Ted Cruz’s Georgia Runoff Fundraising Is Actually Going to His Campaign. He’s Not Alone
The runoff is a gold mine for politicians. And now that they can run Facebook ads in Georgia, they’re rushing for it.
Dec. 30, 2020 | Republished by LIT: Dec. 31, 2020
Sen. Ted Cruz (R-TX) needs your help to keep the U.S. Senate in Republican hands. So blared a handful of Facebook ads that Cruz’s campaign committee purchased this month. But none of them were actually raising money for the Republican candidates in Georgia. Instead, every penny donated went directly to… Cruz.
The Cruz campaign bought 15 separate ads on Facebook over the past two weeks, each featuring a video of the senator dramatically hyping the need to hold two U.S. Senate seats in Georgia runoff contests.
“Gun-grabbing, tax hikes, open borders, and stacking the Supreme Court. That’s the radical Democrat agenda if they win the Georgia Senate elections,” Cruz declared.
He asked for $5 contributions to his new “Keep Georgia Red fund.” But Facebook users who clicked through to the online donation page—and read the fine print at the bottom—would see that the actual beneficiary was Cruz’s own campaign committee, not Sens. Kelly Loeffler or David Perdue, the two Republicans running for re-election in Georgia.
Cruz is just one of a number of elected officials of both parties using the competitive—and extremely expensive—Georgia runoff contests to raise money for themselves. Increasingly, those officials are doing so on Facebook, where a political ad ban instituted in late October was lifted this month, but only for ads in Georgia.
That’s led to a rash of Facebook ads invoking the Senate contests in the state on behalf of out-of-state political candidates. On some occasions, the ads don’t even mention the runoff contests, but are targeted at users in Georgia in an effort to exploit Facebook’s state-specific political advertising policy.
Facebook did not respond to questions about that apparent loophole. But the efforts by Cruz and others illustrates the difficulties the company has had in crafting a political ad policy that isn’t criticized as either too restrictive or too easy to exploit.
The social-media giant’s advertising ban, designed to limit misinformation related to the presidential election outcome, temporarily shut down a mammoth political fundraising tool around and after the election. When the company eased the ban this month for ads in Georgia, campaigns jumped at the chance to get back into the Facebook advertising game. Last month, the National Republican Senatorial Committee encouraged its members to use grassroots donor enthusiasm surrounding the runoffs to help build their own fundraising programs.
Senate Majority Leader Mitch McConnell has led the way for his caucus. His campaign has been sending some text messages and running Georgia-focused Google ads linking to a page on the GOP fundraising platform WinRed that says donations will benefit McConnell’s own campaign committee.
According to a source familiar with the arrangement, McConnell’s Georgia-focused fundraising efforts have actually served to cover the cost of using his massive email and text messaging lists to solicit donations that are split between the senator and the two Republican Senate candidates in Georgia. A McConnell spokesperson said that his post-Election Day fundraising efforts, subsidized by his direct Georgia-focused fundraising, have brought in more than $3.4 million for Loeffler and Perdue.
These split fundraising efforts are a key mechanism to boost grassroots financial support for Senate candidates in Georgia, according to guidance published by WinRed. Some members of Congress have taken advantage of that strategy. Reps. Cathy McMorris Rogers (R-WA) and Ashley Hinson (R-IA), for instance, have both purchased Facebook ads this month linking to donation pages that split the proceeds evenly between their own campaign committees and those of Perdue and Loeffler.
Many, though, continue to direct donations purely to their own campaigns or political vehicles. And it’s not just Republicans getting in on the act. Sen. Kirsten Gillibrand (D-NY), for instance, has run a pair of Facebook ads this month with urgent pleas to financially support Democratic Senate candidates in Georgia.
“If you want to take back the Senate and retire Mitch McConnell, the single most important thing you can do right now is donate to elect Raphael Warnock and Jon Ossoff in Georgia,” the ads state. The ads link to a donation page that specifies that the funds will go not to Ossoff or Warnock, but to Gillibrand’s political action committee, Off the Sidelines PAC.
Gillibrand’s PAC largely exists to steer funds to other Democratic candidates, so it’s not inconceivable that some of the money raised through those ads will support Democrats in Georgia. Indeed, the PAC donated to both Ossoff and Warnock ahead of the general election. But by law, it can only give each of them $5,000 before the runoff contest in January, likely less than what the PAC is raising with appeals to the Peach State senate contests.
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— LawsInTexas (@lawsintexasusa) December 29, 2020
Then there are those who are trying to raise money off all the political activity in Georgia without even pretending to care about the runoffs.
