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Inside the Koch Machine

How extreme right-wing forces use front groups to shape Massachusetts politics

Blair Gimma and Will Meyer

The radical far-right billionaires Charles and David Koch are infamous. Invoking the Koch Brothers is synonymous with the tired lament of how money in politics distorts the democratic process. The Brothers are notorious for funding right-wing academics, think tanks, and astroturf social movements like the Tea Party. Their money, organization, and vision has fundamentally reshaped the American political landscape, pushing it further to the right. And they’re not stopping now: The Koch Brothers and their partners plan to spend $400 million on the 2018 midterm elections.

We could fill several books going through the recipients of their largesse—just this week we learned that a Koch-backed group is creating a curriculum for schools that dramatically revises the history of slavery and the civil rights movement—but little is discussed about the influence these brothers have on the state level here in Massachusetts. In this piece, we discuss just three places where Koch affiliated groups are having an influence in the Baystate. First, we consider the legal challenge to Proposition 80, better known as the millionaires’ tax. Then we discuss a shoddy study by a Koch and Wal-Mart backed think tank that was spread by the media without mentioning the study’s questionable sources or its funders. And last, we dive into how a Koch backed organization got a seat—or maybe five—on the State Senate’s Retail Task Force.

As we will show, The Kochs with their allies and operatives often masquerade as small business or taxpayer advocacy groups to front their radically unpopular policies. Just like the Tea Party vented popular rage  to rally support around the donor class’s policy wishlist, the same style of faux-populism is weaponized here. Wealthy far-right conservatives are using a complex web of foundations to conceal their money trail.

The Koch Brothers benefit from local media silence. It is rare that local outlets report on Koch activity at the local or state level (though it does happen). Chances are we’re barely scratching the surface, but here’s our attempt to remedy that.

PART I: Sue the state!

Do you remember the Obamacare lawsuit that went to the Supreme Court of the United States? Our story starts with the 2012 ruling of National Federation of Independent Business [NFIB] v. Sebelius, which upheld the constitutionality of the Affordable Care Act. But when the case went before the court, no one knew who gave the NFIB several million dollars leading up to the lawsuit.

Later that year the NFIB was revealed to be a front for dark money superstars Charles and David Koch and Bush Administration insider Karl Rove. In 2012 and 2013, Freedom Partners, a financial hub of Koch Bros money, donated $3.1 million to the NFIB. Other NFIB donors include Donors Trust, considered to be the ATM of the conservative movement, which between 2011 and 2012, donated $4.1 million to the NFIB Legal Foundation. Crossroads GPS, Karl Rove’s Super PAC, donated $5.1 million to the non-profit between 2010 and 2012. Further, when a congressional inquiry asked about its ties to right wing advocacy groups, the NFIB did not respond. It was also discovered that the group exaggerated its membership by more than 100%. Once claiming that its membership base was 650,000 strong, it now states that it has 325,000 members. According to Government Statistics reported in Forbes Magazine, there are approximately 28 million small businesses in the United States, which should relieve any doubt that the NFIB represents the core of small businesses.

Since then, the NFIB has doubled down on their legal efforts. As NFIB director Juanita Duggan put it, “Our experience in the Obamacare suit taught us an important lesson.” Adding, “We can’t sit on the sidelines. It’s time for us to get into this game because we’re going to be the plaintiff many times before the Supreme Court. That’s where all our policy decisions seem to be made.” The Washington Post reported that the so-called small business group vehemently opposed Obama’s attempted appointment of Merrick Garland and then strongly supported Supreme Court Justice Nominee Neil Gorsuch—famous for his cruel ruling in the ‘frozen trucker’ case. The organization has also been the plaintiff in multiple cases against Environmental Protection Agency, where they fought regulations. In a 2015 case on union elections, they fought to give businesses lead time to bust unions.

This year, The National Federation of Independent Business is one of five plaintiffs in an effort to sue the very popular millionaires’ tax off the ballot this November. Which is weird, because, according to a study funded by American Express, the average small business owner earns $68,000 a year, not more than $1 Million. The NFIB — and other groups from the corporate right — assert that the proposed millionaires’ tax isn’t constitutional because they believe taxes and funding for transportation and education are fundamentally unrelated.

