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CEOs to Workers: More for Me, Less for You-Holly Sklar

CEOs to Workers: More for Me, Less for You

By Holly Sklar
CommonDreams.org
July 25, 2011

http://www.commondreams.org/view/2011/07/25-0

Big company CEOs got a 23 percent raise last year and
corporate profits are at record highs. But the minimum wage
has less buying power now than in 1956 - the year Elvis
Presley first topped the charts, videotape was breakthrough
technology and the Dow closed above 500 for the very first
time.

It’s no accident wages are down while corporate profits are
up. As JPMorgan’s July 11 "Eye on the Market" newsletter put
it, "Reductions in wages and benefits explain the majority of
the net improvement in [profit] margins - US labor
compensation is now at a 50-year low relative to both company
sales and US GDP."

The minimum wage sets the floor under wages, and that floor
is sinking. The 1956 minimum wage was $8.30, adjusted for
inflation.

Today’s minimum wage is $7.25 - just $15,080 annually.

CEOs make more in a few hours than minimum wage workers who
care for children, the ill and the elderly make in a year.
Median CEO pay was $10.8 million last year among 200 big
companies measured by Equilar.

The $15,080 minimum wage workers have for rent, groceries,
transportation, medicine and everything else for the year
doesn’t even buy 2 pounds of the imported caviar featured in
the Forbes Cost of Living Extremely Well Index.

The last increase in the minimum wage to $7.25 on July 24,
2009 was so little so late it left workers 30 percent below
the minimum wage peak of $10.38 in 1968 - $21,590 annually -
in 2011 dollars.

Today’s retail clerks, health aides, child care workers,
restaurant workers, security guards and other minimum wage
workers have $6,500 less in annual buying power than their
1968 counterparts.

That doesn’t help our corner stores, our communities or our
national economy. It hurts.

We didn’t have to go backwards. U.S. income grew $11,684 on
average between 1969 and 2008, the year Wall Street drove our
economy off a cliff. But there was nothing average about the
actual income distribution. Every dime of income growth went
to the top 10 percent. Income for the bottom 90 percent
declined.

Compare that to the period between 1917 (when the data began)
and 1968. Income growth averaged $26,574. The top 10 percent
got 31 percent of that growth. The bottom 90 percent got 69
percent.

You can’t have a strong middle class or a strong economy if
the bottom 90 percent gets none of the nation’s income
growth.

If the minimum wage had stayed above the $10.38 value it had
in 1968, it would have put upward pressure - rather than
downward pressure - on the average worker wage. Wal-Mart and
McDonald’s, our nation’s largest employers, couldn’t
routinely pay $7.25 or a little above.

McDonald’s wages would be more like In-N-Out Burger, which
has an entry wage of $10 plus good benefits and beats
McDonald’s and other fast food chains in the new Consumer
Reports ratings for food, service, value and speed. Wal-
Mart’s wages would be closer to Costco, which pays starting
wages of $11, has the lowest employee turnover in retail,
doesn’t need to spend money on advertising and outperforms
Wal-Mart.

The 2010 American Values Survey found that 67 percent of
Americans supported increasing the minimum wage from $7.25 to
$10.

Critics routinely oppose minimum wage increases in good times
and bad, claiming wrongly they will increase unemployment.
The most rigorous studies of the impact of actual minimum
wage increases, including two studies published recently in
the journal Industrial Relations and the Review of Economics
and Statistics, show they do not cause job losses - whether
during periods of economic growth or recession.

In the words of John Shepley, co-owner of Emory Knoll Farms
in Maryland and a member of Business for a Fair Minimum Wage,
"The notion that raising the minimum wage will kill jobs is
just bunk. People at the lower end of earnings tend to spend
100 percent of their after-tax income. They put it right back
into local businesses buying food, clothing, car repairs and
other necessities. - When the minimum wage is too low it not
only impoverishes productive workers, it weakens the key
consumer demand at the heart of our local economy."

It’s time to stop stuffing the penthouse of the economy with
gold and rebuild the crumbling foundation.

