Photograph by David Brody/Bloomberg

Senator Max Baucus, a Democrat from Montana, right, greets Douglas Shulman, commissioner of the U.S. Internal Revenue Service, prior to a hearing about tax policies relating to Ponzi schemes before the Senate Finance Committee on Capitol Hill in Washington, D.C., on March 17, 2009.

Senator Max Baucus, chairman of the U.S. Senate Finance Committee, said a formal investigation by his panel will get to the bottom of who at the Internal Revenue Service selectively screened groups applying for tax-exempt status based in part on their ideology.

“We know that IRS officials in Washington tried to stop this behavior,” the Montana Democrat said as he opened the Senate’s first hearing on the work by the tax-exempt unit in Cincinnati. “But who in Cincinnati perpetuated this behavior?”

Former IRS Commissioner Douglas Shulman, who left the agency in November, will be speaking publicly for the first time since the matter became public May 10.

Shulman learned that small-government groups had been singled out last year. He never told Congress.

“Were they simply holding out until after the election?” said Senator Orrin Hatch of Utah, the top Republican on the Finance Committee.

Also testifying today are acting IRS commissioner Steven Miller, who is being forced out of his job, and Russell George, the inspector general who oversees the IRS. They had both testified May 17 before the House Ways and Means Committee.

Read the full story here.

Original post is Baucus: Senate Will Get to Bottom of IRS Case by Political Capital.

Photograph by Alex Wong/Getty Images

Treasury Inspector General for Tax Administration J. Russell George, left, and Former Acting Commissioner of the Internal Revenue Service Steve Miller testify during a hearing before the House Ways and Means Committee on May 17, 2013 on Capitol Hill in Washington, DC.

The Internal Revenue Service wrote and planted the question asked on May 10 that led to the IRS scandal, the questioner said in a statement today.

Celia Roady, a partner at Morgan, Lewis & Bockius LLP in Washington, said that she received a call May 9 from Lois Lerner, the mid-level IRS official in charge of tax-exempt organizations. Both were planning to attend a tax conference the next day in Washington.

Lerner “asked if I would pose a question to her after her remarks,” Roady said in a statement released today by her firm. “I agreed to do so, and she then gave me the question that I asked at the meeting the next day.”

According to Talking Points Memo, which got a recording of the event, the question came a few minutes after Lerner finished her prepared remarks. It was: “Lois, a few months ago there were some concerns about the IRS’s review of 501(c)(4) organizations, of applications from tea party organizations. I was just wondering if you could provide an update.”

In response, Lerner acknowledged that the agency used words such as “Tea Party” and “patriot” to decide which applications for tax-exempt status should get tougher scrutiny. Lerner apologized for the agency’s actions.

Roady said she didn’t know how Lerner would answer.

Steven Miller, the acting IRS commissioner who is being forced out, said today in testimony before the House Ways and Means Committee that the agency and Roady had talked in advance. He hadn’t said that the IRS had written the question.

Original post is IRS Planted the Question that Started Scandal by Political Capital.

Photograph by Greg Johnston

Cayman Islands

Social welfare nonprofits, which can keep their donors secret, are a lot like Russian nesting dolls: Open one, and you’ll find a smaller version inside.

That’s what courts in California discovered last year when they tried to figure out who paid for TV ads attacking Gov. Jerry Brown’s tax increase plan. The courts forced an out-of-state nonprofit to reveal its donors only to find out that the ad money came from … another out-of-state nonprofit. That’s where the trail ended.

Prompted by a revelation last week that the Internal Revenue Service improperly targeted Republican-leaning nonprofit applicants, Congress is plunging  into the thicket of tax rules governing those entities. Hearings continue next week.

Campaign-finance watchdogs such as the Sunlight Foundation, Democracy 21, Common Cause and the Campaign Legal Center are imploring lawmakers to look broadly at whether politically active nonprofits are misuing their tax-exempt status. A Bloomberg story today highlights two groups — one Democratic and one Republican — that appear to be gaming the system by buying campaign-style ads and doing most of their work in election years.

There’s yet another way social welfare nonprofits participate in politics: They move dark money, Cayman Islands style. Sometimes a nonprofit gives money to a political committee that can more freely spend on politics, in effect keeping the real donors hidden. Bill Allison, editorial director of the Washington-based Sunlight Foundation, has called that phenomenon a “campaign-finance haven.”

