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Government’s War On Giving

WASHINGTON TARGETS CHARITABLE DEDUCTIONS TO EXPAND ITS WELFARE BUREAUCRACY By Howard Rich || Every year, religious institutions, charitable organizations and philanthropically inclined individuals and corporations give of their time, talents and financial resources to assist those in need. This benevolence is an essential part of the fabric of our country…

WASHINGTON TARGETS CHARITABLE DEDUCTIONS TO EXPAND ITS WELFARE BUREAUCRACY

By Howard Rich || Every year, religious institutions, charitable organizations and philanthropically inclined individuals and corporations give of their time, talents and financial resources to assist those in need. This benevolence is an essential part of the fabric of our country as well as a compelling reminder of the social welfare voluntarily produced by our free-market economy.

According to data compiled by the Atlas of Giving, Americans gave $346.1 billion to charity in 2011 — a 7.6 percent increase from the previous year. That’s an astounding figure when one considers that median household income declined by 1.3 percent last year after adjusting for inflation.

Americans help those in need — even when times are tough. In the process, they generate a nonprofit economy that accounts for nearly 6 percent of our gross domestic product and 10 percent of our workforce, according to the latest data from the National Center for Charitable Statistics.

This is why it is so disturbing to see the Obama administration continue to attack this spirit of generosity — and the nonprofit economy it supports — as part of an effort to expand the public-sector welfare state.

After failing to limit charitable deductions last year, the administration is once again targeting private-sector giving as part of the “fiscal cliff” negotiations, seeking to generate billions of dollars in new government revenue by capping tax breaks for charitable donations.

President Obama isn’t alone, either. According to reporter Naftali Bendavid of The Wall Street Journal, there is a “growing Washington consensus that tax deductions should be mined to raise fresh revenue.”

Naturally, such a cap would result in less charitable giving and cause job losses in the nonprofit sector. Mr. Obama isn’t worried about that. After all, the less money the private sector is able to donate to the needy, the closer the president moves us toward a public-sector monopoly on welfare.

From his first day in office, Mr. Obama has been methodically advancing the unprecedented expansion of America’s welfare state. His 2009 “stimulus” proposal gutted bipartisan Clinton-era welfare reforms — returning states to the “bounty system” of welfare enrollment. Meanwhile, his budgets have dramatically expanded federal anti-poverty spending. “President Obama has thrown money at anti-poverty programs at an unprecedented rate,” according to a 2012 policy analysis by Michael D. Tanner of the Cato Institute. “In fact, since President Obama took office, federal welfare spending has increased by 41 percent, more than $193 billion per year.”

All told, welfare spending in 2011 topped the $1 trillion mark, according to a report issued earlier this year by Republicans on the Senate Budget Committee. This same report also revealed that spending on the top 10 welfare programs has doubled as a share of the federal budget over the past three decades — while the dollar amount of these programs has grown by 378 percent after adjusting for inflation. These are startling numbers — and leaders of both parties share the onus for them. Even more startling, however, is the massive “efficiency gap” that exists between private-sector charities and government-run welfare bureaucracies.

According to a 2007 report by economist James Rolph Edwards, “administrative and other operating costs in private charities absorb, on average, only one-third or less of each dollar donated, leaving the other two-thirds (or more) to be delivered to recipients.”

Not surprisingly, government doesn’t even come close to achieving this level of efficiency. Citing research by Mr. Tanner and others, Mr. Edwards’ report concludes that “public income redistribution agencies are estimated to absorb about two-thirds of each dollar budgeted to them in overhead costs, and in some cases as much as three-quarters of each dollar.”

Why is the private sector able to meet the needs of the poor so much more efficiently? That’s easy: Competition.

“Most private agencies are under strong pressures to operate efficiently and keep costs low,” the report notes. “Benevolent citizens naturally wish a large fraction of their donations to reach the needy, and many will not keep donating to an agency that does not accomplish that. Donors can select among private nonprofit charities, and competition between charities for donations tends to [ensure] efficiency.”

In a government monopoly, there is no competitive pressure — hence no incentive to maximize efficiency.

As policymakers in Washington approach the fiscal cliff, they must resist the urge to target private-sector giving in the name of sustaining a failed welfare state. Doing so will only substitute efficient private-sector benevolence for more unnecessary and inefficient government.

