Working Life Jonathan Tasini's Ruminations on Work, The Economy, and Politics Tue, 02 Sep 2014 15:43:20 +0000 en-US hourly 1 Bigger Demos For Minimum Wage Hike…Though Still Too Low A Demand Tue, 02 Sep 2014 15:43:20 +0000 A louder rumble is brewing in the fight to end poverty–also known as the fight to hike the minimum wage. Filling some jails is on the agenda…

From The Guardian:

America’s fast food workers are planning their biggest strike to date this Thursday, with a nationwide walkout in protest at low wages and poor healthcare.

…Workers from McDonald’s, Burger King, Pizza Hut and other large chains will strike on Thursday and are planning protests outside stores nationwide, in states including California, Missouri, Wisconsin and New York.

The day of disruption is being coordinated by local coalitions and Fast Food Forward and Fight for 15, union-backed pressure groups which have called for the raising of the minimum wage to $15 an hour for the nation’s four million fast-food workers. [Emphasis added]

At least the $15-an-hour demand is significantly higher than the lukewarm $10.10-an-hour demand being pushed by Democrats and The White House. I’m still of the view, as I argued many weeks ago, that the demand should be $20 an hour. But, the main thing that I like here is the activism in the streets.

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Eliminating The Corporate Tax Has Got To Rank As One Of the Dumbest Ideas Thu, 28 Aug 2014 20:59:22 +0000 Politics is full of really asinine ideas–let’s see, the Iraq War counts as a good example. But, for perhaps the dumbest one going I’d offer up the mumbling, coming from even some Democrats, to eliminate the corporate tax. It is stupefyingly idiotic–in the midst of the greatest divide between rich and poor in 50 years, and corporate profits rising to record levels even as wage growth remain at its lowest level in half a century.

The folks at Citizens for Tax Justice have it nailed quite succinctly:

First, a corporation can hold onto its profits for years before paying them to shareholders. This means that if the personal income tax is the only tax on these profits, tax could be deferred indefinitely. It also means that people with large salaries could probably create shell corporations that would sell their services. Their income would then be transformed into corporate income and any tax would be deferred until they decide to spend the money, which could be decades later, if ever.Second, even when corporate profits are paid out as stock dividends to shareholders, under our current system about two-thirds of those stock dividends are paid to tax-exempt entitles, such as pensions and university endowments which are not subject to the personal income tax. In other words, a lot of corporate profits would never be taxed if there was no corporate income tax.

Third, our tax system overall is just barely progressive and it would be a lot less progressive if the corporate income tax were repealed. The corporate income tax is a progressive tax because it is mostly paid by the owners of capital — people who own corporate stocks (which pay smaller dividends because of the tax) and other business assets.

Some have tried to argue that the corporate tax is mostly borne by labor because it chases investment out of the United States, leaving working people with fewer jobs and/or lower wages. But corporate investment is not perfectly mobile and, as a result, the Treasury Department has concluded that 82 percent of the corporate income tax is paid by owners of capital, and consequently, 58 percent of the tax is paid by the richest 5 percent of Americans and 43 percent is paid by the richest one percent of Americans. Congress’s Joint Committee on Taxation has reached similar conclusions.

Robert Reich, the same genius who was a passionate advocate FOR NAFTA, which arguably was a key component in the hammering down of wages over the past 20 years, is among those who have a dumb idea: eliminate the corporate tax and, then, tax dividends and capital gains as ordinary income and, then, as CTJ, says, “tax the gains on corporate stocks each year rather than only when they are realized when the stocks are sold.”But, that’s stupid too and actually wouldn’t get the revenue we need, per CTJ:

The net effect of the proposal, as its proponents acknowledge, would be to lose about half the revenue raised by the corporate income tax.

Honestly, those who advocate this dumb idea have basically capitulated to the same line of thinking that somehow we tax companies too much (not true) and that somehow the “job creators” deserve a break.Bullshit.

It’s wrong on the politics and wrong on something called “Math”.

Though it does fit well with the platform of the Republican Party.

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Burger King’s Whopper Isn’t Just Food–It’s A Mouthful Of Tax Dodging-And-Lies Wed, 27 Aug 2014 12:59:21 +0000 Before I rip Burger King a new one, a moment of full disclosure: I haven’t walked into one of those joints in I dunno 25 years. So, maybe it’s worth the whatever it costs now to choke down and swallow that stuff. But, know this: every dollar you put into that place now is basically a contribution to yet another tax dodge–theft from the public’s right to have a decent society.

You probably read about Burger King’s purchase of the Canadian company, Tim Hortons. Well, it’s nothing but another tax inversion–that cute little tactic that’s all the rage in corporate America. Reincorporate overseas and dodge U.S. taxes.

Citizens for Tax Justice explains:

The merger will allow Burger King to claim for tax purposes that it is owned and controlled by a smaller Canada-based company. We’ve heard this song before — several times in the last three months (Medtronic, Mylan, Walgreen and Pfizer) and 13 so far this year. Corporate bosses and their lobbyists continue to claim that they are doing nothing wrong. Gaping loopholes in the law allow them to do this, and without action from Congress or the administration, there is no incentive for corporations to stop exploiting those loopholes.


