The root of all (IRS) evil

Plenty of ink and outrage has been spilled after the exposure of the efforts at the IRS to target groups applying for tax-exempt status on the basis of their politics. At one level, the outrage has been bipartisan; both Democrats and Republicans on House and Senate committees expressed anger and determination to get to the bottom of the scandal. Rep. Stephen Lynch, a Massachusetts Democrat, compared the harassment employed by IRS agents to the machinations of the Soviet Union, and warned that excuse-making and cover-ups would force him to call for a special prosecutor in the case.

That's not to say that partisanship hasn't emerged amid the outrage. On one hand, critics of the IRS claim with plenty of justification that their scrutiny intentionally benefited supporters of President Barack Obama and his administration while handcuffing his opposition through not one but two election cycles. USA Today analyzed the raw data from the inspector general's audit and determined that no Tea Party or conservative group got an application approved for 27 months, while dozens of groups with progressive orientation managed to win tax-exempt status, enabling them to raise funds and organize more effectively.

Yahoo's Chris Moody reported that one conservative group figured out the problem and came up with a creative solution: They changed their name to sound more progressive. In July 2011, former RNC staffer Drew Ryun applied for tax-exempt status for Media Trackers, a watchdog group that would report on media bias. More than a year later, with numerous interactions making it clear to Ryun that the IRS was blocking the application, he reapplied for the same organization — after changing its name to Greenhouse Solutions. With this vaguely environmental-activist new name, the IRS approved Ryun's new application in three weeks.

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Others sought to defend the IRS targeting by claiming that the Tea Party and other conservative groups were purposefully exploiting the ambiguity in 501(c) regulations. This ambiguity came courtesy of the IRS itself, which changed 501(c)(4) regulations to allow for groups that "primarily" engage in social-welfare activities (such as education) as opposed to explicitly political activities. The 501(c)(4) organizations can conduct unlimited lobbying and endorse political candidates — as opposed to 501(c)(3)s, which can only do limited lobbying and offer no endorsements — as long as such political activities do not exceed 49 percent of their activity, and their donors can remain anonymous. Donations are not tax deductible as charitable contributions, but the anonymity can be valuable, and the organizations themselves don't have to pay taxes on their donations. Unions, by the way, are 501(c)(4) organizations.

Defenders of the IRS claim that the agency was responding to a deluge in applications after the Supreme Court's Citizens United decision by attempting to group similar applications together and review them in a consistent and fair manner. There are only two problems with this defense. First, there was no new deluge of applications when this scrutiny started in early 2010; applications were actually slightly lower for the fiscal year, and only slightly higher when looking at the calendar year. Second, the lack of scrutiny applied to progressive groups and the 27-month gap in approvals for conservative groups make hash of the defense that political viewpoint had nothing to do with the scrutiny.

In a way, though, both of these criticisms miss the mark. The problems at the IRS relate back to the same problem — having the IRS as the arbiter of political speech in the first place. For that, we have campaign-finance reform laws to thank.

In the decades since Watergate, the political establishment has sown hysteria over the threat of money in politics. Instead of going after actual corruption — how long did William "Dollar Bill" Jefferson sit in Congress after investigators found $90,000 in cash in his freezer? — the political class has continued to engineer methods of removing accountability of money in politics while protecting their own entrenched positions. Citizens United sprang from a particularly egregious regulation in the Bipartisan Campaign Reform Act, better known as McCain-Feingold, which prohibited independent organizations from publishing criticism of incumbents within the last couple of months before a general election.

With a blizzard of regulations that channel money into ridiculous and artificial categories and where candidates can take $35,000 donations at a time if they share it with political parties who will spend all of it on the candidate anyway, donors began looking long ago for ways to fund their political point of view. The money started going to tax-exempt organizations that put on pretenses of apoliticism or to PACs and then super PACS that ran their own political campaigns in parallel to the candidates' and the parties' campaigns. That puts the IRS squarely in position to impact politics in the U.S., and it's not exactly a surprise to see an organization act to protect itself against those organizations that want it seriously reduced or eliminated. It's blatantly corrupt and egregious, but not surprising.

None of this took money out of politics, either. All it accomplished was to remove accountability from parties and candidates in how money gets used, and it reduced even further the transparency of money's origins and uses in the political process. It also produced an uglier brand of politics, thanks to the arms-length relationship between candidates and these organizations.

With high-speed internet access nearly ubiquitous, the entire campaign-reform structure should be thrown out, along with tax exemptions for donations to political candidates, campaigns, PACs of all stripes, and political organizations. Instead, people should feel free to donate as much of their cash as they like to candidates and parties, who would then be required to publicly list all donations within 48 hours of receipt on their official websites. When people can channel their cash in such a manner, they won't bother pushing it through the circuitous routes that keep multiplying in each election cycle. That will make candidates and parties responsible and accountable for the campaigns that take place, and might actually improve the tenor and ethics displayed in elections.

The only way to ensure that the IRS doesn't interfere with elections in the future is to take it out of the loop entirely. It never should have been allowed to interfere with political activity in the first place, and hopefully both sides will see the wisdom of closing that door as soon as possible.