The Media Are Offside on Seid

Barre Seid’s bold contribution of $1.6 billion to the Marble Trust has set off a firestorm of condemnation and has engendered urgent calls for “reform” by the cognoscenti on the left. Much of this criticism is hypocritical and ignores similar behavior by major donors whose politics are more aligned with the commentators’. Moreover, it is mostly unfair, demonstrating a limited understanding of how nonprofits come into play for political purposes.

The actual donation was 100% of the stock in Tripp Lite. It was given to the Marble Freedom Trust, a §501(c)(4) social-welfare organization—a nonprofit that can pursue political as well as charitable ends. By law, entities of this kind can receive shares from a donor and then sell them without any party to the transaction paying capital-gains tax. While the tax implications of this gift generated a lot of attention, the real issue was the recipient. The trust is led by Leonard Leo, now famous for his leadership of the Federalist Society and his role during the confirmation processes of three new justices of the Supreme Court during the Trump administration. Coming so soon after the Court’s decision to overturn Roe v. Wade, it is not surprising that commentary on this contribution was largely critical. It was also flawed on six readily demonstrable counts.

First, almost all of the critical articles begin by denouncing the “secretive” and “nontransparent” manner in which this contribution was made. While most note that the donation was legal, the implication is that it was immoral because it was not publicly disclosed when it was made. The law governing (c)(4) organizations does not require that the donor or the recipient announce a contribution and, in fact, most groups of this sort work hard to protect the identities of their donors. Arabella Advisors, for example, has raised millions of dollars for left-of-center politics and policymaking. On its website, you will not find a page about its contributors. With one exception, none of the writers who are lambasting Seid has ever raised the issue of secrecy when writing about Arabella and other progressive entities that work in the (c)(4) area. The sole reporter who has raised questions about those groups is Ken Vogel of the New York Times, which may explain why he was able to break this story.

Second, critics in the media have been stunned by the size of this gift—which may well be the largest ever to a (c)(4) institution. What they neglect to mention is that most of the money going into these groups before the Seid gift was aligned with Democrats and the left. The New York Times estimated that $1.5 billion went into liberal and leftist (c)(4)s during the 2020 election cycle, compared to $900 million on the conservative side. Based on a close reading of the research behind the Times report, it does not appear that various issue-driven (c)(4)s, such as the Sierra Club, were included in this calculation. There are similar groups on the right, but not nearly as many, nor are they as well-funded. Given the amount of money that has gone towards such hot-button liberal issues as climate change, justice reform, and abortion, it is highly likely that the disparity between left and right is even greater.

Third, the fact that the donor avoided paying capital gains tax on the contributed shares has also been a major source of outrage. This move was perfectly legal and Seid received no material benefit from the gift. However, as with the secrecy issue, the critics still see this move as immoral even though many other billionaires, left and right, can and do utilize the same benefit. Donating shares to nonprofits, both §501(c)(3) public charities and (c)(4)s, is a common practice, as the fundraisers at Harvard, the Metropolitan Museum of Art, and other fine institutions will attest. What is positive is that Seid was honest and direct about his intentions: he wanted his money to be able to fund political work. He could have given the money to a (c)(3) and avoided the capital gains tax—and in addition, taken a charitable tax deduction equal to 35% of the donated amount. Now, successful business owners with competent accountants are usually aware of the many legal means they have at their disposal to reduce taxes. Seid chose not to reap the double tax benefits of the (c)(3) path. The law also allows (c)(3)s to make contributions to (c)(4)s. There is some evidence that some major liberal donors have used this tactic to support their favored (c)(4)s. The point is that Seid did not even begin to play with the various ways of reaping tax benefits from supporting (c)(4)s. He was honest about his intentions and direct about his approach.

Fourth, some critics have lamented the fact that the donation was not made to a (c)(3) organization. As one very respected and serious analyst of philanthropy tweeted: “People donate appreciated assets to 501c3s, too, of course. But at least in those instances, the tax write-off (and the avoidance of paying a tax on a capital gain) is in pursuit of the public benefit, not political advocacy.”