But another reason corporations invert is to avoid paying U.S. taxes on profits earned in America in the future, and this is relevant for a company like Walgreen’s (which was considering inversion until recently) or Burger King. This can be accomplished through earnings stripping, a practice that effectively shifts profits earned in the United States to another country where they will be taxed less. So for Burger King, this means it could continue to earn profits off the burgers and fries its sells to Americans yet use accounting tricks to shift those profits to Canada so they will not be subject to U.S. taxes.Looking past the technical details, the bottom line is this: It’s insulting that the company intends to continue profiting by selling a quintessentially American product to U.S. consumers but then pretend to be Canadian when the time comes to pay taxes.

Burger King is actually owned by a Brazilian private-equity firm, 3G Capital Management. And, surprise, surprise, the deal above shields the company from any capital gains liability, per The Wall Street Journal(paywall):

The deal is structured in a way that would shield Burger King’s shareholders, including 3G Capital, from taxes on capital gains. For shareholders of the acquiring company with capital gains, inversions normally trigger tax payments—without yielding cash from a sale of the shares.In this case, Burger King investors can choose to receive either common stock in the combined company or units in a newly formed Ontario limited partnership, or a combination of the two. Choosing partnership units would let shareholders defer taxes on their paper gains until they sell the units or convert them into common stock, which they can do a year after any deal closes. A U.S. taxpayer who holds the units until death wouldn’t owe any income tax on their appreciation, said Robert Willens, an independent tax analyst based in New York.

The move would blunt the impact of a 1996 Treasury rule that sought to discourage inversions by penalizing shareholders of the U.S. company. The rule—known as the Helen of Troy rule, after a U.S. consumer-goods company whose move to Bermuda sparked it—requires shareholders to book any gains on shares converted into stock in a new company.

This whole tax inversion scam has nothing to do with “competitiveness”, as I wrote recently. And it’s very simple to stop this as I wrote here.It may be a legal tax maneuver but it’s theft from the public: the public pays for all the infrastructure that goes into making profits for Burger King, and all the other corporate scum who pocket profits but choose to run away when it comes to paying a fair share.

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Jobs & The Economy: It’s Worse Than You Think Tue, 26 Aug 2014 18:48:52 +0000 Truthfully, this is not particularly a new idea. For a long time, I, and others, have been pointing out that the data about the economy and jobs does not reflect how bad it really is–and this was true way before the financial crisis. But, drumroll, a little academic cover joins the chorus.

David Leonardt has a little write-up:

A new academic paper suggests that the unemployment rate appears to have become less accurate over the last two decades, in part because of this rise in nonresponse. In particular, there seems to have been an increase in the number of people who once would have qualified as officially unemployed and today are considered out of the labor force, neither working nor looking for work.The trend obviously matters for its own sake: It suggests that the official unemployment rate – 6.2 percent in July – understates the extent of economic pain in the country today. That makes intuitive sense. Wage growth is weak, and Americans are pretty dissatisfied with the economy, according to other surveys. The new paper is a reminder that the unemployment rate deserves less attention than it often receives.

Yet the research also relates to a larger phenomenon. The declining response rate to surveys of almost all kinds is among the biggest problems in the social sciences. It’s complicating our ability to understand how people live and what they believe. “It’s a huge issue,” says Alan Krueger, a Princeton economist and one of the new paper’s three authors. (Mr. Krueger, who recently spent two years as the chairman of President Obama’s Council of Economic Advisers, founded the Princeton University Survey Research Center in the 1990s.)

Why are people less willing to respond? The rise of caller ID and the decline of landlines play a role. But they’re not the only reasons. Americans’ trust in institutions – including government, the media, churches, banks, labor unions and schools – has fallen in recent decades. People seem more dubious of a survey’s purpose and more worried about intrusions into their privacy than in the past.[emphasis added]

The paper can be read here. It is a deep dive into a concept known as “rotation group bias”…this is a very fun topic to bring up say on a first date or with your dentist just before the drill gets turned on.But the point really is: the surveys are not giving accurate data.

And because the data is not accurate it is not measuring how bad it really is out there–something most of us can feel by talking to our family and friends.

For many years, I’ve written about the very bad idea of tying wage hikes to the Consumer Price Index because the CPI does not capture the full cost of food, housing, gas, minimal clothing and the other stuff you need to live.

This study just shows that it’s a lot worse for people than statistics the government is spitting out.

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Mozilo Hasn’t Paid Yet Mon, 25 Aug 2014 13:48:57 +0000 A problem that I’ve been writing about for several years is the grim reality that the top bankers and Wall Street guys, who were responsible for the financial crisis, have never been out in jail–and jailing these guys is the only way that there is a chance that the same thing won’t happen again. Which brings us to the story of Angelo Mozilo.

Yesterday, the NYTimes’ Gretchen Morgenson wrote a piece about Mozilo:

Mr. Mozilo, the co-founder and former chief executive of Countrywide Financial, has largely escaped accountability for his outsize role in the mortgage crisis. But he may soon face a civil lawsuit from the Justice Department, according to news reports last week.

