Campaign Financing - Its Worse Than We Thought

I learned today, courtesy of great reporting by the Times, that campaign financing is worse than we thought.

While Citizens United ("corporations are people too, my friend") allows companies to to freely spend on elections through super PACs, the super PAC has to disclose their donors. Now we find out that these same corporations can contribute to so-called tax-exempt organizations without having to publicly disclose the donation.

Why is this important? Because if there has been one inhibitor to companies donating to the politicians and issues that benefit them, it has been the threat of backlash from shareholders, customers and other stakeholders. In this tax-exempt world, companies like Aetna can contribute to an organization called American Action Network (don't you love the names) that, according to the Times has spent "millions of dollars attacking lawmakers who voted for President Obama's health care bill - even as Aetna's president publicly voiced support for the legislation". Talk about having it both ways!

What is a tax-exempt organization? Apparently, one that is organized under Section 501(c)(4) of the tax code and designated a "social welfare" group dedicated to advancing broad community interests. Now the IRS, in its infinite wisdom, prohibits these groups from spending much of their time on political activity, but has not defined what excessive political activity is. And the groups can do their thing (that is, spend their money) before the IRS actually recognizes that they're a social welfare organization. For example, Karl Rove's Crossroads GPS which has been operating for over two years and is partially responsible for the 2010 election debacle, is spending tons of money behind its agenda, but is not yet recognized by the IRS. I wonder, if for some reason Crossroads GPS is ultimately not recognized, will it have to spend matching funds attacking the positions it advocated? Will the candidates who won elections in 2010 who hitchhiked on Crossroads GPS' positions have to resign? Just saying.

According to the Times' reporting, the numbers are staggering: tax-exempt groups outspent super PACs by a 3-to-2 margin in 2010. They represent 2/3 of the outside money spent to date in 2012 - $100 million so far. At some point, I guess, we'll find out why organizations like Crossroads GPS, American Action Network and Priorities USA (pro-Obama; but let's be clear: this is wrong on both the right and the left) among others qualify for tax-exempt status by virtue of their "advancement of broad community interests". What exactly is the definition of broad community interests? And who decides if these groups are advancing or retarding those interets? As complaints and lawsuits questioning their status proliferate, it might be we'll find the only advancement that they're advocating is the winning of elections. And any attempts to stop them will be shouted down by free speech (when it suits my interests) zealots.

One organization that unquestionably benefits from all this is the Chamber of Commerce, a legitimate non-profit business league. Although I'm not sure the Chamber advances broad community interests all the time, its non-profit status as a trade association allows a corporation to voluntarily decide whether it wants to disclose its contributions or not. I guess those decisions will be based on how much blowback the corporation expects to get. The thought process probably goes something like this: "If we look good and it helps our business relations, disclose; if not, hide it. Our choice based on what's best for us. After all, it is our money!"

Bottom line. Our elections have become a travesty. Citizens United allowed corporations to spend unlimited money behind candidates and issues. But it requires disclosure. Not a problem for Sheldon Adelson, the Koch Brothers, Foster Friess and the like. They have so much money and so personally control their enterprises that they don't seem to care what anyone else thinks. But for companies like Aetna and Dow and Prudential and Chevron and MetLife and others who have shareholders and customers to worry about, these tax-exempt groups provide a legal way to support their special interests while camouflaging their actions. What a country!

So, today I learned that campaign financing is worse than we thought. What I didn't learn is what we do about it.