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The Corporate Raid on State Tax Revenue

Thursday, December 8th, 2011

One of the usual canards of the corporate tax reduction crowd is that high U.S. rates force large companies to invest offshore instead of at home. The Institute on Taxation and Economic Policy and Citizens for Tax Justice have just issued the second installment of their detailed refutation of the myth of oppressive rates.

After putting out a report last month showing that many large corporations end up paying far less than the statutory federal rate (so much less that their rates often become negative), ITEP and CTJ now demonstrate that the story is the same at the state level. Their study, Corporate Tax Dodging in the Fifty States, lists 68 Fortune 500 companies that managed to pay no state income tax at all in at least one year during the period from 2008 through 2010 despite posting a total of nearly $117 billion in pre-tax U.S. profits during those no-tax years.

Sixteen of the companies—including the likes of DuPont, Tenet Healthcare, International Paper, Intel and  Peabody Energy—had more than one no-tax year. DuPont, Pepco Holdings and American Electric Power contributed nothing to state coffers in all three years. The report points out that, if the 265 companies in the sample had all paid the average 6.2 percent average corporate tax rate on their combined $1.33 trillion in U.S. profits, their state tax bill would have been about $82 billion. Instead, they paid only $40 billion, meaning that states were left without $42 billion in revenue that could have been used to help pay for education, healthcare, transportation, public safety and other key state government functions.

A system that allows many companies to sidestep millions of dollars in state tax payments can hardly be called onerous and certainly can’t be the reason for investing overseas. It is thus no surprise that the ITEP/CTJ list of firms with negative or minimal tax rates includes corporations that engage in extensive offshoring; among them are Eli Lilly, General Electric, Hewlett Packard and Merck.

At the same time, the key state tax dodgers include some manufacturing companies that have (at least in part) bucked the offshoring trend and made substantial investments in the United States. Chief among them are Intel and Boeing.

Intel, which has been spending billions on semiconductor fabrication plants in state such as Arizona, and Boeing, which focuses its aircraft assembly in Washington State and South Carolina, are major recipients of the kind of company-specific tax breaks that the ITEP/CTJ report cites as one of the reasons for the decline of state corporate income tax collections.

Intel has been playing the subsidy game in earnest since 1993, when it announced plans for what was then an unprecedented $1 billion investment in a new chip plant, to be built in a suburb of Albuquerque called Rio Rancho. The company pressured local officials to provide what would ultimately amount to about $455 million in property tax abatements and sales tax exemptions on the equipment purchased for the facility.

Soon after getting its way in New Mexico, Intel put the squeeze on officials in Arizona, where it proposed to build another plant in Chandler, a suburb of Phoenix. The company received some $82 million in property tax abatements, sales tax exemptions and corporate income tax credits. In 2005 Intel strong-armed the state to change the method by which it calculates corporate taxes to a system known as single sales factor, which allowed Intel and other companies with lots of property and a big payroll but relatively low sales in the state to enjoy enormous tax reductions.

In 1999 Intel announced plans for a large expansion of its semiconductor operations in Oregon but made it clear that the investment was contingent on receiving a property tax abatement that turned out to be worth an estimated $200 million over 15 years. In 2005 Intel got the county to extend the property tax break to 2025, locking in an estimated $579 million in additional savings. Intel also enjoys a substantial reduction in corporate income taxes thanks to Oregon’s decision to join the single sales factor bandwagon.

Boeing has also sought special tax breaks and other subsidies in multiple states. When the company was ready to begin production of its much-anticipated Dreamliner, it forced Washington to compete with around 20 other states for the work and agreed to stay there only after the legislature in 2003 approved a package of research & development tax credits and cuts in Business & Occupation taxes (the state’s substitute for a corporate income tax), sales taxes and property taxes that together were estimated to be worth $3.2 billion over 20 years.

Rather than showing its appreciation to Washington, the company went shopping for a better deal for the second Dreamliner production line. It chose South Carolina, where it was awarded a subsidy package that has been valued at more than $900 million and is able to take advantage of a “right to work” law that discourages unionization. The Machinists union accused the company of retaliating against union activism in Washington, but the complaint has just been withdrawn as part of a deal in which Boeing will build its new 737 in the Seattle area.

While it was once taken for granted that large U.S. corporations would do most of their investing at home, companies such as Boeing and Intel now act as if they are doing the country a favor with their domestic projects and expect to be rewarded handsomely in the form of special state tax breaks on top of those business-friendly provisions available to all firms.

Far from being held back by tax rates, large U.S. corporations invest offshore or onshore as they please while contributing as little as possible to the cost of public services.

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Posted in Corporate Subsidies, Offshoring, Outsourcing, Tax avoidance/evasion, Unions | No Comments »

Pension Busting at American Airlines

Thursday, December 1st, 2011

There was once a time when a bankruptcy filing by a company was a mark of shame. That stigma has fallen by the wayside, and firms now employ Chapter 11 not to protect themselves against creditors but for strategic purposes.

