Archive for the ‘Corporate Subsidies’ Category

Corporate Virtue and Corporate Subsidies

Thursday, January 30th, 2014

corporate_flag2-1For a speech that was supposed to focus on the plight of low-wage workers, President Obama’s State of the Union contained a surprising number of favorable references to specific large corporations. I counted seven plugs — for Apple, Costco, Ford, Google, Microsoft, Sprint and Verizon. The Ford mention, which alluded to “the best-selling truck in America,” sounded like a high-level product placement.

Most of these companies were cited for their supposed acts of corporate virtue, such as the role of the telecoms in helping to bring high-speed broadband to schools. There’s something else these firms have in common: they’ve all been recipients of substantial economic development subsidies from state and local governments.

My colleagues and I at Good Jobs First issued two reports this week that take a critical stance toward these types of financial aid to business. In one of the reports, Putting State Pension Costs in Context, we look at how the revenue loss from subsidies and corporate tax breaks and loopholes compare to the cost of public employee pensions in ten states where those retirement benefits have been under attack.

We find that in every one of the states the corporate giveaways far outweigh the current costs of providing pensions to state workers. In the case of Louisiana, for example, the giveaways are more than five times the retirement costs.

State legislators and governors have a tendency these days to get frantic about pension costs. Our research suggest that they should be more concerned about the larger revenue losses stemming from what are often ineffective “incentives” given to business.

The other report, Show Us the Subsidized Jobs, is the latest in our series of surveys on the performance of state governments in disclosing online which companies are getting financial assistance and what they are doing with it, especially in relation to job creation. There are two main messages that emerge from the study.

First is the fact that there is now at least some online recipient disclosure in all but a handful of states. The number has doubled since we did the first of these surveys in 2007. That’s the good news.

The other message is not so encouraging: There are vast discrepancies in the depth and the quality of the disclosure. Some states such as Michigan and North Carolina provide reasonably good disclosure for all their major programs, while others such as Nevada and South Carolina provide bare-bones disclosure — meaning company names only — for only one key program. In many cases no information is reported on the number of jobs subsidized companies are creating or the wages being paid.

To enable detailed comparisons of programs, we rate them on a scale of 0 to 100. Points are given for providing details on subsidy amounts, on job and wage outcomes, and on the inclusion of key information about subsidized projects and companies. We also rate programs on how easy it is to find and use the data.

Based on this system, the states with the best average scores for their key programs are Illinois, Michigan and North Carolina. Being best in relative terms does not mean that the absolute scores are very impressive. Top-ranking Illinois has an average of only 65 and Michigan comes in at 58. Every other state has an average below 50 percent. The average program score is only 21 (or 39 if you leave out those with no disclosure at all). Only seven programs score 75 or above.

These scores are so low mainly because so many programs fail to provide good reporting on outcomes, which account for a large portion of the points in our scoring system. Fewer than half of the 246 programs we examine include any reporting on jobs or wages in subsidized companies. And many of those that do provide only projections rather than the actual amounts. Less than one-tenth of the programs provide actual amounts for both jobs and wages.

In the report we emphasize that transparency does not equal effectiveness or complete accountability. A program can disclose all the essential details but still be a waste of taxpayer money. Transparency is what allows the public to determine when that is the case.

Our interest in disclosure is not only for abstract reasons of accountability. If states put more information online, there were will more for us to capture for our Subsidy Tracker database, a national search engine covering more than 500 programs.

Next month we will introduce Subsidy Tracker 2.0. Along with the raw data, we will add information on the parent company of the recipient firms. This will make it possible to see at a glance how much large companies such as the seven cited above have received across the country. The Dirt Diggers Digest will provide wall-to-wall coverage.

Challenging Wal-Mart’s Freeloading Ways

Thursday, November 21st, 2013
from Cleveland.com

from Cleveland.com

Countless words have been published about the retrograde labor practices of Wal-Mart, but none of that writing conveyed as much as the short message recently reported to have been taped to a bin in an employees-only area at one of the company’s stores in Ohio: “Please donate food items here so Associates in Need can enjoy Thanksgiving Dinner.”

My first reaction was that this was a stunt staged by the Yes Men to embarrass the giant retailer. Yet it was all too real. In fact, a corporate spokesperson saw nothing amiss, saying it showed how much the company’s employees care about each other. No doubt they do, but the problem is that Wal-Mart is so deliberately obtuse about its obligation to provide a decent living to those on its payroll.

Leaving it to hard-pressed workers to support their colleagues is just one of the ways Wal-Mart shifts its costs to others. The company puts a much bigger burden on taxpayers, who end up paying for the healthcare coverage that so many of its employees must get from public programs such as Medicaid.

