The Free Speech Silver Lining in the Omnibus Cloud

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By Phil Kerpen

The massive omnibus package of tax and spending changes recently passed by Congress was mostly a defeat for free-market economics.  It extended expensive giveaways for the wind and solar industries, allowed President Obama to fund his Paris climate agreement, funded the president’s aggressive regulatory agenda, and even green-lit his IMF reform.  But the deal is actually a triumph in the single most important policy area: the First Amendment.  And as long as we are free to speak and engage in the political process, we can come back and reverse course on the economic issues.

A detailed analysis by the Center for Competitive Politics identified no less than seven free speech victories in the deal.  They include a ban on anti-speech regulations from the Securities and Exchange Commission and a ban on a potential executive order that might seek to control the political speech of people who have contracts with the federal government – as well as many critical measures to rein in the IRS.

In 2012, Democrats won a national election by turning the IRS into a political intimidation agency, systematically destroying the vitality of the tea party movement that delivered a conservative wave in 2010.  Given the level of scrutiny the agency is now under as a consequence, you might think there was no way they could use the same playbook to tilt the playing field for 2016.  But the IRS was actually poised to propose official rules that would have been facially neutral but would have had the effect of silencing precisely the same groups that were sidelined by targeting in 2012.

This deal takes that risk off the table by expressly prohibiting such rules.

The deal also includes a comprehensive package of IRS reforms authored by Rep. Peter Roskam of Illinois that enjoy broad support but that until now had failed many attempts to be attached to a legislative vehicle that would be signed by the president.

That package includes a prohibition on IRS employees using private email address, as we know Lois Lerner and her coconspirators often did when orchestrating targeting, a mechanism for nonprofit groups to challenge IRS determinations in court so that they cannot be held indefinitely in limbo, and a provision requiring any IRS employee engaged in political targeting to be fired.  (In the recent scandal nobody was: Even Lois Lerner was allowed to retire with her full pension.)

Most significantly, Roskam’s reform package bans the IRS from trying to assess gift tax on contributions to nonprofit organizations, which they infamously attempted against conservative donors. 

In 2011, donors to conservative groups were told that despite decades of clear legal understanding and practice, they could be found liable for gift tax on their contributions.  While the IRS never did impose such a tax, the threatening letters they sent likely had a chilling effect on contributions to conservative groups, which was the point.

Taxing contributions to nonprofits would do nothing to advance the intended purpose of the gift tax – enforcing compliance with the federal estate tax – and would serve to dramatically diminish the ability of nonprofit groups to educate and mobilize citizens in the public policy process.  Yet some liberal advocates continued to praise these abusive letters and even call for more of them to be issued.

Now donors have an ironclad legal guarantee that their contributions to nonprofit groups will not be subject to threatening IRS audit letters and arbitrary taxation.

The bottom line is that on a wide range of issues the omnibus deal is deeply disappointing, but the First Amendment provisions are an enormous silver lining because they mean activists will not be IRSed in 2016 the way they were in 2012.  And that assures conservatives an honest opportunity to effectively engage the political process and come back to win on all the other issues.