In addition to the NFIB, other plaintiffs include the Associated Industries of Massachusetts, the Massachusetts Taxpayers Foundation, and the Massachusetts Competitive Partnership. The Taxpayer’s Foundation’s board contains several corporate executives from the likes of Wal-Mart, IBM, Microsoft, Bank of America, and Vertex Pharmaceuticals, just to name a few. And the Massachusetts Competitive Partnership was dubbed the state’s “most powerful business group” by The Boston Globe. In order to join you must pay $100,000 annually and be in charge of one of the biggest companies in the state. The group, in 2016, according to The Globe, had 14 white men and one white woman as members, from the likes of Bank of America, Vertex, the Patriots, and Raytheon, among others.

Whether or not the Massachusetts Supreme Court rules in favor of the millionaires’ tax, it is worth keeping in mind that the proposed tax is quite popular — 74% of those polled support it. That said, it will be easier to stop with appointed judges in court than at the ballot box with a popular vote.

PART II: Spread fake news

Continuing our who’s who of Massachusetts based Koch groups, last month, the Walton Family Foundation (Wal-Mart) and David Koch backed Pioneer Institute put forth a ‘study’ that was misleading at best. It claimed the millionaires’ tax, if implemented, would send high-earners packing to states like Florida, New Hampshire and California (the state with the highest tax rate for high-earners in the entire country). The so-called study titled, “The Federal Tax Reform Act’s cap on deductions of state income taxes has turned Proposition 80 into an economic time bomb for Massachusetts,” contains shoddy scholarship while omitting some very critical context and details.

To get an idea of the intellectual rigor employed by the self-proclaimed “independent, non-partisan research organization,” we looked at the footnotes in their report. To back up their principle claim—that high earners will leave the state—they first cite a “recent analysis” by a “proven financial expert” named Ray Dalio, who runs the largest hedge fund in the world. The recent analysis was published as a blog post on the professional social networking site LinkedIn. And the reason he is a proven financial expert, according to the study, is because he is “ranked by Forbes in 2017 as the 26th wealthiest person in America, and a philanthropist who, together with his wife Barbara, joined Bill Gates and Warren Buffett’s Giving Pledge, vowing to donate more than half of their fortunes to charitable causes within their lifetimes.” In the conclusion of his blog post, Dalio estimates that states with low taxes and high deductions will benefit “hopefully those who the money trickles down to.”

For starters, the report, in the first paragraph of its introduction, notes how Trump’s latest round of tax-cuts (the Tax Cuts and Jobs Act of 2017) will reduce the ceiling for deductions to $10,000, which will disproportionately affect high-earners who often have high-deductions. What the 17 page report doesn’t say is that Baystate residents who earn over $1 million dollars a year will save on average $95,800 with Trump’s cuts, according to a report by the Massachusetts Budget and Policy Center. In other words, the Pioneer study lacks necessary context for their main finding, by not including how Trump’s tax cut will in fact cut taxes—only how it changes the level for deductions. Further, despite the report’s insistence that many would flee the Commonwealth for Florida and New Hampshire—states that don’t have an income tax, the MBPC report suggests that “An anticipated $35.4 million in state and local revenue would be lost as a result of relocation, leaving the net revenue benefit to the commonwealth [from the millionaires’ tax] at $1.86 billion.” A Stanford Study, cited by the MBPC, found that tax motivated relocations happens “only at the margins of statistical and socioeconomic significance.”

Reading the local news, you’d have a different understanding of this study and its merits. The Shoestring reviewed more than a dozen media reports of the study, none of which mentioned the Pioneer Institutes’ funders, and none engaged the study critically. Many did suggest that there is other research that disputes the study’s findings, though at least three offered no counterargument. Most stories ran a headline that contained a verbatim rehash of the following: “Top earners could leave state, tax study finds.” The MassLive article was the only source we reviewed that mentioned donors (not conservative ones), saying that the Raise Up Campaign was supported by labor unions and community groups. While some mentioned that the Pioneer Institute was ‘conservative leaning’ or ‘free-market based,’ many stuck with something along the lines of “non-profit Boston based research group.” Not one news story mentioned that Pioneer Institute was funded by David Koch or the Walton Family Foundation, which, according to Pioneer’s annual report, gave at least $100,000 to the organization in 2016. (It is also worth mentioning that Governor Baker was Pioneer Institute’s first co-director in the late ‘80s—before the Kochs were involved.)

