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UT-Austin attempts to calm faculty concerns over planned Liberty Institute organized with Lt. Gov. Dan Patrick, conservative donors
September 22, 2021
University of Texas at Austin leaders attempted to quell concerns among faculty this week over a proposed think tank on campus known as the Liberty Institute, weeks after The Texas Tribune reported that the university was working with private donors and Lt. Gov. Dan Patrick to create a center that would be "dedicated to the study and teaching of individual liberty, limited government, private enterprise and free markets."
At a Faculty Council meeting Monday, Provost Sharon Wood reiterated that many decisions had yet to be made about the institute, which already has $12 million in funding over the next two years from the state Legislature and the UT System Board of Regents.
Faculty Council leaders had presented university President Jay Hartzell with a list of eight questions about the university's plans for the institute, its mission and how it would be structured. Hartzell was at an event in Dallas, however, and did not attend the meeting.
In his stead, Wood acknowledged to the council that the Tribune's article "caused a lot of concern" on campus. But she noted that the university did not provide information for last month's story, which detailed emails and documents obtained by the Tribune via open records requests. The request was filed after the university provided vague answers to students and ignored the Tribune's questions about the center.
"So I want to talk to you about what the university is actually planning to do and try to address some of the misconceptions," she told the faculty.
Wood, who is the former dean of the UT-Austin Cockrell School of Engineering, was named provost in June. She told faculty she did not know answers to many of their questions because the discussions about this center predated her arrival in the president's office. But she described a more politically muted proposal than ones discussed privately among donors, lawmakers and school leaders.
According to Wood, the institute's intent is to "support and help attract faculty." She said it will be an "investment in philosophy, politics and economics." She said the idea has been discussed among faculty and school leaders for over a decade, originally led by Tom Gilligan, who was the dean of the McCombs School of Business before he left to run the Hoover Institution at Stanford University, a conservative think tank that operates outside the normal university structure. And she compared the new center to a philosophy, politics and economics department at Oxford University.
"The goal is to provide students who cross traditional boundaries and consider problems from multiple points of view," Wood said. "This allows them to better understand how regulatory and legal environments are going to impact markets. They also will have the analytical and quantitative skills to solve complex problems and understand more economic drivers."
In August, the Tribune reported on Hartzell's emails obtained through an open records request to UT-Austin, as well as two proposals obtained from Patrick's office which suggest more political — though not explicitly partisan — motivations to launch the institute among those involved.
"[A] growing proportion of our population lacks a basic understanding of the role liberty and private enterprise play in their well-being," read one proposal. "Too many Americans, particularly younger students, maintain misconceptions about our political system and lack an even basic understanding of the moral, ethical, philosophical and historical foundations underpinning a free society."
A second proposal described the institute as one that will "educate thousands of students … on the moral, ethical, philosophical and historical foundations of a free society" and asks the state to dedicate money to the project.
It is still unclear who wrote these proposals or when they were written. While they do not reflect the full breadth of discussion about the institute, they provided the most insight into the vision of some of the people involved in its creation. Emails show Hartzell has been involved in discussions since at least 2016.
Wood said the Tribune's report "ignored the role of faculty governance and faculty hiring and also developing new degree programs and implied there was no interest among students." She did not give specifics about those roles.
UT-Austin did not respond to an interview request or written questions sent Tuesday, including a request to provide a list of faculty and students involved in planning the new center.
Despite the decisions yet to be made, some professors remained skeptical about the new center. After Wood spoke, College of Natural Sciences professor Stuart Reichler said faculty's main concern is that the university is allowing the Legislature to politicize UT-Austin.
"You say we need outside funding for this institute to happen," Reichler said. "It sounds like there are already donors, political donors, lined up to provide money for the university to hire people to work in these positions to form part of this institute. I think our concern — or at least what I'm reading into the concern from the questions are — why is the university allowing itself to be politicized by the Legislature? It seems a very dangerous precedent for us to set."
But one professor pushed back on the concerns of his colleagues, arguing that university programs such as social justice centers and diversity, equity and inclusion efforts are already political.
"It seems like you're just treating this as ideas you don't want [on campus] as opposed to some broader principle," said Richard Lowery, a finance professor in the UT-Austin business school.
In response to the funding concerns, Wood noted that there are 15 different efforts on campus funded in a similar way by the Legislature, including the McDonald Observatory and Marine Science Institute, while also stating that it is rare for the university to receive money this way.
She said no donors have been secured for the new center. But emails show at least one donor had agreed to commit $8.5 million toward a new center in 2016. Bob Rowling, a conservative billionaire businessman and well-known UT-Austin donor, confirmed he and oil company executive Bud Brigham were involved in the project. Rowling told the Tribune in August that Brigham was the "real leader on this." UT-Austin did not respond to a question asking Wood to clarify what she meant by her comment.
