IRS scandal – Deja vu all over again

Following years during which they did everything possible to attack the president, congressional Republicans launched an attack on the IRS. The media cheerfully picked up on one-sided tales of IRS abuse.

The year was 1998.

Democrat Bill Clinton was in his second term, but the Republicans controlled Congress, and used every opportunity to attack the president. David Cay Johnston, then a New York Times reporter and probably the nation’s foremost tax journalist, described what happened: “The taxpayer abuse hearings that Senate Republicans held last week were designed to show that the Internal Revenue Service is out of control. And with tales of tax agents in flak jackets storming houses and forcing teen-age girls to change their clothes at gunpoint not leavened by any testimony from the accused IRS agents, the case seemed overwhelming.”

Johnston continued, “But the hearings were just another step in a much larger strategy by Republicans in Congress who have vowed to replace the income tax system with a new tax code” primarily to benefit big corporations and the very rich.

There was another bonus for the Republicans: “Polling has shown the Republicans that attacking the IRS is their most effective tool to win votes in this election year and raise money.”

How did it turn out? Congress passed an IRS “reform” that made it harder for the IRS to audit rich people and actually collect the taxes owed by corporations and individuals wealthy enough to hire expensive tax lawyers. While easing up on the rich, the “reform” required more intense auditing of low-income working people who claim the Earned Income Tax Credit.

The result – poor people were more likely to be audited than the rich. In 1999, the year following the “reform,” fewer than 1 in 100 wealthy taxpayers were audited – down from 1 in 9 in 1998. Audits of big corporations also fell. But the working poor, who can’t afford expensive lawyers, accounted for almost half of all audits.

As an extra bonus, the new law included a retroactive capital gains tax loophole for big investors.

Nobody likes paying taxes. In 1998, the nation’s wealthy elite used a few instances, real or imagined, of abuse by the IRS to make it easier for themselves to abuse the system. At the same time, they focused IRS enforcement against ordinary workers. The congressional Republicans also tried to use the IRS “scandal” to their advantage in the 1998 elections by posing as champions of the people against the IRS.

This year’s IRS “scandal” is at least as phony as the 1998 version. In both cases, by attacking alleged IRS “abuses,” the goal is to prevent the IRS from doing its job.

Since 1998, it has been almost impossible for the IRS to collect much of the taxes owed by wealthy individuals and corporations. This time, the goal is to remove the few existing restrictions on big money buying elections. And of course, there is the political goal of using the phony scandal to distract attention from the real scandal in Congress: the deliberate Republican sabotage of government appointments, economic policy, and health care legislation.

Finally, as in 1998, look for groups and politicians who represent big money to use this “scandal” to cut funds for IRS enforcement and to press for further changes that will shift the tax burden further onto working families.

Photo: Tax Day, April 17, 2012, including the Tax Dodgers and Corporate Loophole cheerleaders, in New York’s Garment District. “You pay taxes so we don’t have to. We’re the Tax Dodgers. We’re number 1. And by that we mean we’re the 1 percent.” Bee Collins CC 2.0



Art Perlo
Art Perlo

Art Perlo lived in New Haven, Conn., where he was active in labor and community struggles. He did research and writing on economic issues in Connecticut, including work with the Coalition to End Child Poverty in Connecticut which helped pave the way for the movement for progressive tax reform in the state. He wrote on national economic issues for the People's World and was a member of the CPUSA Economic Commission.