The Daily Caller

The Daily Caller

The myth of the ‘real IRS scandal’

Photo of Paul Sherman
Paul Sherman
Staff Attorney, Institute for Justice

Almost two weeks after the news broke, Washington is still abuzz about the revelation that the IRS flagrantly abused its power by subjecting conservative nonprofit groups to heightened scrutiny simply for having phrases like “tea party” in their names or for professing to teach the public about the meaning of the U.S. Constitution. The scandal has drawn condemnation from across the political spectrum and has forced acting IRS Commissioner Steve Miller to resign.

But whenever a scandal erupts in Washington, you can count on apologists for government power to deflect attention to something else. It’s a tactic we’ve all witnessed before: Sure, this scandal looks bad, but the real scandal is X, Y, or Z.

In the wake of the IRS scandal, the “real scandal” dodge has been on full display. The real scandal, we are told, isn’t that the IRS was cracking down on conservative nonprofits, it’s that the government isn’t doing more about the role of money in politics.

This is a convenient argument for groups that have long argued for ever greater regulation of political speech, but none of its permutations hold up to scrutiny.

Is the real scandal the fact that the nonprofits targeted for extra scrutiny by the IRS — called 501(c)(4) organizations — may have spent some of that money on political advocacy? No. These groups are allowed to spend money on political advocacy. More to the point, there is nothing inherently illegal about groups raising unlimited amounts of money and spending that money on political advocacy, all tax-free. Groups that do so, so-called 527 groups, are simply subject to a different set of disclosure laws.

So is the real scandal that 501(c)(4) organizations don’t have to disclose their donors? While it is true that such nonprofits can keep their donors secret, that’s nothing new; the practice has been commonplace for nearly three decades. Nonprofits have long been allowed to keep their donors secret, and they have been allowed to spend money on political advocacy since a U.S. Supreme Court ruling in 1986. No one seemed to mind until, in the wake of the Supreme Court’s 2010 ruling in Citizens United v. FEC, opponents of that ruling rebranded these nonprofits as “dark money groups.”

Then the real scandal must be Citizens United, right? That’s the argument made by Nancy Pelosi, who spun the IRS scandal as a reason for overturning that controversial ruling.

But there’s no scandal there either. First, before Citizens United was decided, the rule it announced — that corporations and unions may spend freely on political speech — was already the rule in a majority of states, and there is no evidence that states that permitted this spending were more corrupt or less well governed than those that prohibited it. Moreover, even if all of the 501(c)(4) spending in 2012 had been funded by corporations and unions, that money would represent a trivial five percent of the total amount spent in the election.

Maybe, then, the real scandal has nothing to do with the IRS at all, but rather with the Federal Election Commission, which some have argued is “broken” because it did not force these nonprofits to register with the government as PACs and submit to burdensome campaign-finance laws.

This argument is a perennial favorite among campaign-finance scolds, who point to the six-member bipartisan commission as an agency “designed” to deadlock along party lines. But in the wake of the IRS scandal, it’s hard to call such a system “broken.” If the IRS scandal demonstrates anything, it is the danger of allowing unaccountable bureaucrats to wield immense power to harass or punish people based on their partisan affiliation. Whatever complaints might be leveled against the FEC — and there are many legitimate ones — the fact that it is designed, in part, to prevent that sort of abuse isn’t a scandal.

The only real scandal is the one the nation learned about when the IRS admitted to abusing its power.

That scandal demands a vigorous response. But that response should focus on the actual problem: The IRS has too much power to punish people based on their partisanship, and that power will, inevitably, be abused. The solution to that problem is not to spread the pain around, or to shift power to a different government agency. The solution is to give the government less power over political speakers.

Paul Sherman is an attorney at the Institute for Justice, which litigates campaign-finance cases nationwide.