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Posts Tagged ‘corporate tax’

GOP Smash-And-Burn Tax Plan Does Nothing for Workers

Friday, October 27th, 2017

Congressional Republicans are selling a trickle-down tax scam times two. It’s the same old snake oil, with double hype and no cure.

A single statistic explains it all: one percent of Americans – that is the tiny, exclusive club of billionaires and millionaires – get 80 percent of the gain from this tax con. Eighty percent!

But that’s not all! To pay for that unneeded and unwarranted red-ribbon wrapped gift to the uber wealthy, Republicans are slashing and burning $5 trillion in programs cherished by workers, including Medicare and Medicaid.

Look at the statistic in reverse, and it seems worse: 99 percent of Americans will get only 20 percent of the benefit from this GOP tax scam. That’s not tax reform. That’s tax defraud.

Republican tax hucksters claim the uber rich will share. It’s the trickle down effect, they say, the 99 percent will get some trickle down.

It’s a trick. Zilch ever comes down. It’s nothing more than fake tax reform first deployed by voodoo-economics Reagan. There’s a basic question about this flim-flammery: Why do workers always get stuck depending on second-hand benefits? Real tax reform would put the rich in that position for once. Workers would get the big tax breaks and the fat cats could wait to see if any coins trickled up to jingle in their pockets.

House Speaker Paul Ryan claimed Republicans’ primary objective in messing with the tax code is to help the middle class, not the wealthy. Well, there’s a simple way to do that:  Give 99 percent of the tax breaks directly to the 99 percent.

The Republican charlatans hawking this new tax scam are asserting the pure malarkey that it provides two, count them TWO, trickle-down benefits. In addition to the tried-and-false fairytale that the rich will share with the rest after collecting their tax bounty, there’s the additional myth that corporations will redistribute downward some of their big fat tax scam bonuses.

A corporate tax break isn’t some sort of Wall Street baptism that will convert CEOs into believers in the concept of paying workers a fair share of the profit their labor creates.

Corporations have gotten tax breaks before and haven’t done that. And they’ve got plenty of cash to share with workers right now and don’t do it. Instead, they spend corporate money to push up CEO pay. Over the past nine years, corporations have shelled out nearly $4 trillion to buy back their own stock, a ploy that raises stock prices and, right along with them, CEO compensation. Worker pay, meanwhile, flat-lined.

In addition to all of that cash, U.S. corporations are currently sitting on another nearly $2 trillion. But CEOs and corporate boards aren’t sharing any of that with their beleaguered workers, who have struggled with stagnant wages for nearly three decades.

Still, last week, Kevin Hassett, chairman of the President’s Council of Economic Advisers, insisted that the massive corporate tax cut, from 35 percent down to 20 percent, will not trickle, but instead will shower down on workers in the form of pay raises ranging from $4,000 to $9,000 a year.

Booyah! Happy days are here again! With the median wage at $849 per week or $44,148 a year, that would be pay hikes ranging from 9 percent to 20 percent! Unprecedented!

Or, more likely, unrealistic.

Dishonest, incompetent, and absurd” is what Larry Summers called it. Summers was Treasury Secretary for President Bill Clinton and director of the National Economic Council for President Barack Obama.

Jason Furman, a professor at the Harvard Kennedy School who once held Hassett’s title at the  Council of Economic Advisers, called Hassett’s findings “implausible,”  “outside the mainstream” and “far-fetched.”

Frank Lysy, retired from a career at the World Bank, including as its chief economist, agreed that Hassett’s projection was absurd.

Hassett based his findings on unpublished studies by authors who neglected to suffer peer review and projected results with all the clueless positivity of Pollyanna. Meanwhile, Lysy noted, Hassett failed to account for actual experience. That would be the huge corporate tax cuts provided in Reagan’s Tax Reform Act of 1986.

Between 1986 and 1988, the top corporate tax rate dropped from 46 percent to 34 percent, but real wages fell by close to 6 percent between 1986 and 1990.

Thus many economists’ dim assessment of Hassett’s promises.

The other gob-smacking bunkum claim about the Republican tax scam is that it will gin up the economy, and, as a result, the federal government will receive even more tax money. So, in their alternative facts world, cutting taxes on the rich and corporations will not cause deficits. It will result in the government rolling in coin, like a pirate in a treasure trove. That’s the claim, and they’re sticking to it. Like their hero Karl Rove said, “We create our own reality.”

Here’s Republican Sen. Patrick J. Toomey, for example: “This tax plan will be deficit reducing.”

If the Pennsylvania politician truly believes that’s the case, it’s not clear why he voted for a budget that would cut $473 billion from Medicare and $1 trillion from Medicaid. If reducing the tax rate for the rich and corporations really would shrink the deficit, Republicans should be adding money to fund Medicare and Medicaid.

While cutting taxes on the rich won’t really boost the economy, it will increase income inequality. Makes sense, right? Give the richest 1 percenters 80 percent of the gains and the remaining 99 percent only 20 percent and the rich are going to get richer faster.

Economist Thomas Piketty, whose work focuses on wealth and income inequality and who wrote the best seller “Capital in the Twenty First Century,” found in his research no correlation between tax cuts for the rich and economic growth in industrialized countries since the 1970s. He did find, however, that the rich got much richer in countries like the United States that slashed tax rates for the 1 percent than in countries like France and Germany that did not.

