Thursday, May 29, 2014

Taxpayers Subsidizing 'Free Speech' For Billionaires

That the billionaire Koch brothers are spending upwards of $1 million to launch an election-year advertising campaign in Wisconsin to sing the praises of Governor Scott Walker's policies comes as no surprise. What might not be readily apparent to casual observers is that taxpayers are subsidizing this electioneering.

The ad is sponsored by an arm of the Kochs' operation that is organized as a 501(c)(3) charitable organization, meaning that the donations that went to pay for this advocacy are tax deductible. By blanketing the airwaves across Wisconsin with this pro-Walker message, the Kochs are reducing their tax liability.

IRS rules governing 501(c)(3) tax-exempt status – meant for charitable and educational organizations to promote “social welfare” – prohibit such groups from using any resources to participate or intervene in political campaigns.

On these grounds, the Democracy Campaign filed a complaint with the Internal Revenue Service in 2012 asking the IRS to investigate what appeared to us to be clear violations of the tax-exempt status of Americans for Prosperity Foundation and two other 501(c)(3) "charities." The IRS replied with a letter dated March 22, 2012 saying the agency "has an ongoing examination program to ensure that exempt organizations comply with the applicable provisions of the Internal Revenue Code. The information you submitted will be considered for this program." The letter went on to say "we cannot disclose the status of any investigation." That's the last we heard. Given that AFPF is doing more of the kind of advertising that prompted our 2012 complaint, one has to assume the IRS has blessed this activity. Evidently the IRS does not believe this kind of advertising serves any political purpose. Watch the ad and judge for yourself.

At the invitation of the IRS, we have followed up on our 2012 complaint with a letter calling the agency's attention to the AFPF's latest election-year advertising and requesting enforcement action. We await the taxman's response.

Wednesday, May 21, 2014

Nope, Nothing Political About This Ad

Imagine two kajillionaires, one a pioneer of Internet commerce and the other a spectacularly successful investment fund manager. One lives on the east coast, the other on the west coast. They are known to be partial to liberal causes. They are losing sleep, awakened repeatedly by recurring nightmares. Always the same dream . . . Scott Walker sitting behind the big desk in the Oval Office.

They figure the best way to blow up Walker's road to the White House once and for all is to doom his reelection as Wisconsin's governor. They instruct political operatives they know to set up a tax-exempt social welfare group called "Hacked-Off Badgers." They each funnel several million dollars to the organization.

In the month leading up to the November 2014 election, the group buys weeks worth of advertising time on every television station in Wisconsin. It airs this message, accompanied by ominous music and grainy images of shuttered factories and men in hardhats line up outside the unemployment office:
Scott Walker is a college dropout. And he has been on the dole ever since. Every job he's had has been a government job. That explains why he has no clue how to get Wisconsin's economy moving. Why our state has been dead last in job creation with Scott Walker as governor. Walker's dismal performance doesn't hurt him any. He just keeps feeding from the public trough. But can the rest of us afford to have the worst governor Wisconsin has ever seen? – Authorized and paid for by Hacked-Off Badgers
A pack of federal judges in Chicago just ruled last week that such an ad has no political purpose. Because the message contains no words such as "vote for," "vote against," "elect," "defeat," "support" or "oppose," it is not a political ad. Because Hacked-Off Badgers did not say any of the magic words that ads with a political purpose must contain, the group does not have to disclose how much it paid to launch this attack on Walker, nor does it have to reveal who put up the money.

The political operatives doing the bidding of our two kajillionaires set up Hacked-Off Badgers under a federal law – 26 U.S.C. §501(c)(4) – designed for the creation of groups "not organized for profit but operated exclusively for the promotion of social welfare." The law exempts from taxation the "net earnings of which are devoted exclusively to charitable, educational, or recreational purposes."

In writing regulations to implement the law, the Internal Revenue Service bizarrely took the position that an organization "is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community."

You read right. Exclusively means primarily. So a 501(c)(4) group like Hacked-Off Badgers can spend millions to air their attack on Walker even though the law says the "promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office." Under IRS guidelines, a 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. And for good measure, federal judges have determined that ads like the one sponsored by Hacked-Off Badgers are not political ads at all. Because those magic words are absent, the purpose of the Hacked-Off Badgers' message must be "charitable, educational, or recreational."

Take your pick.

Thursday, May 15, 2014

Judges Put Ignorance, Bias On Display

Yesterday a federal appeals court in Chicago struck down Wisconsin rules requiring disclosure of election-season "issue ads" sponsored by interest groups. The court said state election authorities exceeded their legal authority in establishing the rules.

The ruling changes nothing, because the state had not been enforcing the now-invalidated rules. But the decision does shed additional light on how politicized judges and courts have become.

The judges on the 7th Circuit U.S. Court of Appeals seemed flummoxed by the rules established by the state Government Accountability Board back in 2010 as well as the underlying state law. “Like other campaign-finance systems, Wisconsin’s is labyrinthian and difficult to decipher without a background in this area of the law,” Judge Diane Sykes wrote for the court.

Wisconsin law says if a group engages in activities for a political purpose, it is subject to disclosure requirements and has to respect any applicable campaign finance restrictions. The GAB rules were based on the reasonable and demonstrably correct conclusion that interest group "issue ads" in the weeks before an election have a political purpose. It's hard to see what is "labyrinthian" about that.

