The Trump Taxes Story Exposes a Glaring Hole in Biden’s Criminal Justice Platform

A series of recent reports on President Donald Trump’s finances raises reasonable questions about whether Trump may have committed criminal conduct in the course of tax evasion. The fallout also exposes a glaring hole in Joe Biden’s criminal justice platform—namely, what he would do about the yearslong, escalating financial crime wave that has wreaked havoc throughout the country, one that has been exacerbated by the convenient disinterest and ineptitude of the current president’s Department of Justice.

A robust body of evidence indicates that the level of financial crime in our country is at an all-time high. Last year, the Federal Trade Commission estimated that 40 million Americans had been victims of mass-market consumer fraud in 2017—an increase of more than 50 percent from six years prior. Earlier this year, the FBI's annual report on internet crime concluded that 2019 “saw both the highest number of complaints and the highest dollar losses reported” in 20 years—with “more than $3.5 billion” in reported losses. A study from the University of Pennsylvania’s Institute for Law and Economics—drawing on about two decades’ worth of government data—argued that crime at financial institutions has been “on the rise.”

This misconduct runs the gamut from run-of-the-mill consumer fraud—like fraudulently marketed weight loss products (a serious problem)—to tax fraud on the part of multinational corporations as well as high-earning Americans. And it’s quite costly to ignore. The Brookings Institution reported last year that “one out of every six dollars owed in federal taxes is not paid,” or “about three-quarters the size of the entire annual federal budget deficit,” and that this hole in the budget is probably driven by unpaid taxes owed by the wealthy. At the same time, corporations and the wealthy who skirt the law have benefited from the fact that the IRS has been gutted over the past decade, which has predictably resulted in far fewer audits and referrals for criminal investigations.

As all of this has been happening, there has also been a remarkable collapse in the Justice Department’s pursuit of white-collar crime. According to data maintained by Syracuse University that spans more than 30 years, the Justice Department’s number of white-collar prosecutions has repeatedly hit all-time lows during Trump’s tenure. To be sure, these problems did not all start under Trump’s watch—as law professor Jennifer Taub explains in her new book Big Dirty Money—but they have gotten markedly worse.

The divergent trends—increasing financial crime, decreasing enforcement—should already have been a national scandal. The sheer scale of the many other forms of corruption and ineptitude throughout this administration, however, seem to have prevented it from breaking through, particularly in light of the ongoing pandemic. Now is an opportune time for the Biden campaign to make the case to the public for a concerted crackdown on financial crime—to explain that the federal government desperately needs a prompt, wholesale and aggressive effort to improve the effectiveness of its law enforcement apparatus in this area, if there is any hope for change.

There are many reasons for the current state of affairs, even beyond Trump’s personal interests. One of them is that neither Attorney General William Barr nor former Attorney General Jeff Sessions seemed to have had much interest in pursuing financial crime. Barr has been more interested in expanding executive power and promoting Trump’s political and personal priorities. Sessions used the job to advance his interest in making life as difficult as possible for undocumented immigrants. There has also been a series of internal policy changes that have led to greater leniency in corporate criminal investigations—including the reversal of a policy created by former Obama Deputy Attorney General Sally Yates that required prosecutors to pursue individuals who committed criminal misconduct at corporations instead of merely entering into big-dollar settlements with the companies and moving on.

Meanwhile, there has been a noticeable deficit of high-level prosecutorial talent in the department, owing at least in part to the fact (widely known in legal circles) that many prominent conservative lawyers did not want to work in the Trump Justice Department—due to distaste for the man and his policies, concerns over the long-term financial impact of going back to the private sector after working for the most divisive president in decades, or both. A surprising number of senior Justice Department officials overseeing wide swathes of the country’s criminal law enforcement work have never even been prosecutors. As a result, the Trump-era political appointees and career officials who manage the department’s work in this area have overseen a surprisingly long list of high-profile losses and setbacks in the last few years.

