Archive for the ‘1%’ Category

Facebook’s Dubious Social Mission

Thursday, February 2nd, 2012

The Blues Brothers claimed they were on a mission from God. Mark Zuckerberg, whose $17 billion fortune is about to become even larger thanks to the Facebook initial public offering, insists that his company is on a “social mission.”

In a letter accompanying the firm’s first substantive disclosure filing, Zuckerberg writes that “Facebook was not originally created to be a company.” Its mission, he says, is “to make the world more open and connected,” and he insists: “we don’t build services to make money; we make money to build better services.”

It’s difficult to take this high-mindedness seriously in connection with a company that may soon have a market value of $100 billion built on persuading millions of people to hand over vast amounts of personal information about themselves that Facebook— which has a total workforce of only 3,200—then sells to corporate marketers.  Data protection and privacy are generally considered good things; for Facebook, the possibility of more stringent laws in those areas is presented as a risk factor in its SEC filing.

In his social mission statement, Zuckerberg also writes: “We believe building tools to help people share can bring a more honest and transparent dialogue around government that could lead to more direct empowerment of people, more accountability for officials and better solutions to some of the biggest problems of our time.”

It’s interesting that Zuckerberg never refers to the need for more accountability on the part of Facebook or corporations in general. His letter gives the appearance of promoting corporate social responsibility but never actually does so. His attitude seems to be that Facebook’s only real obligation is to provide supposedly fabulous services, and that by itself will change the world.

It should thus come as no surprise that when it comes to dealing with governments and communities, Facebook is just as self-serving as any corporation not pretending to be on a social mission. This is demonstrated most clearly at its data centers.

These facilities, also known as server farms, are large collections of computers that power online networks. They use vast amounts of power and thus are located in rural areas with cheap electricity. Being highly automated, they create few jobs—yet Internet companies take advantage of the desperation of local officials for investment of any kind to obtain substantial economic development subsidies.

Facebook announced in January 2010 that it would build its first data center in central Oregon, choosing a location in the economically depressed town of Prineville that was part of an enterprise zone, thus making it eligible for property tax breaks for up to 15 years. The company later began expressing public concerns about how its intangible property would be taxed. In recent months it has been pressuring state legislators to restrict the ability of the state revenue department to assess data centers as utilities.

The company has even tried to intimidate the state by warning that, unless it got its way on taxes, the future of the Prineville facility—which employs about 50 people—would be in question. The revenue department now seems to have backed down. It is amazing to see how this purportedly enlightened company would throw its weight around to avoid pay a tax bill that under the worst case scenario would have cost it only $390,000 a year. (That figure, by the way, is about 1 percent of the $30.9 million that Facebook chief operating officer Sheryl Sandberg received in total compensation last year, according to the company’s new SEC filing.)

Meanwhile, Facebook has negotiated a subsidy deal for its second data center, located in North Carolina’s Rutherford County. The facility, which was expected to create about 40 jobs, was made eligible for up to $11 million in county financial assistance, on top of state tax breaks for data centers enacted in 2010. The one good thing that can be said about these subsidies is that they are a lot less costly than the ridiculous sum of $260 million that North Carolina gave to Google in 2007 for its server farm project in the state.

In 2010 Facebook also got a $1.4 million grant from Texas Gov. Rick Perry’s Texas Enterprise Fund to help pay for the creation of a sales office in Austin.

Paying its fair share of state and local taxes without taking subsidies it doesn’t need and without bullying public officials would be a good way for Facebook to start acting like it really is on a mission other than enriching Mark Zuckerberg and a small number of other members of the 1%.

Romney Bites the Government Hand that Has Fed His Fortune

Thursday, January 12th, 2012

Occupy Wall Street may be getting less attention in the corporate media these days, but the movement’s message about the brutal and inequitable nature of contemporary U.S. business is front and center in an unlikely arena: the debate among the Republican contenders.

In recent days, Newt Gingrich and Rick Perry have assailed the business track record of Mitt Romney, using terms such as “vulture capitalism,” “looting” and “job killing” to describe his activities at buyout firm Bain Capital in the 1980s and 1990s.

