Corporate Cowards Divert Shareholder Funds into “Dark Money”

Published on Wednesday, May 8, 2013 by Creators.com

 

 

Corporate Cowards Divert Shareholder Funds into “Dark Money”

 

by Jim Hightower

 

 

 

 
(Image: Brennan Center for Justice)



If corporations are people, as the Supreme Court pretends, they certainly are loudmouths, constantly telling us how great they are and spreading their names everywhere.

Amazingly, though, these corporate creatures have suddenly turned demure, insisting that they don't want to draw any attention to themselves. That's because, in this case, corporations are not selling, they're buying — specifically, trying to buy public office for their pet political candidates by funneling millions of corporate dollars through such front groups as the U.S. Chamber of Commerce. In turn, the fronts use the money to air nasty attack ads that smear the opponents of the pro-corporate candidates.

Why do corporations need a middleman? Because the ads are so partisan and vicious that they would appall and anger millions of customers, employees and shareholders of the corporation. So, rather than besmirch their own names, the corporate powers have meekly retreated behind the skirt of Republican political outfits like the Chamber.

But don't front groups have to report (at least to election authorities) who's really behind their ads, so voters can make informed decisions? No. Thanks to the Supreme Court's infamous Citizen United edict in 2010, such groups can now pour unlimited sums of corporate cash into elections without ever disclosing the names of their funders. This "dark money" channel has essentially established secret political campaigning in America.

[Corporations'] panic over having a little sunlight shine into their deepest bunker reveals just how destructive they intend dark money to be for our democracy.
That's why shareholders and other democracy advocates are asking the Securities and Exchange Commission to rule that the corporate giants it regulates must reveal to shareholders all political donations their executives make with corporate funds. After all, the millions of dollars the executives are using to play politics don't belong to them — it is shareholder money. And by no means do shareholders march in lockstep on which political candidates to support or oppose.

Hide and seek can be a fun game for kids, but it's infuriating when CEOs play it in our elections. Last year, corporate interests sought to elect their candidates by hiding much of their politicking not only from company owners but also from voters.

In all, $352 million in "dark money" poured into our 2012 elections, the bulk of it from corporations that covertly pumped it into secretive trade associations and such scams as "social welfare charities," run by the likes of Karl Rove and the Koch brothers.

Since underhanded, anonymous electioneering puts a fatal curse on democracy, the SEC should at least compel corporate managers to tell their owners — i.e., the shareholders — how and on whom their money is being gambled in political races. It's a simple reform, but — oh, lordy — what a fury it has caused among the political players.

A rare joint letter from the U.S. Chamber, Business Roundtable and National Association of Manufacturers has been sent to the CEOs of the 200 largest corporations in our country, rallying them to the barricades in a frenetic lobbying effort to stop this outbreak of honest, democratic disclosure.
House Republicans are even going to the extreme of trying to make it illegal for the SEC to let shareholders (and the voting public) know which campaigns are being backed by cash from which corporations. Hyperventilating, these powerful scaredy cats claim to be intimidated by the very suggestion that they tell the people what they're doing in public elections.

Their panic over having a little sunlight shine into their deepest bunker reveals just how destructive they intend dark money to be for our democracy. Ironically, the Supreme Court's chief assumption in allowing unlimited corporate cash into the democratic process was that shareholders would be informed and involved, and provide public accountability for their companies' political spending.
Even Justice Antonin Scalia, long a cheerleader for corporate politicking, is no fan of hiding it from the electorate: "Requiring people to stand up in public for their political acts fosters civic courage," he has written, adding that a campaign "hidden from public scrutiny" is anathema to self-governance. He also deems it cowardly: "This does not resemble the Home of the Brave," he pointedly noted.

© 2013 Creators

 

National radio commentator, writer, public speaker, and author of the book, Swim Against The Current: Even A Dead Fish Can Go With The Flow, Jim Hightower has spent three decades battling the Powers That Be on behalf of the Powers That Ought To Be - consumers, working families, environmentalists, small businesses, and just-plain-folks.

What Does It Mean To Be An “American” Corporation?

The Campaign for America’s Future is a strategy center for the progressive movement.

What Does It Mean To Be An “American” Corporation?

By Dave Johnson | April 24, 2013

What does it mean to be an American? What does it mean to be an American corporation? An article in the Wall Street Journal the other day should trigger questions like these.

WSJ: Domestic-Based Multinationals Hiring Overseas,

Multinational companies based in the U.S. boosted their global work forces in 2011 almost entirely by hiring workers overseas, underscoring the slow growth in the U.S. job market.

… The paltry hiring at home reflects where multinational companies are focusing their attention. Stronger economic growth in overseas markets in Asia and Latin America is driving their expansion, reinforcing their shift toward cheaper labor or closer access to customers.

The U.S. parents of multinational firms account for about one-fifth of total private U.S. employment. Since 1999, employment by U.S. multinationals is down by 1.1 million inside the U.S., while it is up by 3.8 million overseas.

The hiring by American companies is not happening in the U.S. At the same time these companies are holding $1.7 trillion of profits outside of the country, away from their own shareholders and our economy to avoid their taxes, while pushing to dramatically lower the taxes they pay us – and even to get out of paying any taxes at all on money they make outside of the country!

Why Do We Have Corporations?

Why do We the People even have laws that allow corporations and give them special benefits? The answer obviously is for our common benefit — why else would we do it? The corporate form of a business enables the company to easily obtain capital from investors, in order to accomplish large-scale projects that benefit us. To encourage this we give these entities special privileges. For example, we limit liability which means the investors are not held liable for the actions of the company – they won’t lose more than their investment if the company gets sued for some reason. We provide a system that helps them obtain financing, insurance, market liquidity and all kinds of things to help those investors get a good return on their money.

Benefit: We the People want railroads, but it takes a lot of money to build and operate a railroad. And our system wants private companies to do the work of building and operating railroads instead us just doing it ourselves. So we set up a way for a private company to gather investment from lots of people.

Why Do We Want “American” Corporations?

Why don’t we just contract with any old corporation that comes along to get things done for us? Who cares what country these entities are from? Why should we as a country want to encourage and support our American corporations? Because American corporations make money for us. That is the whole point.

