Whitehouse Proposes Legislation To Close Dark Money Tax Loophole


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This is not a story about the White House, the building at 1600 Pennsylvania Avenue in Washington, DC where the president of the United States resides. Instead, it is about Sheldon Whitehouse, the feisty senator from Rhode Island who is a fierce advocate for common sense and fairness in government.

What put a bee in his bonnet lately was a $1.6 billion dollar donation made by one Barre Seid of his 100% ownership stake in Tripp Lite, a maker of electrical equipment, to Marble Freedom Trust, a group controlled by Federalist Society co-chairman Leonard Leo. If you don’t know, Leo is the arch conservative who is primarily responsible for Neil Gorsuch, Brett Kavanaugh, and Amy Coney Barrett being on the Supreme Court.

The root of the problem is the absurd Citizens United decision by the court in 2010 that opened the floodgates for corporations to spend as much as they wanted to in order to get political candidates they liked elected.  The result has been a hollowing out of American government to promote more polcies favored by extreme right wing interests, things like defunding the IRS so it wouldn’t be able to catch tax cheats among the mega-wealthy who are stealing America blind so they can hoard their wealth.

The Golden Rule in politics is, “Them that have the gold make the rules,” something that is the object lesson of a game called Star Power that demonstrates how those with power will do anything to hold onto it and keep it away from those who have none. That is America today. Through high power lobbying, they capture of enough seats in Congress by toadies for the super rich, along with judges who are sworn to interpret the law in such a way as to perpetuate the wealth and power of a few (See Clarence Thomas — Harlan Crow).

The thing that has Senator Whitehouse in a tizzy is not so much that Seid could make a gift of that size to a shadowy group that seeks above all else to keep its doings secret, but rather that it represented an enormous capital gain for Seid that went untaxed thanks to a loophole in the IRS code which allowed Seid to avoid about $400,000 in federal capital gains tax. The gift, of course, will be used by Leo and his cohorts to further dismantle the notion of “equal justice under the law” enshrined in the Constitution.

Sheldon Whitehouse has filed a bill he calls the End Tax Breaks for Dark Money Act which would ensure that donations of appreciated assets to 501(c)(4) organizations are subject to the same rules as gifts to political action committees (PACs) and parties. A similar bill was filed in the House of Representatives by Judy Chu of California. Chu said in a statement,

“Thanks to the far right Supreme Court, billionaires already have outsized influence to decide our nation’s politics; through a loophole in the tax code, they can even secure massive public subsidies for lobbying and campaigning when they secretly donate their wealth to certain nonprofits instead of traditional political organizations. We can decrease the impact the wealthy have on our politics by applying capital gains taxes to donations of appreciated property to nonprofits that engage in lobbying and political activity — the same way they are already treated when made to traditional political organizations like PACs.”

“It’s a clear sign of a broken tax code when a single donor can transfer assets worth $1.6 billion to a dark money political group without paying a penny in taxes,” said Whitehouse. “Billionaires attempting to influence politics from the shadows should not be rewarded with taxpayer subsidies.”

The proposed legislation is backed by a number of individuals and organizations. Morris Pearl, Chairman of the Patriotic Millionaires and former Managing Director at BlackRock said about the End Tax Breaks For Dark Money Act, “There is no justifiable reason why wealthy people like me should be allowed to dominate our political system by donating an entire $1.6 billion company to a dark money political group. But perhaps more egregious is the $400 million tax break that comes from doing so. It’s a perfect example of how this provision in the tax code is used by the ultra-wealthy to manipulate the levers of government while simultaneously dodging their obligation to pay taxes. We cannot allow millionaires and billionaires to run roughshod over our democracy and then reward them for it with a tax break.”

The watchdog group OpenSecrets reported last month that super PACs and other groups “have already poured nearly $318 million into spending on presidential and congressional races as of January 14 — more than six times as much as had been spent at this point in 2020.”

Secrecy And Politics Make A Toxic Stew

Secrecy and political donations have a long and convoluted history. The byline of the Washington Post is “Democracy Dies In Secret.” For years, Congress struggled to make campaign financing more transparent, so voters would know who was supporting which candidates. If you’re opposed to lung cancer, you might be less inclined to vote for a candidate supported by a tobacco company, for instance.

Charles Koch has built an elaborate network of right wing organizations devoted to a simple premise — “It’s my money, dammit, and there is no reason why I should have to tell anybody what I decide to do with it.” Koch has weaponized the tax code to allow organizations like the Heritage Society, the Heartland Institute, and the Texas Public Policy Foundation to distort politics in America to favor the wealthy. His Donor’s Trust is devoted to keeping the public in the dark about the political contributions of America’s wealthiest individuals.

It is not people on Social Security who are clamoring for reductions in benefits, it is billionaires like Koch who are distraught that any of their money might be used to support low and middle income citizens. It is Koch and his organizations who set the stage for the Citizens United decision. It is Koch and his network that founded the Federalist Society and installed ideologues like Leonard Leo to use it to pack America’s courtrooms with activist judges dedicated to the idea of justice for the rich but not for others.

As Martin Luther King, Jr. once told us, “We all too often have socialism for the rich and rugged free market capitalism for the poor.” Sheldon Whitehouse wants to do something about that, which suggests what America needs most is a Whitehouse in the White House.

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