The Trouble with the Trib (part 4)

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Taxation, Texas

 
There are other inequities related to the Trib that have never even been mentioned by the legislative and political community. While CEO Smith and his staff of about 30 journalists and an army of interns are scouring the capitol for all the news that doesn’t offend, they are getting a huge tax break as a non-profit. Tax considerations are also an inducement for corporate giving to the Tribune. Unfortunately, tax laws are screwing the small, for-profit businesses engaging in reporting at the Texas capitol and competing against the Tribune.

Harvey Kronberg, who publishes the insightful “Quorum Report” on Texas politics and legislation, has only a couple of people on his staff to compete with the leviathan Tribune, but his daily newsletter has remained viable and popular. Kronberg, however, has to pay salaries along with operational costs, and then taxes on any profits. The owner and publisher of “Capitol Inside,” Mike Hailey, is also competing with Kronberg and the Tribune, and functions as an independent business attempting to build revenue and profit margins. In effect, when Kronberg and Hailey send their checks to the IRS, they are also underwriting the operations of the Texas Tribune, a competitor who threatens the very existence of their political newsletters.

The Business Coalition for Fair Competition (BCFC), a national lobby organization, describes the situation above as “unfair government sponsored competition with private business.” John Palatiello, who is president of the BCFC, testified before the House Committee on Ways and Means in February 2013 and asked Congress to address the “unfair advantages of non-profits” in the commercial marketplace.

“The effect of these special privileges,” Palatiello said, “is that government policy not only reduces the costs of non-profit organizations, but it also raises the costs of doing business for their for-profit competitors. Profit seeking firms must pay higher taxes and postal rates to offset the subsidies accorded non-profits. Thus, because of this preferential treatment, competition between non-profits and for-profits is inherently unfair.”

In an historic report by Ways and Means more than a half century ago, Congress laid the predicate for non-profit tax benefits, and by any reading, the Texas Tribune is a business, and does not deserve to be exempt from the same taxes paid by Kronberg and Hailey.

“The exemption from taxation of money or property devoted to charitable and other purposes is based upon the theory that government is compensated for the loss of revenue by its relief from financial burden which would otherwise have to be met by appropriations from public funds and by the benefits resulting from promotion of the general welfare,” the committee wrote.

The unmistakable interpretation of those words is that unless the non-profit is providing a service not available through commercial businesses, it ought not to be tax exempt. John Thornton and his CEO Evan Smith might argue that there was not sufficient government and political news at the capitol but adequacy is not the IRS’ metric. News is being provided by commercial, for-profit businesses, and if the Texas Tribune wants to do a better job at that endeavor they ought to compete fairly and pay their taxes. There is no basis in logic for the Trib to receive a tax exemption that disadvantages small business people like Kronberg and Hailey, and all the legacy mainstream media facing shrinking margins and making budget cuts that affect their ability to compete with the untaxed Smith Squad.

The IRS needs to conduct a full audit of the Texas Tribune. If it is shown the publication is operating as a business and generating revenue by selling ads and sponsorships, the exemption ought to be removed and the Trib made to compete with the rest of the capitol media on the basis of fairness. Tax exemption rules need to be more strictly interpreted. Current estimates are that they cost the U.S. Treasury about $40 billion annually. The Texas Tribune needs to contribute its share, and stop being provided a competitive advantage against other media companies.

No one has written about the Tribune’s hypocrisies and contradictions with any detail simply because they feared sounding petty or self-serving. Texas newspapers, some of which use the Tribune’s stories, can hardly be expected to criticize an editorial service they use or to publicly whine about unfair competition. The Quorum Report and Capitol Inside could expect its lobby and legislative information sources to go quiet because they, too, must function in a culture of cooperation that is implicit in the way business is conducted by the Texas Tribune.

Politics is a cruel game. Journalism is not supposed to play it, though. Reporters are expected to cast little lights into dark corners and illuminate the way government works and who has influenced its decisions. The Texas Tribune rarely lives up to that mandate and, instead, takes big cash from the people and institutions it is supposed to hold accountable. Money is coming in the door as fast as integrity and credibility are running out.

In less than five years, the Texas Tribune has gone from being an exciting startup to a hypocritical, money-grubbing promotional operation wearing a coat of many colors that it wants desperately to convince everyone is actual journalism. But it is not. There is no reason to any longer take the Tribune seriously as a news organization. They simply cannot be trusted.

The big brains of the Texas Tribune were supposed to save journalism. Instead, they are busily speeding up its extinction.

And they ought to be ashamed.

 

7 COMMENTS

  1. The Texas Tribune is corporate journalism at its sneakiest finest. Of course, it’s become co-opted. There’s no way it can’t be. What’s surprising is how proactively it has done so, and how laughably head-in-the-sand the editor is about it. It’s become Politico on Lady Bird Lake, with its implausibly deniable quid pro quo-style relationships. I guess the cash cows are flush and the milk addictive, and Caesar’s wife is working the machines. Editor Smith learned this grift at the best little coffee table magazine in Texas, but now substitutes generous donations for the slick expensive ads. And now these heartfelt donations become laws ‘donated’ by political players. Smith and the Tribune were a match made in board-room heaven. Even his self-exalted public TV interview program was tainted with kowtowing to many players who in a better world would have been too disgraced to appear in public. Thomas should work harder to not become one of them.

  2. I’ve known this was going on for quite some time, but I didn’t know the extent of the corruption nor the pervasiveness of the stink. As the co-founder and ED of a real non-profit, I’m outraged. We abide carefully, step-by-step, to the rules. The Trib should not glide past them based on the perception that they’re “too big to fail,” which is how it appears. And as a former practitioner of real journalism, I believe they should no longer be allowed to claim they’re journalists, because they’re not. They’re PR flacks and businessmen providing a service for a fee. Bravo to Mr. Moore, the intrepid journalist who gathered these facts! Let’s have an IRS audit, please.

  3. Great piece, Jim. Unfortunately, other journalism is heading that way. Glenn Greewald is making hoopla over his new venture and claiming independence, but what if Omidyar drops hints he wants Greenwald or others to write about some corporate friends of his, and not just the NSA?

    In the Trib’s case, if money is power, it’s now getting to the point where it’s working to leverage the two back and forth, sadly.

  4. After reading Mr. Moore’s article, I would now equate TT as no more than being a highly successful blog. But in doing so, I fear I demean Mr. Moore’s blog, which happens to show more journalistic integrity than TT’s faux journalism.

  5. When can we expect you to reveal your donors, and to scrutinize other non-profits?

    This is from NPR’s website:

    We are scrupulous in disclosing funding relationships that might foster the perception that our supporters have influenced our work. At the same time, a laundry list of disclosures would clutter our programs, rendering appropriate disclosures meaningless, so we avoid rote disclosures each time a supporter is mentioned in our coverage. Whether or not to disclose a funder during the course of a particular story is a careful judgment made by editors and producers on a case-by-case basis. As always, we act carefully and thoughtfully to strengthen the public’s confidence in the independence of our work. For this reason, it’s also important to note that NPR journalists do not read funding credits on-air or online.

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