Other countries see themselves as countries, and compete with us as a country, for their benefit and the benefit of their people. As much as some of us might want a world in which we all cooperate and share and have “free trade” and other ideals and dreams, the fact is that other countries understand themselves as countries. Companies and industries located in other countries are operated to benefit their people. Their governments give them special benefits to help them compete with our companies. And then they are taxed so their country can have good schools and infrastructure and all the rest of the benefits of the modern world, for them.

And if we do not respond in kind, then their people end up better off at the expense of our people.
 
As long as other countries operate for the benefit of their people, it is our job to keep up our end of the bargain as it exists and operate as a country for the benefit of our people. This means that we support our companies, and expect them to bring the money they make back here, and share the returns with us.

We The People Used To Understand Who Is The Boss

We the People (used to) understand that these companies exist for our common benefit and (used to) expect certain things back from these corporations. We (used to) expect them to provide high-quality products and services and not engage in fraud and trickery. We (used to) expect them to provide a safe and fair work environment with good wages and benefits. We (used to) expect them to be good citizens that benefit the communities where they operate. And our laws and enforcement (used to) make sure they operated that way – for our common benefit.

These understandings and expectations have disappeared. An Apple executive articulated the new corporate understanding to The New York Times. He said giant multinationals like Apple “don’t have an obligation to solve America’s problems.” And to prove it, American corporations are holding $1.7 trillion in profits outside the country – just sitting there – rather than bringing that money home, paying the taxes due and then paying it out to shareholders or using it to “create jobs” with new factories, research facilities and equipment.

We The People Have Forgotten

Citizens, elected officials and corporate management have forgotten why we have corporations and who they are supposed to serve. We have instead developed a system in which corporations exist for their own sake, doing anything they want to do, and doing these things only to enrich the few who own and manage them.

There is no longer an understanding and expectation that these entities – creations entirely of We, the People — are supposed to exist for the common good of We, the People. They no longer try to provide high-quality goods and services. They no longer feel they must avoid fraud and trickery – and without enforcement of rules are able to gain advantage over others that do not operate this way. They no longer provide a safe and fair work environment with good wages and benefits. They are not good citizens that benefit the communities and country where they operate.

They are no longer under the control of We the People.

Are American Multinationals Really American?

For all intents and purposes giant “American” multinational corporations have transformed into entities with completely different interests from their American workers, customers, communities, citizens and government. These corporations are no longer operating in the interest of America or any country, while claiming the benefits of being American corporations (when it suits them.)
For example, the giant American multinational corporations are now set up and structured to avoid paying taxes here, or to any country. They set countries against each other in their hunt for low-wage labor, subsidies and advantages in markets.

Some companies are even “American” when it suits them, and not “American” when it does not. The post, Unraveling The Romney/Bain Tax Story drew on a New York Times report, Offshore Tactics Helped Increase Romneys’ Wealth. From the post:

Why is part of the same company set up based in Delaware, and part in the Cayman Islands or Luxemburg or Bermuda? Because the functions of the American-based company are those functions that avoid taxes on foreign entities, and the functions of the Caymans-based part are the functions that would have to pay US taxes if it was in the US. But in reality it is the same company — except for tax purposes! Here is the explanation of the foreign-based parts, from the Times article:

Had those funds been set up in the United States, the Romneys and other American investors would probably have been subject to certain federal taxes for their ownership of “controlled foreign corporations.” Setting up the funds in the Caymans allowed them to avoid those taxes.

Here is an explanation of the American-based parts,

Another appeal of offshore funds is that they help private equity attract investment from deep-pocketed big institutions like pension funds and university endowments. While these are generally tax-exempt, they are liable for taxes on “unrelated business taxable income” if they put money in funds that use debt financing to make investments.

So why aren’t they all just foreign-based? Why do they need to have an American-based part? One reason is that making the loans that run up the debt that enables these companies to get the interest deductions (more tax avoidance) would incur income taxes if the loans came from a foreign entity,

Beyond their tax advantages, however, offshore funds controlled by American money managers can also create new tax problems. Those funds are limited in their ability to make loans without triggering corporate income taxes — an issue for Sankaty funds. Therefore, they usually have a parallel domestic fund that makes the loans, holds them for a period before selling a portion to the offshore fund, a practice known as “season and sell.”

And, of course, the American-based entities enable the low “carried interest” tax rate that hedge fund managers enjoy. The company paying Romney can’t be foreign-based,

So-called carried interest, the cut of a fund’s investment gains earned by its managers, enjoys a favorable tax treatment. But under I.R.S. rules, carried interest cannot be derived from a corporation, like the offshore blockers used by Sankaty.

The American-based entities can buy American companies without incurring “foreign-based” obligations. Then the foreign-based entities can avoid the taxes that the American-based buyers of companies would have to pay. And the foreign-based investors can be in the foreign-based parts of the company, avoiding US tax obligations. Also American entities like pension funds can avoid US taxes they would otherwise have to pay.

To put it another way, the same company can pretend it is US-based when that is what it needs to be, and foreign-based when that is what it needs to be.

What Can We Do?
First of all, we want and need corporations, for the reasons outlines above. For our common benefit, to accomplish large-scale projects, and as a result to bring shared prosperity to our citizens.

But we have to be the boss of them. We have to understand again that We the People set up this system of corporations for our common benefit. (Why else would we set up these things?) And we have to again call ourselves a country.
Can we align the interests of these giant corporations with our national, American interest? If we cannot, they should be stripped of their American corporate privileges and be required to do the same things as other entities that are not wedded to the national interest. And then We the People can build and support American companies that are.

—–

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5 Juicy Tax Breaks That Corporations Enjoy That the Public Can't Touch

Economy  

 

AlterNet / By Scott Klinger

5 Juicy Tax Breaks That Corporations Enjoy That the Public Can't Touch

Do you get a tax break for breaking the law?

 

US companies are keeping more of their profits offshore, choosing overseas tax havens amid talk in Washington about closing corporate tax loopholes, The Wall Street Journal reported Monday

 

April 10, 2013  |  

Corporations are quick to claim “corporate personhood” and their First Amendment rights when it comes to their ability to donate to political candidates, influence elections, and lobby or when it comes to advertising their products, especially those deemed dangerous or socially destructive. But on tax day, corporations are quite content with a tax code full of perks and privileges for corporations that are not available to living, breathing human beings.

1. When corporations break the law, they get a tax break

If you forget to feed the meter, or go a little too fast and get a speed camera traffic ticket in the mail, or God forbid fail to pick up after your dog in a public park, when it comes to tax time, forget it – none of these fines for bad behavior are tax deductible.