***

Howard Rich is chairman of Americans for Limited Government. He is also a syndicated columnist for Liberty Features. This column – reprinted with permission – originally appeared in The Washington Times.

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43 comments

Rube Goldberg December 8, 2012 at 5:38 pm

Comrade President Obama knows what is best for the USSA.

OBEY !!!

Reply
Guero December 10, 2012 at 4:23 pm

Howie and his fellow travelers here are lying through their Repugnant Party teeth.

ONLY the repugs want to change deductions as part of their fraudulent attempt to shield the 1%. No Democrat has suggested eliminating the charitable deduction. Repugs own that one by themselves.

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junior justice December 8, 2012 at 6:02 pm

edit that to: OBEY and be DAMNED!

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BigT December 8, 2012 at 6:40 pm

Obama is GREEDY and jealous…he wants as much as you have as he can TAKE…

And Liberaism is a religion, with god-Obama….your tithe is ALL…No one, I mean No One, is to get something over the left and their high lord….

Election 2012 has emboldened their wanton diety w/ drunken power…

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Guero December 10, 2012 at 4:24 pm

You’re a lyin’ asshole, teapot. Obama kicked y’alls arses and your only response to lie more than you did before the election. No Democrat has suggested eliminating or reducing the charitable deduction.

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SCBlues December 8, 2012 at 7:52 pm

FITS – thanks for treating us once again to the stupidity of Howard Rich . . .

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Zobro December 8, 2012 at 9:51 pm

SCBlues,
Anything incorrect with what he said?

Most of the money you give a charity goes to services, AND you decide who gets the money.

Way less gets to the customer when government does the same work, AND you have no say in where the money goes.

Oh yeah, rather not give one year? Fine don’t, or better yet substitute time for money. Try that with taxes.

Try debating the idea.

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Guero December 10, 2012 at 4:27 pm

Try working with facts, Z-boy. Obama hasn’t proposed eliminating the charitable deduction. Howie lied to you again and you believed him again. Watching Faux news does rot your brain….

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sid December 11, 2012 at 10:35 am

There’s a difference between capping and eliminating, Guero. Where did Rich say eliminate?

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Guero December 11, 2012 at 4:03 pm

I’ll up the ante: Where did Obama say he wanted to cap/eliminate/modify the charitable deduction?

Even Howie doesn’t say it; he implies it so you know he’s lyin’.

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BigT December 8, 2012 at 9:26 pm

Yeah FITS, what are you thinkin’…Truth is Blasphemy to idiot Obama-worshipers like Blues….

Can’t have truth..that may actually hurt their god-Obama….

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Luke December 8, 2012 at 9:39 pm

Idiocy, Jesus deliver us from this lunacy! I love the fact that we have become a nation where if you have money than your opinion is given undeserved weight in the matter of public affairs.

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? December 9, 2012 at 9:15 am

Idiocy is letting people who contribute no money to the system have a say in how much money to take from those who do.

Btw, our country was founded on the principle that those contributing get a say while those not, dont.

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Bonhoeffer December 9, 2012 at 10:19 am

By ? Hmmm, Surely you don’t mean to say that women who did not get the vote until 1920 and African-Ameicans who did not gain that right until 1870 (or 1965 in many Southern states) got no say because they did not contribute to society. Or those young Americans who were under 21 and served in Vietnam War also did not get a say and made no contribution. You might amend your conclusion to: “Our coUntry was founded on the principle that those in power politically and economically should get most of the say.” ( compare e.g., why the electoral college system was originally configurated as it was, or the fact that U.S. Senators were not originally elected by popular vote)

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? December 9, 2012 at 10:58 am

I shouldnt even have to say that not allowing someone a vote due to their race or gender is ridiculous.

My comment is related to those voting on who gets taxeed how(and much) when they do not pay any such taxes.

If you want to include the other issues so be is it, but it obfuscates my point and was not what I was speaking to.

Btw, I already earlier on another post spoke on those being forced into war being allowed votes(conscription).

Really, all my comments mean absolutely nothing as they will change nothing and in the big picture I am not for democracy.