Showing how frustrated personal ambition can outweigh ideology, Gingrich and Perry are espousing views far from their usual reactionary postures. It is the hypocrisy of frontrunner Romney, however, that is of greater significance. While being attacked from the faux Left by Gingrich and Perry, Romney has been veering to the Right. In his victory speech after the New Hampshire primary, he attacked President Obama for supposedly promoting “the politics of envy” and “resentment of success.” Channeling Ronald Reagan, he vowed that “the path I lay out is not one paved with ever increasing government checks and cradle-to-grave assurances that government will always be the answer.”

Yet a look at Romney’s record at Bain shows not only Gordon Gekko-like business buccaneering, but also a willingness to embrace those very government checks and assurances he is now repudiating. Companies acquired and managed by Bain during Romney’s tenure showed no hesitation in taking taxpayer handouts in the form of state and local economic development subsidies.

A comparison of the 1999 Bain portfolio obtained by the Los Angeles Times to the information in the Subsidy Tracker database my colleagues and I at Good Jobs First created (as well as other sources), yields examples such as the following:

Steel Dynamics Inc. In 1994 this company, among whose financial backers at the time was Bain, got a $77 million subsidy package—including grants, property tax abatements, tax credits and reimbursement for training costs—for its steel mill in DeKalb County, Indiana (Fort Wayne Journal Gazette, June 23, 1994).

GS Industries. In 1996 American Iron Reduction LLC, a joint venture of GS Industries (which had been taken private by Bain in 1993) and Birmingham Steel, sought some $20 million in tax breaks in connection with its plan to build a plant in Louisiana’s St. James Parish (Baton Rouge Advocate, April 6, 1996). As the United Steelworkers union noted recently, GS Industries later applied for a federal loan guarantee, but before the deal could be implemented the company went bankrupt.

Sealy. A year after the 1997 buyout of this leading mattress company by Bain and other private equity firms, Sealy received $600,000 from state and local authorities in North Carolina to move its corporate offices, a research center and a manufacturing plant from Ohio (Greensboro News & Record, March 31, 1998). In 2004 Bain and its partners sold Sealy to another private equity group.

GT Bicycles. In 1997 GT, then owned by Bain and other investors, decided to move its manufacturing operations to an enterprise zone in Santa Ana, California. Being in the zone gave the company, which was later purchased by Schwinn, special tax credits relating to hiring and the purchase of equipment (Orange County Register, July 9, 1999).

Since Romney arranged to share in Bain’s profits after he left the firm in 1999, it is legitimate to look at cases of subsidy grabbing by Bain companies after that time. Some of these involved firms that had been acquired during Romney’s tenure but which didn’t get their subsidies until after he departed. For example:

Stream International. In 2000, this operator of call centers, then controlled by Bain, agreed to open a facility in Kalispell, Montana, but only if local officials provided $4 million in grants and tax breaks (The Missoulian, February 8, 2000). U.S. Senator Max Baucus also arranged for a $500,000 grant from the federal Economic Development Administration (AP, March 4, 2000). Later that year, Stream got Silver City, New Mexico to provide tax credits, subsidized training and subsidized rent for another call center (Albuquerque Tribune, July 12, 2000).

Alliance Laundry Systems. In 2000 this maker of washing machines, purchased by Bain in 1998, received a $560,000 grant from the state of Florida in connection with its plan to move a commercial laundry from Cincinnati. (Tallahassee Democrat, June 8, 2000). In 2004 the company received $1.25 million in assistance (including a low-cost loan of $1 million and a $250,000 grant) from the state of Wisconsin. Bain sold the company to a Canadian pension fund in 2005.

Romney’s ongoing profit participation also makes it legitimate to look at subsidies that have gone to companies acquired by Bain after Romney moved into public life:

Burger King Corporation.  In 2005—while owned by Bain, TPG and Goldman Sachs—Burger King let it be known that it was considering moving its headquarters from the Miami area to Houston. After local and state officials put together a $9 million subsidy package, the company agreed to stay in South Florida but move to a new building.  Two years later, Burger King dropped the idea of a new headquarters altogether and had to repay $3 million of the package (which came from a Quick Action Closing Fund grant) to the state as a result. Bain and its partners sold off their remaining interest in Burger King in 2010.