In the early 2000s some states began to disclose which employers accounted for the most low-wage workers and their dependents in these programs. Wal-Mart was invariably at or near the top of these lists. (See the Good Jobs First compilation here.)

Unfortunately, fewer of these lists are being released (and the Affordable Care Act will apparently do nothing to help). Yet the few recent disclosures show Wal-Mart is still creating more of these hidden taxpayer costs than any other company. For example, in July the Dayton Daily News obtained data from the Ohio Department of Job and Family Services indicating that Wal-Mart had more employees or household members on Medicaid or food stamps than any other employer in the state. The most recent compilation of employers accounting for the largest number of recipients in Connecticut’s Husky program (its version of Medicaid) also had Wal-Mart as number one.

Another approach was taken in a recent report by the Democratic staff of the U.S. House Committee on Education and the Workforce, which estimates that the workforce of a typical Wal-Mart Supercenter costs taxpayers some $250,000 a year for Medicaid services (as part of at least $904,000 a year in overall federal safety net costs per store).

These hidden costs are not the only way Wal-Mart sticks taxpayers with the bill. The company has traditionally also been shameless in demanding special tax breaks and other forms of financial assistance when it opens a new store or distribution center. My colleagues and I at Good Jobs First have been tracking this practice since 2004, when we published a report estimating that the company had collected some $1 billion in such subsidies. We later updated the report, finding that the total had risen to $1.2 billion, and we assembled all the data in a website called Walmart Subsidy Watch.

In many of its more controversial urban siting efforts in recent years, Wal-Mart has put less emphasis on special subsidies, which we like to think is because we made the practice more radioactive. Yet the company cannot resist its giveaway demands entirely.

Recently, for example, the company sought tax breaks totaling some $5.4 million for a Supercenter and Sam’s Club it is proposing to build in the Chicago suburb of Tinley Park. Thankfully, the plan was shot down by the board of the Summit Hill School District, which took its vote after a hearing in which one resident described Wal-Mart as a “corporate monster.”

In Texas, however, Wal-Mart seems to be on track to receive a property tax abatement worth $3 million in connection with its plan to build an e-commerce distribution center near Fort Worth Alliance Airport. (For other recent awards, see the company’s entries in the Good Jobs First Subsidy Tracker database, which covers all companies; be sure to search under the official corporate name Wal-Mart as well as the brand name Walmart).

The spirit of the Summit Hill School District is reflected in the activism of rank and file workers, who with the assistance of OUR Walmart are planning to resume protests at company stores on Black Friday. Their efforts will help replace food drives with a living wage and eventually get Wal-Mart to change all its freeloading ways.

The Kochs’ Stake in Pollution

Thursday, May 30th, 2013

Accountability_LATimesPuppets_300x250_FINALREVISED050813_2Koch Industries and the billionaire brothers who run it are best known for their involvement in rightwing causes. The latest controversy is over the Kochs’ reported interest in purchasing the Los Angeles Times and other major newspapers owned by the Tribune Co. A campaign centered in L.A. is mobilizing opposition to such a deal among newspaper subscribers and Tribune shareholders, warning that a Koch takeover would create a new Fox News.

What often gets forgotten is that Koch Industries is not just part of the Koch ideological machine. It is a huge privately-held conglomerate with annual revenues of more than $100 billion and operations ranging from oil pipelines and refining to paper products (it owns Georgia-Pacific), synthetic fibers (it bought Lyrca and Stainmaster producer Invista from DuPont), chemicals, mining and cattle ranching.

I’ve just completed one of my Corporate Rap Sheets on Koch Industries, and it’s clear that the sins of the company go far beyond the political realm. The following is some of what I found.

In November 2011 the magazine Bloomberg Markets published a lengthy article entitled “The Secret Sins of Koch Industries” that made some explosive accusations against the company: “For six decades around the world, Koch Industries has blazed a path to riches—in part, by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety and ignoring environmental regulations. At the same time, Charles and David Koch have promoted a form of government that interferes less with company actions.”

What Bloomberg revealed for the first time were the allegations involving bribery and dealing with Iran. The article reported that the company’s subsidiary Koch-Glitsch paid bribes to secure contracts in six countries (Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia) and that it violated U.S. sanctions by doing business with Iran, including the sale of materials that helped the country build the world’s largest plant to convert natural gas to methanol used in plastics, paints and chemicals.

The environmental cases alluded to by Bloomberg had been previously reported and included the following.

