"First they came for the communists, and I didn't speak out because I wasn't a communist.
Then they came for the socialists, and I didn't speak out because I wasn't a socialist.
Then they came for the trade unionists, and I didn't speak out because I wasn't a trade unionist.
Then they came for me, and there was no one left to speak for me." -Martin Niemöller
Game, set, match... right? Brevity is the key to good communication; you made your point, here's a reference to Godwin's Law?
Well, if it's true that "The constitution stops where the Internal Revenue Code begins", I think it's worth examining why this is such an egregious violation of public trust. So, with that in mind, let's dive into why it's so worrying that the IRS can (and will) target based on ideology... no matter where you fall on the political spectrum.
Let's Back Up - What Did the IRS Do?
In a nutshell, the IRS recently issued an apology for unfairly targeting 501(c)(4) organizations which were formed with the words "Tea Party", "Patriot" or "9/12" in their names. All of those phrases and words are overt or not-so-overt references to the Tea Party movement (generally a conservative movement) which gained prominence before the midterm elections in 2010. Apparently all of this was directed by a field office in Cincinatti (As I went to press the story is changing... D.C. might have been involved). Anyway, when the higher-ups got word, they apparently said to knock it off.
Did it stop? Well, no - it got more sophisticated. Instead of targeting groups based on words in their titles, they started targeting groups based on their objectives. The objectives they targeted now were “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform movement” (according to the soon to be released audit). If you drew a Venn Diagram of groups wanting to limit Government growth and groups with 'Tea Party' in the title? You'd have a circle. That's right - instead of knocking it off, they doubled down and made their targeting more sophisticated.
And why issue this apology now, more than 2 years after the policy started and 2 years after authorities at the IRS knew about it? Well, because of the aforementioned audit. Once it became obvious what the contents of the audit would be ... well, an apology is better late than never.
The Political Response
Predictably, responses to the scandal have divided based on the source's position on the right/left political spectrum. From what I can seen, the major argument on the left is that 501(c)(4)s are being abused, so it's too bad this will now hamper enforcement (see an example of the genre below). It's a nice dodge, but it doesn't excuse the lack of targeting of groups associated with, say, Occupy Wall Street. On the right? Well, the IRS is being targeted, but also President Obama. While IRS related scandals do smack of Nixon, and it's true that Harry Truman established the buck stops at the President's desk - I still think it's premature and unfair. The President was a little late in the news cycle with his outrage (Monday) at the IRS, but I won't fault him for not commenting on a fluid situation until the weekend clarified things. Another thing - the director of the IRS at the time, of course, was appointed by former President George Bush (43). Hopefully (well, it's a weird thing to hope for...) it stops at the field office in Cincinnati, but it'll soon be borne out.
Sadly upshot of this scandal will be no scrutiny for anyone, rather than the across-the-board scrutiny c4s deserve.
Sadly upshot of this scandal will be no scrutiny for anyone, rather than the across-the-board scrutiny c4s deserve.
— Matt Yglesias (@mattyglesias) May 13, 2013
The political response is disappointing in a major way. I sympathize with conservative complaints about being unfairly targeted - but I also have no doubt that if the parties were flipped, conservatives would be excusing the scrutiny in some way. The biggest issue here is at the IRS, and the fact that low level agents in Cincinnati can make hugely disruptive policy changes to an organization as powerful as the IRS.
On Taxes and Discrimination
It's funny, albeit in a sad way, to see people defending the policy on its face. The aims of 501(c)(4) groups have certainly expanded a bit ever since Karl Rove (amongst others) started to form charitable groups with political aims a few years back. However, targeting based on which politicians a group tends to help is crossing a bright line.
We already permit (and accept) IRS discrimination. Think about it - the IRS disproportionately targets certain deductions like the home office deduction, and gives extra scrutiny to small business owners. It pays special attention to people of great means who make many foreign transactions, especially with those who invest money overseas. Why, because those people are more likely to cheat? Well, no - not in reality. Believe it or not, most tax cheating happens in a more modest part of the income spectrum - lower and middle income earners who deal with cash. Think any tipped industry... the IRS claims that waiters and waitresses under-report their tips by a whopping 84%!
So why target people with home offices, small business owners and the like? In the apocryphal words of Willie Sutton (on robbing banks), "that's where the money is". Finding a few million unreported foreign earnings is worth a lot more than busting 50 waiters for pocketing tips.
So, yes - discrimination is great in an organization dedicated to collecting money when it is based on expected value, measured in money. What isn't okay is selective enforcement based upon the stated aims of a group following the same tax code as other groups.
Where to Go From Here
Well, (also predictably) conservatives asked for the IRS Commissioner at the time to step down. The problem? The IRS currently has no commissioner, as Douglas Shulman stepped down in November. Since there is no symbolic resignation that can happen now (other than the resignation of 'low level field agents'), the IRS needs to make something clear:
- The Internal Revenue Service should only discriminate based on potential added revenue. Just like with law enforcement and crime, it doesn't take an 100% clearance rate to discourage tax cheating.
- The IRS shouldn't discriminate based on political ideology (or for that matter, anything that doesn't directly relate to revenue). Nixon's enemies list should have put an end to this, but recently IRS enforcement has been targeting conservatives. (Here's another example).
- The IRS is an enforced monopoly which obviously needs more checks and balances. If low level field agents can wag the dog and enforce their biases and the organization only apologizes after an audit years later - well, in a phrase, "that's not enough".
The Most Likely Path
I'm more pessimistic than that. This will probably just end up going down as a weird political story since the sides are mostly entrenched - a few more apologies, maybe some symbolic bills... then nothing for a while.
Remember, the IRS is the agency tasked with enforcing the details of the Patient Protection and Affordable Care act. If the IRS is targeting politics today, will that be better or worse once they have access to medical data? And it's not just medical data - the bounds of IRS data collection are rapidly shrinking.
I'm hope I'm just a cynic - but when I run for president and a field agent leaks the details of my teenage acne treatment, and reveals my opponent's long held prescription for Viagra... I'll look prescient.
How would you change things?