In sum, the media presented the Pioneer Institute’s research as if it were legitimate. Media outlets attempted to present a ‘study’ that falsely insinuated that the millionaires’ tax would make high earners leave the state without investigating the claim or problematizing it. Trying to appear objective, they often juxtaposed Pioneer “research” with information from the MBPC. However, their supposed neutrality didn’t help readers understand the context for either.

PART III: “Support local business”

Earlier this year, The Shoestring attended a local Senate Retail Task Force Meeting in Northampton, MA. After hearing the Task Force and its audience propose policies like cutting sick time, lowering teenagers’ pay, shirking healthcare responsibilities, and thwarting efforts to raise the minimum wage, we did some digging to see who was on the Task Force and what groups they were affiliated with.

In 2017, then Senate President Stan Rosenberg created a Massachusetts Special Senate Retail Task Force whose aim is to strengthen the local retail sector in the Commonwealth. Among the issues the Task Force was designed to tackle are local competition with online sellers, the effect of retail closures on property tax bases, and ways to increase sales. This summer, the task force will issue policy suggestions in the form of a report. The thirteen member task force includes senators, local retailers, and guess who else? The NFIB.

The NFIB infiltration of the task force is easy to trace. Senator Rosenberg and Senate Minority Leader Bruce Tarr split the responsibility of appointing members to the Task Force. Senator Tarr (93% NFIB rating) was allowed to appoint two senators to the Task Force. He chose Senator Don Humason (100% NFIB rating) and Senator deMacedo (100% NFIB rating). Tarr was also allowed to appoint three retailers to the task force. One of his appointees is not a retailer at all, but instead, Christopher Carlozzi, the state director of the NFIB. The Shoestring reached out to Senator Tarr for comment and didn’t get a response.

We spoke to Senator Rosenberg on the phone, and asked him about the influence of the NFIB on the Task Force. He revealed that he created the Task Force at the suggestion of Senator Tarr. When commenting on the appointment of Christopher Carlozzi, he made the point to differentiate between the national NFIB and the Massachusetts NFIB, which he characterized as a “well-known and fairly well respected organization here in Massachusetts.” To our knowledge, there is no difference between the two as the NFIB Massachusetts is simply an affiliate of the national organization. We reached out to Carlozzi for comment and didn’t get a response. Senator Rosenberg also spoke about the Task Force membership saying, “If you look at the Task Force overall, it is fairly well balanced, that is the most important thing.”

Christopher Carlozzi is a disseminator of right-wing propaganda, often promulgating misleading Koch Brothers funded studies right and right. In an op-ed Carlozzi penned in the Providence Journal, he referenced a study by the Mercatus Center at George Washington University where Charles Koch sits on the Board of Directors. The study aims to show that higher wages contribute to higher teen unemployment, a theory that along with other claims that higher wages will create unemployment, has been debunked by economists who are not funded by Charles Koch. The ‘teenager theory’ has been repeated multiple times by the Task Force in these meetings through a particular narrative in which Task Force members use the example that “teenagers who scoop ice cream” should not be paid $15 an hour. This exact ice cream talking point has even been told numerous times by Northampton City Councilor Dennis Bidwell who is a Democrat.

Even more shocking is the racially coded claim by Task Force member Jon Hurst at the Salem public Retail Task Force Meeting, who said, “Some of the very special interests that push for the $15 also want more taxpayer dollars to fund government funded summer jobs. That seems to be the solution for disadvantaged inner-city youth to work, is to have them funded by the government.” He continued, “They have this idea that all these employees are breadwinners of family of four. Or even that a teenager is helping to put food on the table for their family, and that is just not the case. That is not reality.” This is factually incorrect. Low income teenagers are dropping out of school to go to work in order to provide for their families.