[ Holly Sklar's books include "Raise the Floor: Wages and
Policies That Work for All of Us," "A Just Minimum Wage:
Good for Workers, Business and Our Future" and "Streets of
Hope: The Fall and Rise of an Urban Neighborhood." She can
be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. ]

Taxing Finance by Toby Sanger

Taxing Finance

By Toby Sanger

Reposted from Global Labour Column, Monday, July 18, 2011

http://column.global-labour-university.org/2011/01/taxing-finance.html

 


The financial and economic crisis has led to a long overdue re-evaluation of the role, regulation and taxation of the financial industry around the world.
The IMF estimated that the crisis would cost G20 countries over $1 trillion in increased deficits; costs citizens are now paying for through public spending cuts, austerity measures and consumption tax increases. This alone is a good reason for the unprecedented interest in introducing new taxes on banking and the finance industry. Despite this, the commitment by G20 leaders at their September 2009 summit that the “financial sector should make a fair and substantial contribution” towards paying for some of the costs of the crisis remains unfulfilled.
Following strong advocacy by civil society and labour organisations, a significant advance was made in June 2011 when the European Commission recommended a European financial transactions tax be introduced by 2018 at the latest. It estimated this would generate €37 billion (US$52 billion) a year to fund the European Union’s budget activities.
Beyond paying for some of the costs of the crisis, there are also a number of other compelling reasons for increasing taxation of the financial sector.
Financial sector is too big
Whether considered from a critical political economy or a more conventional neo-liberal perspective, there is broader recognition that the financial sector has grown “too big” for the good of the economy, as a recent IMF report suggested. Finance is an intermediary industry, and doesn’t directly produce products with end-use values for people, so it can divert resources from other more productive areas. Excessive salaries and bonuses paid to engineering graduates to create new financial products and derivatives instead of working to meet more fundamental needs reflects the human resources side of this equation.
Tax changes have provided large benefits and preferences for finance
Major tax changes introduced over the past decades inspired by supply-side economics provided large benefits to the financial sector and to highly-compensated individuals in the industry. These include: preferential tax rates for capital gains and investment income, increasing dependence on consumption-based value-added taxes (which largely exempt financial services), cuts to corporate taxes, reductions in higher income tax rates, as well as the growing use of tax havens.
Reducing incentives for excessive risk-taking
Even from a micro-economic efficiency approach, there is recognition that tax changes increase incentives for short-term speculation and excessive risk-taking in the financial sector, as the IMF and the European Commission have acknowledged. Bankruptcy and limited liability laws have limited downside risk for corporations for centuries. Following the financial crisis, there is also more focus on the damage caused to the entire economy by systemically risky activities, with the implicit public guarantee for “too big to fail” financial corporations.
Some have argued that the exponential growth of trading in financial derivatives — futures, options, swaps, etc. — has magnified financial instability instead of reducing volatility as they were supposed to. The value of financial derivatives outstanding now amounts to over ten times the value of annual global economic output. Clearly much of this involves investments designed to increase profit through leverage and risky speculation instead of hedging to insure underlying investments against economic fluctuations.
There’s been little effort to contain or control this. Financial derivatives have been largely unregulated; unlike transactions for most other goods and services, only a few countries apply taxes to a broad range, let alone any financial transactions; the growth in derivatives, hedge funds, private equity and increasing use of secretive tax havens has not only siphoned revenues from national governments, but also made them more vulnerable to the power of financial capital.
There should be little surprise that pressure exerted by popular groups for new taxes on finance, such as the Robin Hood Tax campaign, is now being supported by many politicians and political leaders from different sides of the political spectrum. The common appeal for international development, anti-poverty, economists and political activists is that new taxes on finance could not just to help pay for the costs of the crisis and provide funding for global social and environmental needs, but also to tame the financial industry and help prevent further financial crises.
