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Tuesday, May 14, 2013

The IRS Scandal, Day 5

Prior TaxProf Blog coverage:

http://taxprof.typepad.com/taxprof_blog/2013/05/the-irs-scandal.html

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Obama should not be allowed to simply throw low- (or even high-) ranking IRS officials under the bus and declare its time to move on. This is not the first time he or his administration has shown at a miminimum a lack of respect for the use of agencies like the IRS to intimidate political opposition -- "jokes" in speeches, comments about the Koch brothers, etc. Is it a mystery that an administration that has invested so much seeking to criminalize dissenting speech or complaining that too much dissentng speech has been made not criminal, would incite this kind of behavior down the ranks? Shades of Henry II...

Posted by: MG | May 14, 2013 5:47:53 AM

I liked you better with the goatee.

Posted by: Thomas Ashley | May 14, 2013 6:29:55 AM

We need some IRS affirmative-action reverse discrimination against leftist groups to make up for past discrimination against the tea party type groups.

Posted by: Daedalus Mugged | May 14, 2013 6:57:44 AM

I have a solution to this and most, if not all, cases of what's been called "crony capitalism". The idea of ending all taxes on businesses, and financing government entirely on individual income taxes, is probably an anathema to most Americans who feel businesses should "pay their fair share". But consider these points:
1. Where but from their customers, you and me, does a business get money to pay their taxes? You’re paying those taxes with each purchase, but they’re hidden from you. Wouldn’t “transparency” dictate that you see when you pay the cost of government?
2. We decry “crony capitalism. Why? Does it give some enterprises a preference over their competition, in exchange for favors from campaign contributions to outright bribes to law makers? If you think all businesses should be on an equal footing, how else would you accomplish such a condition? If you’d like to get corporate money out of elections, how better than to eliminate incentives to buy those lawgivers?
3. Health care for employees gives some tax subsidized health care at the expense of others. If there was no tax to avoid, it would put all workers on the same level playing field. To compensate for this, all health care net expenses would be made exempt from taxation.
4. Having the lowest possible taxes on businesses would make the product of American labor competitive in the world market while preserving higher take-home wages.
I'd be pleased to see any comments on this radical solution. Of course it would affect tax lawyers.

Posted by: Tom Beebe | May 14, 2013 7:05:58 AM

The WH didn't know about this, or for that matter the IRS targeting of conservative donors and pro-Israel groups. They didn't know about the targeting of AP reporters by DOJ. They didn't know about Benghazi being a terrorist attack. They didn't know about Pigford. They didn't know Obamacare implementation was going to be a disaster.

But we can still trust the WH because the Prez *totally* knows what's going on in all the other areas the government is responsible for. Except the areas where the government is screwing up. He's got no knowledge of that. Or it's above his paygrade, one or the other. Depending.

Posted by: Joe Blow | May 14, 2013 7:09:57 AM

So there are a bunch of groups that believe that taxes are illegal and unconstitutional. It seems reasonable to assume that people who believe taxes are illegal and unconstitutional might be more likely to evade taxes than those who do not believe that. It seems reasonable for the tax enforcement agency to give extra scrutiny to such groups. It is kind of like the agencies that try to prevent terrorism giving extra scrutiny to groups who believe that terrorism is an appropriate means to an end.

Posted by: Lerned Guy | May 14, 2013 7:15:56 AM

And then there is the perspective of Jeffrey Toobin in the New Yorker blog:

"In light of this, it might be useful to ask: Did the I.R.S. actually do anything wrong? . . .

"It’s important to review why the Tea Party groups were petitioning the I.R.S. anyway. They were seeking approval to operate under section 501(c)(4) of the Internal Revenue Code. This would require them to be “social welfare,” not political, operations. There are significant advantages to being a 501(c)(4). These groups don’t pay taxes; they don’t have to disclose their donors—unlike traditional political organizations, such as political-action committees. In return for the tax advantage and the secrecy, the 501(c)(4) organizations must refrain from traditional partisan political activity, like endorsing candidates.

"If that definition sounds murky—that is, if it’s unclear what 501(c)(4) organizations are allowed to do—that’s because it is murky. Particularly leading up to the 2012 elections, many conservative organizations, nominally 501(c)(4)s, were all but explicitly political in their work. For example, Americans for Prosperity, which was funded in part by the Koch Brothers, was an instrumental force in helping the Republicans hold the House of Representatives. In every meaningful sense, groups like Americans for Prosperity were operating as units of the Republican Party. Democrats organized similar operations, but on a much smaller scale. (They undoubtedly would have done more, but they lacked the Republican base for funding such efforts.)

"So the scandal—the real scandal—is that 501(c)(4) groups have been engaged in political activity in such a sustained and open way. . . .

"Some people in the I.R.S. field office in Cincinnati took the names of certain groups—names that included the terms “Tea Party” and “patriot,” among others, which tend to signal conservatism—as signals that they might not be engaged in “social welfare” operations. Rather, the I.R.S. employees thought that these groups might be doing explicit politics—which would disqualify them for 501(c)(4) status, and set them aside for closer examination. This appears to have been a pretty reasonable assumption on the part of the I.R.S. employees . . .

"It is certainly true that the I.R.S., and every other part of the government, should be evenhanded in how it applies the law, regarding liberal and conservative groups alike. If left-leaning organizations were disguising their true purposes to obtain 501(c)(4) status, the I.R.S. should have turned them down, too. And there will also be questions about how the Service, which is an independent agency, answered questions from Congress.

"But let’s be clear on the real scandal here. The columnist Michael Kinsley has often observed that the scandal isn’t what’s illegal—it’s what’s legal. It’s what society chooses not to punish that tells us most about the prevailing ethical standards of the time. Campaign finance operates by shaky, or even nonexistent, rules, and powerful players game the system with impunity. A handful of I.R.S. employees saw this and tried, in a small way, to impose some small sense of order. For that, they’ll likely be ushered into bureaucratic oblivion."

http://www.newyorker.com/online/blogs/comment/2013/05/irs-scandal-tea-party-oversight.html

Posted by: Bob | May 14, 2013 7:30:46 AM

The IRS audited E.A. Blayre III who wrote the banned book "America Deceived II" by a real outlaw author.

Last link of "America Deceived II" before it is completely censored:

http://www.amazon.com/America-Deceived-II-Possession-interrogation/dp/1450257437

Posted by: Gregg L | May 14, 2013 8:05:07 AM

Giving added scrutiny to anti-tax extremist groups is a bad thing? Isn't that what law enforcement should be doing? I kind of think that those expressing outrage now were perfectly fine with the extra scrutiny and profiling by Bush II. It always comes down to politics and who thinks they can gain political advantage. When all you have is Benghazi, one rouge tax office and a lost election you do not have much.

Posted by: George | May 14, 2013 8:05:27 AM

Did any criminal acts take place?? Should Obama appoint a special prosecutor to investigate and prosecute any one who broke the law??

Posted by: jarhead | May 14, 2013 8:30:01 AM

The silence on one issue here is deafening: Did the IRS actually find greater criminal activity or other non-compliance in the groups they targeted?

Posted by: Marcus V | May 14, 2013 10:53:36 AM