Targeting the IRS

May 28, 2013, n:nn a.m.

Playing Politics or Just Doing Their Job?

"Tax Exempt"
David Fitzsimmons
Arizona Star, May 23, 2013

If you're having trouble reading what the Section 501(c)(4) applicant is saying, it goes like this:

"I'd like to apply for 501c4 tax exempt status as a "social welfare' group."
"No politics, here, Hawkeye. I'm Mother Theresa with tea bags. Don't tread on my fat cat backers."
"Government is not the solution. (Unless you're a corporation.)"
"Never thought I'd be using the words 'social' or 'welfare' in the same sentence." Giggle, snicker.

[And I should note, if either the Arizona Star or the brilliant and insightful David Fitzsimmons, would prefer that I take down my recommendation that you subscribe to the Star and follow David Fitzsimmons' site -- along with this particular editorial cartoon -- all they have to do is ask.]

If you guessed I'm about to say something about the recent IRS flap, you're right. If you went on to guess I'm about to suggest that IRS employees be prosecuted, or exonerated, you're wrong. ("The more information that comes out about the scandal at the Internal Revenue Service, the harder it is to say employees there erred completely in putting more scrutiny on particular groups seeking tax-exempt status. According to the New York Times, for example, several of the tea party groups targeted by the IRS were engaged in overt political activity. One group — the Wetumpka Tea Party in Alabama — sponsored get-out-the-vote training 'dedicated to "the defeat of President Barack Obama."'” Jamelle Boiule, "Some tea-party groups examined by the IRS indeed crossed the line," Washington Post, May 27, 2013.)

Why am I not yet taking sides? Because I don't think anyone -- and certainly not I -- has a clue as to what was going on in their minds when they began investigating Tea Party organizations that were seeking tax exempt Section 501(c)(4) status. And that is the information, and essentially the only information, that is needed before coming to conclusions about what went on.

If it was the case that a small cabal of partisan, rogue IRS employees decided to strike a political blow for their President during a re-election year, and focused on making life as difficult as possible for anything that smelled of right wing Obama haters, then yes, we have a problem here.

That may yet turn out to have been the case. And I haven't been following every twist and turn of this saga. But as of today I am unaware of any evidence that was the case. If it was, possibly criminal prosecutions are in order, and President Obama deserves his lumps.

But if that is not what happened, the best that can be said of the tsunami of contempt and pre-judgment that has wafted over IRS employees is that it has been grossly unfair -- and fully as much a political act as serious as what they have been falsely accused of. The worst that can be said is that these attacks do serious harm to our democracy.

Whether you think it is the role of government to care for what Jesus called "the least of these," or whether you think the only proper role of government is fighting our continuous wars and paying down our debt, the federal government needs tax revenue. And the way it gets that revenue is by way of what comes very close to being a voluntary system. There are far too few IRS employees to insure that everyone pays his or her fair share. Tearing down Americans' confidence in the integrity of their IRS comes close to being a treasonous act -- regardless of whether it comes about as a result of what IRS employees have done, or as a result of what they have been falsely accused of having done.

For starters, the use of the word "targeting" is as unfortunate as it has been deliberate. Whether we are targeting a dart board, an archery target with a bow and arrow, or a fellow human with a gun, "targeting" suggest at a minimum an intention to use force against something, sometimes out of hostility.

As I have often said, "The problem is not that corporations violate the laws; the problem is that they write the laws." There is a difference between "tax avoidance" (using the tax laws, whether you or others have written them, to legally minimize your taxes -- as Apple argues was all it was doing), and "tax evasion" (lying, or otherwise violating the tax laws).

To paraphrase former Secretary of Defense Donald Rumsfeld, "You don't collect taxes with the law you wish you had, you collect taxes with the law Congress hands you." If you and your tax lawyer think the Internal Revenue Code is more complex than it either should or needs to be, at least you only deal with it once a year. IRS employees have to deal with it many times every day.

I used to have to deal with the requirements of sections 501(c)(3) and 501(c)(4) when chair of the National Citizens Committee for Broadcasting. Both are made up of pretty fluffy stuff for even the most honorable among us. For those who wouldn't qualify for membership in that tiny group, the Code offers a great many temptations.

