This article was reported in partnership with The Investigative Fund at The Nation Institute, with support from The Puffin Foundation.
As Grover Norquist made the rounds on television during the “fiscal cliff” negotiations, he reprised his now-familiar role as the titular spokesman for and enforcer of the GOP’s anti-tax orthodoxy. Despite a few high-profile defections from Norquist’s party line, most Republican lawmakers remained unwilling to raise revenues to deal with the debt crisis they had engineered over a year ago.
How can Norquist, a bespectacled 56-year-old conservative activist, hold such sway over an entire party? Though he has carefully cultivated a certain mystique—on his website, Norquist highlights a quote calling him the “dark wizard of the Right’s anti-tax cult”—in reality, his wizardry is little more than a skillful manipulation of high-dollar politics. Although he’s best known for his “Taxpayer Protection Pledge,” a document created in 1986 and now signed by over 95 percent of the Republican legislators in Congress, Norquist’s influence actually derives from his alliances with powerful donors.
Norquist has never been elected to office, and his foundation, Americans for Tax Reform, doesn’t boast a large membership base like other Washington advocacy groups, such as AARP and the National Rifle Association. Instead, Norquist commands respect because behind him loom some of the most politically active Republican billionaires and biggest industry associations on Capitol Hill.
The Nation reviewed the foundation’s most recently available tax disclosures, which show that in 2010 Americans for Tax Reform received more than 66 percent of its budget from only two sources. That year, the Koch-affiliated Center to Protect Patient Rights donated $4,189,000 to the foundation, and Karl Rove’s Crossroads GPS gave $4 million.
Taken together, these two groups constitute the nexus that has fueled the post–Citizens United dark money explosion in American politics. The Center to Protect Patient Rights is the foundation used by the billionaire clique led by the Koch brothers to distribute grants to allied groups. Two years ago, wealthy moguls like Steve Bechtel of the Bechtel Corporation and Steve Schwarzman of the Blackstone Group met behind closed doors to help raise money for these very efforts. Crossroads GPS, of course, is the group Rove uses to pummel Democrats with negative advertising. The only known individual donor to Crossroads is Paul Singer, the “vulture” hedge fund king famous for his generous contributions to conservative politicians and his efforts to extract large interest payments from third world debt.
Norquist’s pledge, which stipulates that its signatories must oppose efforts to raise tax rates or cut tax credits unless accompanied by dollar-for-dollar reductions in rates, is lucrative for these billionaires. After all, wealthy investment managers enjoy extraordinarily low tax rates because of loopholes like the carried interest rule, which allows their earnings to be taxed at capital gains rates rather than as income. Any effort to raise upper-income marginal rates or close this loophole—which allows some fund managers to pay at lower rates than their doormen—would violate Norquist’s pledge. And to make matters worse for any Republican thinking of such heresy, the big-money network underwriting Americans for Tax Reform also funds the Club for Growth, the Super PAC that has promised to spend big bucks on primary challenges for those who don’t hold the line on taxes.
The second provision of the pledge—the promise not to cut tax credits—is important for understanding how Norquist has become a proxy for K Street. From a budget standpoint, a targeted tax credit is basically equivalent to a subsidy: the main difference between a $1 million tax credit to an ethanol refinery and a $1 million subsidy to the same ethanol refinery, for example, is that one is distributed by the IRS, the other by another federal agency. But Norquist slams any effort to cut tax credits as an onerous tax increase. There are enough of these subsidies in the tax code that many profitable companies, like Duke Energy, can pay an effective negative tax rate.