“The Nakedly Transparent Flouting Of The Tax Laws”: Washington Misses The Point On The Tea Party And The IRS
My pixels have been absent from these precincts while I report a feature story for The Nation, and I’ll have more to say about the ersatz Scandalpalooza being ginned up by Republicans this week, but for now I wanted to drop a quick word about just how overblown the outrage is about the Internal Revenue Service flagging groups with “Tea Party” in their name for extra scrutiny when they apply for 501(c)(4) status. Jeffrey Toobin, in a New Yorker post called “The Real I.R.S. Scandal,” succinctly explains the legal background:
It’s important to review why the Tea Party groups were petitioning the I.R.S. anyway. They were seeking approval to operate under section 501(c)(4) of the Internal Revenue Code. This would require them to be “social welfare,” not political, operations. There are significant advantages to being a 501(c)(4). These groups don’t pay taxes; they don’t have to disclose their donors—unlike traditional political organizations, such as political-action committees. In return for the tax advantage and the secrecy, the 501(c)(4) organizations must refrain from traditional partisan political activity, like endorsing candidates….
Particularly leading up to the 2012 elections, many conservative organizations, nominally 501(c)(4)s, were all but explicitly political in their work. In every meaningful sense, groups like Americans for Prosperity were operating as units of the Republican Party. Democrats organized similar operations, but on a much smaller scale. (They undoubtedly would have done more, but they lacked the Republican base for funding such efforts.)
So the scandal—the real scandal—is that 501(c)(4) groups have been engaged in political activity in such a sustained and open way.
Just how sustained and open a way? Well, in June of last year I reported from the closing weekend of the recall campaign against Republican governor Scott Walker of Wisconsin:
I drive to a microscopic town next to Racine, where a giant open field was a stop on the bus tour in which Americans for Prosperity, the fake grassroots group that fronts for the Koch Brothers, was shipping supporters from, among other places, Illinois, to these here rallies around the state. Not, they claim, to support the Walker campaign—that would violate election law—which they had nothing to do with, but just in the interest of “educating folks in the importance of the reforms.”
The three hundred or so (though National Review counts differently than me) white people—and one black, who stood precisely in the center of the front row and wore an AFP staff T-shirt—heard an AFP staffer hosanna “economic freedom, limited government, and lower taxes.” And that “even Barack Obama’s Bureau of Labor Statistics” said “we’ve created jobs in Wisconsin.” Then he introduced as an “honorary Wisconsinite,” the head of Americans for Prosperity—Wisconsin, Tim Phillips—a Southerner who made a joke about frigid weather. Apparently reverse carpet-bagging is a signal feature of this “grassroots” movement.
Then a third speaker, but I had already wandered off, bored by the conspicuous lack of energy, past a sign reading “Republican’s Are Makers Democrats Are Takers” [sic, of course], and tables featuring free DVDs on both the glories of Scott Walker and the United Nation’s plan to enslave the United States, in the direction of a second, entirely separate, stage across the field put up by the Racine Tea Party. A few minutes later, the rest of the crowd followed me there. For, yes, an entirely separate rally, which had “nothing” to do with the nonpartisan one two hundred yards away that had just ended [wink wink, nudge nudge]. There they heard Walker’s running mate Rebecca Kleefisch rant about the “big union bosses from out of state,” and how the unions were just like Goliath, and her boss was exactly like David.
Me, I fingered my slick Americans for Prosperity—Wisconsin flier, which I later noticed contained the most revealing typo in the history of politics. “The forces of BIG GOVERNMENT would like nothing more than for you to DO NOTHING,” it warned, but promised, “We are gathering citizens together from across Michigan to make phone calls, knock on doors and educate their friends, family and neighbors.”
As Toobin points out, this is the real scandal: the nakedly transparent flouting of the tax laws by groups claiming to be nonpolitical and nonpartisan. Count on the media in Washington to entirely miss that obvious point.
By: Rick Perlstein, The Nation, May 16, 2013
The IRS is under siege for investigating conservative political groups applying for tax-exempt status. But the real problem wasn’t that the IRS was too aggressive. It was that the agency focused on the wrong people—“none of those groups were big spenders on political advertising; most were local Tea Party organizations with shoestring budgets,” writes The New York Times—and wasn’t aggressive enough. The outrage that Washington should be talking about—what my colleague Chris Hayes calls “the scandal behind the scandal”—is how the Citizens United decision has unleashed a flood of secret spending in US elections that the IRS and other regulatory agencies in Washington, like the Federal Election Commission, have been unwilling or unable to stem.
501c4 “social welfare” groups like Karl Rove’s Crossroads GPS, the Koch brothers’ Americans for Prosperity and Grover Norquist’s Americans for Tax Reform—which don’t have to disclose their donors—spent more than $250 million during the last election. “Of outside spending reported to the FEC, 31 percent was ‘secret spending,’ coming from organizations that are not required to disclose the original sources of their funds,” writes Demos. “Further analysis shows that dark money groups accounted for 58 percent of funds spent by outside groups on presidential television ads [$328 million in total].”
