Tax-exempt secrecy


Bearing in mind that every time someone gets a tax break, the other taxpayers must pick up the slack; there is a question that has arisen out of the current IRS “scandal.”

Should any political groups be tax-exempt, and why?

In 1907, the Tillman Law forbade any corporations from donating money to the campaign expenses of any party. This was in response to the growing influence of wealthy corporations following the post-Civil War boom.

In 1947, the Taft-Hartley Act placed the same restrictions on labor unions. Unions responded by forming political action committees, using voluntary donations from its members. Every union member who chose to give to a PAC understood that this money was not tax-deductible.

It took a while for corporations to catch up to this practice, and today corporations spend 15 dollars for every dollar spent by union members for politics. In 2010, the Supreme Court, in its Citizens United decision, overturned 100 years of campaign law, as well as parts of the McCain-Feingold campaign reform, and the reforms instituted following Watergate. (Remember the suitcases full of money that went to CREEP?)

A tax-exempt status is generally named after the portion of the IRS code that applies. For example, the 501(C)3 is a tax-exempt status granted to non-profit organizations formed for a specific charitable purpose, such as community foundations, scholarships, or art. Gifts to these funds benefit the public, and not only is the organization itself tax-exempt, but donations are tax-deductible for the donor. Such groups are strictly forbidden to use any funds for politics, though its spokespersons may be permitted to lobby for its own cause, such as education.

A more recent development is the SuperPAC, a group theoretically independent of any candidate, but overtly political. Also tax-exempt, they can accept unrestricted sums of money from identified donors. These monies are not tax-deductible for the donor, nor are they anonymous. These are generally identified as 527s, and can spend their money on “issues,” but not candidates. An example of this type of group is the Swift Boat Veterans for Truth.

Another type of political group is the Trade Association, such as the Chamber of Commerce. Many high-profile corporations choose to funnel their political contributions through the C of C, because they can influence an election without angering potential customers for their products.

Last, and most egregious, are the 501(C)4s. These “social welfare charities” are also tax-exempt, but these do not have to name their donors, nor are the donations generally tax-deductible for the donors. The attraction for donors is the secrecy. They are permitted to spend money in elections, so long as most of their funds are spent primarily on social welfare. This is a cynical joke. Karl Rove’s Crossroads GPS, the Koch brothers’ Freedom Works, and a number of others use this to keep the names and amounts of donors secret. They don’t even pretend to care about social welfare.

Now, I am all for free speech. But this political speech, my friends, is not free. You and I pay for it by subsidizing the groups through tax-exemptions. This is what should be the focus of the news media: how we, the taxpayers, are being ripped off.

Lola Johnson