More Money for I.R.S. Spurs Conspiracy Theories of ‘Shadow Army’ | Big Indy News
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More Money for I.R.S. Spurs Conspiracy Theories of ‘Shadow Army’



WASHINGTON — It has been called President Biden’s “shadow army,” described as a strike force to shake down small businesses with assault rifles and likened to a militia of auditors on search-and-destroy missions.

A decades-long Republican antipathy toward the Internal Revenue Service has reached a new level of enmity with the passage of a Democratic-backed bill that gives the agency $80 billion to beef up its ability to go after tax cheats. The legislation, which Mr. Biden signed into law this week, will allow the beleaguered agency to hire more than 80,000 employees, upgrade outdated technology systems and improve its ability to respond to taxpayers.

The agency’s staff is the same size today as it was in 1970, when it processed far fewer individual tax returns. Its enforcement staff has fallen more than 30 percent since 2010, and audits of millionaires have declined more than 70 percent. As of late June, millions of taxpayers were still waiting for the agency to process their 2021 tax returns.

But Republicans, who have long accused the I.R.S. of unfairly targeting conservatives, have seized on the law to fan unfounded conspiracy theories about the threat that mom-and-pop shops and middle-class Americans will face from an emboldened tax collector.

The scale and speed at which rumors about the agency have spread portend the political and logistical challenges that the Biden administration will confront as it embarks on the biggest overhaul of the I.R.S. since its inception. From Twitter and TikTok to newsletters and cable news, Republicans have embraced the notion that a bigger I.R.S. is poised to be weaponized against them, often distorting facts to make their points.

“This has become the lightning rod issue that’s really aggravated and activated conservative activists around the country,” said Stephen Moore, a conservative economist affiliated with FreedomWorks, a right-leaning organization that promotes small government. “I think it’s a total outrage.”

Mr. Moore, whose personal fight with the I.R.S. surfaced in 2019, has been leading a group of conservative activists in an attempt to “kill the bill” for nearly a year. Now that it has passed, Republicans have amped up their efforts to demonize the I.R.S., including misconstruing how big it will grow and what new employees will be doing.

“Stop Biden’s shadow army of 87,000 I.R.S. agents,” Senator Ted Cruz, the Texas Republican, blared on Twitter last week with an ominous ad recalling the agency’s targeting of Tea Party groups set against the sound of soldiers marching.

Senator Chuck Grassley of Iowa, a Republican on the Senate Finance Committee, warned Fox News viewers last week that the new I.R.S. agents, a small percentage of whom are allowed to carry firearms, might be coming with loaded “AK-15s” and “ready to shoot some small business person in Iowa.”

“I think they’re going after middle-class and small business people,” Mr. Grassley said. “With 87,000 additional employees, you can imagine what that harassment is going to be to middle-class Americans and our small business people.”

The I.R.S. is beefing up its staff to keep pace with the growth in taxpayers and to replace departing employees. The Biden administration expects that about 50,000 I.R.S. employees will retire within the next decade and that the agency will hire 87,000 new employees, bringing the overall size of the agency to around 120,000. The number of enforcement agents is expected to double to about 13,000 from 6,500 over the next decade.

And despite claims on social media that the I.R.S. hires will be heavily armed, a Treasury official said that just 1 percent of the new employees would be agents working in jobs that require carrying guns.

Still, the I.R.S. recently altered a job posting for criminal investigators amid the backlash, deleting that one of the role’s major duties was to “be willing to use deadly force, if necessary.” The amended ad now lists “Be legally allowed to carry a firearm” as a key requirement.

“The wording change on one web page followed continued misstatements and inaccuracies about I.R.S. employees carrying weapons,” said Khaalid Walls, an I.R.S. spokesman.

Republicans have been eager to fan fears about a scaled up I.R.S. ahead of midterm elections, which will determine which political party controls Congress.

Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, said this week that families making less than $75,000 would face 710,000 additional audits, suggesting that the Biden administration had lied about its pledge to not increase audit rates of taxpayers who make less than $400,000. Mr. Brady also suggested that the I.R.S. would have to target middle-income families to generate the kind of tax revenue that it has assumed the new law will generate.

“Middle-class families ought to be frightened,” he said on Fox News.