Reply
colascguy December 8, 2012 at 10:13 pm

I would have liked to see more current data for TCO of Privavte VS Public sector organizations. The information citied is 5 years old that seems to be very dated.

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Howie Rich's Neighbor December 8, 2012 at 10:15 pm

Howie is just pissed that another of his deductions is biting the dust.
.
He’s about as “charitable” as a mafia don

But really if you think about it,

If what Howie says is true,

What difference does it make if one gets a deduction or not?

It comes from the heart right?

Not from the tax form!

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Sailor December 8, 2012 at 10:29 pm

Howard says 346.1 billion was given in 2011. I wonder how much of that was used for the purpose intended by the donors. There is a real racket associated with charities, some companies making millions and the actual charity getting a very small percentage.

It’s good to give, but do your research and make sure your money is being used for the purpose intended.

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Smirks December 9, 2012 at 12:48 am

Funny how people like Howie rail against charitable deductions that primarily benefit the rich but have no problem in saying we need to gut programs like Social Security and Medicare that help millions of Americans.

How many “charities” are there that just primarily shell out money to certain connected people that run it or work for it?

Howie the Grinch, just in time for the holidays.

Reply
Cancerman December 9, 2012 at 6:59 am

The hacking incident could come back to haunt the political fortunes of first-term Republican Gov. Nikki Haley.

Haley’s approval rating – at 38 percent among the almost 1,000 South Carolinians surveyed – is even lower among those who thought the state failed to protect personal data such as Social Security numbers – dropping to 35 percent, according to the poll.

Meanwhile, Haley’s job disapproval mark – 41 percent among all surveyed – jumped to 46 percent among those unhappy with how the state protected the information.

Huffmon said some of the increased negativity thrown at Haley might not be because of her job performance with the breach. “I’d say it is more likely for those who disapprove of Haley to assign blame for failing to adequately secure the data to the ‘South Carolina government’ for whom Haley is the public face,” he said.

However, political consultants say the hacking represents the biggest crisis of Haley’s two years in office and could define her re-election bid in 2014 if she decides to run.

Haley is contending with people who are upset that it took the state 16 days, after it first learned of the breach, to tell the public and about facts changing at press briefings. Initially, for example, the governor said nothing could have stopped the hackers and no businesses information was stolen.

“It’s hard to tell if we’ve heard the end of the hacking story,” Columbia-based political consultant Steve Fooshe said.

‘I’m sorry’ not enough

Thieves swiped Social Security numbers and other sensitive data belonging to 3.8 million taxpayers with 1.9 million dependents as well as nearly 700,000 businesses in mid-September. The hacking of the mostly unencrypted data is thought to be the largest-ever nationwide at a state agency.

The significant show of concern about the hacking incident in the poll means state officials need to come up with a proportional response, Huffmon said.

“They need to make a big show about beefing up security,” he said. S.C. residents “will need to know how their data will be protected in the future. A simple ‘I’m sorry’ won’t be enough.”

Haley has not apologized, but she now says the state could have done more to protect sensitive financial data. She also has blamed Internal Revenue Service regulations that did not require that states encrypt tax data resting in computer servers.

“Gov. Haley certainly counts herself among the 74.6 percent of South Carolinians who think the state was not providing state-of-the-art computer security,” her spokesman Rob Godfrey said. “South Carolina was way behind, and we’re fixing it as quickly as we can.”

The state has taken several steps, costing $20 million so far, to safeguard information and to help people whose Social Security numbers and other data were swiped.

The Revenue Department is spending $5 million to encrypt tax information. More than 900,000 taxpayers also have signed up for a free year of credit monitoring under a $12 million state contract with Experian. The state Senate and S.C. House also have appointed special investigative committees to look into the breach that could propose legislation to improve security.

“I see this as a huge failure on the part of South Carolina,” said House Minority Leader Harry Ott, a Calhoun Democrat who is vice chair of the hacking committee. “I do not believe enough has been done.”

State Rep. Dwight Loftis, a Greenville Republican who is a member of the hacking committee, said, for the third straight year, he plans to introduce a bill to make the state chief information officer, in charge of state computer systems, a cabinet-level job. State agencies individually run their own computer operations now.

“Maybe it will get some more attention this time,” Loftis said.

