April 16, 2014
Taxation the American way
For The Herald in US
Middle-class, poor, undocumented immigrants, workers abroad, Tea Party, liberals... almost everybody is a tax-payer
NEW YORK — “A good man is hard to find,” was the title of the short story by Flannery O’Connor.
A good job is hard to find in the current US economy, according to the employment-to-population estimate of nine per cent unemployment-less optimistic than the official 6.6 per cent rate but closer to the real deterioration of the bottom of the labour market.
But you can find a good man and even a good job, given the right circumstances—luck among them.
But really, really hard to find is someone who likes the Internal Revenue Service (IRS).
Rich or poor, no one likes to be taxed to get in return very little. Had a heart attack, the leading cause of death in the US? Hopefully you will have paid your own private health insurance, or you will soon invest around US$2,000 applying for bankruptcy-credit for 10 years. Your tax dollars go to prevent terrorism 75 times more than to prevent coronary disease. Public schools, public transportation, social security benefits are in no different consideration.
No one likes to be taxed in that scenario, even if the US taxes rates are much lower than those in similarly developed economies, but you like it less if you are poor or middle class. Since your income comes from work and not from rent (which is partially or not taxed), your proportional percentage will be higher, particularly in the middle segments.
And you like it even less if you are an undocumented worker: you pay taxes, since IRS does not cross information with US Citizenship and Immigration Services (USCIS), and you live in fear of deportation and splitting of your family.
The IRS can put a levy on your earnings if you are an independent contractor that gets the minimum per hour and owes tax money. It is unlikely someone will make it to the grave without being at least once the object of an IRS review.
You live and work abroad? You pay taxes both in that foreign country and at home; something that happens only in the US and in Eritrea.
Even fans of Michael Jackson do not like the IRS. Creative as he was, he estimated his estate in a bit more than US$7 million. With comparable inspiration, the IRS placed it at US$1.125 billion and requests a late payment of US$505 million plus US$197 million in penalties.
Yesterday marked the fourth anniversary of the day when Andrew Joseph Stack crashed his Piper Dakota into Building I of the Echelon IRS complex in Austin, Texas, killing himself and a manager of that seizure and collection unit, Vernon Hunter, and leaving 13 injured. In his suicide note Stack expressed scorn for the US politicians, the 2008 bailout of banks, health insurance companies, unions, the Catholics and his zillionth IRS audit. An engineer and entrepreneur, Stack had skipped taxes and had been in debt several times. He quoted two British authors in one line: “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.” He posted the letter online, set his house on fire, drove to the airport, and wished “a great day” to the controller at the tower.
It is unlikely that the Tea Party will go that far, but nine months after the worst scandal that the IRS had to face —a scandal that quickly vanished for lack of proof— they found opportunity to revive accusations against the IRS, an issue that might be more popular than Senator Ted Cruz’ impersonation of Jimmy Stewart in Frank Capra’s “Mr. Smith Goes to Washington.”
According to Dave Camp (R), chairman of the Committee of Ways and Means of the House of Representatives, the First Amendment is at risk because at least 292 conservative non-profit groups-with names that included expressions like “Patriot,” “9/12,” or “Tea Party”— were subjected to unfair targeting by IRS between 2010 and 2012.
Those non-profits are what the IRS catalogues as 501(c)(4) organizations, which in 1954, when they were regulated for the first time, referred to civic leagues or social welfare groups, “primarily engaged in promoting in some way the common good and general welfare of the people of the community.” Time passed and, with the lenience of both Republicans and Democrats, those groups, either conservative or liberals, “have pumped untold hundreds of millions of dollars into election-related activities,” according to The Washington Post.
Why not simply form political committees, also tax-exempt, to perform voter registration or run political ads, among other activist work? Because it would be known where the funds come from. Instead, a 501(c)(4) allows money to move back and forth in a way that omits donors identities.
The scandal began in May, 2013, and faded as it was quickly addressed. According to former director of the IRS Exempt Organizations division Lois Lerner, the targeting was not a White House plan, as GOP members disputed, but the job of lower-level “front line people” at the agency in Cincinnati, Ohio. That said, she resigned before being fired. Steven Miller, acting IRS commissioner at the time, quit as well and was replaced by another acting commissioner, Danny Werfel, until John Koskinen was appointed by President Barack Obama and approved by the Senate in December, 2013.
Treasury Inspector-General J. Russell George ordered an investigation which found that the so-called “Be On the Look Out” list existed, but it did not limit to Ohio (allegedly other offices also dropped the ball, in California and Washington, D.C.) or the conservatives: names with words like “progressive,” or “occupy,” also raised a red flag for scrutiny of a 501(c)(4), and caused the same delay in tax exemptions to those groups. The Federal Bureau of Investigations (FBI) declared that no criminal activity had taken place, but Republicans objected the results of an inquiry headed by a donor to President Obama, Barbara Kay Bosserman. Today there are six formal investigations ongoing: four at the House and Senate committees, others at the Treasury and Justice Departments.
The Democrats also complained. Representatives Matt Cartwright and Gerry Connolly questioned the independence of George, accusing him of performing an “incomplete” and “fundamentally flawed” audit, timely after a briefing with Republican members of the House Oversight Committee. It might have been a flash of nostalgia —the inspector general was appointed for that life tenure position by former President George W. Bush—, but Cummings and Connolly assert that George narrowed the scope of his investigation after the meeting that excluded the Democrats.
In the pre-Super Bowl interview with Fox News host Bill O’Reilly, Obama famously responded that there was “not even a smidgeon of corruption” in the IRS. And then the President pointed out: “These kinds of things keep on surfacing in part because you and your TV station will promote them.”
Why would Fox News prastice CPR to old news? Perhaps because the 1954 rules for the 501(c)(4) are being reformed. According to the Treasury Department, they “may be both more restrictive and more permissive than the current approach.” There will be new definitions of the political activities that a non-profit can do, plus restrictive boundaries on communications to voters as election day comes closer, among other campaign-related issues.
Even if it is improbable that they will come into effect before this November election, Camp has already said that his committee “will fight any and all efforts to restrict the rights of groups to organize, speak out and educate the public, just as unions are allowed to do so.” He believes the new rules have been “drafted in a manner, in my view, to shut down Tea Party groups”. And for Fox News, they might reduce the ads of Americans for Prosperity.