The Forbes 400 is known as the definitive ranking of the wealthiest Americans. In 2020, despite COVID-19 entering the lexicon, America’s 400 richest added $240 billion to their collective net worth from the prior year. For the past three years, it has taken a net worth of around $2.1 billion to make the Forbes 400 list. Even in these trying times of medical and political uncertainty, 18 new members were added to the ranks of the wealthiest Americans in 2020. In addition, 25 members who appeared on the list in 2019, dropped off the list as their fortunes fell. And, in the comeback category, 9 former Forbes 400 members returned to the list after having fallen off in prior years.
Despite the painstaking efforts that Forbes takes to compile their list of the richest people in America and the world, they inevitably miss some people that should be on the list and include people that should not be. Forbes says that some billionaires are very cooperative with their efforts and provide documentation for their assets and companies, while others are less forthcoming. However, just because a potential Forbes 400 member is cooperative with the business magazine, that doesn't mean that they are providing Forbes with accurate information. Some candidates for the list inflate their assets to appear higher in the rankings, while others intentionally downplay their wealth to avoid publicity and scrutiny.
Until recently, outside of the Houston elite and automotive industry, few knew the name Robert Brockman. The former executive founded Universal Computer Systems, Inc. (UCS), a software company that would go on to merge with Reynolds and Reynolds, the leading auto dealership software provider in the U.S. Following the merger, Brockman became CEO of Reynolds and Reynolds.
Brockman was one of the first software executives to focus on locking customers into long-term contracts for essential products. The software that Reynolds and Reynolds sells is considered essential for auto dealers in their management of many aspects of their business, including conducting credit reports, pricing, promotions and inventory control. So essential, that Reynolds and Reynolds and its main competitor have been subject to an antitrust probe by the Federal Trade Commission.
Brockman built Reynolds & Reynolds into a company with annual revenues of about $1.4 billion. By all measures, Brockman seemed to be living the American dream. The CEO rose from relatively humble beginnings in St. Petersburg, Florida, to owning a 17,000-square-foot mansion in Houston and a 5,800-square-foot home in Aspen, Colorado; not to mention, the Bombardier private jet and 209-foot yacht. However, on October 15, 2020, things took a turn for the worse for Brockman.
“Today’s indictment reflects the Department of Justice’s commitment to finding and prosecuting the costliest and most sophisticated tax crimes in the United States,” said Principal Deputy Assistant Attorney General of the Tax Division Richard E. Zuckerman.
A federal grand jury in San Francisco had indicted Brockman on 39 charges, including tax fraud, wire fraud, evidence tampering and money laundering. The charges stemmed from an alleged decades-long scheme to conceal approximately $2 billion in income from the IRS as well as a scheme to defraud investors. According to prosecutors, the charges against Brockman represent the “largest-ever” tax evasion case in the U.S.
The indictment says that Brockman used a series of offshore entities based in Bermuda and Nevis to hide income earned on his investments from the IRS. As part of the alleged scheme, Brockman directed untaxed capital gains income to secret bank accounts in Bermuda and Switzerland. Prosecutors accuse Brockman of backdating records and using encrypted communications and code words to communicate with a co-conspirator.
According to an affidavit from Brockman’s wife, his Bermuda trust has assets of at least $7.7 billion, including $1.4 billion in Swiss bank accounts. Other reporting has suggested the trust could be valued as high as $10 billion. This amount of wealth would rank Brockman around 50th on the Forbes 400 list, higher than such titans as Leon Black, George Sors, Charles Schwab and Jack Dorsey. Brockman has never appeared on the Forbes list.
Brockman has pleaded not guilty to the 39 charges he faces and his attorneys have argued he has dementia and is not fit to stand trial. According to court filings, a competency hearing is scheduled for September.
Integral to uncovering Brockman’s alleged scheme to defraud the American people, was the IRS and their criminal investigators. However, despite what appears to be good work by the IRS in the Brockman case, the agency is in dire straits. IRS Commissioner Charles Rettig told lawmakers in April that his agency is collecting $1 trillion less than the federal government is owed in taxes every year. Rettig blamed the inability of the IRS to collect taxes on errors, fraud and lack of resources to enforce collections.
