Fundamental Change in the IRS Is Called For

President Barack Obama got it right and wrong Monday when he stated, “If you’ve got the IRS operating in anything less than a neutral and nonpartisan way, then that is outrageous, it is contrary to our traditions.”

He was right in declaring it was “outrageous” for the IRS to target conservative organizations for tough tax treatment. But he was incorrect in saying “it is contrary to our traditions.”

For the U.S. Internal Revenue Service has for decades gone after organizations and individuals that take stands in conflict with the federal government at the time. This has been a tradition, an outrageous tradition.

It is exposed in detail by David Burnham, longtime New York Times investigative reporter, in his 1991 book A Law Unto Itself: The IRS and the Abuse of Power. He relates how President Franklin D. Roosevelt likely “set the stage for the use of the tax agency for political purposes by most subsequent presidents.” Burnham writes about how a former U.S. Treasury Secretary, banker Andrew Mellon, was a special IRS target under FDR. During the presidencies of Lyndon Johnson and Richard Nixon, he recounts, the focus of the IRS’s efforts “at political control” were civil rights organizations and those against the U.S. engaging in the Vietnam War. Nixon’s “enemies list” and his scheme to use the IRS against those on it is what the current IRS scandal is being most compared.

History Professor John A. Andrew III in his 2002 book Power to Destroy: The Political Uses of the IRS from Kennedy to Nixon—its title drawn from U.S. Supreme Court Chief Justice John Marshall’s dictum “The power to tax is the power to destroy”—focuses further on this tradition. He tells of how John F. Kennedy administration’s “Ideological Organizations Project” investigated, intimidated and challenged the tax-exempt status of right-wing groups including the John Birch Society. Then, with a turn of the White House to the right with Nixon came investigations, he writes, of such entities as the Jerry Rubin Foundation, the Fund for Investigative Journalism and the Center for Corporate Responsibility.

During the Reagan administration, I had my own experience with the IRS—ostensibly because of a book I wrote. Nicaragua: America’s New Vietnam? involved reporting from what was then a war zone in Nicaragua and in Florida—where I interviewed leaders of the contras who were working with the CIA to overthrow Nicaragua’s Sandinista government—and Honduras, being set up as a tarmac for U.S. intervention in Nicaragua. I visited a U.S. military base there. The book warned against a U.S. invasion of Nicaragua (subsequently decided against by the Reagan White House after the Iran-contra scandal). The book was published in 1985 and soon afterwards I was hit with an IRS audit. It would be more, I was informed, than my showing up at an IRS office. The IRS was to come to my house for a “field audit.”

The investigator sat on one side of our dining room table and on the other side was me and my accountant, Peter Berger of Shelter Island. What would be an all-day event started with the investigator asking me to detail how much my family spent on food each week and then, slowly, methodically, going through other expenses. Then he went through income. He obviously was seeking to determine on this fishing expedition whether income exceeded expenses. He went through receipts for business expenses including restaurant receipts, asking who I ate with. He sorted through receipts for office supplies. By mid-afternoon, he had gotten nowhere. At that point, having been hours together, a somewhat weird relationship had been formed. And he began to tell me how his dream in college was to become a journalist. He expanded on that, and then asked: “Have you ever faced retaliation?”

“What do you think this is?” I responded.

He was taken back—insisting my name had come up “at random.”

In the end, all he did was trim some of what was listed as business use of my home phone.

Was I being retaliated against for the book I had written? One would never know. Recently, I ran into accountant Berger, now retired, and he commented about how that day at my house was the strangest IRS audit he had ever been involved in.

The IRS has been beyond reform. Burnham writes in A Law Unto Itself: The IRS and the Abuse of Power that a “political imperative of not messing with the IRS” has become “close to being a law of nature almost as unbending as the force of gravity.” It is “rarely examined by Congress.”

President Obama announced yesterday that the acting commissioner of the IRS was asked and agreed to tender his resignation as a result of the scandal. That’s a small start. Far more important is somehow ending the tradition of IRS political tyranny. Fundamental change in the IRS is called for.