The possibility of a new case against Mr. Mozilo came almost exactly seven years after the subprime mortgage machine he created and oversaw began to sputter and stall. That process began in earnest on Aug. 16, 2007, when the company disclosed that it was drawing down its entire $11.5 billion revolving credit line. Other lenders had lost confidence in its operations. [emphasis added]

But, there is the problem. A civil suit will only take away some cash out of the guy’s pocket. Sure, it will make him unhappy. But, these guys have to spend time in jail–taking away their freedom is the only thing that gets their attention.

What happened with the use of RICO? The Justice Department spent years coming up with cases that put organized crime figures behind bars simply for using the mail in the furtherance of some illegal activity. Why not do the same here?

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It’s Not Hard To End Corporate Tax Dodging (Inversions): A Roadmap For Congress/White House Fri, 22 Aug 2014 14:22:22 +0000 It isn’t complicated and it’s not rocket science. The thievery underway in the form of corporate tax inversions can be stopped if there was a will to do so. It’s a problem with three easy-to-describe pieces–and some pretty straightforward solutions. The issue is: does the White House, beyond an election-year messaging stunt, really want to stop the robbery of the American taxpayer?

Citizens for Tax Justice has really done a great service by describing, in very clear language in a new report, how corporations, using so-called “inversions”, are ripping off the people, running away and trying to hide hundreds of billions of dollars from a legitimate tax, and what can be done (if I ever get rich–ha!–I’d write a big fat check to CTJ which, to my mind, does an astounding public service by banging away at the daily corporate tax rip-off…and while I’m on the topic, donate here).

It’s simple, and I’ll summarize the CTJ report (there is a lot more detail in the report):

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. As Edward Kleinbard, former director of the Joint Committee on Taxation (JCT) argues, these benefits, rather than any attempt to enhance “competitiveness,” are the true goals of inversions

I wrote about Kleinbard’s argument here–which eviscerates the bullshit “competitiveness” argument.Step Number One:Loopholes allowing inversions must be closed.


The straightforward solution is to treat the company that results from this arrangement as American if the majority of it is owned by the former shareholders of the American company, and to treat is as American if it is managed in the U.S.

The Levin brothers–Carl in the Senate, Sander in the House–have proposed exactly that (here is my May piece on that). A tiny step, while the fight is on to pass that bill, is to bar these tax-dodgers the right to federal contacts.Step Number Two: Earnings stripping must be stopped.


The second problem is that once a corporation has inverted, it has opportunities to use “earnings stripping” to make profits earned in the U.S. appear to be earned in other countries where they will be taxed more lightly or not at all. In theory, any profits earned in the U.S. are subject to U.S. taxes, whether they are earned by an American-owned company or a foreign-owned company (which an inverted corporation is, technically). But earnings are stripped out of the U.S. when a U.S. corporation (which after inversion is technically the subsidiary of a foreign parent corporation) borrows money from its foreign parent corporation, to which it makes large interest payments that wipe out U.S. income for tax purposes. The loan is really an accounting gimmick, since all the related corporations involved are really one company that is simply shifting money from one part to the other. The interest payments made by the American corporation in effect shift the profits that are really earned in the U.S. to the foreign country for tax purposes.Restrictions on earnings stripping can take several forms, any of which can be weak or strong depending on how strict the limits are. One approach is to limit the amount of interest that can be deducted for tax purposes to some percentage of income or revenue. Another approach is to limit the deductions to the extent that the American subsidiary’s ratio of debt to equity (loans taken to stock issued) exceeds some set limit. The current (very weak) rule uses these approaches, and some reform proposals would simply lower the percentage of income or revenue that the deductable interest cannot exceed. Another approach would be to limit the interest deductions to the extent that the American subsidiary’s indebtedness is disproportionate relative to the rest of the corporate group (the group of corporations owned by the same foreign parent company). This is the approach taken in the earnings stripping proposal in President Obama’s most recent budget plan, which may be the strongest proposal to stop earnings stripping.[emphasis added]

Step Number Three: American corporations must not be allowed to avoid the U.S. tax normally due on offshore profits upon repatriation to the U.S.CTJ:

The third problem is that the profits that American corporations earn offshore are supposed to be taxed by the U.S. when they are officially brought to the U.S. But after inverting, corporations are able to use accounting tricks to escape this rule.

And they do this by shifting around money, particularly in the form of loans to the new sham corporate shell offshore:

But the inversion allows for the use of loans (as an accounting gimmick) to move the money into the U.S. for that purpose while avoiding the tax.

That could be ended by closing a loophole in the tax code (in Section 956…yeah, it gets a bit technical but not that hard understand).Last point: this really does end up in the lap of the president who, at least rhetorically, jumped into the debate recently. If Congress does not act, he can end this theft by executive regulatory action, per CTJ:

Former Treasury official Stephen Shay has argued that this problem (along with earnings stripping) can be resolved through administrative action if Congress fails to act. He cites several sections of the tax code, including 956(e) which says the “Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations to prevent the avoidance of the provisions of this section through reorganizations or otherwise.” The mergers that corporations use in inversions to claim to be restructured as foreign companies would seem to be such “reorganizations.”Another section of the law cited by Shay is even more straightforward in providing this authority to the President. Section 7701(1), provides that the “Secretary may prescribe regulations recharacterizing any multiple-party financing transaction as a transaction directly among any 2 or more of such parties where the Secretary determines that such recharacterization is appropriate to prevent avoidance of any tax imposed by this title.”

