A Modern Update on an Old Classic

For those of us who first saw the Wizard of Oz as children, Dorothy, Toto and her imaginary friends will live forever in our memories. Like all classics this story continues to enchant new generations of children. Like so many literary classics it also serves as a morality play illustrating the never-ending battle between good and evil and false leaders projecting themselves as more than they really are.

In the true sense of a classic the story remains relevant today serving as a metaphor for our moribund political leadership and the continuing fight between two sides each defining themselves as good and the other as evil.

So, let’s take a trip down the yellow brick road and explore the Wizard of Oz as a contemporary story for the politics of today.

Dorothy as the embodiment of the United States is lost and on a trip that she does not know where it will take her, nor how she got there. When she lands among the munchkins, she finds a people living in fantasy world waiting to be rescued, similar to the American people of today, such as the 52% in a recent Gallup poll that found the widening gap between rich and poor as an “acceptable part of our economic system.” So Dorothy as America is lost without direction, seeking leadership to help her find the way home. Instead she is given roadblocks, a twisting path and setbacks along the way. Similarly today, each political party promises us that they will show us the way if we just put our faith in them, but then fail to provide any true leadership to help us find the path home.

The character of Dorothy as a child is illustrative of how our political leaders treat the American people. We are considered to be children incapable of knowing what is best for us and told that if we would only follow their path blindly we will find our way. Instead we get deeper and deeper into a confusing path with no clear way out and unforeseen dangers at every turn: two threatened shutdowns of government, no clear policy on taxes or the recovery, an increasing tax burden on working people while reducing taxes on the wealthiest, all contributing to a growing national debt creating dark clouds on the horizon.

But still we dance down the yellow brick road.

First Dorothy finds the scarecrow. He’s a nice sort of fellow, a sack of straw masquerading as a person, but alas he has no brain. Yes, this lovable scarecrow without a brain could only be representative of the Tea Party. A movement born in anger, with one discernable objective – limit government’s role because big government is bad and it must be starved down to size. Well, in reality what they are saying is that big government is bad when it is in service to others, but when disaster strikes, just like everybody else they want the government to come in and help. If they only had a brain, they would understand that it is government that maintains the rods they drive on, the bridges they cross and that if it were not for government they would be working seven days a week at below poverty wages. The world is so easy to understand when you don’t have brain to muck things up with the facts.

The most recent example of this is Tea Party activist turned mayor of Flint, Michigan who recently turned down an $8.5 million federal grant to build transportation hub, because she believes that “There’s nothing free about government money,” Mayor Janice Daniels said in an interview. “It’s never free, and it’s crippling our way of life.” Placing her ideology before practicality denying the reality of how unemployment cripples people’s way of life by blocking the promise of new jobs as a result of the new transportation hub, Mayor Daniels demonstrates the blind allegiance to ideology over what is good for her constituents.

Facts, oh yes that is another thing that a brain is good for, understanding and making sense out of facts. Our straw-filled, brainless friends deny global climate change in the face of volumes of scientific fact, but challenge a potentially dangerous pipeline because they say here are no scientific facts to support its opposition. But as experience shows us, without a brain, one cannot make sense of facts even once they are presented in logical and irrefutable fashion. Then there is the obsession with no tax increase, and the Tea Party Congress members who have signed a pledge to not raise taxes. Without a brain to take in and interpret information, these folks are willing to sit back and watch municipalities go into bankruptcy and the federal government face the brink of shutdown. That is not leadership, that is blind allegiance to an ideology that does not work, followed only by someone who does not have the brainpower to think critically.

Next Dorothy comes across the Tin Man, who lacks heart. If only the wizard could help him gain a heart all will be right. In or modern day morality play the Tin Man, without a heart is representative of the Republican Party. A party that has become so focused on representing the wealthiest among us that it has lost its heart in the service of its benefactors. Tax cuts for the wealthiest while reducing essential services for everyone else. Critical government benefits such as an extension of unemployment benefits are held hostage to continued tax breaks for the wealthiest Americans. While insisting that deficit reduction can only be achieved by spending cuts targeted at working and low income Americans, their insistence on rewarding their wealthy benefactors with tax cuts adds to the deficit. Further indication of an empty place where their hearts should be is that while insisting on a so-called “strict interpretation” of the Constitution, they ignore a phrase in the preamble that clearly states that it is the role of government to “promote the general welfare.” But without a heart, the Republican interpretation of that phrase becomes to promote the welfare of the few at the cost of the many.

Then there is the lion, all he needs is courage; a perfect description of today’s Democratic Party. Today’s Democratic Party has become a collection of men and women without the courage to fight for what they should stand for. This is a group of people that like the lion in Dorothy’s tale, runs from the fight before it even begins. For example take a major part of the party’s 2008 platform – no extension of the Bush-era tax cuts that mostly benefitted the wealthy. Without so much as a whimper, the Democrats agreed to a two-year extension of these cuts and now only have the courage to complain that they exist, but not to do anything about it. The same can be said for giving up universal health care even before the negotiations began and most recently signing approval of a defense spending bill that takes away basic rights of US citizens who can be held without trial indefinitely just for suspicion of terrorist activities.

Like Dorothy we are lost in a strange and foreboding land without anyone to lead us out but yet we manage to pick up baggage along the way without any promise of their ability to help us out or to find the way home. But wait we have one more friend to find, perhaps he will be the one to help us in our journey –Now we come to the Wizard himself, the guiding philosopher of the tea party – Grover Norquist. This is the man who has expressed his desire to shrink the federal government down to where t is small enough to drown in the bathtub. The no-tax pledge blindly signed by Tea Party and Republican member of Congress was his brainchild. While Grover Norquist stands as the guiding light of the Tea Party and it’s anti-government activists, we never get to see what is going on behind the curtain. But pull it away and you will see the dirty little secret of this so-called “grassroots movement.” Norquist and the Tea Party are funded by the billionaire Koch brothers and by Karl Roves latest incarnation Freedom Works. This is hardly the making of a grassroots movement, rather it is perhaps the biggest corporate lobbying machine fighting any type of government regulation or taxation that might level the playing field and reduce the influence of corporate dollars in the political system.

With a cast of characters like this, I am afraid that real life can only mimic fantasy for so long, then they must part company. So, unless the American people rise up and push back there will be no happy ending here. We will not find our way home and the morass that is Congress will only become more dysfunctional, is that is at all possible.

