Paul L. Caron

Tuesday, May 14, 2013

Jon Stewart and Vic Fleischer on the IRS Scandal

NY Times DealBookNew York Times DealBook:  Congress’s Role in the IRS Focus on Conservative Groups, by Victor Fleischer (Colorado; moving to San Diego):

Outrage continues to escalate over the revelation that IRS employees focused on conservative groups applying for tax-exempt status. The indignation is understandable: political targeting is an abuse of power, and the idea of using the IRS to go after one’s enemies is a classic dirty trick. Unfortunately, the incident provides a new fuel source for the paranoid style in American politics.

The reality is that this is a story of institutional incompetence. And Congress should share the blame.

The root of the problem is poor institutional design, not a political conspiracy. Current law forces the IRS to enforce a vague set of campaign finance laws that have next to nothing to do with raising revenue. The conservative groups at issue were applying for tax-exempt status as “social welfare” organizations rather than Section 527 tax-exempt political organizations. The chief benefit of becoming a social welfare organization is the ability to keep the names of one’s donors private. These social welfare organizations may engage in issue advocacy, and may do some lobbying, but are not supposed to engage in political campaigning. How much political activity is too much? No one really knows.

The IRS is supposed to enforce the tax code, not administer a byzantine campaign finance system. It is good at gathering and processing enormous amounts of data that help the nation raise revenue. Under current law, however, it has little choice but to exercise discretion in the constitutionally dangerous waters of campaign finance.

As Lloyd Mayer, a law professor at the University of Notre Dame, explained, “because Congress and the Treasury have left both the definition of political activity and, for [social welfare organizations], the amount of permitted political activity uncertain, the I.R.S. is required to make broad inquiries and to use politically sensitive criteria to decide if a given organization qualifies for tax-exempt status.” ...

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I promise, I quit reading as soon as I saw "And Congress should share the blame."

Posted by: Woody | May 14, 2013 7:33:07 PM

Another pathetic defense by a tax professor. I truly don't get it - given the limited yet damning information that has been released to the public thus far (including the leaked appendix pages from the TIGTA report), why are these profs so quick to give the IRS the benefit of the doubt? Even if you accept Fleischer's argument that Congress created a screwed up system that the IRS is not equipped to handle (which I fully agree with), doesn't it still seem just a bit fishy that only conservative/tea party groups were targeted? Surely the IRS was also receiving applications from liberal groups that could have been tagged with keywords such as "progressive."

Here's my hunch: a handful of lower level employees decided to target conservative groups for political purposes. Higher ups in the IRS eventually shut this down but they intentionally kept it quiet to avoid controversy. My guess is that they were interested in protecting themselves rather than the Obama administration in general. The story would obviously be much worse if there is in fact evidence that political operatives within the WH were involved, but the story is bad enough if confined to lower level/career employees. The bottom line is that the truth needs to come out.

Oh, and Vic, if you're not comfortable with the IRS enforcing "a byzantine campaign finance system," what do you think is going to happen when the IRS starts enforcing Obamacare? Given your feeling on this issue, it seems like you should have the same concerns in the Obamacare context. Seems article worthy to me.

Posted by: JK | May 14, 2013 3:01:35 PM