Bottom line:

If Congress fails to act and the administration addresses the crisis with regulations, there is no doubt that some members of Congress will accuse it of overstepping its authority, even if that is factually not true. Does the administration have the will to act despite that inevitable backlash? A lot may depend on how that question is answered.

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BREAKING: Bank of America Cuts $16 Billion “Keep Our Executives Out Of Jail” Deal Thu, 21 Aug 2014 14:13:31 +0000 Well, this is just more of the same. Shareholders and customers pay the tab for greed and incompetence–and the Administration goes along. A new deal–but no one held responsible.

This just in:

Bank of America and the Justice Department have a reached a record $16.65 billion settlement, capping the most sweeping federal investigation into the sale of toxic mortgages by a Wall Street bank since the 2008 financial crisis.The landmark settlement, announced by Attorney General Eric H. Holder Jr. in Washington on Thursday morning, requires Bank of America to pay a $9.65 billion cash penalty and provide about $7 billion in relief to home owners and blighted neighborhoods.

“The size and scope of this multi-billion-dollar agreement go far beyond the ‘cost of doing business,’ ” Mr. Holder said in a prepared statement. “This outcome does not preclude any criminal charges against the bank of its employees. Nor was it inevitable over these last few weeks that this case would be resolved out of court.”

Oh really?

As part of the most recent settlement, the bank has agreed to write down the balances of mortgages of struggling home owners and also pay to demolish foreclosed properties contributing to blight in certain cities.“We believe this settlement, which resolves significant remaining mortgage-related exposures, is in the best interests of our shareholders, and allows us to continue to focus on the future,” Bank of America’s chief executive, Brian T. Moynihan, said in a statement.

While no bank executives will face charges as part of the civil settlement, federal prosecutors in Los Angeles are preparing a lawsuit against Angelo Mozilo, Countrywide’s co-founder, who had come to symbolize the risky mortgages that required homeowners to show little proof that they had the ability to pay the loans back.[emphasis added]

So, let’s look at these two parts above.What that quote really should say is, “heh, we socked this to the shareholders and customers. All that money is coming out of their pockets. Me? My guys? Not a penny. And nothing will change. We’ll still get huge pay packages and figure out how to fleece people down the road–while we raise customers’ fees to pay off this beaut of a deal. Thank you Eric Holder. You are a dream”.

This is just nonsense:

For the Justice Department, which has come under fire for an uneven response to the financial crisis, the case is intended as a signature moment and a warning shot to all of Wall Street.

What exactly is the message here to Wall Street?

You rob America. You fuck up the economy. You send millions of people to the unemployment lines. You get personally rich.

And the price to you is ZERO. Not personally financially, not out of your pocket. And, most important, you stay out of fail AND keep your job and huge pay.

The message is not a warning shot.

It’s a wet kiss.

It essentially opens the door to the next financial crisis or financial manipulation because the culture has not changed.

I, and many others, have argued for a very long time that these financial penalties are just bogus. Little fish get nabbed (as I wrote almost three years ago)–and mostly for insider trading, not for the more serious crimes that were committed that hurt millions of people.

It’s a sham.

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Vultures Circling Argentina, Disconnect At The Fed Wed, 20 Aug 2014 20:21:21 +0000 It might look these events are completely unrelated but there is a tie between the extortion underway of Argentina courtesy of a hedge fund, on the one hand, versus the cluelessness at the Federal Reserve Board about what is actually happening to real people.

The vulture is Paul Singer, the hedge fund billionaire who runs Elliott Management. The very short story is that he won’t take a discount on bonds he holds from Argentina’s defaulted bonds–contrary to just about all the rest of the claimants who negotiated a deal with Argentina that would still hand them a nice tidy 300 percent profit.

Argentina is trying to get some legislation passed in the U.S. to help out but certainly this sums it up:

Argentina has refused to pay the holdouts, calling them vultures whose actions are akin to extortion, comments which were repeated by Mr. Kicillof on Wednesday. Both sides failed to reach a court-mediated settlement last month, and on July 30, Argentina slipped into a default after a $539 million interest payment to other bondholders was blocked.

On Wednesday, Mr. Kicillof said the government would extend the option to swap the original bonds with those to be issued under Argentine law to its holdout investors who did not participate in previous debt restructurings.

“Mr. Singer can come here and show up at the counter and receive payment, obtaining a 300 percent profit,” Mr Kicillof said. But, he added, “that isn’t enough for Mr. Singer because he’s a vulture.”

Now, over at the Fed, there is a different kind of vulture but one that also prays at the altar of the bond market. This little cabal of vultures thinks, well, things are doing so much better in the U.S. that the Fed should start raising interest rates:

An increasingly vocal group of dissenters, however, saw evidence that the Fed had nearly exhausted its ability to repair damage caused by the recession. They argued that the Fed must retreat quickly to maintain control of inflation.

