I subscribe to some liberal sites, and as a result get regular emails from them. I recently received an email from Public Citizen. Now, Public Citizen is a 501(c)(4), founded by Ralph Nader, who's primary purpose of late seems to be opposing the ruling handed down in the Citizens United case.

Recall that the Citizens United case hinged on the fact that a 501(c)(4) corporation produced a movie that had a political purpose, in this case a documentary "Hillary: The Movie" that was intended to highlight Mrs. Clinton's perceived shortcomings at a time when she was running for president.

The email from Public Citizen was urging me to donate money to support their distribution of a documentary highlighting how wrong they felt the Supreme Court's decision in Citizens United was.

That's right: a 501(c)(4) corporation made a movie with the express political purpose of protesting the Supreme Court decision that a 501(c)(4) corporation could make a movie with an express political purpose!

Consider the NRA. As every is surely aware, they are a pro-2nd amendment organization. Or Greenpeace, an environmental organization.

These organizations do a lot of things under the auspices of their respective mission statements. One of these is of course publishing a list of candidates and office-holders that may have voted for or against certain laws. Is that electioneering? There's no coordination with any campaigns, there's no quid pro quo with any candidates. This is an issue, and informing the public about how politicians are acting with respect to legislation affecting the issue certainly an "educational" activity falling under the very broad "social welfare" label.

Similarly, when a piece of legislation may be pending, these sorts of groups will certainly attempt to educate the public on what the organizations expect the ramifications of the legislation might be. Any politician supporting a piece of legislation the group supports should be supported by the public, and vice versa. "Urge your congressman to vote for HR bill xxyy." seems like a protected 1st amendment right no matter what (and is why Citizens United was decided the way it was).

Especially consider that when a group runs an ad saying "Senator Smith voted for xxyy, and we think that was wrong" (or right, doesn't matter) the ad may in fact reinforce the other side's opinion of Senator Smith simultaneously with strengthening your side. So if the Kochs say "Senator Smith voted for Obamacare." they probably mean to dissuade you from offering any further support of Senator Smith but if you favored Obamacare, then the ad may instead make you more determined to keep Senator Smith in office.

"civic leagues and volunteer fire departments"

Like Greenpeace, PETA, Public Citizen, Priorities USA, League of Conservation Voters Inc., Planned Parenthood, etc.

The primary activity of a 501(c)(4) must be "issues-related" rather than "electioneering" but that is certainly a very broad brush. If candidate A supports issue X while candidate B opposes issue X, a group can support A (and oppose B) by running ads on issue X while never mentioning either candidate by name.

Don't like the advocacy of the NRA? Have to shut down Mothers Demand Action and Brady Campaign to Prevent Gun Violence, too. All 501(c)(4) groups.

From a freedom of speech perspective, it seems easier to let them all continue to exist.

If I gave you $10,000 it would be a gift from me to you that would be tax-free on your part, but I would have had to pay income taxes on that first as that gift is non-deductible. If I gave $10,000 to, say Greenpeace or the NRA, it would be tax-free on their part, but I would have had to pay income taxes on that first as that gift is non-deductible.

Since donations to 501(c)(4) organizations are not deductible, anyone donating to them has paid taxes on those dollars. Although they are corporations, 501(c)(4)'s generally do not have incomes like other corporations because they don't sell stuff for profit. Nearly all of the money 501(c)(4)'s "earn" comes in the form of already-taxed donations and the law reasonably does not require those dollars to be taxed again simply because they were donated to a 501(c)(4).

Donations to 501(c)(3) organizations *may* be deductible, but those organizations generally are precluded from engaging in political activities--unlike 501(c)(4)s.

A 501(c)(3) is actively engaged in doing things to help people needing it, but not advocating it in the political arena; the reverse is generally true for 501(c)(4). A 501(c)(3) may be feeding the homeless, for example, while a 501(c)(4) might be paying for advertisements that advocate changing a law that is seen to be aggravating the plight of homeless people.

There is some rationale for not taxing dollars that are helping people directly.

Donations to 501(c)(4) are not deductible, so they have been taxed. These are "social welfare organizations" that are not primarily engaged in exempt activities. A lot of 501(c)(4) are public-awareness organizations, like Greenpeace or the NRA.

Donations to 501(c)(3) may be deductible. These engage primarily in exempt activities and are restricted in the political arena. "Section 501(c)(3) organizations are restricted in how much political and legislative (lobbying) activities they may conduct."

"The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency."

A 501(c)(4) is almost always operated through donations made to the organization that are not tax-deductible. That is, the money they run on was taxed before the individuals donated it, at the individuals tax rates. A 501(c)(4) rarely earns any significant income from any source other than these non-deductible donations (otherwise this section would not apply), and so would rarely have any taxable corporate income to speak of.