If the IRS doesn't have enough employees to thoroughly investigate every tax return, or request for special status, how can they decide where to put their limited resources?

The same way every other institution does. Doctors on the battlefield, or in an overcrowded hospital emergency room, use something called triage, separating the sick and injured into three groups: those who will die no matter what treatment they receive, those who will live regardless of how long their treatment is postponed, and those who will live if treated promptly and die if they are not. They are not "targeting" the last group; they are simply engaged in rational prioritizing. The management guru Peter Drucker would point out to some businesses that they were spending 90 percent of their sales force's efforts generating 10 percent of their gross sales, and 10 percent of their effort on the customers producing 90 percent. He didn't suggest they "target" those producing 90 percent, just give them a little more tender loving care. If a company is concerned that its sales force's travel expenses have been increasing too rapidly, it may chose to first focus on those employees who are the 5 percent top outliers. As we've recently learned, roughly one-quarter of the nation's 607,000 bridges need attention -- 66,749 are structurally deficient, 84,748 are functionally obsolete. We've been putting this off for at least a half-century. Now that we're going to do something about it, and we can't fix or replace all of them in a year or two, wouldn't a similar kind of prioritizing and focus be a good idea?

That's what IRS employees have to do every day. That's what I think, based on what I've read, they did here. If an increasing number of taxpayers are claiming that they are entitled to a business deduction for the portion of their living quarters in which they are "working on their business," that might call for a little more attention being devoted to taxpayers making that claim. Given the way Congress wrote the law, "more attention" might require a lot of questions the taxpayers consider unduly intrusive. The same would be true of businesses claiming expenses as non-taxable "business expenses" when the items look more like monkey business.

Whether an organization wants to offer its donors a tax deduction for contributions (501(c)(3)) or simply not have to pay taxes on its income or disclose the names of donors (501(c)(4)) each is a request to the IRS for special treatment resulting in less tax revenue for the government. And the answers, under the law, may well turn on who is doing what, and how much of it, and what can fairly be called "political" activity. The only way to find out what is necessary to make such judgments is to ask a lot of questions. That's not the IRS employees' fault. They are just doing their job. It's Congress' fault for not making more precisely clear what their standards are. And it seems to me that, like a doctor doing triage, with all the changes in corporations becoming people, the restraints off on anonymous million-dollar donations, and the new grassroots organizations on the left and right, it was a perfectly sensible thing for the IRS to do to give some attention to possible abuses.

It will be awhile before at least I have any confidence in answering the question of whether these IRS employees were "Playing Politics or Just Doing Their Job." And until we do know the answer it seems to me the less tearing down of Americans' confidence in their IRS, the better.

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The Oxymoron of "Corporate Responsibility"

July 16, 2010, 9:00 a.m.

[For BP disaster see, "Uncanny Prediction of BP Disaster & Response," June 10, 2010; "BP's Commercial: Shame on Media," June 9; "Big Oil: Calling Shots, Corrupting Government," May 26, 2010; "Obama As Finger-Pointer-In-Chief," May 18, 2010; "Big Oil + Big Corruption = Big Mess," May 10, 2010; "P&L: Public Loss From Private Profit," May 3, 2010.]

Corporate Risk Assessment and Inevitable Disaster
(bought to you by FromDC2Iowa.blogspot.com*)
Sat next to a business consultant on a recent flight. Got to talking about Massey and BP. His contention: It's all just about risk assessment. However conscious and precise we may be about the process (whether we're driving a car or drilling miles beneath the ocean's surface), it goes something like this: What are the potential rewards from our risky behavior? What are those risks? How serious would it be if the worst occurred? What is the likelihood it will occur? (Perception of risk -- or more often mis-perception -- is another matter, as when someone fears flying (despite the relatively slight risk) but continues smoking (despite its almost inevitable risks).) Anyone in business is under enormous pressure to both increase profits and decrease costs; in other words to gradually assume ever increasing risks of harm -- to employees, customers, the environment, or the global economy -- until the inevitable disaster occurs.

