Dodging Unions and Taxes

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.

Sinister Influences on Campus

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.

Can Corporate Tax Dodgers Be Socially Responsible?

In much the same way that Wisconsin Gov. Scott Walker reinvigorated organized labor, General Electric is reigniting the movement for tax justice. The revelation in a March 25 New York Times front-page story that GE arranged things so that it owes nothing to the Internal Revenue Service on its $5 billion in 2010 U.S. operating profits—in fact, it expects to claim a refund of $3.2 billion—has sparked a firestorm of protest.

GE, of course, is not the only high-profile corporate tax dodger. The new US Uncut campaign is also targeting Bank of America, Verizon and FedEx. Other offenders include Google and Amazon.

What tends to get overlooked in the furor over big business tax avoidance is that the companies involved are usually ones that profess to adhere to the principles of corporate social responsibility.

Take General Electric. Like many other large firms, GE tries hard to present itself as a good corporate “citizen.” It has a website dedicated to the subject, and its board of directors has a Public Responsibilities Committee. GE also publishes an annual Citizenship Report.

In the 44 pages of that report, taxes are mentioned only in passing—and then mainly to cite the total amount GE pays to governments worldwide. It uses a figure of $23 billion, but that is over the course of a decade, whereas the other numbers in the report tend to be annual ones. Nor does GE compare the number to the more than $160 billion it earned in profits during the ten years.

GE goes on at length about its commitment to “Community Building,” stating that “Governments and national institutions are vital to progress. The quality of public institutions is therefore crucial.” Yet when it comes to explaining what it does to support a strong public sector, the company changes the subject. It highlights its charitable contributions, its investments in “human capital” and its involvement in environmental and trade policy issues.

GE, like many other companies, is able to get away with this because issues such as fair taxation and tax compliance are largely absent from the discourse of corporate social responsibility (CSR). Given the lack of a standardized definition of what is and is not socially responsible, corporations can pick and choose. We thus end up with cases such as Wal-Mart, which maintains its Neanderthal labor practices while touting environmental initiatives as evidence of its high level of ethicality.

Selective business ethics is especially problematic when it comes to taxes. Business apologists say that corporations have a duty to their shareholders to minimize tax payments and that there is nothing wrong with using all legal means to do so. But how far does that go? The Times pointed out that GE’s tax department has a staff of 975 dedicated to finding every last trick, and the company spends millions each year lobbying for even more loopholes.

What about Wal-Mart’s use of a device known as a captive real estate investment trust to avoid billions of dollars in state income taxes by essentially paying rent to itself and then deducting the cost? And how about those companies that create paper subsidiaries in offshore tax havens? A 2010 study published in the journal Corporate Governance found that even companies that move their legal headquarters to such havens go on claiming to be socially responsible.

Another obstacle is that the governments that are victimized by business tax dodging often fail to take strong measures, thus reinforcing the idea that it is not a significant offense. In the United States, criminal tax prosecutions of large corporations are few and far between. In a rare instance last December, Deutsche Bank paid $553 million in fines and admitted to criminal wrongdoing for helping U.S. customers make use of fraudulent tax shelters. Deutsche Bank, of course, professes a strong commitment to corporate social responsibility.

One place where CSR-spouting corporate tax dodgers are starting to be challenged is Britain. Over the past few years, human rights groups such as Christian Aid have criticized tax avoidance and evasion by transnational corporate operations in developing countries, arguing that these practices keep those nations stuck in a poverty trap. More recently, the UK Uncut campaign (which inspired US Uncut) has targeted tax dodging in Britain itself by corporations such as the European cellphone giant Vodafone. Cyberactivists hacked into Vodafone’s CSR website to post messages about the firm’s dubious tax practices.

Actions such as these help cut through the corporate obfuscation and make it clear that the failure of a large company to comply with a shared responsibility such as taxes is socially irresponsible.

Making Honeywell Feel the Heat

How would you describe the situation of a corporation involved in union-busting, mishandling of radioactive waste, production of nuclear weapons and the effort to lower corporate tax rates while cutting Social Security and Medicare? If you are Barron’s, you’d say the firm is “in its sweetest spot in more than a decade.”

