The Washington PostDemocracy Dies in Darkness

Opinion A $1.6 billion donation lays bare a broken campaign finance system

Leonard Leo, executive vice president of the Federalist Society, speaks to members of the media at Trump Tower in New York on Nov. 16, 2016. (Carolyn Kaster/AP)
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One man has donated $1.6 billion to a nonprofit group controlled by a conservative activist who has crusaded, with startling success, to transform the country’s politics. The only reason the public knows about it? An insider tip-off to the New York Times.

The Times reported this week that electronics mogul Barre Seid last year gave 100 percent of the shares of surge protector and data-center equipment manufacturer Tripp Lite to a group called Marble Freedom Trust. The group is led by Leonard Leo — who has helped bankroll right-wing advocacy on abortion rights, voting and climate change, among other things. His chief focus for a time was reshaping the judiciary as executive vice president of the Federalist Society, including by advising Republican presidents on Supreme Court nominees. The tale of how his group got such a lavish gift underscores the sad state of this country’s campaign finance system.

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The Marble Freedom Trust donation, possibly the largest ever to such an advocacy group in U.S. history, manages to encapsulate in a single case the problems with the status quo. The issue isn’t merely the distortion of democracy enabled by 2010′s Citizens United v. Federal Election Commission. That decision allowed for unlimited political spending by corporations and outside groups — to which, in turn, the ultra-wealthy can funnel unlimited funds of their own. The issue is also that the distortion remains, in most cases, invisible. Nonprofits groups registered as 501(c)(4)s, such as Marble Freedom Trust, don’t have to disclose their donors.

Adding insult to injury, donors can also use these nonprofits to reduce taxes — in this instance, to the tune of somewhere around $400 million. To sell his company on his own, Mr. Seid would have had to pay capital gains taxes, leaving him with less to bequeath to Marble Freedom Trust. But as supposed “social welfare organizations,” 501(c)(4)s are exempt from paying taxes. So instead he handed his shares over to the trust, which then itself sold Tripp Lite: for the $1.6 billion now in Mr. Leo’s coffers. As a result, dutiful everyday taxpayers essentially finance the extravagant expenditures of the privileged few, who use their know-how to avoid their obligations and twist the political landscape.

Congress should close the tax loophole these donors exploit. And the Disclose Act, some version of which has been languishing in Congress for more than a decade, blocked by GOP filibusters, would at least tell voters who’s trying to buy their votes. The Internal Revenue Service can improve things on its own by collecting donors’ information again, after it stopped in 2018. Unfortunately, without a change in Supreme Court precedent or a constitutional amendment, only marginal improvements are possible.

Mr. Leo defended his gambit by saying it is “high time for the conservative movement to be among the ranks of George Soros, Hansjörg Wyss, Arabella Advisors and other left-wing philanthropists, going toe-to-toe in the fight to defend our constitution and its ideals.” Really, it’s not toe-to-toe but billions-to-billions — and neither side should be proud of that.

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