How to Close the Muskrat Loophole, and a final word on Prop 40

Friends,

Did you know that government contractors are currently banned from making campaign contributions?

The law was enacted to prevent corrupt pay-to-play arrangements in which companies seeking federal contracts curry favor with legislators and officials who decide where those federal dollars go, by making massive campaign contributions to them.

But the law doesn’t doesn’t cover the executive officers or major shareholders of government contractors.

Call it the Elon Musk loophole.

Musk’s corporations have a reported at least $38 billion in government contracts. Yet while his corporations are banned from making campaign contributions, Musk — their CEO and major shareholder — is not.

The resulting Muskrat loophole is absurd. Musk is the biggest campaign contributor in American history. In 2024, he reportedly gave more than $250 million to support Trump and other Republican candidates.

In the 2026 midterms, Musk has given more than $483 million to political committees to support Republican congressional candidates. This includes at least $168 million into the Texas Senate race to support Republican Ken Paxton (almost all Paxton’s campaign money). Musk appears out to buy his own personal Senator in Texas.

Musk’s total campaign contributions in 2024 and 2026 add up to some three-quarters of a billion dollars.

So Musk gets $38 billion in government contracts for his Space X and Starlink satellite corporation — enabling him to have an effective monopoly on intelligence that’s critical to U.S. security (and that of Ukraine).

Then he turns around and uses some of those winnings to pour a half a billion into the 2026 midterms to support candidates that presumably will keep awarding him lucrative contracts.

America shouldn’t be contracting out our national defense and foreign policy to Musk, who unilaterally decided three weeks ago that Ukraine should no longer have intelligence about incoming Russian missiles and drones — resulting in deaths and injuries to hundreds of Ukrainian citizens.

How do we close the Muskrat loophole in our campaign finance laws?

I’m pleased to report that Senator Chris Van Hollen (D-MD) and Representative Robert Garcia (D-CA) have announced they will introduce legislation to close it, and thereby prohibit top executives and major shareholders of government contractors (i.e. Musk) from making campaign contributions.

If Democrats take over Congress Tuesday, the Van Hollen-Garcia bill should be high on their 2027 to-do list.

Now, for California’s Prop 40.

It’s a one-time 50 percent tax on California’s billionaires, who have been pouring hundreds of millions of dollars into opposing it and trying to persuade Californians it’s a bad idea.

Their costly campaign against Prop 40 is another reason why Californians should support the measure. Otherwise, billionaire campaign spending makes it impossible for the broad public to be heard.

The super-wealthy all over America are watching what happens in California. “If Prop. 40 goes down in California, I think it’s going to make, not all of the candidates, but it’s going to make a few of the 2028 candidates rethink how they slot that into their presidential policy agenda,” Zach Moller told the New York Times. Moller is the senior director of the economic program at Third Way, a think tank bankrolled by corporate Democrats,

Some potential Democratic presidential candidates have already taken a stance on Proposition 40, including Representative Ro Khanna of California, who has campaigned in favor of it, and Gov. Gavin Newsom of California, who has opposed it.

In reporting on the ballot measure, the New York Times today erroneously reported that “Even for billionaires who derive their wealth from the publicly traded stocks of companies they founded, collecting the tax could be complicated if they do not have enough cash to pay it without selling many of their holdings.”

Rubbish. Many of these same billionaires already borrow against their fortunes to pay for their lavish living expenses — a tax dodge that allows some of them to declare no income at all. If they can borrow against their fortunes for their living expenses, without selling their holdings, they surely can do the same to pay a wealth tax.

My strong recommendation to Californians: Vote YES on Prop 40, and vote NO on the poison pills designed to kill it, Props 41 and 42.

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