That’s the way the investment weekly describes Honeywell International in a recent article that gushes over the company’s financial results and predicts that its stock is “poised for liftoff.” Honeywell, a $33 billion transnational, is viewed differently in Metropolis, Illinois, where some 230 members of the United Steelworkers union have been locked out of their jobs for more than nine months.

Apologists for the attacks on public employees often try to disavow anti-union motivations by saying they have no problem with collective bargaining in the private sector. Honeywell is a glaring reminder that challenges to worker rights can be found among employers of all types these days.

The dispute in Metropolis—which calls itself the hometown of the fictional character Superman—brings together a variety of current hot-button issues, including unions, nuclear power, environmental protection, healthcare coverage and pensions. Honeywell’s plant is the sole facility in the country that converts uranium ore into the uranium hexafluoride gas used in the production of both nuclear power and nuclear weapons. This is a risky process that involves highly toxic materials.

These dangers were highlighted in December 2003, when an accidental release of toxic gas forced the evacuation of nearby residents and the shutdown of the plant for four months. The U.S. Nuclear Regulatory Commission (NRC) issued two violations relating to the way the company handled the incident.

Given such hazards, the members of Steelworkers Local 7-669 have long focused on safety issues, both for themselves and for the surrounding community. The union has been particularly concerned about the high rate of cancer among the workforce and thus has sought to negotiate good health coverage for active workers and retirees. During contract renegotiations last year, Honeywell sought to eliminate retiree health benefits, reduce pensions for new hires, cap severance pay and contract out maintenance. When the union balked but declined to strike, the company abruptly locked out the workers in June. And in a move made all the more reckless by the dangerous nature of the work, the company brought in poorly trained replacements to keep the plant operating.

In September, a loud explosion was heard at the plant but there were no reports of toxic releases. A Steelworkers report notes that the company was cited by the NRC for improperly coaching replacement working during on-site job evaluations by federal inspectors. Honeywell’s safety image was further tarnished just a few weeks ago, when the U.S. Justice Department and the EPA announced that the company had paid a criminal fine of $11.8 million to resolve a charge of illegally storing hazardous and radioactive materials in Metropolis.

The $11 million is the latest addition to the more than $650 million in fines and damages Honeywell has paid since 1995 in connection with 32 instances of misconduct collected by the Project On Government Oversight in its Federal Contractor Misconduct Database (the company ranks 17th in amount paid out).

Honeywell’s record of corporate irresponsibility goes back even farther. From the late 1960s through the late 1980s, the old Honeywell (prior to its 1999 takeover by AlliedSignal, which adopted the name) was targeted by antiwar activists because of its production of cluster bombs and land mines that were widely used in Vietnam and later because it was unwilling to take responsibility for clearing munitions that remained after the war was over.

Despite this checkered history, Honeywell has remained a large federal contractor. It is involved, for example, in both the clean-up of the Cold War-era Savannah River nuclear weapons complex in South Carolina and the construction of a new nuclear arms production facility in Kansas City.

And if all the above is not enough controversy, Honeywell CEO David Cote was named by President Obama (before the lockout) to the National Commission on Fiscal Responsibility and Reform, which issued a report in December that, among other things, proposed cuts in corporate tax rates. Cote issued a personal statement complaining that the report did not take a harder line on Medicare and Medicaid, and he recently called for cuts in Social Security. He also just told Bloomberg Television that he would love to see corporate income taxes entirely eliminated.

For many people, the Honeywell name is still associated with thermostats. But today, it is a poster child for much that is wrong with corporate America—mistreatment of workers, environmental recklessness, military profiteering, and unwillingness to pay a fair share of taxes. It should be made to feel more of the heat itself.

A Good Merger for a Change

AT&T’s proposed $39 billion acquisition of its smaller cell-phone rival T-Mobile has been widely criticized as anti-competitive and bad for consumers. Normally, I would be joining in such a chorus, but this is a special case.

Giant mergers are usually bad news not only for consumers but also for workers, especially if they happen to be unionized. Acquisitions are typically followed by layoffs and sometimes by efforts to bust unions at the firm being purchased. This was seen, for instance, after the acquisition of Northwest Airlines by Delta, which has been accused of intimidating flight attendants and other Northwest workers into decertifying their unions last year.

A very different dynamic is at work in the T-Mobile/AT&T deal. This is a rare instance in which the acquiring company has a vastly better labor relations record than the target.

