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The Obama administration is using the Labor Department to ram through something like Card Check (repeatedly failed to pass the Senate), the Environmental Protection Agency to impose something like Kyoto Treaty protocols (voted down by the Senate 95-0), the NLRB shutting down Boeing’s $2 billion Dreamliner factory in South Carolina and other initiatives, many of dubious constitutionality. It’s a lengthening list. My fellow columnist Charles Kadlec reviews a choice few “executive actions” this week here at Forbes.com. Don’t miss it!
Alarm bells really began sounding when the New York Times reported that the IRS is looking into reversing a 30-year-old policy to apply a gift tax to donors to social welfare organizations. There is almost no chance that this tax came from career staff alone.
Sen. Orin Hatch and five other members of the Senate Finance Committee sent a letter to the IRS commissioner demanding an explanation. The IRS has a long and noble tradition of resisting White House efforts to politicize it. But politicians have, from time to time, misused the IRS.
President Nixon and his minions’ attempts to use the IRS against perceived political enemies is notorious. As noted by Stanley Kutler in The Wars of Watergate:
[White House Counsel John] Dean later prepared a memorandum.… The Service has been too “unresponsive and insensitive” to the White House. Commissioner Walters … appeared “oversensitive” in his concerns that IRS actions might be labeled political. That had to change, Dean said. … Walters “must be made to know that discreet political actions and investigations on behalf of the administration are a firm requirement and responsibility on his part. . . .” Finally, the inevitable rationale: the Democrats “used [IRS] most effectively. We have been unable.”The Democrats “used [the IRS] most effectively?” Of significance was the integrity shown by Treasury Secretary George Shultz, rebuffing White House pressure, and by IRS Commissioner Donald Alexander, whose obituary noted “… about 10 weeks into his job as commissioner, Mr. Alexander announced that he had shut down the Special Service Staff of the I.R.S., which had been investigating critics of Nixon and his Vietnam policies. That night Nixon made the first of several attempts to fire him. . . .”
Are Nixon-like abuses recurring? The evidence is only circumstantial. But what is known is troubling. It demands a close look … if only to dispel the suspicion that is settling upon the Internal Revenue Service. The IRS’ credibility lies in its hard earned reputation for integrity. It deserves to have its reputation cleared or, if its integrity has been violated, have Commissioner Alexander’s axiom that “political or social views are irrelevant to taxation” promptly restored.
1. The Evidence
The Senators’ letter sums up much of the circumstantial evidence:
President Obama and his White House staff have made it clear that they view these organizations with deep hostility. The President himself, in a heated political context, referred to certain 501(c)(4) organizations as “a threat to our democracy.” His White House Communications Director, Dan Pfeiffer, charged that the “powerful interests” supporting some of these organizations “are literally buying elections” . . . .The Senators are right. This tax appears as almost certainly constitutionally defective under the U.S. Supreme Court’s Citizens United decision.
The applicability of gift taxes to 501(c)(4) contributions is ambiguous. Historically, the IRS has deliberately opted against vigorous enforcement of the gift tax on 501(c)(4) contributions. There are good reasons for this. First, it is unclear if contributions to these organizations are eligible for the gift tax given their gratuitous nature, and the fact that the donations are made with the expectation that the organization will work to advance the donor’s policy views. Moreover, these contributions are clearly not designed for tax planning purposes or to avoid the estate tax. Most importantly, however, enforcement of gift taxes on contributions to 501(c)(4) organizations engaged in public policy debate runs an unacceptable risk of chilling political speech, which receives the highest level of constitutional protection under the First Amendment.
2. The stakes:
The majority opinion in Citizens United held that “political speech must prevail against laws that would suppress it, whether by design or inadvertence. Laws that burden political speech are ‘subject to strict scrutiny….’ … Speech is an essential mechanism of democracy, for it is the means to hold officials accountable to the people.”
At the dawn of the Republic, in one of the most fundamental interpretations of the Constitution, Chief Justice John Marshall observed that “the power to tax involves the power to destroy.” What to make of a federal agency that brings the “power to destroy” against “an essential mechanism of democracy?”
The timing of the effort to tax political speech itself seems odd, even suspicious. Come what may this “power to destroy” will be effective during the Obama campaign’s billion dollar re-election effort, chilling individuals from funding opposition groups. Coincidence?
3. The Inquiry
Who will get to the bottom of this? First, of course, is the mainstream media. Katherine Graham showed courage by allowing Ben Bradlee to dispatch Woodward and Bernstein to go after the abuses of the Nixon White House. We can but hope that her successor, son Donald, will rise to his late mother’s stature. Perhaps the Post, or its investigative peers, The New York Times (who scooped the Post in its own back yard on this one) and the Wall Street Journal, already are on this.
Also, this matter falls under the jurisdiction of the House Committee on Government Operations, chaired by Rep. Darrell Issa, and of the House Ways and Means Committee, chaired by Rep. Dave Camp (and its Oversight Subcommittee chaired by Rep. Boustany). These have the power and duty to look into what’s going on.
Federal agencies pursuing a potentially controversial policy shift follow an elaborate process. Typically there is a set of memoranda in a file jacket, against the left side of which is stapled a “concurrence chain.” This is to be initialed by all civil servants, career and appointed, “in the loop.”
At the top of the chain are the relevant political appointees. Sen. Hatch and colleagues do well to address the Commissioner, Douglas Schulman. He was appointed by President Bush and is presumptively innocent of politicization. But the Commissioner is an administrator not a policy maker.
The relevant officials are in the Treasury Department itself. Secretary Geithner’s reputation is, at least vicariously, involved. He might wish to initiate an internal review … before Congress does. Logically, acting Assistant Secretary for Tax Policy, Michael Mundaca, would know the facts. Mundaca appears to be a recess appointment … without Senate confirmation. A breach in the process?
Deputy Secretary Neal Wolin also might know something. Wolin, briefly, served as deputy counsel for economic policy in the Obama White House and thus has direct White House ties. Did he discuss this with the White House? Having served as General Counsel at the Treasury Department from 1999 to 2001 he knows how to get things done. His CIA background, not inherently sinister, is, yes, unsettling.
The upshot? President Obama is no Jimmy Carter. He is proving himself to be effective and even ruthless. Likening him to Nixon in no way implies crimes or any impeachable offense. It does suggest a certain Machiavellian ethos.
Constitutionalists of all parties, Left and Right, find having what looks like a “soft despot” in the Oval Office alarming. Obama is on track to rival Richard Milhous Nixon for that dubious status.
Ralph Benko is a senior economics advisor to The American Principles Project and author of The Websters’ Dictionary: How to Use the Web to Transform the World. He is working on a new book, called "A Golden Age: the political consequences of the peace." This article which first appeared in the Forbes was submitted by contributing author Ralph Benko to the editor of the ARRA News Service for reprint.
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