…Some officials see all of this as evidence that the Fed is rapidly approaching the limits of its abilities. One voting member of the committee, Charles Plosser, president of the Federal Reserve Bank of Philadelphia, dissented at the July meeting, arguing that it was time for the Fed to signal that it was getting closer to raising interest rates.

According to the minutes, some other officials who do not vote this year also were “increasingly uncomfortable with the committee’s forward guidance” that rates are likely to remain low for some time.

But, you can only view the economy as improving so much from the vantage point of the privileged, not from the seat of the regular person, millions of whom can’t pay the bills or find decent paying work.

The point is that, underneath both events, is the same problem: the financial mandarins still call the shots and are always looking for a way to fuck the regular person, whether s/he lives in Argentina or on Main Street U.S.A.

]]> 0 EXPOSED: Corp Taxes Are NOT High, U.S. Corps “world leaders in global tax avoidance strategies” Tue, 19 Aug 2014 12:02:29 +0000 I couldn’t help the “EXPOSED” start to the headline because, actually, this is no surprise. Citizens for Tax Justice has been making this case for a very long time (including here, just as one example). But, here’s another piece of evidence to try to undo that hard-wired, decades-long rhetorical nonsense about corporate taxes being too high in the U.S.

In an academic article, reported yesterday in The New York Times (and kudos for that), entitled “Competitiveness” Has Nothing to Do With It”, Edward D. Kleinbard of the USC Gould School of Law writes (and you gotta love the accessible kick-off):

In the movie Night After Night, a young and naïve coat check girl admires Mae West’s jewelry. “Goodness,” says the woman, “what beautiful diamonds!” – to which Mae West replies, “Goodness had nothing to do with it.”And so it is with the recent wave of corporate inversion transactions.2

Despite the claims of corporate apologists, international business “competitiveness” has nothing to do with the reasons for these deals.


Heather Bresch, the CEO of Mylan, a pharmaceutical manufacturer that is pursuing an inversion into a Dutch firm, effectively spoke for many other chief executives when she recently gave an interview describing herself as entering into the inversion deal only “reluctantly.”5 In her telling, she has abandoned hope that Congress will overhaul the Code to make U.S. companies “more competitive,” and therefore must pursue a tax-driven redomiciliation in the Netherlands against her patriotic instincts, and even though (and here is a point that Ms. Bresch forgot to mention) the merger will subject her firm’s taxable owners to capital gains tax. But all this is a false narrative: U.S. multinationals’ “competitiveness” arguments are almost entirely fact-free. [emphasis added]

Well, he meant to say: they lie.I invite you to read the entirety of his discussion of “stateless income” but the upshot:

In the international arena, U.S. multinational firms have established themselves as world leaders in global tax avoidance strategies, through the generation of stateless income. The result is that many well-known US multinationals today enjoy single-digit effective tax rates on their foreign income, and effective tax rates on their worldwide income far below the nominal 35 percent federal corporate tax rate.[emphasis added]

Essentially, Kleinbard eviscerates the nonsense about “competitiveness” as a reason for tax inversions. And, he, then, warns, in regards to tax inversions:

“…the case for action is urgent, both to protect the U.S. domestic tax base and to preserve existing law’s premises of how the international tax system is supposed to operate. Inversions are an immediate threat to fiscal stability, because they enable inverted firms to strip their U.S. domestic corporate tax base, and to use existing offshore cash to fund dividends or stock buy-backs to U.S. shareholders, which today cannot be done without paying U.S. tax. (I briefly discuss the risk of tax revenue hemorrhaging below.) And once a company has inverted, it is gone: the United States will find it difficult to undo the damage to the tax base in subsequent corporate tax reform.[emphasis added]

Corporate tax burdens are not too high and do not impede growth or competition. And as CTJ has pointed out, two trillion dollars is stashed overseas…that’s a far better money-laundering operation that organized crime.So, you ask, logically, why does this foolishness continue? It’s pretty simple: the political leadership of both parties just parrots this line, year after year. Yes, part of it has to do with political corruption (read: campaign finance system).

But, just as much of it has to do with the acceptance of the false line of idiotic rhetoric about the “free market”. For decades all we hear, from both parties, are the repeated stories about the “job creators” in the vaunted world of the “free market” who need tax breaks and “free trade” deals and all this other crap to remain “competitive”–even if the benefits of “competitiveness” never find their way into the pockets of the underpaid, poverty-stricken workers who are the source of the profits.

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Opera Deal Mon, 18 Aug 2014 16:48:47 +0000 There is a deal that prevents the NYC Opera from locking out its workers. Though hard to know right now what the deal is, there is still one mystery I’d still like to learn more details about.

A deal:

The Metropolitan Opera reached tentative agreements early Monday morning with the unions representing its orchestra and chorus after an all-night bargaining session, and called off its threat to lock out workers a little more than a month before the new season is set to open.

The agreements were announced shortly after 6:15 a.m. by Allison Beck, the deputy director of the Federal Mediation and Conciliation Service, after talks lasted long past the deadline of midnight Sunday that the Met had set for reaching a deal or locking out its workers.

