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“Higher Profits, Smaller Paychecks”: Corporations Increasing Profits At The Expense Of Workers

Two cheers for the comeback of American manufacturing. Or maybe just one.

The manufacturing sector has experienced a modest renaissance since it hit bottom during the Great Recession. The number of manufacturing jobs is set to rise this year, as it has every year since 2010. Profits are soaring — in 2012, after-tax profits of manufacturing firms hit a record high of $289 billion. Share values have soared with them. The Standard & Poor’s 500 Industrials Index has risen 59 percent more than the overall 500-stock index since 2009, Bloomberg reported last month.

Wages, however, are falling. Although the average wage for all workers, adjusted for inflation, has declined by about 1 percent since May 2009, Bloomberg reported, it has declined by 3 percent for workers in the more-profitable-than- ever manufacturing sector.

Numbers like these explain the epic drama playing out in Washington’s Puget Sound region, from which Boeing, long the area’s dominant employer, has threatened to at least partially decamp. Several weeks ago, with the reluctant blessing of union leaders who feared the company might relocate production, Boeing presented its workers with an ultimatum: Either they had to agree that the new hires who would build the company’s new 777X passenger jetliner would have to work for 16 years, rather than the current norm of six, to bump up to full union scale, or Boeing would build the plane elsewhere. Instead of making roughly $28 an hour to build one of the world’s most sophisticated pieces of machinery, workers would make roughly $17 an hour, or less, until they’d put in a decade and a half on the job.

By a 2-to-1 margin, the workers rejected their leaders’ recommendation and voted down the offer. Boeing then initiated a bidding war to see how much in tax breaks it could wring from states that wanted the work. More than a half-dozen states have sent in bids, some with side agreements from local unions that members would work at reduced rates, some with no such agreements because unions barely exist in their states.

It’s not as if Boeing is a clothing manufacturer scrambling to meet the price competition of rivals that make their goods in Bangladesh. Boeing’s sole competitor in the large-scale passenger-plane market is Airbus, the European conglomerate whose workers’ wages are comparable to those in the United States. But Boeing has already located one major plant in South Carolina, where workers make about $10 an hour less than their Puget Sound counterparts. It’s through such moves, and the threat of further such changes, that U.S. manufacturers have increased their profits at the expense of their workers’ paychecks.

None of the workers at either end of Boeing’s pay scale makes anything like the federal minimum wage, but I suspect the anxiety instilled by these kinds of stories is one reason there is wide, and growing, support for raising the minimum wage. It takes no great imaginative leap to see a time in the not-too-distant future when the incomes of all but a fortunate, talented tenth of the U.S. workforce are reduced or held stagnant. Indeed, the median inflation-adjusted salary for American men is already lower today than it was in 1969. Tyler Cowen, a heterodox libertarian economist, has written that the U.S. economy is morphing into one in which 10 to 15 percent of the workforce will be wealthy and the remainder will resign themselves to making do with less. He foresees little likelihood that the eradication of the broad middle class will lead to a United States “torn by unrest.”

I am not sure that the docility of the American people can be so readily assumed. The adoption of minimum-wage increases and living-wage ordinances throughout increasingly liberal cities and blue states suggests that where workers have the capacity to rebalance the economy through legislation, they’ll do just that. With the near-elimination of unions from the private-sector economy, legislation remains the sole means available for workers to bargain for their fair share of their company’s revenue, particularly in sectors, such as retail, that can’t really relocate. That’s why the victories of those workers demonstrating at Wal-Mart and fast-food outlets have taken the form of legislated increases in local minimum wages, rather than resulting in union contracts.

The fight for higher minimum wages may be just the beginning of a long battle to rebalance the economy. If laws are not changed to enable workers to form unions without fear of being fired, the battle for higher median, not just minimum, wages will eventually be fought in the legislative arena as well. Profits that come at the expense of downwardly mobile workers may find little honor — or legislative support — in their own country.

 

By: Harol Meyerson, Opinion Writer, The Washington Post, December 13, 2013

December 14, 2013 Posted by | Corporations, Economic Inequality | , , , , , , , | Leave a comment

“Worse Than Patriots In Arms”: A Patriot Or A Profiteer, But You Can’t Be Both

This week, the three military contractors that do the most business with the Pentagon announced their quarterly profits for 2012. Their profits continue to grow while they push Washington, D.C. to protect their budgets at the expense of the rest of us.