In 1995 the U.S Justice Department, the Environmental Protection Agency and the United Stated Coast Guard filed a civil suit against Koch Industries and several of its affiliates for unlawfully discharging millions of gallons of oil into the waters of six states. In one of the largest Clean Water Act cased ever brought up to that time, the agencies accused Koch of being responsible for more than 300 separate spills in Alabama, Kansas, Louisiana, Missouri, Oklahoma and Texas.

In 1997 Tosco Corporation (now part of ConocoPhillips) sued Koch in a dispute over costs related to the clean-up of toxic waste at an oil refinery in Duncan, Oklahoma that used to be owned and operated by Koch. In 1998 a federal judge ordered Koch to contribute to those costs, and that ruling was upheld by an appeals court in 2000. The companies later settled the matter out of court.

In 1998 Koch agreed to pay $6.9 million to settle charges brought by state environmental regulators relating to large oil spills at the company’s Rosemount refinery in Minnesota. The following year it agreed to plead guilty to related federal criminal charges and pay $8 million in fines.

Also in 1998, the National Transportation Safety Board found that the failure of a Koch subsidiary to protect a liquid butane pipeline from corrosion was responsible for a 1996 rupture that released a butane vapor. When a pickup truck drove into the vapor it ignited an explosion that killed the driver and a passenger. In a wrongful death lawsuit a Texas jury awarded the father of one of the victims $296 million in damages.

In 2000 the U.S. Justice Department and the EPA announced that Koch Industries would pay what was then a record civil environmental fine of $30 million to settle the 1995 charges relating to more than 300 oil spills plus additional charges filed in 1997. Along with the penalty, Koch agreed to spend $5 million on environmental projects in Texas, Kansas and Oklahoma, the states where most of its spills had occurred. In announcing the settlement, EPA head Carol Browner said that Koch had quit inspecting its pipelines and instead found flaws by waiting for ruptures to happen.

Later in 2000, DOJ and the EPA announced that Koch Industries would pay a penalty of $4.5 million in connection with Clean Air Act violations at its refineries in Minnesota and Texas. The company also agreed to spend up to $80 million to install improved pollution-control equipment at the facilities.

In a third major environmental case against Koch that year, a federal grand jury in Texas returned a 97-count indictment against the company and four of its employees for violating federal air pollution and hazardous waste laws in connection with benzene emissions at the Koch refinery near Corpus Christi.

The Bloomberg Markets article reported that a former Koch employee said she was told to falsify data in a report to the state on the emissions.  The company was reportedly facing potential penalties of some $350 million, but in early 2001 the newly installed Bush Administration’s Justice Department negotiated a settlement in which many of the charges were dropped and the company pled guilty to concealing violations of air quality laws and paid just $10 million in criminal fines and $10 million for environmental projects in the Corpus Christi area.

With the purchase of Georgia-Pacific in 2005, Koch acquired a company with its own environmental and safety problems. For example, in 1984 a G-P plant in Columbus, Ohio had spilled 2,000 pounds of phenol and formaldehyde that reached a nearby community. Residents complained of health problems from that incident and from a huge industrial waste pond that the company continued to maintain at the plant.

In 2009 the U.S. Justice Department and the EPA announced that G-P would spend $13 million to perform clean-up activities at a Michigan Superfund site where it previously had a paper mill. In 2010 G-P was one of ten companies sued by the Justice Department over PCB contamination of the Fox River in Wisconsin. Unlike the other defendants, G-P had already settled with DOJ by agreeing to a $7 million penalty and to pay for the costs of a portion of the clean-up. One of the other defendants, Appleton Papers, called the settlement a “sweetheart deal.”

More recently, Koch Industries has been caught up in the controversy over the Keystone XL pipeline. In 2011 Inside Climate News reported that Koch already responsible for 25 percent of the tar sands oil being imported from Canada into the United States and stood to benefit greatly from the new pipeline. Koch denied its involvement, but Inside Climate News found documents filed with Canada’s Energy Board contradicting that statement.

An August 2012 report by the Political Economy Research Institute at the University of Massachusetts-Amherst identified Koch as being among the top five corporate air polluters in the United States.

The reason the Kochs rail against regulation is clear: they’ve got a big stake in pollution.

Note:  The full rap sheet on Koch Industries can be found here.

The Right to Freeload

Thursday, December 13th, 2012

RTWThe justifications cited by Michigan Gov. Rick Snyder for why he signed the “right to work” law that Republicans rammed through a lame duck session are as spurious as the name of the bill itself. The statutes now in place in two dozen states using that label provide, of course, no right to employment yet take advantage of the fact that the uninformed may jump to that conclusion.

Snyder has offered several rationales for his decision to approve legislation he had not previously supported. With a straight face he told Joe Scarborough of MSNBC that the law would make unions stronger by holding them more accountable to members, but he went on to repeat the platitudes about “freedom” that the corporate-backed proponents of the law disingenuously employ.