One of the most popular ploys is to use the bankruptcy court to undermine the bargaining position of labor unions. The latest firm to do so is American Airlines, which said it took the step to “achieve industry competitiveness.” This is corporate-speak for “we’re going to milk our employees dry.”

Such union-busting bankruptcies are far from new. They were pioneered three decades ago by the likes of ruthless airline executive Frank Lorenzo, who used Chapter 11 to abrogate union contracts after taking over Continental Airlines in 1983. Six years later he tried something similar at Eastern Airlines, but changes in the law forced him to settle for weakening the unions rather than eliminating them altogether. Subsequently, most of the other major carriers (and various smaller ones) also went through the bankruptcy process.

Airline management has made the most of the system. In 2006 a federal bankruptcy court barred unions at regional carrier Mesaba Airlines from engaging in strikes or other job actions, prompting the company’s unions to agree to management’s wage-cutting demands. In 2008 a bankruptcy judge gave Frontier Airlines permission to cancel its collective bargaining agreement with the Teamsters, but that decision was later overruled in federal district court. The union, nonetheless, had to make contract concessions, as have workers at other carriers and in other industries.

It remains to be seen how far AMR will go in using the bankruptcy process against its unions. Yet there is little doubt that it will seek to slash labor costs, especially those relating to pensions. The head of the federal Pension Benefit Guaranty Corporation has already expressed concern that AMR might terminate its plans—the way United Air Lines did during its stint in Chapter 11.

This would put an enormous strain on the PBGC, which has already amassed a deficit of $26 billion and would have difficulty providing significant payments to the tens of thousands of people covered by AMR’s pension plans.

There is good reason for AMR’s unions to be concerned about management’s intentions. AMR’S crusade against labor began three decades ago, when Robert Crandall took control of the company in the early days of airline industry deregulation. Apparently inspired by Reagan’s crushing of the air controllers strike, he was determined to get workers to bear the financial consequences of increased competition.

In the early 1980s AMR was one of the country’s first major employers to adopt the pernicious practice of two-tier wages. Crandall pressured unionized pilots to accept a contract that cut the pay of new hires by a whopping 50 percent; for flight attendants the reduction was more than 30 percent, making many of them eligible for food stamps. The moves transferred $100 million a year from paychecks to company coffers.

AMR also pioneered the practice of high-tech offshore outsourcing in 1983 when it set up a subsidiary in Barbados called Caribbean Data Services. The company began air-shipping tons of used ticket coupons to the facility, where operators (mostly women) paid $1.75 to $3 an hour entered the information on computer terminals and then transmitted it via satellite to the airline’s accounting center in Tulsa, Oklahoma. By 1985 the operation was successful enough in cutting costs that American shut down its data-entry operation in Tulsa.

When unions began to challenge the two-tier system in the late 1980s, AMR sued them for supposed violations of federal labor law, fired activists and threatened to shut down the airline. Eventually, Crandall had to accept a softening of the two-tier arrangement, but he pursued a relentless campaign against labor costs which prompted a 1993 strike by flight attendants that ended only when President Clinton personally intervened. Four years later, Clinton intervened again when American’s pilots walked out to protest the company’s rigid bargaining position.

Crandall’s successor, Donald Carty, continued the company’s confrontational labor relations posture. In 2003 he used the threat of bankruptcy to wring $1.8 billion in annual concessions from AMR’s unions. While those negotiations were taking place, AMR management failed to mention that it was simultaneously offering lucrative retention bonuses and special pension protections to top executives at the company. When the plan came to light, the uproar was so intense that AMR’s board ousted Carty and—for a while—adopted a less aggressive posture toward the unions. With the bankruptcy filing, the company appears to be returning to its savage ways.

When Occupy protesters or others talk about income inequality, conservatives complain that this is class warfare. The real class war is that being waged by corporations against decent wages and benefits, using the bankruptcy courts as one of their most effective weapons.

What makes this all the more galling is that severe restrictions have been placed on the ability of struggling individuals—including young people overwhelmed by student loan debt—to use the bankruptcy system to gain relief. Here, as in so many other areas, corporate “persons” have been given the upper hand over real people.

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Posted in Bankruptcy, Pensions, Unions | 1 Comment »

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.

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Posted in 1%, Antitrust, Corporate Accountability, Corporate Crime, Corporate Power, Corporate Profits, Employment, Environment, Layoffs, Tax avoidance/evasion, Unions | No Comments »

Striking Back at Verizon

Thursday, August 11th, 2011

As the U.S. economy teeters, most politicians and mainstream analysts have nothing to offer but the usual counter-productive agenda of reduced public spending, corporate tax cuts and weakening of government regulation of business.

Some of the only helpful initiatives are coming from an institution that much of the American public has been taught to despise: labor unions, especially aggressive ones like the Communications Workers of America.

