Koch Brothers Could Be $1 Billion Richer Each Year From GOP Tax Bill

A new analysis has found that political mega-donors Charles and David Koch and/or the business they operate could make between $1 billion and $1.4 billion more money each year, thanks to the tax breaks in legislation passed in December by Republican members of Congress. The two brothers are currently worth a combined $104.4 billion. Nonpartisan tax experts concluded that the bill, which lowers income taxes, corporate taxes and offers numerous special-interest tax breaks, offers the majority of the gains to America’s wealthiest individuals. The top 1 percent of Americans will get 83 percent of the tax benefits in 2027.

Americans for Tax Fairness (ATF) is a liberal coalition of 425 groups including the AFL-CIO, the Center on Budget & Policy Priorities, the Leadership Conference on Civil & Human Rights and the NAACP that share “the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs.” It released its analysis Wednesday, the first to estimate how much the industrialist Koch brothers will benefit from the recent tax legislation. This rough estimate pertains only to income tax breaks; other provisions that offer tax savings on offshore profits and modify the estate tax will make the Koch family even wealthier.

Because Koch Industries, a global fossil fuel and materials conglomerate, is a private company, its precise corporate status is unknown to the public. Therefore, ATF used what it could find to make two separate estimates. If Koch Industries is a C corporation, meaning that it pays corporate income tax, ATF calculated, based on a 10 percent pretax profit margin, that the business would take in roughly $10 billion in profits per year. Because the corporate income tax rate went down from 35 percent to 21 percent in the tax bill, the company would save at most $1.4 billion. It’s likely Koch Industries hasn’t had to pay the full 35 percent rate because of tax loopholes, so the savings due to the tax bill may be less than $1.4 billion.

If Koch Industries is an S corporation — an arrangement in which income “passes through” the company to its owners, who pay individual income tax — the brothers get a big windfall as well. The tax bill instated a 20 percent deduction on pass-through business income, reducing the brothers’ pre-tax income from an estimated $10 billion to $8 billion each. The analysis assumes Charles and David Koch paid the top income tax rate of 39.6 percent, something AFT acknowledges is unlikely because they are probably taking advantage of loopholes to lower their taxable income, bringing their effective rate below that percentage. But, as the tax bill lowered that top rate to 37 percent, the report concludes that, at most, each Koch brother will get $500 million in annual tax savings because of the deduction and lowered rate.

When asked by International Business Times why the Koch brothers would get all of Koch Industries’ pre-tax profits, an AFT spokesperson TJ Helmstetter said they don’t know how much of the profits go to Charles and David Koch, but “they do own a majority of the company so it is likely that they will get the bulk if not all of it.” Helmstetter emphasized that $10 billion in profits could be a conservative estimate, as Koch Industries may be taking in more than $100 billion in annual revenue, and the profit margin could be higher than 10 percent.

The conservative Koch political network, which rivals either of the two major political parties in size and funding, spent tens of millions of dollars pressuring lawmakers to pass the tax cuts in 2017. “That’s not a bad return on investment: what’s $20 million when you’re looking at a billion or more in tax breaks?” the ATF report asks.

Last year, donors in the Koch network threatened to withhold their contributions if lawmakers failed to repeal the Affordable Care Act and pass tax cuts.

Less than two weeks after the U.S. House passed its version of the bill, Charles Koch and his wife Elizabeth donated nearly $500,000 to the joint fundraising committee of Speaker Paul Ryan, who successfully shepharded the bill through his chamber, as International Business Times first reported. That same day, Charles and Elizabeth Koch each donated the maximum possible amount of $237,000 total to the National Republican Congressional Committee’s main, legal and building accounts.

Now the Koch network is spending millions of dollars more to promote the unpopular tax bill. The network plans to spend between $300 million and $400 million on the 2018 elections, some of which it has already spent attacking vulnerable Senate Democrats.