For decades, Republicans have attacked the IRS and done everything in their power to defund the agency. Between 2010 and 2018, Congressional Republicans successfully shaved roughly 20%, when adjusting for inflation, from the IRS budget and the agency subsequently lost 17,000 enforcement workers. These cuts resulted in IRS audits falling around 55% over that time, from around 1.7 million audits in 2010 to just 770,000 audits in 2019.
Presently, Republican in Washington are rallying against President Biden’s plan to increase IRS funding by $40 billion as part of his infrastructure package. Leading Senate Republicans are falsely asserting that increasing IRS funding will harm law-abiding Americans.
Senator Barrasso (R-WY), chair of the Senate Republican Conference, told Axios that "spending $40 billion to super-size the IRS is very concerning," and "law-abiding Americans deserve better from their government than an army of bureaucrats snooping through their bank statements."
Senator Cruz (R-TX) has also attacked Biden's plan to increase IRS funding saying, "Throwing billions more taxpayer dollars at the IRS will only hurt Americans struggling to recover after waves of devastating lockdowns. ... Instead of increasing funding for the IRS, we should abolish the damn place."
The truth is that increasing IRS funding will benefit average, law-abiding American because they will no longer be taken advantage of by wealthy criminals. IRS studies have shown that under-reporting for taxpayers was far worse for the top 1% of earners than the bottom half of the income ladder. According to the National Bureau of Economic Research, the top 1% of earners account for more than a third of all unpaid federal taxes. These uncollected taxes cost the federal government roughly $175 billion a year in revenue.
In addition, President Biden has said that any new funding for the IRS will go towards increasing IRS oversight of high-income earners and corporate tax returns. In the mid-2010s, the IRS audited close to 30% of the returns of the richest 1% of Americans. By 2019, IRS audits for the richest 1% had dropped under 10%, and Americans with income of $1 million or more faced less than a 1% chance of being audited.
So why are Republicans really so resistant to increasing funding for an agency that generates $6 for every additional dollar invested in it? Big Republican donors do not want to pay their fair share in taxes.
On July 8th, several conservative groups, including the Committee to Unleash Prosperity, FreedomWorks, and the Conservative Action Project, released a letter to congressional Republicans urging them to fight any budget increases to the IRS. These groups are funded by Republican and Libertarian donors who are not afraid to spend their money to influence elections.
The Coalition to Protect American Workers, founded by Trump’s director of legislative affairs Marc Short, has already purchased “multiple” six-figure ad buys across the nation targeting Democrats and Republicans who support increasing IRS funding. Several additional groups bankrolled by major conservative donors, including the Mercer Family Foundation, the Sarah Scaife Foundation and Donors Trust, are also against increasing IRS funding and are not afraid to spend money to get what they want.
Which brings us back to where we began. Robert Brockman, the billionaire accused of running the biggest tax fraud scheme in U.S. history, was also a prolific Republican donor. In 2017, Brockman donated over $80,000 to the National Republican Congressional Committee (NRCC), which works to elect House Republicans. Brockman also donated more than $100,000 to groups connected to former Republican House Speaker Paul Ryan. In addition, during the 2012 presidential race, entities connected to Brockman donated around $1 million to a super PAC backing Mitt Romney. Brockman’s donations to the NRCC, Speaker Ryan and Mitt Romeny helped to bolster their attacks on the IRS and the graduated income tax.
The inadequate funding of the IRS is not only hurting the average working class American who pays their taxes, but it is antithetical to what America stands for. In America, we believe that the law is to be applied equally, without fear or favor. By not sufficiently funding the IRS, some wealthy individuals have been able to take advantage of the American people by not paying their fair share in taxes. Adequately funding the IRS will not only help restore greater faith and fairness in our government, but it could also help shrink rising deficits without raising taxes. There are many more Robert Brockman’s out there and the IRS needs to find them.
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