The strike recently launched by CWA and the International Brotherhood of Electrical Workers against telecom giant Verizon Communications has significance that goes far beyond the terms of their contract negotiations. It is one of the only arenas in which an effort is being made to shore up rather than erode the living standards of American workers—living standards that are supposed to be the backbone of an economy that we are constantly told is based on consumer spending. Also adding to the importance of the walkout is that it is targeting an employer that is emblematic of much that is wrong with corporate America today.

That starts with the evolution of the company. Verizon started out as Bell Atlantic, one of the regional operating companies, or Baby Bells, that resulted from the 1984 dismantling of the old AT&T monopoly. Taking apart Ma Bell was supposed to beget a new era of competition in the telephone business, but instead, some of the stronger Baby Bells focused on acquiring their rivals. Bell Atlantic took over NYNEX in 1997, and a few years later it bought the large non-Bell local phone company GTE. Seeking to downplay its origins, the combined corporation adopted the portmanteau name Verizon, a combination of “veritas,” the Latin word for truth, and “horizon.”

Verizon is now one of two firms that dominate traditional phone service in the United States. The other is the new AT&T, the name taken by the other voracious former Baby Bell, SBC Communications, in 2005. In the end, the dismantling of Ma Bell simply replaced a monopoly with a duopoly.

This concentration of ownership has carried over into the wireless realm, which in the U.S. is now largely controlled by subsidiaries of Verizon and AT&T (Verizon Wireless is a joint venture with Britain’s Vodafone, which owns 45 percent).

Verizon has compounded the negative effects of its bloated market share by fighting the extension of union rights to its wireless operation. From the end of the Second World War to its break-up, the Bell System was strongly unionized, and phone company jobs were among the most secure and best-paying blue-collar positions in the private sector. Things became more contentious after the creation of the Baby Bells—there were widespread strikes in 1989 over company attempts to curtail healthcare benefits—but workers in the core wireline business retained their union protections.

Workers at Verizon Wireless, on the other hand, have been struggling for the past decade to achieve such protections. The company has employed all the usual dirty tricks of union-busting, including surveillance, misinformation and intimidation of activists. As American Rights at Work noted in a 2007 report, Verizon also shut down call centers where organizing was taking place and moved the operations to states with anti-union “right-to-work” laws. The National Labor Relations Board found the company guilty of violating federal labor law for disciplining a worker for union organizing.

Rather than improving working conditions at Verizon Wireless, Verizon seems intent on lowering those in its wireline business. The current strike was prompted by management demands for a long list of major contract concessions concerning pensions, sick leave, healthcare and job security. Verizon also wants to tie wages more closely to individual job performance, an arrangement that is typical of non-union workplaces. CWA and IBEW are accurately charging the company with trying to undo half a century of advances in worker rights.

Verizon’s position should be seen as an assault not only on its 45,000 unionized employees but on the entire economy. If management gets its way, some people will find themselves transferring from Verizon’s payroll to the unemployment rolls, and those who remain would have less disposable income.

Its labor practices are not the only way Verizon harms the economy. As Citizens for Tax Justice points out, Verizon is among those large companies that find ways to avoid paying their fair share of taxes. For the past two years, its federal tax rate has been negative, meaning that it is getting rebates from the Treasury—totaling more than $1 billion—despite enjoying profits of more than $10 billion in each of those years.

Verizon also plays the tax avoidance game at the state and local level. For example, it has received tens of millions in subsidies in New Jersey, and last year it pressured authorities in New York to award it more than $500 million in property tax abatements and other tax breaks for a data center it was planning to build near Niagara Falls. This was on top of $96 million in electricity subsidies. The company cancelled the plan after a lawsuit was filed by a local resident.

In addition to mistreating workers and taxpayers, Verizon has apparently found time to cheat its customers. Last year, Verizon Wireless had to pay a record $25 million to settle Federal Communications Commission charges that it charged 15 million cell phone customers unauthorized fees. The company also agreed to provide $52 million in refunds.

A sign seen on a picket line reads: VERIZON IS KILLING MIDDLE CLASS AMERICA. If this strike is successful, it will send a strong message to all corporate assassins that U.S. workers will not roll over and die.

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Posted in Tax avoidance/evasion, Telecommunications industry, Unions | No Comments »

The Forgotten Legacy of the Excess Profits Tax

Thursday, July 21st, 2011

Behind all the ideological posturing going on in Washington over the debt ceiling, there is a surprising amount of consensus on the wrongheaded proposition that corporations need more tax relief.

The bipartisan Gang of Six plan that has recently been at the center of attention provides for the reduction of the statutory corporate tax rate from 35 percent down to as low as 23 percent. It also calls for moving to a “competitive territorial tax system,” which, as Citizens for Tax Justice points out, would make it even easier for companies to exploit offshore tax havens. A reported new plan being discussed by President Obama and Speaker Boehner as this is being written would probably include something similar.