The leading group on innovative financing for development has endorsed financial or currency transactions taxes at low rates to raise revenues at the global level to fight poverty and climate change. Proponents estimate that a broad-based tax at 0.05% on all financial transactions could generate US$200 to $600 billion a year in revenues globally — significant funding for global development and environmental priorities.
The idea of special taxes on banks and financial transactions is neither new nor speculative. In 1936, John Maynard Keynes wrote in his General Theory that “the introduction of a substantial government transfer tax on all transactions might prove to be the most serviceable reform available, with a view towards mitigating the predominance of speculation over enterprise in the United States.”
Nobel-prize winning economist James Tobin applied Keynes’ idea when he proposed an international tax on currency transactions “to throw sand in the wheels” of international finance, reduce speculation and cushion exchange rate fluctuations after the Bretton Woods monetary system broke down in 1972.
Many countries already have long-standing and effective taxes on certain financial transactions. The UK’s Stamp Duty tax, which includes a 0.5% tax on most equity transactions, has been in existence since 1694 and raises over US$5 billion in revenues annually. Switzerland also levies a tax on transactions of stocks and bonds. China levies a tax on trading in stocks, and adjusts the rate depending on how much they want to cool down or stimulate their stock market. Taiwan not only taxes transactions of stock and bonds, but a tax at a lower rate on transactions of financial derivatives such as options and futures. Other countries have financial transactions taxes, although a number have been eliminated since the 1990s.
Given this experience, there is no question that financial transactions taxes are not only feasible, but can be effective and raise decent amounts of revenue at a low administrative cost without much economic disruption. The greater interest now is in even broader-based taxes to also cover currencies and financial derivatives. Because much of this trading is global and highly mobile, financial transactions taxes in these areas would be much more effective if established through global or multi-lateral agreements.
Of the US$600 billion figure for a 0.05% tax on all financial transactions, about 80% is estimated to come from trading in derivatives. However, there is considerable uncertainty about the impact of a tax on trading on different types of derivatives and therefore on how much revenue would be raised. With a tax based on the notional value of the derivative contract, in some cases even a small tax rate could exceed the value of the actual premium paid. A global FTT might not raise US$600 billion a year and cure all the ills of the global economy, but it could certainly raise significant sums while improving the functioning of the economy. There is solid research showing that a tax at a rate of 0.005% just on transactions of major global currencies could generate over US$30 billion annually at a low administrative cost with little impact on markets. The G20 and other countries should join with the European Commission proposal to establish broader-based financial transactions taxes at the international level, but agree to direct half the funds generated to international development and climate justice priorities.
There’s also no reason why national governments can’t proceed with increasing other taxes on finance. There’s a strong argument for Financial Activities Taxes to compensate for the broad exemption of financial services from most national value-added tax systems. As proposed by the IMF, a 5% tax on profits and compensation in the financial sector would form a good proxy for value-added by the industry and could generate approximately significant revenues in many countries.
Tax preferences that have provided disproportionate benefits to the financial industry and even increased the incentives for speculative behaviour should also be eliminated. These include reduced tax rates for capital gains, stock options and other forms of financial investment income. There’s also solid justification for a higher corporate tax rate on bank and large financial sector firms given the implicit guarantee governments provide to rescue them from failure.
These tax changes will not fix all problems with finance, nor will they eliminate speculation and generate all the revenues we need for global poverty and environmental challenges. But at a time when governments have reacted to the financial crisis by penalizing people with cuts to public spending, increasing taxes on finance would not only be much fairer but also better for the health of the economy.