UT-Austin has ignored interview requests and written questions from the Tribune. Leaders provided few details to students who also raised questions last spring.
When asked by a faculty member at the meeting why UT-Austin did not respond to the Tribune's request for comment, Wood said she did not know.
Wood also told the council that the goal this year is to hire three to five new faculty who would have teaching interests in "philosophical bases for individual and collective decision making and choice, government regulation, legal and policy impacts on economic outcomes and individual choice and freedoms, market design and social welfare, and social prosperity and well-being, including innovation, entrepreneurial activities, company formation and job creation."
She reassured faculty that any new professors would be hired within the proper university protocols, which include deans, department chairs and the Faculty Council. One of the proposals obtained from Patrick's office had suggested the center would be run by a board of overseers made up of "alumni and friends … committed to the mission." They would report to UT-Austin's president and the system's Board of Regents and would manage donor funds and help hire the faculty.
Wood also told faculty that the president's office will find philanthropic support to hire chairs or professors. She also said the university plans to do an inventory of existing courses to develop a list of new classes that may be added. They anticipate conducting a national search for the director. Wood said they also have yet to determine the official name of the institute, its mission and the board and governance structure.
While some faculty said the outline provided by Wood on Monday sounded reasonable, they did not feel as if the university has shared enough information and said more discussion and details are necessary.
"I don't think we know enough yet to know whether the university is doing anything inappropriate or in bad faith here," Steve Vladeck, a law professor and member of the Faculty Council, said. "But I don't think the university has helped itself in how it has conveyed information to the faculty. I don't think [Monday's] meeting helped in that respect at all."
The Faculty Council's executive committee has asked Hartzell to make a presentation to them on the new center.
Disclosure: University of Texas at Austin, University of Texas at Austin - McCombs School of Business and University of Texas at Austin - Texas Enterprise - McCombs School of Business have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.
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A new House bill would blow up the massive IRAs of the superwealthy
September 22, 2021
Legislation currently making its way through Congress would take a sledgehammer to the massive individual retirement accounts built up tax-free by a select group of the ultrawealthy.
The proposal, which is part of the infrastructure and tax package advancing in the House, targets the jaw-dropping IRAs accumulated by multimillionaires and billionaires such as tech investor Peter Thiel, which were first reported by ProPublica earlier this year. Those accounts — Thiel's alone was worth $5 billion in 2019 — have allowed some super-wealthy Americans to turn their Roth IRAs, tools meant to incentivize middle-class retirement saving, into supersized tax shelters.
The proposed reform, put forward by House Ways and Means Chairman Richard Neal, D-Mass., would effectively cap the total amount someone could hold in a Roth at $20 million and compel the holders of the giant accounts to withdraw anything over that limit. Separately, individuals would have to add up the balances of their retirement accounts — including Roths, traditional IRAs, 401(k)s and 403(b)s — and every year withdraw half of any amount over $10 million. The provisions would only apply to individuals with taxable income of over $400,000 or couples making over $450,000.
The reform wouldn't affect the overwhelming majority of Americans, whose retirement savings (if they have any) are far more modest — the average Roth was worth just $39,108 at the end of 2018.
“Incentives in our tax code that help Americans save for retirement were never intended to enable a tax shelter for the ultra-wealthy," Neal said earlier this year. “We must shut down these practices."
Should the bill pass, it could have profound implications for PayPal founder Thiel, whose gargantuan Roth stunned lawmakers, spurring Neal to vow a crackdown. Thiel wouldn't owe any tax up front and no early withdrawal penalties would apply, but he'd be required to move billions out of the tax-advantaged account. And any gains on investments made with that money would no longer be sheltered from taxes, potentially creating hundreds of millions of dollars in future tax liabilities.
The great appeal of the Roth IRA is that once money is inside it, any income generated — such as capital gains from selling a stock, investment interest or dividends — is tax-free, as long as the holder waits until he or she is 59 and a half to withdraw it. (Thiel hits that mark in 2027.) In a traditional IRA, by contrast, money that's withdrawn counts as income and is taxed.
The IRA reforms are part of a slate of proposals designed to eliminate loopholes and boost tax rates on rich individuals and corporations.
Several of the changes address revelations contained in The Secret IRS Files, a series of ProPublica stories published this year that are exploring the ways the very richest Americans avoid paying taxes. Usually such efforts remain secret, but ProPublica has obtained a trove of tax records covering thousands of the country's richest people. The records reveal not only the diverse array of tax-avoidance techniques used by the rich, but also that some of the very richest have consistently found ways to avoid taking income, so they pay little or no taxes, even as their wealth multiplied to historic levels.