Carlozzi also cites the “Seattle report” released by the National Bureau of Economic Research which is funded by ultra right wing donors like the Scaife Foundation. This report is used by the right as damning evidence that towns will lose jobs if they raise the minimum wage to $15. Northampton City Councilor David Murphy cited the report when arguing against a Resolution to Raise the Minimum Wage to $15, proof that these studies are shaping policies all the way down to non-binding resolutions at the local level. The report has been criticized by numerous economists who claim that it is biased due to its methodology and limited data.

Back to task force member Jon Hurst. He is the president of the Retailers Association of Massachusetts (RAM). The best indicator of RAM’s priorities is perhaps the fact that its Vice President Bill Rennie was on the board at the Center for Economic Opportunity at the Pioneer Institute, to which David Koch has contributed for almost every year between 1998 and 2014. In addition, RAM Membership Director Andrea Shea worked for the NFIB from 1998 – 2004 where she filled a variety of positions including work in the Federal Governmental Relations Department in the Washington D.C. office, as Assistant-State Director in the NFIB Massachusetts office, and as a Membership and Grassroots Manager in the NFIB Massachusetts office.

In addition to being the president of RAM, Jon Hurst served as a board member to National Retail Federation, which joined the NFIB in endorsing a 2016 bill that would delay the Labor Department’s implementation of overtime pay for salaried employees. The National Retail Federation also joined associations like Koch Companies Public Sector, the American Petroleum Institute, and Chevron to create a dark money LLC to fund an exclusive Republican lawmaker hideaway at the 2017 Republican National Convention.

While not quite as swampy as her fellow Task Force members, Senator Kathleen O’Connor Ives, who was appointed by Senator Rosenberg, was endorsed by the NFIB in the 2014 Senate race. She angered many of her Democratic supporters by voting for salary increases for Senators and against a minimum wage increase based on inflation for non-Senators.

Of the thirteen seats, there are a handful of ‘moderate’ senators and small business owners. There are also two union representatives, Jim Carvalho of UFCW and Harris Gruman of SEIU. Gruman is the one of the founders of Raise Up Massachusetts, a grassroots coalition that is fighting for a $15 minimum wage, paid leave, and the millionaire’s tax. When we asked Harris Gruman about the NFIB’s influence on the Task Force he told us, “there’s no love lost between NFIB and SEIU, I assure you!” However, at the Retail Task Force meeting we attended, with the exception of Gruman’s advocacy for a $15 minimum wage, and contradicting Senator Rosenberg’s notion that the Task Force is fair and balanced, the majority, if not all of the policies we heard requested by both small business owners in the audience and the majority of the Task Force were the bread and butter policy planks of the NFIB.

Is it possible that the small business owners attending these meetings don’t know that the Koch Brothers are shaping Main St policy? We reached out to Northampton Task Force member and small business owner Judy Herrell and have not heard back.

Conclusion: Class solidarity

These policies being engendered by the radical right are a matter of life and death. If the Koch Brothers have their way, the minimum wage will stay low (or become completely obliterated), sick days will be reduced (or cut entirely), overtime will be decreased (or eliminated), wage theft protections will continue to weaken, and employers will be absolved of having to offer healthcare. But, employees will not be the only ones to suffer. It is not realistic to think that these kinds of policies save small businesses in the long run. Moreover, these kinds of policies will produce more poverty, sickness, and houselesness in the communities where they are implemented. Small businesses are being duped into short term economic gains at the expense of the welfare of their employees, who will no longer have the money to buy things from their shops, or necessities like groceries and rent.
At the end of the day, the swamp has yet to be drained, as big business masquerades as small business to push through a radical agenda. As organizations like the NFIB—expressed by their influence on the Retail Task Force—continue to pit employees against workers, small business owners must choose how to align themselves politically to best achieve their goals. Do ice cream shop and pet store owners ally with the Koch Brothers to further push their employees under the bus, or do they take a more holistic view of the entire economy—to realize that eight rich dudes control most of the wealth in the United States and don’t give a damn about anyone’s small business? As Charles Koch said earlier this year, “We will work with those of all walks of life, all persuasions, even those we can only find one issue to work together on.” It is time to start asking small business owners and our senators if they know who they are working with.

Blair Gimma and Will Meyer are editors of The Shoestring.

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