Let’s start with T-Mobile. The cell phone provider, owned by Deutsche Telekom, has aggressively opposed an organizing drive launched by the Communications Workers of America (CWA) after the German company entered the U.S. market a decade ago. The company’s anti-union crusade, not widely reported in the mainstream media, has employed the usual techniques of targeting workers with propaganda, misinformation, captive meetings and warnings that unionization would lead to job losses.

What makes T-Mobile’s practices all the more egregious is that Deutsche Telekom has good relations with unions in Germany. It is one of numerous European companies that operate under a global double standard: cooperating with unions at home while fighting them tooth and nail in the United States. It was one of those firms singled out in a report issued last year by Human Rights Watch with the title A Strange Case: Violations of Workers’ Freedom of Association in the United States by European Multinational Corporations.

The report charges that “T-Mobile USA’s harsh opposition to workers’ freedom of association in the  United States betrays Deutsche Telekom’s purported commitment to social responsibility, impedes constructive dialogue with employee representatives, and in several cases, has violated ILO and OECD labor and human rights standards.”

These findings reinforced the conclusions of an earlier report written by John Logan for the American Rights at Work Education Fund.

Consider, by contrast, the case of AT&T, which in its current incarnation is the result of the 2006 recombination of various parts of the old Bell system that had been broken up in 1984. Its mobile phone business is what was previously known as Cingular Wireless.

Before the creation of the new AT&T, Cingular had adopted a policy of strict neutrality with regard to union organizing drive—the stance that the law requires but which is rarely adhered to by U.S. employers. That policy carried over into AT&T, which in 2007 was honored by American Rights at Work for its enlightened labor practices. A report issued by the group at the time quoted an AT&T executive as saying that the company “has long taken pride in our cooperative and respectful relationship with the unions that represent our employees.”

In keeping with this position, AT&T recently told a reporter from BNA’s Labor Relations Week (subscribers only) that it would maintain strict neutrality regarding union organizing after acquiring T-Mobile. This means that an estimated 23,000 T-Mobile employees would have an excellent chance of finally gaining union representation.

It is thus no surprise that CWA and the AFL-CIO have voiced support for the merger. This should not be viewed as a matter of narrow self-interest. The remarkable response to Wisconsin’s attack on union rights has revived the old labor solidarity principle that an injury to one is an injury to all. A corollary to that is that a boon to the rights of one group of workers is a boon to all.

The achievement of collective bargaining rights by 20,000-plus T-Mobile employees would be one of the largest labor gains in the U.S. private sector in many years and could serve as an important lesson about the willingness of workers to embrace unions when management thuggery is taken out of the picture.

Also keep in mind that if AT&T does not acquire T-Mobile, it might end up in the hands of the other industry giant, Verizon Wireless, which also has a dismal record on labor relations.

All this is not to discount the concerns of consumer groups. The fact that AT&T is union-friendly does not give it a pass in other areas. It wouldn’t hurt if the CWA works with consumer groups to be sure that AT&T does not abuse its bigger position in the market.

NOTE: Dirt Diggers Digest now has a Facebook page, where the latest posts are also available. Please pay a visit and feel free to click on the “like” button to bring the tally up to a more respectable level.

Nuclear Deception

After hearing the term “meltdown” used so often as a metaphor for the financial crisis, it is shocking to confront the prospect of a literal meltdown at some of Japan’s nuclear reactors in the wake of the devastating earthquake and tsunami. There is something the two situations have in common: corporate misconduct.

The company that operates the heavily damaged reactors, Tokyo Electric Power (TEPCO), is one of the most unethical large corporations that I have ever examined. It has an astounding history of deceptions and cover-ups made all the more egregious by the grave risks inherent in the business of generating nuclear power in a country prone to earthquakes.

TEPCO’s transgressions first came to light in 2002, after Japan’s nuclear regulatory agency belatedly began to investigate whistleblower allegations that the company had regularly falsified repair reports and inspection data concerning its nukes. The agency found evidence that the company had engaged in the deception for some 15 years, in some cases concealing the existence of cracks in the steel plates surrounding reactor cores as well as other defects.