Goldman Sachs. "Goldman Sachs has agreed to pay $550 million to settle federal claims that it misled investors in a subprime mortgage product as the housing market began to collapse . . .." Notwithstanding the payment, "Goldman did not formally admit to the S.E.C.’s allegations . . .." Now, how credible is that stance? You don't admit to any wrongdoing, but you pay the $550 million fine anyway? Even if you earned over $13 billion, $550 million is a little more than one normally pays to settle a nuisance suit. Moreover, Goldman Sachs "agreed to a judicial order barring it from committing intentional fraud in the future . . .." What a concession from a Wall Street firm! That really stings, and should substantially cut into their future profits. Wow, agreeing to forgo the ability to engage in "intentional fraud." Sewell Chan and Louise Story, "S.E.C. Settling Its Complaints With Goldman," New York Times, January 16, 2010, p. A1.

When grief or anger become seemingly unbearable, we sometimes redirect it into humor. So it is with Harry Shearer's catchy, bouncy, "Mr. Goldman and Mr. Sachs" ("spinning gold out of flax, Mr. Goldman and Mr. Sachs"). Give it a listen; available from Amazon and iTunes.

Massey Coal. It's now come to light that Massey Coal (in whose mine 29 miners died last April) has deliberately applied its risk assessment analysis to miners' safety.

An NPR News investigation has documented a dangerous and potentially illegal act at the Upper Big Branch mine in West Virginia two months before a massive April explosion killed 29 mine workers.

On Feb. 13, an electrician deliberately disabled a methane gas monitor on a continuous mining machine because the monitor repeatedly shut down the machine.

Three witnesses say the electrician was ordered by a mine supervisor to "bridge" the automatic shutoff mechanism in the monitor.

Methane monitors are mounted on the massive, 30-foot-long continuous miners because explosive gas can collect in pockets near the roofs of mines. Methane can be released as the machine cuts into rock and coal. The spinning carbide teeth that do the cutting send sparks flying when they cut into rock. The sparks and the gas are an explosive mix, so the methane monitor is designed to signal a warning and automatically shut down the machine when gas approaches dangerous concentrations.

Howard Berkes, "Massey Mine Workers Disabled Safety Monitor," NPR, July 15, 2010.

There was a risk. But it would result in greater production -- and profits. A worst case scenario was possible, but not inevitable. Sometimes they got away with it. This time they didn't.

BP. BP didn't get away with its cost-saving risk either. By now, everyone's familiar with BP's risk assessment process. The prior blog entries on that one are linked at the top of this blog entry. That company has so often weighted potential cost savings over risks to worker safety and environmental disaster that it amasses hundreds of safety violations (including the Artic spill and Texas City) when other oil companies have less than a handful.

GlaxoSmithKline's Avandia (rosiglitazone). Public Citizen's Health Research Group reports,

3.1 million prescriptions [for Avandia] were filled in 2008. But Avandia is associated with heart failure, heart attacks, liver toxicity, bone fractures, low red blood cell count and macular (retinal) edema with vision loss.

Public Citizen petitioned the FDA to revise the labeling for Avandia due to multiple safety issues in 2000. In 2007 a study published in the New England Journal of Medicine associated the drug with a 43 percent increase in the risk of heart attacks.

"Avandia," Public Citizen Health Research Group.

As an indication of the ties between the FDA and the pharmaceutical industry, as well as the complexities of risk assessment, an FDA advisory panel recently voted 20 to 12 to recommend that GlaxoSmithKline should be permitted to continue to profit from the millions of pills. A vote of 20-12 on such a death risk reminds me of my days on the seven-person FCC, when we would vote 4 to 3 to send a colleague a get-well card. Bear in mind, this same FDA committee, by a vote of 21 to 4, agreed not only that Avandia carries a risk of death from heart attack, but that the risk is much higher from Avandia than from alternative medicines that could be used instead. Matthew Perrone, "FDA Panel Votes to Keep Avandia On the Market," AP/MSNBC, July 14, 2010.

Have you seen the latest commercial for Avandia? The list of side effects goes on seemingly forever. I don't think a diabetic should "ask your doctor if Avandia is right for you," I think if a doctor recommends it diabetics should "ask yourself if your doctor is right for you."

