Category Archives: IRS

Henninger: The Sum of All Fears

Mr. Henniger… says it so well, again…
Here is Barack Obama commenting last Friday on the National Security Agency’s antiterrorist surveillance programs: “We’ve got congressional oversight and judicial oversight. And if people can’t trust not only the executive branch but also don’t trust Congress and don’t trust federal judges to make sure that we’re abiding by the Constitution, due process and rule of law, then we’re going to have some problems here.”


Herewith a partial list of political groups that said they were subjected to over-the-top audits by the Internal Revenue Service:

Greenwich Tea Party Patriots, Greater Phoenix Tea Party Patriots, Laurens County Tea Party, Northeast Tarrant Tea Party, Myrtle Beach Tea Party, Albuquerque Tea Party, San Antonio Tea Party, Richmond Tea Party, Manassas Tea Party, Honolulu Tea Party, Waco Tea Party, Chattanooga Tea Party and American Patriots Against Government Excess. [ Did you get the list??????  These are just those who testified…]

What that target list shows is there was never one “tea party.” It was collections of citizens spontaneously gathering all over the country under one easy-to-remember name. Their purpose was to do politics. For that, their government hit them hard.

In January the pollsters at the Pew Research Center reported that for the first time a majority of Americans—53%—now agree that “the federal government threatens your own personal rights and freedoms.”

This is far beyond concerns about the size of government. A majority of people now see the government of Madison, Jefferson and Franklin as a direct, personal threat.  So yes, we have “some problems” here.  People ask whether the IRS scandal will damage the president. Who knows? It depends on who talks to avoid prison. The IRS audits matter because they are a destructive event that happened at a particularly unsettled moment in the country’s political and social life.

Cynics say presidents have always sicced the IRS on opponents. Perhaps. But those were simpler times. The IRS audit scandal and the NSA’s metadata surveillance may be apples and oranges, but for many the distinctions aren’t so obvious. We live today inside a constant torrent of big government and big data. No one should be surprised if a political backlash, however inarticulate, forms against both for inconsistent reasons.

Consider what people are asked to absorb in the news flow now—some of it political, some not. Beyond the IRS audits and NSA surveillance we have a Department of Justice penetrating press activity protected by the First Amendment, stories about Iran’s hackers accessing the control-room software of U.S. energy firms, China hacking into everything, reports last month of cyberthieves siphoning millions of dollars from ATMs, rivers of email spam that fill inboxes alongside constant warnings to protect yourself against phishing and malware by storing industrial-strength passwords on encrypted flash drives, stories in this newspaper about social-media apps that exist mainly to collect your personal data for sale to advertisers.

Books have been written about governments using Web technology to censor and control their populations. What’s good and evil, helpful and menacing, comes at us with equal force from the same technologies. “Dual-use” was formerly a phrase used mostly in the military. We’re all living in a dual-use world now.

Electronic sophisticates say it’s all good. Sun Microsystems’ former CEO Scott McNealy famously said: “You have zero privacy. Get over it.” That’s what he thinks. This is a sum-of-all-fears environment tailor-made for eventually producing a public backlash. It’s already in the water, with Sen. Rand Paul offering a Fourth Amendment Restoration Act, which he says would stop the NSA’s data-mining program. That would be the one protecting us all from homicidal Islamist bombers.

Scott McNealy was almost right. Unavoidably, the citizens of the U.S. or any free society will have to reach an accommodation—a modus vivendi—with complex systems created by experts with abstruse knowledge. But if so, those citizens need to be free to talk about the terms of their accommodations. In short, they need to be free to do politics.

Effective antiterrorism programs such as metadata surveillance or for that matter efforts to produce progress through genetic manipulation may seem self-evidently good to their proponents. But these technologies are inevitably controversial and will only survive if they gain public support. Today that means exposing them to politics.  The goal of the IRS audits was to suppress politics, to shut up those “conservative” tea-party groups to increase the odds that Mr. Obama’s side would win. One doubts that Mr. Obama’s supporters were distressed about it. But this week they’re stressed about “an alarming age of surveillance.”

Whatever inchoate anxieties predated this presidency are now worse: a politics rife with suspicion and retribution, and most of the people believing the government, for starters, threatens their freedom.  One may hope Mr. Obama has sufficient political skill to protect the antiterrorism structures he inherited. It will be the job of the next president to prevent the public’s sense of personal political threat from heading toward 60% and beyond.

