The IRS Tea Party Muddle

by Benjamin Studebaker

If you just read the news headlines today, you’d think that the IRS was the second coming of COINTELPRO. The IRS is targeting the Tea Party and other conservative, right-wing political organisations, they say. For the average citizens, this reads as though your average citizen’s political views were somehow known to the IRS, as if the IRS was going after registered republicans or members of right wing political groups individually. This is not the case. As Ezra Klein (who is really on his game lately, by the way) points out, what actually happened is quite a bit more mundane than all that.

Turns out that what really happened is that in recent years, there have been a lot of court decisions that have expanded what 501(c), or non-profit, organisations can do in the United States, particularly 501(c)4s. A 501(c)4 is a social organisation. It is permitted to lobby and fund political campaigns, but its primary purpose must be “social”, not “political”. This is an extremely fine line. 501(c)4s benefit from a mostly tax-exempt status, so since the courts have expanded the political capabilities of 501(c)4s, a lot of organisations have sought 501(c)4 status in order to avoid paying taxes. One of the IRS’ jobs is to sort out which of these organisations are genuine “social” organisations and which are “political” organisations masquerading as “social” ones. Since the court expanded the political role of 501(c)4s, the number of organisations applying for 501(c)4 status has doubled, with the majority of new 501(c)4s being Tea Party/conservative/otherwise right-wing affiliated. This puts the IRS in a bit of a bind. Under the current law, it has to monitor the behaviour of 501(c)4s to ensure that they remain social organisations rather than political organisations, and it needs some standard by which to sort them. The standard it adopted is the standard currently under media criticism, as it challenges the tax-exempt status primarily of right-wing 501(c)4s.

All of this can be fixed by a change in the law such that 501(c)4s are more clearly defined, either to directly exclude or include primarily political organisations in the tax exempt status. It’s an easy solution. The problem is structural–it’s not a matter of IRS corruption. There’s no story here.

So why isn’t this the end of the blog post? Well, when I saw the exciting headline that the IRS was picking on the Tea Party, my first thought was that this was a kind of political profiling. It isn’t, but what if it was? Would the IRS have a leg to stand on in defence of political profiling? I’d like to play with the hypothetical, and if you’d like to play as well, read on.

It doesn’t seem automatically unreasonable to suppose that if you are a member of the Tea Party, you are more likely to be in need of an audit than the average person. Say for instance that the police are investigating the murder of a black person whom they correctly believe to have been killed for racial reasons (say the body is found with swastikas drawn all over it or something). Would it not be reasonable for the police to start out by investigating known members of racist political organisations? Say, neo-Nazi groups, the KKK, things of that nature? While the racial nature of the murder is certainly not proof that a member of one of those communities was involved, it is certainly reasonable to suppose that there is cause to be more suspicious of the membership.

In the case of the IRS attempting to determine whom to audit, it might be similarly reasonable to suppose that people who are part of anti-tax, small government organisations may be more likely to evade their taxes than your average person. It is not proof, but it provides grounds for a reasonable suspicion.

Now, we could draw an analogy to racial profiling. What about the case of the Arab who is pulled aside at airport security for additional checks? It is true that people of Arab background are more likely to attempt to fly planes into buildings than are other racial groups. The difference between racial and political profiling is that in the racial case, appearance, which is only correlative with political views, is the target. In the political case, one’s political views are a direct motivating factor in one’s behaviour. The people who did 9/11 didn’t do it because they were Arab, they did it because they had a slate of political beliefs which included the belief that they should attack the United States. It just so happened that they were also Arab. One’s racial background does not in and of itself cause a desire to commit acts of terrorism. Belief in radical ideologies that condone terrorism does.

In the same way, while it would be unreasonable to suppose that white southerners are more likely to be guilty of tax evasion, it would be reasonable to suppose that people affiliated with anti-tax, anti-state organisations would be.

Does this mean that the IRS should target members of Tea Party organisations with audits? Not necessarily. There may be better predictors of tax evasion than expressed political beliefs. Say, for instance, that people over a given income threshold were even more likely to evade their taxes than were members of anti-tax organisations, because being rich increases the financial benefits of tax evasion such that it becomes more attractive. It would be better then to profile on basis of income rather than on basis of political affiliation, because income would have a larger direct causative influence over behaviour.

As it stands, it’s my understanding the the IRS operates on a point system. Its computers and employees look over tax returns for suspicious items, tallying the number and severity of suspicious items per return via a point system. They then audit on the basis of two factors:

  1. The number of points of suspicion.
  2. The size of potential tax to be recuperated.

In this way the IRS maximises both the chances that a person or company they audit will in fact be evading as well as the amount of tax money they are able to recoup for the government. This system seems to me to be a better and more efficient means of determining audits than would a system of political profiling. But, if it were impossible to examine returns beforehand in this way? I cannot say that political profiling would be equivalent to racial profiling. There would be significantly more basis for doing it, on the grounds that political beliefs are much more likely to influence behaviour than is racial background.