The 87,000 hires were described by users on social media platforms like Truth Social, the social media network started by former President Donald J. Trump, as “thugs” and “terrorists” and likened repeatedly to the Gestapo, the K.G.B. and even soldiers for the Roman Empire. Along with Mr. Cruz, the conservative commentator Dan Bongino and congressmen from Arizona, Texas and Louisiana took to calling the I.R.S. an “army.”

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Conservative personalities with hundreds of thousands of followers on Twitter questioned why the I.R.S. suddenly needed “a massive stockpile of guns and ammo” (the agency’s spending on ammunition this year is actually in line with its many years of purchases, according to fact checkers) and accused Democrats of “weaponizing” the agency with agents “trained to kill Americans.”

On TikTok, users theorized that the I.R.S., armed to the teeth, was coming to seize their guns, and threatened to retaliate.

Kari Lake, the Trump-backed election conspiracist running to be governor of Arizona, wrote on Truth Social on Aug. 9 that “not a single one of us is safe.” She suggested, as did other high-profile users, that it was no coincidence that “they hired 87,000 IRS agents the day before” the F.B.I. search of Mar-a-Lago, even though the bill enabling the hiring had not yet been signed into law.

Right-wing outrage over the search of the property dovetailed with the charged language about war and dictatorship that has been circulating for weeks on platforms like Truth Social and helped amplify the I.R.S. backlash, said John Scott-Railton, a senior researcher at the Citizen Lab at the University of Toronto’s Munk School of Global Affairs and Public Policy.

“It was a piece of disinformation that was floating around and salient at the time that involved government overreach,” he said.

Mentions of the I.R.S. and its hiring plans, already elevated after Mr. Biden discussed the Inflation Reduction Act in late July, surged 254 percent after the Mar-a-Lago search compared to the week before, according to data from Zignal Labs. Chatter around “armed I.R.S.” and “I.R.S. firearms” on social media, online forums, broadcast channels and traditional media increased 1,044 percent and 532 percent after the search.

The I.R.S. has acted inappropriately in the past, including unfairly targeting conservative groups that applied for tax-exempt status during the Obama administration. In 2013, the agency acknowledged that it had been singling out terms such as “Tea Party” and “patriot” as a shortcut for deciding if organizations were engaging in social welfare, which would qualify them for tax-exempt status, or if they might be political organizations. Former President Barack Obama called the agency’s actions “inexcusable” and ultimately demanded the resignation of the acting I.R.S. commissioner. A 2017 report from the Treasury inspector general found that progressive groups had also been improperly scrutinized.

Still, for all the ads and rhetoric, it is not clear whether the message is resonating ahead of the midterms.

A poll conducted by the market research firm YouGov with The Economist magazine this week found that around half of Americans supported the bill that included the I.R.S. funding when they were given a brief overview of what it contained. Around one-third of the respondents opposed it.

A separate survey from Morning Consult and Politico found that most voters are not worried about being audited by a beefed-up I.R.S. because they think that high-income Americans will bear the brunt of the increase in audits.

The Biden administration has been trying to debunk disinformation and tamp down fears. It insists that the revamped I.R.S. will be focused on better customer service and that honest taxpayers will have less to fear because audits will be better targeted at those who are evading taxes.

In a memo this week to the I.R.S. commissioner, Charles P. Rettig, Treasury Secretary Janet L. Yellen mapped out her top priorities for the agency and reiterated that it must focus on rich tax dodgers and cracking down on corporate tax evasion.

“These investments will not result in households earning $400,000 per year or less or small businesses seeing an increase in the chances that they are audited relative to historical levels,” Ms. Yellen wrote.

John Koskinen, who served as I.R.S. commissioner in the Obama and Trump administrations, said that he thought the attacks on the agency by Republican lawmakers were irresponsible and that he worried that they could lead to violence against members of the agency. He suggested that the only taxpayers who would end up having to pay more were those who were not paying their taxes, and said that agents do not wield their weapons without good reason.

“The idea that the I.R.S. is going to show up and audit all sorts of people for the fun of it are either ignoring reality or just don’t know how the I.R.S. operates,” Mr. Koskinen said. “Honest taxpayers, who are the vast majority, aren’t going to be bothered at all.”

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Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice



For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

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Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024



Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

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The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.

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Goldman grumbling grows for banking giant to sack CEO David Solomon



The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
Getty Images

“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

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