Working Life Jonathan Tasini's Ruminations on Work, The Economy, and Politics Wed, 01 Oct 2014 18:24:21 +0000 en-US hourly 1 Your Taxes Went Up…Yawn…Shrug…Good News For Social Security!!! Wed, 01 Oct 2014 18:24:21 +0000 In case you didn’t notice, your taxes went up at the beginning of 2013–and you probably didn’t notice. Nor did most of the country. And that’s a good thing for Social Security.

My friend Dean Baker over at the Center for Economic and Policy Research slipped this quiet analysis out:

In January of 2013 nearly every worker in the country saw their payroll tax increase by 2.0
percentage points. The payroll tax holiday that had been put in place at the start of 2011 ended in December of 2012, leading to a jump in the Social Security tax from 10.4 percent to 12.4 percent of earnings up to the taxable limit.This was an extraordinarily large increase in the payroll tax. Past increases had generally been phased in gradually. For example, from 1980 to 1990 the tax rate was increased by a total of 2.24 percentage points; however in no year did the rate rise by more than 0.72 percentage points, just over one-third of the 2013 increase. If the public was strongly opposed to any tax increases, it would be expected that one as large as the 2013 rise in the Social Security tax would lead to considerable anger, especially given the weakness of the labor market which was s till very much feeling the impact of the 2008-2009 recession at that point.

This is why it was striking to find that most people responding to a 2013 Google Consumer Survey apparently did not even know that their payroll taxes had been increased at the
start of the year. The poll asked respondents whether at the beginning of the year their Social Security taxes were raised, lowered, left the same, or don’t know. (See the appendix for a full description of the methodology.) A majority of respondents answered that they didn’t know what had happened to their payroll taxes at the start of the year. Only 28.9 percent correctly answered that their taxes had gone up.[emphasis added]

And this is important in this sense: while Social Security is solvent and can pay benefits many years down the road, at some point, there needs to be tax hikes to make up shortfalls to avoid benefit cuts, particularly if we increase Social Security benefits–which many of us believe should be done. I’m all for increasing the payroll taxes for the very wealthy but, based on the recent experience, people won’t scream or even feel a slight increase in the payroll tax, particularly if it means HIGHER benefits.

As Dean says:

These poll results suggest that the public may not be especially adverse to modest increases in the payroll tax, since they may not even notice them. This supports the findings of other polls that indicate most Americans favor strengthening Social Security
through revenue increases such as raising the program’s tax rate. This would be especially likely if the tax increases occurred in the context of rising real wages. (The Social Security Trustees project that real average hourly compensation will rise by more than 60 percent over the next three decades.) If most workers see their wages rise in step with average compensation over the next three decades, then even an increase of 2-3 percentage points in the payroll tax would not prevent them from enjoying far higher standards of living at the end of this period than they do today.

Worth remembering: people don’t mind taxes if they are for the right thing.

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63 Million Tue, 30 Sep 2014 15:27:35 +0000 Numbers sometimes tell a story. Today, it’s 63 million. 63 million is the only number you can remember to explain to the dim politicians and “analysts” who just don’t understand why the global economy is stumbling along. It’s simple math.

63 million is the projected jobs gap around the world by 2018 just for the G20 countries. And, so, yes the dire situation for workers is much, much, much worse because the 63 million jobs gap is only for G20 countries (Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union).

I’m going to come to say more here in a moment. But, remember these five key points:

Tens of millions of people have essentially zero prospects for decent work in the next 5-10 years.

They have zero prospects for work even though productivity is racing along just fine.

They have zero prospects for decent work because governments are not doing enough.

They have zero prospects for decent work because a bigger slice of the pie is not going to workers but to elites and corporate treasuries.

They have zero prospects for decent work because corporations just don’t care.

Where does this all come from? I happened to be re-reading a presentation made by Guy Ryder, Director-General of the International Labour Organization, to the recent G20 Labour and Employment Ministerial Meeting(yes, you can say: Tasini, you have to get out more).

Ryder had some important and revealing charts to make clear how truly bad the situation is. A bottom line:

Despite a modest economic recovery in 2013-4, economic growth is expected to remain below trend over the foreseeable future. The G20 jobs gap in 2012 was about 55 million. The ILO estimates that the gap will continue to widen until 2018, reaching 63 million that year.

You basically get the point from the chart–the higher trend line shows where jobs should have been, the lower blue trend line shows what can be expected (and you can see the sharp drop from the crisis).