Extending the “Payroll” Tax Cut

While the Democrats and Republicans in Congress posture over extending the so-called payroll tax cut, the facts about the impact of this policy are lost in all the bombast. In reality, taxes cut are not nor have they ever proven to be effective stimuli to a sagging economy. If the two parties can make headlines with their fight over these tax cuts, it gives the appearance that they are trying to actually do something, and hide the fact that this may well be the most ineffective and unproductive Congress in generations.

Let’s start with some facts that seem to have gotten lost in the shuffle. First, by calling this a “payroll” tax cut, the administration is camouflaging the fact that it is a Social Security tax cut. While one side of the aisle tries to deal its deathblow to Social Security by claiming that it is on a collision course with insolvency, the other side of the aisle is hastening that insolvency by reducing its only source of income – the Social Security tax. The two percent reduction in the Social Security tax essentially robs $265 billion from the Social Security trust fund. This “incidental” fact has never entered into the arguments on Capitol Hill.

If it is true that the Social security trust fund is heading toward insolvency, then why deny it more funds? As usual, the answer is a shortsighted fiscal policy and politicians who cannot see beyond their next election.

Cutting taxes as a stimulus to the economy is a straw dog. Politicians settle on this because it seems as though they are doing something and voters like to have more money in their pockets. According to the Congressional Budget Office each $1 million in tax cuts creates thirteen new jobs. That translates to a cost to the government of $77,000 per job created. On the other hand $1 million in unemployment benefit creates 19 new jobs for a cost of $52,000 per job. The reason that unemployment benefits creates more jobs is that people collecting benefits need that money to meet daily expenses and will spend it immediately while a social security tax cut goes to people who are employed and many of them will not spend their tax break but will save it instead.

The GOP members of congress are insisting that spending cuts offset any tax cut. However when they championed the extension of the Bush era tax cuts, there was no such demand. So the GOP platform seems to be that tax cuts for the wealthiest Americans are solid fiscal policy while tax cuts for working families are dangerous fiscal policy that must be offset. This position becomes clearer when one looks at the offsets being suggested by the Republicans.

One idea being floated by the GOP is a pay freeze for federal workers and a reduction in the federal workforce by 10%. Both would further harm the economy, and both place an inordinate burden of reducing the deficit on working families. A ten percent reduction in the civilian workforce of 2.15 million would result in 215,000 jobs lost, offsetting the 265,000 jobs that would be created by the payroll tax cut. The dollar savings would be approximately $1.6 billion to offset a tax cut of $265 billion. Either the GOP leadership cannot do simple math or the real reason behind their plan is to gut Social Security and the work of the federal government.

However there are ways that can bring more funds into the federal government and maintain the solvency of the Social Security system well into the future. The first step would be to eliminate the Social Security tax cap. Currently all employees pay Social security tax on the first $106,800 of salaried income. Other income such as investment income, business income, etc are not subject to this tax. As a result of this wage cap, higher income workers pay a substantially reduced Social security tax rate. For example, at the current rate of 4.2%, all workers earning less that $106,800 pays the full tax rate on all of their salaried earnings. However, a hypothetical salaried employee earning $213,600 is only paying a rate of 2.1% of salary. Eliminating the cap would not only make Social security a more progressive and fairer tax but it would guarantee solvency well beyond 2075.

Another plan by the GOP, again focuses on some of the most vulnerable people in society - reducing Medicare reimbursements to senior citizens. This plan is in response to the astronomical growth of Medicare costs. However, what is being ignored here, is that under the previous administration, the Medicare was prohibited from negotiating drug prices with the pharmaceutical industry. In essence this translates into a $29 billion dollar annual subsidy to big pharma. Unlike other prescription drug suppliers Medicare is the only major insurance company that is barred from negotiating prices. As an example, Medicare currently pays 58% more for prescription drugs than the Veterans Administration that is permitted to negotiate.

Another step would be to eliminate the Bush era tax cuts, which went overwhelmingly to the wealthiest Americans. The extension of these cuts were justified as a fiscal necessity in this economic downturn. But if they indeed were needed as a stimulus, they should have softened the economic downturn that began during the prior administration. Another example of how tax cuts, do not stimulate the economy and that the cost of extending these cuts - $220-300 billion – is poor fiscal policy.

One more quick fix that would not only help reduce the deficit and also bring an increased level of fairness and rationality to US tax and fiscal policy are the subsidies aid to the oil companies. While posting record profits and increasing her costs to consumers, big oil enjoys $4 billion a year in tax subsidies. However, in this new world of Repubospeak, any attempt to bring an increased level of fairness and equity to tax policy is defined as a tax increase.

If we were to implement these simple fixes the total saved would be between $234 and $334 billion. That total is achieved through saving $29 billion in Medicare art D, $200-300 billion in Bush tax cuts and $4 billion in oil subsidies. These are just three quick fixes that bring fairness and restore some level of responsibility and fairness to federal tax and fiscal policy. I am confident that here are dozens more such items in the federal budget that can result in billions more in savings. But these will never be implemented because it is not about reducing the deficit, it is about starving government and creating a crisis in Social Security to justify gutting this country’s most successful social program.

To Infinity and Beyond

Those are the immortal words of Buzz Lightyear. In reality, we may not be reaching for infinity yet, but something just a little bit closer - that mysterious red planet that has spawned so many science fiction and Armageddon movies. On Saturday, November 26th, the United States launched he $2.5 billion Curiosity Mars Rover, with the mission of searching for ancient habitable environments to learn if Mars was once home to microbial life.

On that same day, only two days after Thanksgiving and one month before Christmas, children living in 17 million US households went to bed hungry. While hunger and poverty are reaching record levels in the US and the Republican controlled Congress looks for new ways to cut social welfare programs in the name of reducing the federal deficit, our government was able to justify spending $2.5 billion to learn if there was ancient life on Mars. We all should be asking, “what about life on this planet?”

If we kept our focus on earthly needs and not on the remote possibility of Martian microbes, what could that $2.5 billion have provided? For starters $2.5 billion dollars could have produced more than 6,00 units of affordable housing, providing a decent place for thousands of American families currently without homes.

There are other possibilities for those dollars as well, the same amount of federal dollars could have been used to hire approximately 37,000 elementary school teachers. Replacing many teachers fired due to budget cuts, thereby reducing class size and providing a higher quality education for thousands of children. Or it could have been used to provide more than 150,000 college scholarships making college attainable to young people whose families cannot afford the increasing costs of a college education. If you are more concerned about safety, these funds could have been used to hire 40,000 police and firefighters, making u for the thousands who have been laid off due to municipal budget cuts.

