(Original Post)

By Zaid Jilani on Feb 26th, 2011 at 11:00 am

Today, hundreds of thousands of people comprising a Main Street Movement — a coalition of students, the retired, union workers, public employees, and other middle class Americans — are in the streets, demonstrating against brutal cuts to public services and crackdowns on organized labor being pushed by conservative politicians. These lawmakers that are attacking collective bargaining and cutting necessary services like college tuition aid and health benefits for public workers claim that they have no choice but than to take these actions because both state and federal governments are in debt.

But it wasn’t teachers, fire fighters, policemen, and college students that caused the economic recession that has devastated government budgets — it was Wall Street. And as middle class workers are being asked to sacrifice, the rich continue to rig the system, dodging taxes and avoiding paying their fair share.

In an interview with In These Times, Carl Gibson, the founder of US Uncut, which is organizing some of today’s UK-inspired massive demonstrations against tax dodgers, explains that while ordinary Americans are being asked to sacrifice, major corporations continue to use the rigged tax code to avoid paying any federal taxes at all. As he says, if you have “one dollar” in your wallet, you’re paying more than the “combined income tax liability of GE, ExxonMobil, Citibank, and the Bank of America“:

    [Gibson] explains, “I have one dollar in my wallet. That’s more than the combined income tax liability of GE, ExxonMobil, Citibank, and the Bank of America. That means somebody is gaming the system.”

Indeed, as politicians are asking ordinary Americans to sacrifice their education, their health, their labor rights, and their wellbeing to tackle budget deficits, some of the world’s richest multinational corporations are getting away with shirking their responsibility and paying nothing. ThinkProgress has assembled a short but far from comprehensive list of these tax dodgers — corporations which have rigged the tax system to their advantage so they can reap huge profits and avoid paying taxes:

    - BANK OF AMERICA: In 2009, Bank of America didn’t pay a single penny in federal income taxes, exploiting the tax code so as to avoid paying its fair share. “Oh, yeah, this happens all the time,” said Robert Willens, a tax accounting expert interviewed by McClatchy. “If you go out and try to make money and you don’t do it, why should the government pay you for your losses?” asked Bob McIntyre of Citizens for Tax Justice. The same year, the mega-bank’s top executives received pay “ranging from $6 million to nearly $30 million.”

    - BOEING: Despite receiving billions of dollars from the federal government every single year in taxpayer subsidies from the U.S. government, Boeing didn’t “pay a dime of U.S. federal corporate income taxes” between 2008 and 2010.

    - CITIGROUP: Citigroup’s deferred income taxes for the third quarter of 2010 amounted to a grand total of $0.00. At the same time, Citigroup has continued to pay its staff lavishly. “John Havens, the head of Citigroup’s investment bank, is expected to be the bank’s highest paid executive for the second year in a row, with a compensation package worth $9.5 million.”

    - EXXON-MOBIL: The oil giant uses offshore subsidiaries in the Caribbean to avoid paying taxes in the United States. Although Exxon-Mobil paid $15 billion in taxes in 2009, not a penny of those taxes went to the American Treasury. This was the same year that the company overtook Wal-Mart in the Fortune 500. Meanwhile the total compensation of Exxon-Mobil’s CEO the same year was over $29,000,000.

    - GENERAL ELECTRIC: In 2009, General Electric — the world’s largest corporation — filed more than 7,000 tax returns and still paid nothing to U.S. government. They managed to do this by a tax code that essentially subsidizes companies for losing profits and allows them to set up tax havens overseas. That same year GE CEO Jeffery Immelt — who recently scored a spot on a White House economic advisory board — “earned total compensation of $9.89 million.” In 2002, Immelt displayed his lack of economic patriotism, saying, “When I am talking to GE managers, I talk China, China, China, China, China….I am a nut on China. Outsourcing from China is going to grow to 5 billion.”

    - WELLS FARGO: Despite being the fourth largest bank in the country, Wells Fargo was able to escape paying federal taxes by writing all of its losses off after its acquisition of Wachovia. Yet in 2009 the chief executive of Wells Fargo also saw his compensation “more than double” as he earned “a salary of $5.6 million paid in cash and stock and stock awards of more than $13 million.”

In the coming months, politicians across the country are going to tell Americans that the only way to stave off huge deficit and balance the budgets is by gutting programs for the poor, eviscerating support for the middle class, eliminating labor rights, and decimating the government’s ability to serve the public interest. This is a lie. The United States is the richest country in the history of the world, and income inequality is higher now than it has been at any time since the 1920's, with the top “top 1 percentile of households [taking] home 23.5 percent of income in 2007.”

It is simply unfair for Main Street Americans who’ve already been battered by one of the worst economic crises in our history to have to continue to sacrifice while the rich and well-connected continue to rip off taxpayers and avoid paying their fair share. That’s why a Main Street Movement consisting of Americans who are fed up with the status quo is rocking the nation, and one of its first targets should be tax dodgers like Bank of America and Boeing.

Update All across the country, Main Street Americans are protesting tax dodgers like Bank of America. A picture from one such demonstration (HT: @loril):

Update On its Twitter account, US Uncut notes that protesters outraged at Bank of America's tax avoidance shut down a major branch in Washington, D.C. today.

Update Hundreds of demonstrators descended on a Bank of America branch in San Francisco,some carrying signs mocking the bank's logo as "Bankrupting America" (HT: @jashsf):

Update One Uncut US demonstrator carried a sign that read: "I pay almost 1/3 of my measly income, Bank of America pays NOTHING?!!!" (HT: @allisonkilkenny):

Update This art school dropout in Maine was outraged at having to pay more taxes than Bank of America (HT: RawStory):

(Original Post)

By Bernie Becker - 02/26/11 07:06 AM ET

An interest group with union ties is slamming Boeing for its tax-paying record, not long after the aerospace giant won a huge federal contract.

In a Friday release, Citizens for Tax Justice declared that Boeing basically did not pay any U.S. corporate income taxes between 2008 and 2010, even as it reported around $10 billion in profits.

That release came a day after the Air Force, in a decision that surprised some, awarded Boeing a $35 billion contract to build a fleet of aerial fueling tankers over European Aeronautic Defence and Space.

“Throughout the competition for this lucrative federal contract, Boeing has tried to position itself as the company that supports America,” Bob McIntyre, the executive director of Citizens for Tax Justice, said in a statement. “But its shocking success in avoiding payment of U.S. corporate income taxes tells a very different story.”

In its release, which it says was based on S.E.C. filings, the group says that Boeing received a federal tax rebate in 2009, while paying 0.3 percent of its income in federal income tax in 2010 and 1.2 percent in 2008.

A Boeing spokesman said the release, which may also shed some light on the potential difficulties in passing a corporate tax reform package, was not necessarily an appropriate way to characterize the company’s tax bill.

Charles Bickers said that the company’s income tax expense rate was between 23 percent and 33 percent and 2008 and 2010, but that its actual payout may have been less due to pension payouts, IRS audit settlements and other items.

Still, news media outlets have also reported in the past that Boeing pays a relatively small tax rate. The New York Times reported earlier this month that the Chicago-headquartered company’s corporate tax bill had come to 4.5 percent over the last five years, when counting both federal and other taxes. (In all, Boeing was one of 115 companies on the Standard & Poor's 500 index that paid less than 20 percent in corporate taxes, that report stated.)

