Steve Forbes’ signature line in his 2000 campaign is, “Steve Forbes: He wants you to win.” But who’s the “you” in his slogan?
Of Forbes’ top ten career patrons, six are Wall Street investment bankers, who earn the lion’s share of their income speculating in the stock market. All that income would be tax-free under Forbes’ flat-tax proposal.
Heirs to large fortunes, on the other hand, would see the estate tax eliminated. That would be particularly beneficial to millionaires like Forbes: Since his father died in 1990, the family has been paying off the estate-tax bill in installments, according to an August 1999 article in The Washington Post. Perhaps that’s why Forbes is so adamant about eliminating the estate tax. His campaign’s Web site says that estate taxes are “regressive taxes that hurt working families, small-business owners, and especially farmers who want to pass their farms on to their children.”
Middle class deductions disappear
As for corporations, Forbes would slash their income tax rate from 35 to 17 percent. As with the flat tax for individuals, many deductions that are important to the middle class would disappear. For example, the write-offs that corporations can take for offering fringe benefits such as health insurance would disappear, which might tempt employers to stop offering medical coverage for their employees. Similarly, the share of Social Security and Medicare taxes that employers pay could no longer be written off.
Forbes’ flat tax would also eliminate the unlimited write-off for interest; while the deduction helped fuel the leveraged-buyout craze of the 1980s, eliminating it wholesale would hammer companies that are carrying a lot of debt. Similarly, it would abolish tax breaks for research-and-development costs, which would hurt high-technology companies.
While those deductions would disappear, others would be added to the code. Depreciation would disappear, allowing corporations to immediately write off the entire cost of capital investments in land, construction and machinery. Business expenses, including travel and entertainment costs (even three-martini lunches), would be fully deductible.
Forbes, Inc. would benefit
As Fortune magazine pointed out in a 1996 article, one of the companies that would benefit most from rewriting the corporate tax rules would be none other than Forbes, Inc. The closely held firm carries little debt, has relatively few employees and has research-and-development expenses. What’s more, Forbes could write off the entire cost of entertaining wealthy advertisers on board his yacht. As advantageous as the tax would be to Forbes, he nonetheless has to live under the rules of the current system. He’s proved to be quite adept at that as well.
Forbes attacks the current tax code on the grounds that it allows the rich and powerful to carve out loopholes for themselves while average Americans bear the brunt of the tax burden. He speaks from personal experience.
Why Forbes raises cattle
To encourage family farms, federal tax law allows cattle farmers to enjoy substantial write-offs on their business expenses. On top of the federal tax break, New Jersey cattle farmers get a property tax break if they own at least five acres of land and generate at least $500 in revenue a year. Which helps explain why Steve Forbes is in the cattle business. His New Jersey farm meets the state’s revenue test, with about $5,500 in yearly income, and he gets the federal write-offs for raising cattle, too.
Forbes raises three different breeds of show cows: Polled Herefords, Galloways and belted Galloways. “You don’t make money selling hamburger meat,” Forbes told Fortune magazine in 1996. “You make money breeding show cows; that’s the name of the game.”
If Forbes did not stock his land with show cows, his property would be valued for tax purposes at $9 million, according to a local land assessor. The assessor estimated that, with the cows, Forbes’s land would be assessed at only $160,531. On the 449 acres of his land with cows grazing, Forbes pays just $2,215. On the smaller 70.5-acre plot without cattle, Forbes pays a hefty $50,000.
Forbes’ bending of the tax code isn’t limited to cattle. Just months after the 1996 election, when he failed in his attempt to “bury the tax code,” he was hiring tax attorneys to work that tax code to advance his candidacy in 2000 and potentially reduce his financial burden. Forbes figured out a way to keep his ad campaign running on a year-round basis.
The resulting nonprofit organization, Americans for Hope, Growth, and Opportunity, was designed to continue broadcasting his message and seek a broader base through television, radio and the Internet. It solicited money, bankrolled ads featuring Forbes, and sent out press releases detailing the candidate’s political views on issues of the day. William Dal Col was the president of Americans for Hope, Growth, and Opportunity; he switched over in 1999 to serve as manager of the 2000 campaign, the same post he held when Forbes ran in 1996.
Shielded from scrutiny
Forbes launched and operated AHGO in near-total secrecy. Because it has not applied for tax-exempt status, AHGO is shielded from the scrutiny that a tax-exempt organization receives. Tax-exempt organizations, for example, must make significant portions of their tax returns public, Forbes’ not-for-profit corporation is under no such legal obligation.
Al Olsen, the accountant who prepared the tax return for AHGO in 1997, said he thought that Forbes’ intent was indeed to avoid disclosing the organization’s finances. “They told me I had to file a Form 1120,” Olsen said in an interview with the Center for Public Integrity. “They used their own lawyer.”
Had AHGO filed Form 990, as required for tax-exempt organizations, he would have been required to include all of its sources of revenue. AHGO listed its donors, but when the Center asked Dal Col to provide the full names and the amounts and dates of their contributions, he refused.
The Forbes campaign was no more eager to release AHGO’s tax returns than it was to disclose Forbes’s own returns. Paul Sullivan, an attorney for Forbes, refused the Center’s request for a copy of the most recent tax forms filed by Americans for Hope, Government, and Opportunity.
Read more in Money and Democracy
“The history of the race, and each individual’s experience, are thick with evidence that a truth is not hard to kill and that a lie told well is immortal.” — Mark Twain