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- The GOP is abuzz with the possibility that the scandal at the IRS will lead to tax reform. This path will dead-end.
- Past IRS scandals produced useful reforms partly because the GOP wasn't focused on pinning the blame on the President.
- The targeting scandal has led to other troubling revelations about the IRS.
Republicans on Capitol Hill are abuzz with the possibility that the scandal at the Internal Revenue Service will lead to tax reform. Media strategist Frank Luntz is advising them to harness public outrage to reach this goal.
This path will dead-end. Republican tax-reform plans remain vague, because that's the way they stay popular. And the leading Republican tax-reform ideas have no real relation to the facts of the scandal. Republicans generally want to broaden the tax base, lower rates and reduce the number of brackets. The IRS could have harassed conservative groups applying for tax-exempt status -- the core of the current scandal -- even if we did all of these things with a flat tax.
Conservatives disliked it when Democrats responded to the massacre in Newtown, Connecticut, by proposing gun regulations that wouldn't have done anything to stop it, and that disconnection is one reason the regulations didn't have enough political momentum to pass. That example should make Republicans think twice about using the IRS scandal to flatten taxes.
Some conservatives would like to get rid of the corporate-income tax, which actually would prevent such a scandal from happening again. Republicans have enough political sense, though, not to propose that. So the default response is continued vagueness: They're saying we should "abolish the IRS" without noting that they would almost certainly have to create another large, intrusive tax-collection agency to replace it.
Republicans had a better response to the last round of IRS scandals, in the 1990s. In 1997, congressional hearings revealed that IRS agents were being pressured to meet quotas for back taxes and penalties. Agents, sometimes anonymously, admitted that these quotas had led aggressive collectors to squeeze taxpayers for money they didn't really owe.
A bipartisan commission recommended reforms to rein in such practices. The Clinton administration resisted some of the recommendations, but many of them ultimately became law in 1998.
Senator Rob Portman, the Ohio Republican who helped lead the commission as a member of the House back then, points out that these reforms played a role in uncovering today's scandals. The 1998 law created an inspector general within the Treasury Department to police the IRS for abusive practices, and it was a report from this office on the targeting of conservative groups that brought the latest scandal to light. "You could argue that we would know nothing about this if not for the law," Portman told me.
The earlier IRS scandals produced useful reforms partly because the Republicans who did the most to publicize them weren't focused on pinning the blame on President Bill Clinton. They instead wanted to demonstrate the dangers of letting the federal government have too much power, and in finding ways to reduce those dangers.
We could use a congressional investigation with the same spirit today. The targeting scandal has led to other troubling revelations about the IRS. The Taxpayer Advocate of the U.S. has, for example, reported that a whopping 69 percent of people who claimed the adoption tax credit for 2012 were audited -- even though most of the returns were clean. (The IRS hasn't disputed these facts.)
And news reports have suggested that the IRS may have targeted a broad range of conservatives -- individuals as well as organizations -- for audits. One conservative writer, Anne Hendershott, has accused the IRS of singling her out for political reasons. Even if that speculation is incorrect, the details of the story she tells -- that an IRS agent summoned her to a meeting and forbade her from bringing her husband -- point to the possibility that some IRS practices still need reform.
Why, for example, should the agency be trying to predict whether new tax-exempt organizations will comply with the law? Brett Kappel, a lawyer at Arent Fox LLP's political-law group, says it shouldn't: "A better approach is to do away with this asking for permission in advance." The IRS should confine itself to checking whether groups already in operation have in fact followed the rules.
Robert Schriebman, a tax attorney based in Los Angeles who was involved in the last round of reform, believes that enforced tax collection -- liens, seizures and the like -- should be placed under the supervision of independent judges, so that the IRS is not its own "judge and jury." It should also be easier for taxpayers to record meetings with IRS officials.
Portman cautions against legislating before we know all the facts about the scandal: "We have to get to the bottom of this first to find out what happened, how it happened and why it happened."
That's right. But Congress shouldn't just investigate a political scandal. It should look at the larger threat of abusive behavior by a fearsomely powerful government agency.