Corporate domination of our political discourse makes it all but impossible for national leaders to suggest that large companies, which have been enjoying abundant profits while much of the country suffers from high unemployment and other forms of economic distress, should be paying more, not less to keep the USA afloat. Behind many of the protestations against special tax breaks for the oil industry and ethanol producers are agendas that call for lowering the statutory corporate rate for all companies.

It wasn’t always this way.  The United States has a history, now largely forgotten, of imposing higher taxes on corporations during times of national emergencies. Excess profits taxes were imposed at various times to put a check on profiteering during wartime.

The first excess profits tax was enacted in 1917, less than a decade after the basic corporate income tax came into being. It remained in place through the World War I, and in 1919 President Wilson recommended that it be made part of the permanent tax system. Congress demurred, but the tax was not eliminated until 1921, well after the end of the war.

Interest in an excess profits tax was revived in the 1930s.The National Industrial Recovery Act of 1933 used a form of excess profits tax to prevent evasion of the declared-value capital stock tax. Later in the decade, as war seemed imminent, a broader based excess profits tax began to be discussed. In 1940 President Roosevelt, insisting that government should ensure that “a few do not gain from the sacrifices of many,” sent a message to Congress calling for a “steeply graduated excess-profits tax.”

There was little disagreement on the need for such a tax. The debate centered, instead, on how the levy would be calculated—especially the question of what base would be used to determine the excess. The tax remained in effect through 1945. Only five years later, Congress returned to an excess profits tax to help pay for the Korean War.

Writing in the Journal of Political Economy in 1951, economist George Lent wrote that the tax had “been accepted as an essential part of a broad system for the equitable distribution of the cost of defense.” Unfortunately, that acceptance turned out to be short-lived. The excess profits tax enacted in 1950 was terminated in 1953, and despite an ongoing Cold War and then large-scale intervention in Vietnam, corporations were no longer expected to shoulder a significant portion of U.S. military costs.

During the past decade the situation has grown even worse. Despite the existence of two expensive wars and a trend toward privatization of military functions that makes the conflicts extremely profitable to the private sector, no one talks of higher corporate taxes.  On the contrary, the demand for lowering those taxes has been relentless.

The justification for excess profits taxation need not be linked only to military costs and the profits of Pentagon contractors. Today we are seeing excessiveness of another kind in relation to corporate profits. Most large companies are enjoying bloated bottom lines by refusing to return their workforce back to pre-recession levels. They can do this because unemployment is high, unions are weak and those with jobs find it difficult to resist demands for intensified workloads.

Along with the wars in Iraq and Afghanistan, there is a war at home—a war against workers that amounts to a form of profiteering. If the leaders of this country were not in thrall to corporations, we would be talking about an excess profits tax focused on employers that keep their staffing levels artificially low.

It could very well turn out that higher, not lower taxes are what would induce companies to begin hiring again. Those companies which resist would at least be helping reduce the national deficit rather than further enriching the investor class.

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Posted in Corporate Power, Tax avoidance/evasion, Unions | No Comments »

Fighting Unions in Bizarro World

Thursday, June 9th, 2011

UAW President Bob King (left)

Some right-wingers in Congress appear to be envious of their state counterparts who have been attacking labor rights in legislatures across the country.

They were given an opportunity to engage in some union-bashing of their own at a recent hearing of the House subcommittee on Health, Employment, Labor and Pensions, known as HELP.

The Right is already up in arms about a National Labor Relations Board complaint charging Boeing with shifting work from its unionized operations in Washington State to union-unfriendly South Carolina to retaliate against worker activism. Now HELP chair Phil Roe of Tennessee is accusing the Board of making it easier for unions to use corporate campaign tactics against employers.

Roe and other panel Republicans seem to be living in a parallel universe in which large numbers of companies are forced to their knees by ruthless corporate campaigns, and workers suffer from intimidation not from anti-union employers but from labor thugs who will stop at nothing in their organizing efforts.

The depiction of this bizarro world was aided by the choice of witnesses at the hearing. There were, of course, no union representatives. Instead, the panel included the president of a janitorial company in Indiana that had been targeted by the Service Employees International Union; a contractor from New Mexico representing the anti-union Associated Builders and Contractors; and a partner in the law firm of Morgan, Lewis & Bockius, which is infamous for its work in opposition to organizing drives.

The only shred of legitimacy came from the one other witness—Catherine Fisk, a law professor from the University of California-Irvine—whose testimony documented the legal justification for the tactics that make up corporate campaigns. But she was mainly ignored by the subcommittee Republicans, who spent most of their time lavishing praise on the two business owners, especially the janitorial executive, David Bego, who has self-published a book about his struggle with the SEIU entitled THE DEVIL AT MY DOORSTEP.

Excerpts from the book on the web begin as follows: “It was a nasty, ugly, three-year, million-dollar war I did not ask for, but had to win. Otherwise, the business I loved would be infiltrated by a scheming labor union determined to undermine employee privacy rights and destroy my version of the American Dream.” Bego also pursued his dream by campaigning aggressively against the Employee Free Choice Act.