But that’s not the case for corporate bad actors.  Take, for example, BP’s toxic mess in the Gulf of Mexico or Wells Fargo’s abusive lending practices that cost tens of thousands American families their homes. BP’s clean-up costs and Wells Fargo’s settlement fees were likely fully deductible, leaving the rest of us to pick up a significant piece of the tab for their destructive behavior. Senators Sherrod Brown (D-OH) and Charles Grassley (R-IA) have issued a bi-partisan call to end the tax deduction for Wall Street banks settling charges of lending abuse that lead to the Great Recession.

2. When corporations fall on hard times, the tax code helps makes them whole

When corporations fall on hard times and lose money in a given year, those losses cannot only be used to fully offset any taxes they owe that year, but they are allowed to carry those losses into the future for up to seven years, reducing their taxes when good times return.

Families face a different set of rules on tax day. Imagine the family that has experienced long-term unemployment or costs of an uninsured major illness during the year. They might have to deplete their savings or retirement accounts to stay afloat. Like the corporation, they are able to deduct the cost of their losses in the year they occur, but unlike corporations they cannot generally carry the deductions they cannot use into future years.

Corporations can use future tax savings to recoup their losses and replenish the savings drained during the bad year. Human families get no such benefit.

3. Many corporations get to choose where in the world to report their income, allowing them to choose a nation with low or no taxes

For American workers, there is little doubt where their income is earned and thus where the taxes are owed. If you are a doctor with an office in Omaha, you can’t pack up your diploma and ship it to a bank vault in the Cayman Islands and tell your patients to mail their payment check to a post office box in the Caribbean nation, explaining that they need to pay for the intellectual property represented by that diploma.

But if you are a corporation, that’s exactly what you can do. U.S corporations have $1.7 trillion of their profits stashed offshore, much of it in places like the Cayman Islands, even though most have no employees or offices in tax haven nations. They do so because they register their patents in a tax haven nation, like the Cayman Islands, that imposes no taxes on corporate income. They argue that the shift in profits from the U.S. to the tax haven is to pay the cost of the intellectual property represented by the patent. This sort of profit shifting and tax haven abuse by corporations costs the U.S Treasury $90 billion a year in lost tax revenue.

4. Superstorm Sandy devastated millions of American families, but corporations got to deduct the full value of their losses from their taxes

Millions of American families suffered damage to their homes and property last year, from Superstorm Sandy, western fires and other natural disasters. The federal tax code expects human property owners to pick up the full cost of damage for an amount equal to ten percent of the taxpayer’s annual reported income. Beyond the ten percent threshold, any additional losses may be taken as a tax deduction.

In contrast, corporations face no such income threshold. Corporate shareholders are not asked to absorb damages equal to ten percent of the corporation’s taxable income as individual families are. Corporations can –and do – deduct every dollar of losses they incur. Many firms, including Verizon and other utilities serving the New York and New Jersey areas saved millions of dollars on their 2012 taxes by deducting the full costs of Sandy damage on their taxes.

5. If you are an American citizen working abroad you pay American taxes on your foreign earnings; if you are an American corporation you can indefinitely delay paying U.S. taxes on income you earn abroad.

About five million American citizens live or work abroad. Come April 15th, each of them is expected to file a tax return and pay U.S. taxes on all their income. The amount they owe is reduced by an amount equal to any taxes they paid to foreign governments on that income.

But U.S. corporations get a different deal, called deferral. They get to indefinitely put off paying U.S. taxes of their foreign until and unless they bring those funds back to America. This loophole costs the U.S. Treasury almost $60 billion a year. Senator Bernie Sanders (I-VT) recently introduced the Corporate Tax Dodging Prevention Act, which would close this loophole, putting corporations and real humans on the same footing come tax time.

As many people work hard to make corporations less human on election day, perhaps it is time to make them more human on tax day.

Scott Klinger is an Associate Fellow at the Institute for Policy Studies.

Reclaim Democracy!

Corporate Welfare Grows to $154 Billion even in Midst of Major Government Cuts

 

Editor’s Note: Even as the federal government executes major cutbacks, it’s giving huge subsidies in the form of tax breaks to industry, a fact legislators rarely acknowledge. The Boston Globe recently published a thorough and eye-popping report detailing the nature and extent of these breaks. We think it’s a must-read. 

By Pete Marovich

First published in the Boston Globe


WASHINGTON — Lobbying for special tax treatment produced a spectacular return for Whirlpool Corp., courtesy of Congress and those who pay the bills, the American taxpayers.

By investing just $1.8 million over two years in payments for Washington lobbyists, Whirlpool secured the renewal of lucrative energy tax credits for making high-efficiency appliances that it estimates will be worth a combined $120 million for 2012 and 2013. Such breaks have helped the company keep its total tax expenses below zero in recent years.

The return on that lobbying investment: about 6,700 percent.

These are the sort of returns that have attracted growing swarms of corporate tax lobbyists to the Capitol over the last decade — the sorts of payoffs typically reserved for gamblers and gold miners. Even as Congress says it is digging for every penny of savings, lobbyists are anything but sequestered; they are ratcheting up their efforts to protect and even increase their clients’ tax breaks.
‘It’s not about tax policy, it’s about benefiting the political class and the well-connected and the well-heeled in this country,’ Said Senator Tom Coburn of Oklahoma.

The Senate approved tax benefits for Whirlpool and a host of other corporations early on New Year’s Day, a couple of hours after the ball dropped over Times Square and champagne corks began popping. A smorgasbord of 43 business and energy tax breaks, collectively worth $67 billion this year, was packed into the emergency tax legislation that avoided the so-called “fiscal cliff.’’

In the days that followed, the tax handouts for business were barely mentioned as President Obama and members of Congress hailed the broader effects of the dramatic legislation, which prevented income tax increases on the middle class and raised top marginal tax rates for the wealthy.

Yet the generous breaks awarded to narrow sectors of the American business community are just as symptomatic of Washington dysfunction as the serial budget crises that have gripped the capital since 2011. Leaders of both parties have repeatedly declared their intention to make the corporate income tax code fairer by lowering rates and ending special breaks, while intense lobbying, ideological divides, and unending political fights on Capitol Hill block most progress.

