Audit Notes: The IRS story in context, Silicon Valley oligarchs

Necessary context from ProPublica and the NYT on the overblown scandal

The bulk of the IRS scandal press coverage has been seriously devoid of the kind of context that tells readers how and why the targeting of Tea Party groups was almost certainly not a Nixonian plot from the Oval Office to intimidate political opponents.

So it’s great to see ProPublica’s excellent piece showing why the scandal is way, way over-hyped (emphasis mine):

With all the furor over applications being flagged from conservative groups — particularly groups with “Tea Party,” “Patriot” or “9/12” in their names — it’s worth remembering that a social welfare nonprofit doesn’t even have to apply to the IRS in the first place.

Unlike charities, which are supposed to apply for recognition, social welfare nonprofits can simply incorporate and start raising and spending money, without ever applying to the IRS…

Of the more than $256 million spent by social welfare nonprofits on ads in the 2012 elections, at least 80 percent came from conservative groups, according to FEC figures tallied by the Center for Responsive Politics.

None came from the Tea Party groups with applications flagged by the IRS. Instead, a few big conservative groups were largely responsible.

And the kind of targeting done by the IRS’s Cincinnati office was hardly limited to Tea Party groups. Also, read Dick Tofel on why ProPublica’s receipt of conservative-groups’ tax records is almost surely no scandal either (it was likely inadvertent).

The New York Times also had a solid effort on the IRS story a few days ago, examining the Cincinnati office at the root of the uproar:

Overseen by a revolving cast of midlevel managers, stalled by miscommunication with I.R.S. lawyers and executives in Washington and confused about the rules they were enforcing, the Cincinnati specialists flagged virtually every application with Tea Party in its name. But their review went beyond conservative groups: more than 400 organizations came under scrutiny, including at least two dozen liberal-leaning ones and some that were seemingly apolitical.

Over three years, as the office struggled with a growing caseload of advocacy groups seeking tax exemptions, responsibility for the cases moved from one group of specialists to another, and the Determinations Unit, which handles all nonprofit applications, was reorganized. One batch of cases sat ignored for months. Few if any of the employees were experts on tax law, contributing to waves of questionnaires about groups’ political activity and donors that top officials acknowledge were improper…

It is not unusual for I.R.S. specialists to search for patterns in applications, in part for clues toward fraud and scams — a single tax preparer employing the same tax gambit for multiple clients, for example — and in part to ensure that similar groups are treated in a consistent way, the former officials said.

It’s Occam’s razor: An evil administration out to squelch its opposition, except the ones who actually had the money to oppose them? Or low-level bureaucrats doing what they always do?

— Quote of the day goes to Robert Levine on Twitter for this sharp insight:

Tech companies’ biggest costs are content, bandwidth, and programmers. They’ve made political causes out of reducing the cost of all three.

Silicon Valley has cloaked itself in the language of revolution and liberty, but it does seem that more people are beginning to seeing through that. Read Evgeny Morozov’s epic Baffler takedown Tim O’Reilly and the Randian underpinnings of the tech evangelists.

Here’s Larry Elliott in The Guardian writing about Google Chairman Eric Schmidt in the corporate-tax row going on in the UK right now:

He likes to portray himself as the new sort of boss of a new sort of company, the ones that boast of their non-hierarchical structures, their dress-down policies and their chill-out zones. But the row about tax has shown that the people running these new-wave behemoths are not hippy capitalists, they are robber barons in chinos.

And here’s Joel Kotkin, no lefty he, writing in The Daily Beast:

What we have then is something at once familiar and new: the rise of a new ruling class, arrogant and self-assured, with a growing interest in shaping how we are governed and how we live. Former oligarchs controlled railway freight, energy prices, agricultural markets, and other vital resources to the detriment of other sectors of the economy, individuals, and families. Only grassroots opposition stopped, or at least limited, their depredations.

But today’s new autocrats seek not only market control but the right to sell access to our most private details, and employ that technology to elect candidates who will do their bidding. Their claque in the media may allow them to market their ascendency as “progressive” and even liberating, but the new world being ushered into existence by the new oligarchs promises to be neither of those things.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,