“Slashing corporate taxes opens floodgate on ‘dark money’ ads”

Ezra Reese oped:

Political organizations very rarely withhold donors currently because the 35 percent tax is simply too high. A cut in that rate to 20 percent, however, would lead a number of political organizations and their donors to conclude that withholding the names of at least some donors would be worth the price. The result would be political organizations that raise unlimited, undisclosed funds, pay a relatively small tax on those funds, and then spend all remaining funds on political ads.

This loophole could be closed by an FEC ruling that political organizations engaged in federal electoral activity should register and report under federal campaign finance law (which unlike the IRS system, requires mandatory reporting enforced by both civil and criminal penalties). But at the FEC, trends are cutting the other way, with half the current commissioners believing that a political organization need not register and report unless it is spending most of its funds on communications that “expressly advocate” for or against federal candidates, a standard that many organizations are deft at avoiding.

A large cut in the corporate rate, without action to preserve that rate as applied to political spending, will create a roadmap to raise unlimited amounts of undisclosed money, spend it all on political activity, and pay only a minimal tax. The result would be an eclipse on the sunlight of public disclosure of political spending.


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