In his remarks at the John F. Kennedy Space Center on April 15, 2010 President Obama stated “I am 100 percent committed to the mission of NASA and its future. Because broadening our capabilities in space will continue to serve our society in ways that we can scarcely imagine. Because exploration will once more inspire wonder in a new generation -- sparking passions and launching careers. And because, ultimately, if we fail to press forward in the pursuit of discovery, we are ceding our future and we are ceding that essential element of the American character.

Now, just nineteen months alter, in the midst of a severe economic downturn, when millions of children are having their dreams denied or deferred these words seem to run hollow. What do we gain by inspiring wonder in a new generation if they are unable to pursue that wonder through a quality education or if they are too hungry to aspire to anything more than wondering where their next meal will come form or when their Mommy or Daddy will get a job or they will have a permanent place to live. How do we tell them that as a country we believe that finding microbes on a distant planet is more important than helping them to succeed right here on planet Earth?

When we cannot even provide the basic needs for millions of American citizens, and unemployment is approaching record levels, we must make crucial decisions about how our federal tax revenues are spent. Do we focus our attention on improving life here on earth, or do we look out beyond the stars and focus on the possibility of ancient life existing on a distant planet?

The Shocking, Graphic Data That Shows Exactly What Motivates the Occupy Movement

By Les Leopold, AlterNet
Posted on October 23, 2011, Printed on October 24, 2011
http://www.alternet.org/story/152811/the_shocking%2C_graphic_data_that_shows_exactly_what_motivates_the_occupy_movement

What are the Occupy Wall Street protesters angry about? The same things we’re all angry about. The only difference is the protestors turned their anger into public action. Occupy Wall Street lit the embers and the sparks are flying. Whether it turns into a genuine populist prairie fire depends on all of us.  

Now is not the time for wonky policy solutions, as the media meatheads are calling for. Rather, it’s time to air our grievances as loudly as possible, which is precisely what Wall Street and its minions fear the most. Here’s a brief list of why we should be angry and the charts to back it up. 

1. The American Dream is imploding...  

The productivity/wage chart says it all. From 1947 until the mid-1970s real wages and productivity (economic output per worker hour) danced together. Both climbed year after year as did our real standard of living. If you’re old enough, you will remember seeing your parents doing just a bit better each year, year after year.  Then, our nation embarked on a grand economic experiment. Taxes were cut especially on the super-rich. Finance was deregulated and unions were crushed. Lo and behold, the two lines broke apart. Productivity continued to climb, but wages stalled and declined. So where did all that productivity money go? To the rich and to the super-rich, especially to those in finance.

2. Our wealth is gushing to the top 1 percent...

Actually the top tenth of one percent. Because of financial deregulation and tax cuts for the rich, the income gap is soaring. Here’s one of my favorite indicators that we compiled for The Looting of America. In 1970 the top 100 CEOs earned $45 for every $1 earned by the average worker. By 2006, the ratio climbed to an obscene 1,723 to one. (Not a misprint!)

3. Family income is declining while the top earners flourish...

As women entered the workforce, family income made up for some of the wage stagnation. But now even family incomes are in trouble. Meanwhile, the incomes of the richest families continue to rise. 

4. The super-rich are paying lower and lower tax rates...

To add financial insult to injury, the richest of the rich pay less and less each year as a percentage of their monstrous incomes. The top 400 taxpayers during the 1950s faced a 90 percent federal tax rate. By 1995 their effective tax rate – what they really paid after all deductions as a percent of all their income – fell to 30 percent. Now it’s barely 16 percent. 

5. Too much money in the hands of the few combined with financial deregulation crashed our economy...

When the rich become astronomically rich, they gamble with their excess money. And when Wall Street is deregulated, it creates financial casinos for the wealthy.  When those casinos inevitably crash, we pay to cover the losses. The 2008 financial crash caused eight million American workers to lose their jobs in a matter of mont

hs due to no fault of their own. The last time we had so much money in the hands of so few was 1929! 

6.  We’re turning into a billionaire bailout society...

We bailed out the big Wall Street banks and protected the billionaires from ruin. Now we are being asked to make good on the debts they caused, while the super-rich get even richer, some making more than $2 million an HOUR! It would take over 47 years for the average family to make as much as the top 10 hedge fund managers make in one hour. 

7. The super-rich still control politics...

Both political parties are occupied by Wall Street. For nearly an entire generation they have competed with each other to gain campaign contributions in exchange for tax breaks and regulatory loopholes for the richest of the rich. Today’s so-called financial reforms are porous, while the money continues to flow to both parties.
 
8. Unemployment is a catastrophe...

The reckless gambling on Wall Street tore a hole in the economy sending millions to the unemployment lines. Wall Street caused the enormous spike in unemployment and no one else – not the government, not home buyers, not China.

9. Our prospects for the future are growing dim...

It’s bad enough that unemployment is sky-high. But it’s even worse when you can’t find a job for months, even years. Right now the number of unemployed for 26 weeks or more is at record levels. Many of the long-term unemployed will never work again.

10. The big banks are getting even bigger...

Too big to fail is alive and well. Our nation’s biggest banks are growing larger and larger with no end in sight. Despite what politicians say, the taxpayer will bail out the big banks again. And the big banks know it.
Stand up and be counted!
Americans are a patient people. Mass movements do not form very often. Most of us hoped that after the crash, the big banks would be broken up, the casinos would be shut down and the gamblers would be punished. At the very least, we expected that the elite financiers would pay for the damage they created – the jobs destroyed, the neighborhoods wrecked, the services cut. It didn’t happen. Finally something clicked. A small number of kids stood up and got noticed. And now it’s growing. We see an outlet for our frustration, our justifiable anger, our disappointment in leaders who sold out.
We don’t know where it’s all going. But this is the time to stand up and be counted – literally. The currency of a populist revolt is numbers in the street. Let’s show our anger where it will be seen. And let us take heart from the words of Franklin Roosevelt who during his first inaugural address in 1933, led the first occupation of Wall Street: 

Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True, they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money.
Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored conditions. They know only the rules of a generation of self-seekers.
They have no vision, and when there is no vision the people perish.
The money changers have fled their high seats in the temple of our civilization. We may now restore that temple to the ancient truths.
The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
Happiness lies not in the mere possession of money, it lies in the joy of achievement, in the thrill of creative effort.
The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow-men.
Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be values only by the standards of pride of place and personal profit, and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing.

Les Leopold is the executive director of the Labor Institute and Public Health Institute in New York, and author of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It (Chelsea Green, 2009).