In 2009, BusinessWeek placed the company's average tax rate at 3.2 percent. Both The Times and BusinessWeek used Capital IQ, a research firm, for its figures.

In its release, Citizens for Tax Justice – which counts the presidents of UAW, AFSCME and the AFL-CIO as board members -- also referenced a 2008 Government Accountability Office report that asserted that Boeing had 38 subsidiaries in jurisdictions considered tax havens, including 16 in the U.S. Virgin Islands alone.

The group also released a report on a slew of American corporations that paid relatively little in taxes in the run-up to the 1986 tax reform push.

In the current discussion on tax reform, Washington officials on both sides of the aisle have given a general endorsement to the idea of lowering the current top corporate rate of 35 percent by broadening the tax base and eliminating breaks and loopholes.

But one potential sticking point in the push to overhaul the corporate tax code, as The Times and others have noted, is that some companies and industries actually appear to have a relative advantage under the current system.

For example, Aswath Damodaran, a professor at New York University’s business school, found that the biotechnology and pharmaceutical industries had an effective tax rate of around 5 percent, while the trucking industry paid around 30 percent.

And General Electric – whose chief executive, Jeff Immelt, heads up President Obama’s new job creation council – had paid an average effective tax rate of 3.6 percent of late, according to congressional testimony. Disney (36.5 percent) and Home Depot (35.4), meanwhile, paid roughly 10 times a higher percentage.

(Original post)

By Robert Frank

High state taxes are chasing out the rich, according to the antitax crowd. We have it in Maryland, New Jersey, Rhode Island, and Connecticut.

Now comes some new research claiming that taxes are driving the rich out of New York. But like the other research, it contains some fundamental flaws.

The Partnership for New York City, comprised of business leaders, says the state’s “Millionaire’s Tax” has forced some of the state’s most valuable earners and tax-payers to other states. The tax, which applied to those earning $200,000 or more, expires at the end of 2011. But some Democrats want to keep it from expiring.

The Partnership says New York lost a net 1.7 million residents from 1999 through 2008, and the average net worth of people who left was $338,000, citing stats from the Center on Wealth and Philanthropy. (Note, this is before the “Millionaire’s Tax” was imposed).

The report says that from 2007 to 2009, when the Millionaire’s tax was imposed, New York saw a 9.4% decline in state taxpayers who earn $1 million or more. Citing stats from Phoenix Marketing, the Partnership says the number of $1 million earners fell to 345,892 in 2009 from 381,786 in 2007.

It sounds scary. But it isn’t entirely accurate. As the liberal Citizens for Tax Justice points out, the 9.4% decline was actually for people who have wealth of $1 million, not for those who earn $1 million or more. And during that time, the nation as a whole lost wealth and millionaires because of the stock-market swings.

But there is something else to note in the Partnership’s research. The number of millionaires in New York actually increased in 2010–while the tax was in place. New York had 381,197 millionaires in 2010, an increase of 35,000 millionaires from 2009. This again likely reflects wealth gained from the stock market and Wall Street, not from taxes.

Kathryn Wylde, the president and CEO of the Partnership, was kind enough to call me while she was out of the country to clarify. She said the population number is indeed for wealth not income. But when I pointed out that the numbers still failed to prove a link between tax changes and the population of rich people, she said that “anecdotally” she was hearing a lot about wealthy people leaving the state, to lower-tax New Jersey, Connecticut and Florida.

“It’s a very difficult thing to measure,” she said. “We get a lot of it anecdotally. Our evidence is from conversations with lots of high earners and there is an increasing tendency to gravitate to lower-tax places.”

She is absolutely right. Measuring the precise movements of the wealthy is difficult without data. It is even harder to measure the reasons for their movements. And that is why we should take all of these studies for what they are–political talking points with very little supporting data.

It is very possible rich people are leaving New York because of high taxes. But there is little or no supporting evidence.

Do you think the rich are leaving New York because of taxes?

(Original Post)

Wednesday, February 23, 2011

A labor-backed advocacy group called Citizens for Tax Justice has struck back against a Partnership for New York City report on the state's so-called millionaire's tax. The Partnership, which represents big business, had argued that the three-year personal income tax surcharge has already caused thousands of high earners to leave New York, and that it should not be extended past this year. Citizens for Tax Justice claimed that the Partnership resorted to “making data up” in reporting that the number of $1 million earners in New York fell 9.4% from 2007 to 2009.

CTJ, which seeks “fair taxes for middle-income and low-income families,” wrote, “The Partnership is implying that millionaires had the magical ability to see into the future and start moving out of New York in 2007 and 2008 as a result of a tax increase that hadn't even happened yet.”

Technically, no crystal ball was needed. The surcharge passed in May 2009. New Yorkers could have left the state in mid-2009 and filed 2009 tax returns as residents of their new states.

But CTJ's other points raise legitimate questions. The Partnership claimed that New York had 381,786 taxpayers who earned $1 million or more in 2007, but CTJ cited Internal Revenue Service data showing only 375,265 tax returns had adjusted gross incomes of $200,000 or more that year.

CTJ notes IRS data for 2009 is not even available yet. The group wrote that the Partnership got its numbers from Phoenix Marketing International, which measured net worth, not “taxpayers who earn $1 million or more,” as the business group claimed.

Kathy Wylde, president of the Partnership, said her study tried to show that extending the tax would only make it easier for legislators to ignore the state's long-term deficit, even if it didn't push high-income earners out of state.

In any case, Phoenix Marketing International's data showed the number of millionaires nationwide fell 13.9% from 2007 to 2009, so New York's drop of 9.4% was better than average, despite the tax surcharge. New York lost proportionately fewer millionaires than 43 of the 50 states, CTJ found.

The nationwide decline suggests that New York lost millionaires primarily because New Yorkers made less money and saw their property values drop during the recession, not because they moved to other states.

(Original post)

If you want to know why we have budget deficits all over, look no further than the roaring success of corporate tax avoidance.

Richard Wolff

19 February 2011

Nothing better shows corporate control over the government than Washington's basic response to the current economic crisis. First, we had "the rescue", then "the recovery". Trillions in public money flowed to the biggest US banks, insurance companies, etc. That "bailed" them out (is it just me or is there a suggestion of criminality in that phrase?), while we waited for benefits to "trickle down" to the rest of us.

As usual, the "trickle-down" part has not happened. Large corporations and their investors kept the government's money for themselves; their profits and stock market "recovered" nicely. We get unemployment, home-foreclosures, job benefit cuts and growing job insecurity. As the crisis hits states and cities, politicians avoid raising corporate taxes in favour of cutting government services and jobs – witness Wisconsin, etc.

Might government bias favouring corporations be deserved, a reward for taxes they pay? No: corporations – especially the larger ones – have avoided taxes as effectively as they have controlled government expenditures to benefit them.

Compare income taxes received by the federal government from individuals and from corporations (their profits are treated as their income), based on statistics from the Office of Management and the Budget in the White House, and the trend is clear. During the Great Depression, federal income tax receipts from individuals and corporations were roughly equal. During the second world war, income tax receipts from corporations were 50% greater than from individuals. The national crises of depression and war produced successful popular demands for corporations to contribute significant portions of federal tax revenues.