Other measures could include outsourcing some computer security work to get the latest expertise, Loftis said. “Yes, it’s expensive, but how much does the hacking cost all those people?”

‘This affects everyone’

The number of South Carolinians with some knowledge of the breach was higher than Huffmon expected, based on the estimated 40 percent of people who do not regularly watch the news or get their news from cable television, which does not regularly cover state issues.

About 73 percent of those polled said they were very or somewhat familiar with the breach. Another 18.5 percent said they heard about the cyber attack but did not know the details.

Only 8.3 percent of respondents had no clue that hackers might have stolen their tax data.

“When you have people who are not following general news knowing about this, you’re going to need to address this in a meaningful way,” Huffmon said. “This is not some arcane policy. This affects everyone.”

Letters to consumers and businesses notifying them of the breach should start going out this week. Those letters will include alerts for the 3.3 million taxpayers whose bank account numbers were exposed because that routing information had been used to get direct deposit of refunds. The data stolen dates back to 1998 but affected only tax returns that were filed electronically.

Winthrop surveyed 929 respondents from Nov. 25 through Dec. 2. The poll has a margin of error of plus or minus 3.5 percent.

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BigT December 9, 2012 at 7:48 am

Had a begger – highly probable an Obama voter who is Racist – ask me for money in the parking lot…

I gave him $5 bucks, as I always do, and sent him on his way….

The economy is so bad even the bums are suffering…and the liberal elites just laugh and sip more champaign…

In Nazi Germany, they hated Jews…in America, today the Nazis hate anyone who is not a Begger and worshiper of the elite liberals….

It’s take your earnings now…take your freedom next…and if they are not stopped, they’ll come for your life….

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Old Bike Dude December 9, 2012 at 7:52 am

Howie’s charity is contingent on tax breaks. That’s mighty white of you Howie.

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BigT December 9, 2012 at 8:11 am

Why’s liberal government based on how much money lazy, incompetent Community Organizers can Take from Earners???

PS: the face of Klan-level racism is alive and well in America today…it Flourishes in the Liberal party…

Since Obama was re-elected, the left has become very outspoken and honest. They HATE White people, even the White Liberals hate whites…and they admit it outright now…

Hating based on Race was wrong when the Democrats did it back in the olden times…and it’s as wrong now…

Differece is, now: The people you liberals Hate, fought for and built this country…You will risk your life pushing your Racial Hate with us….

I’ve had enough of it…and have actually challenged a young Racist earlier this week…and he backed down, like most Lazy Liberal and corrupt Liberals will….

But I expect you to become more emboldened, and in a way that is the best thing to happen..so we can settle this injustice like it should be settled…

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? December 9, 2012 at 9:12 am

We do not need charity anymore. Govt will take care of everyone via the Robin Hood method.

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vicupstate December 9, 2012 at 11:32 am

Actually Democrats are trying to raise taxes on the wealthy by not extending the Bush tax cuts, the GOP, is offering the alternative of limiting tax deductions.

Some tax deductions DO need to be eliminated, but the one for charity is not one of them, and it is not true that Obama and the Democrats have proposed doing so. Howie and Fits are full of shit.

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BigT December 9, 2012 at 11:56 am

Government WASTE NEEDS to be ELIMINATED….

Taking More of the EARNERS’ money for incompetent people like Obama, is WRONG….

Not to mention: Raising Taxes slows Revenue…even moreso in an Obama Depression…

Liberals are not only Mis-guided…they are IGNORANT regarding Economics….And Vic you represent just how STUPID you are…

Punishing those who contribute to your easy-street life (that you do not/cannot earn) is the politics of Damn Fools (see Obama-Vic)….

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Sailor December 9, 2012 at 7:27 pm

So where did you get your Ph’D in economics? From Liberty University?

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shifty henry December 9, 2012 at 1:45 pm

cancerman T 6.59am:

Lillian McBride may need a new job in January.

Reply
tomstickler December 9, 2012 at 2:54 pm

Fess up: how many of you itemized deductions, and the cap on charitable contributions would have any effect on your giving, personally?

Oh, you have no idea, since Howie neglected to tell you what the cap is that Obama proposes?

