It’s a scary thing when powerful government officials misuse their power, and especially when they misuse it to afflict the needy and comfort the comfortable. This appears to be what’s happening now as the chairmen of the two congressional tax-writing committees seek to change the tax status of various worker centers that have annoyed politically active corporations like Walmart, Darden Restaurants, and McDonalds.
I am not a tax lawyer and can’t say with any certainty whether a worker center formed to provide services such as job training, education, and legal assistance to low wage workers should suddenly be transformed from a 501(c)(3) charity into a labor organization if it challenges wage theft or other labor problems caused by a store or corporation. I don’t think the law should operate that way, but the law has a lot of problems.
What I can say is that it’s a shame that Sen. Orrin Hatch and Rep. Paul Ryan are spending their time on a matter of importance only to huge corporations that need no help from Congress in crushing worker organizations, fighting wage increases, and profiting immensely from weak labor standards and high unemployment. As their letter to IRS Commissioner John Koskinen shows, Ryan and Hatch don’t like the fact that worker centers have exercised their constitutionally protected right to “protest and picket against targeted businesses.”
One of the protests the congressmen cited was a Restaurant Opportunity Center protest over the takeover of Olive Garden restaurants by a hedge fund, Starboard, that wanted to cut labor costs by $48 million and transfer the savings to the pockets of investors. The workers and the worker center weren’t asking for the right to be the exclusive bargaining representative: they just didn’t want their wages cut and didn’t want to be changed from waged employees to tipped employees. But Ryan and Hatch want the IRS to investigate the workers.
Wage cutting is one of the biggest problems facing the American economy, but whose side did Hatch and Ryan take? The hedge fund’s side, of course. They saw struggling workers trying to be heard by a powerful employer, and their response was: “We can’t have that!”
Ryan and Hatch could help reduce the deficit and ease the tax burden on 99% of their taxpaying constituents by eliminating the $11 billion loophole in the tax code that lets hedge fund managers treat much of their earned income as capital gains or dividends, reducing the tax rate from about 40 percent to about 20 percent. But no, when choosing between affluent hedge fund millionaires and low-wage workers, Hatch and Ryan want the IRS to investigate the weak and powerless workers.
Don’t think for a second that Hatch and Ryan are worried about tax compliance. The two Republicans have overseen a reduction in enforcement at the IRS that is ballooning tax avoidance and cheating by entities that—unlike the workers at Walmart or the Olive Garden, have a lot of income and a lot of tax liability to avoid. The congressional budget for the IRS cut $346 million, 1,800 tax collectors, and 46,000 audits. Given that each dollar invested in tax enforcement returns six dollars, it’s impossible not to conclude that Hatch and Ryan are more interested in muffling workers voices than they are in collecting taxes.