US corporations resented that arrangement, and after the war, they changed it. Corporate profits financed politicians' campaigns and lobbies to make sure that income tax receipts from individuals rose faster than those from corporations and that tax cuts were larger for corporations than for individuals. By the 1980s, individual income taxes regularly yielded four times more than taxes on corporations' profits.

Since the second world war, corporations have shifted much of the federal tax burden from themselves to the public – and especially onto the middle-income members of the public. No wonder a tax "revolt" developed, yet it did not push to stop or reverse that shift. Corporations had focused public anger elsewhere, against government expenditures as "wasteful" and against public employees as inefficient.

Organisations such as Chambers of Commerce and corporations' academic and political allies together shaped the public debate. They did not want it to be about who does and does not pay the taxes. Instead, they steered the "tax revolt" against taxes in general (on businesses and individuals alike). The corporations' efforts saved them far more in reduced taxes than the costs of their political contributions, lobbyists' fees and public relations campaigns.

At the same time, corporations also lobbied successfully for many loopholes in the tax laws. The official federal tax rate on profits is now around 35% for large corporations, which theoretically have to pay additional state taxes on their profits and local taxes on their property (land, buildings, business inventories, etc). Those official and theoretical tax obligations have been used to support conservatives' claims that corporations pay half or more of their profits to federal, state and local levels of government combined. However, because of loopholes, the truth is very different. The actual tax payments of corporations, and especially large corporations, are far lower than their official, theoretical obligations.

The most comprehensive recent study of what larger corporations actually pay by three academic accountants – professors at Duke, MIT and the University of North Carolina – gets at that truth. It examined a large sample of corporations. Their average turned out to be a rate of total taxation (federal, state and local combined) below 30 %. The study concluded:

"We find a significant fraction of firms that appear to be able to successfully avoid large portions of the corporate income tax over sustained periods of time. Using a 10-year measure of tax avoidance, 546 firms, comprising 26.3% of our sample, are able to maintain a cash effective tax rate of 20% or less. The mean firm has a 10-year cash effective tax rate of approximately 29.6%."

General Electric (GE) deserves special mention. The New York Times reported that its total tax payment amounted to 14.3% over the last five years. Citizens for Tax Justice corrected that down to 3.4%, as the profits tax it paid in the US. Thus, GE paid a far lower tax rate on its income than most Americans paid on theirs. In 2009, GE received a huge $140bn bailout guarantee of its debt from Washington. By choosing GE's chief executive, Jeffrey R Immelt, to head his economic advisory panel, President Obama effectively rewarded the corporate programme: give us more and tax us less.

Corporations repeated at the state and local levels what they accomplished federally. According to the US Census Bureau, corporations paid taxes on their profits to states and localities totalling $24.7bn in 1988, while individuals then paid income taxes of $90bn. However, by 2009, while corporate tax payments had roughly doubled (to $49.1bn), individual income taxes had more than tripled (to $290bn).

If corporations paid taxes proportionate to the benefits they get from government and in fair proportion to what individuals pay, most US citizens would finally get the tax relief they so desperately seek.

(Original post)

By Timothy Noah

Feb. 16, 2011

A couple of years ago Bob McIntyre bought his daughter a mobile phone. She was living in Oakland, Calif., at the time, and McIntyre lived in northern Virginia. He told her to buy the phone in Oakland and to send him the bill. With rebates and discounts the phone ended up costing about $25. But when McIntyre got the bill, he hit the roof.

McIntyre, I should point out, is director of Citizens for Tax Justice, a liberal nonprofit. CTJ has a well-established reputation for scrupulously honest research—McIntyre's been tutoring me about tax distribution tables for three decades—and the man doesn't waste a lot of time griping that our wallets have been picked clean by the gol-durned guv'mint. (That's Grover Norquist's racket.) But McIntyre was flabbergasted to receive a bill of nearly $60 for his daughter's cell phone, of which the majority was taxes. The city fathers of Oakland had calculated their tax based on the phone's sticker price of about $300. Consequently, McIntyre ended up paying more for the tax than he did for the phone.

Taxes on mobile phone use are so high that you might wonder whether the government considers their use a vice, like the consumption of alcohol or tobacco. A pack of smokes costs about $5, on top of which state tax will add, on average, $1.45. That's an average tax rate of 22 percent. In the states of Nebraska, Washington, or New York—where taxes on cellular service are highest—the combined state and local tax is 18 or 19 percent, which isn't too far behind. Nationwide, the average state-local tax burden on cell phone service is 11 percent, compared with an average general sales or use tax of only 7 percent.

Federal taxation of cigarettes (a federal excise tax of about 25 percent is built into the price of a pack) is much more onerous than federal taxation of cell phone use (a 5 percent surcharge paid into the Federal Communication Commission's Universal Service Fund, which subsidizes schools, libraries, hospitals, and rural providers). But when combined with state and local taxes on mobile phone service in Nebraska, Washington, or New York, the total tax burden is 22 or 23 percent. Nationwide, the combined federal-state-local tax on cellular phone service averages 16 percent.

Why are mobile phones taxed so much? A new analysis by Scott Mackey, a Vermont-based economist who works for wireless providers, lays into the FCC, which since 2007 has raised its USF surcharge from 4 to 5 percent. (I'm relying on Mackey for all my cell phone data.) But state and local taxes on cell phone use average more than twice this federal surcharge. And Mackey points out that during the recession local governments have been bumping up their taxes on cellular phone service as they scramble to replace lost revenue. Baltimore went from $3.50 to $4 per month. Montgomery County, Md., went from $2 to $3.50. (Neither of these calculations includes county 911 fees, nor, of course, other state and federal fees.)

Flat-rate taxes on the purchase of goods or services are by definition regressive. That's why states typically keep sales taxes below 10 percent. But the nationwide average tax on cell phone use is, again, 16 percent. That is largely, I would guess, a relic of the time (a dozen years ago?) when cell phones were still a luxury item. It wouldn't have seemed especially regressive to tax somebody's Nokia back when audiences were flocking to see Titanic. But today cell phones are ubiquitous. Although 25 percent of American households have no land lines, only 2 percent have no phone service at all, according to the Pew Foundation's Internet and Life Project. Families too poor to have a land line usually have at least one cell phone. Increasingly, that phone is a smart phone; according to another Pew study, 17 percent of families earning less than $30,000 rely on a cell phone to access the Internet.

As McIntyre often points out, the federal income tax is superior to most state taxes because it's progressive. Rich people pay a larger percentage of their income in taxes than middle-class people, middle-class people pay a larger percentage than poor people, and the poorest people pay no income tax at all. Indeed, they may achieve a net income gain through the Earned Income Tax Credit. That's the way it's supposed to work, anyway; assorted deductions and exemptions and other loopholes undo progressivity a bit. (McIntyre can tell you about that, too.) When the federal and state governments need revenue it's generally not a good idea for them to jack up taxes on goods and services. Far better that they do it through federal and (in the 43 states that have them) state income taxes.

The only logical reason to maintain the current tax scheme would be to discourage cell phone use. That's why we have sin taxes on unhealthy stuff like Marlboros and Coca-Cola. But cell phones aren't unhealthy (except if people use them while driving—already banned in eight states, and for novice drivers in 28—or engaged in some other activity where multitasking is unsafe). And except in certain situations (in class; at the dinner table, the movies, or a funeral; on Amtrak's quiet car; perhaps in bed with your spouse) cell phone use is perfectly acceptable. It's wonderfully convenient, even fun! If we're going to chide cell phone providers—as we should—for adding sneaky fees to your bill, we mustn't ignore the government when it does the same.

