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The IRS Out of Control
The Wall Street Journal ^ | 7/17/02

Posted on 07/17/2002 7:21:20 AM PDT by wcdukenfield

We knew the Internal Revenue Service’s tax-collection arsenal included, among other things, the legal right to audit, sue and penalize tax cheats. But until last week we didn’t know the agency had license to gratuitously humiliate innocent taxpayers in the process.

On Friday, the Journal reported on page one that the IRS has disclosed the names of hundreds of citizens engaged in what amounts to tax planning. These individuals—many of them prominent businessmen—are accused of no wrongdoing. Their only sin is that they are clients of KPMG, the accounting firm currently doing battle in court with the IRS.

Last week the Justice Department sued KPMG on behalf of the IRS. The government alleged that some of KPMG’s tax shelters are illegal and requested the names of clients who had inquired about them. The accounting firm complied, providing the names in a so-called “privilege log” to protect their identities. The IRS promptly went public with the names, blithely smearing the reputations of innocent third-party individuals in an effort to strong-arm its court opponent and embarrass its clients.

This is a dangerous and outrageous precedent. To begin with, not all tax shelters are illegal, and a court has to rule on the ones in question. Nor is it against the law to minimize one’s tax burden. In fact it’s common sense, and private citizens shouldn’t be smeared in government press releases or news leaks for trying.

But the real potential damage here is to the assumption of privacy among taxpayers. Our tax system works because people are willing to disclose highly confidential information regarding investments, charitable contributions, estate planning and so on. That willingness is linked inextricably with an understanding that these disclosures will be kept secret. Keeping, this confidence encourages compliance. Abusing it in the manner of the IRS’s KPMG disclosures can only have the opposite effect. “This is unprecedented and it’s fundamentally wrong,” says Kathryn Keneally, a tax expert at the American Bar Association.

Section 6103 of the tax code is the basic provision that protects the privacy of tax returns. And in the past, the IRS has interpreted 6103 as “broadly inclusive” and “sweeping in nature.” When groups like the Landmark Legal Foundation and even Members of Congress have sought the identities of tax-exempt organizations or audit targets, the IRS has argued that it was duty-bound to protect taxpayer identities.

But protecting privacy apparently is no longer a concern when the IRS is a plaintiff. These days, the agency would have us believe that publicly shaming a target’s clients is fair game in establishing a case against the target.

Tax experts are debating whether the IRS disclosures are in fact illegal, but Donald Alexander, a former IRS commissioner, says it doesn’t matter. “Even if releasing these names is permissible under law, it’s still inadvisable,” says Mr. Alexander. “You do not release names of individuals to the public unless there’s an overwhelming reason to do so, and I find that reason lacking here.”

The IRS has also left itself naked to charges of political partisanship. Justice’s lead litigator on this matter is Stuart Gibson, a well-known Democratic activist in Virginia. Among the names disclosed last week was William Simon Jr., a Republican who happens to be in the middle of a gubernatorial race in California. Mr. Simon’s opponent, Democrat Governor Gray Davis, immediately pounced on the disclosure. A major Bush campaign contributor and a recently appointed U.S. ambassador also were sideswiped. Respecting the confidentiality of tax returns is a good way to avoid the appearance of political bias.

Not long ago, Congress was curtailing IRS abuses. Perhaps post-Enron, the tax man feels as if he can once again get away with anything, even harassing honest Americans. The agency falls under the purview of Treasury Secretary Paul O’Neill and clearly needs adult supervision. He might start by firing or sending to Siberia whoever was responsible for this abuse of government power.


TOPICS: Announcements; Breaking News; Business/Economy; Constitution/Conservatism; Crime/Corruption; Culture/Society; Editorial; Government; Miscellaneous; News/Current Events; Politics/Elections; Unclassified
KEYWORDS: taxreform
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1 posted on 07/17/2002 7:21:20 AM PDT by wcdukenfield
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To: wcdukenfield
This article is spot on. The IRS should never have released those names. Absolutely disgusting.

Scrap the code! If we didn't have such a bloody mess of a tax code, we wouldn't need these stupid tax shelters. Sheesh...

2 posted on 07/17/2002 7:32:15 AM PDT by Wphile
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Comment #3 Removed by Moderator

To: wcdukenfield; Bigun; pigdog; ancient_geezer; *Taxreform
It's quite obvious that the IRS is getting bigger and more abusive. It's been that way for 85 years and it will continue until the IRS is ended.

The IRS has so much power and zero accountability.

It should be clear to all that either we end the IRS or the IRS ends us.

There are bills in Congress right now that would end the IRS. Take a look at a national sales tax (click on SALES TAX on the left of the black bar). Eliminate the IRS AND eliminate income taxes, payroll taxes, and withholding.

4 posted on 07/17/2002 7:36:46 AM PDT by Principled
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To: WORLD SUCKELS USAS BREAST
Great screen name!

Have you looked at what a national sales tax would do to alleviate this type of abuse?

5 posted on 07/17/2002 7:38:07 AM PDT by Principled
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To: wcdukenfield
Our tax system works because people are willing to disclose highly confidential information regarding investments, charitable contributions, estate planning and so on.

Or risk going to jail.