On top of that, Snyder has made the assertion that being a RTW state will make it easier for Michigan to attract new investment and jobs to the state, citing data from the Indiana Economic Development Corporation. The relationship between RTW and attractiveness to corporations is not a simple matter. On the one hand, there is a body of literature showing that RTW does not have a significant impact on job growth or the rate of new business formation. Yet, as Peter Fisher points out in his review of this literature in chapter 6 of his recent report Selling Snake Oil to the States, there is evidence showing that RTW states tend to have lower wage rates and lower per capita income.

There is no doubt that those lower wages along and lower rates of unionization are appealing to at least some low-road companies. In many RTW states there is a long history of coddling such firms. As James Cobb shows in his book The Selling of the South: The Southern Crusade for Industrial Development, 1936-1990, Dixie was using the availability of cheap, non-union labor as a selling point in industrial recruitment even before Section 14(b) of the 1947 Taft-Hartley Act created RTW by giving states the right to outlaw union security provisions in labor agreements. Cobb notes that some southern communities went so far as to offer written commitments to those investors that their operation would be union-free.

It is interesting that Snyder cites Indiana and its IEDC in his economic development rationale for RTW. That state and agency have relied much less on RTW than on subsidies in the effort to attract investment. Both lures are currently given equal billing on the homepage of the IEDC website, yet inside the site there is nothing more about RTW yet there are numerous pages about the myriad business tax credits and other kinds of assistance the state has to offer.

There is also a body of literature showing the limited effectiveness of such financial “incentives” in fostering economic growth, but here too there are some mercenary companies that will respond to handouts. The IEDC, by the way, has been the subject of investigative reporting showing that it has exaggerated the job-creation impact of its activities.

In his Snake Oil to the States report, Peter Fisher notes that RTW, by allowing workers who decline to join an existing union to avoid contributing to the cost of the collective bargaining from which they benefit, should really be called Right to Freeload.

The same can be said about the corporate subsidies that are at the heart of the economic development efforts of Indiana and numerous other states. Special tax breaks granted to certain companies mean that they are not paying their fair share of taxes, forcing other companies and households to make up the difference.

Michigan is actually a special case in this regard. Since taking office, Snyder has pushed the state to rely less on business tax credit programs, which under his predecessor had reached astronomical levels. However, his motivation for this has been to reduce taxes on all companies, meaning that the business sector overall will pay less and thus increase the burden on families.

By reducing wages, RTW is another way of allowing business to avoid paying its fair share of economic growth. The pattern is clear: through a combination of low wages, weak unions, subsidies and low business tax rates, the Right wants to build a society based on corporate freeloading.

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New in CORPORATE RAP SHEETS:  a dossier on drugmaker Merck, including its Vioxx scandal (which led to billions in fines and lawsuit damages), tax dodging and more.

 

Corporations are the Real Moochers

Thursday, September 20th, 2012

The firestorm over Mitt Romney’s closed-door comments depicting nearly half the U.S. population as parasites is coming mainly from those defending seniors, the poor and the disabled. But what’s really wrong with the Ayn Rand worldview Romney was parroting is that it ignores those who are the biggest moochers of all: giant corporations.

If, as Romney suggested, moocherism begins with the failure to pay federal income taxes, then that label can easily be applied to many of the country’s major companies. A November 2011 report by Citizens for Tax Justice and the Institute on Taxation and Economic Policy found that more than one-quarter of large companies paid zero taxes in at least one of the three years examined.

Quite a few of those companies arranged their affairs so that they had negative tax rates, meaning that the IRS sends them checks. And many of those that paid taxes did so at what CTJ and ITEP called “ultra low” rates of 10 percent or less.

Corporate tax avoidance is just the beginning of the story. The dependence on government that has Romney so upset is at the heart of the business plan for much of Corporate America. What libertarian types tend to overlook is that much of the public spending they disdain comes in the form of purchases from businesses. It’s estimated that more than $500 billion a year in federal outlays occurs via private-sector contracts.

Some companies rely so heavily on that spending that they are as government-dependent as any Medicaid or food stamp recipient. Aerospace giant Lockheed Martin, for example, derives more than 80 percent of its revenue from the federal government, especially the Pentagon; for its competitor Raytheon the figure is about 75 percent.

A large portion of what is called entitlement spending, especially in healthcare, ends up in the pockets of corporations, including drug makers, medical device manufacturers and for-profit hospital chains. The largest of the latter, HCA, gets more than 40 percent of its revenue from Medicare and Medicaid.