(Original post)

By Conor Williams

Friday, February 11, 2011

This week's coverage of President Obama's speech at the U.S. Chamber of Commerce largely portrayed him as a chastened progressive crusader. With hat in hand and downcast eyes, the president walked across Lafayette Park and assured American corporate leaders that he was ready to play nice.

Tired of "outdated and unnecessary regulations," corporate America? We'll back off. Might you consider spending some of the "nearly $2 trillion sitting on [your] balance sheets" to hire a few Americans off of our unemployment rolls? We'll call you "corporate patriots!"

So what does this mean for the president's stated goal to eliminate tax loopholes and subsidies that allow many American corporations to pay much lower taxes than they would otherwise? Industry relies on the nation's infrastructure, political institutions and much more. In last month's State of the Union address, Obama insisted that American business should start paying its share. After all, while American corporations report near-record profits, many unemployed Americans are still waiting for their chance at economic recovery.

So how to make the case? The president might look across the Atlantic -- in Britain, a group called U.K. Uncut has been protesting government austerity cuts in an especially promising way. It seeks out corporations and individuals that avoid paying taxes, calculates how much their taxes would be without loopholes, and then highlights programs that could be saved if they paid their share. Cellphone giant Vodafone recently settled a tax bill of 6 billion pounds -- about $9.6 billion -- for 1 billion pounds, or about $1.6 billion. Meanwhile, the British government cut $11.2 billion in public services to the nation's poor. So U.K. Uncut shut down a number of Vodafone's stores with sit-in protests.

Sir Phillip Green heads a number of British retail outlets and is one of the country's richest men, but in 2005 he managed to avoid the equivalent of $455 million in taxes via some borderline legal financial jujitsu. This didn't stop Britain's Conservative government from asking him to provide advice on spending cuts. In response, U.K. Uncut shut down some of Green's stores to highlight how his unpaid taxes could cover the salaries of 9,000 National Health Service nurses.

While U.K. Uncut is a grass-roots program (and American progressives would do well to work along similar lines -- I'm looking at you, Coffee Party), there's no reason that the president couldn't use these sorts of arguments to shape the political agenda in 2011.

Imagine if, every few days, the White House announced something like this: "This year many big oil corporations recorded record profits (ExxonMobil reported over $30 billion in earnings), while American taxpayers provided them $4 billion in tax subsidies. If Congress acts to stop these fiscally irresponsible programs, we could use this money to double Race to the Top education funding."

Or how about this? "Under current tax law, U.S. corporations may defer taxes on their offshore profits until they return these profits to the U.S. The deferral makes it much easier for them to avoid taxation altogether. Citizens for Tax Justice estimates that adjusting this policy could net around $200 billion through 2015, enough money to bring wireless broadband to every American household and fund high-speed rail development for several years."

And then on a really cranky day: "If adopted, GOP Rep. Paul Ryan's 'Roadmap for America's Future' would dramatically slash corporate taxes and decrease federal revenue by $183 billion if enacted this year. To avoid more deficit spending under this scenario, we'd need dramatic cuts -- like eliminating the departments of State, Interior and Veterans Affairs."

When asked, around 70 percent of Americans reliably answer that corporations pay too little in taxes. A strategy calling attention to corporate tax avoidance could drum up support for the tax reforms that Obama has been pushing since arriving in office. A steady diet of fiscal facts would go a long way towards marginalizing GOP posturing. While the president would be fighting corporate lobbyists and the inclinations of many members of Congress, he'd have the clear moral and fiscal high ground, which might just be what he needs to pass some of these reforms.

(Original Post)

Guest Editorial

by Martin J. Bennett‚ Feb. 10‚ 2011

A recent article in the Economist magazine titled “Tough Times for Everyone – Except Public Sector Workers” states that taxpayers are now learning about “the banquet public sector workers have been having at the expense of everyone else” and that many public employees can “retire in their mid-50s on close to full pay.”

These unsubstantiated claims – repeated endlessly in media – stand reality on its head. Such accusations are part of a systematic campaign by corporate America to mislead taxpayers and scapegoat public employees.

California public sector workers, such as teachers, public health nurses, firefighters, librarians, maintenance, park, transit, and social workers are not responsible for the economic crisis that makes drastic cuts to state and local governments necessary. These public employees earn modest, middle-class pay and benefits.

Rather, it was big business and the wealthy who gamed the deregulated financial system to make huge profits. Their speculation in the home mortgage markets triggered the Great Recession; then they proceeded to take billions in bailouts from the government; and last year, Wall Street’s leading investment and financial services firms paid out a record $144 billion in compensation and benefits.

These same corporate interests adamantly refuse to pay their fair share for vital public services or education.

Moreover, the recent Congressional extensions of the Bush era tax cuts are an unexpected windfall for the richest Californians. According to the Citizens for Tax Justice, the top 1% of the state's income earners will now bring home about $14 billion more each year to their mansions. This represents more than one half the state's budget deficit.

What are the myths and what are the facts about California public employees?

First, there are not “too many” public employees in California. According to the California Budget Project (CBP), we have the second lowest ratio of state workers per 10,000 residents in the nation. In addition, more than 70,000 public sector jobs have been eliminated in California since the crash of 2008, and public sector job loss is proportionately greater in California than in most other states.

Second, public employees in California are not overpaid and they do not receive lavish benefits, compared with the private sector, according to the UC Berkeley Institute for Labor and Employment (IRLE). Economists Sylvia Allegretto and Jeffrey Keefe authored the IRLE report, “The Truth about Public Employees,” in which they examined wage and demographic data from the Bureau of Labor Statistics, and found that the average California public sector worker is older, more experienced, and more educated than their private sector counterpart – 55 percent of public employees have completed a bachelor’s degree, compared to 35 percent in the private sector.

The report indicates that the typical private sector worker receives higher wages, but public employees with the same characteristics earn somewhat better vacation, medical and retirement benefits. The researchers conclude that an “apples to apples” comparison that takes into account age, experience, and education reveals “no significant differences in the level of employee compensation costs on an annual or per hour basis between private and public sector employees.”

Third, public sector employees do not receive “gold plated” pensions as alleged by the corporate media like the Economist magazine. Again, reality defies the myth.

The California Public Employee Retirement System (CalPERS),
which administers and manages a pension fund for 1.6 million public employees, reports that the average CalPERS retiree receives a pension of $25,000 per year. Half of CalPERS retirees receive less than $16,000, and 78 percent receive less than $36,000 annually. Less than 2 percent of CalPERS retirees receive a pension of more than $100,000 per year, and the majority of these are highly paid managers and supervisors – not union members – with 30 years’ service.

Often forgotten is that public pensions are not paid from operating budgets of state and local government but are earned through monthly employee and employer contributions over 20 to 30 years. CalPERS professionals manage the $225 billion trust fund, and 75 cents on every dollar of retirement benefits are investment earnings. The taxpayers contribute 14 cents for every dollar of benefits.

Blaming public employees for our fiscal crisis deflects from the central issue of the historic, and widening, divide between the rich and everyone else. The solution is to reform our inequitable and unsustainable system of taxation.