I guess that is beside the point that Howie is trying to make, that this is all just another step in Obama’s plan to make us all slaves to his socialist state.

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BigT December 9, 2012 at 4:10 pm

Why is it any of your G*($%^* business…You Filthy Piece of Greedy S%^t….

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Smirks December 10, 2012 at 8:38 am

Oh, you have no idea, since Howie neglected to tell you what the cap is that Obama proposes?

Well, here’s what was proposed previously by Obama:

Last year, President Obama proposed lowering the maximum value of the tax benefits for charitable donations from 35% to 28% for individuals making more than $200,000 a year and couples who earn more than $250,000. So where taxpayers in the top bracket currently pay 35 cents less in taxes for every dollar given to charity, that would be reduced to 28 cents per dollar donated, according to a new report from the National Economic Council.

usatoday.com/story/news/nation/2012/12/09/charitable-deduction-lobbying/1750943/

Obviously, Howie doesn’t give a shit about deductions for the poor, or programs for the poor, or anything for the poor for that matter. He just wants to make sure that he gets out of as much of his responsibility to pay taxes as humanly possible.

Please, think of the poor old and disabled people, except for when Social Security cuts, Medicare cuts, Medicaid cuts, etc. are being discussed. You should feel really bad for hurting those unfortunate souls except for when it hurts Howie’s bottom line! How dare you!

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Smirks December 10, 2012 at 8:42 am

…except for when it hurts Howie’s bottom line to help them!*

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BigT December 9, 2012 at 4:09 pm

The GREED in WASHINGTON is DISGUSTING…

When will Obama get enough???

How many Billiond of Dollars in Vacations do the Obamas have to take, until they are Happy Robbing people who actually Work….

Good for nothing people are taking your country…why are we letting them???

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The Tax Man Cometh December 9, 2012 at 5:05 pm

Taxes,taxes, and more taxes are in your future mighty mouth!

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Torch December 9, 2012 at 5:20 pm

Hey Big T(urd), you never answered tomstiklers question on how much your deductions would be effected. You just revert to your usual characters representing your curse words. As I was once told, cursing is a feeble mind trying to expess a thought.

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BigT December 9, 2012 at 6:05 pm

None of your GREEDY F^&*in’ business…you immoaral piece of $#!*…Keep you laws off my paycheck…

And what’s more, I almost Kicked the @$$ of a Liberal Racist last week for bashing me as a White person…the Sissy little Punk almost cried, and Cowered…so i let him go. Needless to say he’ll STFU from now on…

And if I hear any of you GREEDY Obamaites sticking your nose in my personal Tax busines, I’ll Slap the P!$$ out of you…

Many of you come on here, and Spout off…but you better keep you mouths shut on the Skreet…

You may have stole the election…but I’ll vote w/ my foot up your @$$…

When there is a consequense for your Corruption, you P%^&&es usually lose your manhood, right quick…

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The Tax Man Cometh December 9, 2012 at 8:45 pm

Oh we’re going to get that check and MORE!

Taxes,taxes and MORE taxes

That’s what you have to look forward to

We are figuring even more ways to tax you

You dumb bastard!

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Smirks December 10, 2012 at 8:50 am

None of your GREEDY F^&*in’ business…you immoaral piece of $#!*…

In other words, no, BigT doesn’t donate jack squat to charities. For fucks sake, I bet he barely even breaks 10% of the $250k+ per year you’d have to make to be hit by the charitable deduction change Obama proposed last year.

It really is humorous that he calls us greedy when Republicans are defending tax breaks for the rich while demanding massive cuts to Social Security and Medicare. Oh, those poor rich people’s tax deduct- I mean, charities! They will definitely need the money when the Republicans send millions of poor, disabled, elderly people out on the street.

Keep your hands off his paycheck! He’s going to need to save every last dime to have any semblance of retirement at age 70-80!

finance.yahoo.com/news/more-americans-delaying-retirement-until-120300150.html

Raise or remove the payroll tax cap to extend Social Security’s longevity, or pray your retirement funds won’t get destroyed by Wall St. over the next several decades so you can retire a few years before you die, if you’re lucky… Damn, that’s a really tough choice right there!

