Super Tax the Super PACs

01 July 2012
Published in Blog

The rich and powerful just got more powerful--and most likely richer.

While all eyes have been focused on the Supreme Court’s healthcare ruling, the Court quietly released a decision last Monday that could impact even more Americans.

The Supreme Court had a chance with this new case to reverse its infamous 2010 Citizens United decision. By way of brief background, the Citizens United ruling, together with the federal appeals court decision in vs. FECgave birth to the monstrosity known as Super PACs--independent political action committees which advocate for or against a specific candidate. And worse yet, these rulings ended restrictions Congress had imposed on the amount of money corporations, unions and wealthy individuals could contribute to these "independent" political committees. 

But instead, the Supreme Court decided to increase the flow and influence of corporate money in our political system by striking down Montana’s Corrupt Practices Act, a law which had been enacted in 1912 to end the corruption caused by the “copper kings”--the big mining companies--which had been essentially buying politicians with large donations and bribes. This Montana law had banned corporate donations to political organizations for 100 years until the Court struck it down and declared that States--in addition to the US Congress--could not enact legislation barring corporations from contributing to Super PACs.

Who could oppose guarding our political system from potential corruption and increase corporate influence over our political system? Well, at least the five Justices who voted to strike the Montana law down. (Anyone surprised that these five Justices were all appointed by Republican Presidents?)

There are currently 640 Super PACs and, in 2012 alone, these groups have already raised over $240 million. In this year’s election cycle, millions of dollars are being thrown around like a drunk stock broker in a high-end strip club “making it rain” by tossing fifty dollar bills at strippers.

Lets be honest: How can a politician supported by millions from a wealthy individual or corporation ever say “no” when asked by them to vote a certain way or take a position on an issue? If you say they can't, then you're among the 77% of Americans who believe politicians will stand with the big money contributors over the public interest. 

Where is this heading? Can you say: “Citizens-gate”? (Okay, I’m not sure of what we will actually call the scandal, but I'm pretty sure the suffix will be "gate.")  Our politicians are dangerously in peril of returning the dark days when they were up for sale to big money donors like the crooked “Nucky Thompson” in HBO’s “Boardwalk Empire.”

And this development has not gone unnoticed by American voters. A recent poll found that 70% of Americans believe that the current Super PAC system will lead to corruption. And just last week, Senator John McCain echoed this gloomy prognosis when speaking of the Citizens United decision: "I think there will be scandals as associated with the worst decision of the Supreme Court in the 21st century.”

What’s astounding to me is that opposition to Super PACs is one of the few things that unite people from both political parties. Indeed, a recent Washington Post-ABC News poll found that 69% of Americans want Super PACs to be illegal.  

The rise of Super PACs is also resulting in a very alarming consequence: polls indicate that 65% of Americans now trust the government less because big donors have more influence than the average voter. And worse, 26% percent of Americans now say they are less likely to vote because of Super PACs. That number will undoubtedly increase as more Americans feel that that our political system is being controlled by the wealthy and big corporations.

The stakes are clear: the Super PACs are a threat to our democracy. I’d say a “clear and present” danger but I don’t want to be overly melodramatic--but it's truly close to that. The pitfalls of the current Super PAC system are clear: Increased  chances for corruption, undermining confidence in our political system and Americans checking out of the process because they feel the system is unfairly rigged in favor of the wealthy and big corporations.

The question is what can be done? We have few options:

1. Amend the US Constitution to impose limits on these types of contributions. This could work but would take years;

2. Stop paying the Supreme Court Justices until they reverse their decision. Okay, I’m kidding with this one but I bet it would have an impact; or

3. The most immediate and practical solution is Congress imposing a tax on the Super PACs. And not just any tax, but a Super tax. (There would no doubt be a court challenge to this tax, but as we observed this past week with the healthcare ruling, the Supreme Court is very deferential to Congress' power to impose taxes.)

Did you know that Super PACs don’t pay taxes on the contributions they receive? Unbelievable, isn’t? These Super PACS are no doubt businesses but the contributions are not taxable because they are considered “gifts” under federal tax law. C’mon, a gift is a bouquet of flowers or a tie, not $2 million with the hope of changing public policy to help your corporation or personal investments.

The contributions to Super PACS should be deemed income. The money is given for a service, namely that the Super PAC will use the funds to lobby the American people on behalf of the donor. And for contributions over the current limit an individual can contribute to a federal political candidate – $2,500 – I propose a fifty percent flat tax be imposed which doesn’t allow deductions.

The funds raised from this “super tax” can be used to reduce the deficit or to increase the amount presidential candidates are offered for public financing.

At some point there will again be limits imposed on contributions by wealthy individuals and corporations–-the question is do we first need another “Watergate” type scandal to make that happen?