IRS guidelines for 501c4 groups state that “the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office…a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity.” It’s ludicrous for groups like Crossroads GPS—which spent at least $70 million during the last election—to claim that its primary purpose is not political activity. Only the likes of Karl Rove would believe that running attack ads against President Obama qualifies as social welfare.
So what did the IRS do about this blatant abuse of the tax code by some of the country’s top corporations and richest individuals? Virtually nothing. “When it comes to political spending, the IRS is more like a toothless tiger,” wrote Ken Vogel and Tarini Parti last year in a story headlined, “The IRS’s ‘feeble’ grip on big political cash.”
It’s obvious that our Wild West campaign-finance system needs more, not less, scrutiny and much tighter, not looser, regulation. Yet conservative groups are exploiting the IRS scandal to further dilute regulatory agencies that are already on life support. Writes Andy Kroll of Mother Jones:
The IRS’s tea party scandal, however, could hinder the agency’s willingness to ensure politically active nonprofits obey the law. The IRS will likely operate on this front with even more caution, taking pains not to appear biased or too aggressive. That in turn could cause the agency to shy away from uncovering 501(c)(4) organizations that do in fact abuse their tax-exempt status by focusing primarily on politics.
The Rove’s of the world would like nothing more than for the public to believe that conservative groups had too few opportunities to influence the 2012 election and were wrongly persecuted by evil Washington bureaucrats. Yet the 2012 election should have taught us precisely the opposite lesson—that our patchwork regulatory system is far from equipped to deal with the new Gilded Age unleashed by Citizens United. As Rep. Keith Ellison told Hayes last night: “We need to redouble our efforts to bring real campaign-finance reform forward.”
By: Ari Berman, The Nation, May 14, 2013
If corporations are people, as the Supreme Court pretends, they certainly are loudmouths, constantly telling us how great they are and spreading their names everywhere.
Amazingly, though, these corporate creatures have suddenly turned demure, insisting that they don’t want to draw any attention to themselves. That’s because, in this case, corporations are not selling, they’re buying — specifically, trying to buy public office for their pet political candidates by funneling millions of corporate dollars through such front groups as the U.S. Chamber of Commerce. In turn, the fronts use the money to air nasty attack ads that smear the opponents of the pro-corporate candidates.
Why do corporations need a middleman? Because the ads are so partisan and vicious that they would appall and anger millions of customers, employees and shareholders of the corporation. So, rather than besmirch their own names, the corporate powers have meekly retreated behind the skirts of Republican political outfits like the Chamber.
But don’t front groups have to report (at least to election authorities) who’s really behind their ads, so voters can make informed decisions? No. Thanks to the Supreme Court’s infamous Citizen United edict in 2010, such groups can now pour unlimited sums of corporate cash into elections without ever disclosing the names of their funders. This “dark money” channel has essentially established secret political campaigning in America.
That’s why shareholders and other democracy advocates are asking the Securities and Exchange Commission to rule that the corporate giants it regulates must reveal to shareholders all political donations their executives make with corporate funds. After all, the millions of dollars the executives are using to play politics don’t belong to them — it is shareholder money. And by no means do shareholders march in lockstep on which political candidates to support or oppose.
Hide and seek can be a fun game for kids, but it’s infuriating when CEOs play it in our elections. Last year, corporate interests sought to elect their candidates by hiding much of their politicking not only from company owners but also from voters. In all, $352 million in “dark money” poured into our 2012 elections, the bulk of it from corporations that covertly pumped it into secretive trade associations and such scams as “social welfare charities,” run by the likes of Karl Rove and the Koch brothers.
Since underhanded, anonymous electioneering puts a fatal curse on democracy, the SEC should at least compel corporate managers to tell their owners — i.e., the shareholders — how and on whom their money is being gambled in political races. It’s a simple reform, but — oh, lordy — what a fury it has caused among the political players.
A rare joint letter from the U.S. Chamber, Business Roundtable and National Association of Manufacturers has been sent to the CEOs of the 200 largest corporations in our country, rallying them to the barricades in a frenetic lobbying effort to stop this outbreak of honest, democratic disclosure.
House Republicans are even going to the extreme of trying to make it illegal for the SEC to let shareholders (and the voting public) know which campaigns are being backed by cash from which corporations. Hyperventilating, these powerful scaredycats claim to be intimidated by the very suggestion that they tell the people what they’re doing in public elections.
Their panic over having a little sunlight shine into their deepest bunker reveals just how destructive they intend dark money to be for our democracy. Ironically, the Supreme Court’s chief assumption in allowing unlimited corporate cash into the democratic process was that shareholders would be informed and involved, and provide public accountability for their companies’ political spending.
