(Original post)

By Glenn Pasanen

27 Jan 2011

Last month, Mayor Michael Bloomberg fueled what Paul Krugman has described as "a recurrent fantasy about a Bloomberg third-party candidacy that will save America" when he presided over the convention of new political group dubbed No Labels.

"No Labels," of course, implies a nonpartisan, non-ideological effort, but, whatever progressive positions Bloomberg holds to on social issues, the mayor's fiscal strategy over the last three years has come from a standard conservative political playbook: reduced services -- especially in education and human services -- criticisms of city unions, expanded privatization and regressive tax policy. In his State of the City speech on Jan. 19, Bloomberg reiterated these positions. He called for smaller government. He took aim at public employee unions, pledged to chip away at seniority privileges and scale back pensions. And he vowed not to raise taxes.

The speech came only days after the City Council, having gotten some items restored, signed off on Bloomberg's latest budget-cutting modification, his ninth in the past three years. A substantial 10th slice is likely with the release next month of the preliminary budget for fiscal year 2012. What these serial budget cuts make clear is that New York, once a laboratory for national liberal policies, is conducting an experiment in urban conservative policy.

ANALYSIS

The current strategy is very much at odds with that of the first-term Bloomberg administration. The mayor's response in November 2002 to the fiscal crisis following 9/11 and the accompanying recession did resemble a" No Labels" strategy. For instance, its emergency $6 billion budget-cutting plan was split equally between much higher taxes and service reductions. It was nonpartisan and apolitical, based on shared sacrifices from all New Yorkers.

The City's Fiscal Condition

The focus on cuts in education and human services next year looks premature in terms of the city's actual fiscal condition. According to the Independent Budget Office's December Fiscal Outlook, New York City is in surprisingly good shape. It has lost fewer jobs than projected, and increased city revenues, not acknowledged in the city's November plan, will add $525 million to the current fiscal year budget, $790 million in fiscal 2012, and an average of $2 billion in each of the following two years.

That helps create a $1.7 billion surplus this fiscal year and shrinks the city's projected budget deficit for 2012 to $1.1 billion -- a nominal figure at this date in a projected $67.5 billion budget. It also reduces the city's projected deficits for 2013 and 2014.

The Independent Budget Office's forecasts are a reminder that the city, in spite of billions of dollars in budget reductions, is reducing the pace of growth of spending, not actual spending. From 2011 to 2014, city spending (including state and federal funding) will grow from $65.1 billion to $74.6 billion. Admittedly the city still does not know how much the state will reduce its funding for schools and general aid. That, the Independent Budget Office, concedes, is a wild card in its predictions.

The IBO projections, indeed, are more optimistic than those of state and city fiscal monitors. The State Financial Control Board December staff report on the November modification makes the bleakest, worst-case projection. It finds the fiscal 2012 deficit could reach $3.9 billion, with markedly higher amounts in later years.

Managing Deficits: Privatization

In his latest effort to reduce the deficit -- whatever its size -- Bloomberg has increasingly underscored another conservative strategy -- privatization. The new deputy mayor for operations, Stephen Goldsmith, the former mayor of Indianapolis, is famous for privatizing city public services. His first public action, a published review of several city agency programs offered a rather blunt critique of current Bloomberg administration practices, but promised a $500 million savings with better management over the next four years.

Since then, the management news has not been so good, and Goldsmith has much to attend to beyond his role in the snow snafu in December.

One goal of privatization is saving money. In some cases -- most notably the CityTime payroll management project, which is more than 10 times over budget -- this goal clearly has not been met.

Yet concerns about contracting practices are nothing new. City Limits magazine, for instance, recently noted that it identified problems with the CityTime contract more than two years ago. It also quoted Lillian Roberts, executive director of the city's largest public employee union, DC37, as saying that the federal indictments in that case are "merely the tip of the iceberg and an outrageous example of the greed and corruption that are the result of an unregulated procurement process."

The city's efforts to upgrade and modernize its 911 emergency response system have been plagued by cost overruns and missed deadlines, with the city removing one contractor and in the midst of trying to get its money back from another. Last month City Comptroller John Liu rejected a $286 million contract for another 911 project.

The Daily News has been investigating the Department of Education's use of consultants and reported in January that, between 2008 and 2010, the department spent some $200 million on consultants. In 2010, more than 100 consultants got over $100,000 each, and close to two dozen received over $200,000.

The Independent Budget Office, which is doing a series of studies of the department, reported in a December blog, "What is Yellow and Rises at the Same Time it Falls," that school transportation contracting costs will exceed $1 billion this school year. In the last five years, it found, costs have risen by $115 million while ridership has fallen. Some reasons for the increase are unclear although non-competitive contracts and fewer contractors may be factors, along with higher gas prices.

City Comptroller John Liu added to the questions surrounding contracting with an announcement in November, entitled, "Trim Fat Around City Contracts Before Resorting to Layoffs and Service Cuts" that cites "$157.4 million in potential savings through audits of city agencies."

Education and Social Services Cuts

While private companies and organizations still get city contracts, some groups are being asked to bear the brunt of the city's budget problems. Over the past eight years, the administration's concept of sacrifice has narrowed considerably. The city comptroller's December report on the city's economy and finances, for instance, notes that the city’s budget cutting -- almost $600 million this year and over $1 billion in 2012 -- is nearly 90 percent service cuts and 10 percent new revenues.

According to the state comptroller's review of the November budget plan recently approved with some modification by the City Council, those cuts "would fall hardest on the city's schools and the neediest citizens." The city comptroller points out that cuts in education total $670 million over the 2011 and 2012 fiscal years and that the number of teachers is scheduled to be reduced by 5,398 in 2012, nearly 4,000 by layoffs and the balance by attrition. Teachers would represent 70 percent of all headcount reductions in city departments in 2012. (In contrast, there will be no reduction in uniformed police officers.)

The Mayor's Management Report gives little information about the impact of nine rounds of cuts on human services. But the four-year plan of the November modification is pretty clear about Bloomberg administration priorities: Over the next four years, children's services would be cut by nearly 6 percent, homeless services by 6.6 percent, and health and mental hygiene by over 7 percent. During this time, housing and libraries would lose 23 percent, cultural affairs 29 percent, and youth and community development 33 percent.

Labor and Deficits

More than anything, else, though, the mayor plans to rely on pension reductions and labor concessions to rein spending. In his State of the City speech last week, he laid out a number of proposals for accomplishing this, including raising the retirement age for future non-uniformed city workers to 65, getting rid of a bonus for uniformed workers and allowing the city to negotiate pensions with the unions, something currently barred by state law. Bloomberg pledged not to approve any salary increases for city workers "unless they are accompanied by reforms in benefit packages that produce the savings we need to continue making investments in our future and protecting vital services."

That reflects what already was in his November plan. After several years of annual 4 percent increases, the mayor drew a line in the sand and said the unions will self-fund any raises, through productivity savings and/or benefit concessions.

Much of the uncertainty about future budget deficits comes from the unresolved negotiations with the city's unions. Contracts for a number of unions -- DC37, the police and firefighter unions, and the Communications Workers of America, which together represent nearly 50 percent of the workforce -- have already expired. According to the state comptroller, raises at the projected inflation rate would cost over $1 billion a year.

Further, the mayor has long delayed any settlement with the teachers and supervisors unions, who have been working without a contract. At stake in any final deal is, according to the city comptroller, nearly $900 million in this fiscal year and $800 million to $900 million in each of the following three years -- none of which is included in the November modification.

The new pressure on city labor echoes a national argument by many governors, including New York's Andrew Cuomo, that public-sector workers are over-compensated, and that taxpayers can no longer afford early retirement ages, rising pension costs and health plans that strike many who work in the private sector as generous. But Michael Powell in a recent New York Times article wrote, "A raft of recent studies found that public salaries, even with benefits included, are equivalent to or lag slightly behind those of private sector workers." (He did not offer figures for New York City alone.)