This is a bit deceptive because it doesn’t tell the whole story: the spread between the crisis level and projected jobs level, in my opinion, should say, in part, that lower wages (slave labor) was a big attraction to corporations to stick around in developing countries. Still, as Ryder says:

In the emerging G20 countries, jobs gaps are not as wide as an industrialized countries but the prospect of closing the gaps in the next five years is not very promising under current growth trends.

Then, there are three other graphs that tell the story of depression and robbery.First, look at this one:

The developing countries–the red line–had higher percentage growth because their workers were coming from slave-like, poverty wages–but still you can see the deep dive there, as well. And when it hits poorer people in that dramatic fashion, that translates into hunger. The green line had actual negative numbers in some spots but, overall, pretty much nowhere.
So, duh. I mean, seriously, to the morons who claim to be economists and, then, are “analysts”: why is it so hard to understand that when wages aren’t going up, people don’t have money to spend?

And where is the money going? Not to workers. The chart below illustrates the share of economic activity–Gross Domestic Product–that is going to workers…and it’s in steep decline.

As Ryder says, this isn’t a new story:

This is a long-term structural problem, a “legacy vulnerability” which was revealed by the crisis but has been decades in the making. Its persistence over recent decades demonstrates that it is a problem that won’t go away on its own; it must be addressed by specific policies. And it is a problem affecting nearly all G20 economies, both current account surplus and deficit countries.

But, it makes an even bigger problem greater because of the lack of jobs.

Now, it isn’t because workers aren’t more productive:

The blue line shows that we’re working our asses off and the red line shows how little we get for our work. I pointed this out recently when I criticized the pathetic $10.10-an-hour federal minimum wage campaign is far too low and argued, based on productivity, that it should be $20-an-hour.

Now, what does all this mean? To repeat:

Tens of millions of people have essentially zero prospects for decent work in the next 5-10 years.

They have zero prospects for work even though productivity is racing along just fine.

They have zero prospects for decent work because governments are not doing enough.

They have zero prospects for decent work because a bigger slice of the pie is not going to workers but to elites and corporate treasuries.

They have zero prospects for decent work because corporations just don’t care.

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A Billion-Dollar Bank Scam Mon, 29 Sep 2014 20:52:33 +0000 A billion here, a billion there…all of a sudden…yeah, you’re talking real money. And one assumes that’s what the accountants at banks figure when they smile about the latest scam to pad the bottom line for banks. It’s called “dividend arbitrage”–and that “arbitrage” already gives a hint.

It’s legal–but still a scam that costs the taxpayers. It does, however, make banks about a billion dollars a year. In the bigger picture of hundreds of billions of dollars in bank revenues, it’s tiny. However, it shows the lengths to which the financial manipulators try to concoct schemes to make more money.

The Wall Street Journal explains (paywall):

Known as “dividend arbitrage,” the strategy is run largely from London, where the banks temporarily transfer ownership of a client’s shares to a lower-tax jurisdiction around the time when the client expects to collect a dividend on those shares, according to people familiar with the matter.The maneuver typically enables bank clients to reduce taxes from as much as 30% of the dividend payment to 10% or so—and sometimes to zero. The savings are divided between the client, bank and entities that take ownership of the shares. The business largely involves stocks listed in Europe and Asia.

Bank of America is under the microscope for the practice but isn’t alone:

Other banks that arrange similar transfers of corporate stock include Citigroup Inc., Deutsche Bank, Goldman Sachs Group Inc., and Morgan Stanley,  according to clients and people involved in the business. Banks collect fees on the transactions.

B of A loves the tactic:

Last year, Bank of America estimated that trades aimed at helping clients reduce withholding taxes on stock dividends generated more than $1.2 billion for the bank from 2006 to 2012, according to people familiar with the internal estimates.

Just another tax-dodging tactic that robs the Treasury. Wanna know why your roads have holes? This is an example.

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Secret GOP Documents Show MASSIVE CORPORATE SUPPORT Wed, 24 Sep 2014 17:47:05 +0000 I’m not really shocked by this. But, still worth spreading the word.


The documents, many of which the Republican officials have since removed from their website, showed that an A-to-Z of America’s most prominent companies, from Aetna to Walmart, had poured millions of dollars into the campaigns of Republican governors since 2008. One document listed 17 corporate “members” of the governors association’s secretive 501(c)(4), the Republican Governors Public Policy Committee, which is allowed to shield its supporters from the public.“This is a classic example of how corporations are trying to use secret money, hidden from the American people, to buy influence, and how the governors association is selling it,” said Fred Wertheimer, president of Democracy 21, a nonpartisan group that advocates more transparency and controls over political money.

