MAGA's new gift
A new MAGA finance rule to reduce reporting burdens on businesses is in effect. Tax cheats and criminals all over the US are cheering. A WaPo article, Treasury ends ownership reporting rules for U.S. companies, reports about reporting rules that MAGA is gutting. The rules were put in place to combat and reduce money laundering and other financial crimes. Now, tax cheats and criminals can better hide and keep more of their assets, legitimate and illegitimate.
Trump's Treasury Dept finalized the new rule yesterday. It exempts US companies and individuals from reporting beneficial ownership information to the Treasury Department's financial crimes unit. That obliterates reporting requirements established under a 2021 law aimed at combating illicit finance and tax cheating.
Not only is Trump gutting the reporting rule, he goes a big step further. Trump's treasury will delete the information previously reported by Americans. The gutted rule was simple in principle. If a person ultimately owned or controlled a corporation or LLC, federal financial-crimes investigators could identify that person through a confidential database. The information was not a public registry. This isn't a minor regulatory tweak. This is deliberate removal of a fundamental state capacity. The government's ability to determine who owns what in a state-created corporate entity is now gone. Here's FinCEN's FAQ page to bring tax cheats and criminals up to speed on the new layer of secrecy that MAGA is giving them.
The size of the burden that MAGA claims existed under the old rule does not remotely justify the scale of this new rule. For an ordinary small business, disclosure meant entering the names and identifying information of the people who actually own or control it, using a free electronic system. FinCEN estimated that a straightforward initial filing would take about 90 minutes, with more complex ownership structures taking longer. But complexity is often precisely what investigators need to untangle who owns what. An honest government concerned in good faith with efficiency and reduced paperwork could have simplified forms, extended deadlines, funded free assistance, etc. Instead, Treasury chose categorical exemption to obliterate the targeted beneficial ownership reporting. That's real deregulation of special interests at the expense of the public interest!
How much is this gonna cost us?
This one will have some bite. The consequences cannot yet be measured precisely because Trump's administration dismantled the reporting system before it could generate years of enforcement data. The IRS projects a 2022 gross tax gap (owed but unpaid taxes) of $696 billion and a net gap of $606 billion annually. Those official figures are conservative, not a full census of sophisticated tax evasion (tax cheating). The IRS and outside analysts acknowledge major measurement difficulty involving foreign and illegal activity, complex pass-through structures, digital assets, and corporate non-filings. Research on top-income evasion indicates that conventional audits miss a lot of hidden offshore and complex-entity evasion. A cautious estimate is that eliminating ownership data could cost the Treasury ~$5 billion annually in additional uncollected taxes. That does not count undetected fraud, laundering, corruption, sanctions evasion, or other non-tax violations.
Now, tax cheats can put a business, investment account, real estate holding, or other shielded asset in the name of an LLC controlled through nominees or layered entities. The cheater can then claim that income or assets belong to a separate company, not to them. That allows things like (1) business income or capital gains to be withheld from a personal tax return, (2) concealment of property and investment income from tax authorities, (3) shifting and laundering of legal and criminal money through an entity owned by another entity, e.g., in a secrecy jurisdiction, so the human owner is difficult or impossible to identify, and (4) frustrate collection of tax debts, civil judgments, child support, or restitution by appearing to have fewer assets than the cheater/grifter actually controls.
In addition, MAGA's new secrecy shield helps people who need to hide a conflict between their official or fiduciary roles and private financial interests. A public official, contractor, executive, politically connected intermediary, or grifter can use an entity to disguise that they are on both sides of a deal. A government official can steer a contract, permit, subsidy, or asset sale to a company they secretly control. A vendor creating a hidden related-party company can send out inflated or fictitious invoices. A donor, lobbyist, or politically exposed person can conceal their financial stake in a recipient of government action. The possibilities are just about endless!
Impacts on the rule of law
This new rule is part of a broader MAGA governing strategy. MAGA's authoritarian and kleptocratic policy is to weaken or eliminate the federal government’s capacity to regulate, investigate, tax, and expose powerful but corrupt private actors. MAGA's demagoguery calls the resulting transfer of power “freedom” or “relief from burdens”, but it relieves only special interests at the expense of the public interest and average individuals.
That policy design reveals MAGA priorities. The administration here did not just lower a compliance cost. It privileged and sanctified anonymity for domestic wealth and corporate power over the public’s interest in enforcing tax law, tracing criminal proceeds, detecting conflicts of interest, and holding the real beneficiaries of corporate activity accountable. The beneficiaries are not ordinary citizens trying to run transparent businesses. They are people and institutions for whom concealment is extremely valuable. They are precisely the people and interests that a functioning rule-of-law state should be able to easily scrutinize, not shield.
Q1: Is it credible for MAGA elites to tell us this new rule was too much of a burden on businesses to report who owns what?
Q2: Can you see why tax cheats and criminals will love using this new way of doing business?
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