Read His Lips

Perhaps the most significant indication of the mayor's recent shift to conservative political strategies is his rejection of income tax hikes. During the 2002 fiscal crisis, the mayor raised average property tax rates by 17.5 percent and temporarily increased personal tax rates for higher income people for three years, much as Mayors David Dinkins and Rudolph Giuliani did in the 1990s. Bloomberg also instituted a three-year, temporary sales tax increase.

The average property tax remains the same in 2011 (market valuation increases, however, have raised assessments, thus raising actual tax bills). The regressive city sales tax, recently raised to 4.5 percent, is at a historic high. The higher personal income tax rates on wealthier New Yorkers, however, reverted to lower rates in 2006, although the Independent Budget Office found no evidence that anyone left the city because of the tax increase -- one argument used by the mayor to explain his refusal to re-introduce higher rates.

The mayor has vowed to continue his no tax increase policy. "Let me be clear," he said in his State of the City speech, "we will not raise taxes to balance the budget." Increasing taxes, he said, "would undermine our recovery by driving people and businesses to lower-tax cities and states and deterring investment from overseas."

This decision not to raise taxes on the most affluent New Yorkers takes hundreds of millions of dollars off the budget table. The Independent Budget Office's Budget Options report last February noted that a modest tax rise -- still lower than the 2003-2005 rates -- on high-income New Yorkers would raise almost $500 million in 2011 and $678 million in 2013, approximating the education department cuts in 2011 and 2012. The rates would affect only the 8.4 percent of taxpayers with adjusted gross income over $125,000, who would pay an average of $9,500 more than they currently pay.

But the appeal of tax cuts for high-income taxpayers, as seen in the two-year extension of the Bush federal tax cuts for the nation's wealthiest, seems to outweigh any argument for shared sacrifice. This persists in spite of the fact that that, according to Citizens for Tax Justice, "the combined taxes levied by federal, state, and local governments in the United States are among the lowest in the developed world."

Incidentally, Citizens for Tax Justice reports that the extended personal income and new estate tax cuts in the December compromise will mean an average tax break of $120,726 for the top 1 percent of New York State taxpayers, those with an average income of $2.3 million. They will receive 43 percent of the total tax cut in New York State, while the average benefit for the 20 percent of New Yorkers with the lowest incomes, averaging $11,975 a year, will be $182.

Across the country and in New York City, these actions -- fewer human services, attacks on labor, lower taxes, privatization, growing inequality, less shared sacrifice – are the ingredients on a familiar political label: conservatism. Perhaps we should address -- rather than deny -- political labels, so that we can better understand what is happening.

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.

(Original post)

January 27, 2011

By BINYAMIN APPELBAUM

WASHINGTON — Large trucking companies paid the government more than 30 percent of their income in 2009. Biotechnology companies paid less than 5 percent.

Such yawning gaps among industries have become a defining feature of the nation’s corporate tax code, an unwieldy accretion of rules and exceptions that amount to a reward for some kinds of businesses and a rebuke for others.

President Obama on Tuesday added his name to the long list of politicians who have called for an overhaul of those rules, so that companies of all kinds pay the federal government a roughly equal share of their annual profits.

“It makes no sense and it has to change,” Mr. Obama said in his State of the Union address. “Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years — without adding to our deficit. It can be done.”

But recent efforts to rationalize the code all have failed, and some members of both parties express skepticism that this time would be different. The problem, in a nutshell, is that the popular step of lowering taxes for industries like trucking requires the unpopular step of raising taxes for industries like biotech.

The very idea already is drawing howls from the corporate sector.

Moreover, many of the individual exceptions that allow corporations to shield profits from taxation actually enjoy broad popularity, like tax breaks to support domestic manufacturing, low-income housing and green energy.

There is also the chance of political gridlock. Senate Democrats and House Republicans both are holding hearings on tax reform. Both declare the subject a priority. But it is hardly clear that the two parties are talking about the same thing.

Many conservatives want Congress to cut the overall amount collected from corporations to spur economic growth.

Representative Paul D. Ryan, the Wisconsin Republican who gave the party’s response to the president’s State of the Union address Tuesday night, has proposed eliminating the corporate income tax. Mr. Ryan instead would impose a smaller, 8.5 percent tax on business “consumption” — a measure of income that excludes investment, meaning that the government would collect a much smaller share of a much smaller tax base.

Many liberal groups, meanwhile, see increasing corporate taxation by closing loopholes as a relatively painless way to reduce the federal deficit.

“It doesn’t make a lot of sense to say that we’re going to close loopholes and then give all the money back to corporations,” said Steve Wamhoff of Citizens for Tax Justice, a nonprofit group that favors increased corporate taxation. “This would be one deficit reduction measure that would get the most support from the public.”

The United States imposes a top corporate tax rate of 35 percent. It is almost entirely a theoretical exercise. Various government and private studies have found that the average corporation generally pays about 25 percent of its income, thanks to a mix of deductions and ever-more-sophisticated tax avoidance strategies.

Google, saluted by the president Tuesday as a paragon of American innovation, paid the government 22 percent of its income in 2009, according to its reports. The company reduced its tax bill by more than $1 billion, claiming deductions for research and investment and exploiting a popular corporate strategy by routing a large share of its income through Ireland.

Even more striking are the differences among industries. Aswath Damodaran, a finance professor at New York University who has researched the issue, said that young high-tech companies often pay less than 10 percent of income in taxes, while old-line firms like railroads and utilities often pay more than 25 percent.

This inequality is one of the administration’s major arguments for tax reform. But the idea is widely supported by economists and other academics for a different reason — the concern that the current rules encourage companies to make bad choices.

The ability to deduct interest payments, for example, leads companies to borrow more money than they need. The rules governing real estate have long spurred new construction that would not be profitable without tax benefits.

“The tax code makes bad investments into good ones,” Mr. Damodaran said. “Changing the tax code is going to create economically better decisions.”

A major stumbling block is that Congress — often at the urging of presidents including Mr. Obama — has regularly tinkered with the tax code to effect policies.

The president on Tuesday charged that “a parade of lobbyists has rigged the tax code to benefit particular companies and industries.”

But many of the largest loopholes were designed by the government. A tax break to encourage domestic manufacturing costs will reduce tax collections by $10 billion this year, according to the Office of Management and Budget. Tax breaks to support research will cost about $8 billion. A tax break for companies that invest in low-income housing will cost about $6 billion.

There are some signs that Congress is willing to rethink its ways. Senator Max Baucus, the Montana Democrat who leads the Finance Committee, has been influenced in his thinking by conversations with corporate leaders who told him they would prefer the certainty of a lower tax rate to the uncertain application of various deductions.

Mr. Baucus is now holding a series of hearings on the tax code, beginning with a history of past efforts at reform, emulating the methodical approach he employed in helping to construct last year’s healthcare legislation.

Senator Orrin G. Hatch, the ranking Republican on the Finance Committee, said after the State of the Union address that he believed the entire tax code should be cleaned up — in part because many small businesses actually are taxed as individuals.

“The president is right that our nation’s corporate tax rate, the second highest in the world, is an impediment to economic growth and a significant drag on our economic competitiveness,” Mr. Hatch said in a statement.

Representative Dave Camp, the Michigan Republican who is chairman of the House Ways and Means Committee, is planning a series of hearings on broader tax reform starting Thursday.

But in a sign of the disagreements lurking just beneath the surface, Mr. Camp emphasized that his hearing was focused in part on reducing “the cost burdens of the current code.”

He described the president’s proposals as “a few token gestures.”

(original post)

January 26th, 2011

By Ryan Witt, Political Buzz Examiner

Last night Representative Paul Ryan (R-WI) delivered the Republican response to President Obama's State of the Union speech.  Ryan's speech followed the script most expected.  He criticized the President for what he called the "fail stimulus" and a growing deficit over the past two years.  Ryan argued the country must make tough cuts in order to once more balance the budget and that Republicans would lead the way in this process.  What was missing from the entire speech, which can be read here, was any reference to Ryan's own plan to solve the budget deficit.  A closer look at Ryan's plan may explain why he conveniently left out any reference to his own plan.