The uproar over the revelations forced TEPCO’s president and chairman to resign. This was not just a matter of higher-ups taking responsibility for the misdeeds of underlings. There were reports that the top executives were aware of what was going on. The scope of the subterfuge also continued to grow, prompting some observers to liken the situation to the big U.S. corporate scandals involving companies such as Enron and WorldCom. TEPCO, which was forced to shut down its reactors for extended periods, later admitted that the data falsifications went back as far as the late 1970s.

In 2007 the company admitted that it had concealed incidents involving the emergency shutdowns of its Fukushima reactors—those involved in the current crisis—back in the mid-1980s. A few months after the admission, TEPCO had to apologize for delays and errors in announcing the extent of the damage at its nuclear plant in Kashiwazaki following an earthquake in the northwestern part of the country. When the whole story became known, local officials ordered TEPCO to shut down the plant.

The incident also prompted criticism of TEPCO for building the plant on top of an active seismic fault. It was unclear whether the company had been unaware of the fault or had ignored its presence; in either case, TEPCO looked highly irresponsible. It was later reported that the company had understated the intensity of the earthquake. The Kashiwazaki plant remained offline for more than two years.

TEPCO’s dishonesty is not limited to its nuclear operations. In 2007 it was one of ten utility companies cited by the Japanese government for falsifying data on the large quantities amounts of river water they used for power generation. TEPCO was found to have submitted bogus information on one of its hydroelectric plants for 13 years.

The mendacity of TEPCO is not just a matter of concern for the Japanese. In May 2010 the company announced it would purchase a 10 percent interest in the South Texas nuclear project, one of a slew of proposed new nukes that hope to receive a share of the billions of dollars in federal assistance promised by the Obama Administration to encourage a nuclear renaissance in the United States, where a new nuclear plant hasn’t opened in decades.

Japan’s disaster is already casting a very dark cloud over the prospects for that renaissance.  Debate over new U.S. nukes should not be limited to the technical safety issues. The example of TEPCO raises the question of whether a corporation can be trusted with a technology that has the potential to do such massive harm.

Billionaires, Blowhards and Bribery

Billionaire Sheldon Adelson

The bond between David Koch and Scott Walker is not the only relationship between a reactionary billionaire and a rightwing politician contaminating the U.S. political scene. Attention also needs to be paid to what’s going on between Sheldon Adelson and Newt Gingrich.

Adelson — the fifth wealthiest person in the United States, with a net worth estimated by Forbes at $23 billion — has made a major bet on Gingrich. Since 2006 he has contributed $7 million to Gingrich’s fundraising entity American Solutions for Winning the Future. Through this 527 vehicle (and a regular political action committee with the same name), Gingrich is raking in loads of cash as he teases the country about whether he plans to run for President while mouthing off with a variety of reckless policy pronouncements.

The American Solutions website has a section labeled Corruption. In January a post there announced a new feature called Corrupt Report that was supposed to monitor news of misbehavior “regardless of political party.” Somehow the site has failed to cover the recent disclosure by Adelson’s company, Las Vegas Sands, that it is being investigated by both the Securities and Exchange Commission and the U.S. Justice Department for possible violations of the Foreign Corrupt Practices Act. The Nevada Gaming Control Board is also said to be looking into the matter.

The investigations presumably involved Adelson’s four casinos in Asia — three in China-controlled Macao and one in Singapore — where Las Vegas Sands has branched out from its U.S. gambling operations.

It will be interesting to see how a gambling-related bribery scandal affects the political prospects of Gingrich, who already has the burden of reconciling his “family values” rhetoric with the fact that he has been twice divorced.

Adelson’s support for Gingrich is far from his only foray into conservative politics. Like a number of other billionaires, he seems to have built his reactionary views on a foundation of anti-union animus. This began in the late 1990s, after Adelson purchased the Sands hotel and casino in Las Vegas — the former hangout of Frank Sinatra and the Rat Pack — and tore it down to make way for the gargantuan Venetian gambling emporium.

The Sands had been a unionized operation, but Adelson refused to recognize the Culinary Workers at the Venetian. When union supporters picketed in front of the casino, he tried to have them arrested, setting off a legal battle that lasted for a decade. More recently, Adelson was an outspoken foe of the Employee Free Choice Act, and today the Las Vegas Sands brags in its 10-K filing that none of the workers at its casinos are covered by collective bargaining agreements.

