Karma hits the IRS

It’s payback time for the IRS, as Politico reported last night.  Until now, the agency has usually had little trouble in budget negotiations, as both parties need revenue collected (regardless of the tax policies favored by each), by an agency that had until recently appeared relatively apolitical.  After having its partisanship exposed, the IRS now finds that partisanship carries a big risk on Capitol Hill:


It’s payback time for the agency Congress loves to hate.

After two months of pummeling the IRS in the wake of the tea party targeting scandal, Republicans are trying to starve the agency of its funding and ensure $70 million in scheduled bonuses aren’t paid out while handing more money to the watchdog charged with keeping tabs on the tax collectors. …

Perhaps most importantly, a House subcommittee on Wednesday hit the IRS where it counts: in the wallet.

“Hopefully this will finally get their attention, because they haven’t been as forthcoming as we’d like them to be,” Rep. Pat Tiberi (R-Ohio), a senior Ways and Means Committee member, told POLITICO.

The House Appropriations subcommittee with IRS jurisdiction cleared a spending measure gutting the tax-collecting agency’s budget next year by 24 percent in fiscal 2014. That $9 billion allocation is 30 percent less than President Barack Obama requested for the agency charged with rolling out his signature health care law.

Rep. Peter Roskam, the chief deputy whip in the House, called the appropriation a “reckoning for the IRS.”

Reckoning, yes … and perhaps a “behavior changer.” Our friend Patterico discovered an interesting quote from a central figure in the scandal about the strategy of dumping big questionnaires on tax-exempt applicants.  Lois Lerner told Business Week in November 2011 that they tended to intimidate applicants out of their claims, and Patterico noted the timing — as I also did in my column today for The Fiscal Times:

Lerner, interviewed at the time in regard to an investigation into not-for-profit colleges and universities, underscored the importance of aggressive interrogatories to discourage organizations from pursuing tax-exempt status. Business Week reported Lerner’s response: “Receiving a thick questionnaire from the IRS, she says, is a ‘behavior changer.’”

Frey notes the date of the quote with some interest. The targeting of conservative groups by the tax-exempt unit Lerner ran also used the “thick questionnaire” tactic, which Lerner brags is a form of intimidation.  An entertaining timeline of the IRS targeting scandal compiled by Freedom Works, which supports and trains Tea Party activists and groups, shows Lerner found out about the targeting by June 27, 2011 at the latest, and had initiated an audit of the office and its “be on the lookout” (BOLO) list used for the targeting.

That resulted in a broader BOLO being put into use, and five months later, Lerner is bragging about the “behavior changer” effect of IRS demands for extensive information. Targeting continued well into 2013, and most of the groups that applied for tax-exempt status dropped those requests, or never received approval.


What Congress needs to do is to provide even more significant “behavior changers” on the IRS to ensure that they are no longer in position to interfere with political speech through partisan action again:

They made themselves into a political target, and while the extensive cuts envisioned by the House GOP caucus may not entirely materialize, the agency is certainly going to be forced to make do with less at the end of this budget cycle.  Congress will continue to pursue the scandal with further hearings and perhaps even a special prosecutor to perform an independent probe into the politicization at the IRS.

Those kinds of interrogatories have already proven to be “behavior changers,” but hopefully the real behavior change will take place in Congress itself.  The scandal demonstrates the dangers of the complexity and enforcement of the current tax code and campaign finance regulation, both of which need reform badly in the direction of simplification and objectivity. Perhaps then the IRS can return to its status as a bloodless revenue-collecting agency, and the American taxpayers can be spared “behavior changers” from bonus-collecting bureaucrats with axes to grind.

It’s not enough to punish the guilty in this case.  We need to make sure that we keep agencies like the IRS from accumulating enough power to manipulate political speech and organization for their own purposes.  Otherwise, we’ll find ourselves right back in the same place.

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