Thursday, May 16, 2013

Everybody bashes the Taxman

If you have been following the news in the US, you might have noticed an almighty hullabaloo over the the IRS (their tax man) having targeted Tea Party and Conservative groups. Much hot air and righteous indignation is being spouted and Obama has fired the IRS chief yesterday. Almost everybody on earth loves to bash the taxman (rightfully so !) and this is all good fun.

Except that I believe that in this case the bashing is wrong. Or at least much exaggerated.

What happened is this. The IRS admits that it subjected groups which bore the name tea party, or patriot to extra scrutiny. The fact that such groups are exclusively Republican and that the President is a Democrat seems to indicate political targeting. That is, of course, against the law. Hence all this noise.

But why did the IRS do this - after all, they are not fools. If you try and answer this question, a different picture emerges.

The problem all started with, in my view,  the appalling judgement by the US Supreme Court in the Citizens United case in 2010. In layman terms the Supreme Court decided that organisations were people and had the same right of free speech as you and me. Therefore there could be no curbs on their political activities and donations.

Overnight, all sorts of action groups sprung up and the money started being being poured into US elections of all kinds.  Many of these outfits do not want to disclose who really gives them money. The way to achieve this is to register as a social welfare organisation under the tax code which then grants you tax exempt status - something called Sec 501(c)(4) exemption !! You are not prohibited then from indulging in political activity - its just that the primary activity has to be social welfare in nature. The main purpose of these groups is not to avoid tax (for they do not really seek to make a profit). The primary purpose is to avoid disclosing who is giving all the money.

It is probably a safe bet to say that the majority of these groups (Republican or Democrat) have zero interest in social welfare and are primarily there for  political activity.

From 2010 to 2012, the number of such organisations doubled to some 3400. A large number of them were "tea party" or "patriots". Do you really expect the IRS to sit tight and watch all this. After all, it is their job to check whether these outfits really were primarily involved in social welfare. 

The IRS did not prosecute them or withdraw their status. All they did , in true Ramamrtiham style, is to harass them with lengthy requests for information, do audit reviews, delay decisions on their applications and commence painstaking procedures. In this my sympathies are entirely with the said groups as we all know what the incredible capabilities of Ramamritham are.

The real culprit is the political donations sloshing around consequent to that awful Supreme Court verdict.  In true US politics style, this will not be addressed - instead the IRS will be hauled over coals. Yuk !

I never thought I would ever write a post in defence of Ramamritham, but there you go ... !