© 2011 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/152811/

Elizabeth Warren - Massachusetts Senate Candidate - On Class Warfare

Courtesy of Rumproast.com

I hear all this, you know, “Well, this is class warfare, this is whatever.”—No!

There is nobody in this country who got rich on his own. Nobody.

You built a factory out there—good for you! But I want to be clear.

You moved your goods to market on the roads the rest of us paid for.

You hired workers the rest of us paid to educate.

You were safe in your factory because of police forces and fire forces that the rest of us paid for.

You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.

But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

Class Warfare Index

46.2 million          Number of people living in poverty in the United States

15.1                      Per cent of Americans living in poverty

6.7                        Per cent of Americans living in “deep poverty” less than 50% of the poverty level

0                           Number of times poverty was mentioned by either candidate in the 2008 Presidential Debates.

24                         Per cent of total US wealth held by top 1%

$46,495                Median US income in 2009

7.1%                     Decline in median US income since 1999

9.9                        Per cent of Caucasian Americans living in poverty

25                         Per cent of African Americans living in poverty

50 milion              Number of people in US without health insurance

33                         Per cent of Hispanic Americans without health insurance

11.1                      Per cent of Americans living in poverty in 1973, after the “War on Poverty”

15.2                      Per cent of Americans living in poverty, in 1983, three years into Reaganomics

$22,050                Federal poverty level for a family of four

$44,100                Income needed to provide basic needs for a family of four

15 million             Number of US children living in poverty

21                        Per cent of children living in US in poverty

36                        Per cent of all people living in poverty who are children

64                        Per cent of total national wealth controlled by top 5%

87                        Per cent of national wealth controlled by top 20%

13                        Per cent of national wealth controlled by bottom 80% of population

38                        Per cent of Bush tax cuts that went to top 1%

1                          Percent of Bush tax cuts received by bottom 20% of population

$520,000             Average Bush-era tax cut for top .01% of households

$2.6 trillion          Total increase in federal deficit attributed to first ten years of Bush tax cuts

$5 trillion             Cost of extending Bush tax cuts for next decade

$400 Billion         Total amount spent on interest to finance first ten years of Bush tax cuts

-7.4%                   Decrease in real family income for bottom 20% of families between 1979 and 2009

+72.2%                Increase in real family income enjoyed by the top 5% of families between 1979 and 2009

+116%                 Increase in real family income enjoyed by bottom 20% of families between 1947 and1979

+86%                   Increase in real family income enjoyed by top 5% of families between 1947-1979

1980                    Year Reaganomics and trickle down economics began impacting federal tax codes

236                      Number of Congressional Republicans branding Obama’s efforts to fairly tax the wealthiest Americans as “class warfare”

The No (or not so many) Jobs Jobs Bill

In his speech to the joint session of Congress on September 8, President Obama proposed the American Jobs Act,  designed to be his answer to the stalled economy and high unemployment.  The $447 billion bill relies heavily on tax cuts as a way of stimulating the economy by putting more money in the hands of consumers and encouraging employers to create jobs.  This, in spite of the fact that there is no empirical, historical evidence that tax cuts create jobs.  In reality if you follow the arc of tax cuts starting with Reaganomics and the small government fervor of the 1980’s, through the Bush-error tax cuts, in reality it would appear that tax cuts have a negative impact on the economy.

The costliest cut proposed is a fifty per cent reduction in the payroll tax.  By calling this a payroll tax cut,  the President is obfuscating the fact that in realty it is a Social Security payroll tax cut.  The President is proposing that the 6.2% Social Security payroll tax paid by employers and employees be halved to 3.1% costing an estimated $240 billion.  The idea behind this cut is to put more money into the economy so that small businesses can hire new workers and current workers will have more cash to spend, thereby stimulating the economy.  The average worker will realize a payroll tax reduction of approximately $1,500.  While this is not an insignificant amount to put into someone’s pocket, it will do little to change an individual’s economic circumstances.  First, $1,500 translates to less than $30 per week or $120 per month.  Most people with an extra $120 per month will use it towards offsetting the high gasoline costs, paying down their credit card bills or helping to pay their mortgage or rent.  Not one of these options contributes to creating one single new job.  Instead it will increase the demand for gasoline thereby helping to maintain high gas prices or go directly to the banks and help fund even larger bonuses for executives.

The bigger issue that the President does not address, and which has been entirely ignored by the media, is that this $240 billion cut will further strangle the Social Security trust fund.  This is a Democratic president hammering another nail into the coffin of Social Security.  Even the Republicans have criticized their leading presidential contender for suggesting that Social Security would need to be done away with.  How can the President justify reducing the income of Social Security by $240 billion while it is agreed by all analysts that the trust fund needs to be shored up to provide for the long-term viability of the program and ensuring benefits for today’s workers?  The system requires additional inputs of cash, not less.  In 1955 there were 8.6 workers paying into the system for each retiree receiving benefits, while in 2010 there were less than three.  As the baby boom generation marches toward retirement, this ratio will continue to decrease.  Additionally, as older workers are laid off and are unable to find new jobs, they will file for Social Security earlier creating more of a drain on the system.

According to the President’s proposal a quarter of a trillion dollars will be taken from the system at a time when we should be looking at ways to increase the money going into the Social security trust fund, not reducing it.  While this cut will have little or no impact on job creation, it will move the crisis of Social Security up a number of years resulting in cuts to benefits and raising the retirement age.  While the President seeks to solve one crisis, he is exacerbating another.

The president has also proposed tax credits to companies that hire certain unemployed individuals.  Companies hiring a person who has been unemployed for six months or more can qualify for a $4,000 tax credit and companies hiring an unemployed veteran  can qualify for a $9,600 tax credit.  Just like tax cuts, tax credits do not create jobs.  All these credits will do is determine who gets hired when a  job is available.  The tax credits will flow to companies that would be offering jobs anyway.  These will not necessarily be new jobs.  In order for a company to create a job, there needs to be work .  If the economy remains stagnant, and consumer demand remains low, then regardless of tax credits, new jobs will not be created.  So these tax credits will not result in any net increase in employment.  And the President does not address what happens to those jobs once the tax credit expires.  Is he just creating a vicious cycle of short-term employment? 

By referring to his American Jobs Act as a bi-partisan bill that includes both Republican and Democratic initiatives, the president has proposed a bill designed to win Republican support through its heavy reliance on tax cuts.  These tax cuts make up approximately 59% of the cost of the bill, with only 41% targeting government spending that will actually impact unemployment.  There is a simple fact of life, government spending on big projects, such as those proposed only modestly in this bill – modernizing up to 35,000 schools and infrastructure investments – and not tax cuts put people back to work.  Employed people spend money and pay taxes, and that is what impacts a recession.  The only institution large enough and broad enough to help the country spend its way out of this economic slump is the United States Government.