Attacks on corporate campaigns have surfaced before in Congress from time to time. These go nowhere, because any restrictions would inevitably violate the First Amendment and the National Labor Relations Act. The real counter-offensive comes in the courts, where large companies such as Smithfield Foods, Wackenhut and Cintas have filed racketeering lawsuits to harass unions engaged in such campaigns.

Apart from the Boeing-NLRB controversy, which has little to do with corporate campaigns, it is curious that a new foray against this union tool would occur now. Unfortunately, there has not been an explosion of aggressive organizing drives, and union density in the private sector is dwindling.

But perhaps Rep. Roe is concerned about what may be coming next in his home state. Roe’s district is not far from Chattanooga, where Volkswagen recently opened a $1 billion auto assembly plant. The workers there currently have no union protection, but that could change. The United Auto Workers has announced a new effort to organize the foreign auto plants clustered in the southeast, and the union’s new president Bob King vows it will be much more vigorous than past initiatives.

The UAW has not indicated which producer will be targeted first, but VW is probably a leading candidate. The German company recently shook up the auto world by revealing that it will keep its labor costs in Chattanooga far below not only those of its Detroit rivals but also those of U.S. plants run by Japanese competitors such as Toyota and Honda. With wage and benefit offerings at rock-bottom level, VW workers might very well be receptive to what the UAW has to offer.

A successful union organizing drive in eastern Tennessee would be a nightmare for the likes of Phil Roe. Fortunately, there is probably little he can do to prevent that possibility.

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Posted in Auto industry, Corporate Campaigns, Employee Rights, Unions | No Comments »

Targeting Target

Thursday, May 26th, 2011

Logo of the UFCW's Target campaign

The news of a union organizing drive at a group of Target Corporation stores in the New York City area raises the tantalizing possibility that the master of cheap chic may finally be knocked off its pedestal.

For years, Target has used its stylish image to obscure the fact that many of its employment and other practices are not significantly different from those of its scandal-ridden rival, Wal-Mart. It’s even managed to get itself included on a list of the “world’s most ethical corporations.”

Target’s stores, like those of Wal-Mart’s U.S. operations, are entirely non-union, and the company intends to keep them that way. The New York Times account of the organizing drive has Jim Rowader, Target’s vice president for labor relations, spouting the usual corporate rhetoric about how a union (the UFCW) would undermine the supposed trust that the company has built up with its workers. BNA’s Labor Relations Week (subscription-only) reports that Target is subjecting workers to captive meetings “conducted by store management in an attempt to dissuade workers from seeking union representation.”

Since no representation elections have been held yet, it is unclear whether Target will follow the lead of Wal-Mart in eliminating the jobs of those who dare to vote in favor of a union.

Target does not have a reputation quite as abhorrent as that of Wal-Mart when it comes to other employment practices, but neither is its record untarnished.  It has been accused of subjecting its largely part-time workforce to the same abuses—inadequate wages, restrictions on health coverage, overtime violations, etc.—seen among other big-box retailers. Though not as often as Wal-Mart, Target has shown up on lists prepared by state governments of the employers with the most workers or their dependents receiving taxpayer-funded healthcare benefits. Target has fought against living wage campaigns, most notably in Chicago in 2006, when it threatened to cancel plans for two new stores in the city unless Mayor Richard Daley vetoed a wage ordinance (which he did).

Target has also faced accusations relating to the treatment of minority applicants and employees. In 2007 the company paid a total of more than $1.2 million to settle cases brought by the U.S. Equal Employment Opportunity Commission involving alleged racial discrimination in hiring in Wisconsin and a racially hostile environment in Pennsylvania.

There have been controversies involving the treatment of workers by Target suppliers and contractors, as well.  In 2002 Target was one of a group of retailers that together paid $20 million to settle class-action lawsuits charging them with permitting sweatshop conditions at factories run by their suppliers in Saipan, part of the U.S. Commonwealth of the Northern Mariana Islands in the Pacific. A 2006 report by SOMO, a Dutch research center on transnational corporations, documented other instances in which Target garment suppliers were reported to be abusing workers and the retailer did little in response.

Target has a history of hiring janitorial contractors for its U.S. stores that tend to engage in rampant wage theft. In 2004 one such contractor, Global Building Services, paid $1.9 million to settle an overtime-violation case brought by the federal government on behalf of immigrant workers.  In 2009 another Target cleaning contractor, Prestige Maintenance USA, settled an overtime lawsuit for up to $3.8 million.

Labor practices are not the only area in which Target’s accountability record falls short. Earlier this year, the company had to pay $22.5 million to settle civil charges that its operations throughout California had violated laws relating to the dumping of hazardous wastes. Target has had a good record on gay rights, though last year the company found itself at the center of a controversy after it was revealed to have contributed to a business PAC which in turn contributed to a gubernatorial candidate in Minnesota who campaigned against gay marriage (among other reactionary positions).  Target later apologized.