Corporations can get federal grants as well as contracts. The Commerce and Agriculture Departments have a slew of programs that assist businesses in marketing their products or that underwrite some of their costs. And, of course, a large portion of the billions paid each year in farm subsidies goes to agribusiness giants rather than family farmers.

Despite the recent Republican demagoguery on Solyndra, targeted federal spending to develop new energy technologies is nothing new. The Recovery Act’s billions for solar and wind companies was completely in line with federal programs that have subsidized everything from coal gasification to nuclear power plants. Before the Fukushima Daiichi disaster in Japan, the U.S. government was promoting a loan guarantee program to encourage the construction of a new generation of nukes by major utility companies.

Giant corporations also depend on the federal government to help them sell their goods abroad. The Export-Import Bank of the United States spends more than $30 billion each year providing various forms of insurance, loan guarantees and direct loans for the likes of Boeing, General Electric and Caterpillar. The federal government’s Overseas Private Investment Corporation helps U.S. companies do more business offshore by providing political risk insurance and other types of financial assistance.

Another form of corporate dependency on government  is the ability of natural resources companies to operate on public lands and pay either no royalties or artificially low ones . Mining corporations, for example, take advantage of an 1872 law that allows them to extract gold, silver and other hardrock minerals from public lands royalty-free.

Assistance from the federal government can be a matter of life and death for some companies, as in clear in the cases of General Motors and Chrysler as well as the banks that were brought back from the brink by the TARP bailout and then thrived on the influx of billions in essentially free money from the Federal Reserve.

Hearing all the ways in which the federal government makes life easier and more profitable for big business, a newly arrived Martian might expect giant corporations to be grateful boosters of the public sphere. Instead, as we know all too well, most large companies are disdainful of government and are constantly whining about regulation and taxes they can’t avoid paying.

To make things worse, many government-dependent companies are less than honest when it comes to their dealings with the public sector. The Project On Government Oversight’s Federal Contractor Misconduct Database identifies hundreds of examples of contract fraud and other offenses. Healthcare providers such as HCA, not satisfied with the vast amount of honest business they get from Medicare and Medicaid, have defrauded taxpayers out of billions more.

If Romney wants to find the real moochers—and often crooked ones at that—he can find them in the corporate world that is his natural habitat.

We Subsidized It

Thursday, August 30th, 2012

We Built It. The Romney campaign and the wider conservative movement believe they have a winner in a slogan designed to refute President Obama’s comment about the role of government assistance to business in favor of an idealized Ayn Rand-style entrepreneurship that needs no stinkin’ public infrastructure.

They are so confident, in fact, that they asked a strangely inapt group of messengers to promote the theme at the Republican Convention: a slew of governors. Since Ronald Reagan, the right has ignored the incongruity of having public officials play a leading role in denouncing the public sector. Yet the GOP governors who took to the stage in Tampa to celebrate up-by-one’s-bootstraps free enterprise raised this hypocrisy to new heights.

Despite their frequently expressed laissez-faire beliefs, they have each presided over deals in which huge sums of taxpayer money have been handed over to large corporations in the name of economic development. The Romney campaign, which has been making deceitful allegations about Obama Administration changes in welfare work requirements, chose to have its big convention theme delivered by some of the biggest proponents of corporate welfare.

Take South Carolina Gov. Nikki Haley. She used her convention speech to honor her immigrant parents and the clothing company they created, adding: “So, President Obama, with all due respect, don’t tell me that my parents didn’t build their business.” She also gave praise to Boeing, saying that her state “was blessed to welcome a great American company that chose to stay in our country to continue to do business.” She failed to mention that Boeing’s decision to locate its second Dreamliner assembly line in Charleston was more than a little influenced by a state and local subsidy package estimated to be worth more than $900 million.

That deal was originally negotiated by her predecessor Mark Sanford but Haley enthusiastically carried it out and went to great lengths to defend Boeing against Machinists union charges that the move to South Carolina was prompted by anti-union animus. Haley has also made subsidy deals of her own, including the $9 million recently given to Michelin for a tire plant (photo). Haley subsequently told a tire industry conference: “We want to help you do more business in South Carolina and we want to make sure that you grow. That’s our job.”

Virginia Gov. Bob McDonnell—who told the convention “Big government didn’t build America: You built America!—agreed to give up to $14 million in subsidies to Northrop Grumman to relocate its headquarters to northern Virginia. The move was motivated by a need to be near the company’s dominant customer, the Pentagon, so the subsidies were probably unnecessary and could be seen as a reward for the large contributions the company made to his election campaign.

Ohio Gov. John Kasich, another member of the we-built-it chorus, has given in to job blackmail demands by companies threatening to move their operations out of state unless they got big subsidy deals. Kasich’s administration negotiated $100 million packages with both Diebold Inc. and American Greetings Corp.