It does not take Nostradamus to predict the outcome of this legislative process.  The Republican controlled House will support portions of the bill, those that focus on tax cuts, while defeating the spending portions of the bill including saving the jobs of teachers, cops and firefighters, extending unemployment and providing low cost mortgage refinancing.  Furthermore, the Republicans in the House will defeat any attempt by the President to offset the cost of this bill through closing tax loopholes for big business and raising taxes on the wealthiest Americans.  Once again the Republicans will show that they are the shills of the truly wealthy and of corporate America, and once again the Democrats will show that they have no backbone as a party.  The goal of the Republicans is to stop the President from a second term in office, and nothing guarantees that more than a sagging economy. 

Don’t Tax Me But Give Me My Government Services

It seems as though everybody resents paying taxes but yet we all still want the government to provide services when we need or want them. Without taxes our roads would be impassable, bridges would be unsafe, emergency services would be almost nonexistent, there would be no public education, police or fire. In short, we would be living in Somalia, a country without a functioning government. While the United States continues its slide downhill toward a third world economy, the only institution large enough to prevent that from happening is the government. That is before the vast majority of Republicans in the House and Senate signed a no new tax pledge, binding them to oppose any and all efforts to increase the marginal income tax rate for individuals and business; and TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.

The author of this pledge is Grover Norquist, the head of Americans for Tax Reform. While tax reform itself is not a bad thing, that is not what Grover Norquist or this pledge is about. In his own words, Norquist has very clearly laid out his agenda when he stated: My goal is to cut government in half in twenty-five years, to get it down to the size where we can drown it in the bathtub. It is not about tax fairness or even about tax reform, but it is about reducing government and returning to a strict unregulated, untaxed free market economy that will leave millions of Americans behind.

Republicans make a show of shrinking government, while decrying big government, but have no qualms about funneling its largesse to the wealthiest among us with lavish tax cuts. In fact, those that rail the loudest against big government and taxes are the greatest beneficiaries. One example is in the imbalance of federal taxes paid by the citizens of the states. Currently thirty states are represented by Republican governors. Twenty-two of these receive more in federal tax expenditures than they pay in. On the contrary only nine states represented by a Democratic governor receive more than they pay in federal taxes.

One of those states living off the fat of the federal government is Virginia, currently represented in Congress by Eric Cantor, the majority leader of the House. Not only is Cong. Cantor a signer of the no tax pledge but he has taken the anti-tax mania to newer and more absurd heights. In the wake of Hurricane Irene, Cantor has called for all new spending in federal disaster assistance to be offset by cuts elsewhere in the federal budget. This at the same time that FEMA is being starved by budget cuts forcing it to reduce assistance to tornado ravaged parts of Missouri, in order to provide disaster assistance to areas ravaged by Irene. (it is worth noting here that Missouri is represented by a Democratic Governor)

Back in Virginia however, Mr. Cantor and the entire Virginia Congressional delegation has signed a letter asking for federal emergency assistance. So Mr. Cantor, like so many of his Republican colleagues has no trouble trying to have it both ways. Fight new taxes, force cutbacks in services that he does not believe in, while enjoying a greater return on federal taxes paid by his state; and, at the same time requesting additional federal funds in the form of disaster relief. It seems that Cong. Cantor’s plan is to force shrinkage of the federal government in all states but his own. But he is not the only one, in addition to Virginia, Republican governors in New Jersey, Pennsylvania and Georgia are also seeking federal disaster assistance. Two of these states, Pennsylvania and Georgia, are on the list of states receiving more in federal funds than they pay. If these Republicans were true to their so-called ideals then they should use the excess funds that they receive from the federal government to pay for their disaster relief.

Eric Cantor Wants 'Matching Spending Cuts' on Hurricane Irene Victim Assistance Funds

However, if you are going to be hypocritical, then why not go all out and do it Texas size. Rick Perry, Governor of Texas and leading Republican presidential candidate, said this about taxes in an interview with James Robinson for Life TV: I think we are going through these difficult economic times for a purpose, to bring us back to the biblical principals of you know, you don’t spend all the money. You work hard for those six years and you put up that seventh year in the warehouse to take you through the hard times and not spending all of our money. Not asking Pharoah to give everything to everybody and to take care of folks because at the end of the day it’s slavery and we become slaves to government. Watch it here.

Perhaps Mr. Perry believes it is only appropriate for others to go back to those “biblical principles” but not for him. In his advocating for the federal government to provide federal disaster aid to his state to cope with the forest fires he stated: I think we have had 9,000 separate fires in the state of Texas. The federal government has only helped us with twenty-five of then, that’s inappropriate.

It would seem that what is really inappropriate here is that Governor Perry does not follow his own biblical interpretations. If Mr. Perry had saved in the seventh year to take his state through the hard times, as he preaches, then there would be no need to request federal disaster aid. It would appear that following his preaching on the bible and government is his way of telling others how to live. Another take on “do as I say, but not as I do.”

While I’m talking about Rick Perry and biblical interpretations I just can’t sign off without mentioning Michele Bachman and her evangelical preaching’s. Instead of seeing the recent natural disasters as one result of global climate change, Ms Bachman sees it as a message from above not to take better care of Mother Earth but as an economic message to the people of the United States when she says I don’t know how much God has to do get the attention of the politicians. We’ve had an earthquake, we’ve had a hurricane. He said “Are you listening to me here?” Curiously, she left out the runaway forest fires and the drought in Texas. It seems that God only gives messages when he disagrees with Democratic politicians.

From The Mouth of a Billionaire

I'm not one that you would usually find quoting Warren Buffet, but after reading his opinion piece in the August 15th edition of the New York Times, I find that anyone with his wealth and influence, that makes sense in these senseless times, deserves quoting. So for the benefit of readers who do not read or get the New York times I am quoting his piece in its entirety, it is definitely worth the time to read. Of course it is not perfect, he advocates for continuing the so-called "payroll tax cut," when in reality it is a reduction in the Social Security tax. Continuing this will only drive the nail further into the coffin of Social Security as it only serves to starve it of much needed revenues. This "payroll tax" cut was proposed by President Obama as a way of throwing a bone to the middle class while he caved in on tax cuts to the rich. But the naked truth is, tax cuts do not help in a recession they never have. Just look at the Bush error tax cuts that preceded the current recession.