Even Justice Antonin Scalia, long a cheerleader for corporate politicking, is no fan of hiding it from the electorate: “Requiring people to stand up in public for their political acts fosters civic courage,” he has written, adding that a campaign “hidden from public scrutiny” is anathema to self-governance. He also deems it cowardly: “This does not resemble the Home of the Brave,” he pointedly noted.
By: Jim Hightower, The National Memo, May 8, 2013
Even before the howls of rage have subsided in the wake of Karl Rove’s expressed intention to intervene in Republican Senate primaries to keep stone losers from gaining nominations, one of the chief howlers, the Club for Growth, has announced its own “purge” initiative aimed at House GOP “moderates.” For starters, they’ve identified nine House incumbents at a new website called PrimaryMyCongressman.com who need to be taken out:
“Big government liberals inhabit the Democratic Party, but they are far too common within the Republican Party as well,” said Club for Growth President Chris Chocola in a statement announcing the site. “The Republicans helped pass billions of dollars in tax increases and they have repeatedly voted against efforts by fiscal conservatives to limit government. PrimaryMyCongressman.com will serve as a tool to hold opponents of economic freedom and limited government accountable for their actions.”
This is the same Chris Chocola who earlier this month attacked Rove for his arrogant national interference with the sovereign discretion of primary voters:
“It’s those pesky voters,” Mr. Chocola said in an interview. “They get to decide who the nominee is.”
So why is it an outrage for Rove’s Texas gazillionaires to meddle with Republican primaries but AOK for the Club’s (or the Koch Brothers’) plutocrats to do exactly the same thing? Well, because the latter are “true conservatives,” while the former are trimmers and hedgers, if not actual RINOs. It’s part and parcel of the belief, which I noted a couple of weeks ago in discussing the implications of the “Buckley Rule,” that there’s really no such thing as being “too conservative” unless it means losing a general election, while any even vague step towards moderation is inherently immoral and must be justified by unimpeachable evidence that’s it is necessary. So Rove and company are “interfering” with local voters, while Chocola and company are vindicating their obvious interests.
Now it’s also entirely possible that Rove and Chocola are thick as thieves and are simply staging a phony fight to help each other raise money. But anyway you slice it, the Club’s hypocrisy is pretty amazing.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, February 27, 2013
When Governor Scott Walker faces Wisconsin voters in 2014, he’ll be running on a record of confronting public worker unions, turning down Medicaid expansion that would have covered 181,000 Wisconsinites and creating far fewer than the 250,000 new jobs he promised.
And if that isn’t enough, he can run on the Wisconsin Omnibus Tort Reform Act of 2011.
One of the first bills Walker signed into law, these reforms were taken almost entirely from the Koch-funded legislative warehouse of the Billionaire Rights Movement, the American Legislative Exchange Council (ALEC).
The legislation prevents state health investigation records from being admitted as evidence in any civil or criminal cases against long-term care providers, including nursing homes and hospices.
Sarah Karon of the Wisconsin Center for Investigative Journalism looked into the impact of the reform and found that the families of patients who often cannot testify on their own behalf are powerless to redress abuse and neglect.
In one case, Joshua Wahl — a paraplegic patient with spina bifida and brain damage — had a bedsore left to fester for months before he was finally hospitalized, according to a state investigator.
“It scares me for those who put their trust in a facility,” said Karen Nichols-Palmerton, Wahl’s mother. “It scares me to think of things that could be brushed aside. I don’t rest so easy anymore.”
Nichols-Palmerton is suing the facility, but the investigator’s report will not be heard in court, thanks to the Wisconsin Omnibus Tort Reform Act of 2011.
Why did Walker and Wisconsin’s Republicans decide records documenting such abuse shouldn’t be admissible in court?
It isn’t good for business.
“Each of these (proposals) is aimed at one thing — jobs,” said Brian Hagedorn, Walker’s chief legal counsel, during a hearing for the bill. “These changes send a symbolic and substantive message that Wisconsin is open for business.”
State investigators’ reports are published online. But a Department of Justice spokeswoman told Karon that the law makes it difficult to prosecute abuse and neglect cases at early stages, when severe injuries or death can be prevented.
Nursing homes that accept Medicaid or Medicare must be investigated every 15 months. Non-federally certified facilities are investigated by the states every two years. Wisconsin has cut its staff of nursing home surveyors by more than 30 percent, even as complaints about such facilities have risen by more than 100 percent since the year 2000.
Walker’s record of opening Wisconsin “for business” and turning away from its grand tradition of progressivism hasn’t had such a great effect on job creation. And the cost, especially for those forced to rely on long-term care, is falling squarely on the most vulnerable.
By: Jason Sattler, The National Memo, February 22, 2013