Ryan's plan is called the "Roadmap for America's Future."  To his credit, Ryan does manage to balance the budget in the future with his plan.  What is very controversial, and likely the reason Ryan has so few co-sponsors for his bill, is how Ryan goes about balancing the budget.  Ryan makes very deep cuts to Social Security and Medicare.  The Social Security age would be raised under Ryan's plan, forcing people to either work longer or find some other way to pay the bills later in life.  Ryan would completely do away with Medicare and replace with a voucher seniors would use to purchase private insurance.  If an 80-year-old man's voucher was not sufficient to pay for a policy he would either have to make up the difference or simply go without insurance.

Ryan also proposes to greatly change the tax code as the Citizens for Tax Justice explain in a recent report.  Ryan would permanently extend the Bush tax cuts for the rich, but do away with tax cuts that help the poor and middle class, such as the Earned Income Credit and refundable child tax credit.  Ryan would also allow for an "alternative tax" under which individuals would pay 10% on the first $100,000 they earn, and 25% for all income earned above $100,000.  Ryan's plan would effectively lower taxes on the rich from their current rate of 35% to a new low of 25%.

Ryan's tax plan really hits the poor and middle class in two ways.  First, to make up for lost revenue caused by tax cuts to the rich Ryan would implement a "Value Added Tax" or VAT.  Ryan would repeal the corporate income tax and replace with a 8.5% tax on business consumption.  So when Wal-Mart purchases toilet paper to sell to the public that purchase would be taxed to Wal-Mart at 8.5%.  Wal-Mart would then pass that cost on to consumers through higher prices.  A VAT effectively works as an indirect sales tax.  Finally, Ryan would do away with the current tax exclusion for health care benefits.  In the future if an employer gave employees health insurance that insurance would be taxabe as "income" under Ryan's plan.  Ryan would attempt to make up the difference by giving individuals a $2,300 voucher to purchase insurance, but with many individuals they would still end up paying more.

The effect of Ryan's plan on income groups are dramatic as illustrated below:

— The top 10% of income earners would pay less while the other 90% of Americans would pay more in taxes.
— The top 1% would pay 15% less in taxes, an average of $211,314 less.
— The bottom 80% of taxpayers would end up paying $1,700 more on average.
— The bottom 20% (the poorest Americans with the least money to spare) would end up paying 12.3% more under Ryan's plan.

With facts like these, it is easy to see why Ryan avoided the specifics of his plan to to balance the budget.

(Original post)

By Ryan J. Donmoyer and Peter Cohn - Jan 26, 2011

President Barack Obama called on Congress to cut the top U.S. corporate tax rate for the first time in 25 years “without adding to our deficit,” a sign that businesses will have to give up tax breaks in exchange for lower rates.

The president, in his State of the Union address to Congress last night, also pressed for simplifying the tax system for individuals, which would restructure how more than $1 trillion in revenue is collected annually.

“The best thing we could do on taxes for all Americans is to simplify the individual tax code,” he said, to applause from the audience. “This will be a tough job, but members of both parties have expressed interest in doing this, and I am prepared to join them.”

Some analysts said Obama’s willingness to consider a corporate tax overhaul along with tax simplification may lead to changes in the code.

“Tax reform has been like the weather, everyone talks about it but no one does anything about it,” said Pat Heck, a partner at the Washington law firm KL Gates and a former top aide to the Senate Finance Committee. “Tonight’s speech could be a game changer. While it would be naïve to think tax reform legislation will be drafted overnight, a long journey always begins with a first step.”

‘Disappointed’

Representative David Camp, a Michigan Republican who chairs the tax-writing House Ways and Means Committee, said he was “disappointed” by the lack of details in Obama’s call for a tax overhaul.

“I think it could have used a little bit more on his proposals on individual tax reform,” Camp said in an interview after the speech. “Frankly, we really need more of a path forward even on the corporate side. I think we need some more concrete plans.”

Obama’s proposal for a corporate tax-rate decrease, accompanied by removal of tax breaks, is at odds with that espoused by corporate chiefs. Robert McDonald, CEO of Procter & Gamble Co., and groups such as the Washington-based Business Roundtable have urged the administration and lawmakers to set aside deficit concerns for now to focus on rate reduction.

Each percentage-point reduction in the 35 percent corporate tax rate could cost $8 billion or more a year in foregone revenue to the Treasury, according to the congressional Joint Committee on Taxation.

Financing a rate cut could mean that corporate tax breaks such as a deduction for domestic manufacturing and production income and accelerated depreciation of capital expenses may have to be sacrificed.

Winners and Losers

“If it’s revenue neutral for businesses, there’s probably some winners and some losers,” said Daniel Shaviro, a professor of taxation at the New York University School of Law. “And when you take away a lot of special benefits, you tend to get losers complaining more than the winners celebrating.”

The top marginal corporate tax rate, or the rate paid on the last dollar of income earned, has stood at 35 percent since 1993.

Companies often pay a lower effective tax rate, after taking advantage of tax credits and deductions and keeping overseas earnings reinvested indefinitely. The U.S. is among a handful of countries that tax profits earned in other countries, though only when the money is brought home, or repatriated.

Obama’s call to cut the top rate “will be highly welcomed by the business community,” though it ought to be paired with changing the way overseas profits are taxed, said Drew Lyon, a principal in the Washington national tax services office of PricewaterhouseCoopers LLP. He said Obama should endorse switching from a worldwide system of taxation to a “territorial” system, where companies’ overseas branches and subsidiaries pay tax only to their host governments.

Deficit Concerns

A report by the Washington advocacy group Citizens for Tax Justice released before the speech said the goal should be to reduce the budget deficit, which was $1.3 trillion for the fiscal year ending Sept. 30. The report said Obama should follow President Ronald Reagan’s example in ending more corporate tax breaks than necessary to finance a rate cut.

The president in his speech also called for ending Bush-era income tax cuts for individuals earning more than $200,000 and married couples earning more than $250,000.

The tax cuts enacted under President George W. Bush for all income levels were extended through 2012 as part of a deal Obama worked out with congressional Republican leaders in December.

Obama also asked Congress to make permanent a stimulus tax credit for higher education expenses, up to $10,000 for four years of college. That proposal was estimated by the JCT last year to cost $58.1 billion over 10 years.

(Original post)

By Bernie Becker - 01/26/11

A labor-backed group has said that President Obama’s call for corporate tax reform was “half right, half wrong,” arguing that an overhaul of the tax code should be used to pay down the deficit.

In his State of the Union address on Tuesday night, the president identified revamping the corporate tax code as a way to help American companies compete, but stressed that any reform should not add to the national debt.

But in a report released Tuesday, Citizens for Tax Justice — which played a role in the last major overhaul of the tax code 25 years ago — contended that out-of-touch officials in Washington thought a lower corporate rate should be the main goal of reform and that it was wrong to think that decreasing the corporate rate could spark the economy.

“This kind of thinking is particularly bizarre when our government is in dire need of additional revenue to reduce the budget deficit,” the liberal group’s report said. “One would think that politicians would gravitate towards revenue-raising measures that the public approves. But instead, Congress is contemplating all sorts of program cuts that the public will have a hard time digesting.”

Revenue collection does appear to be emerging as a possible sticking point in the debate over tax reform, which has so far gathered general support from officials in both parties. But as of now, that conversation is centering on whether a reform plan should at first break even when it comes to revenue.

Democrats have tended to agree with the president that a tax code overhaul should be revenue-neutral. But Republicans and some business leaders have generally maintained that tax reform should concentrate more on increasing competitiveness by lowering America’s statutory corporate rate, which is scheduled to soon become the highest in the developed world.

Robert McDonald, the chief executive of Procter & Gamble, said at a House Ways and Means Committee hearing last week that business leaders were asking to take revenue-neutrality “off the table for now.”

“I think if we work together, we can develop a competitive tax system for this country and do it in a fiscally responsible way,” McDonald said.

