Tilting at Windmills

July/ August 2013 Launch pad follies … Roger and Rupert … How to refuel your private jet

By Charles Peters

More scrutiny, not less

For the Internal Revenue Service and tax-exempt groups, the real scandal lies not with the few that have been over-investigated, but with the many that continue to function with too little scrutiny. As of 2012, there were 1,616,053 organizations in this country that were tax exempt—supposedly on the basis that, among other things, they are nonprofit. Time’s Michael Grunwald, a journalist with a gift for raising questions that seldom occur to other reporters, asks why an organization that doesn’t make a profit should need to be tax exempt. After all, income taxes don’t have to be paid if an organization doesn’t have a profit.

Grunwald proceeds to inquire how it is that Harvard has salted away $31 billion over the years if it hasn’t had a little left over each year. And I would add if the National Football League is truly nonprofit, how can it afford to pay its CEO, Roger Goodell, $29.5 million a year? You can argue that Harvard deserves a pass because it’s educational, but what is educational about the NFL?

Ailes calls the shots

An interesting tidbit was buried at the end of a long article in the New York Times by Brian Stelter about the coverage of the gun control debate by Fox News, and about how, to the limited extent it was covered, it was to defend gun rights. At one point, Sean Hannity called Sandy Hook families “props for [Obama’s] agenda.” Gun control is one of the few liberal issues embraced by Fox’s owner, Rupert Murdoch, so why haven’t the folks at Fox given it a hug? Here’s where the tidbit comes in: “The chief executive of Fox News, Roger Ailes, has almost complete autonomy. Mr. Ailes reportedly has a license to carry a concealed handgun in New York City, where Fox News is based.”

What to do if your butler is sick

Recent examples of how the Wall Street Journal provides its readers with news it can use: for mansion owners, the Mansions section describes how an 8,300-square-foot dwelling complete with a bowling alley can be moved back 275 feet from the water’s edge on Martha’s Vineyard, in case of beach erosion. For private jet owners, who have been faced with “opaque and jumbled” refueling costs, Dennis K. Berman provides the glad tidings that an app, known as FuelerLinx, lists the best prices for jet fuel at airports around the world.

“Sorry, he won’t be in until next week …”

That embarrassing IRS conference actually took place in 2010, not last week as so much of the recent indignant reporting implied. The IRS and other government agencies have slowly reformed since the General Services Administration fiasco. The continuing scandal is that almost every other organization in America from beauticians to embalmers has one of these meetings at least once a year. They are supposedly held for educational purposes and are thus tax deductible, but more often, they are devoted to sports, entertainment, and other recreations.

The Monthly’s first comment on this came in a 1977 article by Walter Shapiro and Aleta Kaufman, “Conferences and Conventions: The $20 Billion Industry That Keeps America from Working.” The absurdities of these get-togethers—dozens of which have been attended by almost every single member of Congress—have subsequently been a staple of this column.

I first learned about the fun and games when I was a lawyer in West Virginia in the 1950s. The Bar Association held an annual convention at the Greenbrier Hotel, where a dutiful minority of members spent a minority of hours in meetings, before they joined the majority who were already playing golf and consuming alcoholic beverages. Most conferences and conventions are held in places like Miami, Honolulu, or Las Vegas. My solution is to require them to be held in Buffalo.

Missing-the-point-gate

As a caution against the media’s tendency to overreact, let us not forget the firestorm of journalist indignation aroused by the Justice Department’s recent investigations of the Associated Press and Fox News. You would have thought that reporters had been arrested or jailed, or actually shot, as they are in many other countries. In fact, of course, none of these terrible things happened and, as these stories prove, we still have a press remarkably free to criticize the government.

It can be argued that the Justice Department’s investigations have not been conducted wisely, but not that they were unwarranted. Genuine national security issues were at stake. Both stories tipped off our enemies—North Korea and terrorists in Yemen—that our intelligence agencies had obtained a window into their secrets.

In the case of North Korea, the Fox News story by James Rosen, based on a leak from a State Department contract employee, reported that the North Koreans planned to conduct another nuclear test. Since that decision had only just been made and was tightly held within a small circle of top North Korean leaders, the story in effect revealed that we had a way of penetrating doors they thought were closed. As for the Yemen leak, the AP story exposed a CIA plot that had placed an agent inside an al-Qaeda affiliate and managed to obtain one of its bombs, but had not yet been able to find the bomb maker. The AP story meant nothing less than that a promising intelligence effort had to be abandoned.

Dana Milbank, by keeping his tongue planted firmly in his cheek, usually manages to resist joining the crowd, but this time he was typical of his colleagues in describing the AP investigation as the “Justice Department’s trampling of press freedom.”

Oh, please

In the indignation over the IRS’s investigation of the Tea Party groups’ applications for tax-exempt status, my favorite example comes from the Journal’s Peggy Noonan, who writes that the only purpose of the right-wing Texas group True the Vote was to “keep dead people off the [voter] rolls.” Noonan is not stupid—she wrote some of the more eloquent of Ronald Reagan’s speeches—so it’s hard to believe that she didn’t know that True the Vote was trying to keep not only dead people from voting, but also every black, Hispanic, and any other voter who happens to favor Obama.

The real stories

The IRS story, like the Benghazi talking points story, is not a political scandal, but a bureaucratic one. The Washington Post’s David Ignatius explains: “What you find [in the Benghazi emails between the State Department and the CIA] is a 100-page novella of turf-battling and backside-covering.”

The question to ask about the IRS is not whether too many of its employees are politicized, but whether enough of them are competent and dedicated to public service, not to positioning themselves for lucrative jobs in the private sector.

Dazed and confused

The best coverage of the IRS scandal comes from two articles in the Times by our alumnus Nicholas Confessore and his colleagues, David Kocieniewski and Michael Luo. The first headline reads “Confusion and Staff Troubles Rife at I.R.S. Office in Ohio.”

Charles Peters is the founding editor of the Washington Monthly and the author of a new book on Lyndon B. Johnson published by Times Books.

Comments

  • David Merkowitz on July 29, 2013 10:34 PM:

    Re: The July/August Tilting at Windmills
    Charles Peters praises Time's Michael Grunwald for questioning why nonprofit organizations need to be tax exempt. I haven't read Grunwald's piece (who does read Time anymore?), but maybe other reporters don't raise that question because the answers are so patently obvious.

    The main reason most nonprofits seek tax exemption is to achieve formal recognition as a charitable organization under Section 501(c)(3) of the Internal Revenue Code, which in turn makes donations deductible on contributors' income tax returns. In probably all states, it also exempts the organizations from paying sales taxes on their purchases and property taxes on land and buildings they might own. Whatever your view of the value of nonprofits--be they Harvard University, the Metropolitan Opera, the local Boys and Girls Club, or the Little Sisters of the Poor--many of them live or die on their ability to solicit tax-deductible charitable contributions.

    Another reason we should want charitable organizations to file for tax exemption: It's the only way we (via the IRS) can determine whether they are indeed operating as nonprofits, and fulfilling their charitable mission, rather than sheltering profit-making activities from federal, state, and local taxation. Under the IRS Code, charities' unrelated business income is subject to taxation.

    Certainly, a number of nonprofits, including the NFL and some universities, hospitals, and other charities, pay outrageous salaries to their top officials and spend a lot of money on activities not directly related to their main purpose. Curbing those kinds of abuses should be a worthy goal for members of Congress and federal and state regulators, but it's one that pays few political dividends and is not easily achieved.