The price?:

Among the R.G.A. documents is a 21-page schedule of the policy committee’s Carlsbad meeting last year that lists which companies attended, who represented them and what they contributed. The most elite group, known as the Statesmen, whose members donated $250,000, included Aetna; Coca-Cola; Exxon Mobil; Koch Companies Public Sector, the lobbying arm of the highly political Koch Industries; Microsoft; Pfizer; UnitedHealth Group; and Walmart. The $100,000 Cabinet level included Aflac, BlueCross BlueShield, Comcast, Hewlett-Packard, Novartis, Shell Oil, Verizon Communications and Walgreen.

The access?:

One 2009 document states the benefits of a Governors Board membership, for a $50,000 annual contribution or a one-time donation of $100,000, saying it “offers the ability to bring their particular expertise to the political process while helping to support the Republican agenda.”Board members received two tickets to “an exclusive breakfast with the Republican Governors and members of their staff”; three tickets to the Governors Forums Series, where “a group of 5-8 governors discuss the best policy practices from around the country on a particular topic”; and a D.C. Discussion Breakfast Series, among other events.

If they bump up to Cabinet Membership — $100,000 annually or a single payment of $200,000 — contributors also receive two invitations to “an exclusive Gubernatorial Dinner,” an “intimate gathering with the Republican Governors and special Republican V.I.P. guests” at the Willard InterContinental Hotel in Washington.

Of course, the corporate money corrupts both parties. But, this is a pretty good trove on the Republican corrupt machine.

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Amazon’s Global War Against Its Workers Wed, 24 Sep 2014 17:08:27 +0000 That Amazon is a very ugly company to work for is no secret. And it’s doing so not just in the U.S. but all over the world. Germany is the latest battleground.

Strikes are erupting over Amazon’s attitude towards unions (Wall Street Journal subscription):

For the 16 years the online retailer has done business in Germany, it has shunned the nation’s consensus-driven labor model. It ignores trade unions and largely dictates contract terms at its nine German distribution centers, where it employs about 9,000.Germany’s Verdi labor union has been trying to change that, signing up Amazon employees and this week launching the latest in a series of strikes in an effort to get management’s ear. It hasn’t gotten far. Currently, the union has no say at Amazon.

“From my point of view, Verdi and Amazon don’t go together,” says Robert Marhan, Amazon’s general manager at a warehouse in the central German town of Bad Hersfeld, which has become a logistics hub.

As in the U.S., where Amazon has resisted unions, the company in Germany deals directly with its staff, talking with employees and on-site councils of employee representatives. “What we have is a culture that we see as foreign,” says Verdi President Frank Bsirske, who calls Amazon’s approach unilateral and arbitrary.

This is perhaps the most jarring point, even if the reporter didn’t quite explain it:

The conflict is emblematic of the trans-Atlantic tension between U.S. business practices and Europe’s more labor-friendly traditions. As globalized commerce expands in Europe, unions are digging to avoid losing more influence.

What the sentence should have said was: Amazon is trying to export the viciously anti-union, pro-business practices allowed by U.S. law–thanks to a right-wing U.S. Supreme Court and bi-partisan support–to Germany and other countries which have followed a labor-business model that encourages discussion and sharing of prosperity.And, basically, Amazon is doing its best to exploit people and play on fear in its 2nd biggest market, though again the article tries to neutralize the meaning of the company’s behavior:

Amazon has opened German warehouses in areas of high unemployment where people may be more concerned about jobs than about joining the union. It also ships from around Europe. New sites that open this month in Eastern Europe, where unions are weaker, have the potential to reduce the need to add German staff.

This is nothing new:

Amazon, founded in 1994 as a fledgling online book retailer in the earliest days of the Internet, has only in the past few years become the target of labor-abuse allegations, most recently this year with several U.S.-based lawsuits in five states, including one brought by Heimbach in Pennsylvania. Chief among the complaints, which could soon be consolidated into a nationwide class action lawsuit, is the allegation that fails to compensate hourly workers for time spent waiting in airport-like security lines each time they exit the warehouse. Aimed at combatting product theft, this process can take up to 20 minutes.The suits also contend that while employees get a strictly regimented 30-minute unpaid lunch break, much of that time can be taken up walking from one end of the warehouse to the other. The lawsuits also claim the company is so radically fastidious with workers’ time that it requires employees to count the start and end of their two paid 15-minute breaks per shift from their work stations.

“If it takes three minutes from the moment the bell rings to get to the break room, now you’ve only got 12 minutes left to rest. But then you have to use three minutes to get back to your work area before the next bell rings, so your break is really nine minutes,” Heimbach told International Business Times. “And they constantly monitor you with supervisors that look at computer screens.”