Part of the problem might be that Wisconsin's rules were defended in court by a state agency headed by an opponent of such regulation. But even if Attorney General J.B. Van Hollen didn't exactly put his heart into making the state's case, that's no excuse for federal judges finding a longstanding and often-litigated Wisconsin law "difficult to decipher."

Given the hypocrisy at the core of the federal court's judgment, all this talk about how hard it is to make heads or tails of age-old state campaign finance laws looks like little more than political cover.

Again, Wisconsin law has said for a very long time that if groups engage in activities for a political purpose, they have to publicly disclose both their spending and sources of funding and also raise the money in legally permissible ways. The old state Elections Board approved a rule saying that messages not containing words like "vote for," "vote against," "elect," "defeat," "support" or "oppose" have no political purpose. Neither the 7th Circuit nor any other court ever ruled that the Elections Board exceeded its authority by interpreting "political purpose" in this bizarre way.

But when the GAB replaced the Elections Board and proceeded to replace its predecessor's rule with a new one based on a far-more sensible test to determine which activities have a political purpose and which ones don't, judges suddenly find the GAB lacks the legal authority to write such rules. Yesterday's court decision keeps the Elections Board's magic-words test in force.

The 7th Circuit's decision leaves Wisconsin voters in the dark about who is paying for millions of dollars worth of political attack ads. But the obvious double standard that is at the heart of the court's ruling shines a very bright light on how judges increasingly are not deciding cases based on a consistent application of fair and just legal principles, but rather are bending facts and laws to fit their own political biases.

Friday, May 02, 2014

Out Of Necessity, For The 28th Time

In 2010 the U.S. Supreme Court dropped a bomb on the American political landscape with its decision in Citizens United v. FEC allowing unlimited election spending by corporations, unions and other interest groups. The impact of the blast was felt across the nation. Here in Wisconsin, we already had a full-blown campaign arms race on our hands before Citizens United, but in the ruling's wake we've seen election spending more than triple.

To reach the conclusion that wealthy interests should be able to spend as much as they want to influence our elections, five of the nine justices married two legal doctrines that do not owe their origins to the plain words of the Constitution or the First Amendment but rather are judicial inventions.

The first is the idea that corporations are people. Ages ago the Supreme Court ruled in Dred Scott v. Sanford that people could be property, giving the judiciary's blessing to the institution of slavery. Now the court is holding that property can be a person.

The second doctrine that was joined in court-ordered matrimony to produce the Citizens United ruling is the notion that money equals speech. If you share the justices' belief that money is speech, then you will have to get comfortable with the idea of your employer compensating you for your labor with a pep talk instead of a paycheck. And good luck with the electric company when you send a voice recording to pay your utility bill.

In 2012, 32 donors to federal SuperPACs, the offspring of Citizens United and a related case called SpeechNow v. FEC, gave as much to influence elections as 3.7 million Americans gave to the Obama and Romney campaigns combined. If money equals speech, then each of those 32 SuperPAC donors spoke at 115,000 times the volume of each of the people who gave much smaller amounts to Romney and Obama. More than 300 million Americans gave nothing at all. The mute button was on for them.

A few weeks ago the same slim five-member majority doubled down on Citizens United in a new case called McCutcheon v. FEC and dropped another bomb on American democracy. While Citizens United gave the green light to interest groups to write a blank check for election advertising they sponsor themselves, McCutcheon lifts the lid on what wealthy donors can give directly to candidates, political parties and political action committees.

In McCutcheon, the court struck down the federal aggregate limit on campaign contributions. That limit was about $123,000. In a country of well over 300 million people, a mere 1,219 donors reached that limit in 2012. One of them whose style was cramped was Alabama businessman Shaun McCutcheon. He wants to give more. The same five justices who gave us Citizens United obliged him. Now a single wealthy donor will be able to give $3.6 million to federal candidates and committees.

Wisconsin is one of several states that have laws similar to the federal aggregate limit that was just tossed by the Supreme Court. Ours is an annual limit of $10,000 on total contributions to state and local candidates, parties and political committees. In 2010 and 2012 combined, only 299 donors – including 173 who don't live in Wisconsin – reached the $10,000 limit. These donors' numbers are equal to five one-thousandths of 1% of the state's population, although most of them are not Wisconsin residents.

One of the mega-donors who is chafing under the $10,000 limit is Racine businessman Fred Young, who is challenging the state law in court. If he succeeds, a tiny group of millionaires and billionaires will see their ability to influence state and local elections expanded exponentially. If Wisconsin's $10,000 aggregate limit on donations had not been in place in 2012, a single donor would have been give candidates and parties at least $6.8 million to influence state and local elections in our state.

The First Amendment is only 45 words long. The word "money" is not among those 45 words. And you can read the entire Constitution from the first word ("We") to the very last word of the 27th Amendment and you will not find the word "corporation" a single time. Five members of the Supreme Court have tortured the plain meaning of these founding documents to effectively remove the "r" from free speech and further empower the wealthiest and most privileged among us.

When judges issue rulings so at odds with bedrock principles of democracy and core American values like equality, liberty and justice for all, it is up to the people to overturn them. It is up to us to secure passage of a 28th Amendment clarifying that money is not speech, corporations are not people, elections are not auctions and public offices are not commodities to be sold to the highest bidder.