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Old Bike Dude December 9, 2012 at 4:29 pm Reply
9" December 9, 2012 at 8:40 pm

Rich Rewards:One Man’s Shadow Money Network(excerpt)

Long ago, Earth Day rooted itself in the minds of many Americans as a regular annual event — not bad for what started 42 years ago as a “teach-in” about the dangers of an industrial economy running amok.
But there have always been opponents to the environmentalist agenda, and on Earth Day 2012, they found that they had their own, modern-day “teach-in” — a four-and-a-half minute video posted on YouTube. The slick production, titled “If I Wanted America To Fail,” is a laundry list of libertarian grievances against big government billed as a response to the “economic suicide pact” of environmentalism.
“If I wanted America to fail, I would create countless new regulations and seldom cancel old ones,” says the narrator, black background and foreboding music adding to an apocalyptic tone. “They would be so complicated that only bureaucrats, lawyers and lobbyists could understand them. That way, small businesses with big ideas wouldn’t stand a chance.”

He goes on to mock alternative energy, the public education system and other standards of the left. “If I wanted America to fail, I would prey on the goodness and decency of ordinary Americans,” he concludes. “I would only need to convince them that all of this is for the greater good. If I wanted America to fail, I…I suppose I wouldn’t change a thing.”

Heavily promoted by Michelle Malkin, Rush Limbaugh and other right-wing commentators, the video went viral, racking up 2.3 million views since it debuted.

But few, if any, of those millions of viewers understand the complicated web of secretive, densely interwoven political groups from which the video emerged.

While the network is built around nonprofits with vague names and grassroots slogans that imply the participation of many ordinary Americans, it’s primarily the handiwork of one man: Howard Rich.

Rich, 72, made his fortune in Manhattan real estate, but since at least the early 1970s, his passion has been libertarian politics. He decamped from the Libertarian Party in the 1980s to establish his own network of like-minded think-tanks and publishing companies.

Rich is also prominently attached to leading national libertarian groups — he sits on the boards of directors of the Club for Growth and the Cato Institute. Yet he remains a mysterious figure, rarely interviewed and almost always several steps removed from any direct action.

Still, an examination of the publicity-shy mogul’s efforts makes several things clear. He is deeply committed to his ideological values — willing to spend massive amounts of money to push projects even in places where he has little apparent personal or business connection. He is single-minded in his approach, willing to lash out at conservatives as quickly and as viciously as he will go after liberals. And all indications are that he believes the ends justify the means, sometimes using money as a blunt force object to get his way.

His involvement in electoral politics usually consists of transferring money — though it’s often difficult to say exactly whose money — into nonprofit groups that don’t disclose their donors. When he funds causes — or candidates — directly, Rich frequently camouflages his donations under any of dozens of nearly anonymous shell corporations. In that way, he’s the antithesis of a Sheldon Adelson, an ultra-rich Republicans who has openly given tens of millions to GOP presidential super PACs. On those occasions when Rich is revealed as the source of contributions, though, he’s been unapologetic about his role.

According to Internal Revenue Service records analyzed by the Center for Responsive Politics, from the early 2000s at least through 2010 Rich was the linchpin holding together a confusing, swirling array of political organizations — all of them nondisclosing nonprofit groups — that spent heavily to influence state and federal politics around the country. The constellation of organizations that operate out of a handful of Rich-related addresses is constantly changing, but some of them are well-known: Rich, in his role as chairman of U.S. Term Limits, a 501(c)(4) group under tax rules, has for years been the driving force of the movement to curtail how long elected officials can stay in office. He’s also the chairman of a 501(c)(4) group called Americans for Limited Government, which spent $1.02 million in 2010 targeting Democrats running for Congress and distributed millions more to other groups.

“If I Wanted America to Fail” is a textbook example of Rich’s tangled web. It was produced by a group called Free Market America, which, according to its website, is a joint project of Rich’s Americans for Limited Government and another group, Citizens for Limited Taxes and a Stronger Economy, Inc.

Florida state records show that Citizens for Limited Taxes is registered at a Tampa address that also is home to at least 30 political action committees; the group’s only listed officers are two political operatives and the head of the Florida Chamber of Commerce. State campaign finance records show that in 2010, the group collected and spent more than $12 million helping defeat a proposition that would have slowed development in Florida. Its relationship with Rich? Like so much about his empire, that’s not entirely clear.