And then there’s the matter of subsidies. Like Wal-Mart, Target has extracted lucrative tax breaks and other forms of financial assistance from many of the communities where it has built stores or distribution centers. One of its more audacious efforts was a proposal for a $1.7 billion mixed-use project in the Minneapolis suburb of Brooklyn Park, for which Target wanted more than $20 million in property tax abatements and a public contribution of $60 million for infrastructure costs. Despite seeking all this taxpayer assistance, Target demanded a waiver from the city’s living-wage policy for many contract and part-time workers who would be employed at the site.

Perhaps the best thing that can be said about Target, aside from its style, is that it is much smaller than Wal-Mart. Its total revenues are only about one-sixth of the worldwide sales (and less than one-quarter of U.S. sales) of the Bentonville behemoth. Target’s workforce of 355,000, all in the United States, is dwarfed by Wal-Mart’s domestic headcount of 1.4 million and another 700,000 abroad. Target thus has a much smaller impact on overall labor practices and the global supply chain.

What impact it does have is not salubrious. Now that it is facing some union pressure, let’s hope Target breaks from Wal-Mart and decides that it is makes sense to treat its workers with as much respect as its customers.

NOTE: Speaking of subsidies, the Subsidy Tracker database I created for Good Jobs First has just been expanded and now has more than 65,000 entries covering 154 subsidy programs in 37 states.

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Posted in Corporate "Social Responsibility", Corporate Subsidies, Discrimination, Employee Rights, Employment, Retail, Supply Chain, Unions | 2 Comments »

Boeing’s Flight Plan

Thursday, May 12th, 2011

Now that Osama bin Laden has been eliminated, the greatest threat to the American Way of Life, a growing chorus of right-wingers seems to believe, is a federal agency that has been around since 1935.

That agency is the National Labor Relations Board, and its atrocity is to have challenged the absolute right of a corporation to invest its money where it sees fit.

The corporation in question is Boeing, which was recently accused by the NLRB of having violated federal labor law by locating a new production line for its Dreamliner aircraft in union-unfriendly South Carolina rather than Washington State, the company’s traditional manufacturing base. The Board’s acting general counsel, responding favorably to an unfair labor practice allegation filed by the International Association of Machinists, charged that Boeing’s siting decision was a retaliatory action against the union.

If the Board complaint prevails, “no company will be safe from the NLRB stepping in to second-guess its business decisions on where to expand or whom to hire,” thundered an official from the National Association of Manufacturers. Equally hysterical statements are being made by conservative public officials and commentators, who worry that the case could imperil job growth in “right-to-work” states. Some Republican Senators are touting a Right to Work Protection Act.

Boeing, meanwhile, continues to insist that its embrace of the Palmetto State was not driven by union-avoidance. Its CEO Jim McNerney just published an op-ed in the Wall Street Journal headlined BOEING IS PRO-GROWTH, NOT ANTI-UNION. While it is refreshing to see a major U.S. corporation disavow anti-union animus, McNerney’s statements are disingenuous. This begins with some simple facts.

McNerney asserts that the portion of Boeing’s U.S. workforce represented by unions is “about 40%…a ratio unchanged since 2003.” I hope McNerney is not involving in making any sensitive calculations about the company’s aircraft, because he seems to be challenged when it comes to numerical accuracy.

According to Boeing’s 10-K annual filing with the SEC for last year, 34 percent of its total workforce of 160,500 was represented through major U.S. collective bargaining agreements with the Machinists, SPEEA and the UAW. Other unions represent much of Boeing’s limited foreign workforce (in Canada and Australia), so there is no way the U.S. union percentage can be 40 percent, unless McNerney thinks you can round up from 34.

At the end of 2000, about 48 percent of Boeing’s U.S. workforce was represented by unions. The figure then began to slide—as a result of layoffs, outsourcing and union decertifications that must have been encouraged at least implicitly by management. The number of union-protected Boeing workers in the United States at the end of last year was more than 38,000 lower than a decade earlier.

McNerney’s description of how Boeing ended up in South Carolina is also highly misleading. He claims the decision resulted from an objective assessment of various factors in several states.

The fact is that Boeing set the stage for the move over a long period of time. South Carolina was one of the states considered in 2003 for the first Dreamliner production facility before the company bullied the Washington State legislature into enacting a $3 billion package of corporate tax breaks as the price for staying put.

South Carolina’s consolation prize was that in 2004 Vought Aircraft, a key supplier of the fuselage and other components of the Dreamliner, agreed to build a $560 million manufacturing complex at Charleston International Airport. In 2005 a Boeing executive told a public meeting in Charleston that the Vought operation could receive more Dreamliner work in the future (Post and Courier, 7/19/05). Despite the open anti-union stance of Vought management, the company’s South Carolina workers voted in 2007 to be represented to the Machinists.

Starting in 2008, Boeing bought out Vought’s interests in the Charleston operations. In September 2009 the Machinists union was decertified amid persistent rumors that Boeing would choose Charleston as the location for the second Dreamliner assembly line. In October 2009 Boeing made it official, announcing it would spend at least $750 million on the new production line.