But in its report, Citizens for Tax Justice argues that — because of loopholes and tax breaks — what corporations actually pay in taxes is comparatively low, citing a Treasury Department report from 2007 that says the U.S. “takes a below-average share of corporate income in taxes.”

The group also suggested corporate tax provisions that Congress could eliminate, including companies’ ability to defer paying taxes on income gained outside the U.S. until those profits are repatriated.

(Original post)

January 25, 2011

David Corn

Republicans seem a tad cocky these days. After repealing President Obama's health care law -- I mean, voting symbolically to repeal it -- they are claiming this week that they have already rescued the economy, and they are highlighting their party's most unpopular positions without concern for popular backlash. Hubris, anyone?

On Monday morning, Dow Jones reported that a quarterly survey of 84 companies conducted by the National Association for Business Economics found that 42 percent of these firms expect to hire more workers in the coming six months. Fifty-five percent reported rising demand. As soon as the report was out, the office of House Majority Leader Eric Cantor (R-Va.) e-mailed reporters, "THERE ARE THE JOBS" -- as if the GOP could take credit for this encouraging news. But the survey was taken between Dec. 17 and Jan. 5, before the House Republicans had done anything. The trends the survey had captured had been in place for months -- and unconnected to any GOP action.

Still, Sen. Jon Kyl (R-Ariz.) also tried a similar stunt, during an interview with Bloomberg's Al Hunt. Here's the exchange:

HUNT: Let me talk about the Obama administration and business. Corporate profits are soaring. Goldman Sachs named 110 new partners. Bonuses are flowing. S&P has risen more than in any three-year period since the tech bubble. General Motors is -- the IPO. This isn't an anti-business administration, is it?

KYL: I would contend that, for the last two years, it's been highly anti-business. Some of the results that you just talked about, I suspect, are . . . coming from the fact that we extended tax rates that the president did not want to extend, but was willing to do so at the end of the year last year.

Reality check. The positive swing in the economic indicators occurred prior to the tax cut deal. And until that compromise was concocted last month, there was no telling which rates would be extended. (Remember, the Democrats and Obama supported extending the Bush tax cuts for mid- and low-income Americans, and the GOPers wanted to extend those tax rates plus the tax cut bonuses for the wealthy.) The math here is simple: Maintaining the tax breaks for the rich had nothing to do with the rise in corporate profits or GM's turnaround. Kyl, like Cantor, is acting like a rooster who believes its crowing is responsible for the sunrise. In this case, they're crowing in the afternoon.

The U.S. economy, believe it or not, does not move on the basis of GOP press releases. But that does not mean that Republican positions don't deserve scrutiny.

Take Rep. Paul Ryan (R-Wis.), the new chairman of the House Budget Committee. The Republicans tapped him to deliver the GOP reply to Obama's State of the Union address on Tuesday night. That sends a strong signal: Ryan is the Republicans' guy when it comes to the party's grand economic message. But Ryan is also a policy extremist.

Last year, he unveiled an economic plan dubbed "A Roadmap for America's Future." It is most notable for urging the privatization of Social Security and the elimination of Medicare and most of Medicaid. Citizens for Tax Justice concluded that Ryan's comprehensive scheme would lead to tax hikes for 90 percent of Americans and lower taxes for the wealthiest Americans -- and still cause massive debt. Last year, Rep. John Boehner (R-Ohio), now the House speaker, declined to endorse Ryan's plan. And Cantor has kept his distance from the "Roadmap," hailing only "elements" of the plan. National Review magazine reports that Boehner, Cantor, and other House GOPers "are not showing much eagerness to take up the roadmap's specifics."

Yet the Republicans have placed Mr. Roadmap in the spotlight, consequently providing Democrats the opportunity to deploy one of their all-time favorite arguments: Republicans want to take down Social Security. And grab that opportunity the D's have. On Monday, the office of Senate Majority Leader Harry Reid (D-Nev.) fired out a statement blasting Ryan:

In an unsettling development for America's seniors, ending Social Security and Medicare is now the official position of the Republican Party. Republicans tapped Rep. Ryan, the architect of a plan to end Social Security and Medicare, to deliver their response to the President's State of the Union.

The Reid statement exclaimed that "Republicans are not only endorsing Rep. Ryan's extreme plan, but giving him unprecedented power to carry it out." That was something of a stretch. But providing Ryan this coveted and high-profile spot does prompt an inconvenient question for Boehner, Cantor, and other Republican leaders: Do they or do they not support Ryan's proposal to privatize Social Security and end Medicare?

By anointing Ryan their pointman, the Republicans are inviting trouble. And by claiming that they are responsible for recent economic progress -- if only by mere presence alone -- they invite the charge of arrogance. When Boehner was sworn in as speaker of the House, he said that Republicans will "now move forward humble in our demeanor." Did he really mean it?

(Original post)

Ryan Stays Mum about His Budget-Busting "Roadmap" While Bachmann Peddles Debunked Myths in Rebutting Obama's SOTU

By Joan Walsh

Tuesday, Jan 25, 2011

Prepared for President Obama to give a "centrist" State of the Union address to prove he can work with intransigent Republicans, I was pleasantly surprised. They may be small things, but a few points stood out. I was happy he pledged that "we simply cannot afford a permanent extension of the tax cuts for the wealthiest 2 percent of Americans," adding "Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break." I just hope he fights to end those tax cuts in 2012 even though he didn't in 2010. I'm glad Obama promised to cut taxpayer subsidies for oil companies (even though almost no one clapped.)

Sadly, it took a little bit of courage to speak with compassion about the children of illegal immigrants or to say "American Muslims are part of our family." I liked a lot of what he said about investment in education, transportation and infrastructure, but I have no idea how that squares with his promise to freeze domestic spending for five years.

The president was lucky to have not one but two GOP rebuttals, and they were equally strange and dishonest. Rep. Paul Ryan railed against the deficit without proposing even one specific cut. He didn't talk about his own infamous "Roadmap," maybe because most analysts have called it a budget buster, even though it essentially replaces Social Security and Medicare with vouchers. The Congressional Budget Office estimates Ryan's plan wouldn't balance the budget until 2063, and would add $62 trillion to the debt by then. Citizens for Tax Justice said Ryan's Roadmap raises taxes on 9 out of 10 taxpayers and while slashing them for the wealthiest.

Wisely, Ryan talked about none of that. He promised to repeal "Obamacare" and replace it with "fiscally responsible patient-centered reform," but didn't say word one about what it would entail. Most dishonestly, Ryan said Democrats had overspent "to the point where the president is now urging Congress to increase the debt limit," ignoring the fact that Congress raised it seven times under President Bush. That's your new chair of the House Budget Committee. (Update: Somehow I missed the best line in Ryan's rebuttal, in which he worries we're headed toward "a future in which we will transform our social safety net into a hammock, which lulls able-bodied people into lives of complacency and dependency." I want to ask the 14.5 million unemployed Americans, and the millions more who are underemployed, how they're enjoying their hammocks. Leave it to a Republican to come up with such vivid metaphors of leisure to talk about suffering. It's the only way they can relate.)

Tea Party leader Michele Bachmann followed Ryan, and CNN chose to broadcast her talk while other networks didn't. Bachmann has actually proposed budget cuts – eradicating the Department of Education and saving money (?) by repealing the Dodd-Frank Financial Regulation act. But she didn't talk specifics in her SOTU rebuttal, either. Luckily, she didn't get into American history, after her disastrous Iowa speech sugarcoating slavery and otherwise distorting the American past. (Note to Bachmann: George Jefferson was definitely not one of the founders.) She flashed Perot-style charts blaming rising unemployment solely on Obama, and ranted about 16,500 new IRS agents supposedly hired to enforce Obamacare (Factcheck.org has already debunked that myth).

Bachmann ended with a shot of soldiers raising the flag at Iwo Jima (which she mispronounced) and compared it to Americans fighting the debt crisis. "We will proclaim liberty throughout the land," she concluded. "We the people will never give up." Unfortunately, she was looking at the wrong camera for the entire speech, so she always seemed to be looking over the viewer's left shoulder (in my case, at my dog Sadie.) It was a little creepy.