The CBP reports that corporate profits increased by more than 400 percent between 2001-2008 in California, and the adjusted gross income of the upper 1 percent increased by 77 percent between 1993-2008, while incomes of the bottom 80 percent remained flat. Yet state revenues from corporate taxes have declined by one half since 1981, and the wealthiest 1 percent of income earners (who averaged $1.7 million in 2010) pay lower tax rates than they did two decades ago.

In California we have a revenue crisis – and not a spending crisis.

Tax reform and boosting taxes for those most able to pay would make it possible to restore cuts to public services, adequately fund public education, safety, and health care, and fairly compensate public employees. Such a progressive tax policy includes: (1) increasing by a modest 1% the corporate tax rate (returning to the 1981 level); (2) closing corporate tax loopholes such as the failure to reassess commercial real estate at market rates (now protected by Proposition 13); (3) enacting a severance tax on oil extracted and produced in California; (4) restoring the top personal tax rate for the upper 1 percent from 9.3 to 11%; (5) reconsidering and repealing some of the $12 billion in tax cuts by the legislature for individuals and corporations over the last fifteen years.

A healthy and vital public sector is essential for the private sector to flourish.
Corporations and the wealthiest Californians greatly benefit from public investment in infrastructure such as mass transit and affordable workforce housing, high quality education accessible to all, and comprehensive social services, particularly for low-income Californians.

Let’s stop pointing fingers at hard working public employees and begin to build a broad coalition to implement a responsible and progressive tax policy.

Martin J. Bennett teaches American history at Santa Rosa Junior College, serves as Co-Chair of the Living Wage Coalition of Sonoma County and is a member of the California Federation of Teachers Local 1946.

(Original post)

By Stephen Clark

February 08, 2011 | FoxNews.com

A taxpayer watchdog group is throwing a penalty flag on President Obama's assertion in a Super Bowl pre-game interview that he didn't raise taxes, claiming the president signed into law at least two dozen tax increases.

"Just 16 days into his presidency, Obama signed into law a 156 percent increase in the federal excise tax on tobacco -- a hike of 62 cents per pack," Americans for Tax Reform said in a press release Monday, arguing that Obama's approval of this tax hike was a violation on his campaign pledge not to raise taxes on the middle class.

Seeking to burnish his centrist credentials, President Obama told Fox News' Bill O'Reilly Sunday that he "didn't raise taxes once."

"I lowered taxes over the last two years," he said in an interview that aired before the heavily-viewed Superbowl on Sunday.

But ATR cites the health care law as an Obama administration imperative that contains two dozen new or higher taxes, including the individual mandate tax and the employer mandate tax.

"President Obama's entire claim of being a net tax-cutter rests merely upon the temporary tax relief he has signed into law," the group said. "The tax increases Obama has signed into law have invariably been permanent. In fact, Obama has signed into law $7 in permanent tax hikes for every $1 in permanent tax cuts."

The group estimates that the permanent changes to tax law Obama signed totals a net tax hike of $618.7 billion.

But supporters of the president say ATR's math doesn't add up.

"I think it's a little tendentious on their part," Robert McIntryre, director of the progressive Citizens for Tax Justice, told FoxNews.com."If the rule is anything that's temporary doesn't count as a tax cut, then George W. Bush is in trouble from their point of view since all of his tax cuts were temporary. They must hate Bush."

Ryan Ellis, the tax policy director for ATR, responded that Bush would have made his tax cuts in 2001 and 2003 permanent if he could have gotten the 60 votes required in Congress.

But Obama, he argued, prefers to make the tax cuts temporary.

"If you're looking at temporary tax cuts, how are you paying for it? He's paying for it with a permanent tax hike," he said. "It's not exactly fair to mix those things together."

"It's a question of baselines and the biggest problem is he's a tax cutter of temporary tax cuts by permanent tax hikes that never go away," he added.

White House Press Secretary Robert Gibbs said Tuesday that he had not seen ATR's claims but "I would note that I think the Congressional Budget Office released figures yesterday that show that for the third consecutive year the American people are paying less in taxes than they did during the previous administration."

The CBO on Monday said that according to projections, income tax payments this year will be nearly 13 percent lower than they were in 2008, the last full year of the Bush presidency, and corporate taxes will be lower by a third.

The White House also has defended the tobacco tax hike previously, saying it didn't violate Obama's pledge because it didn't apply to income, payroll or investment taxes. Supporters have also noted the money gained from the tobacco tax is intended to finance a major expansion of health insurance for children.

The White House has addressed charges that the health care overhaul raises taxes, saying the law includes the largest health are "tax cut" in history for middle class families. The White House has cited the Congressional Budget Office estimate that Americans buying the same coverage they have today in the individual market will see premiums fall by 14 to 20 percent.

ATR says the individual mandate tax, which starts in 2014, will require anyone not buying "qualifying" health insurance to pay an income surtax of $495. That amount increases to $990 for two members of a family and $1,485 for three-member families.

Among the other tax hikes ATR cites in the health care law are:

* the medicine cabinet tax, which began in January. It will prevent consumers from using their health savings accounts (HSA), flexible spending accounts (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin), the group argues;

* the HSA withdrawal tax hike, which started in January. It increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, making them less appealing than IRAs and other tax-advantaged accounts, which remain at 10 percent, ATR said;

 * the flexible spending account cap, or the "Special Needs Kids Tax," which was unlimited. It has been capped at $2,500 since January. The new cap imposes a "particularly cruel and onerous" burden on parents of special needs children who use the money to pay for costly tuition, the group argued.
    
* the medical itemized deductions cap, which allows consumers to deduct medical expenses if the total cost reduces the filer's income by 7.5 percent, will face a threshold of 10 percent starting in 2013.

* the tax on indoor tanning services, which began in July, imposes a new 10 percent excise tax on Americans using indoor tanning salons.

(Original Post)

2-07-11

By Joseph A. Palermo

Mr. Palermo is Associate Professor of American History at CSU, Sacramento. He's the author of two books on Robert F. Kennedy: In His Own Right (2001) and RFK (2008).

The overstated celebrations and commemorations of the centennial of Ronald Reagan’s birth, with their razzle-dazzle of Super Bowl tributes and marathon deifying in Simi Valley, are fitting tributes to a president whose public relations guru, Michael Deaver, was a pioneer of this same kind of flim-flammery.  But the Reagan centennial’s flashy hagiography masks a far more complicated reality.  He set the nation’s economic agenda, imitated by Democrats Bill Clinton and Barack Obama, which continues to this day.

“Reagan taught us deficits don’t matter,” Dick Cheney once boasted.  But not even the staunchest of Reaganites (Democrat or Republican) would make that assertion today.  Those who are celebrating the centennial of President Reagan’s birth are rejoicing in the trajectory he put the nation on.  And what a trajectory these last three decades have been.

At the start of his 1980 campaign, after undergoing several cram sessions with enthusiasts of “supply side” economic theory, Reagan told an interviewer:  "an across the board reduction in tax rates, every time it has been tried, it has resulted in such an increase in prosperity . . . that even government winds up with more revenue."  But Reagan had no evidence to support this assertion, which his own vice president, George Herbert Walker Bush, famously denounced during the Republican primaries as "voodoo economics."