The result: sweeping bipartisan tax reform of the sort negotiated in 1986 by Republican President Ronald Reagan and Democratic House Speaker Thomas P. “Tip’’ O’Neill Jr. is rated a long shot once again this year. In fact, the most visible signs of cross-party cooperation on corporate taxes are among regional groups of lawmakers who team up, out of parochial interest, to maintain special treatment for businesses in their home states.

In the absence of meaningful change, corporations like Whirlpool continue to pursue the exponential returns available from tax lobbying. The number of companies disclosing lobbying activity on tax issues rose 56 percent to 1,868 in 2012, up from 1,200 in 1998, according to data collected by the nonpartisan Center for Responsive Politics.

Whirlpool had plenty of company on New Year’s, including multinational corporations with offshore investment earnings, Hollywood companies that shoot films in the United States, railroads that invest in track maintenance, sellers of energy produced by windmills and solar panels, and producers of electric motorcycles.

Their special treatment is a fraction of a broader constellation of what the federal Joint Committee on Taxation estimates will be $154 billion in special corporate tax breaks in 2013, contained in 135 individual provisions of the tax code.

Watchdogs and tax analysts denounce these favors as a hidden form of spending that amounts to corporate welfare. In essence, these “tax expenditures’’ are no different than mailing subsidy checks directly to companies to pad their bottom lines.

Congress reduced the number of tax breaks in 1986 as part of the broader reform package. The breaks steadily crept back, particularly in the last decade, as lawmakers heeded requests from advocacy groups and business lobbyists to lower taxes as a way of subsidizing particular industries.

“There’s a justification and rationale for virtually every one of these. They have their intellectual advocates, and they have their political advocates, and that’s how they get in the law,’’ said Lawrence F. O’Brien III, an influential lobbyist and a top campaign fund-raiser for Senate Democrats who represents financial industry clients and other interests.

Whirlpool has a powerful Michigan delegation behind it, including key committee chairmen of tax-writing and energy committees in the House. In response to questions from the Globe, the company said its special tax breaks led it to save “hundreds’’ of American jobs from the effects of the recession.
“Energy tax credits required that Whirlpool Corporation make significant investments in tooling and manufacturing to build highly energy-efficient products,’’ Jeff Noel, Whirlpool’s corporate vice president of communication, said in an e-mail. “If you look at our 101-year history, we have definitely paid our fair share of US federal income taxes.’’

But its federal income taxes have been minimal in recent years, thanks in large part to tax credits and deferrals, according to public filings. Its total income taxes — including foreign, federal, and state — were negative-$436 million in 2011, negative-$64 million in 2010, and negative-$61 million in 2009. It carries forward federal credits as “deferred tax assets’’ that it can use to lower future tax bills.

The renewed tax breaks granted by Congress in January, which were retroactive to the beginning of 2012, will not be recorded until Whirlpool pays its 2013 taxes. Because of the absence of that tax credit, and because of greater earnings and changes in foreign taxes, the company estimated its total 2012 tax expenses will be $133 million.

Whirlpool did not provide a specific number of jobs retained. The benefits were not sufficient to protect Whirlpool’s employees at a refrigerator manufacturing plant in Arkansas. Last summer, the company laid off more than 800 hourly workers, closed the factory, and moved manufacturing of those refrigerators to Mexico. It was part of an overall reduction of 5,000 in its workforce announced in 2011 in North America and Europe.

Congress “made a big mistake,’’ by authorizing hundreds of millions of dollars in tax credits for Whirlpool based on arguments that the company would retain domestic jobs, said Howard Carruth, a machine maintenance worker and union official who began work at the plant in 1969 and lost his job last year when the plant closed.

“They really hurt the economy around here,’’ he said. “I blame the corporate greed.’’

The closing also transformed Carruth from loyal to embittered customer: “We bought Whirlpool for our own house, for family and friends. If one of those goes out in my house right now, it will not be replaced by Whirlpool.’’
Many companies would probably pay much higher taxes — including Whirlpool — if Congress eliminated special breaks and lowered the income tax rate to 25 percent from the current 35 percent.

An extra benefit of winning government subsidies through the tax code: Recipients remain immune from spending cuts like the automatic “sequester’’ imposed on March 1.

Called the “tax extenders,’’ 43 credits, deferrals, and exceptions for general business and energy firms were lumped into the fiscal cliff legislation. The returns on lobbying investments companies realized when the Senate passed its fiscal cliff bill helps explain why Washington tax lobbyists remain in demand:

• Multinational companies and banks, including General Electric, Citigroup, and Ford Motor Co., with investment earnings from overseas accounts won tax breaks collectively worth $11 billion — a return on their two-year lobbying investment of at least 8,200 percent, according to a Globe analysis of lobbying reports.
• Hollywood production companies received a $430 million tax benefit for filming within the United States. As a result, companies like Walt Disney Co., Viacom, Sony, and Time Warner — with the help of the Motion Picture Association of America, chaired by former Connecticut senator Christopher J. Dodd — realized a return on their lobbying investment of about 860 percent.
• Railroads lobbied on a broad array of issues, a portion of which yielded $331 million for two years’ worth of track maintenance tax credits. Return on investment: at least 260 percent.
• Even at the low end of the economic scale the returns can be large. Two West Coast companies that manufacture electric motorcycles — Brammo Inc. of Oregon, and Zero Motorcycle Inc. of California — reported combined lobbying expenditures of $200,000 in 2011 and 2012. They won tax subsidies payable to the consumers who buy their products worth an estimated $7 million. The electric motorcycle market stands to receive a return on that investment of up to 3,500 percent.

Like each of the industries that won special treatment in the Jan. 1 “extenders’’ corporate tax measure, the electric motorcycle lobby argued that tax breaks would protect or create jobs. Electric motorcycle manufacturers only employ hundreds of workers now, said Jay Friedland, Zero Motorcycles vice president, but could employ thousands in the future.

“There are definitely provisions in the extenders that people scratch their heads at, but if your goal is to build a replacement for the pure oil economy, this is the kind of industry you want to make an investment on,’’ he said.
Measuring the rewards for lobbying on individual tax provisions is by nature imprecise, especially for large corporations that weigh in on dozens of issues. Companies file blanket disclosure reports that do not break down their lobbying expenditures by individual issue.

Publicly traded companies like Whirlpool with narrower lobbying agendas, and who publish their annual tax credit benefits in shareholder disclosure reports, are easier to track.