Quintiles Transnational Corp. When Bain and other private equity firms bought this pharmaceutical services company in 2007 they inherited a $25 million subsidy package that the company had negotiated with North Carolina officials in 2006. The package included an up-front $2 million grant from the One North Carolina Fund, a $2 million matching grant from Durham County, and the promise of up to $21.4 million over 12 years from a performance-based Job Development Investment Grant.

AMC Entertainment. After being promised more than $40 million in subsidies, this movie chain (bought in 2004 by Bain and other private equity firms) agreed to move its headquarters from downtown Kansas City, Missouri to a nearby suburb across the state line in Kansas. The deal was criticized as an egregious case of taxpayer-financed sprawl.

And finally, what about Staples, whose early backing by Bain is frequently cited by Romney as the best example of his business acumen? The chain has long been making use of economic development subsidies, including the period when Romney was still at Bain. In 1996, for example, it chose Hagerstown, Maryland as the site for a distribution center after getting a $4.2 million subsidy package (Baltimore Sun, April 16, 1996).

It’s quite possible that Romney’s recent anti-government comments, like much of what he says, are not meant to be taken too seriously. But as long as he is spouting free-market rhetoric, he needs to be reminded about the extent to which his ascent (and that of the rest of the 1% ) has been propelled by public money.

Making Corporations Disappear

Thursday, November 10th, 2011

From the 11-year prison term and $92 million fine imposed on convicted insider trader Raj Rajaratnam to the apparent misappropriation of hundreds of millions of dollars in client funds at failed brokerage firm MF Global to the admission by Japan’s Olympus Corp. that it has been cooking the books for years, the news is full of reminders about the criminality that pervades the corporate world.

At the same time, the ongoing Occupy movement has been bringing renewed attention to the disastrous consequences of the Supreme Court’s Citizens United ruling that enshrined corporate personhood. One of the more popular protest messages seen at Occupy encampments is: “I will believe that corporations are people when Texas executes one of them.”

As Russell Mokhiber of Corporate Crime Reporter points out, the idea is not so far-fetched. For the past two decades there has been a small but persistent campaign to promote the idea that the state-granted charters of rogue corporations could be challenged, thereby putting them out of business. The movement was pioneered by Richard Grossman, who co-authored a well-circulated 1993 pamphlet entitled Taking Care of Business, which outlined legal and historical justifications for charter revocations.

Grossman’s evangelism helped create the Community Environmental Legal Defense Fund, which helps communities fight corporate intrusions at the local level, and the Program on Corporations, Law and Democracy, which publishes materials that “contest the authority of corporations to govern.”

These groups and others were challenging corporate personhood even before Citizens United, and groups inspired by these ideas launched campaigns to challenge the charters of outlaw corporations such as Union Carbide (largely because of its role in the Bhopal disaster) and Unocal (because of its role in oil spills, frequent workplace safety and health violations, and human rights violations in its relations with repressive governments).

The idea began to catch on. In 1998, Eliot Spitzer, then a candidate for New York Attorney General, said he would not hesitate to push for the dissolution of corporations found guilty of criminal offenses. In the early 2000s, groups in California pushed for a corporate three strikes law to deal with recidivist business offenders such as Tenet Healthcare.

The charter revocation concept waned for a while but had a resurgence last year in response to the outrageous behavior of BP in the Gulf oil spill and that of Massey Energy in creating the conditions that led to the Upper Big Branch mine disaster in West Virginia. Massey ended up being taken over by another company, but BP remains in business despite the fact that its misconduct in the Gulf occurred while it was on probation for earlier federal offenses relating to a 2005 refinery explosion in Texas and 2006 oil spills in Alaska.

The Occupy movement sets the stage for a new assault on corporate recidivists. There is no shortage of offenders. For instance, the New York Times just showed that numerous investment banks have committed repeated violations of Securities and Exchange Commission anti-fraud rules. Mokhiber suggests that potential candidates for the corporate death penalty include health insurers, nuclear power plant operators, giant banks and firms engaged in hydraulic fracking.