Those tactics can bump up against stricter state campaign-finance laws, as was the case in California with the Americans for Responsible Leadership.

Two days before the November 2012 election, a California Supreme Court judge ordered the nonprofit based in Phoenix to reveal who gave it the $11 million that it in turn contributed to a business group opposing Brown’s California tax initiative.

Americans for Responsible Leadership reported that it received its money from the Center to Protect Patient Rights — another nonprofit with secret donors.

An October 2012 Bloomberg News investigation of the Center to Protect Patient Rights, also based in Phoenix, revealed that it raised $62 million for the 2010 elections and parceled out most of its money to other nonprofits.

The center’s donors remain a secret.

Original post is Nonprofits: Cayman Islands of Political Money by Political Capital.

Photograph by Kevork Djansezian/Getty Images

Former first lady and Secretary of State Hillary Rodham Clinton speaks with her husband former president Bill Clinton as they attend the opening ceremony of the George W. Bush Presidential Center on April 25, 2013 in Dallas, Texas.

Bill Clinton says it’s a waste of time to speculate about his wife’s ambitions for 2016.

“That is the worst expenditure of our time,” the former president said today at a 2013 Fiscal Summit sponsored by the Peterson Foundation.

Hillary Clinton, the former first lady, senator from New York and secretary of state, is taking a role at the Clinton Foundation, writing a book and “having a little fun being a private citizen for the first time in 20 years,” he said.

Focusing on presidential politics just six months after President Barack Obama’s reelection “obscures our capacity” to take on the big problems, he said. It also “plays to our national tendency to attention deficit disorder when it comes to politics.” It’s important not to “get off on to politics too early.”

Clinton was joined at the forum today by Bill Gates, the Microsoft co-founder and co-chairman of the Bill and Melinda Gates Foundation, who joked that he doesn’t think his wife is running for president. “Hillary hasn’t mentioned it to me either,” Gates said.

Gates, in an interview with Bloomberg Television before the summit in Washington, said his fellow wealthy Americans should pay more as the U.S. grapples with reining in its budget deficit.

“There’s no doubt that as you look at balancing budgets to the degree you need more revenue” that lawmakers will need to look to the wealthy “to get a little bit more from them proportionately than you get from people as a whole,” Gates said. “I think that’s pretty likely.”

Clinton also had this to say about Obama’s 2010 health care law, with major provisions still taking effect this year. “We really need about five years to see if the drivers in the health-care law” work, he said, “to see if that works.”

Original post is Bill Clinton: Hillary 2016 Speculation Waste of Time by Political Capital.

Photograph by Andrew Harrer/Bloomberg

The U.S. Department of the Treasury building in Washington, D.C.

That’s how much government debt the Treasury Department projects it will pay down in this year’s second quarter.

That would mark the first net decline in debt since 2007, before the deepest recession since the Great Depression took hold. The federal debt is about $16.8 trillion.

The projection comes amid cutbacks in federal spending, including the automatic across-the-board cuts known as sequestration, and tax receipts exceeding forecasts.

Bloomberg’s Meera Louis has more here.

Original post is Bloomberg by the Numbers: $35 Bln by Political Capital.

Photograph by Daniel Acker/Bloomberg

Delegates watch a video about former President George W. Bush at the Republican National Convention (RNC) in Tampa, Florida.

“After the most unpopular second term of the post-World War II era, ” pollster Gary Langer reports, former President George W. Bush “has gained in public esteem as time since his presidency has passed – not that the public’s ready yet to throw him bouquets.”

As President Barack Obama and others head to Dallas this week for the dedication of the George W. Bush Presidential Center — a library, museum and research institute at the campus of Southern Methodist University — ABC News and the Washington Post have done some polling on the stature of the 43rd president. Bush’s approval ratings remain upside down in most cases, though he has recovered some ground.

His first term opened with a bid to reform education, and produced the No Child Left Behind Act by year’s end. It also saw the terrorist attacks of Sept. 11, 2001, which overran much of his domestic agenda for the remainder of that term — save for some tax cuts in 2001 and 2003. It saw an invasion of Afghanistan in retaliation for 9/11, with a war that has run more than a decade, and it brought an invasion of Iraq in pursuit of suspected weapons of mass destruction that never materialized. More than 6,000 Americans have died in those wars — the Iraq war still largely unpopular. His hopes of overhauling immigration laws were set aside during that first term, and defeated in the Senate in his second term.