In addition to seeking tax breaks, corporate lobbyists also seek to protect favorable elements that are already baked into US tax policy. Private equity firms, for instance, fight each year to defend the tax treatment of “carried interest’’ payments for investment managers. Those payments are treated as a capital gain by the Internal Revenue Service, and thus taxed at a much lower rate, 20 percent in 2013, than the top income-tax rate of 39.6 percent.

The best-known example of a millionaire benefiting from “carried interest’’ tax treatment was Mitt Romney, the 2012 Republican presidential nominee, who reduced his individual tax rate to below 15 percent by applying the provision to his extensive Bain Capital profits.

The publicity surrounding Romney’s tax returns fueled an onslaught by critics. The private equity industry’s trade group and the nation’s largest firms spent close to $28 million on lobbying in 2011 and 2012, according to public records. So far, they have won — a benefit that the Obama administration has estimated is worth at least $1 billion over two years. The return on investment for maintaining the status quo on the carried-interest tax rate over two years was at least 3,500 percent.

The returns show how cheap it is, relatively speaking, to buy political influence.
“It’s an end run around policy, and that makes it very efficient,’’ said Raquel Meyer Alexander, a professor at Washington and Lee University in Virginia who has examined the investment returns on lobbying. “Firms that sit on the sidelines are going to lose out. Everyone else has lawyered up, lobbied up.’’

Critics lament that fiscal combat between Republicans and Democrats is preventing serious reform of the business tax code.

“What we’re doing is running a Soviet-style, five-year industrial plan for those industries that are clever enough in their lobbying to ask all of us to subsidize their business profits,’’ said Edward D. Kleinbard, a former chief of staff at the Joint Committee on Taxation and now a law professor at the University of Southern California.

“These are perfect examples of Congress putting its thumb on the scale of the free market,’’ he said. “I’ll be damned if I know why I should be subsidizing Whirlpool.’’

Congress has the opportunity every two years to stop doling out a good portion of these favors. A peculiarity of many special tax breaks is that Congress places “sunset’’ provisions on them.

Some observers say passing temporary tax breaks gives lawmakers an ongoing source of campaign funds — from companies that are constantly trying to curry favor to get their tax credits renewed. Others say it’s because making these tax rates permanent would require a 10-year accounting method — a step that would show how much each provision is truly costing taxpayers.

Whatever the reason, Congress has made many of them quasi-permanent, by simply extending them again and again.

“It’s the same cowardice that Congress has on everything. They don’t want to be truthful about what they are doing,’’ said Senator Tom Coburn, an Oklahoma Republican and persistent critic of government waste and special deals in the tax code.

Coburn voted against the raft of “extenders’’ when they were previewed and approved by the Senate Finance Committee at a hearing in August 2012. He offered amendments to strip individual tax breaks out of the package — including the high-efficiency appliance tax credit for Whirlpool and GE — but they were shot down by the majority Democrats on the committee, led by chairman Max Baucus, of Montana.

“It’s not about tax policy, it’s about benefiting the political class and the well-connected and the well-heeled in this country,’’ Coburn said in an interview. “We’re benefiting the politicians because they get credit for it. And we are benefiting those who can afford to have greater access than somebody else.’’
Whirlpool pursues its Capitol Hill agenda from an office suite it shares on the seventh floor of a building on Pennsylvania Avenue that is loaded with similar lobbying shops and sits just a few blocks from the Capitol. Across the street, lines of tourists wait to view the original Declaration of Independence and the Constitution at the National Archives.

Whirlpool and other appliance manufacturers won tax breaks for producing high-efficiency washing machines, dishwashers, and refrigerators in 2005, as part of a sweeping package of energy incentives approved by the Republican-controlled Congress.

But that victory was just the beginning of a prolonged effort. Whirlpool and other appliance manufacturers must perpetually work to win renewal of their credits every two years or so. In recent years, the company has spent around $1 million annually on lobbying, up from just $110,000 in 2005.

The fiscal cliff legislation represented the third time the appliance tax credits were included in a tax extenders bill.

Defending the credits has become easier, said a person who has participated in Whirlpool’s lobbying efforts. The extenders, this person explained, is an interlocking package of deals, each with a particular senator or representative demanding its inclusion.

“Some of it is the inherent stickiness of something that is already in the tax code,’’ said the person, who was not authorized to speak about Whirlpool’s efforts and requested anonymity. “If they open Pandora’s box and start taking things out, it’s politically very difficult.’’

The paradoxical posture of senators of both parties was on full display at the hearing last summer of the Senate Finance Committee to consider the most recent package of tax extenders. Some members lamented the system of doling out tax breaks, pledging to reform the corporate code, even as they defended individual items in the legislation and voted to approve it.

The senators said they wanted to provide stability and predictability for businesses that had come to rely on the temporary provisions to stay afloat and retain workers.

They did make an effort to trim the package: Some 20 provisions were left on the cutting room floor, according to data cited in committee. The panel ultimately approved the bill with a bipartisan, 19-to-5 majority.
Senator Debbie Stabenow, a Democrat from Michigan, went to bat for Whirlpool and other companies who she said are creating next-generation appliances that save water and electricity.

“We have one of those major world headquarters in Michigan — and it’s amazing what they are doing,’’ she said. “Right now, we are exporting product, not jobs,’’ she added, without mentioning Whirlpool’s Arkansas plant closure last year.

Former senator John F. Kerry, another member of the committee, said certain industry sectors need temporary tax subsidies. Oil and gas companies, Kerry explained, benefit from permanent tax breaks in the law, while the wind, solar, and other alternative energy interests are forced to come to Congress “hat in hand’’ every two years.

Coming “hat in hand’’ in this context means deploying teams of lobbyists, mostly former Capitol Hill aides. They left their government jobs with an understanding of the tax code and, working in the private sector, are able to leverage their political connections to gain access to congressional leaders and staff.
Among the busiest and most influential of these tax-lobbying teams is Capitol Tax Partners, a firm headed by Lindsay Hooper, and his partner, Jonathan Talisman. Hooper served as a tax counsel to a senior Republican on the Senate Finance Committee in the 1980s. Talisman held the post of assistant treasury secretary for tax policy during the Clinton administration. They did not respond to requests for comment.