In 2007 Adelson founded  Freedom’s Watch, an advocacy group that tried to build support for the Bush Administration’s surge strategy in Iraq, beat the drum on what it called the “Iranian Threat” and which in 2008 was being touted as the right’s answer to MoveOn.org — a claim that somehow missed the distinction between a group funded by large numbers of small contributions and one bankrolled mostly by a single multi-billionaire. Despite that money, Freedom’s Watch was a short-lived flop.

Adelson also became active in Israel, where he started a conservative newspaper and became a leading backer of rightwing politicians, especially Prime Minister Benjamin Netanyahu. He has also been an apologist for the repressive Chinese government, which allowed him to build his lucrative casinos in Macao.

At times Adelson has been called the Right’s answer to George Soros. The difference is that Adelson’s political views serve his financial self-interest, especially when it comes to paying taxes. According to a 2008 profile of the gambling magnate in The New Yorker, Adelson once said to an associate: “Why is it fair that I should be paying a higher percentage of taxes than anyone else?”

It’s amazing that Adelson, whose only higher education came from a stint at the tuition-free City College of New York, can forget that progressive taxation (or what’s left of it) is what pays for the public institutions and infrastructure that help people like him succeed.

Even more dismaying than billionaires’ deluding themselves into thinking that they are completely self-made is the fact that they can now use large amounts of their undertaxed wealth to promote policies that make life ever more harsh for the rest of us.

Challenging Corporate America’s Hiring Freeze

You would never know it from the preoccupation with budget deficits and the attack on public unions, but there is still a severe jobs crisis in the United States.

The focus on the state and federal fiscal situation has deflected attention from what should be a major scandal: the failure of big business to accelerate hiring in step with the emerging recovery in overall economic activity.

In recent weeks the dimensions of that scandal have become increasingly apparent as corporations report lush earnings for 2010 while hiring remains depressed. To highlight this incongruity, I looked at the top 50 companies on the most recent Fortune 500 list. Twenty-nine of them have recently reported their annual profits while also disclosing the size of their payroll as of the end of the fiscal year.

On the earnings side, it is truly fat city. The 29 posted aggregate net income of $239 billion, a whopping 48 percent increase from the year before. Oil companies, of course, are raking it in. Exxon Mobil was up 58 percent and Chevron 81 percent. Service sector giants are also reporting much richer bottom lines. UPS showed an increase of 62 percent and AT&T 63 percent. Some blue chip industrials more than doubled their earnings. Boeing soared 152 percent and Ford Motor 141 percent.

By contrast, the employment figures are pitiful. Together, the 29 corporations reported a decline of about 3,500 positions in their aggregate head count of some 4.6 million. While most of the companies showed little change—and some banks increased their hiring a bit—a few of the corporate giants slashed payrolls. Telecommunications behemoth Verizon Communications reduced its workforce by 28,500 jobs while boosting its profits more than 13 percent. General Electric, whose CEO Jeff Immelt is advising the Obama Administration on job creation, got rid of 17,000 net positions during 2010 while enjoying a 6 percent rise in earnings. (GE is one of the few companies that provide a geographic breakdown of their workforce. In the U.S. GE’s head count was down by 1,000.)

It’s interesting that the percentage decrease in head count at Verizon and GE is almost identical to the percentage increase in profits at each of the companies.

Given these numbers, why is big business facing little criticism for its hiring freeze? There is a tendency to regard even large corporations as helpless in the face of economic conditions, and they are not expected to resume hiring until the market mandates it. Yet the overall economy is picking up and still there is a resistance to hiring.

Corporate apologists such as the U.S. Chamber of Commerce would have us believe that the reason is excessive workplace regulation. The Chamber has just come out with a report making the preposterous claim that if state governments would only curtail their employment rules to the lowest common denominator, 746,000 new jobs would magically materialize.

A major reasons hiring is anemic is that workplace rules—and union presence—are too weak rather than too strong. Companies can do more business and garner more profits without increasing their head count largely because there is nothing stopping them from squeezing more work out of the same number of employees. Stricter protections and more collective bargaining would result in higher employment levels.

One of the favorite policy prescriptions for high joblessness is to offer tax credits to companies to hire more people. The existence of those programs at the state and federal levels is, however, contributing little to job creation.

