Saturday, May 29, 2010

Combined Reporting

Local media, Republican legislators, and business blowhards are doing all they can to inflate the idea of onerous taxation possibly pushing Harley-Davidson from Wisconsin.

Some things never change.

They won't be happy until they [business] no longer pay taxes. (Even then, I'm not so sure.) This time, the culprit is combined reporting.

The Journal, alongside their co-conspirators, would have us believe combined reporting is an anomaly, a burdensome taxation specific to Wisconsin. Yet, combined reporting is a practice common among the majority of states.

Businesses typically create subsidiaries (in low-tax states) and allocate profits to such to avoid taxation. The New Rules Project has a great summary of this scheme and swindle.

In February 2009 the Institute for Wisconsin's Future released a report chronicling the tax avoidance and nefarious intentions which combined reporting would end for Wisconsin businesses.

Harley-Davidson paid no state income tax in 2007. So, we have a large corporation paying no state income tax, yet, some want to claim taxation is making them less competitive. Add this to the fact that the State of Wisconsin gave Harley-Davidson $4.5 million in 2006. The City of Milwaukee has given the company $868,000; while Tomahawk has given the company $3,042,000. From 2000 through 2006, Harley-Davidson had received $3,910,000 from the Wisconsin Department of Commerce.

Not only does the tax burden on Harley-Davidson seem to be minimal, the State (along with certain localities) is subsidizing the company. These hand-outs and favorable tax treatment are the case for Harley-Davidson operations in other states, too. The company also has no qualms about asking the Feds for "help," either.

One interesting tactic the Mayor or the Governor could use in exposing this bribery is televising the discussion with company executives. (All economic development discussions using public dollars should be televised to expose these toxic dealings to the light of day.) If an executive (or one of the anti-tax crusaders) could justify, on camera, why they should not pay their fair share of all means, don't pay. I just want to, finally, hear a plausible explanation.

For Further Reading:
Class Warfare
Doyle Says Combined Reporting Not To Blame For Harley's Woes
Falsehood Fabrication
Legalized Bribery
Luring Lunacy
Miller Pork
Site Selection Shenanigans
Spuriously Invoking The Tax Boogeyman
Welcome to Walmart

Sunday, May 23, 2010

Out-Of-Control Excuses

Lest the media be able to rewrite the causes and dictate the outcomes of Greece's problems, I need to squash some misinformation and falsehoods. This latest writing was motivated by the Journal Sentinel's "Lessons from Greece" editorial. In which, they fabricate or ignore the causes, and deduce the completely wrong conclusions.

They proclaim, "The central problem in Greece was out-of-control spending on government programs for aging populations." They talk of Greece's budget deficit and their debt, but no evidence backs up the claim of "out-of-control spending" and there is no mention of the numbers concerning these programs for the aging. If that is what actually caused their fiscal worries, some data corroborating such should be presented.

In reality, average annual government expenditures in Greece totaled 50.4 percent of GDP. Total spending for the European Union as a whole equaled 50. 7 percent of GDP. As Michael Linden and Sabina Dewan state, "Over the past 10 years, Greece has consistently spent less, as a share of GDP, than the European Union as a whole."

The Journal then, typically, brings the "over spending" meme back around to gutting American programs - like Medicare, Medicaid, and Social Security. And, of course, they use the Peter G. Peterson Foundation to support such claims. Dean Baker has more on the true intentions of Mr. Peterson. [Whenever a Journal article cites the Peterson Foundation, the Wisconsin Policy Research Institute, or the Tax Foundation be very skeptical.]

The Journal creates false reasons for Greece's troubles, they then compare the U.S. to Greece. Investors will not have faith in Greece's ability to pay its debt, the U.S. has debt too, therefore, investors will soon have no faith in the U.S.. Paul Krugman explained why this connection is ridiculous and a red herring.

From here the Journal jumps ahead to an whole austerity program for the U.S. Yes, with aggregate demand stifled and the private sector neither spending nor hiring, the editors believe now would be a great time tighten our belts. WTF?! We need "prudent budgeting" to solve out debt. Whatever that nebulous statement means.

Governments must continue to spend now: repair and improve infrastructure - bridges, roads, electric grids, sewer systems, water ways, etc.. Without this necessary (and overdue) maintenance and government spending the economy would grind to a halt and unemployment would skyrocket. Spending more now to ensure growth (which enables us to pay off debt) is better than allowing unemployment to ravage a generation.

The lesson we should learn from Greece is that the neoliberal age of tax cuts and deregulation has left all nations vulnerable to the whims of bond traders.

For Further Reading:
A Principled Europe Would Not Leave Greece To Bleed
Being Rude to the Deficit Hawks
Clinton's Bequest
Deficit or Depression?
Economy Needs More Big Government
From Keynesianism to Neoliberalism
Greece's Spending Cuts Are Making The Crisis Worse
Paranoia Overdose
Social Security: The Phony Crisis
The Bubble Economy
The Debt Delusion
The Liability Con
This Time, Don't Buy What Rubin's Selling
Where Have All the Keynesians Gone?