Capitol Tax Partners lobbied on behalf of 48 companies in 2012, according to its mandatory disclosure reports. That client roster includes a bunch of companies that won tax breaks in the fiscal cliff bill: Whirlpool (energy-efficiency tax credits), State Street Bank (tax treatment of offshore investment income), and the Motion Picture Association of America (tax breaks for domestic film production), to name a few.

In Whirlpool’s case, Capitol Tax Partners and other boutique tax lobbyists helped the company win access to key lawmakers, said the person who has participated in the company’s lobbying efforts.

“There is a certain amount of door-opening and phone-call-answering quality of some of these firms that can be useful to make sure that you are getting your message to the right person at the right point in time,’’ the person said. “But on the substantive issues, these were done by the energy-efficiency advocacy groups and the companies themselves.’’

After the Senate Finance Committee approved the tax extenders package last summer, it remained uncertain when it would materialize on the Senate floor for a final vote. Insiders kept their eyes peeled as the rancorous debate over the fiscal cliff — whether taxes would rise on the middle class wealthy — drowned out any voices discussing corporate tax reform.

Nothing was certain, until majority Democrats rolled out their bill on New Year’s Eve. With tax increases for the rich included, it would raise $27 billion in new revenue in 2013. The Obama administration trumped that figure as helping to reduce the deficit.

But in reality, any gain from taxing the rich was easily eclipsed by waves of tax cuts in the bill — including the $67 billion in the corporate tax breaks that had been resurrected at the last minute and voted on early on Jan. 1.

“They finally do it, and the extenders were bigger than the tax increases on the rich,’’ said Robert McIntyre, director of the advocacy group Citizens for Tax Justice. “Wow. What was this fight about?’’

Where the GOP and Tea Party are in Lockstep: Corporatocracy Republished to Exposing ALEC

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Corporatocracy Republished to Exposing ALEC

by Bob SloanFollow for Exposing ALEC

REPUBLISHED from November 8, 2010 - UPDATE

Due to the new interest in corporation's involvement in writing the legislation enacted by our lawmakers for us to live by...and the ALEC Exposed document dump and stories exposing the American Legislative Exchange Council (ALEC) I thought it appropriate to republish my earliest work from last year.  Much of it is about ALEC and the corporate pursuit of assuming government authority through manipulating our laws, privatization and deceit.  Last November there was not much interest on this issue, so this diary and those I'll subsequently republish have not been read by many.  I republish in an effort to again explain why what we're doing now to eliminate ALEC is so important.

Language In Our Evolving Society - Reprinted here in part from Federal PIECP and Program VIolations Blog, by Bob Sloan

As we move firmly into the 21st. century, Webster's Dictionary has had to update and re-publish their volumes on an evermore frequent schedule. This is due to new and creative words such as "twitter", Blogger", "Google", "Skype" and other similar words that define or adequately describe the ever changing world we live in.
As yet one new word that's being used more and more frequently remains without official definition. No, it's not "refudiate" that's circulating across the internet like a ping-pong ball on meth-amphetamine. The word is Corporatocracy. More and more of us find this word in our vocabulary. There's even a definition or two of this word found on the "Urban Dictionary" web site.

Here they are:

Corporatocracy
1. "A social and economic class of rulers, defined by their involvement in the ownership and management of large corporations. 2. The social and economic structures that empower and protect such rulers. 3. The political culture that serves such rulers.

2. "Rule by an oligarchy of corporate elites through the manipulation of a formal democracy.

3. "A type of government in which huge corporations, through bribes, gifts, and the funding of ad campaigns that oppose candidates they don't like, become the driving force behind the executive, judicial and legislative branches."
Corporatocracy is an important word for our generation and the social environment we find ourselves in here at the close of the first decade of this century. We already have oligarchy and fascism and both words evoke denials and sometimes nervous laughter when mentioned in the same sentence with America or United States. Individuals who research such things as language tell me there are subtle differences between these three words, but those differences are narrowing as we approach 2011.

One might ask what is the real meaning of "Fascism" in the 21st Century? Are corporatocracy and fascism similar in meaning or definition? Again, we must look to the Urban Dictionary for a current definition of fascism. One definition, contributed by Bertie Bumwhistle Urban Dictionary for the current "Version" of fascism.

Here it is - all 14 points:

Powerful and Continuing Nationalism:
Fascist regimes tend to make constant use of patriotic mottoes, slogans, symbols, songs, and other paraphernalia. Flags are seen everywhere, as are flag symbols on clothing and in public displays.

Disdain for the Recognition of Human Rights:
Because of fear of enemies and the need for security, the people in fascist regimes are persuaded that human rights can be ignored in certain cases because of "need." The people tend to look the other way or even approve of torture, summary executions, assassinations, long incarcerations of prisoners, etc.

Identification of Enemies/Scapegoats as a Unifying Cause:
The people are rallied into a unifying patriotic frenzy over the need to eliminate a perceived common threat or foe: racial , ethnic or religious minorities; liberals; communists; socialists, terrorists, etc.

Supremacy of the Military:
Even when there are widespread domestic problems, the military is given a disproportionate amount of government funding, and the domestic agenda is neglected. Soldiers and military service are glamorized.

Rampant Sexism:
The governments of fascist nations tend to be almost exclusively male-dominated. Under fascist regimes, traditional gender roles are made more rigid. Opposition to abortion is high, as is homophobia and anti-gay legislation and national policy.

Controlled Mass Media:
Sometimes the media is directly controlled by the government, but in other cases, the media is indirectly controlled by government regulation, or sympathetic media spokespeople and executives. Censorship, especially in war time, is very common.

Obsession with National Security:
Fear is used as a motivational tool by the government over the masses.

Religion and Government are Intertwined:
Governments in fascist nations tend to use the most common religion in the nation as a tool to manipulate public opinion. Religious rhetoric and terminology is common from government leaders, even when the major tenets of the religion are diametrically opposed to the government's policies or actions.

Corporate Power is Protected:
The industrial and business aristocracy of a fascist nation often are the ones who put the government leaders into power, creating a mutually beneficial business/government relationship and power elite.

Labor Power is Suppressed:
Because the organizing power of labor is the only real threat to a fascist government, labor unions are either eliminated entirely, or are severely suppressed .

Disdain for Intellectuals and the Arts:
Fascist nations tend to promote and tolerate open hostility to higher education, and academia. It is not uncommon for professors and other academics to be censored or even arrested. Free expression in the arts is openly attacked, and governments often refuse to fund the arts.