Throughout his career, Barack Obama has benefited from having lame opponents, and that trend is clearly continuing thanks to the new leadership of the GOP. He looked presidential; Ryan and Bachmann looked small and lost. The worst response was from GOP Rep. Paul Broun, the one who was afraid Democrats wanted to play "kissy-kissy" by sharing seats during the SOTU. He skipped the address and spent it on Twitter, where he declared, "Mr. President, you don’t believe in the Constitution. You believe in socialism." That's probably better than Rep. Joe Wilson interrupting an Obama address to the House by screaming "You lie," but not by much.

January 24, 2011

By Drew Pierson and Meg Shreve

Leaders of 17 organizations representing higher education institutions, public policy advocacy groups, and industry associations met with Treasury Secretary Timothy Geithner on January 21 for a closed-door meeting on corporate tax reform.

“I think there is a consensus [in America] we need to do something about the high corporate tax rates relative to the rest of the world,” said Tax Foundation tax counsel Joe Henchman, who attended the meeting.

With Japan recently announcing plans to lower its corporate tax rates, the United States will have the highest corporate income tax rates among the 34 wealthy nations in the OECD, at 40 percent (combined with state taxes) in 2010, according to the Cato Institute.

Participants involved with the discussion at the Treasury Department said the focus was revenue-neutral corporate tax reform. Although both Henchman and Robert McIntyre, director of Citizens for Tax Justice, declined to offer many details because Treasury had asked that no specifics from the meeting be discussed, they said they had offered varying suggestions as to the feasibility and scope of such reform.

For example, McIntyre said he advocated corporate tax reform that was not revenue neutral, but rather would increase revenue to address the nation’s rapidly mounting debt. Henchman noted the difficulty of reforming corporate tax rates by only eliminating expenditures because of the relatively limited number of them on the corporate side of the tax system. He said it might be wise to consider larger reform that takes on personal income tax as well.

“It doesn’t get you very far down,” Henchman said of lowering the rates by eliminating corporate tax expenditures.

National Economic Council deputy director Jason Furman on January 21 reiterated the Obama administration’s preference for revenue-neutral corporate tax reform at a conference in Washington.

Tax reform has been a frequent topic of discussion in both major parties during the early weeks of the 112th Congress. House Majority Leader Eric Cantor, R-Va., said January 4 that tax reform could boost U.S. competitiveness and that he expects Obama to discuss reform during his State of the Union address on January 25.

But lately the focus on reform has shifted from both corporate and personal income taxes to mostly only the corporate side. The day before the meeting, on January 20, the House Ways and Means Committee held the first in a series of hearings on corporate tax reform, at which invited business leaders argued for a lower rate.

Not everyone is convinced a corporate-only focus on tax reform is the best approach. Federal Reserve Chair Ben Bernanke testified before the Senate Budget Committee January 7 that he hoped Congress would undertake a tax reform effort to reduce the deficit and encourage economic growth, and said that individual and corporate taxation should be treated “as a holistic, single part of policy.” Senate Budget Committee member Ron Wyden, D-Ore., echoed those remarks.

The meeting was the third on corporate tax reform between Geithner and community leaders. On January 14 the Treasury secretary held a closed meeting with the chief financial officers of many high-profile businesses, including Coca-Cola and the Walt Disney Co., to discuss such efforts, and he met with business leaders again on January 20.

Henchman said he thought the January 21 meeting was “a good discussion.” Although he declined to say whether Geithner had indicated if more such meetings would be held, Geithner has said previously he expects to participate in a series of these meetings. Besides Henchman and McIntyre, Rosanne Altshuler of Rutgers University was in attendance, as was Maya MacGuineas, president of the Committee for a Responsible Federal Budget, and Daniel Shaviro of the New York University School of Law, among others.

Other organizations represented at the meeting included the American Enterprise Institute, the Center for American Progress, the Center for Budget and Policy Priorities, the Business Roundtable, the Service Employees International Union, Columbia Law School, the American Action Network, the Brookings Institution, the U.S. Chamber of Commerce, the AFL-CIO, the National Association of Manufacturers, and the University of California, Berkeley.

(Original post)

1/21/2011

Dave Lindorff
 
If President Barack Obama had announced this week that he was appointing Japan’s Takanobu Ito, president and CEO of Honda, to head his new Council on Jobs and Competitiveness, one can imagine the shock wave that would go through the American body politic. A foreigner!--and one from one of America’s major competitors--to head a White House advisory panel on jobs and competitiveness?

And yet, at least the president could argue that Ito represents a company that earns the bulk of its revenues from its operations in the US.

But what are we to make of the actual announcement, that the president has named Jeffrey Immelt, chairman and CEO of GE Corp., to chair the President’s Council on Jobs and Competitiveness?

Immelt heads a company that has for years topped the list of transnational corporations as ranked by the size of their foreign asset holdings. More significantly, GE is a company that for years has also received more of its revenues and its profits from abroad than from its US operations (a record 60% in 2009), that has far more of its 304,000 employees overseas than in the US, and that has more assets abroad than at “home,” where its headquarters offices are located.

Even those domestic revenues and earnings are less than they might appear, in terms of jobs at least, since they are primarily from the company’s financial subsidiaries, while most of the revenues and earnings from abroad are from its manufacturing operations.

What this means is that in very real terms, GE is not an American company. It is a foreign company that happens to be headquartered in the US, and that happens to have a chairman/CEO who was born in the US, and holds a US passport.

If Congress were serious about enforcing government rules on foreign lobbying, and if the Federal Election Commission were serious about enforcing its rules about foreign influence in US elections, Immelt and GE would have to register as foreign agents when they lobby Congress and the White House, and GE would be barred from donating funds to election campaigns.
Find the real AmericanFind the real American

It’s ironic, isn’t it, that people on the loopy right are still making a fuss about whether President Obama was really born in Hawaii, or might really have been secretly born abroad before being sneaked into the US territory by his mother, but aren’t outraged at the appointment of the head of a functionally foreign firm to advise him on his domestic jobs policy. The truth is, it would hardly matter where an American president entered the world from his mother’s womb. The important thing would be where he grew up, how he viewed his national allegiance, and of course, whether he is an American citizen, none of which is in question in Obama’s case. On the other hand, there are plenty of good reasons to wonder whether GE’s chief executive, in becoming the president’s top advisor on jobs policy, really has America’s and American workers’ best interests at heart. (He isn't even being required to resign his posts at GE, which makes the question of where his real loyalty lies even more grave.)

Between 2005 and 2009, according to GE’s own 10-K financial reports, the company shed jobs in the US so fast, and added them abroad so fast, that the US employee share of GE’s total workforce dropped from 51% to 44%, a process of job destruction that has continued apace since then. In 2009 and 2010, according to information compiled by the United Electrical Workers (UE), GE closed down 29 manufacturing plants in North America, 28 of them in the US and one in Canada. A total of 3000 workers lost their jobs in those closings, with many of those jobs being added at GE facilities overseas in low-paying countries like China and India. But actually, the job losses were greater, as those shuttered facilities had until recently employed twice that many workers, UE reports.

Just last September, for example, GE announced that it was shutting down its last US lightbulb manufacturing plant and moving that operation to China. The 200 workers at the factory in Winchester, VA, who had been earning some $30 per hour making lightbulbs for the US market, were all added to the US jobless rolls. Why? Workers in China could make the new substitute fluorescent bulbs cheaper, and then GE could import them back into the US duty-free.

Meanwhile, Immelt recently told Forbes magazine about his company’s plans for expanding jobs...in India. As he put it to the magazine, the company’s approach to expanding its markets in the rest of the world is “to be ‘local’ in every sense of the word. That means migrating P&L (profit and loss) responsibility and major business functions (like R&D, manufacturing and marketing) from a centralized headquarters to an experienced in-country team.”