Other examples. These are only the most recent examples. There are hundreds of others. A couple that spring immediately to mind are Bhopal (Union Carbide chemical spill; 500,000 exposed, 15,000 killed) and Three Mile Island (partial core meltdown of Babcock & Wilcox nuclear reactor).

That the U.S. electric utilities chose to save money by managing the nation's electric grid through the Internet, rather than a more secure system, is a monumental calamity just waiting to happen. Siobahn Gorman, "Electricity Grid in U.S. Penetrated by Spies," Wall Street Journal, April 8, 2009, ("Cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, according to current and former national-security officials.").

And see generally, Nicholas Johnson, "'The Corporation' and the Search for Agreement," October 1, 2004 (a commentary prompted by the film "The Corporation").

Obama as "socialist."

Meanwhile, the Tea Party has TPed a Mason City billboard as the organization's own Mount Rushmore, likening President Obama to Hitler and Lenin and indicting the three of them as socialists. Jennifer Jacobs, "Iowa Politics Insider: More Fallout From Obama/Hitler Tea Party Billboard," Des Moines Register, July 15, 2010.

As for "Leaders Prey on the Fearful & Naive" slug at the bottom of their billboard, I'd suggest the TP folks take a look in the mirror, and a second look at those they follow on radio and TV, and as speakers at their rallies.

I won't write at length about the TP's choice and characterization of Hitler and Lenin. Obviously, they have been chosen as characters to despise, in the Republican/TP's efforts to do everything they can to make Obama fail (as they have openly acknowledged). Never mind that if he fails, America fails.

Frankly, each of the disasters noted above have involved not socialism -- government ownership of means of production -- but a form of fascism, fascist corporatism, or more simply put, political corruption, the domination of political and regulatory institutions by large corporations. "Agency capture," to a lesser or greater degree, was a factor in each of the noted disasters.

Indeed, if only Obama were a socialist we would have long since clawed our way out of the global economic collapse brought on by Goldman Sachs and others. When 80 percent of our economy is driven by consumer spending, unemployment (including that which is not reported) runs closer to 20 than 10 percent, and consumers are, not irrationally, saving rather than spending, you can't create an economic turn-around by giving money to corporate executives and calling it a "jobs program."

Darkening consumer confidence and plunging prices combined with a generally dismal outlook to dampen hopes for a quick economic recovery. . . . "Consumers are facing three major hurdles," Art Hogan, chief market strategist at Jefferies & Co., said in an interview. "They are paying down their debt, their houses are not worth as much as they were two years ago and they're staring down the barrel of 10 percent unemployment." . . . Taken together, the week's economic data suggest that a global recovery will be staggered and sluggish in getting off the ground. Consumers -- the engine of the U.S. economy -- are catching few breaks.

Frank Ahrens, "Drops in Consumer Confidence, Prices Temper Recovery," Washington Post, July 15, 2010.

Businesses won't provide additional employment until they see a reason to increse production. There's no reason to increase production unless consumers are going to spend. Consumers aren't going to spend if they're concerned they, too, may soon be unemployed.

"Trickle down" never works, but especially not at this time. What we need is trickle up.

If Obama were a socialist he would have created a federal, employer-of-last-resort, jobs program that would have immediately (FDR's programs were in place in a month) put everyone on a payroll. Give the unemployed a job, the confidence they won't be fired, and the money that goes with it, and they'll use the money to buy stuff they need, not increase their savings accounts. Their purchases will require increased production; increased production will increase private sector employment. Gradually those on the federal payroll will be picked up by private employers.

Now that's a real jobs program. Recession reversed; global economic collapse averted. Corporations profiting from their business sense, not their political dollars -- and our taxpayer bailouts of the wealthy. See generally, "Unemployment Answer is Jobs Not Bailouts," February 6, 2010.

What the TPers ought to get angry about (and, in fairness, to some extent do) is a "capitalism" in which successful businesses keep all of their profits, and unsuccessful businesses pass their losses on to the taxpayer. "Heads I win, tails you lose."

