Jane Mayer in the New Yorker pursues what I think has been common knowledge in some realms, namely, an attempt by the billionaire Koch family of Wichita, Kansas to catalyze and influence opposition to the Obama administration.
That more has been afoot than meets the eye is not news. After Rick Santelli, a CNBC reporter, called on the floor of the Chicago commodities exchange for folks to converge in Chicago for a Tea Party, a spontaneous series of demonstrations emerged. Being a former intelligence officer, however, I could not but note that a tell-tale clue had been left that sophisticated hands had long been at work. Apparently, chicagoteaparty.org had been registered quietly as a domain name the preceding year, in 2008, before the election had even taken place. A little Googling seemed to connect those strings (and more) that Jane Mayer has identified related to the Koch brothers.
But why the Koch brothers?
At least one obvious answer is the estate tax. The estate tax for the past century has been a mechanism by which majority control of our major family held corporations has since 1900 systematically been transferred to the public, either as direct payment to the federal government or as donation to charitable foundations. It is little discussed or understood outside of rarified circles, but as an objective matter — agree or disagree with it — the estate tax has been at the core of America’s particular system of capitalism. (It may take a separate discussion to explore the magnitude of the impact of the estate tax on 20th century American economic and social capitalism. Wait for it.)
Until the Bush tax cuts, the estate tax stood at 55%. As a result of the tax cuts initiated by the Bush administration, by 2010, it was zero. Unless Congress acts, it will return full-force to 55% in 2011.
To understand the impact on the Koch family, consider that some reports place the wealth of the Koch brothers at $36 billion dollars, their company second at times only to Cargill as the largest privately held company in America. To the Koch family, a 55% estate tax means they must contemplate a corporate re-organization, the result of which would conceptually be to go public and sell off 55% of their shares in order to pay the tax or, more likely, that they would donate the majority of shares to a charitable foundation. Either way, the estate tax at 55% would entail a transformation of Koch Industries and a diversification of ownership, with ramifications for the family’s long term control.
If the Koch family concerns do indeed total $36 billion, every 1% change in the estate tax has an impact of $360 million upon them personally. Every 10% change has an impact of $3.6 billion. A similar calculation could be applied to Rupert Murdoch’s concerns, as he had to become an American citizen, subjecting him to the U.S. estate tax, in order to acquire American media. It is no wonder that both families would have an interest and ability to direct virtually unlimited sums of money to influence American political outcomes. Whether by creating and funding a wide and mutually reinforcing network of think tanks, or seeding and funding local grass roots organizations, it is no surprise to learn that a sophisticated and well-funded hand has been active.
It is also interesting to note the divide that now exists in the corporate and media landscapes based possibly on the ramifications of the estate tax. NBC (GE – once Edison’s Company), ABC (Walt Disney’s company), MSNBC (a Microsoft/GE partnership) are all now publicly traded and controlled and, like all publicly traded American corporations, would no longer have an institutional interest in the estate tax. Fox and the Wall Street Journal, controlled by Murdoch, would have an institutional interest.