In addition, Mr Buffet ignores other contributors to the current financial crisis, much as all the Republican presidential candidates do. In the rush to blame the current administration for the crisis, those high-minded Republicans on the campaign trail forget about George Bush's two unfunded wars and his unfunded Medicare prescription program. These two, along with his tax cuts for the rich, formed a perfect economic storm that has brought the country to the brink of default.

But with that in mind, Buffet's op-ed piece is a good read, one that our politicians should take note of and act upon if they are sincere about solving the nation's financial crisis.

Stop Coddling the Super-Rich

By WARREN E. BUFFETT

Omaha

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

excerpted from the New York Times, August 15, 2011

Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway

The New Two Party Political System

The United States, unlike parliamentary democracies, has primarily been a two-party political system, the Republicans and Democrats. In post-industrial America the ideological leanings of these two parties have been quite different. The Republican Party has been the champion of free market capitalism with minimal government intervention in the economy. In the post-Reagan years it has stood for lower taxes and leaner government, even while Republican administrations were racking up record budget deficits.

The Democrats’ core belief, on the other hand, was that there are problems and issues that only government is large enough to tackle and that it is the role of government to regulate the economy so corporations do not do irreparable harm in pursuit of profits. While the Republicans were the party of Ronald Reagan’s philosophy of small government with minimal regulations on corporations and the “trickle down” theory of economics, the Democrats were the party of FDR’s New Deal and Lyndon Johnson’s War on Poverty. The core value of the Democratic Party was the belief in the legitimate role of government to provide for the welfare of its citizens, and that government intervention is needed to regulate the economic vagaries that have negative impact on the country and its citizens.

However, as a result of the recent debate and vote on extending the debt ceiling we have a new two-party configuration – the Republican Party and the Tea Part – with the moribund Democrats as an inconsequential third party. With only 60 members out of 435 members of the House of Representatives, the Tea Party Caucus, representing only 13.7% of the House, was able to hold the debt ceiling hostage to their demands. President Obama conceded to the demands of this small minority party, whose Congressional members represent only 38.8 million people in their congressional districts, or a mere 8% of the US population. His capitulation in this debate signaled the end of the Democratic Party as an entity with any real influence.

In every encounter with the Tea Party and their Republican counterparts, since the 2010 mid-term election, the President has abandoned the core values of the Democratic Party, rendering it to footnote status. In December the President agreed to an extension of the Bush error tax cuts for the wealthiest Americans, adding $32 billion to the deficit annually. He did this without winning any concessions, while backtracking on a campaign promise to end these destructive tax breaks for the wealthy that needlessly add to the debt without creating significant economic activity.

Now, in his most recent capitulation to this minority party, Obama has agreed to spending cuts without revenue generation. This Democratic President, has come down squarely on the side of those most privileged among us. To pay for his extension of tax cuts for the wealthy and his inability to close tax loopholes, providing $100 billion annually in tax subsidies to profitable corporations, President Obama has agreed to an immediate $1.4 trillion in cuts, bringing federal spending to its lowest since the Dwight Eisenhower administration. Only under a Democratic President could we bring the country back to the same spending level that existed before the civil rights movement and before the War on Poverty.

Without core values that set it apart form its rivals, a political party ceases to exist. This President has abandoned the core values of the Democratic Party ceding power to the Republicans and the small but now emboldened Tea Party Caucus. While referring to the debt ceiling deal as a compromise, it is evident that the President does not understand the meaning of compromise. For an agreement to be a compromise, both sides must give and get something. However, in this so-called compromise, the Tea Party and their Republican counterparts gave nothing and got everything, while the Democrats gave everything and got nothing. Hardly a compromise.

While we continue to shower the wealthiest among us with tax breaks and subsidies and impose cuts on the most vulnerable among us to pay for this largesse heaped on the wealthy, we also mourn the loss of the party of FDR, JFK ad LBJ. Seventy years of social welfare programming, that has lifted millions out of poverty and extended a lifeline to others is now on the chopping block. With President Obama leading the retreat, the Democrats have not only turned their backs on their core constituency, but have blocked the hopes and dreams of millions of low income and working Americans for a better life. The failure of the Democrats and this President to stand up for the American people can only signal the Party's death knell. President Obama has committed the most egregious political sin, raising the hopes of millions of people and then doing little to help realize those hopes.

How many of the millions of previously disenfranchised young people and people of color who registered and voted for the first time, just to cast a vote for Mr. Obama, will stay home disillusioned in 2012? It is too late to win them back, the damage has been done.

Tax-Exempt For-Profits Avoid Paying their Share

Excerpted from the Nonprofit Quarterly

JUNE 29, 2011
RICK COHEN

Let’s see if we get this right. Nonprofits are leeches on society, they don’t pay taxes, they take our money (your money) and fail to pay their own way, they pay their executives exorbitantly, they spend too much on administrative costs, and, oh yes . . . they don’t pay taxes. This is worth saying twice, since taxes have become the prime mover of politics in recent years.

The argument is so tiresome, so monotonous, and so ill founded. It’s time to correct the record, not in tabulating how much taxes nonprofits actually pay (and they do: as employers paying matching employees’ FICA, as service providers frequently paying registration and licensing fees, as property owners paying user fees for water and sewerage, etc.), but in terms of how many tax-paying entities don’t pay the taxes they are supposed to pay or receive tax rebates.

Nonprofits are hardly the only tax-exempt nongovernmental entities in the U.S. By happenstance, hook, and crook, for-profit corporations frequently don’t pay taxes, get legislative bodies to exempt them from taxes, and they often pay their executives at levels that leave entire nonprofit budgets in the dust.

Compared to the relatively small number of nonprofits with revenues and real estate, the for-profit sector’s multiple navigation strategies to avoid federal, state, and local taxes leads to a basic question – which sector is the real tax-exempt sector?

If you know the way, you don’t have to pay—at the federal level

The crushing burden of federal taxes seems to leave many corporations much less crushed than nonprofits being hit with Unrelated Business Income Taxes (UBITs):

. This past March, Senator Bernie Sanders (I-VT) provided a list of corporate tax evaders, several of which are among the nonprofit sector’s most trustworthy corporate philanthropic benefactors:

1) Exxon Mobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings.

2) Bank of America received a $1.9 billion tax refund from the IRS last year, although it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion.

3) Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS.

4) Chevron received a $19 million refund from the IRS last year after it made $10 billion in profits in 2009.

5) Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS last year.

6) Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction.

