Last week, The New York Times dropped a bombshell on the political world. The paper reported that one man donated an incredible $1.6 billion to a conservative nonprofit last year, giving an immense amount of unaccountable power to one of the conservative movement’s chief architects. For this week’s Closer Look, we want to tell you more about this donation and the faults that it exposes in both our campaign finance and tax systems.
The man that made the donation was a Chicago-based electronics mogul named Barre Seid. Last year, Seid gave 100% of the shares of his electronics manufacturing company, Tripp Lite, to the Marble Freedom Trust, a new politically-oriented nonprofit controlled by well-known conservative activist Leonard Leo. The group then sold the shares for a whopping $1.6 billion, making Seid’s donation the largest (known) contribution of its kind.
The Times’s report is disturbing on so many levels.
1. That $1.6 billion infusion will make Leonard Leo – a man who has been on the forefront of many conservative causes, particularly the conservative takeover of the federal judiciary – much more powerful than he already is and will shape the electoral and political scene for years to come.
2. It’s not just the inevitable political fallout of the donation that’s troubling. What’s even more disconcerting is that our campaign finance system allows a single individual to make such an obscenely large political donation in the first place. It doesn’t matter what groups or causes they are championing, even if they happen to be ones that we agree with. At the end of the day, ultra-wealthy people like us should not be allowed to use our wealth to warp elections and politics in our preferred direction and, in the process, effectively drown out the voices and demands of everyone else in the country.
3. To make matters even worse, Seid was able to make this enormous donation with complete anonymity. As crazy as it sounds, we probably would never have known about Seid’s donation were it not for an insider tip-off to the Times! There’s a reason why the Marble Freedom Trust and organizations like it are called “dark money” groups: they can spend billions upon billions in our elections and politics without ever having to disclose their donors, leaving voters in the “dark” as to who is really pulling the strings.
4. It’s one of the less-covered aspects of this story, but the tax implications of Seid’s gift are particularly appalling. Because Seid gave Tripp Lite’s shares to a tax-exempt nonprofit, he owed no income taxes whatsoever on his gift. Thanks to a loophole in the way gifts to nonprofits are treated, Seid was able to avoid nearly $400 million in capital gains taxes he would have had to pay if he had sold the shares on his own rather than donating them directly to Leo’s organization. Similarly, if he had given his company to an individual – a family member, friend, or even a complete stranger – he would have been required to pay a 40% gift tax. But because it went to a nonprofit, even one that is dedicated to rigging our democracy in favor of the rich and powerful, he didn’t have to pay any gift taxes. In effect, this means that taxpayers actually subsidize political donations such as Seid’s and the ensuing takeover of American democracy by big money interests.
Billionaires want you to believe that nothing can be done to stop them from transforming America into an oligarchy where a few ultra-wealthy people like them call all the shots. But don’t be fooled – a lot can be done to right the ship and win the battle for economic and political justice in America. Nothing about the state of affairs that allowed this massive, anonymous, tax-free gift was inevitable. It took deliberate policy choices to design this system, and deliberate policy choices can fix it.
Congress can work to limit the influence of big money in politics. Among other things, they can pass a constitutional amendment to reverse the 2010 Supreme Court Citizens United ruling (which opened the floodgates to big money), institute stricter limits on campaign contributions from wealthy individuals, and move towards public funding of elections. They could also pass Senator Sheldon Whitehouse’s DISCLOSE Act, which would require dark money groups like the Marble Freedom Trust to disclose their donors.
On the tax front, Congress could pass legislation to tax unrealized capital gains. If capital gains are taxed on a regular basis, it will prevent billionaires like Seid from skirting their tax liabilities through direct stock donations to dark money groups. There are currently several legislative options to choose from in this regard: President Biden’s Billionaire Minimum Income Tax, Representative Bowman’s Babies over Billionaires Act, and Senator Wyden’s Billionaire Income Tax, to name a few. Furthermore, Congress could reform the gift tax to include donations given to politically active nonprofits.
It’s unfortunately too late for our lawmakers to do anything about Seid’s record-setting gift, but it’s not too late to stop the next one. They can save America from the economic and political takeover of the ultra-rich; all it will take is a willingness to stand up to them.
