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Editor: Paul L. Caron, Dean
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Tuesday, September 21, 2010

Barack Milhous Obama -- Did White House Reveal Confidential Tax Information About Political Enemy?

The Weekly Standard, Koch Industries Lawyer to White House: How Did You Get Our Tax Information?, by John McCormack:

Lately, the White House and its allies have been drawing attention to the political activities of libertarian billionaires Charles and David Koch. ... While the attention is unwanted for the Kochs, if somewhat expected, a lawyer for Koch Industries now tells THE WEEKLY STANDARD that the administration may have crossed a line by revealing tax information about Koch Industries. According to Mark Holden, senior vice president and general counsel of Koch Industries, a senior Obama administration official told reporters at an August 27 on-the-record background briefing on corporate taxes:

So in this country we have partnerships, we have S corps, we have LLCs, we have a series of entities that do not pay corporate income taxSome of which are really giant firms, you know Koch Industries is a multibillion dollar businesses. So that creates a narrower base because we've literally got something like 50 percent of the business income in the U.S. is going to businesses that don't pay any corporate income tax. They point out [in the report] you could review the boundary between corporate and non-corporate taxation as a way to broaden the base.

Holden tells THE WEEKLY STANDARD that this quotation from a senior administration official "came to our attention from different avenues.  We are very concerned about why this would be said about us, particularly in this setting.  We are concerned where this information would have been obtained from. We also are concerned in light of recent events that we have been singled out by the government and others as a campaign against us because of our political views."

Holden claims that the revelation of tax information could have been improper, depending on how the information was obtained by the White House:

"I’m not accusing any one of any illegal conduct. But it’s my understanding that under federal law, tax information, is confidential and it’s not to be disclosed or obtained by individuals except under limited circumstances. ... I don’t know what [the senior administration official] was referring to. I'm not sure what he's saying. I'm not sure what information he has. But if he got this information--confidential tax information--under the internal revenue code ... if he obtained it in a way that was inappropriate, that would be unlawful. But I don't know that that's the case."

Holden says that to his knowledge the tax status of Koch Industries has not been previously reported in the press.

If true, the allegations are particularly troubling in light of President Obama's "joke" in his Arizona State commencement address (at the 3:10 mark) last year about his planned retaliatory audit of the school for its refusal to award him an honorary degree:

As Glenn Reynolds (Tennessee) pointed out at the time in a Wall Street Journal op-ed, Tax Audits Are No Laughing Matter: A President Shouldn't Even Joke About Abusing IRS Power:

Just a joke about the power of the presidency. Made by Jay Leno it might have been funny. But as told by Mr. Obama, the actual president of the United States, it's hard to see the humor. Surely he's aware that other presidents, most notably Richard Nixon, have abused the power of the IRS to harass their political opponents. But that abuse generated a powerful backlash and with good reason. Should the IRS come to be seen as just a bunch of enforcers for whoever is in political power, the result would be an enormous loss of legitimacy for the tax system.

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But here's another possible parallel with Nixon: he did poorly in his first mid-term elections (1970) and two years later carried 49 states. Of course, he later resigned.

Posted by: mike livingston | Sep 21, 2010 3:34:10 AM

It's doubtful that Obama's re-election plan has a "Southern Strategy."

Posted by: Woody | Sep 21, 2010 5:05:14 AM

Serioulsy, he's basing his claim that Obama revealed confidential tax info on that quote? I just looked at Koch Industries page on Wikipedia, which clearly says they have approximately $98 billion in annual revenue. Didn't need to see a tax return for that.

I work with confidential corporate tax info every day, so I understand the importance of maintaning confidentiality and the consequences of revealing said information. But this claim just strikes me as petty and unfounded.

Posted by: Joe Greene | Sep 21, 2010 5:50:58 AM

Holy Crap! The partnerships, S-Corps, and LLCs in the Koch Industries corporate structure pay no federal income tax!!!! Alert the authorities, confidential tax information has been revealed!

Posted by: Ugh | Sep 21, 2010 6:27:35 AM

Google and 30 seconds would clear this up.

Search "Koch Industries" and "Subchapter S" and you'll find ample evidence that Koch is (or at least was) an S corp, including the recitation of facts in a Massachusetts court opinion.


Posted by: public info | Sep 21, 2010 6:49:53 AM

But seriously, isn't there something a little troubling about Administration officials raising the tax-favored status of entities whose owners are known to be critical of the Administration, regardless of where the information came from?

Posted by: mike livingston | Sep 21, 2010 7:42:55 AM

It's only troubling if a REPUBLICAN does it.

You ought to know better.

Posted by: Dr. K | Sep 21, 2010 8:14:55 AM

@ mike--and the owners of which business entities facing the possibility of higher taxes WON'T be critical of the Administration? you're really reaching here . . .

Posted by: title26prof | Sep 21, 2010 9:08:26 AM

It is a matter of public record that Koch is an S corporation. 33 Mass. App. Ct. 707. There's nothing confidential about it. It seems pretty obvious to me that Koch is looking for any excuse to criticize the White House.

Posted by: John | Sep 21, 2010 9:37:15 AM

Isn't the really troubling thing the fact that the Obama Administration thinks that LLCs and S-Corps are taxpaying entities?

Posted by: TexEcon | Sep 22, 2010 8:03:07 AM

John: Don't you have it backwards? Isn't the White House is looking for any excuse to criticize two brothers on its "enemies list"?

The entities named don't pay taxes on their income, their owners do.

Posted by: Elmer Stoup | Sep 22, 2010 2:19:16 PM