7) Goldman Sachs in 2008 only paid 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion from the Federal Reserve and U.S. Treasury Department.

8) Citigroup last year made more than $4 billion in profits but paid no federal income taxes. It received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury.

9) ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2007 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction.

10) Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent.

Business Insidermagazine added additional big corporations, not necessarily those with the name recognition of those on the Sanders list, that are paying next to no federal taxes:

· NextEra Energy: Pretax profits of $8.572 billion, effective tax rate of 1.74 percent

· Xcel Energy: Pretax profits of $4.334 billion, tax rate of 1.78 percent

· Amazon: Pretax profits of $3.512 billion, tax rate of 4.33 percent

· Host Hotels and Resorts: Profits of $1.116 billion, tax rate 3.05 percent

· TECO Energy: Profits of $1.62 billion, tax rate of 2.31 percent

Note that several of these corporations actually received tax rebates, putting their effective tax rates into the realm of negative percentages. In several cases, such as Exxon Mobil and Bank of America, their zero tax rates in 2009 were simply an extension of the lack of taxes they paid the previous year. In fact, many corporations over the years have managed to make their profits immune to taxation. A 2008 Government Accountability Office study found that more than half of U.S. companies doing business in the U.S. had paid no income taxes for at least one year between 1998 and 2005 and 42 percent had not paid taxes for at least two years.

If you don’t want to pay, ask permission not to play—corporations working the states

The appearance of Amazon on the list of mega-corporations that pay little or nothing is worth noting. Remember that many of these corporations that pay next to nothing to the federal government sometimes find themselves paying taxes to state governments – and they often don’t like it.

Some time ago, Amazon got huffy with the state of Texas – where corporations pay almost nothing even when they’re paying full taxes – because the state tried to hit Amazon with a sales tax bill. Amazon’s position was that the state had no right to tax e-commerce. Texas argued that Amazon’s big distribution center in Irving gave Amazon a physical presence in the state and thus triggered its eligibility to pay the sales tax. (Note that putative presidential candidate Rick Perry seemed to side with Amazon against the state comptroller, Susan Combs.) The law is clear: Retailers with a brick-and-mortar physical presence in the state have to collect sales taxes on sales to customers there, but no physical presence, no sales tax.

After initially threatening to shut down its Irving plant, Amazon cooked up a deal for the state. It would make a capital investment of $300 million in “five or six warehouse and distribution centers” in Texas in return for not having to charge customers sales tax for the following four-and-a-half years. The plan would generate 5,000 or 6,000 jobs. The numbers reported suggest that Amazon will save more in sales tax payments than it will invest in the facilities – and the centers are of course to be owned by Amazon, they aren’t gifts to the state.

This deal wasn’t just cooked up by Governor Perry and the Texas legislature. Amazon has negotiated these sales tax exemptions with other states as well. In South Carolina, Amazon has pledged to invest $125 million and create 2,000 jobs by 2013 in return for being exempted from collecting and paying sales taxes from customers. Amazon has a similar deal with Tennessee. It isn’t like Amazon is trying to balance off the sales tax against the high corporate tax rate in Texas. Texas doesn’t have a corporate tax at all.

In revenue-starved Michigan, Fannie Mae and Freddie Mac, two of the nation’s most profitable companies – until they led the Wall Street decline into recession – have never had to pay real estate transfer taxes on properties they have sold in the state. Though governmentally supported, the two mortgage behemoths are private for-profit corporations, though they invoke an ersatz nonprofit status on occasion as in Michigan. The treasurer of Oakland County, Mich., has hit the two GSEs with a bill for $12 million in real estate transfer fees, explaining, “Fannie and Freddie you quack like a duck (or a private corporate entity), so you better pay up.”

It is no surprise to most readers that states frequently offer corporations tax bargains or no tax bills at all if they will relocate their facilities. For example, just this month, Florida Governor Rick Scott wrote a letter to the Chicago Mercantile Exchange offering a neat tax package if the Exchange would move to the Sunshine State. Scott made the pitch after reading in the Wall Street Journalabout the Exchange’s frustration with the 8.9 percent rate in Illinois. Scott isn’t necessarily being partial to the Mercantile Exchange. He actually has proposed the elimination of all state corporate taxes, though the Florida legislature has yet to agree with the notion.

It would be hard to imagine that Fannie and Freddie needed a free pass from Michigan for their real estate transfers, the Chicago Mercantile Exchange a cut rate bargain on corporate taxes in Illinois, or Amazon a sales tax collection break in Texas. But that’s the way the game is played. If a corporation can find a loophole for sidestepping a potential tax bill, they’ll jump at the chance.

If you don’t pay property taxes, you might be a for-profit corporation—abatements for businesses and developers

This isn’t new stuff, to be sure. For what seems like eons, states and localities have been giving away the store to big corporations that have somewhat more robust tax-paying power than nonprofits. In most cases, governments prefer giving corporations tax subsidies as opposed to direct subsidies, because in the arcana of state and local budgets, property tax abatements and exemptions don’t show up as a negative.

The diminutive payments corporations make pursuant to abatements show up as net positives – money accreting to tax coffers that in theory wouldn’t have otherwise been show up as a positive, even though they are less than what the corporations would have paid had they paid normal property taxes – like your and I do.

Ostensibly the quid pro quo, like Amazon’s offer to Texas and South Carolina, is job creation, but the abatements rarely achieve the results. The truly famous example is Pennsylvania’s offer of $70 million in subsidies to a European auto manufacturer to create a manufacturing plant in the southwestern part of the state to create 10,000 jobs; its highest employment ever was 6,000 and the plant closed within a decade. A couple of decades later, Alabama gave another European auto manufacturer $253 million in subsidies to create 1,500 jobs, a cost per job of roughly $169,000 (PDF).

There are often multiple kinds of tax abatements offered to business – straight tax abatement deals, abatements tied to enterprise zones, redevelopment project incentives, etc. Few states even know the cumulative value of what they offer or what they’ve given away.

· A report on tax abatements awarded by governments in Tennessee confessed that it couldn’t even identify all of the entities pitching abatements, but based on admittedly incomplete data, it concluded that governments had given away $105.2 million in 2001 and $104.3 million in 2002 in tax abatements to private entities leasing public property for commercial purposes (PDF). No cost-benefit analysis was available to determine what was achieved through these economic development agreements, much less whether the cost was worth the benefit. A 2010 study by the New Jersey State Comptroller on tax abatements there didn’t even bother to attempt a calculation of the total property tax giveaway to entities that were supposed to be paying property taxes (PDF).

