Ira Stoll's Perspective:
Billionaires thinking of becoming politically active on the right side of the political spectrum be warned: the press will want to know how much you pay in taxes.
President Nixon tried to get the IRS to audit the taxes of his liberal political enemies. The press, the public, and historians rightfully found that to be an affront to the rule of law and to the spirit of liberty.
But now President Obama and his allies at the New York Times are targeting politically active right-of-center billionaires for tax scrutiny, and hardly anyone seems ready to rise for the principle that one should be able to exercise one’s First Amendment rights to engage in speech, association, and petition without having to pay the penalty of a public tax examination.
The opening move came in August 2010, when a “senior Obama administration official” briefing reporters about corporate taxation offered up Koch Industries as an example of a “multibillion dollar business” that doesn’t “pay any corporate income tax.” Koch Industries is run and owned by Charles and David Koch, who are big funders of, among other things, libertarian-oriented political and idea-oriented organizations and programs.
Then, in November 2011, came a front-page assault by the New York Times on Ronald Lauder, a Reagan administration official who is chairman of the Jewish National Fund and of the World Jewish Congress and of New Yorkers for Term Limits.
The Times article faulted Lauder for using legal techniques to minimize his taxes, but it didn’t mention that the Sulzberger family that owns the Times uses the same techniques. Nor did the Times explain or disclose how it got the idea to focus on Lauder’s taxes rather than those of the many other Americans, including liberals like the Sulzbergers, who use the same techniques.
Tax-exempt Columbia University rewarded the Times with a Pulitzer Prize for the article about Ambassador Lauder’s taxes. The prize, alas, seems to have had the effect of encouraging another such attack. It came this Sunday in an editorial that spent much of Sunday and Monday on the Times list of most e-mailed articles. Headlined “What Sheldon Adelson Wants,” the editorial offered up Adelson, the CEO of Las Vegas Sands, as “the perfect illustration of the squalid state of political money.”
The Times editorial claimed that what Adelson “really fears is Mr. Obama’s proposal to raise taxes on companies like his that make a huge amount of money overseas. Ninety percent of the earnings of his company, the Las Vegas Sands Corporation, come from hotel and casino properties in Singapore and Macau . . . Because of the lower tax rate in those countries (currently zero in Macau), the company now has a United States corporate tax rate of 9.8 percent, compared with the statutory rate of 35 percent. President Obama has repeatedly proposed ending the deductions and credits that allow corporations like Las Vegas Sands to shelter billions in income overseas, but has been blocked by Republicans.”
This is breathtaking. First of all, it’s not a “shelter” for a company to pay overseas tax rates on money that is legitimately earned overseas. This isn’t a case of some American company declaring itself to be headquartered in a post office box in Bermuda or Grand Cayman.
It’s not even an American company putting its patents or other intellectual property, for tax purposes, in the name of some Swiss or Ireland-based subsidiary. This is an American company with huge buildings, employees, customers, and revenues genuinely located in these foreign countries.
Second, there’s a double standard. As I pointed out last week in defending Adelson from a similar attack launched by Sen. McCain, 85 percent of chip-maker Intel’s revenues come from overseas.
If the problem is American companies with large overseas revenues, why doesn’t the Times go after Intel?
Maybe if there were greater appetite overseas for the Times’s left-wing journalism, the Times itself would have some more overseas revenues instead of the trickle it derives from the sales of the Times-owned International Herald Tribune.
If the problem is a low effective American tax rate for an American company, why doesn’t the Times have a look at Wynn Resorts, another firm that, like Adelson’s Las Vegas Sands, has gaming and resort operations in Macau and Las Vegas? Wynn’s effective tax rate for 2011, according to its Form 10K, was negative 2.4 percent, far lower than that of Las Vegas Sands.
The answer, of course, is that what really bothers the Times isn’t Las Vegas Sands’ overseas revenues or its tax rate, but the fact that Adelson and his wife choose to participate in the American political process. That’s why the Times singles out Adelson rather than Intel or Wynn.
It is hard to take seriously an editorial that is so riddled with factual inaccuracies. The tax rate in Macau is not “zero,” as the Times claims it is.
There’s a 35 percent tax on gross gaming revenue. The Times claims $60 million spent by Adelson is “greater than any political donation in history,” ignoring the $93 million reportedly spent on election efforts in 2010 by the American Federation of State, County, and Municipal Employees and the $100 million that AFSCME says it will spend in 2012.
Also unmentioned in the Times editorial is the $100 million that George Soros gave to Human Rights Watch, a group with a political anti-Israel tilt that counters the pro-Israel views of Adelson, views that so rankle the Times that the newspaper wants to contravene the Constitution to impose limits on their expression.
What is worth taking seriously — and what the Times and its sources seem to be hoping for — is the chilling effect on any successful American businessman thinking of following in the footsteps of Koch, Lauder, or Adelson.
When Connecticut hedge fund manager Clifford Asness ended his May, 2009, “Unafraid in Greenwich, Connecticut” essay with the line “I am ready for my ‘personalized’ tax rate now,” it was a laugh line.
Three years later, we’re at the point where job-creators who dare to defend the free-enterprise system, advocate for a strong and friendly U.S.-Israel relationship, or criticize President Obama are routinely greeted with tax scrutiny.
Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life.
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