Here’s the breakdown so far for this year:

This week’s announcement raises a fundamental question: Should people and companies be allowed to make huge profits from war? Even raising this question in today’s environment may seem trite, but we used to have different answers than those that prevail in modern-day Washington, D.C.

“I don’t want to see a single war millionaire created in the United States as a result of this world disaster.” President Franklin D. Roosevelt, May 22, 1940.

“Worse than traitors in arms are the men who pretend loyalty to the flag, feast and fatten on the misfortunes of the Nation while patriotic blood is crimsoning the plains of the South and their countrymen mouldering the dust.” –President Abraham Lincoln.

This last quote is particularly relevant to this week’s profit announcements. Lincoln referred to war profiteers making money by cheating the Union Army. Outrage at war profiteering during this period led to the passage of “Lincoln’s Law,” officially known as the False Claims Act. The False Claims Act is the very same law that two of the companies listed above, Lockheed Martin and Boeing, violated through price-fixing and double-billing the taxpayer, leading to their having to pay roughly $20 million in the first quarter of 2012 to settle suits brought by the U.S. government.

During Roosevelt’s time, the idea of a single contractor company making almost a billion dollars worth of profit in three months would have received short shrift. As Roosevelt’s quote above shows, the idea of people profiting from war’s “disaster” disgusted him, and during his presidency the Truman Committee relentlessly investigated and exposed war profiteers. The closest analogy in our time would be the Committee on Wartime Contracting in Iraq and Afghanistan, which found that up to $60 billion (as of September 2011) was lost to waste and fraud in military contracting in those conflicts.

And yet, despite this historical lack of patience for war profiteering, and despite the current record showing gross misconduct and waste, the U.S. government keeps shoveling taxpayer money at these huge corporations. Could it be that the $5 million in campaign donations and $32 million in lobbying dollars so far this election cycle from the military contractors keep Congress intentionally ignorant of the problem?

President George Washington knew a few things about war profiteers, and he didn’t mince words:

“There is such a thirst for gain [among military suppliers]…that it is enough to make one curse their own Species, for possessing so little virtue and patriotism.”

As long as we continue to allow the profit motive to play a role in America’s war, virtue and patriotism–to say nothing of peace–will continue to be in short supply.

 

By: Robert Greenwald, Co-Authored by Derrick Crowe, AlterNet, April 27, 2012

April 28, 2012 Posted by | Congress | , , , , , , , | Leave a comment

“Territorial Tax System”: CEO’s Of Tax Dodging Corporations Push Congress To Cut Corporate Tax Rates

Several corporate CEOs representing the Business Roundtable, a lobbying group, were on Capitol Hill today to unveil a set of measures that they claim will boost the economy. Not surprisingly, some of the high-profile items are a cut in the corporate tax rateand shifting to what’s known as a territorial tax system:

Fresh out of a meeting with members of the Blue Dog Coalition, dozens of CEOs in town for a series of Business Roundtable policy and lobbying meetings today unveiled proposals to boost the economy.

The plan, billed as “Taking Action for America,” calls for a balanced federal budget, a reform of federal regulations and a lower corporate tax rate based on a territorial tax system, among others.

A territorial system, as well as cutting the corporate tax rate without raising more corporate tax revenue, are both misguided proposals. But the interesting thing about these particular CEOs pushing this particular policy prescription is that several of them already run corporations that pay little to nothing in taxes.

For instance, Boeing CEO Jim McNerny is part of the group calling for corporate tax cuts, despite the fact that his company has a negative federal tax rate for the last decade. Only twice in the last ten years has Boeing had federal tax liability in a given year, and between 2008 and 2010, the company made $9 billion in profits without paying any federal corporate income tax.

Andrew Liveris, president and CEO of the Dow Chemical, also joined the lobbying party, even though his company received nearly half a billion dollars in tax refunds in 2010. Proctor & Gamble’s CEO also participated, while heading a company very fond of exploiting loopholes to avoid taxes.

Corporate tax rates are already at a 40 year low. As billionaire investor Warren Buffett explained, “it is a myth that American corporations are paying 35 percent or anything like it…Corporate taxes are not strangling American competitiveness.” Yet corporate CEOs whose companies already pay literally nothing think driving rates down further is the answer to boosting the economy.

 

By: Pat Garofalo, Think Progress, March 7, 2012

March 8, 2012 Posted by | Corporations, Taxes | , , , , , , , | Leave a comment

To Fix The Budget Deficit, Raise Corporate Taxes

Washington is a town currently gripped by deficit hysteria. Various commissions and congressional “gangs” have formed (and broken up) with the goal of crafting a plan to bring the nation’s budget into balance. Even the media has been sucked into this vortex, dedicating far more of its time to covering the deficit than other economic issues, such as unemployment.