OpenSecrets.org made multiple attempts to interview Rich and other individuals involved with his groups, including several board members. But Ray Wotring, Americans for Limited Government’s treasurer, said the group would not allow any representative to comment.

“You can keep pushing, but we’re not going to talk to you,” Wotring said, complaining that OpenSecrets.org published a “hatchet job on Howie in 2006.” For the record, OpenSecrets.org did not publish any articles about Rich in 2006, and has never written specifically about him.

Eric O’Keefe, who co-founded U.S. Term Limits with Rich and is currently the CEO of the Sam Adams Alliance, a tea party group, and board member of the Wisconsin Club for Growth, was the only individual close to Rich who would comment for this story. O’Keefe, who is no longer part of Rich’s organizations but said he follows them and counts Rich as a friend, said it is Rich’s deep commitment to libertarian ideals, not an expectation of payback, that drives his donations to political groups and candidates.

“Howie has given millions of dollars to these causes,” O’Keefe said. “All of us benefit from a functioning democracy and a functioning market economy, but he has never expected to have a tangible return on his investments.”

O’Keefe said Rich is careful to obey laws as they are written, but opposes limits on campaign contributions.

“I can’t speak for him, but I know he pays a lot of money to attorneys to follow the rules,” O’Keefe said. “I know he doesn’t favor the system for limits on contributions” because he believes it favors incumbents.

Occasionally, Rich grants an interview or offers his opinion more directly — posting columns on his own website, for instance. In 2010, he penned one about the Rod Blagojevich scandal in Chicago, in which the former governor of Illinois was accused of selling political favors for campaign contributions. Rich, dripping with cynicism, portrayed the world of politics as a grimy, corrupt place.

“First of all, if you think this sort of pay-to-play scamming doesn’t go on every single day in Washington D.C. and state capitals all across America, I’ve got a bridge in Brooklyn I’d like to sell you,” Rich wrote, continuing:

It may not always be so mindlessly overt (and the tape recorder may not always be on), but in the post-Jack Abramoff world we live in – a world of “free home renovations” for U.S. Senators and cash hidden away in Representatives’ freezers – let’s not delude ourselves.

The network

One way to begin tracing Rich’s network is to follow the numbers — for example, 9900. At least six of the groups affiliated with Rich are based out of an office at 9900 Main Street in Fairfax, VA.

Suite 303 of that four-story office building is home to Americans for Limited Government Inc., Americans for Limited Government Foundation, U.S. Term Limits, Inc., U.S.Term Limits Foundation, Legislative Education Action Drive and Parents In Charge Foundation. Some are 501(c)(3) charities under the tax code, and some are 501(c)(4)s.

Rich is the chairman or president of all of them, with a tight circle of trusted lieutenants in key positions. Bill Wilson, a libertarian political operative who has worked with Rich since the 1990s, is a paid employee of all of the groups. And their various boards of directors are strikingly similar — and dominated by other prominent libertarians, like Ed Crane, the president of the Cato Institute, who in 2010 was a board member of four of Rich’s groups. Frayda Levy, who sits on the board of Club for Growth, is listed as a director of two of Rich’s groups.

Together, these six groups listed $11.6 million in revenues in 2010, the most recent year for which a report is available, and $12.8 million spent on things like political consultants, mass mailings and grants to other politically-oriented nonprofits. There tax status prevents them from having to publicly disclose their funders, so almost none of the $11.6 million these groups reported in revenue can be traced to a specific source.

One exception: A recent OpenSecrets.org investigation into a previously unreported group called the Center to Protect Patients’ Rights found that the group gave tens of millions to major conservative 501(c)(4) organizations — including $5.6 million to Americans For Limited Government, Inc., in 2010. But that trail dead-ends at a post office box in Arizona, with no indication of who is providing the Center’s funds. And there’s very little indication where the rest of Rich’s network gets its money — although Rich’s own pocket is a possibility.

O’Keefe declined to say whether Rich’s own money drives his organizations.

But O’Keefe said that he and Rich share the belief that donors have a constitutionally protected right to contribute to political causes (though not candidates) without having to reveal their names.