Wisconsin Gov. Scott Walker, a rightwing hero for his campaign against public worker collective bargaining rights, used his convention speech to emphasis the importance of letting people “control their own destiny in the private sector.” In July, Walker announced that the state had awarded $62 million in tax credits to Kohl’s to get the retailer to expand its headquarters in the Milwaukee suburb of Menomonee Falls.

And then there’s conservative bad-boy idol Chris Christie, who gave the keynote address at the convention. The New Jersey governor’s administration has been handing out lavish tax credit deals to companies moving from one location in the state to another, including $250 million to Prudential Insurance, $100 million to Panasonic and $81 million to Goya Foods. Since taking office in 2010, Christie has given away more than $1.5 billion in subsidies to corporations.

The examples above focus on bigger deals involving larger companies, since those are the ones with the biggest giveaways of taxpayer funds. Yet many state subsidy programs also serve smaller firms. My colleagues and I at Good Jobs First have assembled data on more than 200,000 subsidy awards from state and local governments around the country in our Subsidy Tracker database. Most of the recipients are not in the Fortune 500.

I cannot resist mentioning that one of those small recipients is First State Manufacturing, a business run by Sher Valenzuela, who is running for Lt. Governor in Delaware on a tea party platform and who was given time at the Republican convention to tell her “I built it” story. In addition to the federal contracts and Small Business Administration loans revealed by Media Matters, information gathered for Subsidy Tracker shows that First State has received more than $29,000 in reimbursements for training costs through Delaware’s Blue Collar Training Grant program—a modest amount but another indication of business dependence on government.

Claims about the autonomy of the private sector are one of the Big Lies of modern conservatism. The real objective of the Right is along the lines of what Gov. Haley told that tire industry conference: to make sure government serves business through subsidies, deregulation, tax minimization and weakening of unions.

To the companies receiving these forms of assistance to expand their business, one could easily adopt the language of President Obama and say “you didn’t build that alone.” The truth is that both liberals and conservatives believe that government should aid the private sector. The difference between the two is in what is expected in return. Liberals make an effort (albeit inadequate) to impose some accountability, whereas the Right believes that business should be able to take all it wants with no strings attached. The debate over whether to limit government should really be one on whether there will be limits on corporate power.

Banking on Boeing

Thursday, May 17th, 2012

Recent passage of a piece of federal legislation on a broadly bipartisan basis was considered unusual enough for the Washington Post to treat it as front-page news. Yet what was most significant about the measure to extend the life of the U.S. Export-Import Bank was not its bipartisanship but rather the way it revealed a profound confusion on the part of both major political parties about how the federal government should relate to big business.

The fate of the Ex-Im Bank, which for decades has served mainly as a tool to promote exports by large U.S. manufacturers, had come into question after it was targeted by tea party types in Congress. While conservatives are usually inclined to do everything possible (short of bailouts) to assist corporations, many had come to accept the view that the Ex-Im Bank was an unjustified form of government intervention. Utah Senator Mike Lee denounced the bank’s operations as “corporate welfare that distorts the market and feeds crony capitalism.”

Supposedly anti-corporate Congressional Democrats joined with the likes of the U.S. Chamber of Commerce and the National Association of Manufacturers to defend the Ex-Im Bank. House Democratic Leader Nancy Pelosi said that Congress had to send “a strong signal to American businesses: we will help them get their products into markets abroad, and in doing so, we will create jobs here at home.” Independent Vermont Senator Bernie Sanders, on the other hand, maintained his long-time opposition to the bank.

In the end, the corporatist wings of the two major parties prevailed, but not before the Ex-Im Bank had been pummeled by conservatives who had begun denouncing the institution as “Boeing’s Bank.” They have a valid point. A huge portion of the agency’s resources have long been devoted to that one company. If you look at the list of loans and long-term guarantees in the bank’s annual report, Boeing’s name shows up repeatedly—more than 40 times last year, far more than any other company. The company got assistance in its deals to sell planes to airlines in more than 20 countries such as Angola, Indonesia and Tajikistan.

The right has assumed the role of Ex-Im Bank critic once occupied by the left. Back in 1974 the anti-imperialist magazine NACLA’s Latin America & Empire Report published a critique of the bank that concluded with the following statement: “Confronted by a world increasingly hostile to U.S. imperialism, strategists will employ the credit levers of the Eximbank in the coming years to punish countries that nationalize American corporations, and to reward those nations that cater to U.S. commercial interests.”