There was little question that the new ethos the Reaganites brought to Washington had a profoundly different attitude toward the poor than had been seen in the Capitol for many years.  Reagan's friend and ally from California, Edwin Meese III, who later became his attorney general, told reporters that the administration "had considerable information that people go to soup kitchens because the food is free and that's easier than paying for it."  Throughout his two-term presidency Reagan blocked any increase in the federal minimum wage.  His domestic policymakers sought to roll back federal help to the working poor who were reeling under the worst economic conditions in a generation.  In fact, during the 1980s, the word "welfare" itself became strongly associated with failure and waste.

Thirty years ago this month, on February 18, 1981, during Reagan's first State of the Union address, the House chamber boomed with applause when he proposed cuts totaling $41.4 billion in the federal budget.  In his first budget he dropped about 400,000 households from the food-stamp program.  At the same time he planned to boost military spending by $7.2 billion, which added significantly to Carter's earlier defense buildup.

On August 13, 1981, Reagan held an outdoor signing ceremony for the Economic Recovery Tax Act (ERTA) at his 688-acre ranch outside Santa Barbara.  Forty-eight House Democrats crossed over to join the Republicans' overhaul of the nation's tax code.  The new legislation reduced marginal income tax rates for all Americans by 25 percent.  The wealthiest Americans, who paid 70 percent in 1981, would see their tax rate lowered to 50 percent.  Rates for lower-income people fell more modestly, from 14 percent to 11 percent.  Today, the Republicans scream bloody murder at the thought of raising the top rate from 35 percent to 39.5 percent.

Not only did the rich reap the greatest windfall from the changes in the tax code but during the "sausage-making" mark-up of the legislation congresspersons and senators larded the bill with billion-dollar tax breaks for corporations, oil conglomerates, and other special interests.  One corporation that benefited from the new legislation was Reagan's former employer, General Electric.  Citizens for Tax Justice, a liberal advocacy group in Washington, D.C., estimated that the new law yielded $1 billion for GE over the course of five years.  GE also paid no income taxes during the first years of the Reagan presidency.  Keeping with Reagan’s spirit of bipartisan servitude to wealthy elites, President Barack Obama recently tapped the CEO of GE, Jeffrey Immelt, to head his economic team.

The supply-siders' prognostications for increased government revenues turned out to be as whimsical as their critics had suspected.  Even with the harsh cuts in social programs and Reagan's signature on subsequent tax hikes designed to mitigate the negative fiscal impact of the initial ERTA, the federal budget deficit swelled from $74 billion in 1980 to $300 billion by the middle of the decade.  So any honest evaluation of Reagan’s legacy on taxes and budget cuts would have to acknowledge that he tilted the playing field in favor of the rich at the expense of the poor. 

PATCO

Reagan’s National Labor Relations Board (NLRB) favored management over labor far more than any previous administration.  Companies now had greater latitude to impose speed-ups, hire scab workers, and violate labor contracts.  No battle illustrates this new order in labor relations than how Reagan handled a strike by the Professional Air Traffic Controllers Organization (PATCO) that began early in his presidency.

Ironically, in 1980, PATCO had been one of three national labor unions that had endorsed Reagan for president; the other two were the Teamsters and the Airline Pilots Association.  During the previous decade strikes by public workers were usually settled quickly with good-faith negotiations and federal arbitration.  Reagan gave PATCO 48 hours to end the strike and when the workers refused he fired all 11,600 of them.  He then brought in supervisors and air traffic controllers from the U.S. military to break the strike.  Reagan's Justice Department even arrested some of the union's leaders and promised to criminally prosecute them.  In a few short weeks PATCO was history.  It was the most aggressive stand against organized labor by the federal government since the passage of the anti-labor Taft-Hartley Act of 1947. 

The president's decisive stand against PATCO altered long-established norms and provided a context for a string of private sector strikes that ended badly for the unions.  Like today, in the recessionary context of the early 1980s it was easy for Reagan and his corporate allies to gain the upper hand against organized labor.  Not long after the PATCO action, the Greyhound Bus Company and Eastern Airlines fired striking workers and replaced them with non-union substitutes.  The labor leader and co-founder of the United Farm Workers, Dolores Huerta, later noted:  "We found that right after the PATCO people were fired the United Auto Workers union accepted an agreement to freeze their wages.  That put a lot of pressure on the other unions to do the same thing.  So, what you had was a tremendous weakening of the power of labor."  Labor’s long slide (which has gone on for thirty years and took down a big chunk of the middle class with it) was initiated early in Reagan’s first term.

Foxes In Henhouses

Reagan attempted to defang federal regulatory agencies that conservatives had long railed against by elevating lobbyists, corporate lawyers, and executives to pivotal positions inside the administration.  The tactics included appointing people to high government posts from the regulated industries themselves, saddling the regulatory agencies with debilitating budget cuts, and encouraging bureaucratic inertia.  For example, to head his NLRB, Reagan tapped John Van de Water, who ran a West Coast consulting firm that specialized in union busting.

Other similar appointments followed.  To lead the Department of Agriculture's marketing and inspection division, Reagan appointed C.W. McMillian who was formerly the vice president of the National Cattleman's Association; Richard Lyng, a lobbyist for the American Meat Institute, became undersecretary of agriculture.  The assistant secretary of energy for conservation and renewable energy, Joseph Tribble, came from the Georgia Pulp and Paper Company, a corporation that had been charged with dumping toxic waste into rivers.  James Watt, who became Reagan's secretary of the interior, had been a lawyer for the Mountain States Legal Foundation, a law firm that represented some of the nation's largest mining and timber corporations.  Anne Gorsuch (Burford) was put in charge of the Environmental Protection Agency (EPA) who, like Watt, came from Colorado and had built her career fighting against environmental regulations as a state legislator.  Secretary of Labor Raymond Donovan had been a construction company executive who instructed the agencies under his command, including the Mine Safety and Health Administration (MSHA), to emphasize "voluntary" compliance by mine operators of health and safety laws.

On the 1980 campaign trail, Reagan had called the Occupational Safety and Health Administration (OSHA) "one of the most pernicious of the watchdog agencies" that sought "to minimize the ownership of private property in this country."  He slashed OSHA's budget by 10 percent and chose Thorne Auchter to be an assistant secretary of the agency whose family-run construction business in Jacksonville, Florida had been charged with forty-eight safety violations.  To chair the Securities and Exchange Commission (SEC), Reagan recruited the Wall Street insider, John Shad, who worked diligently to transform the once feared enforcement arm of the federal government into a partner in the prerogatives of brokerage houses and investment banks.  Shad also emphasized "voluntary" compliance with financial regulations.  During his seven-year tenure at the SEC he froze the number of investigators at its 1981 level even though the number of stock traders nearly doubled in that period.  Reagan cut the SEC's budget by roughly 30 percent and the enforcement division's staff was reduced from two hundred investigators to fifty. 

Reagan's secretary of the treasury, Donald Regan, who entered government directly from his post as CEO of Merrill Lynch, moved to de-regulate the financial services industry and nurtured an environment where big Wall Street players could manufacture new debt instruments, such as "junk bonds," and engage in Leveraged Buy-Outs (LBOs).  Both of these innovations strained the financial system and sapped the productivity of other sectors of the economy.  So the appointing of corporate “foxes” to guard the public’s “hen houses” began under Reagan and has continued through both Democratic and Republican administrations ever since. 