If I and 100 friends decided we wanted to fund the creation of a video outlining the dangers of hiring pedophiles as babysitters, we couldn't easily do so. Who would sign the contract with the producer, director, cast, writer? Who would write a check to pay the distributor and all the other payroll checks? As a group of individuals--using our after-tax dollars--we couldn't. What we'd need to do is organize under a corporate umbrella, which we'd give our after-tax dollars to, and which could then satisfy all those legal requirements. That'd be a 501(c)(4).

There's no taxes being avoided.

The world currently contains 2,170 billionaires — and you’re (probably) not one them, at least not yet. They have a combined net worth of $6.5 trillion, an amount larger than the entire GDP of every country in the world except China and the United States. The number of billionaires increased by ten between June 2012 and June 2013, says a study conducted by UBS and Wealth-X, a consultancy service. Their total wealth grew over that period by 5.3 percent.

That growth, though, was uneven. The European billionaire population fell from 795 in 2012 to 766 in 2013 (even as their total wealth rose 3.7 percent from $2,045 billion to $2,120 billion.) Asia, however, picked up eighteen new billionaires to reach a grand total of 508 while North America’s most exclusive club welcomed eleven new members this year, bringing its membership to 552. (Although with 214 few individuals, North America’s billionaires are worth $38 million more than all of Europe’s super-rich combined.)

Although billionaires have a mean worth of $3 billion each, most just scrape into the club. Some 1,175 people are worth between $1 billion and $2 billion. Only four, Bill Gates, Carlos Slim, Warren Buffet and Amancio Ortega, founder of clothing chain Zara, qualify as “mega-billionaires” with total wealth topping $50 billion each.

Each of those mega-billionaires is self-made, an exceptional figure. Overall, 60 percent of the world’s billionaires made their fortunes themselves. Twenty percent inherited their wealth and another twenty percent inherited a fortune and used it to make another.

[http://www.geekpreneur.com/most-billionaires-are-self-made]

Yeah, cause the Forbes 400, where 30% inherited, doesn't represent billionaires.

Sure 30% is a fairly large percent, but on the relative scale I use, 30% doesn't rate "vast, vast majority" status. And sure, people like Bill Gates had a good head start, coming from a well-to-do family, but he didn't inherit Microsoft and the billions he made from it.

--------------

One of the papers presented at the recent annual meeting of the American Economic Association focused on the 400 richest individuals in the country ranked by Forbes magazine. The paper, "Family, Education, and Sources of Wealth Among the Richest Americans, 1982—2012," by Chicago Booth Professor Steven Neil Kaplan and Joshua Rauh of Stanford, found that fewer of those who made it on to the Forbes 400 list in recent years grew up wealthy than in previous decades.

Some 32 percent of the Forbes 400 in 2011 belonged to very rich families, down from 60 percent in 1982. On the other hand, the share of those in the Forbes 400 who didn't grow up wealthy but had some money in the family—the equivalent of the upper middle class—rose by the about same amount. The proportion of those in the list who grew up poor or had little wealth remained constant at roughly 20 percent throughout the same period.

Most individuals on the Forbes 400 list did not inherit the family business but rather made their own fortune. Kaplan and Rauh found that 69 percent of those on the list in 2011 started their own business, compared with only 40 percent in 1982. In other words, there are fewer people on the Forbes 400 list who came from an affluent background and eventually took over the family business, such as brothers David and Charles Koch (Koch Industries) and the Walton siblings (Wal-Mart), and more self-made people such as Bill Gates (Microsoft), Warren Buffet (Berkshire Hathaway), Philip Knight (Nike), and Stephen Schwarzman (Blackstone Group), who had an upper middle-class upbringing and eventually built their own successful companies.

[http://www.chicagobooth.edu/capideas/magazine/summer-2013/billionaires-self-made]

Lots and lots of people imagine the wealthy hoarding their cash, a la McDuck's pool of gold coins (ever see the Family Guy were Peter tries that?!). They cannot imagine any positive impact deriving from people having wealth.

Of course, if *they* were to win $100M in the lottery, that'd be OK.

It's nice to be liked
But it's better by far to get paid
I know that most of the friends that I have don't really see it
That way
But if you could give 'em each one wish
How much do you wanna bet?
They'd wish success for themselves and their friends and
that would include lots of money
[Liz Phair: Shitloads of Money]

Because printing money in two steps is so much less efficient than printing it directly. They're already printing money, the government just uses the fiction of selling itself bonds to lay a very thin veneer over the process.

According to the CBO: "A corporation may write its check to the Internal Revenue Service for payment of the corporate income tax, but that money must come from somewhere: from reduced returns to investors in the company, lower wages to its workers, or higher prices that consumers pay for the products the company produces."

