The basic story, in case you haven't heard: On August 27, in a background briefing with reporters in which he expected to be described as a "senior administration official" and not "Austan Goolsbee," the White House's soon-to-be-appointed chair of the Council of Economic Advisers said this:
So in this country, we have partnerships, S corps, we have LLCs—we have a series of entities that do not pay corporate income tax. Some of which are really giant firms. You know, Koch Industries, I think, is one, is a multibillion dollar business, and so that creates a narrower base because we got literally something like 50 percent of the business income in the U.S. is going to businesses that don't pay any corporate income tax.
Koch Industries, as you may recall, is the family business of Charles and David Koch, the two most influential donors to libertarian institutions in American history. The Kochs helped found the Cato Institute, the Mercatus Center, and the Institute for Humane Studies, among many other organizations, and have given money to the Reason Foundation over the years (David sits on our Board of Trustees). They were also instrumental in the initial development of the Libertarian Party, for which David ran as vice president in 1980, and have been big donors to more conservative and various nonpolitical causes as well. They are not being trashed for their libertarianism per se in the campaign season of 2010, but because (in the phrasing of the headline on Jane Mayer's influential August feature in The New Yorker), of their "covert operations" in "waging a war against Obama."
Goolsbee's comment drew enough attention from Koch lawyers and Republican senators that the Treasury Department's inspector general is looking into whether he or any other administration official dug improperly through the tax records of a private company. If he did then Goolsbee got at least one important fact wrong, since KI does indeed pay corporate taxes, according to reporting by multiple outlets. The White House's official reaction, in part:
No senior administration officials have any access to anyone's tax returns—individual or business. The administration official was discussing the section of the [President's Economic Recovery Advisory Board]'s tax report that argued we should look at the rising importance of pass through entities that do not pay corporate income tax.
This issue was raised repeatedly by outside experts that testified before the PERAB and Koch was cited to the PERAB as an example by outside commenters to the group. We assume it came up from publicly available information such as the Forbes magazine annual report listing Koch as one of the largest private companies in the nation or the fact that a high fraction of the largest companies within Koch Industries are listed on the Koch website as LLCs, LPs or other frequent pass-through entities. If this information is incorrect, we are happy to revise statements.
An "administration official" also told Politico:
The officials statement was not based on any review of tax filings, and we will not use this example in the future.
Well, they won't use Koch-related organizations as an example of corporate tax-dodging, maybe, but you can bet your bottom dollar that the administration and its surrogates will continue slamming the Kochs for laying off American workers ("The question for the Kochs is instead of spending money on secret campaigns to fill the government with candidates that will enact their special interest agenda, why aren't they spending that money on saving those American jobs?"), maybe being part of a shadowy foreign plot ("You don't know if it's a foreign-controlled corporation.[...]We've got to make sure that we don't have a corporate takeover of our democracy."), for "bankrolling" anti-mosque demonstrations and plotting a "billionaires' coup," and on and on. There is I think zero doubt that the administration began a coordinated PR campaign against the Kochs by early August at the least, and that Goolsbee was just (consciously or unconsciously) doing his part.
But wait, didn't Planet Libertarian have higher hopes for the jauntily named economist (who you can see in a 1999 Reason piece declaiming Internet taxes)? Why yes it did. In fact, the proximity of Goolsbee to Obama was frequently cited as a key reason why some self-identified libertarians were going to vote for the Democratic nominee in 2008. Here's a trip down memory lane:
Obama's chief economic adviser—a friend from the University of Chicago, where they both taught—sounds an awful lot like a libertarian (though I don't know if he accepts the label).
Perhaps I am too optimistic about Obama, but I do not think he is going to turn out to be an orthodox liberal. There is a group of intellectuals connected with the University of Chicago who have accepted a good deal of the Chicago school analysis but still want to think of themselves as leftists. They are, as I see it, trying to construct a new version of what "left" means. Examples would be Cass Sunstein and Austan [Goolsbee], both at Chicago, and Larry Lessig, who used to be there. [...]
[Goolsbee], judging by webbed pieces of his I've read, is a pro-market economist who happens to be a Democrat, rather like Alfred Kahn, who gave us airline dereguation under Carter. He is also Obama's economic advisor. [...]