Most of Manchin’s Income Is Gleaned From Doing Zero Work

Axios this weekend reported that Manchin has gone full Bond Movie Villain, demanding “a firm work requirement” and means testing for the child tax credit that has significantly reduced poverty, and that has supported more than 346,000 children in his home state. Manchin has taken time away from hosting parties on his luxury yacht to tell the press that he’s worried about “our economy, or basically our society, moving towards an entitlement mentality.”

In addition to the work requirement, Manchin is also demanding that the program only help families making less than $60,000. Earlier this month, he explained his thinking: “If you’re gonna target, target to people that need it the most, the working.”

But adding a work requirement to the child tax credit would punish the poorest kids, and it is unlikely to impact their parents’ labor force participation, according to research from the Center on Budget and Policy Priorities and a recent paper from the National Bureau of Economic Research.

As Manchin continues deriding an “entitlement mentality” from the deck of his yacht, most of Manchin’s annual earnings come from sources that do not require him to do any work: He has been raking in hundreds of thousands of dollars each year from corporate dividends and a sprawling stock portfolio, according to his financial disclosures.

While the Senate’s weak disclosure rules make it impossible for the public to know exactly how taxes apply to Manchin’s vast personal fortune, tax experts tell the Daily Poster that it is likely he is benefiting from preferential tax rates for much of that passive income that he did not work for, and that include no work requirements to qualify for.

And notably, Manchin is not trying to add work requirements to those tax policies.

Manchin’s Coal Dividend Windfall

From 2015 to 2020, Manchin raked in nearly $2.6 million in dividends, interest, and other income from his family’s coal brokerage business, Enersystems, according to his financial disclosure forms.

Under the current tax code, passive income from qualified dividends is taxed at different — and often preferential — rates than ordinary income. Those preferences primarily benefit the wealthy, who disproportionately own dividend-generating stocks.

Enersystems sells waste coal, an especially dirty form of fuel, to a West Virginia power plant. Manchin put the company under his son’s control when he was elected secretary of state. He recently defended his Enersystems payments in an exchange with Bloomberg News, saying: “I’ve been in a blind trust for 20 years, I have no idea what they’re doing.”

In other words, he’s saying the fortune he’s paid by the coal brokerage every year doesn’t pose a conflict of interest because he’s doing literally nothing for the money. He makes more every year from Enersystems than he is paid for being a US Senator. Indeed, he has hauled in an average of $428,000 over the past six years from Enersystems while doing no work for the company — assuming you don’t count “work” as using his public office to shill for the fossil fuel industry and try to gut Democrats’ climate legislation, which is happening right now.

Additionally, he has received between about $48,000 and $149,000 in dividends from other sources since 2015.

Manchin’s office did not respond to Daily Poster questions about whether the dividends are qualified or nonqualified for special lower tax rates not linked to work requirements. However, most dividends are qualified, according to Matt Gardner of the Institute on Taxation and Economic Policy.

“Nationwide in 2018, there were $321 billion of ordinary dividends, of which $243 billion were qualified for lower rates,” Gardner told the Daily Poster. “So you can certainly say it’s probable that Manchin benefited handsomely from reduced rates for qualified dividends.”

University of Michigan tax law professor Reuven Avi-Yonah added: “Most dividends from U.S. sources and even most from foreign corporations are qualified.”

Taken together, Manchin could be getting tax preferences on hundreds of thousands of dollars of work-free dividend income each year.

Gardner added that Manchin’s “business income could be eligible for the 20 percent qualified business income deduction, introduced by the 2017 Trump tax cuts,” noting: “there are income limits that might reduce the value of the deduction.”

Manchin’s Capital Gains, LLCs, and Yacht

Similarly, Manchin has reported vacuuming in between $641,000 and $1.9 million worth of passive income off sales of stock funds since 2015.

“If he held (those funds) for more than a year, he would get long-term capital gains rates,” Proskauer tax attorney David Miller told the Daily Poster.

Manchin additionally reported sizable investments in West Virginia property. Gains from those assets — which are gleaned regardless of work status — will also presumably be subject to lower capital gains rather than higher income tax rates.

The long-term capital gains rate for income earned without working tops out at 20 percent — far lower than the ordinary income tax rate Manchin would be paying at his income level.

Manchin also has listed an ownership stake and passive income in AA Property LLC, which is invested in commercial real estate, including a La Quinta hotel. President Donald Trump’s tax cut package created new tax breaks for income funneled through such vehicles — and those tax breaks do not include requirements to have worked for that income.

Meanwhile, Manchin put his yacht inside a limited liability company, which could provide him other tax preferences not tied to a work requirement.

Manchin Backed Estate Tax Repeal With No Work Requirements

In 2013 and 2015, Manchin voted for Republican legislation to eliminate a $5 million cap on income exempted from the estate tax, despite the fact that there are so few West Virginia estates subject to the levy that the IRS listed the number as near-zero. The agency avoided releasing a specific tiny number of taxable estates in the state for 2018 because doing so might accidentally identify the handful of wealthy West Virginians to whom it applies.

While depicting himself as a deficit hawk, Manchin backed an estate tax repeal estimated to cost more than a quarter trillion dollars — and its benefits would flow almost exclusively to wealthy families.

In neither case did Manchin push to add work requirements to the estate tax repeal measures.

Without such provisions, the benefits of the tax breaks can flow to the idle heirs of billionaire tycoons, even if those heirs refuse to seek employment.