AEI Faces IRS Investigation After Baroody's Control of Goldwater Campaign

Representative Wright Patman subpoenas American Enterprise Institute’s tax papers and the Internal Revenue Service initiates a two-year investigation of AEI after William J. Baroody Sr. and several top AEI staff, including Karl Hess, moonlight as policy advisers and speechwriters for Barry Goldwater’s 1964 presidential campaign. Though Baroody and his staff sought to support Goldwater on their own time without using the institution’s resources, AEI comes under scrutiny for potential violation of its tax-exempt status through partisan political activity. Baroody served as the “chief intellectual entrepreneur” of the Goldwater campaign and the “real power behind the campaign,” operating in an “informal back room” manner while controlling speech writing and issues, with campaign manager Dean Burch recalling that Baroody “sort of looked upon Goldwater as his creation.” Baroody’s control was so complete he excluded William F. Buckley Jr., William Rusher, L. Brent Bozell, and National Review from the campaign, determined that only he would have the candidate’s ear, and even wanted to ignore or condemn Ronald Reagan’s famous “A Time for Choosing” speech until donor Walter Knotts of Knott’s Berry Farm threatened to pull campaign funding. The IRS investigation demonstrates that corporate-funded “think tanks” were already deeply engaged in partisan politics by 1964, seven years before the Powell Memo, though they attempted to maintain appearances of scholarly independence to protect tax-exempt status. After the investigation, AEI officers attempt to avoid appearance of partisan political advocacy while continuing to advance conservative policies favoring corporate interests, establishing the model of plausible deniability that allows tax-exempt foundations to influence elections while claiming nonpartisanship.