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A version of this article appeared June 13, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: The Sum of All Fears.

Henninger: The Sum of All Fears –


Think the IRS Is Bad Now? Just Wait.

Will Mr. Hatch get to say ” ‘ told you so…” I hope not.

The Internal Revenue Service has never been an agency much loved by the American people. With the IRS’s targeting of conservative groups, its already bad reputation has now sunk to a new low.

But the scandal raises a critical question: If the IRS can’t manage an increase of 1,700 applications for tax-exempt status that the agency said spurred its targeting of conservative groups, how will the IRS handle its massive new role in implementing ObamaCare?

Under the Affordable Care Act, premium subsidies—tax credits in ObamaCare designed to defray the cost of purchasing health insurance—will go to some seven million tax filers and flow to households earning as much as $94,000 a year. The credits are both advanceable and refundable, meaning the IRS will pay them first and verify the claims for them later, what some call “pay and chase.”

Refundable tax credits are essentially a form of spending through the tax code, something the IRS has struggled to administer for years with other programs. That’s why it’s not far-fetched to say that these premium credits will go to a lot of people inappropriately, and that we can expect to see a lot of erroneous and fraudulent payments.

Look at the Earned Income Tax Credit. Whether you like this refundable credit or not, the Treasury Department’s inspector general for tax administration reported in April that improper payments account for 21% to 25% of total EITC payments in 2012. Take the percentage of improper EITC payments and apply it to the approximate $1 trillion we’ll spend on ObamaCare premium credits in the decade beginning 2014. The math shows that we could see between $210 billion and $250 billion distributed to those who shouldn’t get it—because the IRS has no system in place to verify reported household income.

Put all the potential fraud and improper payments with these credits on top of the already soaring budget for the premium subsidies and we’re headed for a disaster.

I’ve asked Secretary of the Treasury Jack Lew and Secretary of Health and Human Services Kathleen Sebelius to explain the massive jump in costs for premium subsidies. The projected figure for subsidy expenditures has gone from nearly $16 billion in the president’s 2012 budget up to nearly $22 billion in his 2014 budget. Why is the administration expecting these costs to soar? Is it because they are seeing employers dropping coverage, leaving more employees to get ObamaCare insurance through an exchange subsidized with these tax credits? Is it because they expect insurance premiums to soar, driving up the percentage-figure the government must cover with subsidies? Maybe both.

Despite repeated congressional attempts to get answers about the basis for cost estimates on these premium credits, the administration has been far from helpful or forthcoming. This is not acceptable, since Congress is charged with overseeing the executive branch.

As for the president’s claim that his is the “most transparent” administration in history? Well, you try figuring out how the “Affordable Care Act” office at the IRS works: Who reports to whom, when, what they discuss and how the law will be implemented? Both Treasury’s inspector general and the Government Accountability Office have tried to find out, and even they don’t really know the reporting structure of this IRS department.

What we do know is that the person who headed the IRS division responsible for the targeting of conservative groups—Sarah Hall Ingram—now heads the division responsible for implementing the new health-care law. We also know that for some time she did both jobs. This is not comforting.

Now, there are some who say Congress should give the IRS more money so that it can better handle the implementation of ObamaCare. But how can we responsibly appropriate more money to an organization that is already wasting vast sums of taxpayers dollars on conferences, including at least one that featured its employees dressed up like Star Trek characters, as a recently uncovered video shows. More ominous still is the July 2012 report by the Treasury Department’s inspector general for tax administration, which said the IRS needs “to make improvements to stop billions of dollars in fraudulent or improper tax refunds resulting from identify theft and erroneous claims for tax credits.”

The bottom line here is that the IRS can barely manage what it already has to do (and that’s a generous characterization given its unlawful targeting of conservative groups). The prospect of the IRS taking a central role in the administration of ObamaCare can only be described as scary.

Sen. Hatch, a Republican from Utah, is the ranking minority member of the Senate Finance Committee.

A version of this article appeared June 15, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: Think the IRS Is Bad Now? Just Wait..

Orrin Hatch: Think the IRS Is Bad Now? Just Wait. –