Which is, by the way, one reason many people were just aghast that, of all places, the president recently chose an Amazon distribution center to talk about middle-class jobs.

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We Need More Ministers Like This Guy Wed, 24 Sep 2014 00:30:00 +0000 Today, I attended this conference, “Employment and Decent Work for Inclusive and Sustainable Development”. A little nugget and perhaps an obvious revelation came midway through the conference.

Mogens Jensen, Demark’s Minister for Trade and Development Cooperation, was speaking on the second panel. He made what seems to be such an obvious point forgotten by virtually the entire world of talking heads, politicians and all the others who talk scratch their heads trying to figure out how to improve economic growth:

You can have high labor standards, high wages and at the same time have economic growth.

He also said the obvious: there is no use creating jobs that wear people down because, then, you expend resources in the health sector trying to repair broken people.

At first, it was a breathe of fresh air coming from a government minister. And it all made sense when I chatted with the Minister briefly after the session. He said, with pride, that long before he was a Minister he was a union leader for 13 years.

Aha! You mean, he got to speak the truth.

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Hedge Fund Rejection–Part II Tue, 23 Sep 2014 01:29:31 +0000 A week ago, I wrote about CALPERS’ decision to basically get out of hedge funds. Yesterday, Gretchen Morgenson asked whether the love affair with hedge funds is over?


Are public pension funds over their crush on hedge funds?

Looking for better returns, public pension funds in recent years have been socking away money in those lightly regulated vehicles. Some pension overseers have criticized this trend, but they have been few in number and have often been drowned out by hedge fund proponents. Those overseers’ arguments, however, are sound: Hedge funds, with their high fees, secrecy and recent underperformance, are inappropriate investments for most funds charged with providing retirement and other benefits to former workers.


Among the problems posed by hedge funds, pension experts say, are exorbitant fees and illiquidity. (Many hedge funds have one-year lockups, limiting investors’ ability to get out.) Moreover, they are about as transparent as mud.

“As a trustee, I was not allowed to see the hedge fund contracts,” said Chris Tobe, a former trustee for the Kentucky Retirement Systems, and one of those quiet hedge fund critics in the pension world. “The auditor wasn’t allowed to see the contracts, and the contract review committee for the Legislature was not allowed to look at them, either. Given the contracts are secret, how do you know they are not overcharging you on fees?”

The key will be to see what happens in the months ahead–will other funds do the same thing? I’ll keep an eye out for that.

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Cycling And Questions To Ask Fri, 19 Sep 2014 19:50:54 +0000 As a long-time, avid cyclist, I’ve been waiting for a reason to write about this. Unfortunately, the collision in Central Park between a cyclist and pedestrian gives me a chance to do so.

The incident:

A 58-year-old woman was in critical condition after being struck by a bicyclist in Central Park on Thursday afternoon, the authorities said.

The bicyclist, a 31-year-old man, was riding south on West Drive near West 63rd Street in the park around 4:25 p.m. when he swerved to avoid a group of pedestrians and struck the woman, the police said. She hit her head, and was taken to New York-Presbyterian Hospital/Weill Cornell Medical Center, where she was in critical condition.

So, my Top Six gripes list:

1. Some cyclists are a menace. You know the type: all decked out in their racing gear, intense and focused, with visions of “Look at me, I’m Lance Armstrong” perhaps without the performance-enhancing treatments…”perhaps”…I usually think that these men–and I’ve never seen a woman act like this–are also the same guys who work on Wall Street. They just don’t care. If someone proposes to give them tickets, I’m all for it–and impound their bikes as well.

2. Some pedestrians are just out-to-lunch, particularly in Central Park. Pay-the-fuck attention. Especially tourists. The Park does not belong to you. Solution: pen tourists into the 10 block radius around Times Square on weekends and only allow them into Park areas between 11 p.m. and 2 a.m…OK, I’m only kidding…I think. But, at least, it might make sense to post signs in the entry to the Park, and other similar spots, with a sign that says something like, “Who’s In The Park?”, or even hand out leaflets with instructions on rules-of-the-road.

3. Idiot wanna-be cyclists. Look, if you haven’t been on a bike, or you ride once a year, consider moving to the slow lane. It won’t kill you. And if you are out riding with say 6 friends, that isn’t the time to have a chat while spreading yourselves out in one row and blocking the entire road for everyone else.