The current House plan falls short of President Joe Biden's more ambitious proposals to combat wealth inequality through the tax code. But experts say it would significantly increase the taxes paid by high-income Americans. Among other things, it would all but eliminate a major deduction created by President Donald Trump's 2017 tax law that, as ProPublica recently reported, showered massive tax breaks on some of the richest families in the country.
Given the stakes for a small group of wealthy and powerful Americans, it's unclear whether the IRA proposal, along with the rest of the package, will become law. It must pass the House and make it through the Senate, where it will likely need the votes of all 50 Democratic senators to pass. Capitol Hill staffers say the bill remains fluid and provisions could still be cut, added or modified.
For now, however, the proposal has alarmed those who stand to lose the most. Three tax lawyers told ProPublica that clients with giant IRAs have reached out to them, worried about the potential reforms. Already a lawyer and an accountant are offering a paid webinar that pitches strategies to help owners of large IRAs get around the proposed rules.
A spokesman for Thiel didn't respond to a request for comment.
The tax proposals have drawn opposition from Republicans on Capitol Hill. “This is very bad news for the U.S. economy," said Ways and Means Committee ranking member Rep. Kevin Brady, R-Texas, in an interview this week.
A budget analyst at the anti-tax Heritage Foundation specifically criticized the IRA reform proposals as “stifling retirement savings and decreasing the economy-wide investment in future productivity."
Neal announced his plans to curb the size of mega IRAs in July following ProPublica's story revealing how Thiel and other billionaires had amassed giant retirement accounts using techniques largely unavailable to most taxpayers. Other wealthy investors with giant retirement accounts included financier Michael Milken, Warren Buffett and executives from investment giant Bain Capital.
Neal joined his Senate counterpart, Ron Wyden, D-Ore., who had been pushing for reform of mega IRAs for years without much support from his peers.
With a multibillion-dollar tax-free account on the line, a wealthy investor might try to keep his income below the $400,000 threshold set by the proposal. In Thiel's case, it's not clear if that would be possible, given that he's long reported tens of millions of dollars on his tax returns from capital gains, interest and dividends on investments he holds outside of his Roth IRA. And even if he has to withdraw billions from his Roth, he will never have to pay taxes on years of growth inside the account.
ProPublica has previously reported that several billionaires have had very little taxable income in certain years, including Jeff Bezos and Elon Musk. Musk did not respond to questions for that story and Bezos' representatives would not designate someone to accept questions related to that story.
The proposal would also add restrictions in areas that congressional investigators have said are ripe for abuse by the wealthy: The owners of IRAs would be barred from using the accounts to either purchase certain nonpublic investments or buy stakes in companies in which they are an officer.
Thiel launched his Roth IRA by purchasing so-called founder's shares of PayPal in 1999 when he was chairman and CEO of the company, according to tax records and a financial statement Thiel included in his application for residency in New Zealand. Securities and Exchange Commission records show he bought 1.7 million shares for $1,700, or a tenth of a penny per share. (The maximum contribution to a Roth that year was $2,000.) PayPal later told the SEC the shares were sold “below market value."
The practice has become popular among the founders of Silicon Valley companies, who tuck shares of their startups into IRAs, often after buying them at bargain prices. This can sidestep IRA contribution limits and generate massive tax-free growth if the value of their companies explodes.
The proposal would also shut down the so-called backdoor Roth. ProPublica found that billionaires like Buffett had taken advantage of a maneuver, known as a conversion, that allows the wealthy to sidestep existing income caps to create a Roth IRA. In a conversion, the owner of a traditional IRA can transform it into a Roth by paying one-time tax on the money. Once the account is converted into a Roth, no additional income taxes are ever due. The new provision would bar conversions for individuals with income over $400,000, though the ban would not go into effect until 2031 for budgetary reasons. (Buffett previously didn't respond to questions about his IRA.)
The proposal also has implications for the holders of giant traditional IRAs, who could suddenly owe a hefty tax bill. Money withdrawn from a traditional IRA counts as taxable income. Milken, the 1980s junk bond king who went to prison for fraud and was later pardoned by Trump, had traditional IRAs valued at $509 million at the end of 2018, according to tax records. If the law passed, Milken could face a tax bill of roughly $100 million, depending on the current size of his account. A spokesperson for Milken declined to comment.
Separately, another part of the bill would tackle the generous business income deductions granted by Trump's 2017 tax law.
As ProPublica previously reported, the drafting of the deduction was marked by last-minute changes and a rush of lobbying dollars from corporations and the superrich. The result of its passage, confidential tax records show, was a windfall for billionaires such as media mogul Michael Bloomberg, packaging tycoons Dick and Liz Uihlein, and the Bechtel family, owners of a global engineering and construction firm.
Bloomberg received a deduction of roughly $183 million in 2018 alone as a result of the provision, while the Uihleins netted around $118 million.