The real challenge is to figure out what it would mean to execute a giant corporation. There are few precedents for doing so. Nearly all the major companies that have gone out of existence have done so as the result of takeovers by other large firms. In a limited number of cases such as Enron and Lehman Brothers, companies were forced to liquidate, but by the time this happened the firms were effectively worthless.

Unanswered is the question of what would happen if a large and healthy corporation had to cease operations because of a charter revocation. Selling off the company piece by piece in fire sales to other large corporations would have the undesirable effect of increasing concentration in the industry.

While it may be morally satisfying to say that such a firm should simply vanish, that would be unfair to the workers and other stakeholders who may have played no role in the criminal behavior that brought on the revocation. Besides, this too could result in higher industry concentration as other firms capture the disappearing company’s market share.

What’s needed is a set of protocols for a just transition of a de-chartered company to a new corporate form based on principles such as trust busting (splitting up business behemoths into smaller entities), worker ownership, environmental responsibility and community oversight.

A distinction would have to be made between disappearing companies in those industries that serve a legitimate need and those which need to be phased out for reasons aside from the behavior of individual firms (coal, tobacco, for-profit health insurance, etc.).

Figuring out how to dismantle large companies will be a huge and complicated task, but it is an essential undertaking if we are ever to escape from the era of corporate domination.

Tax Dodging Inc.

Thursday, November 3rd, 2011

Given that big business provides the bulk of the money pouring into the political system, it is no surprise that members of Congress and presidential contenders alike tend to espouse the idea that large corporations are overtaxed. This myth gets repeated despite all the evidence that blue chip companies find endless ways to pay much less than the statutory rate.

It is now more difficult for the tax avoidance deniers to spread their snake oil. Citizens for Tax Justice and the Institute on Taxation and Economic Policy have just come out with a compelling study called Corporate Taxpayers & Corporate Tax Dodgers that examines the fine print of the financial statements of the country’s largest corporations and identifies scores of firms that fail to pay their fair share of the cost of government.

Looking at a universe of 280 companies, CTJ and ITEP find that over the past three years, 40 percent of them paid less than half of the statutory rate of 35 percent. Most of those paid what the study calls “ultra-low” rates of less than 10 percent. Thirty of the firms actually had negative tax rates, meaning that Uncle Sam was paying them for doing business. In dollar terms, the biggest recipients of tax subsidies over the three-year period were Wells Fargo ($18 billion), AT&T ($14.5 billion), Verizon Communications ($12.3 billion) and General Electric ($8.4 billion). The freeloaders had rates as low as minus 57.6 percent. You should read the study for yourself to get all the juicy details.

CTJ and ITEP have been putting out these bombshell reports periodically over the past three decades. The ones from the early 1980s drove the Reagan Administration crazy and paved the way for the Tax Reform Act of 1986, which reversed many of the corporate giveaways of the initial Reagan years.

It is tempting to think that this new report will subvert the current corporate tax relief movement, but that is a tall order. Part of the reason is that corporations, having bought much of the policymaking apparatus, have become much more brazen in their self-serving behavior.

Let’s take the case of Nabors Industries, the world’s largest oil and gas land drilling contractor.  Nabors was not eligible to be considered for the CTJ/ITEP study because it is headquartered in Bermuda. The company is not really Bermudan. Its principal offices are in Houston, but it re-incorporated itself in the island nation a decade ago for one simple reason: to escape paying U.S. federal income taxes (Bermuda imposes no such levies on corporations). It was part of a wave of companies that in the early 2000s underwent what were euphemistically called corporate inversions.

Critics called the moves “unpatriotic” or even “akin to treason,” but Nabors went ahead with its plan. There was an effort later in Congress to collect retroactive taxes from Nabors and a handful of other firms that had carried out inversions, but the move was blocked by New York Rep. Charles Rangel after Nabors CEO Eugene Isenberg made a $1 million contribution to a help build the Charles B. Rangel School of Public Service at the City College of New York. Rangel was subsequently charged with an ethics violation in connection with the contribution.