"Socialism" is the Interstate highway system, public schools, libraries, museums, local police and fire protection, the military, and a national, state and local system of parks. I kind of like that socialism, and feel that it often provides me a greater return on my investment of taxes than what I sometimes end up with from the capitalists.

How ironic that the TPers would choose "socialist" as one of their favorite pejoratives for Obama, when he is, apparently, one of the few Americans who appears to be even more frightened of the word than they are.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
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Meaning of May Elections for November

May 19, 2010, 2:30 p.m.
[For BP disaster see, "Obama As Finger-Pointer-In-Chief," May 18, 2010; "Big Oil + Big Corruption = Big Mess," May 10, 2010; "P&L: Public Loss From Private Profit," May 3, 2010.]

What's Take-Away from May 18 Primary Elections?
(bought to you by FromDC2Iowa.blogspot.com*)
There were four elections yesterday, one each in Arkansas and Kentucky, and two in Pennsylvania. What do their outcomes tell us about November we didn't know before?

Very little.

What follows is just one, relatively uninformed, blogger's intuition; not the result of having worked in any of the campaigns, memorized the piles of polling data, or even having read a significant amount of others' commentary.

There are some things we at least thought we knew before the results were in.

"All politics is local." There are so many factors that help shape the outcome of a given congressional or senatorial primary, or general election, that drawing any national (or even local!) generalizations from their outcomes runs the risk of being wide of the mark.

Especially is this so in light of the fact that most outcomes are relatively close. When there are less than 10 points separating the candidates anything from cold or rainy weather to a last-minute news item could have made the difference. In such cases, for purposes of deriving meaning from an election, it's a little silly even to designate a "winner" and "loser," let alone to discard from consideration the "meaning" behind the votes of the 40 percent or more of the voters who supported the "loser."

An incumbent President's party tends to lose seats in the Senate and House during off-year elections.

Aside from that, incumbents tend to get re-elected. No matter how angry the public is with "Congress" in general, voters tend to think their own Member of Congress is OK. The number of Members who want to be re-elected, and are, is generally well above 90 percent.

Most districts are solidly either Democrat or Republican. The real contests occur in the ones that are neither.

Perhaps the largest percentage of voters consider themselves "independent" or third party.

On the other hand, those who vote in party primaries are necessarily more partisan, more concerned about party loyalty, candidates having "paid their dues" to the party, and the impact of primary choices on general election outcomes.

Overall election results tend to reflect the economy. When the economy is trending down, or seems stuck there, voters want "change" -- often manifested in ousting incumbents. When the economy is booming, or clearly recovering, they're less likely to "throw the rascals out" -- or even bother to vote.

Lengthy incumbency cuts both ways. There is at least a lingering concern on the part of voters that "old age" and too many decades in Washington may make an elected official less, rather than more, effective on their behalf. (This is, of course, offset by the increased power, and ability to help the state or district, that comes with seniority.) But it is especially so if constituents detect (whether true or not) a growing disconnect between the Washington elite lifestyle of the elected official and that of the residents of the local area.

My thinking is that nothing happened yesterday to change any of that conventional wisdom.

But there are two conclusions that at least some commentators seem to be drawing from yesterday's returns with which I really disagree. One is that the results reflect a turn to the right, a resurgence of conservatism -- and hope for the Republicans in November. The other is that what we witnessed was an anti-incumbent movement. (E.g., Jeff Zeleny and Carl Hulse, "Specter Defeat Signals a Wave Against Incumbents," New York Times, May 19, 2010, p. A1.)

Sestak's Victory Over Senator Arlen Spector: An Example of "Anti-Establishment, Anti-Incumbency"?

Voters are not in a good mood -- whether discouraged, depressed, angry or violent. Admittedly, that did not cut in favor of Spector's re-election.

But there were so many other factors at play in Spector's case that I think it is woefully overly simplistic to put the results in the "anti-incumbency" column.

For starters, he got 47 percent of the vote. That's not exactly a rout.

Bear in mind, this was a Republican Senator running in a Democratic Party primary! He only recently switched parties, and acknowledged he did it because there was no way he was going to get the Republican Party nomination. The switch enabled the winner, Congressman Joe Sestak to utilize a very effective commercial that left few if any Democrats unaware of Sestak's assertion that Specter was just a Republican opportunist.