Bush left office in January 2009 with record-low approval ratings.

Now, Langer reports for ABC and the Post, Bush’s overall approval rating is 14 percentage points higher than at the end of his second term, his approval for handling of the economy 19 points higher, “and he’s gained, although more slightly, on the Iraq war as well.’

This is not unusual. “In polls four to five years after the end of their presidencies, Bush’s father gained 18 points in approval, but Bill Clinton slipped by 4 and Ronald Reagan lost 12,” Langer writes. ”(Reagan later improved in retrospect; it just took more time.)”

“Bush left office with just 33 percent approval, and a disapproval rating, 66 percent, that tied the disgraced Richard Nixon as the highest on record for a departing president in polls since the Roosevelt administration. Bush’s approval rating on average across his second-term, for its part, stands alone as the lowest on record in modern polling.”

“With his improvements since returning to Texas, Bush remains negatively rated on two central issues of his presidency, but more narrowly so than when he was in office. The public by 53-43 percent disapproves of his handling of the economy, compared with 73-24 percent in late 2008. And this poll, produced for ABC by Langer Research Associates, finds that Americans by 57-40 percent disapprove of his decision to invade Iraq. That compares with a 65-33 percent negative rating for his handling the situation there in mid-2008.”

The survey of 1,000 adults was run April 17-21 and has a possible margin of error of 3.5 percentage points.

See the full ABC/Post Poll here.

See Bush camp celebration here:

As Pres Bush gets ready 2retake the stage, his approval rating is up to 47%. Same level as Pres Obama wapo.st/11H9Lku

— Ari Fleischer (@AriFleischer) April 23, 2013

Original post is Bush Revisited: Regaining Lost Ground by Political Capital.

Photograph by Chip Somodevilla/Getty Images

Senate Budget Committee staff members hand out copies of the Obama Administration’s proposed FY 2014 federal budget in the Dirksen Senate Office Building on Capitol Hill April 10, 2013 in Washington, DC.

That’s the share of the higher taxes under President Barack Obama’s budget proposal that the top 1 percent of U.S. taxpayers would pay in 2023.

The figure comes from the nonpartisan Tax Policy Center, which yesterday released an analysis of the tax proposals in the budget blueprint that Obama administration officials released April 10.

Obama proposes tax hikes on wealthy income-earners to help reduce federal budget deficits. Republicans resist tax increases, saying Obama and Democrats need to do more to curb spending.

Bloomberg’s Richard Rubin has more here.

Original post is Bloomberg by the Numbers: 67% by Political Capital.

Photograph by Daniel Acker/Bloomberg

Department of the Treasury Internal Revenue Service (IRS) 1040 Individual Income Tax forms for the 2012 tax year.

That’s the share of Americans who identified taxes as the biggest problem facing the nation, according to Gallup surveys last month.

The share of people identifying taxes as the biggest problem historically has been in the low single digits, according to Gallup data  included in a 131-page compilation of polling on taxes since 1937 from the American Enterprise Institute.

More Americans identify the economy, government performance or employment as the most important problem facing the nation. In last month’s Gallup survey, about 13 percent identified the federal budget deficit or debt as the most important problem.

Over the past few years, the U.S. public has been about evenly divided between those who say their taxes are too high and those who say they’re about right, according to the AEI document. Those saying their taxes are too low register in the low single digits. Surveys suggest that people consider local property taxes more onerous than federal income taxes, according to AEI.

President Barack Obama is proposing some tax hikes in a budget blueprint administration officials released April 10. The document “proposed higher taxes for top earners, estates, private-equity managers and tobacco users, wrapped inside a call for ‘reforming our tax code,’” Bloomberg’s Richard Rubin reported yesterday. Republicans oppose the tax hikes.

Original post is Bloomberg by the Numbers: 2% by Political Capital.

Photograph by Daniel Acker/Bloomberg

Storage tanks stand near a Lufkin Industries Inc. Mark II Unitorque electric pumping unit as it removes crude oil from a Fidelity Exploration & Production Co. well outside South Heart, North Dakota.