I wrote about this recently and pointed out that the Opera’s operating deficits could be traced right back to the door of Peter Gelb, the general manager, who is paying paid quite nicely. So, this was worth waiting for:

The independent analyst chosen to explore the Met’s finances was Eugene Keilin, a founder of KPS Capital Partners who has long played a role in New York City’s finances, having served as chairman of both the Municipal Assistance Corporation, which was created to deal with the city’s 1975 fiscal crisis, and the Citizens Budget Commission.

Although the Federal Mediation and Conciliation Service announced Monday that “the report of the independent analyst brought in to review the Metropolitan Opera’s finances was nearing its completion,” it was unclear if a written report had been submitted.

Hopefully, we can get a look at that.

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Just Call It What It Is: Slave Labor Fri, 08 Aug 2014 19:43:23 +0000 You can try to call these conditions whatever you want. But, bottom line, this is for slaves.

Right under our New York noses:

In the early stage of the harvest season, Antonio, a farmworker in his 50s, picked peas from daybreak until sundown, 14 hours a day, six days a week, with an hour off each day for lunch.

“I’m tired,” he said, speaking through an interpreter. “Right now my knees hurt a lot because all day I work bending over or down on my knees.”

His workweek at a fruit and vegetable farm in Dutchess County will be even tougher in October when the apples are ready for harvest — many of which will be sold in New York City’s popular greenmarkets: He will no longer have Sundays off. For all that toil, he is paid $8 an hour, the minimum wage. The long hours are expected; there is no overtime pay.

While most American wage earners accustomed to a 40-hour week would be surprised at those conditions, for farmworkers in New York it is within the law.

The lack of overtime pay, as well as the absence of rights to disability insurance and collective bargaining, are artifacts of the exclusions of agricultural work from the federal wage, hour and labor relations acts of the 1930s that were adopted by most states and have seldom been changed. Only California, Colorado, Hawaii, Maine, Maryland, Minnesota and Oregon require time-and-a-half pay for overtime — though in some cases after 60 hours of work a week — and only a dozen states explicitly give farmworkers the right to unionize.

And those nice greenmarkets? All hip except:

Leanne Tory-Murphy, an outreach worker at Worker Justice Center of New York in Kingston, which arranged the interview with Antonio, said, “Overtime protections are put in place for a reason, so workers are not working themselves to the bone.” She takes issue with farms that sell at greenmarkets in the city and flaunt their healthful credentials but do not pay workers overtime.

“A code of conduct is not included under the umbrella of ethical eating,” she said. [emphasis added]

]]> 0 “Some will rob you with a six-gun, and some with a fountain pen”: A New Corporate Tax Scam Thu, 07 Aug 2014 20:43:53 +0000 I love that quote from Woody Guthrie (H/T to Citizens for Tax Justice for using it). Says it all, from the halls of the Chamber of Commerce to the corporate suites to the Congress. Today’s use of the fountain pen comes courtesy of another corporate scam to avoid taxes.

And the folks at CTJ explain how the corporate fountain pen is turning the Real Estate Investment Trust (REIT) into the newest tax dodge. First, what is an REIT?:

A REIT is to real estate what a mutual fund is to stock and bonds: a way for smaller investors to diversify their holdings by owning a share of a large pool of assets rather than owning individual stocks or properties directly. A REIT, just like a mutual fund, doesn’t pay an entity-level tax. Instead it distributes its income to the REIT shareholders who pay tax on their respective shares.
[emphasis added]

Except 75 percent of the trust’s biz has to be in real estate…uh, that’s why it’s called a “real estate investment trust”. But, corporations like Wal-Mart and Windstream Holdings, Inc. have now found a way to scam the taxpayers:

Windstream Holdings is a Fortune 500 company that, according to its website, “is a leading provider of advanced network communications, including cloud computing and managed services, to businesses,” and offers “broadband, phone and digital TV services to consumers.”It shouldn’t qualify as a REIT. As Windstream itself said, the company is putting its copper and fiber networks into the REIT along with “other” real estate.
Is Windstream in the business of providing communications services or owning and managing real estate? Is Corrections Corporation in the business of operating prisons or holding real property? Are casino operators in the business of real estate or emptying your wallet?
We don’t need these companies to spin off their “real estate” assets so small investors can own a piece. These companies are already publicly traded and investors can buy stock or mutual funds that hold the stock.[emphasis added]

Yeah, its boring lingo and complicated for the average person to wrap their brains around.Bottom line: it’s legal (yes) but a misuse, abuse, and, IMHO, a scam that robs us, the public, of revenue that should go to build society.

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Holder’s New (Bargain) Price For Bankers’ “Stay-Out-Of Jail” Card: $17 Billion Wed, 06 Aug 2014 22:40:53 +0000 Well, it gets a bit repetitive to write about this but it’s that or spacecrafts following comets(come to think of it, the comet stuff is much more fun). But, here we go again: bankers rip us off and all they need to do is sock it to the shareholders and customers and, presto, Eric Holder and his boss go home happy campers. The Treasury might get a little richer but nothing much will have changed.