4. Idiot parents. Those are the parents who think it’s really cool to take their kid who has no idea how to ride a bike into Central Park, and give no instruction to the kid about riding on the slow-speed side of the street. Instead, on any given day, particularly weekends, you’ve got kids wildly swerving into bike lanes where experienced cyclists are riding at normal speed. Solution: have a Child Services rep stationed in Central Park, and take the kid away from the parents…OK, I’m sort of kidding. But, why shouldn’t a parent be ticketed for allowing a kid to ride in an unsafe way?

5. The police are partly responsible. They don’t bother to enforce traffic rules that have anything to do with cyclist rights–I’ve counted at least 3 instances in roughly the past year where a truck/taxi was parked in the cycling lanes in my neighborhood…and a cop car was up a block away…doing zippo. They just don’t care. Start giving out tickets for any cycle lane blocking. Drivers complain about cyclists in the road but what’s a cyclist to do when, in some of these instances, s/he has to swerve out to the traffic because some jerk is blocking the lane.

6. Citibikes. I’m all for the program. But, the Citibike “cyclists” give the rest of us a bad name. They ride wherever they choose, swerving here and there with often no clue about the concept of “no, you can’t just go against the traffic.” And, no helmets? How did that ever get allowed?

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Cambodian Slaves Oil This Billionaire’s Fortune Thu, 18 Sep 2014 13:26:25 +0000 Recently, I mentioned Seymour Hersh’s observation that, while most people count sheep to fall asleep, Henry Kissinger, who orchestrated the massive secret, illegal bombings of Cambodia, must count burned and maimed Cambodian babies. Which makes me wonder: has Amancio Ortega picked up a version of the Kissinger habit, counting overworked Cambodian slaves who have made him the fourth richest person in the world?

Ortega, according to Forbes, is worth $64 billion, ranking him just behind Warren Buffet. The source of his fortune:

World’s richest retailer Ortega added $7 billion to his fortune this past year, expanding the gap between him and number four, Warren Buffett. He is up a total of $26.5 billion in the past two years. Though he stepped down as chairman of Inditex (best known for its Zara brand) in 2011, he still owns nearly 60% of its shares. He also has a growing real estate portfolio, estimated to be worth nearly $5 billion, much of it acquired at bargain prices during the financial downturn. He is reportedly planning to list his property holdings in a real estate investment trust. Among his properties: the iconic Torre Picasso, a 43-story skyscraper in Madrid (Google is a tenant). In the past year, he’s bought four new buildings in Madrid, New York and London for around $830 million, taking the number of buildings he owns to 26.

Behind that number though lurks a grim and despicable reality: Ortega rings up those huge profits because of the sweat of thousands of Cambodian garment workers who are paid a minimum wage of $100 a month–let me repeat, ONE HUNDRED DOLLARS PER MONTH–and work in long hours in horrendous conditions, suffering a whole raft of health emergencies from  malnutrition to inhaling chemical fumes.Workers United, which has its earlier roots in the Amalgamated Textile Workers Union and the International Ladies’ Garment Workers Union, (before going through a merger and a split, and now existing as an affiliate of SEIU) is engaged in a global campaign in support of the Cambodian workers. A report:

In December 2013, tens of thousands of Cambodian workers struck for higher wages, shutting down the industry that is the mainstay of the Cambodian economy. In early January, after ten days of mass demonstrations, the military suppressed the strike, firing live ammunition into crowds of demonstrating workers, killing five and injuring many more. Twenty-three activists were arrested and spent five months in prison before being released with suspended sentences of up to two and a half years. In the past weeks, six union leaders have been ordered to court to face charges of incitement to violence in the strike.

Yesterday, Cambodian workers took to the streets and across the globe, union supporters took to the streets with a very simple demand:Raise the minimum wage to $177 a month.

Just saying those words “$177 a month” is jaw-dropping when you think of how little that really is–compared to Amancio Ortega’s immense wealth.

Take your calculator out. If just 10,000 workers got that raise, over a year, that would cost Ortega $9,240,000…which is a rounding error in his bank account, the money he probably spends for flower arrangements in a given year.

And people marched:

In Cambodia:




San Francisco:

New York (where yours truly marched along with the protesters):

It’s pretty simple: Ortega’s wealth is built on a sea of misery. He has picked up where Kissinger left off, bludgeoning Cambodians. Though he wages war in a different way then Kissinger did, you don’t have to drop bombs on people to make life intolerable. It can be done with the stroke of a pen.People are fighting back, though.

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Not Easy To Live In Manhattan If You Aren’t Rich Thu, 18 Sep 2014 01:11:53 +0000 If you ever read the real estate section of The New York Times, there’s a section on page 2 called “Big Ticket”…it’s the place where you can read about the most expensive sale of the week, and that usually means something around $30-$40 million. Well, then, no wonder the gap between rich and poor in Manhattan is tops in the country.


