Monday, October 09, 2017

Who Cares That There Was Never a Scandal At the IRS? We All Should

by Neil H. Buchanan

Do you remember "the IRS scandal"?  If you do, you remember a lie.  Granted, it was an elaborate, innuendo-driven lie that many people repeated endlessly, trying to get you to believe that there was a scandal.  But it was still a lie, and a damaging one at that.

The reason to revisit this issue now is that the Treasury Inspector General for Tax Administration (TIGTA) issued a report last week that showed that the supposedly scandalous behavior never happened.  In other words, the central lie behind this non-scandal has been definitively undermined.

This is, or at least ought to be, big news.  Former President Obama and his supporters should view this as an opportunity to take a victory lap.  After more than four years of Republicans' efforts to try to backfill their absurd claims of a big political scandal, the entire story has (again) collapsed.

It is not just big news, but it is also wonderful news.  Anyone who cares even a whit about the rule of law should be delighted to know that the supposed abuse of government power that Republicans have been screaming about since May 2013 simply never happened.  Unsurprisingly, that is not how Republicans are reacting.

For those who might have blissfully forgotten the details of this particular non-scandal, this all began when an earlier TIGTA report in 2013 addressed an inquiry from Republicans in Congress about whether the IRS was using politicized criteria when reviewing applications for a particular kind of tax-exempt status.

To qualify for that status, an organization cannot engage in political activities.  At least, that is what the law says, with the relevant tax code provision (section 501(c)(4)) saying that organizations that are "operated exclusively for the promotion of social welfare" are eligible for tax-exempt status.

Let us skip over the fact that the Treasury Department has interpreted "exclusively" to mean merely "more than half of the time," which makes it inappropriately easy for politically oriented groups to qualify for this kind of tax exempt status -- a status that, by the way, allows the groups to receive anonymous donations.

What we learned in 2013 is that the unit within the IRS that reviews 501(c)(4) applications had been using the names of organizations as an initial filter to determine who was likely to be engaged in impermissibly pervasive political activity.  If a group calls itself "Ohioans United to Defeat Barack Obama's Un-American Agenda," for example, that might be a group that is mostly engaged in political activity.

What would make this a scandal?  The IRS had supposedly flagged not just "political sounding" names but names that signaled a conservative orientation, including "tea party," "patriot," "9/12."

Once that news broke, we were off to the races.  Despite a complete lack of evidence, Republicans in Congress immediately claimed that this was a political hit job directed from on high in the Obama Administration.  Not only was there no evidence to support such claims, but the TIGTA report had made clear that the IRS had already stopped using those filters.

No matter.  Republicans knew that they could make hay about this, and the two-sides-to-every-story press would surely write that "Republicans say that the Obama Administration has used the IRS to target its enemies, and although Democrats deny this, an investigation is ongoing."

The only reason that investigations continued, however, was that Republicans insisted on continuing to investigate.  Like their obsession with the Benghazi tragedy, which they could never -- even after their own endless series of witch hunts committee inquiries -- turn into a fact-based scandal, Republicans quickly turned "the IRS scandal" into their own echo-chambered conventional wisdom, evidence be damned.

Along the way, people like me would occasionally revisit the story and conclude that there was still no there there.  And even people who would typically be sympathetic to the Republicans' hyperventilations were not all on board.  For example, a year after the non-scandal broke, Chris Wallace on Fox News chastised a Republican for continuing to pursue the story after finding nothing.

The years dragged on, and the evidence continued not to pile up.  But because Republicans have a bottomless well of energy that they use to keep zombie stories alive, they could create news out of non-news simply by continuing to complain about the nonexistent scandal, calling for the impeachment of the IRS Commissioner (who had not even been there during the supposed wrongdoing) and so on.

What is new now?  The original claim was that the filters that the IRS's tax-exempt organizations unit had used were biased against right-wing groups.  Now, it turns out that even that was not true.  In addition to keywords like "tea party," the unit was also looking for words like "occupy," "progressive," and "green energy."

Actually, that information is not new.  We have known for years that the IRS was using both left- and right-oriented search terms, but this report provides exhaustive documentation of that fact.

As tax professor Philip Hackney points out, the non-scandal was always a two-part story: (1) the IRS targeted right-wing groups for extra scrutiny, and (2) the Obama Administration had ordered them to do so.

