A loophole

Our lawmakers have some proposals before them that will try to limit campaign contributions.  We haven’t talked to many of our friends and neighbors who are confident they’ll pass them because there’s no strong political will to kill the political golden goose.  But they’re encouraged that the House leadership wants early debate and are willing to give lawmakers the benefit of the doubt.  For now.  They are concerned, however, about the campaign finance part of the issue.

In our experience, we’ve never seen a bulletproof campaign finance law.  The crafty contributor always finds a loophole somewhere and exploits it and the legislature is usually slow to plug the hole. 

But let’s suppose a bill is passed that puts caps on donations for various offices.  For simplification, let’s assume that the bill passed this year says a person cannot contribute more than $500 to a candidate running for a legislative seat.  For our purposes here we won’t get into dark money, the secretly-donated money that goes through independent committees to hide the identity of donors and the amount they donate.    We’re going to keep this simple. Dark money is a later topic.

Now, suppose you have a basement full of money and you think a $500 donation limit is absurd.  So you find ten people, give them $500 each and have THEM make donations to your chosen candidate.  Here’s how to stop that (we think) end-run around the limit. 

The new campaign finance law would consider any money given by one person to another for the purpose of making a campaign donation as income to the recipient that shall be reported on special employer withholding forms and shall be reported by the surrogate donor on another form as taxable income. The confidentiality provisions of tax return law will be waived so that the Missouri Ethics Commission will have access to that information for purposes of reporting and possible prosecution under tax fraud laws by the Attorney General or an outside counsel hired by the commission. Further, the commission would have subpoena powers and powers to investigate apparent unreported transactions. 

Here’s an example of how this would work: Scrooge McDuck goes down in his basement to bathe in his money pile and decides he wants to donate $5,000 to the Goofy for Governor campaign.  But he can only give $500 under the law.  He decides to drain off an additional $4,500 and give the money to nine other people—Huey, Louie, Dewey, and Donald and Daisy Duck plus to Horace Horsecollar, Ludwig Von Drake, Pluto, Clarabelle Cow, and Humphrey Bear and they each will donate $500 to Goofy.  This law would require Scrooge to file withholding tax forms on each of the other nine.  They would have to file a state version of a 1099 form as outside income.  The ethics commission under this law would have access to those specific forms (but none of the other income tax forms).  The commission could look for something fishy (which for our purposes we will refer to as “a Nemo”)  so it can charge the giver and/or the recipient with tax fraud.  If the Attorney General was the recipient of some of this end-run money, he or she would be disqualified from prosecution because of a conflict of interest and the commission would be able to hire a private lawyer.

Out here, a couple of miles from the capitol, this seems to make sense. 

This plan also has another important benefit.  It avoids any criticism from voters that the legislature has increased the general income tax.  And the proceeds from any fines or penalties could be used to bolster the state’s weak transportation funding.  

Of course, the real boost could come when we create a service fee on dark money funding.  But that’s a loophole for a different day.    

Disclaimer:  We are not saying any candidates for governor are Goofy.    

Let me know what you think......