Nabors and Isenberg have been in the news again recently in connection with another scandal. Nabors announced that it was paying Isenberg, now 81 years old, $100 million to give up his post as chief executive. Although the payment is linked to a severance agreement, Isenberg is remaining with the company as chairman of the board. The situation was remarkable enough to merit a front-page story in the Wall Street Journal, which is normally blasé about bloated executive pay.

Isenberg’s bonanza is the culmination of a series of outsized pay packages. In 2005, for instance, he received total compensation of more than $200 million. In 2008 his bonus alone was more than $58 million. In a non-binding vote earlier this year, a majority of Nabors shareholders disapproved the company’s executive pay policies.

It used to be that executive compensation was high in relation to worker pay rates put still a relatively small amount compared to revenue and profits in large companies.  That has been changing. The payouts to Isenberg have a significant impact on the firm’s bottom line. The $100 million being collected by Isenberg to give up his CEO job more than wipes out the $74 million in profits Nabors posted for the most recent quarter. Nabors, by the way, has disclosed that it has been investigated by the Justice Department for making foreign bribes.

As the Institute for Policy Studies showed in a report a couple of months ago, it is not unusual for major companies to pay their chief executives more than they send to the Treasury in taxes. Add to that the CTJ/ITEP findings and the behavior of firms like Nabors, and it is difficult to avoid the conclusion that in many large corporations the dominant motivation is to enrich their principals, even if that means sidestepping obligations to shareholders, government and workers. In other words, big business is increasingly acting as little more than a vehicle for expanding the wealth of the 1%.

Clawing Back from the 1%

Thursday, October 27th, 2011

Rick Perry has admitted that his recent attempt to revive controversy over President Obama’s birth certificate was done for “fun.” This came after Herman Cain said that his call for an electrified fence to protect the U.S. border with Mexico was meant as a joke.

The question, then, is whether their economic plans should also been seen as pranks. It is indeed difficult to take the proposals of the two men and the other presidential contenders seriously. Do they really believe that the solution to the country’s job crisis lies in massive tax reductions for the wealthy and large corporations along with a rollback of federal regulations on banks, health insurance companies and polluters? These ideas sound as if they were cooked up as part of a Yes Men parody to make the 1% look ridiculous in the face of the growing Occupy movement.

One sign that the candidates are not putting forth legitimate policy prescriptions is that their plans contain no accountability provisions. Perry’s just released “Cut, Balance and Grow” scheme, for instance, has repeated references to the wave of job creation that will supposedly be generated by overhauling the tax and regulatory systems, but nowhere does it say what will happen to those companies that, in spite of being freed from federal shackles, still fail to hire significant numbers of new workers.

When it comes to foreign policy, conservatives love Ronald Reagan’s dictum of “trust, but verify.” But in the realm of domestic economic policy their approach is “take it on faith” – giving the 1% everything they want and doing nothing to make sure that the purported benefits to the economy ever materialize. Actually, it is not only conservatives who adopt this posture. Many pro-corporate Democrats are also willing to give away the store to big business without imposing any real safeguards. This can be seen, for instance, in the bi-partisan campaign to slash taxes on repatriated foreign profits without ensuring that those savings actually result in job creation.

Presidential candidates and federal policymakers have something to learn in this regard from the states, including Perry’s Texas.  Together, the states spend tens of billions of dollars each year on tax credits, grants, low-cost loans and other forms of financial assistance to corporations in an attempt to stimulate job creation and economic development.

More and more of these subsidy programs attach strings to the government largesse. Corporate recipients must commit to creating a specific number of jobs, which are often subject to wage and benefit requirements. When companies fail to live up to those obligations, the state may recoup all or some of the subsidies (or restrict future benefits) through devices known as clawbacks. These provisions vary widely in stringency from state to state and sometimes within states.

