“The IRS And The Real Scandal”: Enabling America’s Financial Elite To Further Entrench Their Wealth And Power
“This systematic abuse cannot be fixed with just one resignation, or two,” said David Camp, the Republican chairman of the House tax-writing committee, at an oversight hearing Friday morning dealing with the IRS. “This is not a personnel problem. This is a problem of the IRS being too large, too intrusive, too abusive.”
David Camp has it wrong. There has been a “systematic” abuse of power, but it’s not what Camp has in mind. The real scandal is that:
The IRS has interpreted our tax laws to allow big corporations and wealthy individuals to make unlimited secret campaign donations through sham political fronts called “social welfare organizations,” like Karl Rove’s “Crossroads,” the U.S. Chamber of Commerce, and “Priorites USA.”
This campaign money has been used to bribe Congress to keep in place tax loopholes like the “carried interest” rule that allows the managers of hedge funds and private equity funds to treat their income as capital gains, subject only to low capital gains taxes rather than ordinary income taxes, and other loopholes that allow CEOs to get special tax treatment on giant compensation packages that now average $10 million a year.
Despite a growing number of billionaires and multi-millionaires using every tax dodge imaginable – laundering their money through phantom corporations and tax havens — the IRS’s budget has been cut by 17 percent since 2002, adjusted for inflation. To manage the $594.5 million in additional cuts required by the sequester, the agency will furlough each of its more than 89,000 employees for at least five days this year.
Finally, all of this, coming at a time when the Supreme Court has deemed corporations “people” under the First Amendment and when income and wealth are more concentrated at the top than they’ve been in over a hundred years, has enabled America’s financial elite to further entrench their wealth and power and thereby take over much of American democracy.
This is the real scandal and the real abuse, Congressman Camp. Your indignation over the IRS’s alleged “targeting” of conservative groups is a distraction from the main event.
By: Robert Reich, The Robert Reich Blog, May 17, 2013
“Focusing On The Wrong People”: The Real IRS Scandal Is Secret Money Influencing US Elections
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
“Scamming The Taxpayers”: The IRS Controversy And The Tax-Exempt Charade
As we’re learning more about the IRS giving heightened scrutiny to conservative groups filing for tax-exempt status, we should make one thing clear: If what we’ve heard so far holds up, the people involved should probably get fired, and new safeguards should be put in place to make sure nothing like it happens again. And let it be noted that liberal publications, at least the ones I’ve seen, have all taken that position and have been discussing this story at length.
Now, let’s see if we can understand the context in which this happened. There’s an irony at work here, which is that it may well be that the IRS employees involved were trying to obey the spirit of the law but ended up violating the letter of the law, while for the organizations in question it was the opposite: they were trying to violate the spirit of the law, but probably didn’t violate the letter of the law.
Let’s take the first part, the IRS employees. When a group files for tax-exempt status, the IRS investigates it, asks it some questions, and determines whether it qualifies under section 501(c)(3) or 501(c)(4). The difference between them is that a 501(c)(3) is supposed to be a genuine charity, like your local food bank or Institute for the Study of Foot Fungus, while a 501(c)(4) is still primarily devoted to “social welfare” but is allowed more leeway to engage in some political activities like lobbying and participation in elections, so long as the political activities make up a minority of its time. The biggest practical difference is that donations to (c)(3) groups are tax-deductible, while donations to (c)(4) groups are not.
Once the Supreme Court said in the 2010 Citizens United decision that (c)(4) groups could engage in “express advocacy” (i.e. explicitly saying “Vote for Smith!”), the IRS got flooded with new applications for (c)(4) groups, and its job was to determine if these groups were actually “social-welfare” organizations that also did some politicking on the side, or if they were groups whose main purpose was actually political, in which case, according to the law, they should be denied (c)(4) status. We know very little at this point about what the IRS employees in Cincinnati did and why, but the generous interpretation is that since so many of the applications they were getting in 2010 and 2011 were from Tea Party groups that looked a lot like their sole purpose was to elect Republicans, they looked for some way to handle them all together, so they searched for applications with words like “Tea Party” and “Patriot” in their names and subjected them to extra scrutiny.