Covid-19 appears to have made matters worse. There has been a wave of consumer financial fraud that has grown out of the pandemic that the Justice Department has done virtually nothing to address and that has resulted in more than 200,000 complaints to the Federal Trade Commission, totaling more than $150 million in losses. But because financial fraud is significantly underreported (many people are ashamed to admit that they have been victimized), the real numbers are likely at least several multiples of these figures. The department has also done little to pursue an international fraud on state unemployment agencies using stolen personal information from Americans, which has cost states at least hundreds of millions of dollars.

The issue has gotten virtually no attention during the general election campaign, but it was one of the many policy areas that Massachusetts Senator Elizabeth Warren raised during the Democratic presidential primaries. Among other things, she campaigned on a law that she had proposed that would have allowed the government to criminally prosecute corporate executives who had negligently overseen companies where criminal conduct had occurred. That particular proposal had its detractors, but it represented much-needed fresh thinking in the area and started a discussion about the limits of white-collar criminal enforcement that had been dormant for too long.

After Warren and others dropped out of the race, however, that issue fell by the wayside. Biden has instead pursued a campaign strategy structured around pledges to reunite the country, level the economic playing field and contain the pandemic. For better or worse politically, Biden’s campaign has let events dictate its priorities rather than try to direct the country’s focus. In so doing, Biden’s criminal justice plan has been focused on addressing the pervasive racial inequities in the system—which have rightly come under scrutiny again in recent months as a result of police violence and widespread protests—as well as other key progressive priorities, like reducing mass incarceration. But one effect of this gap in Biden’s public platform is that it has left his campaign at least partially flat-footed dealing with the stories on Trump’s taxes in the New York Times. If Biden’s campaign had had a concrete and comprehensive proposal to address white-collar crime and financial crime, this could have been a major opportunity for it to tie the news to specific policy ideas. It didn’t.

Voters interested in this topic actually have some reason to be skeptical of the attention that this problem might receive in a Biden presidency, since the Justice Department during Barack Obama’s presidency drew a significant amount of criticism over its failure to pursue fraudsters and corporate misconduct after the last financial crisis. Which is why taking a more outspoken stand makes all the more sense for Joe Biden. There is even good reason to believe—as a strictly political matter—that doing so could draw the support of people from both the tough-on-crime right and the political left. It is an issue not nearly as ideologically polarizing as the race and policing questions that have dominated the campaign.

What should Biden do? He could start by proposing to initiate a uniform federal effort to collect data on the national prevalence of financial crime, which, unlike for other crimes, does not yet exist. Ensuring the right people are in positions of power in the Justice Department would obviously be important too, but the administration under Biden could also issue a directive to local U.S. Attorneys’ offices throughout the country to make this a key priority for enforcement, much like the Trump administration did with immigration.

The Biden campaign could pledge that, if elected, his Justice Department would at least revisit—and strongly consider reversing—the changes to department policy under the Trump administration that have made the enforcement of financial criminal laws more lax, like giving leniency to corporations that self-report the misconduct of their employees. Biden could take a law-and-order approach, promising that his administration would seek a dramatic increase in funding for law enforcement agencies so that they can increase their capabilities, including by hiring more financial analysts, economists and prosecutors. He could promise to make a concerted effort to improve coordination between regulatory agencies and the Justice Department—particularly consumer protection agencies like the FTC and the Consumer Financial Protection Bureau—so that serious cases that lead to civil penalties receive appropriate attention as potential criminal matters too. For a candidate dogged by questions of how he would be able to pay for his proposed climate and health care programs, Biden could pledge to dramatically ramp up the IRS’ audit and enforcement capabilities, so that the government actually brings in more of the money it’s owed. And he could argue that the prosecution of criminal tax fraud would be a top priority.

As for Trump, in a properly functioning Justice Department, his tax avoidance, global financial entanglements, and unusual business and campaign transactions already would have attracted the attention of prosecutors. In fairness to the president, it is too soon to conclude that he has committed any crimes. That said, there would be more than enough reason for a very fulsome investigation if this were anyone but the president. But even setting Trump aside, one thing is clear: This country has been in the midst of an epidemic of financial crime that has been getting worse by the day. Now is the time for the Biden campaign to make this the prominent issue for voters that it can—and should—be.