Eliminating Ex-Im Bank’s credit assistance was high on the list of programs proposed for elimination in the Aid for Dependent Corporations reports issued by the Ralph Nader group Essential Information in the 1990s. By that point libertarian groups such as the Cato Institute were also speaking out against the bank and other forms of corporate welfare. Also lining up against the bank were environmental groups concerned about its role—along with that of the Overseas Private Investment Corporation—in enabling hazardous projects such as the Three Gorges Dam in China.

The contemporary right’s misgivings about the Ex-Im Bank have nothing to do, of course, with anti-imperialism or environmental protection—and everything to do with absolutist ideas about the role of government. The problem these conservatives face is that the actual behavior of large corporations frequently bears little resemblance to pure free-market principles.

Boeing, for instance, is not only perfectly willing to accept federal export assistance but has also sought and obtained billions of dollars in state and local economic development subsidies for its U.S. plants. Its decision to locate a Dreamliner production facility in South Carolina garnered a subsidy package estimated to be worth more than $900 million. The company’s hold over the Palmetto State is so strong that it drove a wedge between South Carolina’s two paleo-conservative U.S. Senators during the Ex-Im debate, with Jim DeMint holding to laissez-faire principles while Lindsey Graham warned that eliminating the bank would jeopardize aerospace jobs.

When it comes to labor relations issues, Boeing suddenly turns into an ardent opponent of government. When the National Labor Relations Board took seriously an allegation by the Machinists that the company’s investment in South Carolina was a form of anti-union retaliation, Boeing screamed bloody murder and got support from all of the state’s leading politicians—and most of the corporate world.

It will be interesting to see how conservatives handle this tension between lionizing large corporations and demonizing them. The outcome of the Ex-Im debate suggests that, for now, corporatists retain the upper hand across the mainstream political spectrum.

Paying Taxes to the Boss

Thursday, April 12th, 2012

From Howard Jarvis, father of California’s notorious Proposition 13, to Grover Norquist, the superlobbyist who pressures politicians to sign a Taxpayer Protection Pledge, conservative ideologues have spent the past few decades poisoning the attitude of Americans toward the payment of taxes. Norquist in particular has been blunt about his ultimate goal: radical reduction in the size of government.

That crusade assumes that taxes are actually going to government. Yet it turns out that a growing portion of state tax revenue is being diverted to corporations, in the name of job creation or job retention. Nearly $700 million a year in withholding taxes paid by workers is being turned over to their employers.

This startling fact comes from Paying Taxes to the Boss, a report my colleagues and I at Good Jobs First have just published.  We found 22 programs in 16 states under which companies are allowed to retain payroll taxes that they deduct from worker paychecks and would normally pass along to state revenue departments. Companies can keep up to 100 percent of the state withholding for designated workers for periods as long as 25 years. The most expensive program, New Jersey’s Business Employment Incentive Program (BEIP), disbursed $178 million in FY2011.

It should come as no surprise that the biggest windfalls are going to major corporations rather than small businesses. Among the largest recipients we found are: Nissan ($160 million in Mississippi), Sears ($150 million in Illinois), General Electric ($115 million in Ohio), Procter & Gamble ($85 million in Utah), Fidelity ($72 million in North Carolina) and Goldman Sachs ($60 million in New Jersey).

Apart from being unseemly, the whole practice is a threat to the fiscal stability of state governments. Payroll and other personal income taxes (PIT) represent a much bigger pot of money than corporate income taxes, so economic development officials can offer larger giveaways to companies and thus do escalating damage to state budgets.

To make matters worse, many of the PIT-based subsidy deals go to companies that don’t really create any new jobs. States frequently offer fat packages to firms that simply relocate existing jobs from a facility in another state. In fact, the diversion of withholding taxes was first adopted in Kentucky as a way to lure companies from neighboring states; the politician credited with originated the idea called it “the atomic bomb of economic development incentives.” Ohio and Indiana responded with their own withholding tax diversions, setting off a PIT-based subsidy arms race.

In recent years, withholding tax diversions have been used, for example, by South Carolina to get Continental Tire to move its North American headquarters from North Carolina; by Georgia to lure NCR from Ohio; and by Colorado to get Arrow Electronics to move its corporate headquarters from New York. In 2011 Kansas provided a reported $47 million in withholding-tax subsidies to AMC Entertainment to get the movie theater chain to move its headquarters from downtown Kansas City, Missouri about 10 miles across the state line to Leawood, a suburb of Kansas City, Kansas.

Along with this interstate job piracy, PIT awards are being given to firms that use the threat of an interstate move to extract big payments to simply stay put. This use of jobs blackmail has been most pronounced recently in Ohio and Illinois.