Congressman-elect Madison Cawthorn (R-NC) purchased a handful of Facebook ads last week in which he pledged to use his new post in a fruitless and conspiratorial attempt to nullify the 2020 presidential election. “Donate below to join the fight and help save our American way of life!” it read. An additional five Cawthorn ads asked people to “defend freedom and defend Georgia!” But like all the others, they linked to Cawthorn’s own donation page. Cawthorn won’t even be sworn in until this weekend.
President Donald Trump himself has led the pack in using the Georgia Senate contests to raise money for his own political endeavors. His political team has been buying Google ads and sending out fundraising emails for weeks declaring the urgent need to hold the GOP Senate majority, and asking for contributions to his own political groups. But the fine print of those solicitations makes clear that a major chunk of the change will be going to Trump’s own committee and a smaller chunk to the Republican National Committee.
The tactic has spread even more widely since Facebook opened its political ads to Georgia-related appeals. Like Cruz, Sen. Mike Lee (R-UT) has run a host of ads this month asking for donations on behalf of his Republican colleagues, Loeffler and Perdue.
“Democrats, with their radical agenda, seek to destroy our country. The center of that fight is now in Georgia. We must keep the Senate,” declare 10 Facebook ads run by the Lee campaign this month. “Join the fight by chipping in what you can.”
Ten Lee campaign ads run this month linked to the senator’s WinRed page. His office insists that the money is finding its way to the upcoming contests.
“Sen. Lee’s multiple Facebook campaigns have raised tens of thousands of dollars for Georgia’s runoff candidates,” a Lee spokesperson said in an email. “Some of those campaigns have offered donors the opportunity to donate to Sen. Lee but less than $100 has been raised in that manner.”
But the language on the WinRed page promoted in Lee’s recent Facebook ads is pretty clear: “Your contribution will benefit Friends of Mike Lee.”
Lyin’ Ted Update: Texas Senator and Attorney Who Claimed Amnesia About the Law fined $35K
Bank loans to candidates and loans derived from advances on a candidate’s brokerage accounts, credit cards, home equity line of credit, or other lines of credit obtained for use in connection with his or her campaign must be reported by the committee, according to the guide.
Federal elections officials have fined Ted Cruz’s Senate campaign $35,000 for failing to report more than $1 million in bank loans he used to finance his successful long-shot race in Texas in 2012.
The penalty was part of a settlement reached by the Federal Election Commission and Mr. Cruz’s Senate campaign in February and disclosed in a letter this week from the commission to the Campaign Legal Center, a watchdog group that had filed a complaint over the unreported loans.
The Times article showed how Mr. Cruz claimed to have liquidated his family’s wealth and put it into his 2012 campaign, when in fact he had borrowed money from Goldman Sachs and Citibank without disclosing it on campaign filings.
Mr. Cruz initially described his actions as a clerical oversight, saying he had disclosed the loans on a different set of reports, filed with the Senate, that detailed his personal income, assets and debts. But those reports did not explain what the loans were used for, and he failed to disclose them, as required, on filings with the election commission, which would have showed the $1,064,000 from the two banks was used for campaign purposes.
On Friday, the Cruz campaign issued a statement adhering to its earlier explanation of how the loans were handled.
“As has repeatedly been reported, the loans were public at the time and fully disclosed on Senate ethics disclosures, but they weren’t reported correctly on the FEC forms,” the campaign said in a statement. “This agreed settlement resolves that filing mistake once and for all.”
During the Republican primary in 2016, Donald J. Trump, a candidate at the time, used the issue to taunt Mr. Cruz, saying Goldman Sachs had “total control” over him and calling the failure to report the loans “a very big thing.”
President Trump now has his own campaign finance problems, having been accused of arranging to pay off an adult film star, who claimed she had an affair with him, shortly before the November 2016 election. Federal prosecutors have described the transactions as a violation of campaign finance laws.
In Mr. Cruz’s case, the Campaign Legal Center filed its complaint in January 2016 in response to the article in The Times. A year later, the election commission, in a rare unanimous vote, accepted the conclusions of its staff that Mr. Cruz’s campaign had not complied with the law.
Tara Malloy, a senior director at the legal center, said that Mr. Cruz’s failure to properly report his loans meant that in “the homestretch of a high-profile election, voters were misled about Cruz’s personal and campaign finances.”
“Candidates should take seriously their legal requirement to disclose where their campaign money comes from,” she said.