During these years, Boeing executives made a series of public and private statements—some of which are cited in the NLRB complaint—expressing their frustration at having to deal with the assertive union workforce in Washington. Consequently, it was obvious to everyone that the Charleston announcement was a rebuff to those workers. BusinessWeek’s story about the move, headlined BOEING’S FLIGHT FROM UNION LABOR, stated that McNerney was “signaling the lengths he’s willing to go to loosen the union’s chokehold on the company.”

The need for the Charleston facility to remain non-union has been made crystal clear by South Carolina Gov. Nikki Haley, who chose Catherine Templeton, an attorney specializing in “union avoidance,” to run the state Department of Labor, Licensing and Regulation. “I think we’re going to have a union fight as we go forward with Boeing,” Haley declared in announcing Templeton’s nomination. “We’re going to fight the unions and I needed a partner to help me do it.”

The comments prompted the Machinists to file suit demanding that Haley and Templeton remain neutral in union matters. Haley, instead, has been a leader of the pack attacking the NLRB.

Despite all the righteous indignation being expressed by that pack, there is nothing remarkable or unprecedented about the Board’s complaint, as the Acting General Counsel has taken pains to point out.

What is remarkable is that so many public figures have forgotten that the National Labor Relations Act, which affirms the right of workers to act collectively to protect their interests in the workplace, is official U.S. policy on labor relations, not the “right to work” laws enacted in 22 states to weaken those activities.

Critics of the NLRB complaint incorrectly claim it will lead to the collapse of “right to work.” If only that were true. It will take a lot more—including a huge boost in labor activism—to restore the full rights of workers throughout the country.

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Posted in Aerospace industry, Employee Rights, Unions | No Comments »

Dodging Unions and Taxes

Thursday, April 21st, 2011

Boeing is used to getting its own way. Earlier this year, for instance, it emerged the surprise victor in a long-running battle for a massive Air Force tanker plane contract.

That charmed existence is now facing a setback potentially much more serious than the bad press the company faced recently when a hole ripped open in one of its old 737s during a Southwest Airlines flight from Phoenix to Sacramento. The National Labor Relations Board is charging the company with a violation of federal labor law for its 2009 decision to locate a second Dreamliner aircraft assembly line at a non-union facility in South Carolina.

The South Carolina move was not just a blow to aerospace workers in the Seattle area, Boeing’s traditional manufacturing base. It was also an egregious example of a large corporation riding roughshod over communities and labor by employing two socially irresponsible practices at the same time: avoiding unions and dodging taxes. It is reassuring that at least one of those ploys may now be backfiring.

Boeing’s dual avoidance strategies started well before it became enamored of the Palmetto State. Although the company’s Washington State operations were unionized long ago, Boeing has for years tried to weaken those unions by seeking two-tier wage structures and by steadily outsourcing portions of the work to foreign contractors.

When the company was ready to begin production of its much-anticipated Dreamliner, it forced Washington to compete with around 20 other states for the work and agreed to stay there only after the legislature in 2003 approved a package of research & development tax credits and cuts in Business & Occupation taxes (the state’s substitute for a corporate income tax), sales taxes and property taxes that together were estimated to be worth $3.2 billion over 20 years. The state also overhauled its unemployment insurance system to reduce costs for Boeing and other employers and tightened up on workers compensation claims.

All those giveaways did not satiate Boeing. Rather than showing its appreciation to Washington, the company went shopping for a better deal for the second Dreamliner production line. In South Carolina it was rewarded with both a subsidy package that has been valued at more than $900 million (click on illustration for details) and a “right to work” law that all but guarantees to keep out unions.

The cumulative effect of Boeing’s practices can be seen in the details of its 10-K annual filings. As a result of those subsidies, the company estimates its total 2010 state tax bill at less than zero—it expects to receive a net refund of $137 million—despite pretax U.S. profits of $4.3 billion. (Thanks to other forms of tax avoidance, it is paying only $13 million in federal taxes.) At the end of 2010, 34 percent of Boeing’s employees were covered by collective bargaining agreements, down from 47 percent a decade earlier.

While Boeing may be a particularly flagrant case, it is far from the only large corporation that dodges unions and taxes at the same time. Unfortunately, the movements addressing these two problems tend to operate separately from one another. Few of the many groups that have recently been chastising General Electric for its tax avoidance mentioned the company’s assaults on unions, while those criticizing Verizon for its anti-union practices rarely note its meager state and federal tax payments.

There are exceptions. With help from my colleagues and me at Good Jobs First (among others), the United Food and Commercial Workers has made Wal-Mart’s tax avoidance one of the issues in its campaign to reform the company and ultimately respect the collective bargaining rights of its workers.