The problem with this claim is that charitable money is often used for politically adjacent activities with serious partisan implications. NPR recently featured a long piece about the Conservative Partnership Institute’s voter-registration and get-out-the-vote operation, claiming that it was partisan because it did not involve enough Democratic politicians and seemed to ignore Democratic base voters. There is no need to belabor how hypocritical this claim is. Go to the website of any of the main voter-registration and related groups on the left and look for positive pictures of Republicans or rhetoric about reaching out to disaffected blue-collar workers. The truth is that a small, but well-funded, segment of the (c)(3) world has been politicized to do a range of traditional tasks such as voter registration, as well as newer initiatives involving social media around hot-button campaign issues. There is even a newsletter, Blue Tent, that advises foundations, individual givers, and other donors on how to influence policymaking and elections through charitable entities. One of its recent editions urged donors to focus on voter-mobilization and voter-persuasion efforts as the best way to help Democratic candidates. This work may be legal, but is it moral?

Fifth, the Seid contribution has been like kerosene thrown on the “death of democracy” bonfire. Even though dozens if not hundreds of liberal billionaires contribute vast sums to nonprofits with a political agenda, his gift somehow has been interpreted as an omen that the end of times are close. Tyler Cowen, the economist and Bloomberg columnist, recently observed that we are now “conflating what’s right with what’s democratic.” If one disagrees with a position or policy or court decision, one can claim that it happened because of the damage done to democracy by the other side. The Georgia legislature passes a perfectly respectable election-reform bill and charges of undermining “true” democracy soon follow.

Yet there is another way of seeing this charitable act—as defending democracy rather than undermining it. Many of us are backers of particular ideologies and parties and, in that role, we might want to see our side have unlimited resources to push our ideas and policies. But, we are also citizens and ostensibly believe in democracy. If we do, should we not want a serious, but relatively balanced, debate about issues and courses of action? What Seid’s gift did is make the political process and policy debate a bit more balanced than it was before—and all of us, liberals, conservatives, and centrists, should applaud him.

Finally, the outrage and condemnation of Seid occurred only weeks after Sen. Marco Rubio was pilloried for criticizing George Soros for his aggressive support of local district attorneys who are in favor of radical justice reform. Within minutes, Rubio was cast as an anti-Semite par excellence. The Twittersphere and conventional media were aghast at Rubio’s insensitivity. Randi Weingarten, head of the American Federation of Teachers, was especially sharp: “THIS Is how antisemitism takes root and spreads. What is a ‘Soros’ backed prosecutor? Soros is a Hungarian Jew who survived the Holocaust. Orban the authoritarian leader of Hungary demonizes Soros all the time in Orban’s culture war to suppress freedom & democracy.”

As clumsy as this tweet is, it and many others with the same point went viral, and it became off-limits to say anything negative about Soros for fear of being accused of being a fascist or at least a semi-fascist. Where was the outrage when the social and conventional media went after Seid, the son of Jewish immigrants who fled the Old World for a new start in Chicago? Unlike Soros, Seid has been supportive of Israel and its institutions. Bar-Ilan University gave him an honorary doctorate and other organizations there have lauded him for his generosity. Why not outrage about attacking this honorable and successful Jewish man? Some critics even claimed, without evidence, that he was a right-wing Christian. But everyone else was happy to jeer and jab with impunity at a 90-year-old Jewish man simply because he does not share their politics.

This gift did one other thing: it reinvigorated efforts to control “dark money.” Sen. Whitehouse has been especially loud in calling for swift action on his proposed legislation, called the DISCLOSE Act, which would make (c)(4)s more transparent about the sources and uses of their money. Given the significant advantage of left over right in funding of this kind, it would be ironic if a quiet, hardworking, conservative businessman from Chicago was the impetus for making this world more open and subject to judgement. If the outrage leads to serious hearings about how all nonprofits are being used for political purposes, even better. In any case, we can all say thanks to Barre Seid not only for supporting, like George Soros, the causes he believes in, but also for exposing the rank partisan hypocrisy surrounding “dark money.”

This article originally appeared in the Giving Review on September 6, 2022.