How Hovde Evaded Federal Taxes

Eric Hovde.

Wisconsin Republican U.S. Senate candidate Eric Hovde has released a new ad promising that if elected, he will donate his salary back to charity.

“I’ve worked hard. Been fortunate,” he declares, and therefore can afford not to spend the salary of $174,000 for the job of senator and will donate it to charity “every year” he declares.

One way he became wealthy, it’s now become clear, is by not paying federal taxes. “Hovde invested tens of millions of dollars in insurance companies that operated in the U.S. but were based in Bermuda, and therefore benefited from not having to pay U.S. corporate taxes,” an analysis by Politico found.

“Between 2003 and 2013, Hovde’s asset management firm Hovde Capital reported non-controlling investments worth up to $74 million in more than a dozen Bermuda-based insurance companies,” the publication reported. “Bermuda doesn’t have a corporate income tax and has even offered “tax assurance certificates” to ensure holders temporary insulation in the event that ever changes. Every Bermuda insurer that Hovde Capital invested in held those certificates, according to a review of SEC documents.”

“One of Hovde Capital’s top investments was worth $7 million in Bermuda reinsurer Max Re, whose CEO reportedly said that many investors in the company understood that it was a ‘tax-efficient’ investment play and has told investors that the company planned to operate so that it would ‘not generally be subject to tax’ outside of Bermuda. Hovde’s firm also invested in several American companies that moved their headquarters to Bermuda to save on taxes,” the story reported.

Hovde’s campaign didn’t deny any of this, but instead Hovde campaign spokesperson Ben Voelkel passed the whole thing off as a“ridiculous” attack by liberals because incumbent Democratic Sen. Tammy Baldwin “can’t run on her own record as a nearly 40-year career politician and rubber stamp for the Biden agenda.” Except that Politico has also done investigative stories on Democratic politicians.

In comments to Urban Milwaukee Voelke defended Hovde, saying this: “These were small (percentage wise) investments and he never had any operational control over these firms. There has never been an allegation that he did not follow the law with regards to taxes.

Many, if not all, members of Congress likely have similar exposure. See this list of companies with subsidiaries in countries without corporate tax. In fact, according to research out of Duke University’s Fuqua School of Business, a “Majority of Publicly Traded U.S. Multinational Firms Use Tax Havens.” So if you own a general index fund, you have exposure to these companies.”

Back in 2012, in his last run for U.S. Senator Hovde ran an ad criticizing big corporations that pay nothing in federal taxes and in 2021 he called for a minimum tax on all corporations. “This is one I really agree with them on because I’ve always hated it — companies like Goldman Sachs or Apple can put all their technology in offshore places and pay no taxes,” he said.

Does Hovde still favor such a law? And if so, how does he square that with his investments in companies that evaded taxes?

As for his pledge to reject any donations from corporate special interests and self-fund his campaign, he can’t control how corporations and wealthy individuals spend their money through independent political groups. Nowadays, such third party spending often outspends the campaign. How will Hovde assure voters that he won’t be influenced by these donations if they help get him elected?

Hovde’s promise to pay his salary to charity also raises questions. It’s a bit reminiscent of another wealthy candidate for office, former Democratic U.S. Sen. Herb Kohl, who promised to be “Nobody’s Senator But Yours” and announced he would accept his salary as a senator, which was $89,500 when he was elected in 1989, but returned all of the pay raises after that to the treasury. Hovde, instead, says he will give his entire salary to charity.

Except: he hasn’t decided the exact charities to which he will donate his salary, other than that it won’t go to the Hovde family foundation, Voelkel told the media. Since Hovde’s pledge has been given to voters to convince them them to support him, and since it seems to suggest this would be better for Wisconsin than if he returned his salary to the U.S. Treasury, shouldn’t voters be informed which charity or charities will be the beneficiaries? He could for instance, give all the money to conservative nonprofits that are trying to undermine democratic elections.

If that sounds unlikely, it’s worth noting there are countless charities out there, including some that get very poor ratings from watchdog groups. Hovde’s promise doesn’t mean much unless we know which groups will benefit from the salary that taxpayers will pay him.

Update March 21: This story was revised to include comments from Hovde’s spokesperson Ben Voelkel.