Johnson benefited from tax cut, but it's not a loophole

As a two-term incumbent, Republican U.S. Sen. Ron Johnson of Wisconsin has a record to run on – and to run against. In addition to Democratic contenders, a series of opposition groups are mining that record to make the case against Johnson.

Into that fray comes Opportunity Wisconsin, which describes itself as representing Wisconsin residents in the fight for economic equity. 

The group launched a TV ad in February that opens with the words "Dereliction of Duty" on the screen, and features a man identified only as "William B." a U.S. Air Force veteran. Speaking to the camera, the man lays out a three-part claim, complete with footnotes on the screen:

"Ron Johnson pushed through a special tax loophole that benefited his own family's business … Then he cashed out of the company for $5 million … (he has) doubled his wealth since taking office."

It appears as a simple string of interconnected facts, all based on past reporting. But it comes with its own series of caveats and asterisks that muddy the truth of the claim.

Let’s start with the first part of the claim – the "tax loophole" – and rewind back to 2017. 

That's when former President Donald Trump proposed a tax overhaul that included a reduction in the corporate tax rate and a repeal of the requirement that all U.S. citizens have health insurance. 

To get the measure through the Senate, Trump needed the full support of Republicans, but Johnson announced he would not back the measure. 

Johnson insisted that the measure include a tax break for so-called "pass-through" companies – those that pass all their income on to the owners or investors. Companies structured this way (often small, family owned businesses) are not subject to corporate income tax.

In the end, the provision was added to the package, and it passed the Senate with Johnson’s support.

To be sure, Johnson’s family-owned business fell into that pass-through category, as did those of many key supporters. 

Nevertheless, Opportunity Wisconsin missteps when it calls the change a "loophole" – the change was well-publicized at the time. And the group mischaracterizes the situation when it suggests the primary beneficiary was Johnson and his family.

Indeed, of the 26 million businesses in the nation in 2014, 95 percent were pass-throughs, according to a May 15, 2017 article published by the Brookings Institution, a Washington, D.C.-based think tank.

But, even that asterisk warrants a footnote.

A ProPublica investigation, published Aug. 11, 2021, found "that Johnson’s last-minute maneuver benefited two families more than almost any others in the country — both worth billions and both among the senator’s biggest donors."

The article noted: "Dick and Liz Uihlein of packaging giant Uline, along with roofing magnate Diane Hendricks, together had contributed around $20 million to groups backing Johnson’s 2016 reelection campaign."

Finally, in a recording obtained by the Milwaukee Journal Sentinel, in which Johnson addressed a group of donors on April 8, 2022 in Medford, Johnson acknowledged that he and others benefitted, framing it this way:  

"Now, did my business benefit? Sure. Did some of my donor businesses? Sure. When you give tax relief to everybody, everybody benefits." 

This part of the claim, on the sale of the business, is the most straightforward.

Johnson’s family-run company – Pacur LLC, an Oshkosh-based plastics company – was created by Johnson along with his brother-in-law in 1979. Johnson was CEO of Pacur LLC until he was elected to the Senate in 2010. 

He sold his interest in the company to Gryphon Investors in 2020 for between $5 million and $20 million, according to federal disclosure reports, which only provide a range. He acknowledged he was in talks about a deal to sell as late as 2018 – so, after the tax measure passed the Senate.

The $5 million cited by Opportunity Wisconsin is on the low-end of the range. The actual sale price is unknown, as Johnson is not required to disclose it.

For the final part of the statement – on Johnson’s wealth doubling – Opportunity Wisconsin said it based its calculations of Johnson’s wealth on the methodology used by OpenSecrets, the Congressional Integrity Project and NBC News.

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Here’s how we broke down those numbers:

When Johnson was elected in November 2010, his financial disclosure forms showed assets of between $17,062,029 and $76,836,000. The midpoint of that range is $46,949,015. 

In 2011, when Johnson took office, his disclosures showed assets (with no liabilities) totaling between $8,767,016 and $38,743,000. The midpoint of that range is $23,755,008.

So, a lot depends on the starting point. 

Fast forward to his 2020 disclosure. In it Johnson’s net worth totalled between $16,951,012 and $79,117,002, with a midpoint of $48,034,007.

This means Johnson more than doubled his wealth. The disclosure forms only provide a range, so precise figures cannot be obtained. But, in any case, Johnson does not dispute it.

Johnson told the Milwaukee Journal Sentinel: "When I got elected, I took all my marketable securities (and) I turned them into cash. I’ve just been sitting on cash. The reason my wealth doubled is I finally sold my business. I cashed out on that. … I sat on cash, I'm still sitting on cash."

Johnson also noted that since he took office, that Standard & Poors 500 Index nearly quadrupled.

"I knew during the COVID recession, this is a really good time to invest (in) the stock market. I didn't," he said. "I should have increased my wealth 3.8 times." 

Opportunity Wisconsin claimed "Ron Johnson pushed through a special tax loophole that benefited his own family's business … Then he cashed out of the company for $5 million … (he has) doubled his wealth since taking office."

The change benefitted his business – but also applied to tens of millions of other businesses. And it was hardly a loophole, if it was widely discussed publicly. He did sell his company for at least $5 million, but the doubling of wealth deserves more context: In that period, the S&P Index nearly quadrupled.

So, the overall claim is a mixed bag – it’s partially accurate but leaves out important details or takes things out of context.

That’s our definition for Half True.