This story is reprinted from The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans—and engages with them—about public policy, politics, government, and statewide issues. The article originally appeared here.
An out-of-state billionaire who has previously bankrolled attempts to defend controversial immigration laws is responsible for nearly all the donations to Gov. Greg Abbott’s $54 million border wall fund.
A member of one of America’s richest family dynasties, Timothy Mellon, contributed nearly 98% of the fund’s total donations when he donated $53.1 million in stock to the state in August, according to public records. Mellon is the 79-year-old Wyoming-based grandson of banking tycoon and former U.S. Treasury Secretary Andrew Mellon.
Before Mellon’s donations, Abbott’s private fundraising campaign had stalled at about $1.25 million around mid-August, two months after its launch—a drop in the bucket for a project with a price tag estimated in the billions of dollars. But on Aug. 27, a state website that tracks donations to the crowdfunding effort said the fund had jumped to nearly $19 million. By the end of the month, it had topped $54 million.
The donations have since stalled again.
Mellon did not respond to multiple requests for comment made to his company, New Hampshire-based Pan Am Systems, and a marketing firm that handled publicity for his 2015 autobiography. Abbott declined to comment.
Mellon does not appear to have close ties to Texas. But he was a top donor to the reelection campaign of former President Donald Trump, who made building a border wall a top priority, and has previously donated money to defend legislation targeting immigrants.
In 2010, he gave an unsolicited $1.5 million to the legal defense of an Arizona law that required police to determine the immigration status of people suspected of being in the country illegally, according to The Washington Post. Critics said the law would lead to racial profiling. The law was challenged all the way to the U.S. Supreme Court, which struck down parts of it but left intact the section allowing officers to ask about immigration status.
Last year, Mellon gave $20 million to America First Action, the main super PAC supporting Trump’s reelection. Since 2018, he’s donated $30 million to the Congressional Leadership Fund, the House GOP super PAC, and he gave $30 million to the Senate Leadership Fund, which tries to elect Republicans to the U.S. Senate, in 2020.
Mellon has not donated to Abbott, but he gave $2,500 to Republican gubernatorial challenger Allen West when West ran for Congress in Florida in 2012. Mellon ramped up his political donations in 2018.
While he overwhelmingly supports conservative campaigns and Republicans, Mellon also gave to two Democrats: U.S. Rep. Alexandria Ocasio-Cortez of New York in 2018 and former U.S. Rep. Tulsi Gabbard of Hawaii for her bid for the 2020 Democratic presidential nomination. Ocasio-Cortez’s campaign later said it did not solicit the donation and would return it.
Mellon has taken heat for using offensive stereotypes to describe Black Americans in his self-published autobiography.
In the 2015 book, Mellon wrote that after the Great Society programs of the 1960s, which were intended to tackle poverty and racial injustice, Black people “became even more belligerent and unwilling to pitch in to improve their own situations,” according to The Washington Post.
He also called social safety net programs “slavery redux.”
Mellon is the chair of Pan Am Systems, a privately held transportation and freight holding company. In the 1980s, he founded a rail company called Guilford Transportation Industries. In the 1990s, he rebranded the company after buying the brand of bankrupt Pan Am Airways.
Forbes estimated Mellon was worth almost $1 billion in 2014, and last year the magazine estimated the Mellon family was worth $11.5 billion.
Abbott’s crowdsourced wall
Abbott, a two-term Republican, has made border security his top priority this year as he seeks reelection next year and is fighting off challenges from his right. Abbott has blamed the Biden administration for an increase in migrants at the border.
In March, Abbott deployed state military and police resources to the border to help federal authorities enforce immigration law. In June, he announced a state of disaster in 34 counties that were seeing large increases in migrant crossings and he unveiled his plan to build a state-funded border wall, picking up where Trump left off.
The Texas Legislature has approved nearly $3 billion over the next two-year budget cycle toward border security, with about $1 billion going to the governor’s office for grants, including $750 million dedicated to the construction of a border wall.
Texas is already paying $25 million for a nearly 2-mile concrete barrier along State Loop 480 in Eagle Pass. Portions of the federal border wall started by the Trump administration, and put on hold by the Biden administration, ranged from $6 million per mile to $34 million per mile for construction. Abbott’s office said it has identified 733 miles of border that may need some type of barrier.
While the state displays the aggregate of private donations to the border wall on its website, it does not readily provide the names of individual donors, despite a commitment from Abbott early on that the crowdfunding effort would have “transparency and accountability.”
Outside of Mellon, the fund received more than 12,100 individual donations as of Sept. 14, totaling about $1.3 million. The median donation was $50.
That level of fundraising is more in line with a similar crowdfunding attempt by Arizona lawmakers 10 years ago to raise private money for constructing a fence on the Mexican border. That effort received about $270,000 in three years, according to The Arizona Republic.
During the Trump administration, a nonprofit called We Build The Wall, which included his former political adviser Steve Bannon as a board member, raised $25 million for a border wall. Bannon and Brian Kolfage, the group’s leader, were accused by the federal government in August 2020 of looting the charity for personal gain. Bannon was later pardoned by Trump.
Tax benefit
Tax experts say Mellon’s decision to donate stock instead of cash could yield a tax benefit for the billionaire.
Normally, a person has to pay taxes on profits made on their investments when they are sold. But investors who donate stock to charity avoid paying a tax on the earnings on their investment and get a tax deduction for the full amount of stock.
“It’s common to give stock that’s increased in value because they can get rid of the gains and they can deduct the donations,” said Lloyd Mayer, a professor at Notre Dame Law School.
Such donations are usually made to nonprofit organizations. But under the tax code, a charitable contribution to a state would likely be tax-deductible if it is “made exclusively for public purposes.” Some people, for example, get tax deductions for donating money to cut the federal debt.
The only hurdle is ensuring the money is only used for public purposes.
“In the case of [a] border wall, presumably built upon public land, I think it’d be hard to argue there are private purposes,” said Lisa De Simone, an accounting professor at the McCombs School of Business at the University of Texas at Austin.
But Mayer said such donations raise questions about undue influence by wealthy donors on governmental policymaking.
In June, Tennessee billionaire Willis Johnson offered South Dakota Gov. Kristi Noem $1 million to help pay for a state National Guard’s deployment to the border to aid Texas’ efforts to catch people crossing illegally. The state’s soldiers were then sent to the Texas border.
“The thing that’s controversial about these kinds of donations is whether they’re distorting government priorities. If government collects money in taxes and the government — Legislature and governor — decide how to spend it, they’re setting their priorities based on the political environment,” Mayer said. “But if you open it up to donations, you’re handing what the government should spend their money on to wealthy donors.”
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