As the debt-ceiling talks tick down to the Aug. 2 deadline, leading the opposition to any deal that includes higher taxes is the new tribune of rank-and-file House Republicans: Majority Leader Eric Cantor of Virginia.
Cantor’s pivotal role marks a rapid rise for the 48-year-old from the Richmond suburbs. It also represents a major coup for sectors of the investment community that Cantor has been striving to assist for years — on the same tax issues that have been at stake this month. And so far, he has prevailed on those issues.
Among the White House’s top demands for new revenue are changes in the tax code affecting hedge funds, private equity firms and real estate partnerships, which would raise an estimated $20 billion over 10 years.
For the past four years, Cantor has taken the lead in the House on fighting the same changes. He also has been one of the top recipients of contributions from those industries — last year, his two fundraising committees took in nearly $2 million from securities and investment firms and real estate companies, more than double the figure for Boehner (R-Ohio).
The hedge fund and private equity proposals were at the center of Cantor’s decision to exit talks with Vice President Biden this month. Since then, the prospect for any immediate tax increases has declined, with the focus turning to spending cuts and broader tax reform postponed.
This dismays Democrats, in part because Cantor has cast his defense of the investment tax treatment as part of the broader tea party-fueled anti-tax orthodoxy. To Democrats, Cantor embodies the convergence of tea party and business interests, which is often obscured by the movement’s anti-Wall Street rhetoric.
“This [anti-tax stance] isn’t all coming up from the grass roots,” said Rep. Chris Van Hollen (D-Md.). “This goes to some longtime cozy relationships between House Republicans and hedge fund managers in the financial sector.”
A spokesman for Cantor noted that he always has opposed raising the investment taxes in question but declined to comment further.
Cantor has said repeatedly that Obama and other Democrats are exaggerating the value of closing tax loopholes for financiers. Although Cantor opposes closing them to raise revenue, he says he is open to doing so as part of broader tax reform that lowers overall rates.
“So I know it makes for good politics to throw the shiny ball out there . . . that somehow Republicans are wed to that kind of policy to sustain these preferences, when all along, in our budget and in our plan, we have said we’re for tax reform, we have said we’re for bringing down rates on everybody,” he said on the House floor last week.
Jennifer Thompson, a political science professor at Virginia Commonwealth University and former Republican campaign operative, said Cantor’s longtime opposition to the investment tax provisions is a sincere reflection of his conservatively inclined district.
“Eric Cantor is a Virginian and you can’t separate too much from that fact,” she said. “His constituents are very much aligned with the no taxes and being back in the black and that’s what Eric Cantor represents.”
Lawmakers from both parties have cultivated the investment community, but Cantor, whose wife is a former Goldman Sachs vice president, has had particularly strong connections. In 2006, his campaign committee and his leadership PAC, established to support other Republicans, collected $682,500 from securities and investment and real estate firms, far more than any other Republican on the Ways and Means Committee and nearly double the take of then-Chairman Charles B. Rangel (D-N.Y.).
Cantor sprang into action in 2007, when Democrats proposed the two major tax code changes that have been at the center of the debt talks. He formed the Coalition for the Freedom of American Investors and Retirees and invited several dozen industry groups to the opening meeting.
One of the changes revolves around “carried interest” — the pay managers receive for gains they produce for investors — which is taxed at the long-term capital gains rate of 15 percent. Many tax experts argue that it should be taxed at the 35 percent rate for ordinary income because it is the managers’ compensation for services performed, not the result of their own capital investment.
Another proposal would tax profits from the sale of hedge funds as ordinary income.
Since 2007, Cantor has railed against the proposals, saying that the carried interest proposal would “raise taxes on innovation and opportunity in America” and harm “mom and pop” businesses.
Democrats dismiss that argument. “There is virtually no evidence that having these people pay ordinary income would inhibit business development,” said Rep. Sander M. Levin (Mich.).
The proposals passed the House, which was then under Democratic control, but fell short of a filibuster-proof majority in the Senate last year.
Cantor’s support from the industries soared. Contributions to his two campaign committees from the real estate and securities and investment sectors jumped to $916,307 in 2008 and doubled to $1.85 million in 2010, according to the Center for Responsive Politics.
The top 10 contributors to Cantor’s two committees in 2010 included three investment firms: employees at SAC Capitol Advisers, the hedge fund founded by Steven Cohen, gave $64,964; those at the private equity firm KKR gave $52,600; and those at Elliott Management, the hedge fund founded by Paul Singer, gave $44,198. The Blackstone Group, the hedge fund run by Steve Schwarzman, and its employees gave $26,100.
The main private equity and hedge fund trade groups have ramped up their lobbying amid the debt talks, spending $4.2 million this year.
By: Alec MacGillis, The Washington Post, July 25, 2011
During the 2010 election season, we heard Republican candidates from coast to coast run on creating jobs. In the 2011 Tennessee legislative session, the Republican majority forgot that message and went after teachers and teacher unions. Any other year this would have been enough to make the staunchest conservative proud, but in a session where Republican legislators presented bills by non-citizens with corporate interests, according to the Tennessean, the measure of success was also to include rewriting existing campaign laws to lift the ban on corporate donations. The ban was lifted late Wednesday when Gov. Bill Haslam signed into law SB 1915, which allows direct corporate donations to candidates.
