Trump Admin Retreats From $1.8 Billion ‘Anti-Weaponization’ Fund

(Sipa USA)
Sipa USA
By Yuval Rosenberg and Michael Rainey

Happy Monday! We hope June is off to a good start for you. Here's your evening update.

Trump Admin Signals It Will Drop Controversial $1.8 Billion 'Anti-Weaponization' Fund

The Trump administration signaled Monday that it is set to scrap its $1.8 billion "anti-weaponization" fund after a pair of court rulings raised new doubts about the viability of the plan and a severe backlash from congressional Republicans endangered other parts of the GOP agenda, most notably a bill providing some $70 billion for immigration enforcement.

The Justice Department said in a statement Monday that it "disagrees strongly" with a federal judge's order Friday to temporarily halt work on the new fund but will comply with it.

"This Fund was open to anybody who was so weaponized, targeted, or persecuted, whether they were Democrat, Republican, Conservative, Independent, or otherwise," the statement said before adding: "The Department will abide by the Court's ruling." That's a sharp change from a statement issued on Friday, when the department said it would "not allow the policy preferences of judges to interfere with our efforts to provide restitution to victims of lawfare."

While the court order blocked further action on the fund at least until a hearing on June 12, the White House is reportedly preparing to back away from the fund altogether in response to pushback from allies on Capitol Hill.

Strong resistance: The decision comes as Senate Republicans return today from their Memorial Day recess still wrangling over the fund and how to proceed with the $70 billion immigration funding bill that got derailed last month because of it. GOP leaders reportedly hope to kick off a series of votes on that larger reconciliation bill as early as Wednesday, but that timetable was imperiled by ongoing opposition to the "anti-weaponization" fund.

Critics in both the Republican and Democratic parties lashed out against the fund after it was announced last month as a part of a settlement in a $10 billion lawsuit Trump brought against the Internal Revenue Service over the leak of his tax records.

The settlement called for the Justice Department to create a $1.776 billion fund to compensate people who claim to have been improperly targeted by the government. Opponents call it a slush fund that could benefit rioters who attacked the Capitol on January 6, 2021. The agreement also barred the IRS from auditing Trump's past tax returns or those of his business. A second federal judge on Friday launched an inquiry into the settlement in which the government agreed to establish the fund.

With just over five months left until the midterm elections and tensions rising between Trump and GOP lawmakers, Republicans reportedly discussed ways that they could limit the fund or kill it on their own. But they preferred that the White House act. Senate Majority Leader John Thune told reporters Monday that he had made clear to the White House over the weekend that the fund needed to be dropped - along with a separate proposal to provide $1 billion for the Secret Service, including security for Trump's White House ballroom - in order for the immigration funding bill to move ahead.

"I do think that the best way to handle it is if the administration decides to shut it down themselves," Thune told reporters.

Trump reportedly also met with Speaker Mike Johnson Monday to discuss the fund and the GOP's stalled legislative agenda.

Democrats push for more: Adding to the pressure on congressional Republicans, Democrats vowed to fight the "anti-weaponization" fund and force difficult votes on the issue.

"Trump's nearly $2 billion MAGA slush fund is his most brazen act of self-dealing yet and one of the most corrupt schemes ever launched by a president," Senate Democratic Leader Chuck Schumer wrote in a letter to colleagues Monday. "Senate Democrats will not let it stand. This week, Senate Democrats will launch a coordinated effort to kill the slush fund before one cent goes out the door. And no matter what Republicans do, we will force them to vote."

After reports that the administration plans to abandon the new fund, Schumer pushed to prevent the idea from being revived. "If Trump and Republicans are truly abandoning this corrupt scheme, they should have zero problem banning it in law," he wrote in a post on X. "This week, Senate Democrats will push legislation to ban this slush fund and ensure no president can ever do this again. Trump's word is nowhere near enough."

In a speech on the Senate floor, Schumer said they would not stop until the fund is "well and truly buried and can never see the light of day." He said that if Republicans bring up their reconciliation bill again, the first amendment he offers will be to ban the "anti-weaponization" fund.

The bottom line: The Trump administration appears to have backed off its plan, but it isn't just Democrats who want all uncertainty about the issue removed. "It's pretty clear that the president has to say very explicitly that there's not going to be a weaponization fund," Republican Sen. Chuck Grassley said.

Quote of the Day: Trouble at FEMA

"It could take a decade to fix what they broke... And if we have a major disaster this year, we're screwed."

− An unnamed "high-ranking FEMA official" as quoted in an article by CNN's Gabe Cohen about the turmoil and long-term problems created at the agency under former Department of Homeland Security Secretary Kristi Noem and Corey Lewandowski, her adviser and alleged paramour.

"By the end of last year, FEMA was sitting on more than $15 billion in unspent funds, according to sources and internal figures reviewed by CNN," Cohen reports. "Lawmakers across the country, including many Republicans, were left fuming after months of asking for disaster money that had been awarded yet still awaited Noem's signature."

Cohen adds that the White House and new DHS Secretary Markwayne Mullin are now working "on stitching back together much of what Noem and Lewandowski tore apart at FEMA - a striking reversal for Trump, who first called for scrapping the agency."

Read more at CNN.

Tax Havens Cost US $40 Billion After Trump Withdraws From Global Deal

On his first day back in office, President Trump ended U.S. participation in a 13-year effort to rein in the use of tax havens and establish a global minimum tax, signing a presidential memorandum that declared that commitments made under the "Global Tax Deal" sponsored by the Organization for Economic Cooperation and Development have "no force or effect" domestically unless formally adopted by Congress. According to a new analysis, that decision has enabled corporations to avoid at least $40 billion in income taxes since the beginning of last year.

"A New York Times review of securities filings from nearly 500 companies showed that they avoided taxes by attributing hundreds of billions of dollars in earnings to low- or no-tax foreign locales like Cyprus, Bermuda, Switzerland and the Cayman Islands," Jesse Drucker and Dylan Freedman wrote in the Times on Friday. "Often, corporations funneled the profits through subsidiaries in places where they had no employees, offices or customers."

In one example provided by Drucker and Freedman, Abbott Laboratories, a $150 billion pharmaceutical company headquartered in Illinois, has reduced its tax bill by claiming all global profits in Malta - an island in the Mediterranean where it has no employees. The move saved the company about $336 million last year.

Abbott previously used Bermuda as a tax shelter, but the island voted to start enforcing OECD tax rules starting in 2025. Two weeks before the OECD laws were to take effect, Abbott moved the tax residency of its Bermuda subsidiary to Malta. In its first year, the Malta Abbott unit reported $17 billion in income - and no income taxes paid anywhere.

While many of the moves to avoid taxes made by corporations like Abbott are legal, the IRS has raised questions about some tax maneuvers. In Abbott's case, the IRS is challenging about $1 billion in tax savings, charging that Abbott took steps that lacked economic substance just to avoid paying taxes.

Some analysts say they are worried that the Trump administration's rejection of a more consistent global tax structure will make it more likely that companies push the limits of tax avoidance. "Accommodating the U.S.'s refusal to participate in the global reforms opens up the door to abuse," one tax attorney told the Times.

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