My colleagues and I at Good Jobs First are currently studying the job creation, job quality and clawback practices of the major state subsidy programs around the country. Our report will not be issued until later this year, but I can say now that among the programs that contain clawback provisions are two that are closely controlled by Perry: the Texas Enterprise Fund and the state’s Emerging Technology Fund. These funds have been criticized for cronyism and other abuses, but at least there are some mechanisms for holding recipients accountable on their commitments.

The same cannot be said at the federal level. If Perry and others proposing national solutions to the jobs crisis were serious, they would be recommending that any tax reductions or regulatory relief be contingent on the creation of significant numbers of jobs—and quality ones at that.

I don’t expect this to happen any time soon. Both branches of the national political elite have bought into the idea that large corporations and the wealthy have to be, in effect, bribed to make job-creating investments in the U.S. economy and that there is no recourse when they fail to carry out what they were paid off to do.

Even before the current crop of pro-corporate economic plans, large companies and the wealthy have, of course, benefitted from a skewed tax system, special subsidies for selected industries, lucrative federal contracts, weak regulation, one-sided labor laws, and a justice system that is soft on business crime. And we have little to show for it in the way of decent jobs and economic security.

Rather than showering even more advantages on the 1 percenters, we should be demanding that they give something back. The Occupy movement can be seen as a big clawback effort whose goal is to recoup not just a tax break here or there but control over the future of the entire U.S. economy.

Subsidizing the 1%

Thursday, October 20th, 2011

Seeking to counter the criticisms raised by the growing Occupy movement, Herman Cain and other apologists for the super-wealthy insist that those who get rich do so only by dint of their own hard work and risk-taking.

This is ridiculous, of course. Accumulating a great fortune requires, among other things, a legal system oriented to property rights, a tax system biased in favor of investment income, and government spending on infrastructure ranging from interstate highways to the internet.

The 1% do not only benefit from the general social and economic framework: in many cases they also receive financial assistance directly from taxpayers. This can be seen most clearly in the economic development subsidies that corporations receive from state and local governments. These are usually awarded in the name of job creation, but often few or no good jobs are created, making the subsidies little different than a handout to powerful business entities.

The closest approximation we have to a roster of the 1% is the Forbes 400 list of the wealthiest Americans. The companies used by those individuals as the vehicles for amassing billions have in many cases been on the receiving end of taxpayer subsidies. Here are some examples drawn from the data my colleagues and I at Good Jobs First have compiled for our Subsidy Tracker database and other sources:

Bill Gates: No. 1 on the Forbes 400 with a net worth of $59 billion

When Microsoft, the source of Gates’ wealth, builds giant server farms to meet its growing data needs it looks for locations that can provide dirt-cheap electricity. Yet the huge company also seeks special tax breaks from state and local governments. In 2010 the company took the lead in pressuring the legislature in its home state of Washington to enact a special sales tax exemption on equipment purchased for rural data centers. After deciding in 2007 to build a $550 million data center in Bexar County, Texas near San Antonio, Microsoft pushed for a subsidy package that turned out to be worth more than $32 million, including $27 million in city and county property tax abatements. State officials in Iowa agreed to provide a $3.4 million grant to pay for infrastructure improvements around a Microsoft data center being built in West Des Moines. These data centers provide tiny numbers of jobs.

Warren Buffett: No. 2 with $39 billion

When General Re, an insurance firm owned by Buffett’s Berkshire Hathaway holding company, decided in 2009 that it was no longer satisfied with its headquarters in Stamford, Connecticut, it gave the impression that it might move out of state. Panicked state officials put together a subsidy package that included a $19.5 million tax credit and a $9 million low-cost loan to subsidize the company’s move to another location within Stamford. No new jobs were to be created.

Larry Ellison: No. 3 with $33 billion

In 2008 Ellison’s software company Oracle obtained $15 million in state tax credits to subsidize the cost of a $300 million data center in Utah that was expected to create only about 100 full-time jobs. In addition, the city of West Jordan agreed to divert $11.8 million in property taxes over ten years to pay for infrastructure costs.

Charles Koch and David Koch: No. 4 with $25 billion

Although the Koch Brothers are rabid proponents of “free” market policies, their Koch Industries has taken more than $10 million in subsidies under Oklahoma’s Investment/New Jobs Tax Credit program.

