The President of Perks

Entrepreneurial profit . . . is the expression of the value of what the entrepreneur contributes to production . . ..

— Joseph Alois Schumpeter, The Theory of Economic Development (1934)

Just as DJT began to calculate how much money he earned running for president, he used the speech he gave at the National Prayer Breakfast as a vehicle to announce a proposed dramatic change in tax law.  If adopted by Congress, it will change the tax laws pertaining to the deductibility of charitable contributions in a way that will benefit those who contribute to political campaigns but presently derive no tax benefits from doing so.  But first, a brief reprise of how DJT fulfilled a prophecy he made in April 2000, converting a run for the presidency into an enormous money maker for him and his companies.

In April 2000, DJT had an interview with Jerry Useem of Fortune magazine on board DJT’s airplane, as he was heading off to a meeting to discuss the possibility of running for president on the Reform Party Ticket,with campaign stops on the way.  In the course of the interview, DJT said that he was giving ten motivational speeches for which he was paid $1 million and, happily, each speech coincided with a campaign stop. As a result, he could use campaign contributions to pay his company for his plane ride in a company owned plane. The company pocketed the proceeds, and DJT pocketed the profits.  Contemplating this strategy while talking with Mr. Useem, DJT said that: “It’s very possible that I could be the first presidential candidate to run and make money on it.”  Sixteen years later he did and did.

According to a report compiled by CNN, DJT’s campaign paid $12.5 million to DJT businesses during his presidential run. It paid $8.7 million to one of the companies that owns the aircraft DJT flitted about in while campaigning.  It paid hotels and golf clubs in which DJT stayed, $1.4 million.  It paid $238,000 for restaurant and food service and even paid a DJT owned bottled water company $2,085 for water DJT and his staff drank while travelling. DJT could not, legally, have taken campaign funds and simply pocketed them, so this protocol was clearly the next best thing.  Campaign funds went to entities owned in whole or in part by him and he pocketed his share of the profits.

DJT is a sensitive man, and recognized how unfair it was that, whereas his campaign was a money maker for him personally, there were no tangible financial benefits for those people who contributed money to help him get elected. Accordingly, one of the first things DJT did after he was elected, was to propose a change to the tax laws that would help future contributors to political campaigns derive tax benefits from their generosity.  It comes from getting rid of something known as the “Johnson Amendment.”

The Johnson Amendment was sponsored by Lyndon Johnson when he was in the Senate in the 1950s.  The IRS regulations issued pursuant to the Johnson Amendment, prohibit 501(c)(3) organizations (which include churches and other religious and charitable entities) from “directly or indirectly participating in, or intervening in, any political campaign on behalf  of (or in opposition to) any candidate for elective public office.”  Although the prohibition has reportedly not been vigorously enforced by the IRS, it has nonetheless been effective in keeping 501(c)(3) organizations from endorsing candidates or becoming involved in partisan activity.

DJT took advantage of his speech at the National Prayer Breakfast (at which he digressed enough from matters ecumenical to mock Arnold Schwarzenegger who succeeded him as the host on the TV show DJT formerly hosted) to say that: “I will get rid of and totally destroy the Johnson Amendment.”

If the Johnson Amendment is “totally destroyed” or, as the vernacular would have it, “repealed”, churches will be free to become actively involved in politics of all stripes.  And when that happens, people who have been making millions of dollars in contributions to political campaigns and causes without receiving any tax benefits, will be able to make those same contributions to the religious organizations of their choice, and claim a charitable contribution for tax purposes.  The religious organization will then be able to direct those funds to the candidates or causes that the donor favors.  It is a win-win for all concerned.

If the Johnson amendment had been repealed before the last election, tax deductible political contributions could have been made by DJT supporters to churches, and the churches would have been able to pay the money to political organizations that supported DJT, and the political organizations would have been able to pay the money to DJT companies for services rendered, and the DJT companies would have earned profits from services rendered to the campaign, and the DJT companies would have paid the profits to DJT.  It would have been a win-win for all concerned-except the electorate.  Of course, even without the Johnson Amendment being repealed, DJT made money from running for president-just as he promised in his 2000 interview.  So sad.

Christopher Brauchli can be e-mailed at brauchli.56@post.harvard.edu. For political commentary see his web page at http://humanraceandothersports.com