Doesn’t sound like the kind of model that’s likely to be adding many jobs here in the US, does it?

And yet, President Obama, in naming Immelt to his new post, said, “We think GE has something to teach businesses all over America.”

On the evidence, let’s hope not!

You have to wonder what kind of advice Immelt will be giving the president (and American businesses). GE likes international trade agreements that allow the company to shift production abroad and then import the goods to the US tariff-free. The company also likes the idea of lower corporate taxes (for the years 2007 to 2009, according to Citizens for Tax Justice's Bob McIntyre, Immelt's GE managed to finagle a tax rate of -14.1%, which is to say the government gave the company an extra 14.1% over and above its profits!), and of course all kinds of tax incentives aimed at increasing hiring, though these measures, while helping corporate bottom lines, have demonstrably failed to lead to significant job creation. GE also opposes measures that would punish companies for outsourcing production, or that would make it harder for it to bring in high-skilled workers from abroad to replace educated but higher-paid American workers. A key reason GE's US tax rate is regularly negative is that it writes off against US income the higher taxes it is paying to foreign countries on the much greater earnings it books on production and sales in its operations in those countries.

Arguably, from the point of view of American workers, it might be better if Obama had hired Honda’s chief executive, whose company at least has been adding jobs in the US, not eliminating them.

Looked at another way, it’s ironic to note that the US Justice Department is currently trying to cook up a legal concoction that will allow it to arrest and prosecute Australian Wikileaks founder Julian Assange for espionage, because he dared to do what US journalists should have been doing--digging up the documents that expose US misdeeds abroad. They might more appropriately be looking into the way ostensibly American corporate executives like Immelt have been using their companies to sabotage the nation’s entire economy and political system.

Come to think of it, that kind of thing--undermining the country--used to be called treason. Now it’s just a ticket to a job as White House adviser.

(Original post)

2011-01-21

By Kim Dixon

WASHINGTON, Janp 21 (Reuters) - U.S. companies are not overtaxed on average, but trimming the highest corporate tax rate could help raise U.S. business global competitiveness, a top economic adviser to President Barack Obama said on Friday.

Obama officials have been listening to major U.S. companies gripe about the top 35 percent marginal corporate rate as the president mulls whether to tackle reform of the tax code -- a mammoth task by all accounts.

Obama president also faces the challenge of a divided Congress where it could be tricky to pass sweeping initiatives in the next two years, which lead up to his re-election campaign.

A top economic adviser told corporate tax officials that Obama is open to all ideas as he considers a law rewrite.

'The high top marginal rate is an indicator that reform could have meaningful benefits, especially in an increasingly global economy where business activity responds to tax rates,' Jason Furman, deputy director for Obama's National Economic Council, told executives at an event on tax policy.

Still, he noted the impact of the high rate is sometimes overblown, citing loopholes and tax preferences in the code.

'The high top marginal tax rate is not evidence that American companies are on average overtaxed compared to historical averages of other countries,' Furman said. For a comparison of international tax rates, see:

For an overhaul of the tax system, Obama needs to take the lead, analysts and observers said. Many are looking to the State of the Union speech on Tuesday for a sign of his commitment.

'We're in the second inning; we'll know a lot more after the State of the Union,' said a tax official at one of America's biggest companies, who spoke on condition of anonymity.

Secretary Timothy Geithner last week met with chief financial officers with America's biggest companies and on Friday met with academics and policy officials to gather ideas.

Many believe the politics of taxes make substantive changes unlikely in the next two years, especially with Republicans in control of the U.S. House of Representatives and a looming presidential campaign.

'I'd be shocked if anything could pass in the current Congress,' said Bob McIntyre, president for Citizens for Tax Justice and a participant in Friday's meeting with Geithner.

He said the president and lawmakers need a mandate from the public to move forward.

Two participants at the meeting, who did not want to be identified, said it didn't appear Treasury had a clear plan yet on a way forward.

RAISING REVENUE?

Furman said any revamp must not result in a loss of revenue, given the near $14 trillion federal debt.

'The president isn't looking to the corporate sector to help solve this fiscal challenge,' Furman said. 'What he is asking is that in the process of doing any reforms to the tax code we don't make these fiscal problems any worse.'

A top Procter & Gamble official told Congress this week that Congress shouldn't get hung up on ensuring that any tax cuts are fully offset by spending cuts.

McIntyre said he told Geithner that any corporate tax overhaul should raise money to chip away at the deficit.

The 1986 tax overhaul signed by President Ronald Reagan raised money on the corporate side to account for cuts in individual tax rates.

One meeting participant, speaking on the condition of anonymity, said the administration appeared to be in the early days of thinking on the matter.

'To be honest, I was more optimistic that this might be a 2011 issue before I got the call to come to this meeting,' the person said. 'I'm not convinced that this is going to be his No. 1 agenda item when they are now having feel-good meetings with think tank folks,' the person said.

(Reporting by Kim Dixon; Editing by Andrew Hay and Leslie Adler)

(Original post)

JANUARY 21, 2011

By Jeffrey Sparshott

WASHINGTON (Dow Jones)--Treasury Secretary Timothy Geithner Friday met with think tanks, unions, universities and business groups to discuss corporate taxes as the Obama administration weighs changes to the tax code.

Geithner in a speech last week said the White House is looking for ways to encourage growth and investment while also cutting the deficit.

The Treasury secretary met Friday with representatives from 17 groups from across the political spectrum, including the American Enterprise Institute, Brookings Institution, Business Roundtable, AFL-CIO and Columbia Law School. The Treasury Department didn't provide further details.

Participants said the groups held a roundtable discussion with the secretary, with each party given a chance to express views while the Treasury pooled ideas.

"There were thoughtful comments the whole way through," said Joseph Henchman, tax counsel for the non-profit Tax Foundation. "Obviously there is a consensus for doing something about our high corporate tax rate."

The U.S. corporate tax rate is 35%, though many pay less due to credits, deductions, exclusions and exemptions. Still, the headline rate is significantly higher than other developed nations--for example, U.K. companies pay 28%, Canadian 18%, German just under 16%, Swiss 8.5% and Japanese 30%, according to OECD data.

Many companies argue the higher rate makes them less competitive, and one common idea has been to broaden the tax base by eliminating exemptions while lowering the overall rate.

But the administration also faces mounting debt and some calls to generate more revenue.

"I didn't think it was a good idea to use all or most of the money from corporate tax reform to cut rates," said Bob McIntyre, director of the liberal Citizens For Tax Justice and one of the meeting participants. "Revenue neutral reform would be a disaster."

Friday's meeting is one in a series of discussions between senior Treasury officials and outside experts. It follows by a week a gathering with chief financial officers from more than a dozen major U.S. companies.

-By Jeffrey Sparshott, Dow Jones Newswires; 202-862-9291; jeffrey.sparshott@dowjones.com

(Original Post)

by dcampbell

Sat Jan 08, 2011 at 05:57:58 PM PST

The Sacramento Bee on Saturday features an article by Dale Kasler on page 1 entitled “State’s economic levers limited.”  This piece and others promote a piece that is fundamentally wrong.  It is simply not accurate that the state can not respond to the economic crisis.  Here is a start.  I will return to the issue of why the press  gets this issue wrong  or what Robert Reich calls- “The big lie.”

It is clear that the California budget is in crisis,  but the argument that there is little that can be done is simply wrong.  There are resources to fund job recovery and economic growth.  It is a choice.  We can not simply cut our way out of the crisis, budget cuts and lay offs make the recession worse. California will need to raise taxes to fund the schools and to repair the social safety net.

Specific policy proposals:

As a consequence of the just passed federal tax reductions, including the reduction of taxes to the wealthiest taxpayers,  Washington-based Citizens for Tax Justice estimate that  California’s richest taxpayers will be saving about $14 billion annually on their federal taxes. The next wealthiest 4 percent, with an average income of $310,000, will save another $6.5 billion.  State taxes should be increased on these two groups to secure this available 20.6 Billion dollars to fund the necessary jobs creation projects.  Enforce the current California law taxing the sales of goods by out of state companies ( such as Amazon)  over the internet.  Gain. 1.2 billion $.

