But as U.S. president for the last 4-1/2 years, Barack Obama has faced accusation after accusation of impinging on civil liberties, disappointing his liberal Democratic base and providing fodder for rival Republicans as he deals with the realities of office.
News in the past week of the federal seizure of phone records from the Associated Press news agency and the Internal Revenue Service’s targeting of conservative Tea Party groups, has intensified criticism already simmering over the Guantanamo Bay prison camp and aerial drone strikes abroad.
Asked at a news conference on Tuesday why the administration had not done more for civil liberties, Attorney General Eric Holder said: “I’m proud of what we have done” and emphasized the administration’s shift from Bush era harsh interrogation practices of terrorism suspects that had drawn international criticism.
When he took office in 2009, Obama promised to close the Guantanamo camp for foreign terrorism suspects, but it remains open with 166 detainees, many on hunger strikes in protest at indefinite detentions. Obama said last month he would revisit that pledge and blamed Congress for blocking his plan to close the camp, partly through restrictions on transfers of detainees.
Let’s be very clear: because the Internal Revenue Service holds so much private data, and because it can make people’s lives absolutely miserable, it is of paramount importance in our political system that it both is, and is perceived as, an apolitical entity. If it discriminated against tea party groups that attempted to register as 501(c)4 social welfare organizations, then that’s a grave offense, and it needs to be investigated thoroughly and dealt with severely.
(Source: Andrew Harrer/Bloomberg)
But the particular bias people are angry about is the opposite of the bias they should be angry about. The problem wasn’t that the IRS was skeptical of tea party groups registering as 501(c)4s. It’s that it hasn’t been skeptical of Organizing for America, Crossroads GPS, Priorities USA and Heritage Action Fund registering as 501(c)4s. The IRS should be treating all these groups equally and appropriately — which would mean much more harshly.
Updated with the link
A First Amendment watchdog group is suing the Internal Revenue Service for failing to challenge the tax-exempt status of churches whose pastors engage in partisan politicking from the pulpit.
The Freedom From Religion Foundation, which advocates total separation of church and state, filed the lawsuit Wednesday (Nov. 14) in U.S. District Court in Western Wisconsin, where the 19,000-member organization is based.
The lawsuit claims that as many as 1,500 pastors engaged in ‘Pulpit Freedom Sunday’ on Sunday, Oct. 7, when pastors endorsed one or more candidates, which is a violation of IRS rules for non-profit organizations.
IRS rules state that organizations classified as 501 (c) (3) non-profits — a tax-exempt status most churches and other religious institutions claim — cannot participate or intervene in ‘any political campaign on behalf of (or in opposition to) any political candidate.’
James Timothy Turner, the self-styled “president” of the Republic for the united States of America (RuSA), was indicted today on charges of conspiracy to defraud the federal government and several other tax charges, including attempting to pay taxes with a fictitious financial instrument and attempting to obstruct an Internal Revenue Service investigation.
Based in the southeast Alabama town of Ozark, Turner heads what is likely the largest and most organized group of antigovernment “sovereign citizens” in the country.
According to the federal indictment announced Tuesday, Turner is alleged to have attempted to pay his own taxes with a fictitious $300 million bond and to have assisted others who wanted to get out of paying taxes with similar bonds ranging from $10 million to $300 million, the FBI said in a joint statement with the Internal Revenue Service and the Justice Department.
Turner burst onto the sovereign citizens scene in 2007 with a series of seminars claiming he could help his clients get out of paying mortgages, credit card debt and income tax bills. But with RuSA, which he formed in 2010, Turner went a step further, setting out to form a shadow government that he claimed would lie in waiting for the day the federal government crumbled.
On the face of it, Senator Harry Reid’s explosive but flimsily sourced claim that Mitt Romney paid no income tax seems preposterous. Mr. Romney has denied it, and without his returns no one can say for sure. But for someone who makes millions of dollars a year, would it even be possible?
The I.R.S. disclosed that six of the 400 people in the country with the highest gross income paid no federal income tax at all.
It so happens that this summer the Internal Revenue Service released data from the 400 individual income tax returns reporting the highest adjusted gross income. This elite ultrarich group earned on average $202 million in 2009, the latest year available. And buried in the data is the startling disclosure that six of the 400 paid no federal income tax.
The I.R.S. has never before disclosed that last fact.
Not even Mr. Romney, with reported 2010 income of $21.7 million, qualifies for membership in this select group of 400. But the data provides a window into the financial lives and tax rates of the superrich. Since the I.R.S. doesn’t release data for the tiny percentage of Americans at Mr. Romney’s income level, the 400 are the closest proxy.
The tax plan passed by Senate Democrats on Wednesday isn’t really about taxing the rich; it’s about taxing the megarich. As Timothy Noah has explained in the New Republic, the plan would actually reduce taxes on a lot of fairly rich people by renewing the (supposedly temporary) Bush-era tax cuts for everyone except those who make more than $250,000 a year. Even then, Democrats are only proposing a higher marginal tax rate, which means that even people raking in far more than $250,000 will still pay lower taxes on their first quarter million in annual earnings. Crunch the numbers, and it turns out that the biggest losers under the Senate plan are couples that earn more than $1 million a year—mostly multi-millionaires and billionaires.