Even if their motivations were innocent and they were just struggling to find ways to wade through all these applications and do their jobs properly—in other words, if there was no violation of the spirit of the law—it was still improper for them to sort the applications this way, because it could mean in practice that an ideological test was being applied to which groups got heightened scrutiny. But now let’s look at the other half of the story, the groups applying for tax-exempt status.
The truth is that a great many of the groups that request 501(c)(3) and 501(c)(4) status, of all ideological stripes, are basically pulling a scam on the taxpayers. Maybe that’s a bit harsh, but at the very least they’re engaged in a charade in which they pretend to be “nonpartisan” when in fact they are very, very partisan. For instance, nobody actually believes that groups like the Center for American Progress on the left or the Heritage Foundation on the right aren’t partisan. When there’s an election coming, they mobilize substantial resources to influence it. They blog about how the other side’s candidate is a jerk, they issue reports on how his plans will destroy America, and they do all sorts of things whose unambiguous intent is to make the election come out the way they want it to. CAP and Heritage, along with many other organizations like them, are 501(c)(3) charities, meaning as long as they never issue a formal endorsement and are careful to avoid any express advocacy, they can maintain the fiction that they’re nonpartisan (keep getting tax-deductible contributions, which are easier to obtain than those that aren’t tax-deductible).
And that fiction is even more exaggerated when you get to the (c)(4) groups, particularly the new ones. For instance, when Karl Rove’s Crossroads GPS applied for 501(c)(4) status, it explained to the IRS that it was a social-welfare organization for whom influencing elections wouldn’t be its primary purpose. Instead, the group said “Through issue research, public communications, events with policymakers, and outreach to interested citizens, Crossroads GPS seeks to elevate understanding of consequential national policy issues, and to build grassroots support for legislative and policy changes that promote private sector economic growth, reduce needless government regulations, impose stronger financial discipline, and accountability in government, and strengthen America’s national security.” It claimed that 50 percent of its activities would be “public education,” 20 percent would be “research,” and the remaining 30 percent would be “activity to influence legislation and policymaking.” On the section of the form where the group has to state whether it plans to spend any money to influence elections, it wrote that it “may, in the future” do so, but “Any such activity will be limited in amount, and will not constitute the organization’s primary purpose.”
As everyone knows, this is a joke. Crossroads GPS was created for one purpose and one purpose only: to get Republicans elected. Maybe they found a way to stay within the letter of the law, but there’s no question they were violating its spirit. And the same is true of Priorities USA, the pro-Obama group created in advance of the 2012 election by a couple of former White House staffers. Both are actually twin groups, a (c)(4) and a super PAC, which allows the people running them to keep within the letter of the law by moving spending around between the two. (Stephen Colbert and Trevor Potter memorably explained how all this can be done.)
Without knowing anything about the particular Tea Party groups that were subjected to heightened scrutiny (we’ve only heard about a few so far), the broader context is that you have a lot of groups of all political persuasions that are essentially trying to pull a fast one on the IRS, and through them, the American taxpayer. Keep in mind that tax-exempt status is a gift that we give to groups that can demonstrate they deserve it. Perhaps this part of the tax code should be made stricter, or perhaps it should be made looser so all these charades can stop. But either way, this wouldn’t be a bad time to start that discussion.
By: Paul Waldman, Contributing Editor, The American Prospect, May 13, 2013
“A Fatal Curse On Democracy”: Corporate Cowards Divert Shareholder Funds Into “Dark Money”
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
“Popping Out Of Every Hole”: Mitch McConnell Faces A Real Threat, And It’s Not Left-Wing Leaks
As is often the case, we’ve been burying the lead as we dissect the leaked recording of Senate Minority Leader Mitch McConnell’s private whack-a-mole strategy session.