Christy Walton & family: No. 6 with $24.5 billion (and three other Waltons worth more than $20 billion)

The descendants of Wal-Mart founder Sam Walton are the richest group of relatives in the country. In addition to lousy wages and cheap imports, Wal-Mart’s growth has been funded by taxpayers. At Good Jobs First we have documented more than $1.2 billion in state and local economic development subsidies that have gone to Wal-Mart stores and distribution centers around the country.

Jeff Bezos: No. 13 with $19.1 billion

Bezos built Amazon.com into an online retailing powerhouse by exploiting what amounts to an unofficial subsidy. The company’s resistance to collecting sales taxes on customer purchases gives it a competitive advantage over brick-and-mortar rivals. Amazon also plays the conventional subsidy game. When it opened fulfillment centers in Kentucky about a decade ago it obtained more than $27 million in financial assistance from the state.

Mark Zuckerberg: No. 14 with $17.5 billion

Zuckerberg’s Facebook also rides the data center subsidy gravy train. In 2010 the company chose to locate a server farm in an enterprise zone in Prineville, Oregon, enabling it to enjoy property tax breaks that could be worth more than $40 million over the next 15 years. Facebook also applied for a 10-year waiver of all income and excise taxes under the Oregon Investment Advantage program. The facility opened in April with a total staff (including security guards) of 40 people. In 2010 Facebook also got a $1.4 million grant from Texas Gov. Rick Perry’s Texas Enterprise Fund to help pay for the creation of a sales office in Austin.

Sergey Brin and Larry Page: No. 15 with $16.7 billion

Founded by Brin and Page, Google is yet another tech darling in the data center racket. In 2007 the company announced it would build one of those facilities in the western North Carolina town of Lenoir after pressuring state and local officials to come up with a subsidy package that turned out to be worth $260 million. In 2008 Google turned down a small portion of the subsidy package – $4.7 million from the Job Development Investment Grant program – apparently because it did not expect to reach its original goal of creating 210 jobs within four years. Google also got about $49 million in subsidies for a data center it opened in Iowa in 2009.

Michael Dell: No. 18 with $15 billion

At one time, the founder of computer company Dell was one of the few members of the Forbes 400 whose firm was creating manufacturing jobs in the United States. On that basis, Dell got officials in North Carolina to put together a $242 million subsidy package in 2004 for a PC assembly plant in Winston-Salem. The facility opened in 2005 with 350 workers and grew to about 1,100 before cutting back to about 900. State and local officials were stunned in 2009 when Dell announced plans to shut the operation (and others in the U.S.) and outsource the work to contract plants in Mexico and other countries. Officials pressed Dell to return the subsidies it had received. The company agreed to give back about $26 million of the local subsidies but balked at repaying state tax credits it had claimed.

 

These subsidies, by themselves, did not ensure the success of the companies or propel the members of the Forbes 400 into the realm of ten-figure net worths. Yet the amounts of money involved are not insignificant—especially to the governments that had to forgo the revenues. In the aggregate, state and local subsidies take about $60 billion a year out of the funding for education, healthcare, fire protection and other public services.

Such subsidies are also a prime example of how this country caters to wealthy individuals and large corporations, and how they in turn demand to be compensated by taxpayers for what they should be doing at their own expense. It’s time for the 1% to do less taking and more giving back.

A Rogues Gallery of the One Percent

Thursday, October 13th, 2011

For the past 30 years, Forbes magazine has used its annual list of the 400 richest Americans as a platform for celebrating the wealthy. This year, amid the persistent jobs crisis and the growing challenge posed by the Occupy movement, the Forbes list has to be viewed in a different light. Rather than a scorecard of success, it comes across as a rogues gallery of the 1 Percent who have hijacked the U.S. economy.

Start with the overall numbers. Combined, the 400 are worth an estimated $1.5 trillion, up 12 percent from the year before. This at a time when both the net worth and annual income of the typical American household have been sinking. When the first Forbes list was published in 1982 there were only about a dozen billionaires. Today, every single member of the 400 has a ten-figure fortune. Their average net worth is $3.8 billion.