We never had any proof that the second part was true.  Indeed, as I argued all along, it would amount to political malpractice for the Obama people to engage in that kind of dirty trick, because it was so pointless.  "We're going to win by having the IRS slow down tax-exempt status applications from tiny local Tea Party groups, none of which have enough money to tax in the first place."

Now, we have proof that the first prong of the non-scandal was never true.  The IRS did use politically-oriented search terms to try to sort through applicants for inappropriate levels of political activity, but it did not do so on a partisan or ideological basis.  And even so, they stopped using those search terms, in an effort to avoid even the appearance of political intent in their reviews.

Will this stop the Republicans?  Of course not.  A New York Times story quotes the chair of the House's tax-writing committee: "This report reinforces what government watchdogs and congressional investigators have confirmed time and time again: Bureaucrats at the I.R.S. ... arbitrarily and haphazardly administered the tax code and targeted taxpayers based on political ideology."

No, the report says exactly the opposite.  The IRS covered the political spectrum, meaning that regardless of a group's apparent political ideology, they might receive added scrutiny in applying for status as a not-excessively-political organization.

And what of the press?  A Washington Post news article stated that the new TIGTA report "could undermine claims that conservatives were unfairly targeted under President Barack Obama."

Normally, I would love to make a sarcastic comment about that kind of bizarre understatement, but there is no improving on Steven Benen's take on The Post's "quite generous" choice of words: "If 'could undermine' is synonymous with 'completely discredits,' then sure."

All of this serves as a helpful reminder that the Trump Administration's blatant dishonesty is only a continuation of a strategy of lying that Republicans have been honing for years.

I recently wrote about "one-sided dishonesty" in American politics.  My claim was that Democrats are occasionally dishonest in the old-fashioned political sense, shading the truth and sometimes getting caught, whereas Republicans have applied the principles of mass production to the propagation of lies.

In that column, I noted a term coined by Paul Waldman, "the audacity gap," which he says "makes Republicans the party of 'Yes we can,' while Democrats are the party of 'Maybe we shouldn’t.'"  That Republicans are still audaciously claiming that there was an IRS scandal under Obama is one of only many examples.

Indeed, there is an interesting overlap among examples of Democrats' timidity.  The new TIGTA report notes that one of the search terms that the IRS used that would pick up left-leaning groups was "acorn."  As The Times notes, ACORN is "the acronym for the now defunct Association of Community Organizations for Reform Now."

But the interesting question is why ACORN is now defunct.  That group was itself the victim of what turned out to be a non-scandal, in which a right-wing group doctored videos to make it appear that the group was corrupt.

When that story broke, Democrats in Congress and the White House hid under their desks.  Even after it became completely clear that the whole affair was a political hit job, Democrats simply allowed funding for ACORN's community organizing activities to be eliminated, and the group died.

Similarly, when the 501(c)(4) story first broke in 2013, the Obama Administration fired the acting IRS commissioner and acted as if something horrible had happened.  (Those who remember Obama's baseless firing in 2010 of Shirley Sherrod, the victim of another doctored video, might start to notice a pattern.)

In the meantime, Republicans continue to use the IRS non-scandal as a reason to "punish" the agency with further cuts to its budget.  Even if the Republicans cannot get their act together this year to cut taxes for rich people and corporations, they can continue to achieve the same end by making it all but impossible for the IRS to catch tax cheats.

The Republicans will never admit that there was no scandal.  The Democrats will never make a concerted effort to educate the public.  And the press will continue to say that it is all very complicated and that the two sides disagree.  It is a beautifully closed system, with the only losers being the American people, who need the IRS to be able to continue to do its job.


Joe said...

Saw something a few weeks ago where true believers thought this:

warranted firing Sessions. Sessions ... TINO (Trump In Name Only)?

A true believer type online that I and someone else here regularly engage with felt this was a real scandal, though he wasn't surprised since it fit his narrative of "the left" in government. I was always doubtful but thought it might be possible that in some fashion, at least in the lower tier of enforcement, there might have been some problematic disparate impact problem. Not that it something conservatives generally think should be deemed illegal generally speaking.

I'm usually wary about just assuming there is nothing there -- often that isn't really necessary to swat away alleged problems. But, these days self-created scandals really should be carefully addressed. Give an inch, a mile will be taken.

Shag from Brookline said...