While the Senate tax plan could certainly go further in taxing the rich, focusing on the megawealthy makes sense considering how much of our economy is now controlled by them. According to the Internal Revenue Service, there are 66,000 taxpayers who individually control $20 million or more in assets, and all these people put together are worth $4 trillion—more than the net worth of 70 percent of the US population.
The investment bank Credit Suisse, for its part, classifies “ultra high net worth individuals” as people with at least $50 million in assets—and according to the bank’s 2011 Global Wealth Databook, more of these UNHWIs live in the United States than anywhere else in the world (see chart above).
Four years after the Internal Revenue Service started requiring nonprofits to submit more information about their charitable and commercial activities, the agency still struggles to determine which income earned by colleges, hospitals, and other big institutions is taxable, an IRS official said today.
Steven T. Miller, deputy IRS commissioner, made the comment at a Congressional hearing devoted to an issue that has vexed lawmakers and regulators—how to ensure that charities pay taxes on income they generate through businesslike activities such as magazine publishing and retail sales.
Figuring out if an organization’s business income is “substantially related” to its charitable mission, and therefore tax-exempt, “is a remarkably difficult and soft sort of issue to deal with,” Mr. Miller told the oversight subcommittee of the House Ways and Means Committee. For example, the agency has to determine questions like whether to tax money a nonprofit museum earns from post cards sold in its gift shop, he said.
The rules governing unrelated business income taxes are an “ongoing source of confusion,” said Rep. Charles W. Boustany Jr., a Louisiana Republican who chairs the subcommittee, which oversees the IRS.
A 2008 Chronicle investigation found that more than half of 91 large charities with unrelated business activities reported overall losses or no taxable income. Many were taking advantage of vague language or exemptions built into the law to avoid paying taxes, it found.
A proposed regulation could cost the U.S. banking system hundreds of billions of dollars, in turn costing our economy billions of dollars, and achieving no discernible benefits for banks, depositors, taxpayers, or the U.S. economy.
One of the costliest regulations to come down the pike of late has nearly managed to escape detection. Earlier this year, the Treasury Department published its “Guidance on Reporting Interest Paid to Nonresident Aliens,” which would require banks to report to the Internal Revenue Service the amount of interest they pay to non-resident aliens with a U.S. bank account. While the Treasury and the regulatory apparatus insist that the cost and inconvenience of adhering to this law are next to nothing, the reality is that this rule could cost the U.S. banking system hundreds of billions of dollars in lost deposits. In turn, this will cost our overall economy billions of dollars, while achieving no discernible benefits for banks, depositors, taxpayers, or the U.S. economy.
The Encroaching Regulatory State
Foreigners have never paid taxes to the U.S. Treasury on their interest earned in U.S. banks and would continue being exempt under the new regulation. The sole requirement would be that the banks report the interest paid to these account holders to the IRS, primarily to conform to international regulations that call for more transparency by financial institutions.
The Internal Revenue Service has created a bright-line test to determine if foreign corporations that buy U.S. firms are really operating in their claimed home countries or just benefiting from preferential tax treatment.
The IRS has adopted a temporary rule, describing the test, and has begun the usual rulemaking process with an identical proposed rule.
In 2006, the IRS adopted temporary rules to fight so called inversion transactions where a U.S. corporation would create a new company in a tax haven, which then bought or exchanged all of the shares in the domestic corporation for shares in the foreign corporation.
Under section 7874 of the Internal Revenue Code, such companies are considered expatriated entities and the acquiring foreign entity is called a surrogate foreign corporation. Significant penalties are attached to the conversion of the domestic stock into foreign stock to discourage such transactions.
Entities were considered foreign surrogates if, after acquisition, at least 60 percent of the stock in the foreign corporation was held by former shareholders of the domestic company and if the new entity did not have substantial business activity outside the United States.
The new test defines substantial business activity as having 25 percent of the corporation’s employees, assets and income located or derived from a foreign country.
Besieged by identity theft, Florida now faces a fast-spreading form of fraud so simple and lucrative that some violent criminals have traded their guns for laptops. And the target is the United States Treasury.
With nothing more than ledgers of stolen identity information — Social Security numbers and their corresponding names and birth dates — criminals have electronically filed thousands of false tax returns with made-up incomes and withholding information and have received hundreds of millions of dollars in wrongful refunds, law enforcement officials say.
The criminals, some of them former drug dealers, outwit the Internal Revenue Service by filing a return before the legitimate taxpayer files. Then the criminals receive the refund, sometimes by check but more often though a convenient but hard-to-trace prepaid debit card.
The government-approved cards, intended to help people who have no bank accounts, are widely available in many places, including tax preparation companies. Some of them are mailed, and the swindlers often provide addresses for vacant houses, even buying mailboxes for them, and then collect the refunds there.
Postal workers have been harassed, robbed and, in one case, murdered as they have made their rounds with mail trucks full of debit cards and master keys to mailboxes.
The fraud, which has spread around the country, is costing taxpayers hundreds of millions of dollars annually, federal and state officials say. The I.R.S. sometimes, in effect, pays two refunds instead of one: first to the criminal who gets a claim approved, and then a second to the legitimate taxpayer, who might have to wait as long as a year while the agency verifies the second claim.