Two years later January 6 uprising, a plurality of Americans say the most important issue facing the country is the threat to democracy. This threat isn’t just about rioters on the US Capitol, a coup plot by an incumbent president, court rulings limiting voting rights, or politicians denying verified election results. The threat is also something less dramatic but more insidious – an unregulated campaign finance system that allows billionaires to control the political system using secret pools of anonymous money, otherwise known as black money. .
This week, America got a rare glimpse into this part of the democratic crisis when The lever, ProPublica, and The New York Times exhibited the largest known political advocacy donation in US history. A reclusive tycoon named Barre Seid has secretly transferred his business empire to a black money group led by Leonard Leo, the Republican operative leading the conservative crusade to remake the justice system. Leo’s group then sold Seid’s company for $1.6 billion, which they can now use to fund and grow Leo’s political machine for decades.
Indeed, the maneuver was subsidized by the public: the complex transaction avoided hundreds of millions of dollars in taxes, increasing the size of the contribution. And here’s the thing: if the donation hadn’t been disclosed, the country might never have learned the source of the giant investment, even though it is equivalent to the GDP of a small country and could now shape the whole an era of American politics.
If democracy requires transparency and a commitment to the principle of “one person, one vote”, then this situation indeed represents a serious threat to democracy. But billionaires and corporations no doubt expect readers to see this week’s news and breathe a sigh of resignation. They want you to think nothing can be done after a 2020 election that saw $1 billion in black money spending, a Jan. 6 rampage promoted by black money groups, and a 2022 midterm in during which congressional super PACs of both parties are teeming with anonymous money.
But the opposite is true: there are simple ways to fend off or limit this oligarchic threat so that Americans can at least know who is trying to influence their votes, their representatives, and their justice system.
It’s time to finally pass the DISCLOSE law
First and foremost, lawmakers could finally pass Sen. Sheldon Whitehouse’s (DR.I.) DISCLOSE Act, which has languished in Congress since 2010, the year the United Citizens decision sparked a lasting flood of black money into politics. The fundamentals of the bill shouldn’t even be considered partisan or controversial: it would require black money businesses and political organizations to spend money on elections or judicial nomination campaigns to disclose all their main donors.
Lawmakers could also pass Whitehouse’s accompanying measure requiring donors to disclose advocacy groups lobbying the courts through amicus briefs, also known as “friends of the court” filings. Without such transparency, these influential amicus briefs can appear to come from a wide range of public-minded grassroots groups — even when those groups are funded by the same handful of billionaire donors and foundations that helped fund the conservative takeover of the high court .
Black money, however, does not only influence elections and court decisions. It also corrodes the legislative apparatus through academic institutions and advocacy groups that seek to shape the way legislators think about politics. Every once in a while we get a glimpse of this so-called “cognitive capture” when word leaks from a Washington think tank publish studies that serve the legislative interests of the organization’s sponsors or the foreign government.
To start making these kinds of disclosures more routine, lawmakers can lift the ban that currently prohibits the Securities and Exchange Commission (SEC) from requiring publicly traded companies to disclose all of their political spending, including donations to think tanks, pressure groups and advocacy. organizations.
President Barack Obama’s appointees could have done so but refused, and Republicans later barred future administrations from adopting such a disclosure rule. Now there’s legislation in Congress to enforce the disclosure rule — and new SEC commissioners appear to support the initiative. Those regulators could even follow the demands of Democratic senators and tie a black money disclosure provision to the rule on greenhouse gas emissions that the agency is now considering.
In state capitals, legislatures can continue to pass laws requiring the disclosure of donors to black money groups when they donate money in elections. Rhode Island successfully defended its black money disclosure law after it was challenged in a lawsuit and the U.S. Supreme Court decided not to hear the case. Colorado lawmakers also just passed bipartisan legislation strengthening its own disclosure laws.
It’s important to note that such reforms don’t just happen in strong Democratic states. Just this year, the Republican governor of the dark red state of Tennessee signed a law requiring the disclosure of black money. And in November, Arizonans will have the opportunity to vote on a ballot measure requiring the disclosure of dark money political contributions over $5,000.
Closing the loopholes of Leonard Leo
Outside the political arena, investors can play an important role with shareholder resolutions requiring corporate executives to disclose all corporate political spending, including on dark money groups. In recent years, such resolutions and pressure campaigns have compelled more than three-fifths of S&P 500 companies to disclose at least some of their spending. More of these resolutions can significantly increase this percentage and remove the loopholes that still allow companies to hide some of their expenses.
Finally, tax reforms can prevent billionaires and corporations from using complex transactions to have their donations of black money subsidized by the public.
In Seid’s case, he likely avoided up to $400 million in taxes by transferring his company to Leo’s tax-exempt black money group, which then sold the company. This maneuver left the monetary gains from the sale untaxed as they were only realized once inside a tax-exempt entity.
The donation also appears to have benefited from a tax code provision solidified in 2015, when President Barack Obama signed legislation explicitly exempting donations to black money groups from federal gift tax.
These increases to the black money donation tax code are what you might call the Leonard Leo loopholes – and they can be closed. Congress could reform the gift tax and pass existing legislation to tax billionaires’ unrealized gains before they can be sheltered within a black money pool.
“Transparency allows the electorate to make informed decisions”
Granted, there’s always the possibility that one of these reforms could be struck down by the Supreme Court, which Leo has already packed with his ideological allies. But at least when it comes to disclosure initiatives, conservative jurists have created favorable precedents. Indeed, as the Roberts Court removed limits on political spending, it justified these sweeping decisions by insisting that disclosure laws are an authorized control of corruption.
“Disclosure allows citizens and shareholders to respond appropriately to corporate discourse,” the court wrote in its statement. United Citizens decision. “This transparency allows the electorate to make informed decisions and give appropriate weight to different speakers and messages… The government can regulate corporate political speech through disclaimers and disclosure requirements. “
The most immediate obstacles to ending the era of black money are the beneficiaries of the current system.
While most grassroots Democratic lawmakers recognize the problem with dark money — and while the entire Senate Democratic caucus officially supports the DISCLOSE Act — the real power brokers in both political parties continue to benefit from the black money problem. black money, suggesting they won’t be too eager to make it less dark.
The same goes for corporations and billionaires who have already lobbied against disclosure bills. This includes some of Washington’s most influential players, including the American Chamber of Commerce, Koch Industries and the anti-union National Committee for the Right to Work.
They want a legal architecture that allows anonymous donors to buy American politics and subvert the public will.
They want an opaque system that continues to produce corrupt court decisions and legislation that benefits a handful of secret payers, rather than the population as a whole.
They want to perpetuate this stealthy and endless assault on democracy that threatens the very foundation of self-government.
It’s up to all of us to stop them.