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The Problem With Closing Tax Loopholes

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"What we're saying is get rid of special interest loopholes and deductions that are uniquely enjoyed by the wealthy," Republican Vice Presidential Candidate Paul Ryan recently told the Fox News network. Ryan was explaining how he and Governor Mitt Romney could enact more than $4 trillion in tax cuts, largely for the wealthy, without raising taxes on the middle class.

While Ryan's words resonated as much now as they did two years ago when he introduced his original plan, Ryan's budgets have failed to include a single example of which loopholes he would close for wealthy special interests. And given his ties to many of the special interests who are clearly benefitting from them, it's not hard to see why.

In fairness to Chairman Ryan, the problem of big money affecting budget and tax policy transcends party affiliation. Thanks to the Supreme Court's ruling in Citizens United two years ago, corporate money has flowed into political ads via Super PACs and shadowy groups cloaked as social welfare organizations. Though elected officials, like Ryan, don't run these groups, they are often associated with them and involved in attracting and maintaining donors.

Though some Democrats are just as complicit as Republicans in raising these million dollar donations, it's no secret that the outside Republican groups have vastly outraised and will no doubt outspend the Democratic groups, with Republican causes already pledging to spend $400 million to defeat the Democrats in 2012.

Closing special interest tax loopholes that benefit the few at the expense of the many requires standing up to the special interests that benefit from them. That is hard to do when you are closely associated with those same wealthy few in order to raise money for your election, which may be Ryan's problem, and is certainly an issue for the Romney campaign.

Ryan has close ties to one of the biggest spending groups, Americans for Prosperity (AFP), which according to a recent analysis by ProPublica, has spent $18 million so far this election cycle on ads attacking President Obama.

From tax returns, we know that AFP is funded in part by the Koch brothers. According to the group's tax returns, its donors include a $1 million contribution from the David H. Koch Charitable Foundation in 2008, a $67,556 contribution from the Charles G. Koch Charitable Foundation in 2009, and a $7.7 million dollar contribution in 2010 laundered through a group called the Donors Trust, which is funded by yet another group chaired by Charles Koch, the Knowledge and Progress Fund.

Ryan is reportedly one of the few lawmakers to appear at the Koch brother's twice-yearly conferences for the millionaires who fund their conservative causes, and Ryan has also participated in conference calls and teleconferences with AFP activists in at least four different states. The Koch brothers have also contributed to Ryan directly, with Koch industries ranking among his top 20 donors during his Congressional tenure for both his Leadership PAC and campaign committee combined.

From his relationship with Koch industries, the largest oil and gas campaign contributor, it is fair to assume that for Ryan, closing special interest tax loopholes will not translate into recouping the billions of dollars a year that the Big 5 oil companies get away with in tax breaks while pocketing more than $1 trillion in profits. What's more, the Romney campaign has explicitly supported these loopholes, and Harold Hamm, an oil executive and Super PAC donor, is Romney's chief energy advisor.

Ryan also reportedly has close ties with a number of prominent Republican hedge fund billionaires close to the Kochs and to Romney, including Paul Singer, Kenneth Griffin, and Cliff Asness. In fact, the securities and investment industries have contributed nearly half a million to Ryan's Leadership PAC (Prosperity PAC) and his campaign committee, combined, with the biggest contributors either employees or family members of Elliot Management, a Wall Street hedge fund owned by Singer. Other top Ryan contributors include individuals from Steven Cohen’s SAC Capital Advisors and the Affiliated Managers Group based in Massachusetts.

Understanding Ryan's relationship with the hedge fund billionaires who we know are giving mega contributions to the Super PACS supporting Romney and suspect are also funding conservative groups, it is hard to see how Ryan could support ending the so-called carried interest loophole, a $10 billion dollar tax break that allows hedge fund millionaires to avoid paying a 35 percent tax rate on the bulk of their income. As for Romney, he continues to dodge the question of whether he would support closing the carried interest loophole.

The truth is, as long as elected officials are in a race to raise money in million dollar increments, it's hard to see how any of them will be able to close the many tax loopholes that benefit the wealthy few at the expense of the middle class. The Romney-Ryan campaign has already made clear to the Tax Policy Center that no corporate taxes would be cut to finance their proposed 25 percent corporate tax rate.

Real tax reform will require fundamental campaign finance reform, including meaningful limits on campaign contributions and expenditures, whether through a Constitutional Amendment, public financing, or a sea change in the Court's view of money in politics over the next generation.
So, for now, it's hardly surprising that despite the rhetoric, the only specifics Ryan and Romney are able to give are on which loopholes they will continue to protect. What is surprising is if anyone really believes that the new tax cuts will be paid for by standing up to special interests.

An earlier version of this post implied that Steven Cohen’s SAC Capital Advisors itself was a Ryan donor, rather than individuals from that firm. This has since been clarified.

Amy Rosenbaum is a Fellow at the Center for American Progress Action Fund.

This post is part of the HuffPost Shadow Conventions 2012, a series spotlighting three issues that are not being discussed at the national GOP and Democratic conventions: The Drug War, Poverty in America, and Money in Politics.

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