And where did this wealth come from? Forbes tries to justify the skyrocketing assets of the 400 by saying that “an alltime-high 70% are self-made…This is the working elite.” New riches may indeed be better than inherited wealth, but how did this “elite” climb the ladder of success?

The question is all the more pertinent, given the current inclination of conservatives to refer to the wealthy as “job-creators” as a way of rebuffing efforts to get the plutocrats to pay their fair share of taxes.

How much job creation can be attributed to the Forbes 400? In a chart on Sources of Wealth, the magazine notes that the largest single “industry” is investments, accounting for the fortunes of 96 of the 400. By contrast, manufacturing, which is more labor intensive, is listed as the source for only 17 of the tycoons.

Within the investments category, about one-sixth of the people in the top 100 made their fortunes from hedge funds, private equity and leveraged buyouts—activities that are more likely to result in the destruction than the creation of jobs. For example, Sam Zell (net worth: $4.7 billion) was ruthless in laying off workers after his takeover of the Tribune newspaper company.

Forbes no doubt would respond by pointing to the 48 people on the list who got fabulously wealthy from the technology sector. Yet many of these companies create very few jobs: Facebook, which made Mark Zuckerberg worth $17.5 billion, has only about 2,000 employees. Or, like Apple, which gave the late Steve Jobs a $7 billion fortune, they create most of their jobs abroad in low-wage countries such as China rather than manufacturing their gadgets in the United States. The same is now true for Dell—source of Michael Dell’s $15 billion fortune—which has closed most of its U.S. assembly operations.

The few people on the list who are associated with large-scale job creation in the United States got rich from a company known for paying lousy wages and fighting unions. Christy Walton and her immediate family enjoy a net worth of more than $24 billion deriving from the notorious Wal-Mart retail empire (other Waltons are worth billions more). The Koch Brothers ($25 billion) are bankrolling the effort to weaken collective bargaining rights and thereby depress wage levels, while satellite TV pioneer Stanley Hubbard ($1.9 billion) has been an outspoken critic of labor unions and was an aggressive campaigner against the Employee Free Choice Act.

Poor job creation performance and anti-union animus are not the only sins of the 400 and their companies. Some of them have a checkered record when it comes to other aspects of accountability and good corporate behavior.

Start at the top of the list. Bill Gates, whose $59 billion net worth makes him the richest individual in the United States, is known today mainly for his philanthropic activities. Yet it was not long ago that Gates was viewed as a modern-day robber baron and Microsoft was being prosecuted by the European Commission, the U.S. Justice Department and some 20 states for anti-competitive practices. In the 1990s there were widespread calls for the company to be broken up, but Microsoft reached a controversial settlement with the Bush Administration that kept it largely intact.

Today it is Google, whose founders Sergey Brin and Larry Page are estimated by Forbes to be worth $16.7 billion, that is at the center of accusations of monopolistic practices.

Amazon.com, headed by Jeff Bezos ($19.1 billion), has fought against the efforts of a variety of state governments to get the online retailer to collect sales taxes from its customers. By failing to collect taxes on most transactions, Amazon gains an advantage over its brick-and-mortar competitors but deprives states of billions of dollars in badly needed revenue.

Cleaning products giant S.C. Johnson & Son, the source of the combined $11.5 billion fortune of the Johnson family, recently admitted that it has used aggressive tax avoidance practices to the extent that it pays no corporate income taxes at all in its home state of Wisconsin. Forbes ignores this issue, but instead describes in detail the criminal sexual molestation charges that have been filed against one member of the family.

And then there are the environmental offenders, such as Ira Rennert ($5.9 billion.) His Renco Group was for years one of the country’s biggest polluters, and the Peruvian lead smelter of his Doe Run operation is one of the most hazardous sites in the world.

This is only a small sampling of the transgressions of the 400 and their companies. Rather than being hailed as job creators, they should be made to answer for their job destruction, their tax avoidance, their anti-competitive practices, their environmental violations and much more.  Rather than celebration, the Forbes 400 and the rest of the 1 Percent are in need of investigation.