The mean income of the top 5 percent of households in Manhattan soared 9 percent in 2013 over 2012, giving Manhattan the biggest dollar income gap of any county in the country, according to data from the Census Bureau.

The top 5 percent of households made $864,394, or 88 times as much as the poorest 20 percent, according to the Census Bureau’s American Community Survey, which is being released Thursday and covers the final year of the Bloomberg administration.

Appalling. But, not surprising if you pay attention.

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S&P: Inequality Hurts State Taxes. Yet Another “Duh” Tue, 16 Sep 2014 20:23:39 +0000 When do we get to the point when the obvious–DUH–doesn’t come as some surprise or revelation to the elites? Probably never when it comes to inequality because they can’t see because they don’t live it. Last week, I wrote about a “Duh”–the G20 being told that higher wages will lift the global economy. Today, it’s the dopes over at Standard & Poor’s who wake up from a slumber–or self-imposed denial.

Meteor Blades already picked up on S&P’s discovering that inequality hurts economic growth. Yesterday, S&P followed up on that magical discovery with a new one:

Extending our analysis to public finance, we find that increasing income inequality is undermining the rate of state tax revenue growth. In addition, it is contributing to volatility in tax revenue collections.


Our analysis found a negative relationship between income inequality and state tax revenue tends. When we tested the relationship by tax structure, we found the negative effect was stronger and only statistically significant in the sales tax-reliant states. The findings support our view that rising income inequality contributes to weaker tax revenue growth by undermining the rate of overall economic expansion. [emphasis]

Well, no shit. You mean, people aren’t make enough money so they don’t pay taxes? And you get paid to come up with that? What a gig.Ok, I have to cut these guys some slack–they aren’t the brightest bulbs in the universe (as Michael Lewis pointed out previously, only the guys who can’t get a job on Wall Street go to work for the ratings agencies)

So, this is worth pointing out. Progressive tax systems are better than flat-tax systems…duh again. Or, as the dim bulbs say it:

The results of this analysis found that income inequality for both groups — the income tax and the sales tax-dependent states — relates negatively with tax revenue growth. However, the negative effect was stronger in the sales tax-reliant states than it was for the income tax-dependent states. In addition, the relationship was only statistically significant at the one percent level for the sales tax-reliant states. This suggests that through a progressive tax structure, it’s possible to counteract much of the depressing effect inequality has on tax revenue growth rates. In contrast, the strong negative relationship we found in the sales tax-dependent states reflects how rising income inequality contributes to slower economic growth. And absent the progressivity found in most of the income-tax states’ tax structures, the slower economic growth related to inequality gets transmitted to the sales tax-reliant states’ budgets as slower tax-revenue growth.[emphasis added]


In a setting of rising income inequality, the move toward more progressive tax rates may help states generate faster tax revenue growth than would flatter tax regimes. In California, the Legislative Analyst’s Office (LAO) has indicated as much. Since 1993, the top percentile’s inflation-adjusted incomes have increased by 75%. Incomes of the bottom four quintiles, on the other hand, all declined, between 2.9% to 9.3% during this span. California’s revenue dependence has mirrored these income trends, with an increasing share of its income tax collections coming from the high-income taxpayers. In 2012, for example, taxpayers with incomes in the top percentile paid almost 51% of the state’s personal income tax revenue, up from 33% in 1993.(9) Thanks to the combination of a progressive income tax schedule and divergent income trends, the state’s finances have come to rely more heavily on high-income taxpayers.

Obviously, no one wants to avoid ending the inequality we see by demanding higher minimum wages and higher basic wages. But, progressive taxation is a better way to combat inequality than the more regressive sales tax…again, duh…but it helps when these guys say the obvious.OK, now back to our regularly scheduled life in the real world.

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Nation’s LARGEST Pension Fund Sends A Shiver Through Hedge Funds Tue, 16 Sep 2014 01:12:56 +0000 I’m all for change happening through action in the streets. But, it doesn’t hurt to send a little tremor into the world of the elites in other ways. And that’s exactly what the California Public Employees’ Retirement System (CALPERS) has just done.

CALPERS “Covers more than 1.3 million active and retired state, local government, and school employees and their family members”, an overwhelming number of whom are unionized public sector workers. It has $300 billion in assets. Six of the 13 board members are elected by the workers’ representative organizations, and another 2 are chosen by the governor.

When CALPERS acts, the rest of the pension fund world listens.