At the same time, both parties seem to agree that the nation’s corporate tax code needs to be reformed. President Obama and House Budget Committee Chairman Paul Ryan each dedicated a portion of their respective budget plans to overhauling the federal corporate income tax, which is high on paper, but so riddled with loopholes, deductions, and outright giveaways that few corporations pay the full statutory rate (and several corporations pay no corporate income tax at all).

This, then, should be an excellent opportunity to kill the proverbial two birds with one stone: cleaning up the corporate tax code, lowering the corporate tax rate, and still raising more revenue that can be put towards deficit reduction.

But no.

Despite all the hyperventilating over the deficit, both Republicans and Democrats have said that they want corporate tax reform to be revenue neutral, meaning no more or less revenue will be raised by the new system than was raised by the old. President Obama and Treasury Secretary Tim Geithner have each extolled the virtues of deficit-neutral corporate tax reform. But if this is actually the road that’s taken, it will constitute a colossal missed opportunity.

At the moment, corporate tax revenue has plunged to historic lows. In 1960, the corporate income tax provided more than 23 percent of federal revenue; the Office of Management and Budget estimates that it will provide less than 10 percent this year.

During the 1960s, the United States consistently raised nearly 4 percent of GDP in corporate revenue. During the 1970s, the total was still above 2.5 percent of GDP. Now, the U.S. raises less than 1.5 percent of GDP from the corporate income tax. As the Congressional Research Service put it, “Despite concerns expressed about the size of the corporate tax rate, current corporate taxes are extremely low by historical standards.”

The United States effective corporate tax rate is also low by international standards (though the 35 percent statutory rate is the second highest in the world). There are plenty of reasons for this drop, but chief among them is the proliferation of loopholes and credits clogging up the corporate tax code (alongside the growing use of offshore tax havens and the ability of corporations to defer taxes on offshore profits indefinitely).

Huge corporations, such as ExxonMobil, have recently had years where they paid literally nothing to the U.S. Treasury, despite making huge profits. The New York Times made waves by finding that General Electric paid no federal income tax last year, instead pocketing hundreds of millions of dollars in tax benefits. Mega-manufacturer Boeing has done the same, paying no federal taxes in 2009 while collecting $132 million in tax benefits. Google last year had a 2.4 percent effective tax rate, while California-based Broadcom’s rate was just 1.4 percent, far below the rate that the average American pays.

The Treasury Department estimated in 2007 that corporate tax preferences cost $1.2 trillion in lost revenue over a decade. So there is ample room to remove credits and deductions (like those that benefit, amongst others, hugely profitable oil companies and agribusinesses), lower the statutory rate, while still bringing in more revenue. Some companies would see their taxes go up, but others would see their tax bills drop, and the corporate tax code would be more fair, efficient, and competitive, while ensuring that all corporations pay their fair share.

As the Center on Budget and Policy Priorities put it, “corporate tax reform is a solid candidate to make a contribution to fiscal improvement … Taking a major revenue source off the table for deficit reduction at the outset would be ill-advised.” Indeed, with corporate profits skyrocketing—up 81 percent over a year ago—and corporations sitting on trillions in cash reserves, there is no reason that corporate tax reform should be done in a way that is deficit neutral, besides the fact that raising more revenue will be politically difficult, as corporations will likely throw their considerable lobbying weight against such a move. But in the end, failing to raise additional corporate tax revenue will simply shift more of the deficit reduction burden onto a middle-class already battered by the Great Recession.

By: Pat Garofalo, U. S. News and World Report, May 25, 2011

May 25, 2011 Posted by | Big Business, Budget, Class Warfare, Congress, Conservatives, Corporations, Deficits, Democrats, Economy, GOP, Government, Ideologues, Ideology, Income Gap, Lawmakers, Media, Middle Class, Politics, Press, Pundits, Regulations, Republicans, Tax Credits, Tax Evasion, Tax Loopholes, Taxes, Unemployed, Unemployment, Wealthy | , , , , , , , , , , , , , , , , , | Leave a comment

Forget The Rich: Tax The Poor And Middle Class

Nothing is certain but death and taxes, it used to be said, but in the madcap times we live in, even they’re up for grabs.