Apparently, Bank of America–a really big, big player in the mortgage crisis primarily through its acquisition of Countrywide Financial Corp–has a deal (via WSJ website):

Bank of America Corp. and the Justice Department are close to a deal in which the bank will pay between $16 billion and $17 billion to resolve allegations of mortgage-related misconduct in the run-up to the financial crisis, according to people familiar with the matter.The bank has agreed to pay roughly $9 billion in cash to the Justice Department, states and other government entities, these people said, with additional money aimed at consumer relief, such as reducing mortgage balances for struggling homeowners.

If finalized, the agreement would set a record for fines and damages in a civil settlement between the U.S. government and a company. It would eclipse the $13 billion pact struck between the Justice Department and J.P. Morgan Chase & Co. in November over similar issues. Citigroup Inc. recently agreed to pay $7 billion to settle similar claims that it sold shoddy mortgage-backed securities ahead of the financial crisis.

Bank of America agreed to the outlines of a deal after a phone call Thursday between Chief Executive Brian Moynihan and Attorney General Eric Holder, people familiar with the matter said. For weeks, the bank refused to offer more than $13 billion, including cash and consumer relief, while the Justice Department was seeking $17 billion.

This comes on top of the court order just last week that fined Bank of America $1.9 billion as punishment for “a brazen fraud by the defendants”.It’s not a bad thing for some money to trickle back to homeowners but it’s a pittance if you line up the financial damage overall in lost jobs, lost pensions (money never to be recovered because of the time lost to accrue money to expected levels) and, of course,lost homes.

That figure is in the trillions of dollars of lost opportunity.

For that, these people deserved sever jail time.

For fuck’s sake, at the bare minimum, if there is going to be a fine, all to be paid by shareholders and consumers, and not a dime out of the pockets of the CEOs/managers, each of the CEOs who cut these deals, along with their senior management, should have been forced to resign. Otherwise, the same culture has been left in place–and the next crisis is just a matter of time.

Nothing has changed.

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Inequality Hurts Economic Growth. Well, Duh. No Surprise, S&P Late To The Party Tue, 05 Aug 2014 19:40:23 +0000 One response to this might be “better late than never”. Actually, the spin on this story neglects to actually talk about the role S&P actually played in the financial crisis. But, apparently, the geniuses at S&P have now figured out what any normal person would understand: when a few people get all the marbles, not much is left for the others.

So, first, here’s how the Times plays this:

Economists at Standard & Poor’s Ratings Services are the authors of the straightforwardly titled “How Increasing Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide.” The fact that S&P, an apolitical organization that aims to produce reliable research for bond investors and others, is raising alarms about the risks that emerge from income inequality is a small but important sign of how a debate that has been largely confined to the academic world and left-of-center political circles is becoming more mainstream.


Then there are the economists in what can broadly be called the business forecasting community. They wear nicer suits than the academics, and are better at offering a glib, confident analysis of the latest jobs numbers delivered on CNBC or in front of a room full of executives who are their clients. They work for ratings firms like S&P, forecasting firms like Macroeconomic Advisers and the economics research departments of all the big banks.The key difference, though, is that rather than trying to produce cutting-edge theory, they are trying to do the practical work of explaining to clients — companies trying to forecast future demand, investors trying to allocate assets — how the economy is likely to evolve. They’re not really driven by ideology, or by models that are rigorous enough in their theoretical underpinnings to pass academic peer review. Rather, their success or failure hinges on whether they’re successful at giving those clients an accurate picture of where the economy is heading.

Well, the first part is a shrug.It’s the second part that is stupefying. S&P is hardly simply an academic, non-involved party that produces material not driven by ideology.

As I wrote almost two years ago, Standard & Poor’s was found to have “deceived” and “misled” 12 local councils in Australia that bought triple-A rated constant proportion debt obligations (CPDOs) from an intermediary in 2006.

And, for even longer, we’ve known that ratings agencies are not simply neutral agencies. They, indeed, are centers of corruption, which led the Justice Department to investigate more than three years ago whether S&P improperly rated dozens of mortgage securities in the years leading up to the financial crisis.

Indeed, finally, the Justice Department sued S&P (though, in my view, nothing was going to change because this was a civil suit and no high-ranking company official will pay for any crimes); the suit is currently in court.

So, honestly, this feels like a PR ploy: someone at S&P wants to jump on top of the hand-wringing about inequality. No one is suggesting in this report any changes in the entire financial system.

If you read the report, it’s kind of a mish-mash of information–you could collect mostly using Goggle and a day’s work.

It has this pearl for example:

There is no shortage of proposals for tackling extreme income inequality. President Obama has proposed an increase in the hourly minimum wage to $10.10 from the current rate of $7.25, and the IMF recently called on lawmakers to boost the wage (though it refrained from suggesting a specific level). Managing Director Christine Lagarde said that doing so would help raise the incomes of millions of poor and working-class Americans and “would be helpful from a macroeconomic point of view” (58).An increase in the minimum wage would certainly carry with it short-term impacts, likely bringing 900,000 people above the poverty line in the second half of 2016–and, according to the CBO, lifting wages for 24 million workers at the next level above minimum wage. Fewer American households at or below the poverty line would also help bolster government balance sheets and likely improve state and local credit conditions.