Attention, please:

The California Public Employees’ Retirement System, the nation’s largest pension fund, will eliminate all of its hedge fund investments over the next year on concerns that investments are too complicated and expensive.The pension fund, which oversees $300 billion, said on Monday that it would liquidate its positions in 24 hedge funds and six hedge fund-of-funds — investments that total $4 billion and more than 1 percent of its total investments under management.

The decision, after months of deliberation by the pension fund’s investment committee, comes as public pensions across the United States are beginning to assess their exposure to hedge funds. It is likely to reverberate across the investment community in the United States, where large investment funds look to Calpers as a model because of its size and the sophistication of its investments.


A growing number of pension funds and institutional investors have expressed concern that the fees that hedge funds charge are too high. While there is a range, hedge funds typically follow a “2 and 20” model where investors pay management fees of 2 percent of the total assets under management and 20 percent of the profit.These concerns have become more pronounced as performance across the hedge fund industry has disappointed investors. Hedge funds have underperformed the Standard & Poor’s 500-stock index for the last five years, a metric that pension funds frequently cite as a comparison. In 2013, for example, the average hedge fund returned just 9.1 percent, according to the data firm HFR. That compares with a 32.4 percent increase in the S.&P. 500.

Calpers said it paid $135 million in hedge fund fees over the financial year that ended on June 30. The hedge fund investments returned just 7.1 percent, adding 0.4 percent to the firm’s total returns. For its hedge fund investments to have a material impact, Calpers would have to increase its hedge fund investments to at least 10 percent of its total portfolio, which was not a feasible option, according to Joe DeAnda, a spokesman for Calpers.[emphasis added]

There has been a movement over the past several decades to try to use pension fund money–that’s deferred wages of workers, not a gift–as a lever to shape a better economy. To date the victories have been quite modest. However, the financial crisis made a lot of pension funds perk up–these funds lost hundreds of billions of dollars because of the Wall Street greed, money that can’t be recouped (because of the lost investment opportunity) and means retirees will always be playing catch up.

Let’s see if this causes more funds to dump hedge funds–or at least force a change in the absolute “2 and 20” ripoff fee scheme.

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Hey, Corporations: Since You Are A “Person”, Before You Flee The US, Pay Your Taxes–Like People Fri, 12 Sep 2014 13:43:04 +0000 Ok, so, most sane people don’t buy into the idiotic idea that corporations should have the same standing as people. But, right now, thanks to a majority of morons on the Supreme Court, that’s the law. So, fine, then, while we try to close the loopholes on tax inversions, let’s apply a similar standard: the law that says before renouncing U.S. citizenship, a person has to pay taxes on unrealized capital gains.

For those just checking in on the tax inversion scam, I’ve written a number of pieces about this (including here, here and here). In sum, quoting Citizens for Tax Justice:

The inversion crisis actually consists of three related problems which each call for specific solutions. First, loopholes in our tax law allow American corporations to pretend they are based abroad. Second, those corporations claiming to be based abroad (and corporations that really are based abroad) are able to use “earnings stripping” techniques to make profits earned in the U.S. appear to be earned in countries where they will be taxed more lightly or not at all. Third, the profits that American corporations earn offshore are supposed to be taxed by the U.S. when they are brought to the U.S., but after inverting corporations are able to use accounting tricks to escape that rule. The first problem is simply the absurdity that American corporations can pretend to be foreign corporations, while the second and third problems are the benefits they obtain by doing so.

Ok, so, that’s the scam, and there are plenty of solutions for the problem.

But, in the meantime, as CTJ cleverly points out yesterday:

Individuals and corporations are both allowed to defer paying U.S. taxes on key parts of their income. Under current law, wealthy individuals are required to give up this benefit when they renounce their American citizenship, while profitable corporations are not.The tax code allows American individuals to defer paying income taxes on capital gains (appreciation of their assets) until they sell their assets. But wealthy individuals who renounce their U.S. citizenship lose this benefit and are required to pay tax on unrealized capital gains.

American corporations are allowed to defer paying income taxes on profits earned by their offshore subsidiaries until those profits are brought to the U.S., but under current law are not required to give up that benefit even after being acquired by a foreign owner. This more generous treatment of corporations has no apparent rationale and seems to be an accident of history rather than the intent of Congress.

Legislative history (explained below) suggests that Congress preserved deferral to help American multinational corporations compete with foreign-based multinational corporations. There is no reason to continue this tax break for corporations once they declare that they are no longer American.

Ending deferral in this situation would also remove a significant incentive for corporations to undergo inversions and could complement other legislative proposals to prevent inversions.
[emphasis added]

Ok, so, you want to leave. Fine, here’s the boot stuck up your ass. But, before we apply the boot, pay up–just like people do.

