The IRS & taxes is a real bucket of snakes for most Americans. That said, why aren't they more enthusiastic about going after political & corporate fat cats?

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IRS by IRS

Nope, I'm not going to defend the IRS, which appears to have acted in ways wholly inconsistent with their mandate for unbiased investigations into, in this case, whether certain political groups should receive tax-exempt status. It is unclear how high up the chain of command these untoward actions went, but this morning's news suggests it wasn't just a few rogue auditors in Cincinnati.

The problem wasn't that the agency scrutinized these so-called "social welfare" organizations -- as I'll emphasize in a moment, tax law in this area is an accident going out to happen. It's that they violated neutrality, investigating conservative groups by searching on "tea party" and "patriot."

Republicans will of course try to pin this on the president, despite the fact that since Nixon used the IRS to target his enemies, the president's been barred from even discussing this kind of thing with the agency.

No, the problem here isn't the president. It's the Supreme Court's Citizens United decision and subsequent tax law written by Congress that gives these groups tax exempt status (under rule 501(c)(4)) as long as most of their activities are primarily on educating the public about policy issues, not direct campaigning.

Of course, the ambiguities therein are insurmountable. Many of these groups, especially the big ones, spend millions on campaign ads mildly disguised as "issue ads," and under current law they can do so limitlessly and with impunity.

According to today's NYT:

The tax code states that 501(c)(4)'s must operate "exclusively" to promote social welfare, a category that excludes political spending. Some court decisions have interpreted that language to mean that a minimal amount of political spending would be permissible. But the I.R.S. has for years maintained that groups meet that rule as long as they are not "primarily engaged" in election work, a substantially different threshold.

Nowhere do the rules specify what "primarily engaged" means...

Again, I see no way that a government agency could fairly interpret and enforce these instructions. What is "primarily engaged"-at which point does an issue ad cross the threshold into campaign ad -- what kind of "education" is GPS Crossroads providing and how is it promoting "social welfare?"

Weirdly, the IRS hasn't seemed particularly interested in going after the big fish here, like Rove's Crossroads GPS on the right or Priorities USA on the left. Instead, they appear to have systematically targeted small fry on the far right. If so, not only is that clearly biased and unacceptable -- it's also ridiculous given the magnitude of the violations of tax exempt status by these small groups relative to the big ones.

At the end of the day, we should really ask ourselves what societal purpose is being served here by carving out special tax status for any of these groups. If anyone can show me any evidence that the revenue forgone is well spent, that these groups are making our political system and our country better off, please do so. If not, then no one's saying shut them down -- they've got a right to speak their minds. But not tax free.

This post originally appeared at Jared Bernstein's On The Economy blog & is crossposted at the Huffington Post.

Follow Jared Bernstein on Twitter: www.twitter.com/econjared

Authors Bio:
Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama's economic team.

Bernstein's areas of expertise include federal and state economic and fiscal policies, income inequality and mobility, trends in employment and earnings, international comparisons, and the analysis of financial and housing markets.

Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute in Washington, D.C.

Between 1995 and 1996, he held the post of deputy chief economist at the U.S. Department of Labor.

He is the author and coauthor of numerous books for both popular and academic audiences, including "Crunch: Why Do I Feel So Squeezed?" and nine editions of "The State of Working America." Bernstein has published extensively in various venues, including The New York Times, Washington Post, Financial Times, and Research in Economics and Statistics. He is an on-air commentator for the cable stations CNBC and MSNBC and hosts jaredbernsteinblog.com.

Bernstein holds a PhD in Social Welfare from Columbia University.