Obsession with Crime and Punishment:
Under fascist regimes, the police are given almost limitless power to enforce laws. The people are often willing to overlook police abuses and even forego civil liberties in the name of patriotism. There is often a national police force with virtually unlimited power in fascist nations.

Rampant Cronyism and Corruption:
Fascist regimes almost always are governed by groups of friends and associates who appoint each other to government positions and use governmental power and authority to protect their friends from accountability. It is not uncommon in fascist regimes for national resources and even treasures to be appropriated or even outright stolen by government leaders.

Fraudulent Elections:
Sometimes elections in fascist nations are a complete sham. Other times elections are manipulated by smear campaigns against or even assassination of opposition candidates, use of legislation to control voting numbers or political district boundaries, and manipulation of the media. Fascist nations also typically use their judiciaries to manipulate or control elections.

"14 identifying characteristics of Fascism by Political scientist Dr. Lawrence Britt. ("Fascism Anyone?," Free Inquiry, Spring 2003, page 20)."
I'm college educated but not a scholar by any stretch of imagination or definition. But as I look around me I've begun to notice that there are changes that have been taking place for the past 25 years. These changes have always been subtle, hardly noticeable and cause no immediate concern or sound an alarm. At 62 I find myself yearning for the "good 'ol days" as most of us do as we approach our "golden years". This has allowed me to relive some experiences and compare today's way of life, government, relationships to the years of my youth.

Suddenly I am concerned and several alarms have begun sounding between my ears; klaxons, sirens, bells and whistles. The cause of this alarm is the ever-increasing involvement of private corporations in another new term we've learned; the Prison Industrial Complex (PIC). A sub-culture has evolved over the past three and a half decades. It is composed of an assortment of influential corporations, state lawmakers, the American Legislative Exchange Council (ALEC)and an unwitting society. Together they have allowed corporations to devise a means to profit from incarceration through privatization of: housing, medical care, commissary, feeding and transportation of state and federal inmates and detainees. Private interests are now found in all phases of our judicial system from juvenile holding facilities, jails, detention centers to adult prisons. In addition incarcerated individuals, men, women and youthful offenders have been put to work in prison industries to increase the profits for participating corporations.

This privatization of prisons and industries began at the same time that incarceration rates began to climb from our "War on Drugs" legislation in the 80's. At the same time (1979) the federal Prison Industries Enhancement Certification Program (PIECP) became law. The "PIE program" as it is commonly called, allowed a relaxation of federal laws prohibiting the interstate sale and delivery of prisoner made goods in the U.S. It also encouraged partnerships between prison industries and private sector manufacturers so inmates could be trained and provided skills to enable them to seek gainful employment upon release and thus avoid recidivism.

Unfortunately, as with any other "capitalistic" endeavor, PIECP was analyzed by corporate interests with an eye on how to make money through this program. The first act was to establish private prison facilities through contracts with state and federal governments. The second was to initiate a plan to increase the rate of incarceration - and per diem profits - to provide a steady flow of workers...

Join us in New Orleans on August 5th for the Protest Alec demonstration!  If you can't attend you can donate to the effort at the site.

Originally posted to Exposing ALEC on Sat Jul 23, 2011 at 11:23 AM PDT.

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How Big Corporations Are Unpatriotic

Published on Thursday, March 28, 2013 by Common Dreams

How Big Corporations Are Unpatriotic

by Ralph Nader

Many giant profitable U.S. corporations are increasingly abandoning America while draining it at the same time.

General Electric, for example, has paid no federal income taxes for a decade while becoming a net job exporter and fighting its hard-pressed workers who want collective bargaining through unions like the United Electrical Workers Union (UE). GE’s boss, Jeffrey Immelt, makes about $12,400 an hour on an 8-hour day, plus benefits and perks, presiding over this global corporate empire.
Telling by their behavior, these big companies think patriotism toward the country where they were created and prospered is for chumps. Their antennae point to places where taxes are very low, labor is wage slavery, independent unions are non-existent, governments have their hands out, and equal justice under the rule of law does not exist. China, for example, has fit that description for over 25 years.

Other than profiteering from selling Washington very expensive weapons of mass destruction, many multinational firms have little sense of true national security.
Did you know that about 80 percent of the ingredients in medicines Americans take now come from China and India where visits by FDA inspectors are infrequent and inadequate?

The lucrative U.S. drug industry – coddled with tax credits, free transfer of almost-ready-to-market drugs developed with U.S. taxpayer dollars via the National Institutes of Health – charges Americans the highest prices for drugs in the world and still wants more profits. Drug companies no longer produce many necessary medicines like penicillin in the U.S., preferring to pay slave wages abroad to import drugs back into the U.S.

Absence of patriotism has exposed our country to dependency on foreign suppliers for crucial medicines, and these foreign suppliers may not be so friendly in the future.

Giant U.S. companies are strip-mining America in numerous ways, starting with the corporate tax base. By shifting more of their profits abroad to “tax-haven” countries (like the Cayman Islands) through transfer pricing and other gimmicks, and by lobbying many other tax escapes through Congress, they can report record profits in the U.S. with diminishing tax payments. Yet they are benefitting from the public services, special privileges, and protection by our armed forces because they are U.S. corporations.

On March 27, 2013, the Washington Post reported that compared to forty years ago, big companies that “routinely cited U.S. federal tax expenses that were 25 to 50 percent of their worldwide profits,” are now reporting less than half that share. For instance, Proctor and Gamble was paying 40 percent of its total profits in taxes in 1969; today it pays 15 percent in federal taxes. Other corporations pay less or no federal income taxes.

Welcome to globalization. It induces dependency on instabilities in tiny Greece and Cyprus that shock stock investments by large domestic pension and mutual funds here in the U.S. Plus huge annual U.S. trade deficits, which signals the exporting of millions of jobs.

The corporate law firms for these big corporations were the architects of global trade agreements that make it easy and profitable to ship jobs and industries to fascist and communist regimes abroad while hollowing out U.S. communities and throwing their loyal American workers overboard. It’s not enough that large corporations are paying millions of American workers less than workers were paid in 1968, adjusted for inflation.

Corporate bosses can’t say they’re just keeping up with the competition; they muscled through the trade system that pulls down on our country’s relatively higher labor, consumer and environmental standards.