No matter what proof the White House provides that Osama bin Laden indeed has had his bucket kicked — and at this point even al Qaeda admits he’s dead — there still will be uncertainty. Whether they ever release those damned photos or not, a lunatic few will continue to insist that Osama’s alive and well and running a Papa John’s Pizza in Marrakesh.

As for taxes, having to pay them is no longer a sure thing either, especially if you’re a corporate giant like General Electric, with a thousand employees in its tax department, skilled in creative accounting. You’ll recall recent reports that although GE made profits last year of $5.1 billion in the United States and $14.2 billion worldwide they would pay not a penny of federal income tax. Chalk it up to billions of dollars of losses at GE Capital during the financial meltdown and a government tax break that allows companies to avoid paying US taxes on profits made overseas while “actively financing” different kinds of deals.

It gets worse. In 2009, Exxon-Mobil didn’t pay any taxes either, and last year, they had worldwide profits of $30.46 billion. Neither did Bank of America or Chevron or Boeing. According to a report last week from the office of the New York City Public Advocate, in 2009, the five companies, including GE, received a total of $3.7 billion in federal tax benefits.

As The New York Times‘ David Kocieniewski reported in March, “Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less… Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.”

What’s greasing the wheels for these advantages is, hold on to your hats, cash. Over the last decade, according to the NYC public advocate’s report, those same five companies — GE, Exxon-Mobil, Bank of America, Chevron and Boeing — gave more than $43.1 million to political campaigns. During the 2009-2010 election cycle, the five spent a combined $7.86 million in campaign contributions, a 7 percent jump over their 2007-2008 political spending.

“These tax breaks were put in place to promote growth and create jobs, not bankroll the political causes of corporate executives,” Public Advocate Bill de Blasio said. “… No company that can afford to spend millions of dollars to influence our elections should be pleading poverty come tax time.”

And by the way, those campaign cash figures don’t even include all the money those companies funneled into the 2010 campaigns via trade associations and tax-exempt non-profits. Thanks to the Supreme Court Citizens United decision, we don’t know the numbers because, as per the court, the corporate biggies don’t have to tell us. Imagine them sticking out their tongues and wiggling their fingers in their ears and you have a pretty good idea of their official position on this.

Meanwhile, last week Republicans like Utah’s Orrin Hatch, ranking member of the US Senate Finance Committee, grabbed hold of an analysis by Congress’ nonpartisan Joint Committee on Taxation and wrestled it to the ground. The brief memorandum reported that in the 2009 tax year 51 percent of all American taxpayers had zero tax liability or received a refund. So why, the Republicans asked, are Democrats and others so mean, asking corporations and the rich to pay higher taxes when lots of other people — especially the poor and middle class — don’t pay taxes either?

Hatch told MSNBC, “Bastiat, the great economist of the past, said the place where you’ve got to get revenues has to come from the middle class. That’s the huge number of people that are there. So the system does need to be revamped… We have an unbalanced tax code that we’ve got to change.”

All of which flies in the face of reality. As Travis Waldron of the progressive ThinkProgress website explained, “The majority of Americans who do not pay federal income taxes don’t make enough money to qualify for even the lowest tax bracket, a problem made worse by the economic recession. That includes retired Americans, who don’t pay income taxes because they earn very little income, if they earn any at all.

“And while many low-income Americans don’t pay income taxes, they do pay taxes. Because of payroll and sales taxes — a large proportion of which are paid by low- and middle-income Americans — less than a quarter of the nation’s households don’t contribute to federal tax receipts — and the majority of the non-contributors are students, the elderly, or the unemployed.”

What’s more, ThinkProgress notes, “The top 400 taxpayers — who have more wealth than half of all Americans combined — are paying lower taxes than they have in a generation, as their tax responsibilities have slowly collapsed since the New Deal era.”  In the meantime, “working families have been asked to pay more and more.”

So maybe death and taxes are no longer certain, but one thing remains as immutable as the hills. In the words of another golden oldie, there’s nothing surer — the rich get rich and the poor get poorer.

By: Michael Winship, CommonDreams.org, May 10, 2011

May 14, 2011 Posted by | Businesses, Class Warfare, Congress, Conservatives, Corporations, Democrats, Economy, Elections, General Electric, GOP, Government, Income Gap, Jobs, Lawmakers, Middle Class, Politics, Republicans, Tax Credits, Tax Increases, Tax Liabilities, Tax Loopholes, Taxes, Voters | , , , , , , , , , , , , , , , , , | Leave a comment

   

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