How Johnson Avoided Paying Tons of Taxes
Meanwhile his backers are running an ad claiming Mandela Barnes didn't pay his taxes.
The campaign for U.S. Senate could get very personal when it comes to how the candidates have — or haven’t — paid taxes.
An ad by the Wisconsin Truth Super PAC supporting incumbent Republican U.S. Senator Ron Johnson attacks Lt. Governor and democratic challenger Mandela Barnes for allegedly failing to pay property taxes and income taxes. In fact, Barnes eventually paid the property tax owed for a condo he owned, and didn’t pay income taxes in 2018, the year he ran successfully for Lt. Governor, because he had no paid job that year and didn’t earn enough to be required to pay state or federal income taxes, as Dan Bice has reported. So both claims in the ad are false.
Meanwhile, Johnson has a history of avoiding income taxes. As a 2016 story by Progressive magazine reported, Johnson reported in required Senate Financial Disclosures that he loaned himself between $1 million and $5 million (the form only reports a range of money) from the Pacur LLC company he owned in 2004, and loaned himself another $1-$5 million in 2007.
As Iowa State University professor Dr. Dave Sly, a specialist in manufacturing corporations and corporate tax structures, explained to the publication, Johnson then had to pay only interest payments on the loan, which were paid back to the company he owned, while he paid not a dollar in income taxes on the payoff he got from the company. If his loans totaled $10 million (the top of the reported range), he thereby avoided paying $3.5 million in taxes (at the federal income tax rate of 35% for income over $319,000). If the loans totaled $2 million (at the bottom of the reported range), he would have saved $70o,000 in taxes.
Who benefitted from this? Johnson has admitted that he benefitted personally from this tax break. “Now, did my business benefit? Sure,” he said.
But the bigger gain may have been for key supporters of Johnson, like the Uihleins and Hendricks. As Politifact reported, an April 2021 study by the National Bureau of Economic Research found that the top 1% of Americans by income have received nearly 60% of the tax savings created by the provision. Most of that amount went to the top 0.1%, the study found.
“Confidential tax records… reveal that Johnson’s last-minute maneuver benefited two families more than almost any others in the country — both worth billions and both among the senator’s biggest donors,” a story by Pro Publica reported.
“Dick and Liz Uihlein of packaging giant Uline, along with roofing magnate Diane Hendricks, together had contributed around $20 million to groups backing Johnson’s 2016 reelection campaign.
“The expanded tax break Johnson muscled through netted them $215 million in deductions in 2018 alone, drastically reducing the income they owed taxes on. At that rate, the cut could deliver more than half a billion in tax savings for Hendricks and the Uihleins over its eight-year life…
Johnson has never disclosed how much his company benefited from the tax break he successfully added to the Trump tax plan. But he has admitted he doubled his personal wealth during the years he served as Senator. As Bice has reported, Johnson reported assets worth at least $16.5 million, yet paid just $2,105 in state income taxes for 2017. He has declined to explain how he managed to pay so little.
All of which is likely to be used in attack ads by Democratic groups supporting Barnes.