Monday, May 13, 2013

The Formosa Oolong Posse, the IRS and chilling of political activity

Not that I know much (or want to) about the legal/definitional arcana of ‘501(c)4 social welfare groups,’ but the scandal involving the IRS’s extra scrutiny aimed at groups that used words/phrases like ‘tea party,’ ‘constitution,’ ‘limiting expanding government,’ ‘Bill of Rights’ and who also engaged in political activities, seems to me serious, and its causes were essentially two:
1. There was a political desire to suppress activity on the right, while keeping the status quo concerning similar groups on the left. This is evidenced by two things. (a) The scrutiny began during 2010, with important midterms in the offing. It continued through the 2012 elections. (b) A similar level of attention was not aimed at politically active groups on the left, whose titles or literature contains buzzwords from that end of the spectrum. I won’t try to exhaustively list them, but words/phrases like ‘social justice’ ‘corporatism’ ‘one percent’ ‘occupy,’ are obvious examples.

2. As is pointed out in this blog post from the WaPo, the criteria for deciding whether a 501(c)4 group is indeed ‘too much’ of a political group to warrant tax exempt status are inexact ( I would say necessarily inexact).  That inexactitude puts a fairly hefty interpretive onus on people whose job it is to investigate such groups. This does two things: it provides cover for politically motivated witch hunts/intimidation tactics; it provides a secure basis of employment for the savants that interpret said regulations; lawyers.

In order to prevent future episodes such as this, it seems the possibilities involve some combination of the options contained under these two separate heads:


1. Keep the category, allowing no tax exempt status for any SW organization that involves itself in political activity of any sort. (Basically the 501(c)2 approach, but allowing no wiggle room. Similar to how churches are treated.)
2. Keep the category; allow no exemptions for SW organizations that directly support individual candidates or political parties.
3. Keep the category; allow no exemptions for SW organization that directly support PACs or SuperPACs.
4. Keep the category; allow all political activities for SWs and retain exemptions. (Treat ‘em like 501(c)3s (unions for example).

5. Do away with the category; tax all politically active SW organizations.
6. Do (5) along with abolishing the other two categories.  Tax ‘em all.
7. Maintain tax exemptions for groups that are presently covered under these regs (churches, unions and ‘SW’ groups), and have no restrictions based upon political activity. Effectively reduce the category to one, allowing tax exempt status for organizations that are politically active.
To also include
8. In every case, require full transparency from all politically active organizations and/or the IRS.
Taxation can be wielded in such a way as to discourage or make political speech excessively difficult to undertake. The present situation is a case in point. The suspect right of center groups had to lawyer up. This takes money and time. Left of center groups like those listed in the op-ed (Organizing for America, Crossroads GPS, Priorities USA and Heritage Action Fund), or the Open Society Institute, did not have to do this. That government action created an unfair burden. If political speech is to be made onerous, then that needs to be evenly distributed across the political spectrum. End special privilege for unions, (who are obviously left of center). Treat them as you would the suspect right of center SW organizations, or suspect churches. If your actions in effect, suppress political speech by making it onerous for one or some, fairness dictates that you need to make it equally onerous for all.
On the other hand, tax exemptions tend to encourage the behaviors that are not taxed. Should we not encourage political activity? Allowing churches and unions, political organizations and social welfare organizations the privilege of tax exemption for political activity would encourage these groups to do so. It would also encourage the formation of more such groups, while also encouraging extant groups to get politically active.
Is there anything wrong with groups looking out after their interests through politics? Does it not already occur? Should we not expect it? Should we not encourage it?  It will still be the case that employees of said groups are taxed on their incomes. So, the loss of revenue would probably not be significant. And, if groups hire folks to do the politicking for them, that just means more income tax revenue than would have otherwise been the case.
The large and powerful special interests and political parties maintain their unfair advantages partially through reliance on the inhibitory effects of the byzantine regulations surrounding political speech. They can afford the permanent legal representation that allows them to steer themselves away from the shoals of taxation and litigation, while they can also rely on those lawyers and those same regulations to discourage possible smaller or fledgling competitors from entering the fray.
If we were to dispense with the regulations, that advantage would vanish.  Coupled with complete transparency, and stringent reporting requirements for all, this might have the effect of lessening corruption in politics. It would eliminate one byzantine suburb of activity for the legal class, that would be a pity.
Then again, we could simply keep the status quo and have the “Tea Party” rename itself. How about “Formosa Oolong Posse” would that pass the IRS filter?

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