“Our position was always that we were always happy to have people brag about their money, but it’s not our business to brag about their donations,” O’Keefe said.

Repeating an argument often made by those who oppose disclosure, O’Keefe said that when donors’ names are made public, they become targets for solicitations from other people seeking money, and it opens them up to retribution from powerful interests.

“That’s a real and ongoing concern,” he said. “We viewed it as our role to protect [donors] from that.”

Trying to trace the cashflow between Rich’s groups is a little like watching a Rube Goldberg contraption: there are a lot of moving parts. For instance, in 2010, Americans for Limited Government Foundation gave the Parents In Charge Foundation a grant of $225,000, and the U.S. Term Limits Foundation a grant of $234,000. But it also owed $1 million to its 501(c)(4) sibling, Americans for Limited Government, Inc.

Americans for Limited Government, Inc., in turn, gave a grant of $125,000 to U.S. Term Limits Inc. — and then lent it $346,000 more.

Yet the same year, U.S. Term Limits Foundation lent $85,000 back to Americans for Limited Government, Inc.

Confused yet? This may well be the point, or, according to tax attorney and former top IRS official Marcus Owens, it may be a clever system to skirt restrictions on how the organizations can operate. Because of the similarities between the various groups — their staffs, board members, missions and organizations they fund — the churn of cash back and forth raises questions, Owens said.

“It’s the same group, at the same address, with occasionally some new faces and they all seem to act on the same set of principles — limited government and term limits — so it seems kind of implausible that there is some sort of benefit from these internal financial relationships other than to disguise and modify the character of the money,” he said.

For example, grants from a 501(c)(3) organization, such as U.S. Term Limits Foundation, couldn’t be used by a 501(c)(4), such as Americans for Limited Government, Inc., for political activity. Loans from the same group, structured as ordinary business transactions, would have no such restrictions, Owens noted.

Also, tax law requires 501(c)(4)s like Americans for Limited Government, Inc., to spend the majority of their resources on “social welfare” activities. Spending too much on politics can lead to a challenge of their tax-exempt status.

“If you have a 501(c)(4) that’s heavily engaged in political activity, it needs to somehow establish that 51 percent of what it does, isn’t political — how do you do that quickly? Make a grant,” Owens said. “You could have a sort of circular cycling of dollars that attempts to support the tax status of all the (c)(4)s in the network.”

And moving money between groups may help Rich’s organizations appear to be funded by multiple sources. Receiving all its donations from a single source can be problematic for an organization trying to maintain its favorable tax status, according to Owens, as it suggests the group’s purpose is to benefit that single donor.

The fact that Rich lends money to the groups in his network is unusual, Owens noted.
In 2010 Rich lent $772,000 to U.S. Term Limits, Inc., through Rich Lending Corporation. In previous years he lent money to Americans for Limited Government, Inc., and sometimes the group lent money back to Rich Lending Corporation, as well.

According to Owens, this may be a way to gain a tax benefit for funding a politically active nonprofit. Simply donating money to the group money might not be tax deductible as a business expense — particularly if the group engages in lobbying or political activity, which Americans for Limited Government does. But if the money is loaned by a for-profit company it can be used for any purpose by the recipient and the source of the funds would avoid limitations on business deductions.

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Smirks December 10, 2012 at 9:18 am

Man, whatever happened to just submitting links?

Interesting read.

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junior justice December 9, 2012 at 10:38 pm

OK, BigT –

It’s time for you to put your feet on the street, become a voice for the people, and an agitator first-class; we’ll follow your progress in the news. Your eloquence and razor-sharp analyses will keep proofreaders on overtime. We eagerly await your pronouncements.

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BigT December 10, 2012 at 5:46 am

jj, I’m not trying to make a name for myself, like FITS, Harpo, Kardashian and Anderson Cooper…

I’m the little guy out there funding the corrupt, greedy and unjust, racist government of the left…

I’ll defend myself hand to hand, and I know there are millions like me (see Chick-fil-A demonstration)…

We have all but given up on a fair democracy defending our lives and liberty (see election 2012.) But we know WE are stronger and more determined than the lazy, illigitimate and coward…and we’ll prove that to you elite liberals, in the streets, one at a time…if that’s what it takes…

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