IRS scandal makes case for tax reform

The IRS administers Obamacare and made a rule the Supreme Court might have to strike down.
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The IRS scandal grows by the hour. Every hour shows more proof that the Internal Revenue Service behaved badly, and always has. But people aren’t looking at the real scandal. The real scandal is a tax code that needs an IRS to enforce it. Our tax laws let, even make, the IRS ask things about you that are none of anyone’s business but yours. Such laws are not fit for governing a free people.

The latest IRS news

Representative and Speaker of the House John Boehner (R-OH) laid it on the line a few minutes ago:

I don’t want to know who is going to resign. I want to know who is going to jail over this!

Jail. That’s a fighting word. CNAV never knew that John Boehner had it in him (and could suggest that a lot of people ought to go to prison over many things beyond the IRS behaving badly). So what could prompt this normally unambitious, unassuming, limp-wristed Speaker to speak thus?

The American people found out last week that the IRS has targeted “Tea Party” and “Patriot” groups. Lois Lerner, the officer-in-charge of screening Forms 1024 (the “501(c)(4) application”), blamed low-level office drones in the Cincinnati, Ohio office. Never mind that the Cincy office is the main office for handling your Form 1024. (Or Form 1023, the “501(c)(3) application,” for that matter.)

Well, that did not hold for long. The Inspector General for Tax Administration was about to report that Lois Lerner knew about this bad IRS behavior in June of 2011. Worse: then-Commissioner of Internal Revenue Douglas Shulman told a Congressional committee, with a straight face,

There’s absolutely no targeting. This is the kind of back and forth that happens when people apply for 501(c)(4)….

A bald-faced lie. We now learn that most liberal groups would get their 501(c)(4) letters within ninety days – as the IRS often advertises. Conservative groups often had to wait 27 months. That time frame is significant: the IRS instructs non-profits to apply for their tax exemptions within 27 months of forming, for the IRS to recognize them retroactive to their date of forming as tax-exempt.

The IG report is now out. It lays the blame squarely on the IRS for delaying these applications. It says the IRS used “inappropriate criteria” to flag Tea Party and other conservative applications for review. The IRS then didn’t attend to them as fast as they did other applications. Finally, the IRS asked for information that the IG says was “not necessary.” (See also this analysis at The Washington Post.)

Last night, de facto President Obama admitted the IRS “failed” the country. And for what it’s worth (which might not be much), the FBI will now investigate the IRS.

Nor did the IRS stop with Tea Party and Patriot groups. The IRS moved against any group advocating for Israel. And they even moved against Franklin Graham, who now runs Billy Graham’s ministries.

Liberal attitudes color how they see the IRS

New York IRS office

New York office of the IRS. Photo: Matthew G. Bisanz, CC BY-SA 3.0 Unported License.

Exhibit A: Paul Waldman, a progressive opinion maker. In this “special to CNN,” he says what he’s really afraid of:

The danger now is that because of this affair, instead of scrutinizing all 501(c)(4) applications regardless of the applicants’ ideological perspective, a chastened IRS will let more and more applications slide by with minimal inspection.

And elsewhere in his piece, Waldman says what he really wants: that only those organizations that exclusively do “social work” get a tax exemption. And what does “social work” mean to a progressive? Redistribution of wealth. He wants to see the rules that held before Citizens United v. FEC, and that the only organizations allowed to make political speech, and not pay taxes on the money they take in, would be labor unions.

Exhibit B: Alex Seitz-Wald, at Salon.com. In a piece yesterday, he repeated the meme that “a makeshift enforcement test” was all that was at work in the IRS Cincinnati office (and other offices). Obviously he wrote before the IG report came out. He then scoured the archives of the IRS and turned up three cases of inconsistent, or arguably selective, application of the 501(c)(4) rules against liberal groups:

  • A chapter of the NAACP.
  • All Saints Episcopal Church, Pasadena, CA
  • Greenpeace International

Senator Harry Reid (D-NV) said the same from the floor of the Senate. But what Senator Reid did not mention is that at least eight of his colleagues leaned on the IRS to “crack down” on Tea Party and Patriot groups. They even said, in writing, that if the IRS couldn’t rein in those groups, the Senate would legislate against them.

In 2010, [Senator] Max Baucus [D-MT] wrote a letter to the director of the IRS saying, “Go investigate these kinds of groups.” We had Chuck Schumer [D-NY], who has been stirring this around for a number of years, by 2012 he goes out and gives a similar tough letter to the head of the IRS saying, “Look at these groups,” and [he] gets six others to sign the letter.

Make that seven: Al Franken (D-MN), Jeff Merkley (D-OR), Jeanne Shaheen (D-NH), Tom Udall (D-NM), Michael Bennet (D-CO), Carl Levin (D-MI) and Sheldon Whitehouse (D-RI). If the Senate had any character, it would expel them all. (Could this be why Max Baucus will not seek re-election?)

Matt Miller hinted darkly that the orders could have come from Obama himself, and showed how. That’s why an FBI investigation might not be enough.

The real scandal: why we even have an IRS

But so far, no one has yet asked the right question. The right question is: why do we need an IRS? Why do we need an agency of the government that asks you for the kind of information an identity thief would love to have? If anyone other than the IRS asked you half the questions on Form 1040 (a personal or family income tax return), would you not round on that person and snarl,

Nunnayer d__n bizznizz!

To be sure, partners, shareholders, members of non-profit companies, and the like might like to know the details on Form 1065, 1120, or 990. Those are the income-tax returns for partnerships and corporations, and the “information-only” report for non-profit groups. But does anyone outside the partnership or company have to know these details? Only the IRS.

And what does the IRS do with this information? Sometimes they share it with people’s ideological enemies. The liberal group ProPublica admitted the IRS gave them information from the Forms 1024 on 31 conservative groups after the 2012 federal election. ProPublica knew better than to share financial information – and that’s the kind of information they got. Worse: they asked for information on 67 groups, including conservative, liberal, and middle-of-the-road – and got information only on 31 conservative groups. (Or so they say. That the IRS would even give them the time of day is a scandal in itself. And why ProPublica implicated themselves in this kind of gossip-mongering, no one yet knows.)

Merely firing the current Acting Commissioner of Internal Revenue, and Ms. Lerner, as Rep. Sander Levin (D-MI) now wants to do, will not suffice. Even a thorough housecleaning would not solve the problem.

The problem is with the IRS itself. “The power to tax is the power to destroy.” Everyone in the IRS knows this. They are a gang of willing hatchet men, willing to wield their hatchets on behalf of whoever happens to be President at the time.

All the more reason to abolish, not just the IRS, but a tax code that makes any of its activities necessary. And that means abolishing all income taxes and laying and collecting only those “taxes, duties, imposts and excises” that the Constitution, before Amendment XVI, authorizes Congress to lay and collect.

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Terry A. Hurlbut has been a student of politics, philosophy, and science for more than 35 years. He is a graduate of Yale College and has served as a physician-level laboratory administrator in a 250-bed community hospital. He also is a serious student of the Bible, is conversant in its two primary original languages, and has followed the creation-science movement closely since 1993.

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