Moreover, he was a five-term, 30-year, 80-year-old Senator. The political meaning from the ouster of a one-term incumbent Senator is one thing. But when a Senator has served as long as Specter, and has reached 80 years of age, to be voted out of office involves much more than mere "anti-incumbency."

Admittedly, "'close' only counts in horseshoes," and it really hurts to lose an election. But for what it's worth, under the circumstances, and against all the odds, Specter should take some considerable personal solace and satisfaction from the 47 percent vote of confidence, admiration, and appreciation that he was able to win as an 80-year-old Republican running in a Democratic primary.

How About Senator Blance Lincoln in Arkansas?

The meaning of the outcome in the Democratic Primary in Arkansas is a little more clear cut than the one in Pennsylvania. But it's still not unambiguous -- especially with regard to the assertions that yesterday's four elections represent a "swing to the conservative right" on the part of voters.

For starters, Lincoln "won" in the sense that she got more votes than the runner-up, Arkansas Lieutenant Governor Bill Halter -- just not enough to prevent the need for a runoff, since she did not get 50 percent.

Second, the winner of the Republican Primary election, John Boozman, who defeated seven opponents, has been an Arkansas Representative in Congress since 2001. So that can scarcely be said to be the result of an "anti-establishment, anti-incumbent" vote.

Did Lincoln's failure to win outright illustrate the voters' move to the conservative right? No, the fact is that in her case it was exactly the opposite.

The SEIU and AFL-CIO weighed in heavily on the side of Halter precisely because she was perceived as being too conservative -- especially with her votes against healthcare reform, and her perceived support of the Wall Street banks. The voters wanted a more liberal candidate.

Republicans vs. Democrats in Congressman Jack Murtha's District

Following Democratic Congressman Jack Murtha's death, the only election yesterday pitting a Republican against a Democrat was in Pennsylvania's 12th Congressional District.

If an overwhelming Republican victory anywhere could have been seen as a harbinger of a national tectonic shift to the conservative right and a Republican sweep of the House in November it would have been this one.

On the other hand, the same could be said for the Democrats were they to win. Even though the 12th had been a Democratic district with Murtha, it also happens to be a district that went for Senator McCain over Obama a mere 18 months ago.

However conservative the district may be said to be, the majority did not vote for the Republican. The Democrat, Mark Critz (a former Murtha aide), won over a Republican businessman, Tim Burns, by a substantial 53 to 45 percent.

Incumbency was not in issue in that contest. But the issue of a possible shift -- from the Democratic Party, to a pro-conservative, Republican Party -- certainly was. And the verdict on that race would have to be that it just wasn't there for the conservative Republicans..

Paul's Win is Republicans' Problem -- Not Nation's or Democrats'

Rand Paul, son of Presidential candidate and Congressman Ron Paul (R-Tex.), scored a 24-point Republican Senate primary victory over Kentucky Secretary of State Trey Grayson -- the favorite of the Republican establishment, up to and including Senate Minority Leader Mitch McConnell of Kentucky.

Thus, while it contributes nothing to an understanding of "anti-incumbency" (as neither held the Senate office), it certainly does say something about the division within the Republican Party between the Republican establishment and the anti-Establishment, Tea Party, wing of opposition.

Given that this was a Republican Primary it necessarily tells us little about the conservative, anti-Establishment leanings of Democrats and Independents. Indeed, there are those who believe that Paul will be much easier for the Democratic Party candidate to beat than Trey Grayson would have been. And Tea Party membership, to the extent it can be measured, seems to be disproportionately made up of those who would otherwise be (or still are) Republicans.

But we scarcely needed this Primary to know that there is a schism between the conservative, right wing, take no prisoners, anything to bring down Obama, just say no wing of the GOP, and the Establishment, moderate, reasonable, come let us reason together wing. Nor have we been unaware that the former seems to be gaining adherents over the latter.

In sum, they were an interesting four elections, but when Chris Matthews says, "Tell me something I don't know," I'm not sure what one can offer based on the results.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
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