Rather than thinking up more incentives, perhaps there we should create a disincentive for corporations to continue their hiring boycott. There is a growing awareness these days that big business is not paying its fair share of taxes.  We could begin to address this problem by creating tax penalties for profitable companies that refuse to use their earnings to alleviate understaffing.

Pressuring corporations to do more hiring would not only improve life for the overworked employed and reduce the ranks of the unemployed. The additional tax revenue that comes in—whether from the penalties or the withholding paid by the newly hired—would also alleviate the state and federal fiscal crunch and make it easier for us to ignore those who insist that cutting the size of government is the solution to everything.

Public Employees and the Public Interest

Chicago Tribune, January 29, 1900

Well before Wisconsin Gov. Scott Walker began his unholy crusade, the Right was heavily promoting its claim that public employee unions are a threat to the public. The title of a 2009 book by conservative ideologue Steven Greenhut said it all: Plunder! How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.

What the union bashers are trying to obscure is that public employees have a long history of supporting policies that promote the broad public interest. This goes back to the very roots of the public employee union movement.

In the 1890s teachers in Chicago created a federation that became the first real teachers union and one of the pioneers of public employee unionism in general. When the federation, led by Margaret Haley and Catherine Goggin (illustration), was confronted with a move by the board of education to cut teacher salaries because of a purported fiscal crisis, the teachers responded to the claim of a revenue shortfall in a creative way. They launched an intensive investigation of tax dodging by some of the largest corporations in the city, finding that property tax underpayments amounted to some $4 million a year (serious money back then).

Tax officials were reluctant to crack down on powerful business interests, so the teachers sued, eventually winning a favorable ruling in the Illinois Supreme Court (though the U.S. Supreme Court later went the other way).

A cynic might say that the teachers were simply acting in their self-interest by finding a new revenue source that would help restore their lost wages. Yet their goal was also to find funds that could improve conditions in the schools—and those conditions were truly abysmal. In his 1975 history of the American Federation of Teachers, William Edward Eaton writes that in the 1890s:

The teachers of Chicago daily faced the horrors of overcrowded, unsanitary buildings stuffed with too many children and controlled by an impersonal bureaucratic structure. This they did with poor pay, no job security, and no pension system.

The efforts of teacher organizations to address these problems, through collective bargaining as well as tax justice campaigns, also redounded to the benefit of the students and their families.

The Chicago teachers were also an important force in the passage of the Illinois Child Labor Law of 1903. That cynic might say this was aimed at boosting school enrollment and increasing the demand for teachers. Maybe so, but can anyone deny that banning child labor was also a boon for society as a whole, aside from sweatshop proprietors?

In the decades that followed, unions of teachers and other government employees have been among the strongest advocates of a vibrant public sector. They have continued to be leading critics of corporate tax dodging and opponents of efforts to gut public services. Unions such as AFSCME have been at the forefront of campaigns to stop the contracting out of government functions and the privatization of public assets such as highways—practices that usually work to the detriment of taxpayers as well as public employees.

The state and local public employee unions accomplished this against all odds. Denied the protection of the National Labor Relations Act, they had to get states one-by-one to recognize their right to organize—the right that is at risk in Wisconsin and elsewhere. It took a period of remarkable militancy in the 1960s and 1970s—including defiance of laws banning strikes by public employees—before they made significant progress. Among those strikes was the 1968 walkout by sanitation workers in Memphis, where Martin Luther King Jr. was visiting to show his support when he was assassinated.

And even then there were often severe fiscal limits on the ability of public employees to bargain for substantial wage gains. To compensate, many public unions put more emphasis on securing better retirement benefits for their members. These pension rights—in effect, deferred wages—are now under attack as if they were some giant giveaway.

The real giveaways are the lavish business tax cuts and corporate subsidies that the likes of Gov. Walker promote at the same time that they are demanding severe concessions from government workers. The great confrontation of 2011 comes down a question of whose interests are more closely aligned with those of the public at large: those who teach our children, drive our buses and put out fires in our homes—or superwealthy individuals and large corporations that are reluctant to create new jobs.

With each passing day, the momentum is moving in favor of the descendants of the 1890s Chicago teachers who are fighting for their rights and for the public interest in Madison, Columbus and other capitals across the nation.

