Only the breaking EO story has a direct tax angle, of course. Both might irreparably weaken the Obama administration for the remaining useful period of its second term (once jockeying for 2016 starts, nothing really will get done in Washington). So in that sense, even the Benghazi revelations could affect the chances of serious tax reform by destroying what little bipartisanship existed in Washington. But Lerner’s statements threaten to directly harm tax administration and enforcement, particularly because Republicans are becoming increasingly sensitive to abuse of power issues in Washington.
At Friday’s American Bar Association meeting in Washington, Lerner said that a group of IRS employees in Cincinnati had been inappropriately selecting conservative groups for further review because of their use of terminology associated with the Tea Party. Questions were asked about contributors, or the application processing taking too long. Lerner claimed that the actions were not the result of political bias. “They did it because they were working together; this was a streamlined way for them to refer the cases, and they didn't have the appropriate level of sensitivity about how this might appear to others,” she said. Lerner apologized, noting that many of the questions and letters had been withdrawn and promising that additional procedures were put in place to prevent a repeat occurrence. There was some attempt to deflect blame from senior officials, including former IRS Commissioner Douglas Shulman, but the Associated Press reported Saturday that high-ranking members of the IRS knew about the matter as early as 2011, which would contradict testimony from Shulman and others.
Republicans are incensed, of course. House Majority Leader Eric Cantor and House Ways and Means Chair Dave Camp promised hearings on the issue. Michigan Democratic Sen. Carl Levin, chair of the Senate’s Permanent Subcommittee on Investigations, said that the entire EO process might need further review. The White House said it assumed the issue would be investigated by TIGTA.
Lerner’s explanation that the reviews were not the result of political bias seems wildly implausible. She cannot possibly expect Republicans or the public to believe that the officials in Cincinnati decided to target any group affiliated with the Tea Party for nonpolitical reasons. Lerner’s credibility is also damaged by the AP’s revelation that IRS leadership knew about it but continued to deny it. How could the IRS possibly allow this kind of conduct to continue during one of the most partisan campaign seasons in U.S. history? The incompetence boggles the mind. It’s also bewildering how the Service could sit in front of GOP lawmakers and chastise them for underfunding tax enforcement when employees were using some of those supposedly precious funds to conduct a politically charged vendetta against conservative exempt organizations.
Lerner’s statement isn’t the end of this story. And her explanation and apology seem both incomplete and hollow. Her words are likely to only further fan the flames of anger. Republicans will likely be even less sympathetic to requests for increased IRS funding. And they will be justified in feeling that way. How can the GOP possibly trust the IRS to behave appropriately after years of misconduct and then lying about it? And a weakened tax administrator hurts everyone, especially taxpayers and the treasury.