But raising the minimum wage is not without negative consequences. Reduced labor demands resulting from higher wages could reduce potential hires by 500,000 jobs, according to CBO estimates (59). Further, while 49% of those workers making the minimum wage are under age 25, the CATO Institute reports that, of older workers (the other half of minimum wage earners), 29.2% live in poverty and 46.2% live near the poverty level, with family incomes less than 1.5 times the poverty line (60).

So, using the “on the one hand this but on the other hand that” approach, these people, who are so worried about inequality, raise the entirely inadequate proposal to raise the minimum wage–which would still leave millions in poverty and is truly meek–and, then, immediately, they try to undercut the campaign with the same bogus arguments foisted by its enemies…and those who lives just fine with inequality.It does not take a genius to know that when you rob minimum wage workers of $300 billion just in the past five years, and keep wages low and destroy unions, that people can’t afford to pay their bills and that hurts economic growth.

This isn’t an exercise needing academic research or more argument.

It’s all about political and economic power.

But, it is interesting that these people at the center of the corrupt system have to say something about inequality.

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Corp Tax Evading And Fleeing The Country? Fine, Kiss Your Federal Dollars Good-Bye Fri, 01 Aug 2014 13:17:57 +0000 Corporate tax inversions are getting a lot of ink now (thanks largely to the heavy lifting done by the Levin brothers–Carl in the Senate, Sander in the House, and Citizens for Tax Justice…not, respectfully, by the celebrity of the moment). The president has even spoken out a bit, though we will see whether that’s just mid-term elections political rhetoric. But, a related move is now on the agenda and I love the name: No Federal Contracts for Corporate Deserters Act.

Without a doubt, tax inversions should be stopped. But, in the meantime, an easy move would be to simply say: you wanna shift a huge piece of your profits abroad? Well, fuck you, don’t come knocking on the door of the taxpayers looking for federal contracts.

OK, so, Reps Rosa De Lauro and Lloyd Doggett, and Senators Dick Durbin and Carl Levin (there’s Carl again with actual action, not words), might not say it quite like I did. But, this will do:

“For too long we have let companies avoid their tax obligations at the expense of companies who pay their fair share,” DeLauro said. “Even worse, the federal government has been subsidizing this bad behavior, by continuing to reward inverted companies with lucrative federal contracts. These companies take advantage of our education system, our research and development incentives, our skilled workforce, and our infrastructure, all supported by U.S. taxpayers, to build their businesses. But when the tax bill comes due, they hide overseas. Yet suddenly, when federal contracts are being applied for, they are all as American as Uncle Sam once again. This has to stop.”“With every successful inversion, the tax burden increases on the rest of us to pay what the corporate inverter doesn’t,” said Durbin.  “The burden is made worse by allowing companies to profit off of federal contracts paid for by U.S. taxpayers, while those very companies run from their U.S. tax responsibility.  We should make permanent the long-standing ban on federal contracts for corporations that have renounced their American corporate citizenship.”

“Americans are rightly outraged at the wave of corporations seeking to abandon the U.S. to avoid their taxes,” Levin said. “We ought to put a stop to all inversions, but at the very least, we should stop these companies from receiving federal funding from the same American families who have to pick up the tax burden inverted companies shrug off.”

“Corporations that renounce their citizenship not only invert their business operations but pervert our laws,” said Doggett. “Those dodging their fair share of taxes should not be rewarded with taxpayer-funded government contracts.” [emphasis added]

It is kind of ludicrous: corporations that hide from the public when it comes time to pay for roads and other systems that lead to corporate profits have the gall to put out their hands when it comes to taking even more money from the public (which is essentially who pays for tax-funded federal contracts). Cut ‘em off.

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Some Sneakers Are Missing Fri, 01 Aug 2014 00:48:25 +0000 …Or else maybe Nike’s off-shore shell game has changed. In any case, there’s something fishy in Bermuda.

Citizens for Tax Justice drops the anchor (how many cliches can I use in one post?):

It’s far more common to see bare feet than sneakers on the streets and beaches of Bermuda, but major athletic footwear manufacturer Nike reports having six subsidiary companies on this island nation with population of about 65,000 people. That’s six less than the dozen it reported last year, but it’s still a lot.

….So what happened to the missing Nike subsidiaries? It’s possible that they were sold. But it’s also possible that the company simply hopes it can get away with not disclosing this potentially-embarrassing information going forward.

One thing is clear: whatever else may have changed in the past year, Nike definitely still has substantial foreign cash stashed in low-tax havens. We know this because Nike is one of the relatively-few Fortune 500 companies that disclose how much tax it would pay on repatriation of its permanently reinvested earnings (PRE). The company estimates that if it repatriated its offshore cash, it would have a $2.1 billion tax bill on their $6.6 billion in PRE. This is a 32 percent tax rate, the implication of which is that they’ve paid about 3% on their offshore profits so far. And it’s hard to find a foreign tax rate that low outside of, say, Bermuda.


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