SB 1915 changes existing law T.C.A. § 2-10-131 which did read: “No corporation may use any funds, moneys or credits of the corporation to make contributions to candidates. This means corporations are prohibited from making contributions to any PAC that supports the election or defeat of any candidate.” This has been nullified and allows for direct contributions without penalty.
For the first time in Tennessee history, direct corporate contributions to candidates and political parties will be allowed.
“This basically would just level the playing field, because unions are allowed to do this by statute now,” said Sen. Bill Ketron, R-Murfreesboro, according to the Nashville City Paper. Ketron was in the spotlight earlier this year, along with House Speaker Pro Tempore Judd Matheny, for introducing and sponsoring legislation they introduced without reading.
The argument for passing such legislation to allow the influx of corporate money into Tennessee politics was based on fairness. Republicans were quick to point to unions and their political action committees as justification of needing this change, implying that P.A.C. money was unfairly going to the Democrats. This was not the case.
When we examine the numbers, we find that it is the Republicans who are benefiting from PAC money by a margin of $3-$1, reports Knox News. SB 1915 was written to become law as soon as the governor affixed his signature to the bill. So corporate America, Tennessee is now open for business: You are free to directly contribute to any candidate you wish.
The 107th Tennessee General Assembly’s 2011 session was one filled with controversy and fundamental changes to our state’s political structure. While the majority worked to silence one voice in government, they simultaneously opened the door to another. Republican supporters of SB1915 contend that they are complying with the Citizens United ruling that extends First Amendment rights to corporations and lifts prior bans on corporate independent expenditures. Critics of the bill contend that it will lead to a decline in good government and pit legislators against each other for corporate donations.
In a time when citizens are getting more impatient with their representatives, how does allowing corporate influence increase accountability? The financial summary of SB1915 shows that it will actually cost taxpayers money to implement. Not only do the taxpayers get silenced by corporate interests, they get to pick up the tab of implementing the changes. Gov. Haslam has signed the bill and it is now law in Tennessee. Let the era of rental legislators begin. May the highest bidder win.
By: Chris Robison, Associated Content, June 2, 2011
This afternoon, the People’s Rights Campaign, a coalition of labor and community organizations, organized a community action on Madison’s Capitol Square. Activists scrounged for their last pennies and taped them to “deposit slips” so that they could be deposited directly into the accounts of the CEOs of M&I Bank, Bank of America and JPMorgan ChaseBank.
“Why should they have to pay any taxes at all when grubby peasants and working stiffs still have a few pennies left in their pockets?” asked the group’s press release.
Kim Grveles of Wisconsin Resists”What we’re trying to do here is call a spade a spade,” National Nurses United organizer Pilar Schiavo said. “Walker’s budget takes from the poor, seniors, students and workers at a time when people most need help. Walker is taking our last pennies and giving them to the rich and to corporations.”
Kim Grveles of Wisconsin Resists added, “We’re demonstrating Walker’s agenda to transfer money from people to corporate sponsors of the governor and other GOP members of the legislature. Every bill is making us poorer and making the big corporate campaign contributors wealthier just like a reverse Robin Hood– stealing from the working class poor and giving to the rich.
“The corporations aren’t paying their fair share in taxes, they’re getting bailout money and they’re making millions in profits every year.”
Organizers referenced a May 1st article in the Wisconsin State Journal that pointed out that “changes to a corporate tax law proposed in Walker’s budget may mean businesses would pay the state about $46 million less in taxes over the next two years– and $40 million less each year after that.”
Reverse Robin Hook Mike Amato speaks in front of M&IGroups of protestors spread out and took their pennies and deposit slips to the branches of M&I Bank, Bank of America and JPMorgan Chase Bank closest to the Capitol.
At M&I, security guards locked the front door as soon as the group of a dozen or so approached. Mike Amato of the Teaching Assistants’ Association, who was dressed as a Reverse Robin Hood, tried giving his deposit slip to a guard, saying, “They want to create a peasant system, so we’re helping them out by being reverse Robin Hoods, stealing pennies from the poor to give to the rich.”
The security guard seemed unimpressed, later blocking off the entrance to the drive-thru teller window as well, saying that it was “private property” and making deposits to the CEO’s account would not be allowed, but he was later seen with a bank manager, discussing the text of one of the deposit slips the group had left behind.
Reverse Robin Hood’s BandAccording to Schiavo, a group of protestors succeeded in getting into the local Bank of America investment branch, where they deposited their pennies into CEO Brian Moynihan‘s account. Protesters were locked out of JPMorgan Chase Bank’s branch but were able to deposit their slips through the slit between the glass doors and leave them in a pile in the entryway.
Schiavo noted that the People’s Rights Campaign seeks, through this action, to call attention to their platform, which calls for “restored rights to living wage jobs, access to healthcare and retirement security rather than giving back to corporations that have already received money from the government and continue to give huge bonuses to their CEOs.”
By: Rebecca Wilce, Center for Media and Democracy, May 11, 2011