Download this article as pdf


Toby Sanger is a CCPA research associate and senior economist with the Canadian Union of Public Employees. He previously worked as principal economic policy advisor to the Ontario Minister of Finance and as chief economist for the Yukon government.

Further reading
Toby Sanger (April 2011), Fair Shares: How Banks, Brokers and the Financial Industry Can Pay Fairer Taxes, Canadian Centre for Policy Alternatives

Rick Wolff: "Threats of Business and Business of Threats"

The Threats of Business and the Business of Threats

Posted by Socialist WebZine On 9:21 PM

We are not to demand government action to lower their soaring prices. And if we do, corporations will punish us.





by Richard D. Wolff


More and more we hear that nothing can be done to tax major corporations because of the threat of how they would respond. Likewise, we cannot stop their price gouging or even the government subsidies and tax loopholes they enjoy. For example, as the oil majors reap stunning profits from high oil and gas prices, we are told it is impossible to tax their windfall profits or stop the billions they get in government subsidies and tax loopholes. There appears to be no way for the government to secure lower energy prices or seriously impose and enforce environmental protection laws. Likewise, despite high and fast rising drug and medicine prices, we are told that it is impossible to raise taxes on pharmaceutical companies or have the government secure lower pharmaceutical prices. And so on.

Such steps by "our" government are said to be impossible or inadvisable. The reason: corporations would then relocate production abroad or reduce their activities in the US or both. And that would deprive the US of taxes and jobs. In plain English, major corporations are threatening us. We are to knuckle under and cut social programs that benefit millions of people (college loan programs, Medicaid, Medicare, social security, nutrition programs, and so on). We are not to demand higher taxes or lower subsidies or fewer tax loopholes for corporations. We are not to demand government action to lower their soaring prices. And if we do, corporations will punish us.

Three groups deliver these business threats to us. First, corporate spokespersons, their paid public relations flunkies, hand down the word from on high (corporate board rooms). Second, politicians afraid to offend their corporate sponsors repeat publicly what corporate spokespersons have emailed to them. Finally, various commentators explain the threats to us. These include the journalists lost in that ideological fog that always translates what corporations want into "common sense." Commentators also include the professors who translate what corporations want into "economic science."

Of course, there are always two possible responses to any and all threats. One is to cave in, to be intimidated. That has often been the dominant "policy choice" of the US government. That's why so many corporate tax loopholes exist, why the government does so little to limit price increases, why government does not constrain corporate relocation decisions, etc. No surprise there, since corporations have spent lavishly to support the political careers of so many current leaders. They expect those politicians to do what their corporate sponsors want. Just as important, they also expect those politicians to persuade people that it's "best for us all" to cave in when corporations threaten us.

What about the other possible response to threats? Government could make a different policy choice, define differently what is "best for us all." In plain English, it could persevere in the face of business threats, and to do so, it could counter-threaten the corporations. When major corporations threaten to cut or relocate production abroad in response to changes in their taxes and subsidies or demands to cut their prices or serious enforcement of environmental protection rules, the US government could promise retaliation. Here's a brief and partial list of how it might do that (with illustrative examples for the energy and pharmaceutical industries):
1. Inform such threatening businesses that the US government will shift its purchases to other enterprises.

2. Inform them that top officials will tour the US to urge citizens to follow the government's example and shift their purchases as well.

3. Inform them that the government will proceed to finance and organize state-operated companies to compete directly with threatening businesses.

4. Immediately and strictly enforce all applicable rules governing health and safety conditions for workers, environmental protection laws, equal employment and advancement opportunity, etc.

5. Present and promote passage of new laws governing enterprise relocation (giving local, regional, and national authorities veto power over corporate relocation decisions).

6. Purchase energy and pharmaceutical outputs in bulk for mass resale to the US public, passing on all the savings from bulk purchases.

7. Seize assets of enterprises that seek to evade or frustrate increased taxes or reduced subsidies.

Laws enabling such actions either already exist in the US or could be enacted. In other countries today, existing models of such laws have performed well, often for many years. These could be used and adjusted for US conditions.

Of course, it is possible to create a much better basis than threat and counter-threat for sharing the costs of government between individuals and businesses. That basis would be established by a transition to an economic system where workers in each enterprise functioned collectively and democratically as their own board of directors. Such worker-directed enterprises eliminate the basic split and conflict inside capitalist corporations between those who make the key business decisions (what, how, and where to produce, for example) and those who must live with and most immediately depend on those decisions' results (the mass of employees).