Pass an oil extraction tax.  Require that the oil companies pay taxes when they take our oil out of the ground and then refine it and sell it back to us.  Gain.10 Billions.  Pass the 10.1 billion dollar jobs package as proposed in the Assembly last year.  This would pay off debts to local governments and keep teachers in classrooms to avoid massive layoffs. California is the only oil producing state in the country that imposes no taxes on the pumping of oil. The proposed tax was to be 6% of the sales price of oil.  Alaska and Louisiana both charge 12.5%.  
 
In California we need to spend more state money to improve schools, to develop roads and infrastructure, and to create jobs.  Those who are well educated are more employed and paying taxes while those with less education, those who leave school, are in a prolonged economic crisis.  It is well documented that our schools and our universities are in a finance crisis.  We need to be preparing young people for new jobs and to create new industries.  The success of students in higher education will significantly determine California’s future competitiveness and prosperity.   Improving education, including both k-12 and higher education, makes California more likely to attract investment and the creation of new jobs and new industries.

California government must protect and empower our citizens. To foster prosperity  it must prepare the young for civic participation. (BTW. This has been recognized since the first California Constitution of 1849).  Protection includes health care, social security, safe food, environmental protection, safe streets, job protection, etc.

Our economy needs roads, bridges, telephone lines, communications systems, energy and quality education.  These services make freedom and prosperity possible. Conservative opposition to these services ignore the economies need for infrastructure.

The finance capital collapse and theft on Wall Street produced this crisis, not immigration.   Now Wall Street has recovered, but the states and specifically California is left with the destruction.  The best available response is for California to tax and spend to stimulate the economy- that is Keynesian stimulus. The anti tax radicals and the Republicans will oppose this approach.  They must be defeated.  

Specific proposals :
Enforce the current California law taxing the sales of goods by out of state companies ( such as Amazon)  over the internet.  Gain. 1.2 billion $.

Pass an oil extraction tax.  Require that the oil companies pay taxes when they take our oil out of the ground and then refine it and sell it back to us.  Gain.10 Billions.  Pass the 10.1 billion dollar jobs package as proposed in the Assembly last year.  This would pay off debts to local governments and keep teachers in classrooms to avoid massive layoffs.

Pay for the Jobs package with a new oil severance tax.    Imposition of an oil severance tax. California is the only oil producing state in the country that imposes no taxes on the pumping of oil. The proposed tax was to be 6% of the sales price of oil.  Alaska and Louisiana both charge 12.5%.    

Establish a  public state bank such as the Bank of North Dakota. Initially move 25% of all state revenue, receipts and reserves into this bank and 25% of all PERS and STRS funds. Manage the bank as a public service. Over time, finance state borrowing from our own bank.   Gain.  6% of the budget.

Continue efforts to eliminate waste, fraud and abusive where it exists.  There may be legitimate savings here.  For example not paying $13.2 billion for a Bay Bridge that originally was to cost under $6 billion.   Do not pay to import the steel for the bridge from China.
Repeal the 2009 and 2008 tax cuts for corporations passed to gain the extra Republican votes for the budget.  Savings $1 billion.

As a consequence of the just passed federal tax reductions, including the reduction of taxes to the wealthiest taxpayers,  Washington-based Citizens for Tax Justice estimate that  California’s richest taxpayers will be saving about $14 billion annually on their federal taxes. The next wealthiest 4 percent, with an average income of $310,000, will save another $6.5 billion.  State taxes should be increased on these two groups to secure this available 20.6 Billion dollars to fund the necessary jobs creation projects.  

Sell state bonds to gain funds for investment. At present we pay bond holders a market rate.  Rates are so low at present we should borrow and invest.  To achieve a Keynesian stimulus we could sell many more bonds in particular to  the public employees retirement system PERS  and STRS.   Once started ( stimulated) debt financed building will stimulate more building bringing private  debt financing into productive investments.

Many more sources of revenue need to be developed.  We have been thinking too small and looking in the wrong directions.  Please make suggestions.

Unfortunately we would be unable to tap  a major source of potential revenue because it is tied to the national economy.  There should be a significant tax on the sale of stocks, bonds, and financial instruments.  The sources of this tax are in New York and can be easily moved around the globe.  Some planning is necessary to develop this source.  Potential Gain.  $30 billion per year.

Limits on Keynes.

A major limit on the use of Keynesian theories within one state is that most states- particularly California- are not allowed to go into debt.  Keynesian theory and practice call for public expenditures  and going into debt to pay for these expenditures.  Of course California has been going into debt each year for the last three years, it is just that accounting moves have been used to disguise the debt.

Since the state can not go into debt it will need to use tax policy to raise the funds necessary for public investments.  The state has also been targeting particular industries, notably the film industry with tax subsidies and local governments have been providing tax subsidies in the form of enterprise zones.  Along with needed  tax reform, these forms of subsidies (debt) should be reformed to focus on economic growth.    Tax suggestions were in the prior section.

A state can not print money, but it can sell bonds to fund development. California currently sells bonds.  We could develop bonds for more  growth oriented public investment.  At present we pay bond holders a market rate. To achieve a Keynesian stimulus we could sell many more bonds in particular to  the public employees retirement system PERS  and STRS.  These are among the largest investment funds in the nation. Their investment strategies should be re designed to promote in state economic growth.  After all, the money in PERS and STRS is California money.  And, the best way to keep these funds financially solvent is to improve the California economy.  So, directing investment in a manner to promote growth would provide significant capital for public projects.  We could sell bonds to PERS and STRS at a better rate than they are presently getting.  Further, by working with PERS and STRS we could develop a system where they serve as a marketing director to sell state bonds to their members.  There are many people interested in investing in public bonds.

After a 2-4 year transition period, a similar pool of available funds would develop in the new California Public Bank.

Alternative;

We can follow the process of Ireland and Greece and dramatically cut services and raise taxes and impoverish the economy.  Then, since the nation is poorer and has less income you will need to raise more taxes and cut more services all in an effort to protect the excessive profits of bankers and bond holders.

California can continue the current process of cuts and reductions.  The fiscal crises of the states – all the states- has caused major cut backs and retrenchment and made the economic crisis approach a depression.  The state cut backs are greater than the federal stimulus producing a prolonging of the crisis for working people.  Continuing on the present direction produces obscene profits for billionaires along with growing poverty

There are kids who need teachers, hospitals that need nurses, neighborhoods that need police and fire protection.

Four  more at www.choosingdemocracy.blogspot.com

(Original Post)

Lloyd Doggett on Sunday, December 12th, 2010 in an interview.

Lloyd Doggett says tax cut for richest Americans exceeds annual income of average Central Texas families

Rep. Lloyd Doggett speaks to KVUE-TV, Dec. 12, 2010

Austin U.S. Rep. Lloyd Doggett vigorously opposed the deal reached between President Barack Obama and Republicans to extend tax cuts initially put in place by Congress when Republican George W. Bush was president.

After Vice President Joe Biden urged House Democrats Dec. 9 to vote for the deal, Doggett told reporters: "If it's take it or leave it, we'll leave it," according to an online USA Today news post. Early Dec. 17, the House approved the extension. Doggett then said on CNN’s "American Morning:": "We all like less taxes. But this came at an immense cost. It's our money. It certainly is. But it's also our (future) debt."

Doggett, a Democrat representing the state's 25th Congressional District, which takes in parts of Travis and Bastrop counties plus Hays and five counties south and east of Austin, had swung home before the vote. And on Dec. 12, he told Austin’s KVUE-TV, Channel 24: "The richest 1 percent of America will get a bigger tax cut through this bill than the family income of the average family here in Central Texas. That’s just not equitable."

Solid comparison?