Deregulation

On February 17, 1981, Reagan signed Executive Order 12291 mandating that all federal regulations undergo a "cost-benefit" analysis.  Proposals for new guidelines were to be submitted to David Stockman's Office of Management and Budget (OMB) to determine their effects on big business's bottom line.  Any rule that corporations did not like would be subjected to an industry-friendly review.  Reagan gave the OMB new powers to reject "burdensome" regulations and he named a corporate lobbyist, Jim Tozzi, to be the deputy administrator of the Office of Information and Regulatory Affairs (OIRA), a division of OMB.  Tozzi had specialized in finding ways around federal rules for his clients, and as a high-ranking official he now could "review" many of the same directives he had fought against.

Reagan appointed J. Peter Grace, chief of W. R. Grace & Company, to head the "President's Private Sector Survey on Cost Control."  The Grace Commission had an executive committee consisting of CEOs from some of the nation's largest corporations.  Accustomed to working behind closed doors, the panel refused to cooperate when Congress demanded a list of its members.  In the mid-1980s, Grace's own company was forced to settle a civil lawsuit that accused it of poisoning two wells in Woburn, Massachusetts that led to the leukemia deaths of five children and one adult.  The Woburn case was later chronicled in a best-selling book and even made into a Hollywood movie, A Civil Action.

The end result after Reagan’s two terms was a tripling of the national debt, from about $900 billion to $2.9 trillion.  No president in U.S. history had tripled the debt in peacetime.  Then, as today, the same politicians who brought us the tax cuts and military spending point to the deficit as an excuse to gut programs that serve not only the poor but the working middle class.

Reaganomics

In his best-selling 1981 book, Wealth and Poverty, the conservative author George Gilder offered a spirited defense of laissez-faire capitalism and bluntly stated the underlying premise of supply-side economics.  “A successful economy depends on the proliferation of the rich,” he wrote, “to help the poor and middle classes, one must cut the taxes of the rich.”

What transpired throughout most of Reagan's time in office was a patchwork of fiscal measures designed to blunt the negative budgetary effects of the original 1981 ERTA, and shift the tax burden from the wealthy to the working and middle classes.  The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 closed some of the loopholes and raised specific taxes that the ERTA had dropped.  Richard Darman, a top White House aide, labeled the $37.5 billion in new taxes contained in TEFRA, (along with the Highway Revenue Act's $3.3 billion), “the single largest tax increase in history.”  The 1983 Social Security Amendments raised payroll taxes and imposed new restrictions on workers' benefits.  The Deficit Reduction Act of 1984 and the Omnibus Budget Reconciliation Act of 1987 both found ways to raise revenues while cutting social spending.  In addition, Congress stepped in with its own initiatives in the form of the Gramm-Rudman-Hollings Act of 1985, followed by the Gramm-Rudman Act of 1987, which set fixed deficit targets and a means of theoretically achieving them.

During the Reagan years labor unions suffered their most precipitous decline in the post-war period.  The share of private sector workers who belonged to unions fell from close to 20 percent in 1980 to 12.1 percent in 1990.  (By the 2000s it had dropped to about 7 percent.)  This decrease in private sector unionization is sometimes attributed to changing attitudes among the workers themselves, but public employee unions grew steadily during this period and accounted for most of the new unionization.  It was far more difficult for governmental institutions to practice the kind of aggressive anti-union tactics that have become the norm in the private sector since the 1980s.

The Harvard economist, Benjamin Friedman, calculated that the portion of national income invested in plant and equipment during the Reagan administration averaged about 2.3 percent.  During the previous three decades it had averaged three percent and had never reached that number in the 1980s.  Friedman’s analysis undercuts the view that supply-side tax cuts had produced greater investment in domestic plant and equipment.

Throughout the post-World War II period the United States had run modest trade surpluses.  But on September 16, 1985, the Commerce Department announced that the United States had become a debtor nation.  For the first time since 1914 the United States brought into being a situation where it had to borrow money from abroad to pay for its imports.  In 1980, the U.S. still kept up a trade surplus of $166 billion, but by 1987 the nation owed foreigners $340 billion.  The trade imbalances were, in part, the product of “neo-liberal” trade policies that rewarded American companies that outsourced production to low-wage countries.

In early 1981, Reagan’s Secretary of Human Services Richard Schweiker caused a stir when he called for reducing Social Security benefits for those who retired before the age of sixty-five and imposing new requirements to punish early retirees.  Reagan had been a harsh critic of Social Security throughout his public career, which he considered a "coercive" government program.  Reagan appointed a fifteen-member "bipartisan" commission headed by one of the administration’s favorite free market economists, Alan Greenspan, to examine the condition of Social Security and make recommendations.

Greenspan had been a close associate of the free-market guru and Atlas Shrugged author, Ayn Rand, and, along with Milton Friedman, was among the academic economists most famous for holding an almost religious devotion to the precepts of laissez-faire capitalism.  The Greenspan Commission imposed higher payroll taxes on working people, which accounted for about half of the hike in taxes from 1984 to 1989.  The Commission’s work was widely praised because the legislation that sprung from it was bipartisan.  But the higher payroll taxes, along with the regressive tax increases contained in the TEFRA and other acts of Congress during the 1980s, constituted nearly a 50 percent tax hike on lower-and middle-class workers. 

Cash-strapped state and local governments also raised taxes to offset the reductions in federal assistance.  When viewed in the context of the substantially lower tax rates for the highest income earners, the changes in the tax structure associated with Reaganomics amounted to one of the largest redistributions of wealth upward in U.S. history.

By 1984, Reagan had largely succeeded in realigning the economic debate away from Keynesianism with its positive view of the role of government and toward a culture that valued deregulation and free markets over all else.  Large swathes of the public had become suspicious of social programs and contemptuous of government.  In 1987, Reagan appointed Greenspan to chair the Federal Reserve Board, which was a post he held for the next eighteen years, thereby institutionalizing many of the tenets of Reaganomics.  Deregulation, along with "free trade" and cutting welfare spending, became bipartisan orthodoxy in Washington as domestic policy moved definitively in the Republicans’ direction.

What came after Reagan were bipartisan “free trade” agreements, NAFTA, GATT and the WTO, which ended up outsourcing millions of good-paying American jobs to low-wage countries.  Then came the bipartisan deregulation of the Telecommunications industry that gave us Fox News, and at the close of Clinton’s second term, the bipartisan deregulation of the financial services industry that took a mere eight years to bring the nation’s economy to its knees.

Now, out of the wreckage from the last thirty years of bipartisan Reaganite economic policy designed to serve the richest of global elites, we have the bipartisan calls for shredding what’s left of the social safety net, including Social Security, as a way to “make hard choices” to tackle the deficits that were produced by more or less the same politicians that brought on the catastrophe in the first place.        

Today, with states, counties, and municipalities reeling under a load of debt, brought to us by failed Reaganomics, the public sector, by which I mean health care services for the poor and elderly, schools, libraries, police and fire fighters, child protective services, as well as social programs of all kinds that help people, are being cut back past the bone and into the marrow.  What we’re seeing at the state and local levels is nothing short of the systematic dismantling of public institutions that took decades to build.