One concrete example can illustrate the benefits of this alternative to the threat-counter-threat scenario. Corporations have used repeated threats (to cut or move production) as means to prevent tax increases and to secure tax reductions. Likewise they have made the same threats to secure desired spending from the federal government (military expenditures, federal road and port building projects, subsidies, financial supports, and so on). In effect, corporate boards of directors and major shareholders seek to shift tax burdens onto employees. Their success over the last half-century is clear. Tax receipts of the US government have increasingly come (1) from individual rather than corporate income taxes and (2) from middle and lower individual income groups rather than from the rich. In worker-directed enterprises, the incentive for such shifts would vanish because the people who would be paying enterprise taxes are the same people who would be paying individual income taxes. Taxation would finally become genuinely democratic. The people would collectively decide how to distribute taxes on what would genuinely be their own businesses and their own individual incomes.

***
Richard D. Wolff is Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York. He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications. Check out Richard D. Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, at www.capitalismhitsthefan.com. Visit Wolff's Web site at www.rdwolff.com, and order a copy of his new book Capitalism Hitshttp://www.blogger.com/img/blank.gif the Fan: The Global Economic Meltdown and What to Do about It.

from MrZine

Nov. 11-13 Nat'l Anti-War Conference in CT

November 11-13 Stamford, CT

NATIONAL CONFERENCE

TO BRING THE TROOPS

AND WAR DOLLARS HOME NOW!

 

In the summer of 2010, 800 activists from peace, environmental, economic and social justice groups from around the country gathered in Albany for the largest movement conference held since 9/11 and the initiation of the so-called “War on Terror”. The conference presented a wealth of dynamic speakers and dozens of panels and workshops focusing on analyses, issues and actions in order to organize effectively for ending US wars and for social change. An ambitious action plan was adopted and a new national coalition, UNAC, the United National Antiwar Committee, was formed.

Since then, UNAC has implemented the action program, culminating in large bi-coastal mobilizations on April 9-10, 2011, and responded to the huge events of recent months: the popular uprisings in Tunisia, Egypt, and other North African countries; the fight backs to union-busting and cuts to social services in Wisconsin and elsewhere; the wars at home on communities of color, rising Islamophobia and racist attacks on Muslims and pre-emptive prosecutions; activists targeted by the FBI; attacks on civil liberties; environmental destruction and global warming; struggles to end the siege of Gaza, threats to Iran and No. Korea; the dangers of nuclear power; and the endless wars continuing in Iraq, Afghanistan, and now expanding in Libya.

As we see in Egypt and throughout history, all critical social change comes through the direct, massive, independent intervention of the people. This does not happen spontaneously.

It is time for a unified movement to meet again to learn, to strategize, to plan and to organize in order to take stock and to move forward collectively. Everyone attending this one-person, one-vote conference has an equal voice and responsibility for the direction of the movement and the development of an action program to carry us through 2012.

UNITED NATIONAL ANTIWAR COMMITTEE (UNAC)

www.UNACpeace.org This email address is being protected from spambots. You need JavaScript enabled to view it. 518-227-6947

How the Rich Soaked the Rest of Us- Rick Wolff

How the Rich Soaked the Rest of Us

by: Richard D. Wolff, t r u t h o u t | News Analysis

How the Rich Soaked the Rest of Us
(Image: Aran Chandran)

How the rich soaked the rest of us: The astonishing story of the last few decades is a massive redistribution of wealth, as the rich have shifted the tax burden.

Over the last half-century, the richest Americans have shifted the burden of the federal individual income tax off themselves and onto everybody else. The three convenient and accurate Wikipedia graphs below show the details. The first graph compares the official tax rates paid by the top and bottom income earners. Note especially that from the end of the Second World War into the early 1960s, the highest income earners paid a tax rate over 90 percent for many years. Today, the top earners pay a rate of only 35 percent. Note, also, how the gap between the rates paid by the richest and the poorest has narrowed. If we take into account the many loopholes the rich can and do use far more than the poor, the gap narrows even more.