Under the House proposal, the deduction would be capped at $400,000 for an individual and $500,000 for a couple, virtually wiping it out for the very rich. If such a cap had been in place in 2018, for example, the Uihleins would have gotten a deduction worth just $500,000 instead of $118 million. A competing Senate proposal unveiled by Wyden in July would go even further. A spokesperson for the Uihleins declined to comment on the proposed reforms.
On a broader level, the House plan would spell a significant tax hike on Americans earning more than $400,000, raising their individual income tax rates as well as bumping up the corporate tax rate, the first such hikes in a decade.
But despite the proposal's ambition, critics say it misses a rare opportunity to capture the massive untaxed wealth of some of the richest individuals in history, including Bezos and Musk, who have often found ways to keep their income low.
As ProPublica reported, they and other billionaires have managed to pay little to no taxes in the past. Some have done so by pursuing the so-called buy, borrow, die strategy. By holding on to his Tesla stock but borrowing money to finance his lifestyle, Musk, for example, can avoid income that is taxable under current law. If he sticks to this strategy till death, the income tax liability on his fortune will evaporate for his heirs.
Some Democrats and policymakers had aspired to even bolder tax code changes that would have targeted the stratospheric increases in the ultrawealthy's riches. One idea, championed by Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., would be to levy a so-called wealth tax on billionaires' overall holdings. Another, pushed by Wyden, would tax the annual gains billionaires logged, even if they hadn't sold the assets. Both ideas foundered, with concerted opposition from billionaires and skittishness from Democratic centrists. Some critics point out that wealth taxes have often failed in other countries. And many policymakers believe it would be too logistically difficult to measure assets properly and enforce such a sweeping rule on gains.
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Mocking last weekend's pathetic pro-Trump rally is easy -- but the anti-democratic movement behind it is no joke
September 22, 2021
Last Saturday, a much-anticipated Washington rally organized by a no-name TrumpWorld character was a complete bust, with only 50 attendees showing up to voice their support for Jan. 6 Capitol rioters, who were characterized at the event as "political prisoners."
Yet given that this event fell flat, does that mean that right-wing extremism in the post-Jan, 6 era is still a problem? Researchers who monitor online forums and track in-person far-right gatherings say the answer is simple: Yes.
"We condemn all violence, political violence," former Donald Trump campaign aide Matt Braynard told rally-goers on Saturday — from a stage that was barely a foot off the ground while flanked by a security guard with a singular AirPod. "This is about justice and disparate treatment and equal treatment under the law," he continued, attempting to create a frame of support around at least a few of the people arrested for their activities in or around the U.S. Capitol on Jan. 6.
Even though this particular rally drew what could generously be considered a lackluster crowd, extremism experts who monitor right-wing ecosystems online and in the real world say the sparse turnout doesn't represent the true scale of the threat posed by right-wing extremism.
Jared Holt, a resident fellow at the Atlantic Council's DFR Lab, who researches and tracks right-wing social media posts and conversations, told Salon that threat remains "incredibly urgent."
"A small showing at Saturday's event shouldn't be mistaken for a reflection of the far right generally," Holt said. "A lot of the dynamics we saw in play around Jan. 6 have since trickled into state and local politics, where there is often much less scrutiny and fewer resources to effectively address it."
The fact that last Saturday's gathering was a "bust" was "to be expected," Holt said, reflecting "the lack of apparent organizing that we saw happening online before the event."
"This rally ended up getting Matt Braynard a ton of press, raising his profile from a no-name organizer," Holt added. "What he does with this newfound visibility remains to be seen."
Oren Segal, vice president at the Center on Extremism at the Anti-Defamation League (ADL), largely concurred with Holt's analysis, telling Salon that it's important to focus on right-wing extremists in local communities around the nation.
"Whether it's harassing school boards, election officials or health care workers. we need to understand is that the front line against extremist activity and action is probably more local than it's been in a long time," Segal said.
"For years, people thought of an international threat, and more recently, we're thinking about these online spaces that can be very daunting," he continued. "Well, when you see people harassing individuals in your community, when extremists are talking about the need to double down locally, they know, or hope, that eventually will have a greater impact nationally than going to the nation's capital. I think maybe all eyes are on D.C. when all eyes ought to be in local communities to really understand the current extremist landscape."
Two pro-Trump attendees amid the dismal Saturday gathering showed up with flags bearing logos of the "Three Percenter" far-right militia. Yet when asked by Salon about the insignias, the duo claimed to be unaware of what the flags represent.
In a Tuesday afternoon press release, Braynard's Look Ahead America organization announced that it planned to hold another "Justice for J6" rally next weekend at the state capitol in Albany, New York. Why the seat of New York state's government is relevant to this cause — which involves alleged federal crimes committed on federal property — was not made clear.
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