In 2011 Ohio forked over a $93 million subsidy package—including PIT-based tax credits worth $75 million—in response to a threat by greeting-card giant American Greetings to move its headquarters out of state. A few weeks later, the administration of Gov. John Kasich responded to a similar threat by security services provider Diebold Inc. with a $56 million package, including $30 million in PIT-based credits.

Meanwhile in Illinois, Sears got $150 million in PIT-based credits along with $125 million in local property breaks to keep its headquarters in the distant Chicago suburb of Hoffman Estates. And Motorola Mobility, now part of Google, was given a $100 million withholding-tax deal to keep its headquarters in the Chicago suburb of Libertyville.

At Good Jobs First we normally frame our critique of subsidy programs in terms of the need for greater accountability. In the case of withholding-tax diversions, we decided that the negative impacts are so serious that the best policy recommendation is to call for their abolition.

I wonder if Grover Norquist would support the idea of getting state politicians to pledge that they will not support any increases in taxes going to employers?

Subsidies and Sunshine

Wednesday, March 14th, 2012

This being Sunshine Week, there’s a lot of discussion going on about open government. One of the things government should be open about is the dubious practice of giving subsidies to companies in the name of economic development.

Each year, state and local governments in the United States award tens of billions of dollars in tax breaks, cash grants and other financial assistance to business, with the lion’s share going to large corporations ranging from Google and Facebook to Wal-Mart and Boeing. Much of the money goes to companies that don’t need it and often provide little return to taxpayers in terms of creating quality jobs.

The good news is that it is easier than ever to discover which companies are getting the giveaways. A decade ago, only a handful of states disclosed the names of subsidy recipients. That number is now up to 43 states and the District of Columbia. Data from those 44 jurisdictions—along with previously unpublished data from five other states—can be found on Subsidy Tracker, the database created by my colleagues and me at Good Jobs First. The only states with no data currently available are Mississippi and Nevada, but we’re seeking unpublished info from them as well.

A glance at the inventory of data sources that have been fed into Subsidy Tracker makes it clear that there is a great deal of variation in the depth of available information from state to state. We have entries for two dozen programs in Washington and Wisconsin, yet only one each for Alabama, California, Idaho, Massachusetts and Tennessee.

There are also significant differences in the types of subsidies for which recipient information is available. A major dividing line is between those states that have disclosure relating to corporate tax credits (or other business tax breaks) and those that keep that information secret even while revealing data on other categories such as grants. According to our latest tally, 31 states plus DC provide online disclosure of corporate tax break recipients. The ones with the most extensive tax subsidy reporting include Missouri, North Carolina and Rhode Island.

Among the states that are aggressive promoters of corporate tax breaks but which decline to reveal which companies are benefiting from that largesse are Alabama, Georgia, Kansas, Mississippi, New Mexico and Tennessee. A few states—including Maryland and South Carolina—disclose the names of companies but not the value of the credits they are receiving.

Subsidy disclosure is an issue addressed in Following the Money 2012, a new report by USPIRG, the third in its series of report-card studies on state spending transparency. USPIRG provides a thorough assessment of the Google-government portals that have proliferated in recent years. The report does a good job when it comes to general state spending, but we at Good Jobs First have a friendly disagreement about its treatment of subsidies. (I am graciously cited in the acknowledgements for having reviewed drafts of the report, but the disagreements I expressed to USPIRG are not mentioned).

Despite the fact that company-specific reporting on subsidies is missing from the core content of nearly all state transparency portals, USPIRG gives many of those portals high grades for subsidy transparency. Quite a few of the sites have links to other webpages with the subsidy data, and we have no objection if USPIRG wants to awards points for that practice.

The problem is that USPIRG’s scoring category on subsidies also covers grants, some of which are economic development subsidies but many of which are not. The distinction is not made clear, and in numerous cases it appears that the data treated by USPIRG as subsidy disclosure is actually information relating to other kinds of grants to non-governmental entities. For example, the Massachusetts transparency portal (which is given 8 of 10 points in the subsidy category) lists grants to non-profit organizations for providing social services, but it does not cover the state’s job creation programs. The latter include tax credits that will soon be disclosed, thanks to the efforts of groups such as PIRG’s Massachusetts affiliate.

It is understandable that USPIRG, in its effort to promote the march of government openness, would want to take a flexible position about what constitutes transparency. But the fact of the matter is that most online subsidy disclosure is still fragmented, occurring through far-flung webpages and obscure PDF reports. That’s precisely why we at Good Jobs First created Subsidy Tracker, which brings all those disparate sources (plus unpublished data) together in one national search engine.

Centralized state transparency portals are certainly a welcome development, and we salute USPIRG for promoting them, but they are not yet an effective means of educating the public on big giveaways of tax dollars.

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%.