To our inquiry, Doggett’s office passed along a report by Citizens for Tax Justice, a liberal group focused on federal, state and local tax policies and their impact. The Dec. 9 report states that under the extension, the nation’s wealthiest 1 percent would enjoy an average tax cut of almost $77,000 in 2011. The report says that in Texas, the wealthiest 1 percent would see an average cut of $79,563.

Doggett spokesman Cameron Arterton said the U.S. Census Bureau says the median family income for Doggett’s Congressional District 25 based on a 2009 survey is estimated at $57,723. Arterton said for Travis County, the median family income is $67,030; for Hays County, $70,998; and for Bastrop County, $55,344. To refresh, the median is not the same as the average, which is based on adding up all the family incomes and dividing the total by the number of families. In this instance, half of the area’s families have a lower income than the median and half of the area’s families have a higher income than the median.

At the Census Bureau, spokeswoman Jenna Arnold guided us to county-by-county survey research showing estimated median and mean (or average) family incomes for the counties singled out by Doggett’s office for 2005-09; they differ slightly from the one-year estimates cited by Doggett’s office. For 2005-09,  the median family income in Travis County is estimated at $69,251, about $25,000 less than the county’s average estimated family income of $94,955. Bastrop County’s median family income, $59,582, was about $12,000 less than its estimated average, $71,656. Hays County’s median family income, $72,647, was about $14,000 less than its estimated average, $86,364.

Median or mean, what’s the best way to judge income?

Lloyd Potter, the state demographer, told us that generally, he prefers to use average (or mean) income in comparisons rather than median income. "There’s something intuitive about the concept of an average," he said.

But averages, Potter said, are sometimes distorted by extreme values at the high or low ends.
"So if you had someone (in your county) who was really wealthy, like a billionaire, or just a couple, that would pull the mean up fairly significantly. It’s perhaps misleading as far as how most people are living," Potter said. "You’ve got some very wealthy people in Travis County. Doesn’t Sandra Bullock live there?"

We heard next from Doggett, who pointed out via e-mail that in his Dec. 16 House remarks opposing the extension, he correctly compared the tax cut for the wealthiest Americans to median--not average--family incomes in Central Texas.

Doggett said that in the earlier KVUE interview, "I wasn’t trying to change the standard of measurement... I was conveying the same important point about this tax deal -- the inequality between the tax benefits for the wealthiest 1 percent in this deal and the typical family income in our area for an entire year."

His e-mail continues: "Even if you strictly limit ‘average’ to mean ‘mean,’ not ‘median,’ my statement is still accurate for the congressional district I represent." His office pointed us to census research indicating that family incomes in the district averaged $75,455 for 2005-09 in 2009 inflation-adjusted dollars.

Doggett added that "‘median’ is a type of ‘average’ too according to Merriam Webster’s online, which lists the first definition of  ‘average’ as ‘a single value (as a mean, mode, or median) that summarizes or represents the general significance of a set of unequal values.’)"

As he acknowledges, Doggett didn’t specify median or mean incomes to KVUE, enabling his statement to leave the misimpression that the 2011 tax cut for the nation’s wealthiest 1 percent exceeds the average income of Central Texas families.

Solely considering average family incomes, his claim doesn’t hold up for two of three counties singled out by his office. Taking median incomes into account, though, his statement is supported.

We rate the statement Mostly True.

(Original Post)

By Dr. Barbara Reynolds   

Thursday, 06 January 2011 00:00
Nowhere to be found, not under the mistletoe, Christmas tree nor tucked in gift bags are what Black Americans need most for the coming year: Faith, courage, and leadership to stem a snowballing crisis.

All over the United States, many non-White, non-wealthy citizens are shivering from the passage of an $858 billion tax bill that feels like an iceberg crashed down on their heads, freezing out dreams of a better life. 
Moreover this year the usual cheery lyrics extolling a White Christmas take on cynical even angry significance.

Passage of the bill will extend 13 months of unemployment benefits at a cost of $60 billion, but this is a mere sop when you see almost $800 billion going to the rich and the super-rich. The scenario looks worse because covering the costs means more misery for people at the bottom who face stagnant wages, rising fuel costs, and slashed education funds.

How much more can middle-America take from the job squeeze, mortgage foreclosures and billions fleeing from housing, education, and energy assistance?

Could all the pain eventually erupt into open class warfare like that unfolding in Britain? U.S. Senator Bernie Sanders certainly thinks so. On the Senate floor, the Vermont Independent took his colleagues to task about America’s "disappearing and shrinking middle class."
Sanders said that the wealthiest Americans today earn about 12 cents of every dollar in the economy, adding that the top 1 percent of income earners make 23.5 percent of all income. According to Sanders, that is creating a severe unequal distribution of wealth in America. "We got to own up to it," Sanders concluded. "There is a war going on. The middle class is struggling for existence. Greed has no end. If we don't start representing those families, there will not be a middle class in this country."

The war is claiming casualties among African-Americans, many of whom were considered middle-class. Black unemployment is now about 16.7 percent, compared to 8.7 for Whites. The Economic Policy Institute estimates that 40 percent of African Americans will have experienced unemployment or under employment by the end of 2010, and this will increase child poverty from one-third of African American children to slightly more than half.

While the Black middle class and the elderly become cash poor, the deal makers on the hill are shamelessly continuing the President Bush era money grab.

The Citizens for Tax Justice states that the wealthiest one percent of taxpayers will pocket almost $77,000 per year more as a result of the new tax deal. The top one percent would take home more than 25 percent of the total tax cut; the bottom 60 percent would share less than approximately 20 percent.

Reports showing the depth of greed are outrageous. The Economist Magazine reported that “As great wealth has accumulated at the top, the rest of society has not been benefiting proportionally. In 1960 the gap between the top 20% and the bottom 20% was thirtyfold. Now it is seventy-five fold. Thirty years ago the average annual compensation of the top 100 chief executives in the country was 30 times the pay of the average worker. Today it is 1000 times the pay of the average worker.”

Two years ago, in a report entitled Democracy in an Age of Rising Inequality, the American Political Science Association concluded that progress toward realizing American ideals of democracy in some areas have reversed. “Privileged Americans roar with a clarity and consistency that public officials readily hear and routinely follow while citizens with lower or moderate incomes are speaking with a whisper.”
In other words, while the privileged demand and even defend their largesse as their entitlement, those who are being exploited raise hardly a whimper.

The handwriting is on the wall, the money grabbers have been buoyed by how easy it was under President George W. Bush and now President Barack Obama to grab taxpayers money for their special interests. Can we say with any certainty now that Social Security or Medicare, will be protected or the continued raid on school budgets to make up for shortfalls won’t critically destroy education progress for millions of young people?

The silence of those being exploited must cease. There are no more comfort zones for the have-nots to rest. Behind the gated enclaves of the newly arrived black upper middle class, hard-times are knocking on their doors. With much of the corporate press on the side of the privileged, either the stepped on will stand up or be ground into the dirt.

Leadership must grab hold of this Winter of Discontent before it snowballs into a revolution. That will take courage and faith that the great victories Black Americans helped won can be won again.

(Original Post)

By Annette Fuentes|January 4, 2011 12:30 p.m. |In Budget Crisis

Where, oh, where, will new Gov. Jerry Brown and his legislative colleagues find billions to fill that humongous budget gap (up to $26 billion, give or take) they face going into the new year? Well, commentator Peter Schrag has a compelling idea. According to calculations by Citizens for Tax Justice in DC, when President Obama and Congress voted to extend the federal Bush-era tax cuts for uppermost income earners, they voted to save California’s 5 percent richest people about $20.5 billion in taxes every year.

Schrag, former Sac Bee editorial page editor and columnist for the California Progress Report, notes that such a sum is about 75 percent of the projected deficit and suggests that tapping just a bit of that bounty from the state’s most affluent—about three-quarters of a million people—could go far to saving the state’s most vulnerable institutions. Like public education.

Brown, who was sworn in yesterday as governor, has certainly hinted at the possibility of raising taxes to rescue the state from its crisis. And he called out public schools and education in general as a priority. Would California’s richest residents rebel at revenue raising to rebuild schools? We might find out.