‘Grass-roots’ tax foe

While complaining that a state tax-increase proposal is a blatant effort by special interests, a Washington, D.C.-based group refuses to disclose the identity of its own corporate contributors.

Citizens for a Sound Economy Inc. and its affiliates historically receive millions from companies that benefit from the “grass-roots” political efforts. The group’s latest aim is to defeat a tax-reform package that Gov. Bob Riley proposed.

National officials of CSE, a nonprofit political action group, discussed strategy with members of the group’s local branch last week. One of the most effective strategies in the effort to defeat the tax increase in the Sept. 9 referendum, they said, would be to emphasize the enormity of the special interests supporting the tax increase.

“We need to use their power against them. Nobody likes special interests,” said Martin Reiser, public affairs strategist for both CSE and its tax-exempt affiliate, Citizens for a Sound Economy Foundation Inc.

“We believe we are underdogs in this fight. We’re up against the most powerful special interests in Montgomery, particularly the Alabama Education Association and the Business Council (of Alabama). … Special interests in Montgomery are trying to get farther and farther into our pocket,” Reiser said.

The director of campaign operations for both CSE and CSEF, Stephen Flaherty, told the group, “If we work together efficiently, we can beat their money every time.”

‘Grass-roots’ label

Reiser and Flaherty repeatedly characterized their organization as “grass roots,” a refrain in CSE’s promotional literature. The group’s Web site uses the term “grass roots” 550 times. The term “corporate contributions,” however, is absent.

CSE and CSEF may project a grass-roots image, but its funding sources are anything but.

According to forms filed with the Internal Revenue Service, CSEF received contributions, not including money going to CSE, of $4.4 million in 2001. In 2000, the amount received was $6.6 million. In 1999, CSEF received $7.3 million in contributions.

Of the nine contributions listed in CSEF’s 2001 report — the identity of the contributors is not public record — the average gift was $345,032. In 2000, the average listed gift was $317,360. CSEF officials refused to identify the donors.

Local chapter

The president of the local chapter of CSE, Terry Smith, said he approves of CSE’s conservative political message. He is troubled, though, by the national headquarters’ decision not to release the identity of contributors.

“Personally, I think they should be disclosing the contributors,” Smith said. “If they’ve gotten big bucks from big business, the honest thing is to report it.”

“I can see how that would be a legitimate complaint, that they’re working for some big businesses trying to get their taxes down,” he said.

Smith said he would prefer that CSE not accept contributions from special interests, but financial realities require him to rely on CSE.

“I don’t have millions of dollars to give to this campaign (to defeat Riley’s tax-reform plan). Sometimes you’re stuck with the fact of accepting that they have the money to give. Lower taxes is an issue I agree with, but I guess I’m caught in the middle,” Smith said.

Smith said CSEF pays a few hundred dollars a month to fund the local chapter’s airing of a twice-a-month TV show called “What Do You Think?”

Although Smith said he wants Riley’s proposal defeated, he said he likes parts of it. He supports accountability provisions in the bill and he supports exempting the poorest citizens in the state from income tax.

“I’m not fighting for timber interests or cigarette companies. I’m not associated with those folks in any way,” Smith said.

But Smith and others like him give CSE, which claims 7,000 members in Alabama and 280,000 nationwide, the fuel it needs to proclaim itself a grass-roots organization.

Refused to name donors

CSEF, like all tax-exempt nonprofits, must annually file a Form 990 with the Internal Revenue Service. Most of the information on these forms is public record, but not the list of contributors. The forms made public by CSEF have the identity of all contributors whited out.

Chris Kinnan, CSE’s director of public affairs, refused to provide the whited-out contributor identities to THE DAILY “out of respect for donor privacy.”

“Donors themselves are free to disclose if they contribute, but we don’t disclose the names of our donors,” Kinnan said.

Asked if CSE and CSEF would consider reversing the secrecy policy for future contributions, Kinnan said, “No, we would not.”

Kinnan also refused to comment on the past contribution figures reported by media.

A Washington Post article reported CSEF received a $380,000 grant from Microsoft Corp. in May 1999. On December 1998, CSE issued a news release stating that CSEF applauded South Carolina’s decision to withdraw from the multi-state class action against Microsoft. In January 1999, CSEF announced the results of a poll that its director said demonstrated most Americans supported Microsoft against the U.S. Department of Justice.

Dozens of other CSE news releases supported Microsoft’s antitrust positions in 1999 and 2000.

The same pattern existed for contributions received in 1999, according to records obtained by the Sierra Club. CSEF in that year received $600,000 from a foundation controlled by an oil-and-gas conglomerate; $250,000 from General Electric; and $250,000 from the Daimler-Chrysler Corporation Fund. The same year, CSE intervened in a case challenging the constitutionality of the Clean Air Act. CSE, like its contributors, argued against the act.

According to contribution records obtained from CSE and CSEF by a nonprofit public interest group called Public Citizen, cigarette-manufacturer Philip Morris Cos. Inc. contributed $1.1 million in 1998. In June 1999, CSE condemned then-President Clinton for proposing a class-action suit against tobacco companies. In the same month, CSE condemned increasing taxes on cigarettes. A November 1999 CSE news release condemned contingency fees for attorneys suing tobacco companies.

Pharmaceutical companies contributed $373,750 to CSE and CSEF in 1998, according to the Public Citizen report. In June 1999, CSE condemned a Clinton administration proposal to nationalize prescription medicine.

A million-dollar contributor in 1998, U.S. West Communications, benefited from CSE’s push for deregulation of long-distance phone service.

Determining the extent to which contributors may be affecting CSE’s decision to actively oppose Riley’s tax proposal is difficult given its refusal to disclose current information. A look at 1998 contributors, however, suggests enemies of Riley’s package may have friends at CSE.

Georgia-Pacific Corp., for example, contributed $101,000 to CSE, according to Public Citizen records. Georgia-Pacific is a major player in Alabama’s timber industry. Along with large-scale agriculture, timber interests will see a major jump in their property taxes under Riley’s plan.

Other agricultural and timber interests contributed $258,000 to CSE and CSEF in 1998. The Alabama Farmers Federation, which opposes the tax package, predicts an effective property-tax increase on large farms of 400 percent. If this is accurate, costs would increase for food retailers. Food retailers gave CSE and CSEF a combined total of $633,250 in 1998.

Some of the largest contributions to CSE were from tobacco companies. Riley’s proposal includes a substantial tax increase on cigarettes.

Riley’s chief of staff, Toby Roth, previously served as the director of CSE’s Alabama operations. He avoids direct criticism of the group that opposes his new boss, but he said CSE money could have a major impact on the referendum results.

“I’m not prepared to say CSE is for sale,” Roth said, “but they have a very active fund-raising operation. The extent to which they are effective will be dictated by their fund raising from businesses that are opposed to the package.”

On the Net: Citizens for a Sound Economy, www.cse.org

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