Corporate executives, when confronted with charges that show little respect for the country, its workers and its taxpayers who made possible their profits and subsidized their mismanagement, claim they must maximize their profits for their shareholders and their worker pension obligations.

Their shareholders? Is that why they’re stashing $1.7 trillion overseas in tax havens instead of paying dividends to their rightful shareholder-owners, which would stimulate our economy? Shareholders? Are those the people who have been stripped of their rights as owners and prohibited from even keeping a lid on staggeringly sky-high executive salaries ranging from $5,000 to $20,000 an hour or more, plus perks?

Why these corporate bosses can’t even abide one democratically-run shareholders’ meeting a year without gaveling down their owners and cutting time short. To get away from as many of their shareholder-owners as possible, AT&T is holding its annual meeting on April 26 in remote Cheyenne, Wyoming!
Pension obligations for their workers? The award-winning reporter for the Wall Street Journal Ellen E. Shultz demonstrates otherwise. In her gripping book Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers, she shows how by “exploiting loopholes, ambiguous regulations and new accounting rules,” companies deceptively tricked employees and turned their pension plans into piggy banks, tax shelters and profit centers.

Recently, I wrote to the CEOs of the 20 largest U.S. corporations, asking if they would stand up at their annual shareholders’ meetings and on behalf of their U.S. chartered corporation (not on behalf of their boards of directors), and pledge allegiance to the flag ending with those glorious words “with liberty and justice for all.” Nineteen of the CEOs have not yet replied. One, Chevron, declined the pledge request but said their patriotism was demonstrated creating jobs and sparking economic activity in the U.S.

But when corporate lobbyists try to destroy our right of trial by jury for wrongful injuries – misnamed tort reform – when they destroy our freedom of contract – through all that brazenly one-sided fine print – when they corrupt our constitutional elections with money and unaccountable power, when they commercialize our education and patent our genes, and outsource jobs to other countries, the question of arrogantly rejected patriotism better be front-and-center for discussion by the American people.

Ralph Nader is a consumer advocate, lawyer, and author. His latest book is The Seventeen Solutions: Bold Ideas for Our American Future. Other recent books include, The Seventeen Traditions: Lessons from an American Childhood, Getting Steamed to Overcome Corporatism: Build It Together to Win, and "Only The Super-Rich Can Save Us" (a novel).

Meet the CEO Who Cut Worker Pay in Half While Pulling in $21 Million Last Year

Corporate Accountability and WorkPlace  

Too Much: A Commentary on Excess and Inequality / By Sam Pizzigati

Meet the CEO Who Cut Worker Pay in Half While Pulling in $21 Million Last Year

CEOs these days aren’t just slashing worker jobs to add on to their own rewards. They’re slashing worker pay as well. 

 

March 25, 2013  |  

 

This article orignially appeared inToo Much, the inequality weekly. Sign up to receive free via email.

The founder of modern management science, Peter Drucker, considered excessive executive pay an assault on good enterprise management practice.
Peter Drucker, the analyst who founded modern management science, died in 2005 at age 95. At his death, business leaders worldwide hailed this
Austrian-born American for his enormous contribution to enterprise efficiency.

But Peter Drucker also cared deeply about enterprise morality. In his later years, he watched — and despaired — as downsizing became an accepted corporate gameplan for pumping up executive paychecks. Drucker could find “no justification” for letting CEOs benefit financially from worker layoffs.
“This is morally and socially,” he would write, “unforgivable.”

If Drucker were still writing today, he’d likely be even more unforgiving. CEOs these days aren’t just slashing worker jobs to add on to their own rewards. They’re slashing worker pay as well — and no CEO may be benefiting more from shrinking paychecks than Ford chief executive Alan Mulally.

Mulally has restored Ford to profitability, his many business and political admirers never tire of pointing out, without having to take any taxpayer bailout. But Mulally has indeed enjoyed a hefty bailout — from his workers.
Entry-level workers at Ford used to make $28 an hour. That rate fell by half when the auto industry financial crunch first hit five years ago and now sits a bit above $19. And since the crunch all Ford workers, not just entry-level workers, have given up cost-of-living wage adjustments and health benefits.

Auto industry execs have declared these worker concessions as absolutely necessary. Without lower compensation for auto workers, the argument goes, the auto industry would never become “globally competitive.” This same reasoning apparently doesn’t apply to compensation for Ford CEO Mulally.
Ford has just announced that Mulally’s pay package for 2012 nearly hit $21 million. His personal rewards for the year almost doubled the pay that went last year to his chief German rival, Daimler CEO Dieter Zetsche, and even more stunningly dwarfed the $1.48 million Toyota CEO Akio Toyoda took home.

But the magnitude of how well Mulally has done for himself — since Ford workers started coughing up concessions — only swings into real focus when we step back and contemplate the towering pile of Ford shares of stock he now holds. In just over a half-dozen years, CNN Money reports, Mulally “has amassed holdings valued at more than $300 million.”

Among America’s CEOs, of course, Mulally hardly stands alone. The outrageousness of American CEO rewards has been building for some time.
Back in 1986, as Forbes noted last week, America’s ten highest-paid CEOs together pocketed $57.88 million in compensation. In 2012, the top 10 pulled in $616.4 million, about five times as much as the 1986 total after taking inflation into account.

Over that same 26-year span, average weekly wages for America’s workers barely increased at all.

So what should we be doing about CEO compensation? In France, the newly elected government of President François Hollande has placed a 450,000 euro cap — about $580,000 — on executive pay at the 52 companies where the French government holds a majority stake.

This cap will essentially limit executives at these publicly controlled companies to no more than 20 times the pay of their lowest-paid workers.
The French people, for their part, would like to see their government apply a similar cap to executives at all corporations, not just those companies where the government holds a controlling interest.

Earlier this month, just after Swiss voters passed a national referendum that bans executive signing and merger bonuses, a major French pollster asked whether people favored or opposed creating a “maximum wage” for all corporate CEOs. A whopping 83 percent of the French public supported the idea.

The French may have been reading their Peter Drucker. American CEOs, Drucker believed, should earn no more than 20 or 25 times their worker pay. Last year, in Great Recession-ravaged Michigan, Alan Mulally pulled in over 500 times the pay of Ford’s lowest-paid workers.

 

Sam Pizzigati is the editor of the online weekly Too Much, and an associate fellow at the Institute for Policy Studies.