6 posted on 07/17/2002 7:40:11 AM PDT by A Ruckus of Dogs
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To: Grampa Dave
Simon bump! (you know more CA/Simon people to ping than I do :))
7 posted on 07/17/2002 7:41:14 AM PDT by Black Agnes
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To: wcdukenfield
The IRS Out of Control

Alright. Everyone who is surprized by this raise their hands.

Boonie Rat

MACV SOCOM, PhuBai/Hue '

8 posted on 07/17/2002 7:43:38 AM PDT by Boonie Rat
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To: Wphile
"If we didn't have such a bloody mess of a tax code, we wouldn't need these stupid tax shelters. Sheesh..."

But if we didn't have such a convoluted tax code they could never intimidate and fleece so many taxpayers or pay for the expansion of government. You just really don't get it, do ya'? ;-)

9 posted on 07/17/2002 7:49:44 AM PDT by Badray
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To: Black Agnes; Ernest_at_the_Beach; ElkGroveDan; eureka!; tubebender; SierraWasp; NormsRevenge; ...
Thanks for the ping.

It is obvious that the Rat infested IRS took this shot at Bill Simon to help their fellow infected RAT Davis.

Just more proof of why we need to elect enough senators to take control of the Senate and retain control of the house.

Then when they are sworn in Jan 2003, both houses need to pass a bill that requires every POS professional government employee from GS to sign a letter of resignation that can be acted on during the 4 years of any new president. Then, make it effective for GW's last 2 years.

This is the only way to get rid of the Rat maggots/socialists/communists/enviralists in our Federal government.

Then, President Bush could sign the bill and activate the immediate departure of about 200,000 rats from federal employment. That would be a loud and clear signal to those remaining to behave or you will be out of a job!

The State Department, IRS, FBI, EPA, Forestry Service, USDA, and every federal department is loaded with these vile left wing maggots. Time to demaggot these departments.
10 posted on 07/17/2002 7:54:27 AM PDT by Grampa Dave
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To: wcdukenfield
1-800-AWAY IRS

FMCDH

11 posted on 07/17/2002 7:56:10 AM PDT by nothingnew
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To: Badray
I know. I'm way too logical and I tend to forget the sinister intent of the government. ;o)
12 posted on 07/17/2002 7:59:44 AM PDT by Wphile
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To: wcdukenfield
Absolutely disgraceful.
13 posted on 07/17/2002 8:02:21 AM PDT by Desdemona
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To: Principled
It's quite obvious that the IRS is getting bigger and more abusive. It's been that way for 85 years and it will continue until the IRS is ended.

Give the Office of Homeland Security a few years, and you will think the IRS is your best friend.

14 posted on 07/17/2002 8:13:31 AM PDT by Blue Screen of Death
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To: Grampa Dave
"Time to demaggot these departments."

Hear, hear. Oh, to dream though. At a minimum, W should get some p*ssed off patriot cowboy types in to play hardball with the "maggots". At least make their life hell...

15 posted on 07/17/2002 8:14:40 AM PDT by eureka!
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Comment #16 Removed by Moderator

To: wcdukenfield
Its easy to dump on the IRS. Many people there are not terribly bright, and its easier to dump on them than it is to address the issue of overtaxation.

The only person I know to ever be seriously audited by the IRS happened to have cheated them out of about $2 million in taxes. They repossesed his gorgeous home in Darien, he lost his prized country club memberships, his wife died, and he committed suicide. Its sad, but frankly the guy deserved it.

17 posted on 07/17/2002 8:20:17 AM PDT by andy_card
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To: wcdukenfield
The IRS has also left itself naked to charges of political partisanship. Justice’s lead litigator on this matter is Stuart Gibson, a well-known Democratic activist in Virginia.

This is what it is all about pure and simple. Everyone in California who opposes Davis, should join a class action civil rights action against Gibson for misusing his authority to interfere in a political contest.

18 posted on 07/17/2002 8:21:38 AM PDT by ElkGroveDan
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To: wcdukenfield
"Our tax system works because people are willing to disclose highly confidential information regarding investments, charitable contributions, estate planning and so on. That willingness is linked inextricably with an understanding that these disclosures will be kept secret. Keeping, this confidence encourages compliance."

What disinformation, but no shock or surprise coming from a mainstream publication like the WSJ.

The government tells you in the 1040 instruction booklet in the "Privacy Act and Paper Reduction Act Notice" that any and all information you disclose on a tax return can be used against you. It is worded in such a way that the general public doesn't realize it is are being Mirandized.

19 posted on 07/17/2002 8:33:48 AM PDT by Middle Man
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To: ElkGroveDan
I have no sympathy for Simon or any person of power who uses the twisted tax code for their benefit but leaves Joe Sixpack to be fleeced by the IRS instead. If Simon was aware of the tax code to the extent that he hires KPMG, or Anderson to get his sorry backside out of paying taxes instead of changing the system, he deserves the full wrath of the Democrats bilge pump. He is running to represent citizens right?

Maybe this is part of an overplay of the democrats hand that could create change. Any politician who enjoys the rewards of creative accounting(even if it is legal) without loudly demanding real change deserves to just go straight to hell.

20 posted on 07/17/2002 8:37:08 AM PDT by blackdog
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