Most of the talk, on the recording and in the media, has been about the cold-blooded, ruthless assessment of the alleged weaknesses of Democratic activist-actress Ashley Judd as a reelection challenger. Riveting if revolting stuff. But what caught my eye was the very last paragraph of the colloquy, in which the Kentucky Republican’s staffers assure their boss that they are going to vet and figure out how to destroy “potential primary folks.”
Specifically, they said they would investigate a wealthy Louisville, Ky., businessman Matthew Bevin, who has been willing at least to listen to some tea party types.
To understand what the Republican Senate leader is up to these days, you need to remember that he now lives in fear less of his home-state Democrats — whom he has essentially neutered in his nearly 30 years in the U.S. Senate — than of tea party and other Republicans who hate his grip on the GOP in Kentucky and his record of talking a better conservative game than he plays.
Working on that resentment is how now-Sen. Rand Paul managed to defeat McConnell’s handpicked GOP candidate for junior senator from Kentucky in 2010. And even though Paul now pledges support for McConnell, and Paul’s former campaign manager is now on McConnell’s team, the five-term incumbent can’t be sure that he is a lock in the May 2014 GOP primary.
That is one reason why McConnell took the unusual step (for a party leader) of joining a list of other senators who vowed to filibuster any and all new gun control legislation.
That is why McConnell hit the floor the other day to roundly denounce — in far more caustic terms than those used by Speaker John Boehner (R-Ohio) — the president’s new budget.
And that is why McConnell is screaming bloody murder about what he claims was the involvement of the “left” in the “bugging” of his campaign office in Louisville last February.
McConnell and his minions have no proof of who was responsible for the recording and the gifting of it to Mother Jones. He may turn out to be correct.
But it is equally possible that the guilty party was a disgruntled Republican — or even that someone on McConnell’s team tried to emulate the tactic allegedly used by GOP strategist Karl Rove in a Texas gubernatorial race in 1986. Rove was widely suspected by the Texas press, and many Republicans, of having bugged his own office so that the device could be “discovered” and he could denounce the Democrats.
No device was found in the McConnell office, though no one apparently looked for one until this week, when the Mother Jones story broke.
Whatever the leak’s provenance, McConnell rushed to the microphones in the Capitol on Tuesday, surrounded by his loyal Senate GOP followers, to denounce the recordings as an example of how the “left wing” was out to get him in Kentucky.
McConnell campaign manager Jesse Benton stepped up the hysteria level on Wednesday, saying on Mike Huckabee’s radio show that the recording’s release were evidence of “Gestapo kind of scare tactics.”
Translation: Hey, Tea Party! You think I’m an unprincipled dealmaker with centrist tendencies? Look how the left wing hates me!
The idea that a Kentucky Republican might have gotten hold of the recording and leaked it is not so far-fetched in a state party that has begun to feel stale and discontented after decades of control by the Louisville-based McConnell.
“There is a lot of discontent in McConnell Land,” said David Adams, who blogs in Kentucky and was Rand Paul’s first campaign manager in 2010. “People aren’t feeling like the Republican Party in the state is going in the right direction.”
The relationship between McConnell and Paul — who were ferocious enemies until the end of the 2010 primary — is described by one Kentuckian on the Hill as merely “transactional.” McConnell was the tea party’s real target in that election, with his chosen candidate, Trey Grayson, just the stand-in.
Now it is McConnell himself who has to face the grassroots wrath, at a time when his overall approval rating in the state is 36 percent — the worst of any senator.
Adams ticked off his major complaints about McConnell on the issues: “The bank bailout. The sum total of all the wasteful federal budgets he voted for, especially in the Bush years. The Patriot Act and the National Defense Authorization Act, for what they did to privacy and civil rights. All the pork barrel money he brings back and all the press releases he puts out it.
“We’ve got hundreds.
“Just all the years of him claiming that he cares about freedom and liberty when his long record shows otherwise.
“He’s playing his own form of whack-a-mole. He pops out of every hole there is.”
By: Howard Fineman, The Huffington Post, April 10, 2013
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 