· Do you think Goldman Sachs is going to pack up and leave the New York metropolitan area? New York and New Jersey must believe it and have offered the immensely profitable firm lots of abatements for its office towers in Manhattan and Jersey City. New York City gave Goldman $200 million in tax breaks for is 43-floor office tower in Lower Manhattan and then somehow tossed the firm another $140 million in property tax breaks. Across the Hudson River, Goldman built a 42-story complex with the incentive of $160 million in tax incentives and has negotiated new abatements for a second yet-to-be-built office building. Is Goldman hard up for cash? Not with profits per employee of $1.4 million in 2009, twice the 2008 level, not with net earnings (profit) of $8.35 billion for calendar year 2010 (PDF), a little down from 2009’s $13.39 billion.

· A 2004 study by Good Jobs First examined the public subsidies (not just tax abatements, but also free or significantly discounted land, corporate tax credits, and more) supporting 84 of 91 Wal-Mart centers and stores, with an estimated governmental giveaway to the retail behemoth of $624 million (PDF).

· Boeing has been a mainstay of Seattle’s corporate landscape forever, but in 2001, the corporation announced it was moving its corporate headquarters out of Seattle and induced a property tax cutting competition among Chicago, Denver, and Dallas/Fort Worth. The local and state government generosity was noteworthy, with Chicago’s package offering the most to the company, a package of $56 million in subsidies for only 500 jobs. That shook up Seattle officials, so that when Boeing announced its plans to find a new location for manufacturing its 7E7 “Dreamliner” passenger jet, the state put together a $3.2 billion/20 year subsidy package, basically freeing Boeing of most local taxes.

· A 2009 study by the state of Nevada yielded some information on the sales and use tax exemptions granted the Nevada Commission on Economic Development (almost doubling from $18.9 million in fiscal year 2007 to $34.8 million in fiscal year 2008 – for 22 businesses (PDF)).

The reality about corporate tax breaks at the state and local level is troubling from a public policy perspective:

· State governments and localities don’t even know how much they’re giving away. There is no accounting available to even the officials who are supposed to monitor what they’re giving corporations.

· The abatements and exemptions offered to corporations are by choice, not by law. Legislatures and city councils are choosing to give specific corporations specific tax breaks.

· The purported quid pro quos offered by businesses for their abatements are hard if not in most cases impossible to enforce, clawback provisions or otherwise.

· For many corporations, the expectation of abatements is automatic. It isn’t that they will bolt from Manhattan to Omaha if they don’t get abatements. Both local governments and corporations know this, but the abatements are almost automatic anyhow.

· Businesses actually employ consultants—lobbyists—who are sometimes paid a percentage of the tax savings. Securing tax abatements for businesses is now an industry.

· Local government officials who know that the corporations can well afford to pay their tax bills are whipsawed between demanding corporations on one side and skittish legislatures on the other. For many officials, it isn’t a matter of agreeing to or rejecting an abatement application, but trying to negotiate the best possible payment from the corporation possible.

· Corporations sometimes come back for additional, layered abatements, even when projects fail, so that the projected subsidy cost of a project at the front end is hardly the true total subsidy cost at project completion.

It is difficult to imagine that the public, no matter what taxpayers think of what nonprofits do or do not pay as property taxes (in the form of payments in lieu of taxes or user fees), thinks that museums, hospitals, universities, and other nonprofit facilities are positive contributions to their communities. In contrast, read the conclusion of a 2007 report on corporate tax credits and tax abatements in Connecticut:

“We were unable to determine the aggregate jobs associated with firms that claimed tax credits and/or abatements during the study period…DECD’s analysis concludes that several Connecticut tax credit, property tax abatement and exemption programs have negative or very limited positive impacts. Other programs have had little or no participation. (PDF)”

A critical report (PDF) on Jersey City’s tax abatements for developers and corporations concluded that “all that glitters is not gold.” The glitter is in the coffers of the corporations that are raking in tax abatements and other incentives without much impact on job creation or other concrete, measurable economic development activities.

Corporate executives earning more than entire nonprofits

The total revenues of most nonprofits are lower than the compensation packages for corporate executives. According to the AFL-CIO’s 2011 Executive Paywatch, the average annual compensation for CEOs of S&P 500 companies in 2010 was $11,358,445, with a base salary of over $1 million, a bonus of more than $250,000, stock awards of $3.8 million, and option awards of $2.4 million.

Compare those executive salaries to the entire annual revenues of public charities. Nine out of ten registered public charities (all 501(c)(3) nonprofits except for private foundations) and nine out of ten public charities filing 990s reported revenues of less than $1 million, according to the latest statistics compiled by the Urban Institute’s National Center for Charitable Statistics.

Overpaid nonprofit CEOs? It’s clear that the majority of nonprofits, not to mention their executive directors, are hardly raking in much money, even as state legislatures and city councils aim at nonprofits for tax-like revenues. The executives of the tax-exemptfor-profit corporations make more money than the bulk of entire nonprofit organizations generate as revenues to support their tax-exempt programs:

Exxon Mobil: In 2010, R. W. Tillerson’s total compensation as CEO was $28,952,558

Bank of America: Brian T. Moynihan’s 2010 compensation was $1,940,069

General Electric: Jeffrey R. Immelt’s total compensation in 2010 was $21,428,765

Chevron: J.S. Watson’s total compensation was $16,260,528

Boeing: In 2010, W. James McNerney Jr. received $19,740,023

Valero Energy: William R. Klesse’s total compensation was $11,103,385

Goldman Sachs: Lloyd Blankfein’s compensation was $14,116,423

Citigroup: Vikram Pandit earned $1 million

ConocoPhillips: James J. Mulva took in $17,932,895

Carnival Cruise Lines: Micky Arison’s total compensation was $7,097,709

Amazon: CEO Jeffrey Bezos’s total compensation in 2010 was $1,681,840

NextEra: In 2010, Lewis Hay III received $13,560,217

Xcel: Richard C. Kelly’s total compensation was $9,956,433

Maybe it’s obvious, but we’ll say it: The big corporate tax scofflaws, headed by CEOs with multi-million dollar compensation packages, are increasingly paying little or no taxes despite billions of dollars in profits. Why aren’t members of Congress, state legislatures, and municipal councils looking to the for-profit tax exempts to pay their fair share instead of trying to eke nickels and dimes out of the organizations that due to their 501(c)(3) status are truly supposed to be tax exempt? Something is awry with public policy decision-makers’ understanding of what the “nonprofit” actually means and it’s tiresome and monotonous.