“Jobs, Jobs, Jobs” is a nice slogan but it tells us nothing about the quality of those jobs.  Today, what’s happening all over the country are across-the-board layoffs of public employees who had decent jobs with okay benefits and in their place are either McJobs or no jobs at all.  What we’ve seen happening over the past three or four years is a further deskilling and downgrading of the living standards of the average American worker.

The legacy of Reaganomics continues with the aggressive attempt to turn public school teachers into Wal-Mart workers.  Put in its context of austerity and debt reduction, this concerted attack on teachers is just the latest onslaught against the American working middle class.  They’ve already wiped out the manufacturing workers and their unions, now they’re going after public employees and their unions.  Across the country, right-wing Republican governors are teaming up in a spirit of “bipartisanship” with clueless “education reform” zealots like Michelle Rhee to eliminate teacher tenure, slash pensions, and generally make public school teaching a profession that someone would have to be crazy to want to join.

If you like the way things are in the United States today—with Gilded Age levels of inequality, weak labor unions, low-wage service jobs for most of the workforce, and a public sector that’s dying on the vine—then you can thank Ronald Reagan.

If you could have seen the parade of disabled people (many of them severely) who came to the California State Capitol in Sacramento on February 3 begging their elected leaders to block a proposed cut of $750 million from programs that help them live better lives—one by one, approaching a microphone at a recent hearing, speaking eloquently and poignantly, and calling out for human dignity and compassion—you’d have a better idea of the kind of suffering that this brand of heartless economics have wrought in this country.  That’s the true Reagan legacy.

(Original post)

By Brady Dennis

Thursday, February 3, 2011

Timothy F. Geithner can't seem to talk enough these days about corporate tax reform. From D.C. to Davos, the Treasury secretary has chatted up chief executives and academics, bankers and labor groups, Republicans and Democrats, all in the name of fixing a tax code that most everyone agrees could use a major overhaul.

What remains unclear is whether the Obama administration actually intends to push for meaningful changes to the corporate tax code this year, or whether political obstacles will relegate Geithner's campaign to a mere plank in President Obama's new business-friendly platform.

Over the past few weeks, Geithner has met on multiple occasions with corporate leaders and others with a stake in the debate, with the aim of building support for the administration's proposal to dramatically reduce the 35 percent corporate tax rate while closing windows in the tax code that permit many corporations to pay much less.

Some of those who attended the powwows have left with the impression that little real action lies ahead.

"All this talk about tax reform is happy talk," said one participant, who spoke on the condition of anonymity because the Treasury Department asked guests not to discuss the private meetings. "This is a way for them to talk about something the business community cares about, but it's not for real."

Others, however, see an administration determined to pursue real changes.

"I think they're committed to trying to get tax reform done," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, whose members have met with Geithner and members of Congress on the topic. "Their tone, their body language, their approach - everything they're doing leads me to believe they're serious."

Since the beginning of the year, Geithner has taken the temperature of a wide range of groups with an interest in changing the corporate tax code. There have been meetings with executives from Wal-Mart, Exxon Mobil and Caterpillar; with think tanks as disparate as the conservative American Enterprise Institute and the liberal Citizens for Tax Justice; with advocacy groups such as the Business Roundtable and the AFL-CIO; and even with Bill Bradley, the former New Jersey senator who helped engineer the last major overhaul of the tax system in 1986.

In his recent State of the Union address, Obama issued an explicit call for a tax overhaul, saying it makes no sense that some companies and industries can end up paying no taxes while others are "hit with one of the highest corporate tax rates in the world." He called on lawmakers to "level the playing field" by lowering the tax rate and eliminating loopholes.

At 35 percent, the U.S. tax on corporate profits has become one of the highest in the industrialized world as other nations have steadily cut corporate rates. The U.S. business community has been calling for years for a reduction, arguing that the higher rate discourages domestic investment and encourages companies to locate operations overseas.

However, many companies already pay a much lower effective tax rate, thanks to a spectrum of deductions and credits with which they would be reluctant to part. Multinationals, in particular, benefit from the current code, which allows them to defer taxes on profits earned abroad unless and until they bring the money home to the United States.

Republicans are pressing for adoption of a "territorial" tax system that would tax only profits earned domestically, the system in effect in virtually every other developed country. But such a move is likely to face opposition from smaller domestic companies, as well as from many Democrats who argue that such a system would encourage the largest firms to outsource U.S. jobs.

Further complicating efforts: Many businesses are not organized as corporations at all and therefore do not pay corporate taxes. Instead, they pay taxes on their profits under the individual tax code. Obama has ruled out an overhaul of the individual tax code for now, because it is likely to require him to break his campaign promise not to raise taxes on Americans who earn less than $250,000 a year. But Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, has said he would prefer a global tax overhaul that tackles both parts of the code and reduces tax rates for businesses of all sizes.

The administration has placed other constraints on the debate. For example, Obama and Geithner are advocating that corporate tax changes remain "revenue neutral," meaning they would shift the tax burden among corporations without increasing or reducing overall federal tax collections.

Despite a consensus on the need for change, many observers see little chance of such legislation getting through Congress anytime soon.

"The constraints are too tight. . . . There's not unanimity on how you would get there," said Douglas Holtz-Eakin, former director of the Congressional Budget Office and now president of the American Action Forum. He said overhauling just corporate taxes would be tough under the best circumstances, let alone with a divided Congress and huge budget and deficit problems looming.

University of Michigan law professor Michael Barr, a former assistant Treasury secretary under Obama, said that many industries are wedded to the current tax structure and that any changes would create clear losers, while the benefits of changing the code are likely to be diffused throughout the economy.

Still, he said, that doesn't mean it's not worth trying.

"They are serious about it. They are really going to push hard for it," he said of the administration. "Conceptually, people say there's agreement. When push comes to shove, we'll see who in Congress is willing to take it on."

Staff writer Lori Montgomery contributed to this report.

(Original post)

February 2, 2011

By Roger Russell

A coalition of 15 national organizations urged the Senate Judiciary Committee to keep a provision in S. 23, The Patent Reform Act of 2011, which would stop tax strategy patents. The bill goes to mark-up on Feb. 3.

The coalition thanked committee chairman Sen. Patrick Leahy, D-Vt., and ranking member Sen. Charles Grassley, R-Iowa, for including the tax strategy provision in the broad patent reform bill.

“We commend you for including a provision in S. 23…to address the serious problem of tax strategy patents,” the letter said. “We believe that this pro-taxpayer measure is a critical component of any comprehensive patent reform effort. The ongoing, serious concerns associated with tax strategy patents pose a significant threat to American taxpayers and businesses, and we believe that Congress must prioritize fixing this problem as soon as possible.”

The coalition said tax strategy patents “may limit the ability of taxpayers to utilize fully interpretations of tax law intended by Congress – effectively creating a monopoly for the patent holders to determine who can and cannot utilize parts of the tax code.”

The letter noted that as of now, the number of tax strategy patents have grown to over 130 issued, with more than 150 applications for patents currently pending.

The organizations that signed the letter are the American Institute of CPAs, Tax Justice Network USA, New Rules for Global Finance, American College of Tax Counsel, Consumer Action, The American College of Trust and Estate Counsel, Partnership for Philanthropic Planning, Global Financial Integrity, International Association for Registered Financial Consultants, National Association of Enrolled Agents, USPIRG, Certified Financial Planner Board of Standards, Financial Planning Association, American Association of Attorney-CPAs and Citizens for Tax Justice.