Linking the two issues has been made more urgent by the fact that the Right is taking the offensive on both fronts. This year has seen more attacks on worker rights at the state level and more attempts to lighten the tax obligations of corporations (and the wealthy) at both the state and federal levels than at any other time in modern U.S. history. Beating back both of those campaigns is the only way to protect any semblance of a just economy.

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Posted in Corporate Subsidies, Tax avoidance/evasion, Unions | No Comments »

Sinister Influences on Campus

Friday, April 15th, 2011

Normally, someone who writes a blog is thrilled to see it mentioned in a national publication. But I had mixed feelings when a reference to the Dirt Diggers Digest appeared recently in the Washington Post. That’s because it came in an op-ed written by two people at a rightwing group engaged in a campaign that smells a lot like red-baiting.

Here’s the background: In March the Mackinac Center for Public Policy, a rightwing think tank in Michigan, filed a state freedom of information request to see private e-mails of faculty and staff members at the labor studies programs of Michigan’s public universities. The demand covered all messages containing references to the recent controversies over public employee collective bargaining rights in Wisconsin (the Republican Party in that state had just made a similar demand regarding the e-mails of a University of Wisconsin history professor).

The FOIAs have generated an intense debate over academic freedom and activism by those working at state educational institutions. After the Washington Post published an editorial highly critical of the information requests, Mackinac’s president Joseph G. Lehman and senior editor Thomas S. Shull responded in the op-ed.

As part of their attempt to justify the e-mail fishing expedition, Lehman and Shull cite examples of what they depict as “inappropriately political” activities at Wayne State University’s Labor Studies Center.  These include the preparation of materials for labor activists working on living wage and privatization issues and helping “workers ‘research’ their employers through numerous links to such online resources as the ‘Dirt Diggers Digest.’”

It’s amazing how quickly Lehman and Shull pivot from a complaint about supposedly partisan activities to an attack on labor-oriented corporate research. Since when is it scandalous for labor educators to have close ties to unions and produce materials for their use? And is there something sinister about helping workers gain a better understanding of the companies that employ them?

The Mackinac Center apparently thinks so, and its FOIA request seems to be an attempt to make labor educators at public universities think twice about working closely with the labor movement. It is a ploy that goes hand in glove with the attack on public employee union rights in Michigan and numerous other states.

Unwilling to acknowledge an anti-union motivation, the Mackinac Center would have us believe that its concern is that the labor studies programs are being “sidetracked from [their] educational mission.” The implication is that educators who are too connected to outside groups lose their academic integrity.

Since the Mackinac Center folks are so worried about threats to academic independence, I recommend that they investigate a troubling situation at another taxpayer-supported educational program in their state: the Ross School of Business at the University of Michigan.

Ross fosters close ties to corporate groups through its “executive education” program, which brags: “At Ross we go beyond connecting theory to practice. We connect theory to your practice so you can connect ideas to your organization’s strategy.” Ross faculty members assist corporations not only in the classroom but also in the boardroom. The school’s website describes its faculty as “leaders in helping executives and managers leverage cutting-edge knowledge to support real organizations” and it tells companies:  “You can take advantage of this resource by booking a Ross faculty expert to speak at your next board meeting, strategic planning session, or in-house workshop. Our Michigan Speakers Bureau delivers expertise in emerging markets, outsourcing, innovation, strategy, and more.”

Corporate infiltration can be seen throughout Ross’s programs. These include the Mitsui Life Financial Research Center, which was named after the big Japanese insurance company that provided “a generous endowment.” The Center sponsored a seminar last year on “Negotiating with Labor under Financial Distress.”

The Ross School also houses the Zell Lurie Institute for Entrepreneurial Studies, named for real estate magnate Samuel Zell and his late partner Robert H. Lurie. After taking over the Tribune Company in 2007, Zell decimated the unionized staffs at its newspaper properties. Is that the kind of entrepreneurship the Institute is teaching?

Business influence also extends to individual professors, some of whom hold chairs endowed by specific corporations. The Ross faculty includes a Ford Motor Company Clinical Professor of Business Administration, a Dow Professor of Sustainable Science, a Bank One Corporation Assistant Professor of Management and Organizations, and an Ernst & Young Professor of Accounting. Even those without endowed chairs seem to have succumbed to business-think. Associate Professor Aneel Karnani published an opinion piece in the Wall Street Journal last year entitled “The Case Against Corporate Social Responsibility.”

And in perhaps its most shameless practice, the Ross School welcomes company “recruiters” to campus so they can enlist graduating students into the corporate movement. The Ross website, dropping all pretense of independence, tells these headhunters: “We greatly appreciate your ongoing commitment to Ross and look forward to working with you toward our mutual success.”

How can an educational institution that vows to achieve mutual success with an outside movement stay true to academic principles?

I trust that as soon as they are made aware of this situation, Mackinac Center staffers will demand to see the e-mails of all the corporate educators at the Ross School. Perhaps some of the research experts at Wayne State can help them make sense of the business connections.

What’s more likely is that they won’t get the joke.

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Posted in Corporate influence on campus, Unions | No Comments »

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