The Permit Power, The IRS and The Troll Under The Bridge

The Permit Granter Controls Access To The Bridge
The Permit Granter Controls Access To The Bridge

The frequent war stories about the number of permits necessary to construct everything from a dog house in the back yard to a nuclear power plant are so legion that they should not pass unnoticed in the rarefied groves of academe. It is important, therefore, to ask how the permit system should operate in principle, how it operates too often in fact, and what, if anything, could be done to improve the situation. Intelligent legislation to simplify the permit process is always welcome, for no provision in the Constitution compels the government to issue permits before allowing individuals to go ahead with their business. While we cannot (and should not) strive for a permit-free society, I think we should move much closer to that end than we presently are.


(Richard Epstein)

Since August or September of 480BC, Western Culture has been well aware of the power multiplier that comes with establishing and holding a choke point. When King Leonidas of Sparta held a vast army of Persians at bay for several days with a smaller force at Thermopylae; the world then knew that chokepoints were strategic fulcrums from whence power could be leveraged far beyond its initial limits. The economic analog to such a chokepoint is the monopoly. The government permit power is just such a chokepoint generating function to empower the state beyond its circumscribed constitutional limits.

When the government controls activity via permit, they are able to do several things that go far beyond their enumerated Constitutional powers. They can pick winners and losers. They can dictate the size and scope of activities without having to depend on the approval of courts or legislators. An agency wielding permit power can skim a surplus off the top through fees that go beyond the cost of providing inspection and certification related to the permit. Like a gang of brigands controlling a bridge, a regulating agency can use the permit power to dictate who gets to pass, how much traffic traverses the road and how much in bribes have to be paid in order to get across the river.

That being stipulated, the government can’t completely abandon all permitting. Take the example of the Nuclear Reactor about an hour’s ride down the road from my house. The citizens of North Alabama are well-served having cheap and abundant electrical power. They would also be in a world of hurt if the Widow’s Creek Reactor ever went Full-Cadmium Chernobyl on us. It could thus be logical to argue that a government certification, for a fair and reasonable fee, involving a skilled and reasonably unbiased experts inspecting the safety at Widow’s Creek is not as terrible an idea as the libertarian mind would make it out to be. The problems occur when this gets attempted in the real world.


When the IRS used permitting power out of its Exempt Office to control who got tax-exempt status under IRC 501(c)(4), the social welfare organizations clause became a major source of permitting abuse. These sorts of activities are described in the code as “Social welfare; grassroots and other lobbying and/or issue membership organizations.” The IRS has the permit power to allow or deny them tax exempt status when they engage in the following activities: “Public education on policy issues; direct lobbying; member mobilization for grassroots lobbying & campaign purposes; May make candidate related expenditures but cannot be major purpose.”

So, rightly or wrongly, the IRS can use taxation power to determine who can affordably engage in political lobbying. They can choose to make these activities cheap and easy for those whose politics they support. Drew Ryun ran an experiment that demonstrated the capricious nature of how the IRS played political “gottcha” with its power of permit. Mark Steyn details this below:

Drew Ryun applied for permanent non-profit status for a group called “Media Trackers” in July 2011. Fifteen months later, he’d heard nothing. So he applied again under the eco-friendly name of “Greenhouse Solutions,” and was approved in three weeks.

Why the fourteen month difference in the approval times? It could be that Conservative groups and Liberal groups applying for the identical tax exempt status were facing significant differences of rater level when their applications were reviewed for approval. Here is a list of questions the IRS directed to The Ohio Tea Party.


“Provide the time, location and content schedule of each event. Identify and provide copies of handouts to the audience. The names and credentials of the instructors. If speeches or forums were or will be conducted at the event, provide detailed contents of the speeches or forums, names of the speakers or panels, and their credentials. Copies of all handouts provided and distributed at the forum, including any Internet or advertising material discussed or used at the forum. Indicate the percentage of time and resources you have spent or will spend conducting these activities in relation to 100 percent of all your activities.”

The permit power has been used to gather reams of information on people the government has no legitimate purpose to be gathering. The IRS is currently asking religious groups for information like “What words do you use when you pray?” “For what do you pray?” After protesting outside of a Planned Parenthood Clinics, The Thomas More Society received the following questions from the IRS.

“Please explain how all of your activities, including the prayer meetings held outside of Planned Parenthood, are considered educational as defined under 501(c)(3),” reads the letter, made public by the Thomas More Society, a public interest law firm that collected evidence about the IRS practices. “Organizations exempt under 501(c)(3) may present opinions with scientific or medical facts. Please explain in detail the activities at these prayer meetings. Also, please provide the percentage of time your organizations spends on prayer groups as compared with the other activities of the organization.”


And the IRS stands in front of Congress and just stonewalls and lies. You see, Mr. Miller can’t speak on individual cases; it might cause the resolution thereof to become biased somehow…

The simple solution remains that we have to take this power away from government agencies whenever possible. If you give government bureaucracy discretion, the bureaucrats will abuse and corrupt the system. The number of permits required for anything needs to be reduced to the bare minimum possible. The process has to be as clearly defined and unchangeable as possible. Everyone waits in the same queue. Everyone endures the same undue process. There is no other way to avoid the governmental permit process from becoming a scam. There is no other way to prevent it from being used to circumvent the constitutional limits of government on the behalf of the corrupt schemes of empowered individuals.


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