The Republican Party has long challenged the IRS in support of its "donor class" that engages in the tax audit lottery by decreasing IRS funding. Trump's tax "plan" would continue this. As I understand it, while 501(c)(4) organizations are tax-exempt, contributions to such an organization would not entitle the contributor for a tax deduction, including a charitable deduction. With the identities of contributors hidden, IRS cannot readily check if a contributor has taken such a deduction. Also, many in the "donor class" might make a contribution in the form of appreciated property, e.g., corporate stock, which the organization, because of tax-exempt status, would not have a taxable event on the sale of such appreciated property. I understand the IRS due to this non-scandal scandal has laid off implementing gift tax provisions. Such contributions can serve as subsidized estate planning for some in the Republicans' "donor class." (That could be mooted by the Trump "plan" to eliminate the estate tax.)

That Republican "donor class" includes mostly 1%ers, who, if Trump's tax "plan" were to be enacted, might be expected to politically tithe from their tax savings therefrom, augmenting the benefits already provided to the Republicans' "donor class" courtesy of SCOTUS' Citizens United. Apparently the Republicans' sense of equality is its access to campaign funds from the 1%ers aka American Oligarchs.

John Barron said...

That's silly, shag. IRS maintains a list of 501(c)(3)s, and if an entity isn't on the list, your CPA won't take the deduction.

Anyone who has read the statute (a peculiar originalist flaw) knows that none of the political entities qualified. The Revenue Ruling contradicted the statute, but as no one tried to abuse the status before, it never got corrected. When entities with obvious political purposes began invoking it, the Service began scrutinizing them, as they should have. And as most were RW, they got most of the scrutiny.

The only real scandal is that the RR hasn't been withdrawn.

Shag from Brookline said...

Not everyone uses a "CPA" or a tax lawyer to prepare returns. With a self-reporting system some taxpayers play the tax audit lottery because of the money at stake. The IRS doesn't have the personnel to thoroughly audit the situation I described or other situations in playing the tax audit lottery. How might a Roy Cohn have advised a wealthy client? John, perhaps its silly in the sense of a TV reality show, but significant tax revenues are lost because of the lack of funding for the IRS to perform enough audits that would lessen playing the tax audit lottery and providing more revenues.

That said, John, I am in accord with your 2nd and 3rd paragraphs except the report referenced in Neil's post rejected the claim you make:

"And as most were RW, they got most of the scrutiny."

John, I note you did not challenge my comments about the Republicans' "donor class," other than in your 1st paragraph on taking a charitable deduction for a contribution to a 501(c)(4) organization, which of course would not be proper. Is that silence tacit agreement?

Shag from Brookline said...

By the way, the tax audit lottery might also benefit CPAs and other preparers of tax returns who might be a tad aggressive. Perhaps there are IRS statistics concerning decreases in tax audits and decreases in IRS actions against errant tax return preparers resulting from audits. I'll try to check later.

Jonny Scrum-half said...

I "get" why Republicans (and any politician, really) lies about stuff like this, especially when the voters reward them for such lies. What I don't understand are people like Paul Caron (Pepperdine Law's Dean) or Glenn Reynolds (law professor at Tennessee), who push this BS despite, I'm guessing, not being paid for doing so. What reason do they have for ignoring the truth and spreading propaganda?

John Barron said...

shag: "Not everyone uses a "CPA" or a tax lawyer to prepare returns"

Anyone who matters to this discussion does. Along w/ my J.D., I'm a C.P.A. with an M.S. in taxation (as you seem to care about the periods, l added them). In the real world, I told my clients that I can either be a brain surgeon or a coroner--it all depends on when I get to the body. Wealthy clients know how to use the skills.

Roy Cohn wouldn't advise a client to cheat; for the right people, the income tax system is more-or-less voluntary, even today.

Our oligarchs are equal-opportunity buyers. Cory Booker and Cory Gardner got plenty of cash from Big Pharma, amd they voted accordingly.

Shag from Brookline said...

John's silence on the Republican "donor class" continues, with diversions such as:

"Wealthy clients know how to use the skills."

" ...for the right people, the income tax system is more-or-less voluntary, even today."

"Our oligarchs are equal-opportunity buyers."

It's not clear that John knows much about Roy Cohn.

Surely such a credentialed tax person is aware of the tax audit lottery.