“THE POWER TO TAX IS THE POWER TO DESTROY”

May 06, 2021
The Coming IRS Reign Of Terror
JAMES BOVARD

The power to tax has long conferred the power to destroy political opponents. But in the glorious era of President Joe Biden, all previous cases of government abuse of power are being expunged, at least by the media and Biden supporters. That is why it is supposedly safe to vastly increase the power of perhaps the most feared federal agency, the Internal Revenue Service.

After announcing his endless wish list for new federal spending, Biden told Congress last week: “I’ve made clear that we can do it without increasing deficits.” Biden believes he has found a goose that will lay golden eggs for federal revenue ­ a new army of IRS agents to hound Americans and corporations to pay far more taxes.

The Washington Post reported that “the single biggest source of new revenue in the plan comes from dramatically expanding the clout of the nation’s tax agency.” Slate reported, “Biden wants to fund a massive upgrade to the American welfare state by making the IRS great at audits again.”

But the agency Biden seeks to expand and unleash has an appalling record. As author David Burnham noted in “A Law Unto Itself: The IRS and the Abuse of Power” (1990), “In almost every administration since the IRS’s inception the information and power of the tax agency have been mobilized for explicitly political purposes.”

President Franklin Roosevelt used the IRS to harass newspaper publishers who were opposed to the New Deal, including William Randolph Hearst. FDR also dropped the IRS hammer on political rivals such as the populist firebrand Huey Long and radio agitator Father Coughlin, and prominent Republicans such as former Treasury Secretary Andrew Mellon. President John F. Kennedy spurred the IRS to launch the Ideological Organizations Audit Project, which targeted right-leaning groups, including the Christian Anti-Communist Crusade, the American Enterprise Institute and the Foundation for Economic Education. Nixon Administration officials gave the IRS a list of official enemies to, in the words of presidential assistant John Dean, “use the available federal machinery to screw our political enemies.” Congress enacted legislation to severely restrict political contacts between the White House and the IRS.

But the power of IRS agents continued to increase decade by decade. In 1988, then-Sen. David Pryor, a moderate Democrat from Arkansas, warned that the IRS “ operates a near totalitarian system.” Pryor complained that the IRS had encouraged a “bounty-hunter mentality among revenue officers” and called for reforms to assure that the IRS “operates on the basis of public respect rather than fear.” Congress enacted a so-called Taxpayer Bill of Rights but it failed to curb the revenuers.

The Clinton administration, like many of its predecessors, exploited the IRS to punish its political enemies. In 1995, the White House and the Democratic National Committee produced a 331-page report entitled “ Communication Stream of Conspiracy Commerce” that attacked magazines, think tanks, and other entities and individuals who had criticized President Bill Clinton. In the subsequent years, many organizations mentioned in the White House report were hit by IRS audits. More than 20 conservative organizations ­ including the Heritage Foundation and the American Spectator magazine ­ and almost a dozen individual high-profile Clinton accusers, such as Paula Jones and Gennifer Flowers, were audited.

Members of Congress also routinely exploited their power to send the secret financial police against their enemies. The Associated Press reported in 1999 that “members of both parties in Congress have prompted hundreds of audits of political opponents in the 1990s,” including “personal demands for audits from members of Congress.” Audit requests from congressmen were marked “expedite” or “hot politically” and IRS officials were obliged to respond within 15 days. Because the abuse was bipartisan, there was little enthusiasm on Capitol Hill for an investigation.

In the Obama era, the IRS again became a political hit squad. The IRS demanded donor lists from 24 conservative nonprofits and proceeded to audit 10% of their donors ­ an audit rate ten times higher than average for the country. A 2013 Inspector General report confirmed that IRS employees had devoted far more scrutiny to nonprofit applications that used the terms “tea party” or “patriot” or that criticized government spending or federal deficits. In 2017, the IRS formally apologized to scores of conservative groups that it had wrongfully targeted in tax audits.

The hubbub over Obama IRS machinations overshadowed similar appalling abuses on Capitol Hill. In 2014, the Center for Competitive Politics (since renamed as the Institute for Free Speech) filed a complaint with the Senate Ethics Committee charging that senators had personally intervened to demand IRS audits against conservative organizations. The senators “pressured the IRS to undertake income-tax investigations of specific organizations, to find that specific organizations were in violation of the law, to reach predetermined results pertaining to pending applications by individual organizations for nonprofit status.”