Corporate income taxes account for about $250-$200B in annual revenue. Compliance costs for business to determine how much tax they owe is also estimated at about $200-$300B annually. In other words, it costs corporations almost as much or maybe slightly more to determine how much they owe as they actually owe. Not to mention the inordinate amount of effort that goes into determining how to run the business when various tax considerations come into play (e.g. when to buy equipment, or hiring that 50th employee) instead of simply doing what's best for the business for business reasons rather than tax reasons. And virtually all of these taxes and compliance costs get passed on directly to consumers/labor/shareholders.

A huge amount of "corporate welfare" comes in the form of special tax breaks--eliminate the tax breaks and you eliminate the corporate welfare and the tens of millions of dollars of lobbyist money showered on politicians as they try to seek those special tax breaks.

Apart from the economic shot in the arm freeing up about $600B every year in the economy would be--and the increase tax revenues resulting from growth--the "cost" is largely recaptured as the dollars flow into personal income taxes (wages, dividends). Further, with the specter of double taxation removed, we could reset the CG rates to normal income rates.

The point relative the size of government here is that you take away a huge incentive for corporations to lobby for special tax treatment. That money flows out of the political system. Sure, corporations may find other things to lobby for, but special tax treatment seems to be #1 on the hit parade.

P.S. This will never happen because too many people think we need to punish corporations with taxes.

The unions sure do...Opensecrets.org tracks political spending. In the top 25 organizations donating to candidates over the last few years, unions dominate the list and tilt almost exclusively Democrat. On the other hand, the few corporations in the top 25 tend to donate fairly evenly, favoring the ruling party.

Heavy Hitters: Top All-Time Donors, 1989-2014

This list includes the organizations that have historically qualified as "heavy hitters" — groups that lobby and spend big, with large sums sent to candidates, parties and leadership PACs. Individuals and organizations have been able to make extremely large donations to outside spending groups in the last few years.

Rank Organization Total '89-'14 Dem% Repub%
1 ActBlue
                                                $102,669,137 99% 0%
2 American Fedn of State, County & Municipal Employees
                                                $61,819,929 80% 1%
3 National Education Assn
                                                $58,988,290 56% 4%
4 AT&T Inc
                                                $57,026,335 41% 57%
5 National Assn of Realtors
                                                $55,559,528 41% 44%
6 Intl Brotherhood of Electrical Workers
                                                $45,572,151 91% 2%
7 Goldman Sachs
                                                $45,270,985 53% 44%
8 United Auto Workers
                                                $41,923,428 71% 0%
9 Carpenters & Joiners Union
                                                $41,577,299 71% 9%
10 Service Employees International Union
                                                $38,711,298 84% 2%
11 Laborers Union
                                                $38,401,420 83% 7%
12 American Federation of Teachers
                                                $37,271,825 89% 0%
13 Communications Workers of America
                                                $36,472,773 86% 0%
14 Teamsters Union
                                                $36,355,957 88% 5%
15 JPMorgan Chase & Co
                                                $35,122,566 47% 51%
16 United Food & Commercial Workers Union
                                                $34,172,703 86% 0%
17 United Parcel Service
                                                $32,687,492 35% 64%
18 Citigroup Inc
                                                $32,519,262 48% 50%
19 National Auto Dealers Assn
                                                $32,267,410 31% 68%
20 EMILY's List
                                                $31,892,295 98% 0%
21 American Bankers Assn
                                                $31,629,002 36% 63%
22 AFL-CIO
                                                $31,597,075 60% 3%
23 Machinists & Aerospace Workers Union
                                                $31,407,747 98% 1%
24 American Medical Assn
                                                $30,175,387 40% 59%
25 Microsoft Corp
                                                $29,718,801 55% 43%

"The vast, vast majority of them inherited their wealth"

cnbc.com: Forbes says that 30 percent of the Forbes 400 members inherited their wealth and the remaining 70 percent are entirely “self-made.” And even by United for a Fair Economy's calculations, the number of "self-made" rich is rising. In 1997, the group calculated that 50 percent of the Forbes list inherited all or part of their fortune.

wikipedia: Sixteen percent of millionaires inherited their fortunes. Forty-seven percent of millionaires are business owners. Twenty-three percent of the world's millionaires got that way through paid work, consisting mostly of skilled professionals or managers.

cato institute: Roughly 80 percent of millionaires in America are the first generation of their family to be rich. They didn’t inherit their wealth; they earned it. How? According to a recent survey of the top 1 percent of American earners, slightly less than 14 percent were involved in banking or finance. Roughly a third were entrepreneurs or managers of nonfinancial businesses. Nearly 16 percent were doctors or other medical professionals. Lawyers made up slightly more than 8 percent, and engineers, scientists and computer professionals another 6.6 percent. Sports and entertainment figures — the folks flying in on their private jets to express solidarity with Occupy Wall Street — composed almost 2 percent. By and large, the wealthy have worked hard for their money. NYU sociologist Dalton Conley says that “higher-income folks work more hours than lower-wage earners do.”