Note:  A new movement called US Uncut is organizing actions around the country calling for a crackdown on corporate tax dodging as an alternative to harmful cuts in government programs such as education.

The Selective Sanctity of Contracts

Along with the rule of law and private property rights, the sanctity of contracts is considered fundamental to “economic freedom.”  Yet certain kinds of contracts, namely the collective bargaining agreements of U.S. public sector workers, are now starting to be regarded as dispensable.

In Wisconsin, newly elected Gov. Scott Walker – whose official website is emblazoned with the slogan “Wisconsin is Open for Business” – is trying to strip state employees of their right to bargain collectively on the full range of workplace issues and force them to pay a much larger portion of the cost of their pension and healthcare benefits, sparking unprecedented protests (photo).  Similar attacks on public bargaining rights are under way in states such as Ohio, and a wide array of public officials are talking about the possibility of reneging on state and local government pension benefits negotiated over many years.

These assaults on the contract rights of public workers are said to be necessitated by the dire fiscal condition of many states. Yet it is telling that those assaulting public unions are not also questioning the viability of other expensive government obligations, for which the beneficiary is business rather than labor.

State and local governments spend an estimated $70 billion a year on economic development subsidies – corporate income tax credits, property tax abatements, direct cash grants, etc. – to lure large companies to invest in their jurisdiction or to retain those already there. They do so despite extensive evidence that such subsidies are often immaterial in corporate site selection decisions and that their costs—which for some tax deals can last for decades—often far outweigh the economic benefits of the investment.

The current fiscal crisis is a perfect opportunity for states to abandon these self-defeating subsidy practices. Yet aside from a small number of places such as California, where Gov. Jerry Brown is seeking to eliminate the highly ineffective enterprise zone program, and a few other states where film production tax credits have been reduced or suspended, surprisingly little is being done to end the corporate giveaways.

Shutting down or cutting back the boondoggle programs would limit new obligations, but if states are truly facing a fiscal emergency perhaps they should also look for ways to escape from expensive financial commitments that are already in place. Why are state and local governments not looking for ways to abrogate existing subsidy agreements?

Some might say that companies would lay off workers if they had to return subsidies. That’s debatable, but the problem could be addressed by limiting the revocations to large and profitable companies. For example, why shouldn’t Google (2010 profits: $8.5 billion) be required to give back the big subsidy packages it has extracted for its data centers, including $200 million for a facility in Lenoir, North Carolina and about $50 million for one in Council Bluffs, Iowa?

The same goes for the big Wall Street firms. Should Goldman Sachs (2010 profits: $8.4 billion) be allowed to keep the $175 million in subsidies (and $1.7 billion in tax-exempt financing) it received for its new headquarters in lower Manhattan—or the $164 million it got for an operation across the river in New Jersey?

What about Boeing ($2.1 billion in profits for the first three quarters of 2010): Should it retain the estimated $900 million subsidy package it received for its new Dreamliner production line in Charleston, South Carolina?  Must Procter & Gamble ($12.7 billion in profits for the fiscal year ending June 2010) retain the $85 million tax break it got for a plant in Utah?

And, of course, there is Wal-Mart (which will soon announce annual profits expected to exceed $14 billion). Over the years it has received what my colleagues and I at Good Jobs First estimate at more than $1.2 billion in subsidies at hundreds of stores and around 90 percent of its 100 or so distribution centers—including at least five facilities in Wisconsin. Couldn’t it afford to give some of that back in a time of need for many of the communities in which it operates?

Business advocates would no doubt scream bloody murder if subsidy abrogation were ever seriously considered by state or city governments. They would accuse officials of breaking solemn promises and poisoning the business climate. They would mobilize small business owners to defend the rights of their larger brethren. And they would waste no time bringing suit against public officials for breach of contract.

On what basis can subsidy agreements be considered sacrosanct while public sector collective bargaining agreements and pension obligations are torn to shreds? The failure of those seeking to undermine commitments to public workers to also call for sacrifices by business suggests that their real objective may have more to do with ideology than fiscal relief.

Note: For more details on the subsidy deals cited above and many more, see the Accountable USA state pages of the Good Jobs First website (index by company name here). And see our Subsidy Tracker database as well.