The Secret IRS Files

2022

Country/area: United States

Organisation: ProPublica

Organisation size: Big

Publication date: 08/06/2021

Credit: Jesse Eisinger, Jeff Ernsthausen, Paul Kiel, Justin Elliott, James Bandler, Patricia Callahan, Robert Faturechi, Ellis Simani, Doris Burke, Agnes Chang and Lucas Waldron

Biography:

Jesse Eisinger – Senior Editor and Reporter

Jeff Ernsthausen – Senior Data Reporter

Paul Kiel – Reporter

Justin Elliott – Reporter

James Bandler – Reporter

Patricia Callahan – Reporter

Robert Faturechi – Reporter

Ellis Simani – Data Reporter

Doris Burke – Senior Research Reporter

Agnes Chang – Creative Story Technologist

Lucas Waldron – Visual Investigations Editor

Project description:

The Secret IRS Files used a historic scoop—the greatest trove of heretofore secret financial information on the ultrawealthy ever made public—as the starting point to build a deeply reported series that revealed dramatic, systemic inequities that allow the ultrawealthy in the U.S. to pay tiny amounts of federal income taxes. Unlike most Americans, whose taxes are automatically removed from their paychecks, the ultrawealthy live in a different reality where they can overwhelmingly control what they pay—or don’t pay—in taxes. The series revealed the myriad, sometimes shocking, ways in which they do that—and how the law allows it to happen.

Impact reached:

The series led to proposed legislation (now stalled by the seeming demise of the Build Back Better plan) that would close tax loopholes on IRA accounts that benefit the ultrawealthy. And a US senator proposed a rare tax on the wealth (rather than income) of America’s richest, precisely what ProPublica focused on. The series also sparked a counter-reaction by Republican senators, who have fulminated against the fact that tax information of the nation’s wealthiest people was provided to ProPublica, as well as ProPublica’s willingness to publish it (see our editor’s note explaining why we published private information). Indeed, according to recent reporting by Axios, the information provided to ProPublica forms a key element of the party’s attempt to take on President Biden. Should the Republicans reclaim the House, according to Axios, the prospective Speaker, Kevin McCarthy, is planning a series of investigations to “deflect attention” from the commission investigating the Jan. 6 assault on the Capitol and “stoke culture wars for 2024.” First on McCarthy’s list is an investigation of the leak that formed the basis for ProPublica’s series. Certainly, that qualifies as anything but an endorsement by the Republican legislators. But their efforts to use the leak against the IRS and the president—and along the way, use the government’s might against the press—is a testament to the crucial importance of the information that has been uncovered. More broadly, ProPublica’s reporting has prompted a national conversation that penetrated multiple realms, from calls for reform, to an awareness of wealth as a tax issue in reporting on the subject, to a change in the public discourse such that when Elon Musk was named Time’s Person of the Year in December, there was an immediate backlash in the press and social media that cited Musk’s failure to pay taxes.

Techniques/technologies used:

Two journalists, one from our data team and the other a data-savvy reporter from the wider newsroom, spent months transforming what was largely an undifferentiated mass of data, with millions of bits of information identified only by arcane tax jargon into a searchable SQL database that allowed reporters to process the information in a way that would let them identify patterns and glean insights.

We also relied on a variety of technologies to communicate and collaborate securely in order to avoid compromising our sources and to protect the sensitive information we obtained. We primarily relied on Python to build this system. Unfortunately, we cannot be more descriptive than this, out of an abundance of caution for protecting our sources.

In addition, to compare the wealth and taxes of billionaires to typical Americans, we performed a unique analysis of the Survey of Consumer Finances. We calculated how much a typical working-age, wage-earning American earned and how much wealth they accumulated, which we then used to calculate their taxes in recent years. In doing so, we were advised by a former Federal Reserve economist who worked on the SCF and had used it to study the ways in which typical Americans build wealth over their lifetimes. We used R to assist with this analysis. The result was a more accurate way of comparing the tax situations of the ultrawealthy to that of typical Americans.

What was the hardest part of this project?

Obtaining secret information is every journalist’s dream, of course, but the good fortune of receiving records obscures the intense efforts ProPublica invested in both validating the information and extracting meaning from it. Reporters and researchers spent months combing through everything from Securities and Exchange Commission filings and lawsuit records to announcements of lottery winnings, as well as interviewing a variety of sources, to confirm that the data was accurate. That was in some ways easier than trying to then make sense of millions of numbers, particularly given that the reporters were limited by the need to keep the information confidential in the early months, which in turn limited how much they could reveal in interviews with experts — and in some cases prevented it entirely.

In addition, tax law is incredibly complex and has evolved greatly over time. That made performing analysis and finding clear and compelling storylines challenging for each and every story in the series.

What can others learn from this project?

Why did ProPublica receive the IRS trove rather than another publication with far greater resources? One clue was the extraordinary efforts ProPublica had previously devoted to reporting on the failures of the tax system: The 17 articles in its “Gutting the IRS” series investigated everything from the stripping of the agency’s budgets, to its inability to take on the rich, to the fact that the poor were increasingly more likely to be audited than the rich.

ProPublica also has a long track record of doing sophisticated data analysis, which perhaps made us a more likely candidate to receive such material and also allowed us to hit the ground running after receiving the data set.