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Apple Ready To Ring Up More Tax Dodging Profits Thu, 11 Sep 2014 17:46:10 +0000 Just keep in mind this point: every time your favorite consumer company, the one with that very friendly logo, rolls out a new product, its internal corporate machine is getting ready to dodge taxes.

This is a story that goes back to 2013 but, as far as I know, the reality is the same. Here’s the upshot from a longer study by Citizens for Tax Justice:

Thanks to PSI’s efforts, we now know that Apple shifts U.S. profits to one of its non-taxable Irish subsidiaries through a “cost-sharing agreement” that gives the subsidiary the right to 60 percent of profits from its intellectual property, and that Apple also shifts profits from other foreign countries where it sells its product to its non-taxable Irish subsidiaries.

The Irish subsidiaries have few if any employees and don’t do much of anything, but Apple Inc has a huge incentive to claim that a lot of its profits are generated by these subsidiaries because Ireland is not taxing them. So, Apple uses the “cost-sharing agreement” to convert U.S. profits to non-taxable Irish profits for tax purposes, and likewise manipulates transfer-pricing rules and other tax provisions to turn profits from other countries into untaxed Irish profits.


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On Wages, The Economist Agrees Wed, 10 Sep 2014 13:31:17 +0000 The other day I wrote about a campaign by the International Trade Union Confederation to push the G20 to make hiking wages the cornerstone of any policy to create a sustained and healthy global economy . The Economist agrees.

The magazine had a relatively long piece in its September 6th edition (subscription paywall) entitled,  “The big freeze: Throughout the rich world, wages are stuck”. After looking at a variety of countries, and pronouncing the situation grim, the last paragraph really is what mattered:

Wages, of course, are not just important to central bankers. Weak pay saps revenue from income tax and social-security contributions, making it harder for governments to mend public finances. The lack of growth in real wages hurts household finances, too, keeping consumers tight-fisted. A healthy and sustained recovery in the rich world will remain elusive until the pay squeeze ends. [emphasis added]

As I said in my original piece, duh.


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Burger King’s Whopper Strategy: Your Waistline Expands, The Company’s Tax Bill Shrinks Tue, 09 Sep 2014 17:49:28 +0000 A couple of weeks ago, I wrote about Burger King’s tax inversion strategy–you know, the clever tax dodge strategy that’s all the rage among the corporate elite because it funnels hundreds of billions of dollars overseas and outside the reach of the IRS. Well, that apparently isn’t the half of it. Burger King has a two-pronged approach to screwing the country–at the waistline and at the bottom line.

No one really has to be told what horrendous slop gets shoveled across the counter at Burger King. Basically, that slop kills people but it’s a golden slot machine that never stops generating huge revenues for the company.

And where do those revenues go? Abroad. Hidden. And not in some penny ante way. Citizens for Tax Justice tells us:

Burger King’s recent decision to pursue a corporate inversion to Canada is the culmination of years of maneuvering to dodge paying its fair share in corporate taxes. In fact, Burger King was able to cut its average worldwide effective tax rate by more than 60 percent over the past few years likely through complex accounting maneuvers.[emphasis added]


The first key point to know is that Burger King only owns a small percentage of its thousands of restaurants worldwide, with the overwhelming majority of its restaurants owned by individual franchisees who pay Burger King for use of its intellectual property. From the beginning of 2010 (when private equity firm 3G Capital purchased the company) through the end of 2013, Burger King went from owning about 12 percent of its worldwide restaurants (1,422), to owning less than half a single percent of its worldwide restaurants (52).Unlike physical properties such as restaurants, stores or even factories, it’s relatively easy to shift the location of income-generating intellectual property from one jurisdiction to a different low- or no-tax jurisdiction. This may explain why, after its purchase by 3G Capital in 2010, Burger King reorganized its business structure by shedding ownership of nearly all the individual restaurants that it owned.

And shifting its profits to Switzerland, Singapore, Luxembourg, Hong Kong and the Netherlands does what?:

Burger King’s strategy of profit-shifting and relying more heavily on intellectual property came to fruition in 2013, when it was able to lower its worldwide effective tax rate to a mere 11 percent. For purpose of comparison, the company’s average worldwide effective tax in the three years before it embarked on its aggressive tax dodging maneuvers was nearly 28 percent, meaning that company was able to lower its tax rate by 60 percent over just a few years.

So, look, if the fact that that food is killing a lot of people isn’t enough reason to avoid the Whopper, perhaps the fact that the company does everything it can to dodge taxes–with tax inversions and lots of other maneuvers–will make some people willing to spend their food money elsewhere.

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