One conclusion is clear and obvious: the richest Americans have dramatically lowered their income tax burden since 1945, both absolutely and relative to the tax burdens of the middle income groups and the poor.

Historical tax rates for the highest and lowest income earners.

Historical tax rates for the highest and lowest income earners.

Consider two further points based on this graph: first, if the highest income earners today were required to pay the same rate that they paid for many years after 1945, the federal government would need far lower deficits to support the private economy through its current crisis; and second, those tax-the-rich years after 1945 experienced far lower unemployment and far faster economic growth than we have had for years.

The lower taxes the rich got for themselves are one reason why they have become so much richer over the last half-century. Just as their tax rates started to come down from their 1960s heights, so their shares of the total national income began their rise. As the two other Wikipedia graphs below show, we have now returned to the extreme inequality of income that characterized the US a century ago.

Share of national income taken by top tranches of earners.

Share of national income taken by top tranches of earners.

The graph above shows the portion/percentage of total national income taken by the top 1 percent, the top tenth of a percent, and the top 100th of a percent of individuals and families: the richest of the rich. The third graph compares what happened to the after-tax household incomes of Americans from 1979 to 2005 (adjusted for inflation). The bottom fifth of poorest citizens saw their income barely rise at all. The middle fifth of income earners saw their after-tax household income rise by less than 25 percent. Meanwhile, the top 1 percent of households saw their after-tax household incomes rise by 175 percent.

Relative increases in net household incomes of Americans from 1979 to 2005.

Relative increases in net household incomes of Americans from 1979 to 2005.

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In simplest terms, the richest Americans have done by far the best over the last 30 years; they are more able to pay taxes today than they have been in many decades, and they are more able to pay than other Americans by a far wider margin. At a time of national economic crisis, especially, they can and should contribute far more in taxes.

Instead, a rather vicious cycle has been at work for years. Reduced taxes on the rich leave them with more money to influence politicians and politics. Their influence wins them further tax reductions, which gives them still more money to put to political use. When the loss of tax revenue from the rich worsens already strained government budgets, the rich press politicians to cut public services and government jobs and not even debate a return to the higher taxes the rich used to pay. So it goes - from Washington, to Wisconsin to New York City.

How do the rich justify and excuse this record? They claim that they can invest the money they save from taxes and thereby create jobs etc. But do they? In fact, cutting rich people's taxes is often very bad for the rest of us (beyond the worsening inequality and hobbled government it produces).

Several examples show this. First, a good part of the money the rich save from taxes is then lent by them to the government (in the form of buying US Treasury securities for their personal investment portfolios). It would obviously be better for the government to tax the rich to maintain its expenditures, and thereby avoid deficits and debts. Then, the government would not need to tax the rest of us to pay interest on those debts to the rich.

Second, the richest Americans take the money they save from taxes and invest big parts of it in China, India, and elsewhere. That often produces more jobs over there, fewer jobs here, and more imports of goods produced abroad. US dollars flow out to pay for those imports and so accumulate in the hands of foreign banks and foreign governments. They, in turn, lend from that wealth to the US government because it does not tax our rich, and so we get taxed to pay for the interest Washington has to give those foreign banks and governments. The largest single recipient of such interest payments today is the People's Republic of China.

Third, the richest Americans take the money they don't pay in taxes and invest it in hedge funds and with stockbrokers to make profitable investments. These days, that often means speculating in oil and food, which drives up their prices, undermines economic recovery for the mass of Americans and produces acute suffering around the globe. Those hedge funds and brokers likewise use part of the money rich people save from taxes to speculate in the US stock markets. That has recently driven stock prices higher: hence, the stock market recovery. And that mostly helps - you guessed it - the richest Americans who own most of the stocks.

The one kind of significant wealth average Americans own, if they own any, is their individual home. And home values remain deeply depressed: no recovery there.

Cutting the taxes on the rich in no way guarantees social benefits from what they may choose to do with their money. Indeed, their choices can worsen economic conditions for the mass of people. These days, that is exactly what they are doing.

This article was also published in The Guardian.

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