Lyin’ Ted of Texas Writes with Support of Twenty Senators for Wealthy Tax Cuts
Rallying around to stir more hyperbole, in a letter sent to Steve Foreclosure King Mnuchin on Monday, the Lyin’ Senator from Texas urged the Treasury Secretary to use his authority to index capital gains to inflation, a move that would almost exclusively benefit the mega-rich.
After the Trump administration floated a proposal to index capital gains taxes for inflation, it was hard to spin it as anything less than a gift to the super rich. Little wonder:
Two-thirds of the savings from such a move would go to the top one-tenth of 1 percent of U.S. taxpayers. The public reaction was overwhelmingly negative.
Former Trump economic adviser Gary Cohn declared the idea dead on arrival, and the administration has given little real indication it’s pursuing the idea further. That’s likely for the best, but we perhaps shouldn’t let it go so quickly. Trump’s proposal highlights one of the deeper problems in the tax code. Congress should fix it.
Rallying around to stir more hyperbole, in a letter sent to Steve “Foreclosure King” Mnuchin on Monday, the Lyin’ Senator from Texas urged the Treasury Secretary to use his “authority” to index capital gains to inflation, a move that would almost exclusively benefit the mega-rich.
Claiming, falsely, that the United States economy “has experienced historic levels of growth as a result of Congress and the current administration’s policies such as the Tax Cuts and Jobs Act,” Cruz insists that it is now crucial for the Treasury Department to adjust capital gains for inflation “so that everyday Americans can continue to enjoy better lives and livelihoods.” And by “everyday Americans,” he of course means (but doesn’t say) the spectacularly wealthy.
Missing from Cruz’s call for Mnuchin to use “executive authority” to end this “unfair” treatment of taxpayers, which was signed by 20 of his Republican colleagues, is the fact that, according to the Penn Wharton Budget model, a whopping 86% of the benefit of indexing capital gains to inflation would go to the 1 percent (and reduce annual tax revenue by an estimated $102 billion over a decade).
Perhaps seeking to address this criticism, Cruz claimed that changing how capital gains are taxed “would…unlock capital for investment, increase wages, create new jobs, and grow the economy, benefiting Americans across all income levels.”
In other words, he’s arguing that the executive branch should give the super-rich another tax cut and it’ll benefit everyone because of trickle-down economics which—checks notes—has never actually worked.
Including in the case of the 2017 Tax Cuts and Jobs Act.
Still, the Treasury Department is apparently looking into using its regulatory power to change the way taxes on capital gains are assessed. The idea is to confine the taxes to real, inflation-adjusted gains, not nominal gains, as now. There’s a particle of sense in this notion, but it’s buried miles deep in bad faith and bad economics.
The change would amount to a tax cut that the country cannot afford. Its benefits — even by the standard of recent Republican thinking on tax reform — would be heavily skewed toward the very wealthy. The change would open vast new opportunities for tax avoidance. And this far-reaching alteration to the tax code would be done without involving Congress.
Unaffordable, unfair, inefficient and quite possibly unlawful — for just one idea, that’s impressive.
According to the Tax Policy Center, using the most recent data, about one-third of capital gains could be attributed to inflation in 2012. Full indexing would have cut taxes on those gains by about $30 billion. Allowing for various offsets, the net revenue loss if the plan were implemented would be $10 billion to $20 billion a year — enough to make a serious fiscal problem worse.
The federal government is already borrowing close to a trillion dollars a year, partly thanks to the recent tax-reform law, and that’s with the economy at or close to full employment. Government debt held by the public stands at almost 80 percent of gross domestic product and is on track to rise to 150 percent of GDP over the next 30 years. To pile another tax cut on top of this would be madness.
The earlier reform failed as well on fiscal fairness and efficient tax collection — but nothing like this new idea does. Cutting capital-gains taxes without making other changes is about the most regressive thing that could be done to the tax code. And indexing capital gains for inflation without indexing capital expenses (such as interest payments and depreciation) would create an array of new tax shelters.
What about the particle of good sense? In a comprehensive plan, you could deal with the revenue shortfall by raising rates and closing loopholes. And you could advance fairness by making the code more progressive in other ways. Then, comprehensive (not partial) indexation would make the tax code more neutral. At present, the taxes that people and firms expect to pay depend on future inflation, which creates uncertainty and other distortions. Other things equal, it would be better to have a code that was inflation-proof.
Other things aren’t equal, however. As it stands, the plan is a terrible idea that should be dropped immediately. If not, there’s hope it will succumb in short order to the legal challenges it will surely provoke.
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