Trump Is Undermining Congressional Tax Policy
Killing off Direct File and Neutering the Corporate Minimum Tax Is Executive-Branch Meddling
Congress is supposed to make tax laws and the executive branch is supposed to implement them. The Internal Revenue Service and its parent agency, the Treasury Department, are supposed to write rules that govern exactly how tax laws are carried out.
Unfortunately, those rules can be just as heavily influenced by lobbyists for the rich and corporations as are the tax laws themselves. The difference is that members of Congress have to stand behind their tax positions with their votes, providing some accountability. Executive rulemaking is done much more in the shadows, with often no one in particular to blame if the results are bad. (The president, of course, is ultimately responsible, but the line to him can be thin and winding.)
Recently, two instances of executive decisions on taxes shows how corrupt the process can be.
The first is the decision to end the IRS Direct File program. This was a free option that allowed tax filers to bypass the for-profit tax-preparation industry, saving taxpayers time and money. Direct File was created under the Biden administration as part of its renewed investment in the IRS. It began a limited but successful rollout in 2024: over 140,000 (relatively simple) returns were processed, saving those taxpayers an estimated $5.6 million in filing fees.
This year almost 300,000 taxpayers used the service. Even though that was more than double the previous year’s total, it fell short of expectations. One big reason was that the Trump administration did little to promote the program during the tax-filing season and intimated that the service would soon be shut down. Over the summer, those hints became a reality and then last month, the Treasury issued a self-serving report to justify its actions.
The Trump Treasury claims it will encourage taxpayers to use the so-called “free file” options provided by private tax-filing corporations. But since those companies are in business to make profits, they have never adequately advertised their free options–have in fact hidden them and steered customers to processes that cost money instead. When the IRS tried to force the companies to stop hiding their free services, the two leading ones–H&R Block and Intuit, maker of TurboTax–dropped out of the program rather than comply. Intuit had been fighting for decades to forestall a program like Direct File and now–after what turned out to be just a brief period of IRS resistance to the company’s lobbying–it has once again achieved its goal.
Killing off Direct File will cost taxpayers millions of dollars in unnecessary filing fees, while the other recent instance of executive tax meddling will cost the federal government billions of dollars in lost revenue. The Corporate Alternative Minimum Tax (CAMT) was another Biden innovation which ensured the very biggest and most profitable corporations would pay at least 15% on the profits reported to shareholders.
That definition of profits is central to the working of the tax because corporations essentially maintain two sets of books: one that results in the highest possible earnings to attract investors, and a second one that uses every possible loophole to report as little income as possible to the IRS. It’s this disparate bookkeeping that allows wildly profitable firms to go years paying little or nothing in federal income taxes.
By finally breaking through that double bookkeeping barrier–at least for corporations with over a billion dollars in annual profits–the CAMT was estimated to raise more than $220 billion over 10 years. Showing once again how concentrated corporate wealth and power have become, all of that predicted revenue would come from just about 150 huge firms.
But this signal tax-fairness achievement is being steadily undermined by the Trump administration. The Treasury department is creating new carveouts to exempt certain kinds of income from the tax; allowing conglomerates to duck under the income floor by counting each of their businesses’ profits separately; and giving broader license to use losses to diminish earnings. As one tax expert put it in the New York Times: “‘They’re effectively repealing the statute.’”
Congress shouldn’t let its legislation be nullified by a rogue executive branch. But don’t expect any immediate action because the Republican majorities in both chambers reflexively defer to President Trump. If, however, Democrats are in charge of Congress in 2027, regaining control over tax policy would be a good place to start necessary reforms.