This Republican tax scam is a case of the adage that former President George W. Bush once famously bungled: “Fool me once, shame on you. Fool me twice, shame on me.”

This blog was originally published at OurFuture.org on October 27, 2017. Reprinted with permission.

About the Author: Leo Gerard, International President of the United Steelworkers (USW), took office in 2001 after the retirement of former president George Becker.

Caterpillar’s CEO Just Got A Big Raise, And It Explains What’s Wrong With American Capitalism

Tuesday, April 21st, 2015

AlanPyke_108x108Heavy machinery manufacturer Caterpillar gave its CEO a 14 percent raise last year, in a $17.1 million package of cash, stock, and other compensation that is hard to justify in light of the famed brand’s actual performance.

CEO Douglas Oberhelman’s big raise came despite a decline in Caterpillar’s sales. The company justified its decision to Crain’s by pointing out that Oberhelman oversaw a good year for the company as measured on a per-share basis. Those accounting metrics benefited from the company’s decision last year to buy back a bunch of shares to make Caterpillar look better on a per-share basis, the Wall Street Journal notes.

Caterpillar is hardly unique in finding creative ways to justify paying CEOs. Therules for performance pay are broken across all industries. Fortune 500 CEOs are now paid hundreds of times what the typical worker makes, up from the healthier 30-to-1 ratio that was typical in the long middle-class boom that followed World War II.

Oberhelman has been paid nearly $18 million per year on average since assuming the company’s top office. The $17.1 million package for 2014 is a hefty percent raise from the $15 million Caterpillar paid Oberhelman in 2013. That year’s package was portrayed as a significant cut from his 2012 earnings of $22.4 million, but critics in 2013 argued that even that down year was still a severe overpayment for the CEO’s performance. The way the company’s performance-based compensation systems are designed, the CEO got a $2 million performance bonus for a year when sales fell by 16 percent.

The company is a perennial favorite when politicians and journalists need something to stand in for middle-American moxie and blue-collar striving. Profiles of both Caterpillar and Oberhelman tend to play up the firm’s roots in Peoria, Illinois, a town rendered synonymous with Real America by the cliched old test of an idea’s marketability: “Will it play in Peoria?”

Caterpillar earned its associations with American grit and ingenuity in its early decades of success, but its modern behavior is testament to the financialization of even the blue-collar segments of the U.S. economy. Modern-day Cat does what is best for the share price even if that means squashing its actual production workers in contract talks and moving their jobs across the state lineif they object too loudly to the new treatment.

Identifying Caterpillar’s success with humble midwestern values is a lie, at this point in the company’s history. Oberhelman and his shareholders make gobs of money from a wink-nudge arrangement in Switzerland. A Swiss subsidiary claims to be the final destination for much of the cash that Cat brings in. Caterpillar paid $55 million to wish that Swiss branch into being about 80 years after its founder opened his first factory in Peoria.

The scheme has avoided $2.4 billion in U.S. tax payments since 2000.

The deal is also entirely legal, much like the highly technical profit-shifting arrangements that tech giants use to keep their profits away from the Internal Revenue Service. Caterpillar gets all the public relations gloss that comes with being from Peoria while ducking the taxes that fund roads and fire departments and houses that people can afford to buy in central Illinois.

Caterpillar’s Swiss swindle is especially useful to shareholders and people like Oberhelman whose pay is determined more by stock tickers than by what happens on the factory floor. The company’s stock price benefits from engineering a flow of company cash that leaves more overall value on the books, even if the books are Swiss and the stocks trade in Chicago.

Moves that hurt workers but benefit investors threaten to become a defining pattern in the American business world. Years of hostile takeovers in the 1980s and 1990s helped create a fascination with short-term indicators of shareholder value, as Steven Pearlstein explains, and that fascination is now part of the curriculum in business schools. Executive compensation shifted more and more from cash to stock, giving the people in charge of the largest firms in the U.S. economy a huge incentive to chase short-term on-paper valueat the expense of the long-term, concrete business success. Because that shift benefits people wealthy enough to own stock at the expense of working people, the financialization of the American business world has naturallyexacerbated inequality.

Opposing the sheer size or inequity of modern CEO compensation doesn’t do much to address the roots of the problem, no matter how loud the objections. Restoring the traditional link between work and economic mobility means reversing the financialization of companies like Caterpillar — causing them to focus on the long-term and consider interests that aren’t gauged in stock prices. Ideas for changing corporate behavior include greater profit-sharing for lower-level employees and closing tax loopholes that make stock-based CEO pay deductible.

Last year, such ideas featured prominently in the work of an international working group of left-of-center policymakers that some pundits expect will serve as the basis for Hillary Clinton’s economic platform in her run for the White House. If the 2016 cycle stops through Peoria, as so many previous politicians have done to use Caterpillar production facilities as a backdrop for speeches and glad-handing, the company may find itself cast in a very different kind of story about the American economy.

This blog originally appeared in Thinkprogress.org on April 21, 2014. Reprinted with permission.

About the Author: Alan Pyke is the Deputy Economic Policy Editor for ThinkProgress.org. Before coming to ThinkProgress, he was a blogger and researcher with a focus on economic policy and political advertising at Media Matters for America, American Bridge 21st Century Foundation, and PoliticalCorrection.org. He previously worked as an organizer on various political campaigns from New Hampshire to Georgia to Missouri. His writing on music and film has appeared on TinyMixTapes, IndieWire’s Press Play, and TheGrio, among other sites.

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