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No Wonder Obama Was so Desperate to Pack the D.C. Circuit

The D.C. Circuit Court of Appeals struck down another Obama administration power grab yesterday. It ruled unanimously that the IRS did not have the statutory authority, under the so-called Horse Act of 1884 (passed 29 years before the income tax existed), to license tax preparers, require them to pay annual fees, and attend at least 15 hours of continuing education a year.

The Horse Act was passed to bring an end to a rash of fraudulent claims stemming from the Civil War, where people would claim compensation from the government for horses and other property taken or killed in the war. They would often claim that some broken-down plow horse was actually a magnificent beast worth many times more. (That’s not at all dissimilar to the rash of allegedly fraudulent claims against BP for the Gulf oil spill of 2010 that’s going on right now.) It authorized the treasury secretary to establish standards for people representing claimants before the Treasury.

In 2011, rather than asking Congress for the power to license tax preparers, the Obama administration just went ahead and took the power, using the fig leaf of the Horse Act. But tax preparers, of course, don’t represent their clients before the IRS. They simply fill out the incredibly complicated forms. The clients, not the preparers, are representing that the information on the forms is correct. That was the opinion of the IRS itself up until the Obama administration came into being. In 2009 it wrote, “Just preparing a tax return [or] furnishing information at the request of the IRS … is not practice before the IRS ….”

The Circuit Court ruling was unequivocal: “If we were to accept the IRS’s interpretation of Section 330 [of the United States Code, where the Horse Act is enshrined today], the IRS would be empowered for the first time to regulate hundreds of thousands of individuals in the multi-billion dollar tax-preparation industry. Yet nothing in the statute’s text or the legislative record contemplates that vast expansion of the IRS’s authority.”

Why did the Obama IRS try to get away with this? Simple: to help out the big guys at the expense of the small guys, which is to say crony capitalism. Obeying the new regulations would have been no problem for, say, H&R Block or even full-time accountants. It was aimed at forcing out of the market the mom-and-pop operations who earn a few thousand dollars each spring helping friends and neighbors to file their income-tax returns.

The giveaway here is that the deputy IRS commissioner who crafted the new rules was none other than Mark Ernst, former CEO of—wait for it!—H&R Block. H&R Block, of course, was all in favor of the new rules that would have axed a considerable portion of their competition. Giving Ernst a political appointment to deal with matters directly concerning a former employer would have been flatly illegal, so he was given a “civil service” appointment instead, as though he were nothing more than one more bureaucrat moving up the ladder. His civil service career lasted less than two years.

President Obama presents himself as the champion of the poor and downtrodden. But that’s only the poor and downtrodden who are happy to be, effectively, wards of the state. The ordinary Joe who is just trying to make his own independent living is of no concern to Obama. Indeed Obama cares far more about the big guy who can attend $30,000-a-plate dinners and expects favors in return.

Despite frequent attribution, Commodore Cornelius Vanderbilt never said it, but President Obama should: “Law? What do I care about the law? I got the power ain’t I?”


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