Here’s more evidence the economy is coming back: State tax collections reached a record in 2012, totaling $794.6 billion. The tally breaks the previous mark of $779.7 billion set in 2008, the U.S. Census Bureau reported today.

Many states attributed the higher collections to increases in sales and income taxes. Others, including North Dakota and Alaska, saw spikes in revenue from fees on oil and gas drilling. North Dakota’s shale boom resulted in a whopping 47 percent jump in tax collections from the year before, to $5.62 billion.

California, New Hampshire and Wisconsin were the only states that collected less money last year than in 2011, the report found.

Across the U.S., state revenue from alcohol sales was up 5.1 percent, while income from tobacco fell. Gasoline taxes charged at the pump contributed to the gain in revenue for the third straight year.

Tax collections are a key benchmark of the economic health of states, and last year’s increase is “absolutely good news,” said Cheryl Lee, chief of the state finance and tax statistics branch at Census in Suitland, Maryland. “It’s showing steady improvement in the economy.”

The report is the first set of financial stats released from the 2012 Census of Governments.

Original post is State Tax Revenue Hit Record in 2012 by Political Capital.

Photograph by Chip Somodevilla/Getty Images

JP Morgan Chase CEO Jamie Dimon, left, and Goldman Sachs CEO Lloyd Blankfein leave the White House after they and 13 other bank heads met with President Barack Obama on March 27, 2009 in Washington, DC.

President Barack Obama will meet with the heads of the world’s biggest banks, including Goldman Sachs Group Inc.’s Lloyd C. Blankfein and JPMorgan Chase & Co.’s Jamie Dimon, seeking to strengthen ties that have been strained by new U.S. curbs on fees and trading.

The NTSB begins public meetings on the Boeing 787 lithium battery fire.

In the Senate, a cloture vote will determine whether lawmakers consider a bill to expand the background checks on gun purchases.

Bloomberg View Columnist Amity Shlaes joins a Cato Institute discussion on tax reform under President Calvin Coolidge.

Speaking of taxes, eliminating most deductions, lowering overall tax rates would be a “good idea,” voters say 47 percent to 35 percent, while 55 percent say the rich pay less than their fair share, according to a Quinnipiac University poll released today. Almost two-thirds of American voters have someone else prepare their tax return.

Treasury Secretary Jacob Lew and Acting OMB Director Jeffrey Zients head to Capitol Hill to sell the Obama administration’s budget to hearings of House and Senate committees, while the House Appropriations panel hears from Acting Commerce Secretary Rebecca Blank on her agency’s spending plans.

The House Armed Services Committee hears from Defense Secretary Chuck Hagel and Joint Chiefs Chairman Martin Dempsey on the Pentagon’s budget request. The House Select Intelligence Committee holds a hearing on threats to the U.S. with witnesses including Director of National Intelligence James Clapper, CIA Director John Brennan and FBI Director Robert Mueller. The Atlantic Council holds a discussion of the future of the Air Force, with topics including budget cuts, competitor nations and new technologies.

A House Energy and Commerce panel, chaired by Rep. John Shimkus, an Illinois Republican, holds a hearing on the Coal Ash Recycling and Oversight Act of 2013 as the Senate Environment Committee hears from EPA head nominee Gina McCarthy at her confirmation hearing. NOAA holds a conference call on its Drought Task Force.

The rebound in homebuilding after a six-year slump should generate as many as 500,000 jobs this year and 700,000 in 2014, including related services, estimates Russell Price, a senior economist at Ameriprise Financial. Price is the top forecaster of employment over the past two years, according to data compiled by Bloomberg.

The SEC’s Dodd-Frank Investor Advisory Committee meets today. A Senate Banking panel holds a hearing on the role of regulators and consultants in the scrapped multibillion dollar settlement over mishandled foreclosures. A House Financial Services panel on capital markets holds a hearing on derivatives provisions of the Dodd-Frank Act.

The Washington International Trade Association holds the third in a four-part series of discussions on Trans-Pacific Partnership negotiations, this one on U.S. priorities and objectives. Bloomberg Government’s Robert Litan and Navigant Economics Managing Director Hal Singer discuss how FCC policies affect investment in telecommunications at ITIF.

And this evening, filmmakers Ken Burns and David McMahon discuss their film “The Central Park Five” after a screening at the National Press Club.

Original post is Washington Daybook: Banks, Budgets and Guns by Political Capital.