despite its reputation for corruption and incompetence.
Charles Littlejohn, a contractor at Booz Allen Hamilton who worked for the IRS, brazenly stole thousands of information on wealthy American taxpayers, including that of former President Donald Trump and billionaire Ken Griffin. Littlejohn then leaked Trump’s tax information to the New York Times and information about other wealthy individuals to ProPublica. He said he was motivated by a desire to seek financial equity and that his action was a service to the country. The leaked information was the basis for several articles published by both the New York Times and ProPublica that criticized billionaires such as Trump and Griffin for allegedly avoiding paying federal and state income taxes through financial gimmicks and legal loopholes.
Ken Griffin sued the IRS in December 2022 over this leak. Rather than admit wrongdoing, the government fought every step of the way. According to the Wall Street Journal, even though the government knew Littlejohn was the culprit, it continued to publicly deny any information about what happened and who did it. After Littlejohn was identified, the government attempted to argue that Littlejohn was not a government employee when he committed the crime, even though at the time he worked within the IRS and used the computer assigned by the IRS to steal individuals’ tax records. .
In October 2023, Littlejohn pleaded guilty to unauthorized disclosure of tax returns. Last January, he was sentenced to five years in prison and fined $5,000. Judge Ana Reyes told Littlejohn: “What you did in attacking the sitting president of the United States was an attack on our constitutional democracy. …Your actions also posed a threat to our democracy. … This creates the same fear as January 6. »
Griffin and the IRS recently reached a settlement on the data leak lawsuit. Griffin reportedly said his goal in the lawsuit was to motivate the IRS to “improve data security and own up to its mistakes rather than obtain the modest damages it could likely seek in court.”
On Tuesday, the IRS issued a public apology to Griffin, saying, “The IRS takes its responsibilities seriously and recognizes that it failed to prevent Mr. Littlejohn’s criminal conduct and the unlawful disclosure of Mr. Griffin’s confidential information. … The agency believes that its actions and the resolution of this matter will result in a stronger and more reliable process for protecting the personal information of all taxpayers.”
Griffin was able to obtain a public apology from the IRS, which is rare, because he had the financial resources to sue the government. However, many Americans who lack the financial means also deserve an apology from the IRS.
The IRS has a reputation as an agency that “cannot do its basic job well but terrorizes taxpayers whether they deserve it or not,” according to the Wall Street Journal. Examples reported by the WSJ that highlight these concerns include: the agency responds to only 10 percent of taxpayer calls; the IRS admitted to distributing $19 billion in “improper” earned income tax credit payments in fiscal year 2021 (28% of all EITC payments); an audit found that the IRS spent $574 million to implement the Foreign Account Tax Compliance Act, but collected only $14 million in revenue (the U.S. Congress expected law collects $9 billion in compliance revenue by 2020).
Other controversies surrounding the IRS are not to be overlooked. During the Obama administration, an IRS employee leaked donor information to the National Organization for Marriage to the media, a breach of trust that raised concerns about the security of the agency’s data. The Huffington Post then published a story identifying a Mitt Romney-linked political action committee as one of the donors, a move that further fueled the controversy. The IRS ultimately paid NOM $50,000 to settle the lawsuit.
Arguably the most egregious IRS scandal under the Obama administration was the agency’s unfair targeting of conservative groups seeking nonprofit status. A congressional investigation found that the IRS “set aside all incoming Tea Party applications for special treatment—a move that would subject these organizations to lengthy delays, cumbersome questioning, and ultimately prove fatal to some of their applications.” During the investigation, as many as 24,000 emails from Lois Lerner, the former Internal Revenue Service official at the center of the scandal, were “improperly” destroyed. Ultimately, President Obama’s Justice Department declined to file charges against Lerner, and she was able to retire with a full pension.
Despite its long history of incompetence and failure, the IRS continues to demand more money, power, and better access to taxpayer data, even as it often fails to deliver on its promises. In 2022, while lobbying for an additional $80 billion in funding through the Inflation Reduction Act of 2022 to hire 87,000 new IRS agents, IRS Commissioner Charles Rettig assured the U.S. Senate that these additional IRS agents would “absolutely not” increase audit oversight of small businesses or middle-income Americans. However, the most recent IRS audit shows that “since last summer, 63 percent of new audits have been of taxpayers with incomes under $200,000.” Only a small overall share hit the highest earners, while 80 percent of audits covered filers earning less than $1 million.” In other words, the IRS broke its promise.
An even bigger headache awaits ordinary American taxpayers in 2025. It’s called the “$600 rule.” Starting next year, any American who receives more than $600 for transacting goods and services through third-party payment platforms, i.e. PayPal and Venmo, will have to report their income via a 1099 form -K. The IRS insists it wants to catch wealthy tax evaders, but it pathetically goes after Americans trying to make ends meet through odd jobs. Besides the added burden of preparing an additional tax form, American taxpayers deserve to know why we should entrust more financial data to an agency that has a history of failing to keep our data secure.
While the IRS publicly apologizing to Ken Griffin after a costly legal battle is a step in the right direction, it is crucial for the agency to understand that this is not just a individual. This is about restoring the confidence of every American taxpayer. This can only be achieved through concrete actions, not mere words. To begin, the IRS must demonstrate its commitment to data security and transparency, reassuring taxpayers that their financial information is in safe hands.