Democratic New York Sen. Charles Schumer, lamenting the Republican takeover over the House of Representatives in 2010, declared that “there are many things that can be done by the IRS.” In a March 12, 2012 letter to the IRS, Schumer “urged the service to investigate various groups identified through reference to news articles,” a Wall Street Journal oped noted. On December 16, 2014, the Senate Ethics Committee dismissed the complaint from the Center for Competitive Politics, claiming that senators “have broad discretion to comment on matters of public policy in communications with agencies.” Perhaps the committee also presumed senators had a sacred prerogative to exploit the IRS to assail their enemies.

While political abuses of the IRS have received most of the headlines, routine day to day outrages have continued unabated for decades. In the 1990s, IRS agents were indoctrinated to see taxpayers as liars and class enemies.

IRS agents were trained with a game called “Culture Bingo.” That game taught the doctrine: “Taxpayers seem to live better than I do” to maximize resentment of taxpayers being audited. The American Institute for Certified Public Examiners complained of the course materials: “Every ethical issue presented finds the ethical result to be pro-IRS and anti-taxpayer. There is not one scenario where an IRS agent might act unethically against a taxpayer’s interest.”

“Culture Bingo” spurred IRS agents to audit the lifestyles of taxpayers instead of simply their tax returns. IRS agents showed up unannounced to inspect people’s homes and demand to know what people kept in their bedroom drawers.

Former Republican Sen. Bill Roth exposed stunning IRS abuses in Senate hearings in the late 1990s. Former IRS district chief David Patnoe testified: “More tax is collected by fear and intimidation than by the law. People are afraid of the IRS.”

One confidential IRS document uncovered in 1997 revealed that IRS auditors in the San Francisco region were expected to assess at least $1,012 in additional taxes for each hour they spend auditing a taxpayer’s return. An IRS instructor in the Arkansas-Oklahoma district was caught on videotape lecturing collection agents on how to treat taxpayers: “ Make them cry. We don’t give points around here for being good scouts. The word is enforced. If that’s not tattooed on your forehead, or somewhere else, then you need to get it. Enforcement. Seizure and sales…. Enforce collection until they come to their knees.”

Congress passed reform legislation, but it did little to curb the vast arbitrary power possessed by IRS agents. Consider IRS depredations under the Bank Secrecy Act of 1970, which required banks to file a federal report for any cash transaction exceeding $10,000. The IRS “enforced” the law by presuming that anyone who deposited slightly less than $10,000 was a criminal. The IRS seized a quarter billion dollars because it disapproved of how businesses and individuals structured their bank deposits and withdrawals. IRS bureaucrats don’t even need to file a criminal charge before snaring citizens’ life savings.

Between 2005 and 2012, the number of IRS seizures rose more than fivefold, but the vast majority of victims were never criminally prosecuted for structuring offenses. “One-third of those cases involved nothing more than making a series of sub-$10,000 cash transactions,” the Institute for Justice reported. A 2017 Inspector General report found no evidence in 91% of the forfeiture cases that the money came from illegal activities. IRS investigators simply looked at banking records and then confiscated  the accounts of hundreds of people. Most of the victims were “legal businesses such as jewelry stores, restaurant owners, gas station owners, scrap metal dealers, and others.”

The IRS targeted businesses with legal sources of income because “the Department of Justice had encouraged task forces to engage in ‘quick hits,’ where property was more quickly seized… rather than pursuing cases with other criminal activity (such as drug trafficking and money laundering), which are more time-consuming,” the Inspector General reported.

The one certainty is that the new powers Biden bestows on the IRS will be horrendously abused, and that most members of Congress won’t give a damn. Instead, they will pile on to further oppress American citizens and political activists. In 1967, a federal appeals court decision proclaimed, “The court will not place its stamp of approval upon a witch-hunt, a crusade to rid society of unorthodox thinkers and actors by using the federal income tax laws” to silence them.

Unfortunately, such lofty sentiments are far more likely to be found in musty judicial compilations than in today’s Washington.