Sunday, May 16, 2010


Obama is a Nazi-Commie

Laura Bush is a Maoist


A lawmaker blocking a vote on raising the liability cap pertaining to oil companies?

Young Companies: Biggest Job Destoyers

John Torinus (conservative, business-shill of the Journal Sentinel and CEO of tax-avoiding Serigraph Inc.) is pushing his 'entrepreneurialism, small business creates jobs' contention, yet again.

Doug Henwood elaborates, "The small business myth is probably the most durable and pervasive of all. It holds appeal across the political spectrum, from corporate lobbyists trying to sell tax breaks to postmodern New Agers trying to sell their vision of decentralization and local self-reliance...Small firms pay less than large ones, are less likely to offer health, pension, or child care benefits, and are often more dangerous to workers. With few exceptions, they're not all that innovative technologically."

I have tried to put this "idea" to bed many times. See below for more.

For Further Reading:
Job Creation
Legalized Bribery
Small Business

Gyro Meat

The Right, never missing an opportunity to take the low-road, is trying to give inertia to a "talking point" connecting a nanny state and the debt/insolvency problems of Greece (along with some other European countries: Italy, Ireland, Portugal, and Spain). As usual, reality doesn't support this privatized, market-humping meme.

The problem primarily stems from these countries following a laissez-faire, highly speculative, highly leveraged, American economic model. A consumption-based growth, fueled by easy credit. Buy now, pay later. And, of course, Wall Street was pulling strings behind the curtain.

With easy money allowing everyone to live beyond their means, purchasing an unsustainable lifestyle, on credit. Thus, giving the illusion of prosperity. The whole global system is in jeopardy. We have spent the last few decades spending on iPhones and SUVs, rather than on sewage systems, public transportation, and energy alternatives. This is a problem of priorities and tax avoidance, not of overly compensated public workers.

As Peter Boone and Simon Johnson assert, "The main problem that Portugal faces, like Greece, Ireland and Spain, is that it is stuck with a highly overvalued exchange rate when it is in need of massive fiscal adjustment." Doug Henwood saw the 'EU problem' in 1998 when the European Union, and a single currency among its member countries, was being created.

Unemployment in the EU's highly indebted countries is: Spain 20%; Ireland 14%; Greece 10%, Portugal 9%; and Italy 8.7%. As of this writing U.S. unemployment is 9.9%.

Public debt as a percent of GDP is: Greece 124.9; Italy 116.7; Portugal 84.6; Ireland 82.9; Spain 66.3. Presently, the U.S. public debt is 67.1 % of GDP. (In Japan it's 105%; Germany 70%; and France 67%.)

Luckily, as Paul Krugman explains, the U.S. is not Greece. He also, like Boone and Johnson, concludes that, "If Greece still had its own currency, it could restore competitiveness through devaluation."

Concerning other talking points regarding Greece, some data needs to be introduced into the discussion. The average Greek worker logs the second highest hours per year among 33 OECD countries. The average age of retirement in Greece is 61.4 years, slightly higher than the European average of 61.1 years. And, the average Greek pension is $990 per month. The average pension in other EU countries: Spain $1,176; Ireland $2,105; Belgium $3,466; and the Netherlands $3,962. Civil servants in Greece represent 22.3% of the total workforce, in France its 30%, in Sweden 34%, and in the Netherlands 27%. "As a result of cuts carried out since 1990...the total real income of civil servants has fallen by 30%."

Those numbers don't indicate Greece is a bunch of lazy, spoiled loafers.

Class warfare, as always, is alive and well.

Saturday, May 15, 2010

Wage Reality

John Schmitt, of the Center for Economic and Policy Research, finds, "When state and local government employees are compared to private sector workers with similar characteristics - particularly when workers are matched by age and education - state and local workers actually earn 4 percent less, on average, than their private sector counterparts."

So much for the talking-point of overpaid and lavishly rewarded public sector workers.

Rate Reaction

The Journal Sentinel believes, "Some increase in the City of Milwaukee's water rate is warranted, but not this much." They claim, "Raise the cost of that water - even if it is still cheaper than in other places - and the region becomes less attractive."

Why is that? It's great to make proclamations. But it is also necessary to share the reasoning and maybe some data to back up the claim. The idea that a place must give away resources, cut taxes, provide cheap yet educated labor, provide subsidies, and on and on - with no guarantees or expected returns - is ridiculous. We should just have a blind faith in the 'built it and they will come' dogma. Locations have inherent advantages, encouraging business to locate in less than optimal places is inefficient and ultimately decreases overall growth.

Hence, allowing desert cities to charge minuscule water rates (due to heavy Federal subsidization of their water infrastructure) skews the true price of water, while allowing an inefficient (and unnatural and unsustainable) advantage to these locations.

Even after the proposed increase, "Milwaukee would have the 59th cheapest water out of the 78 water utilities in the seven counties that make up Southeastern Wisconsin. Among the country's 50 biggest cities, Milwaukee's water would still only rank 37th in cost."

The price of a product should reflect all costs involved in bringing that product to market, including the negative externalities. True capitalist and market proponents should understand that availability and location play a role in pricing. Supply and demand are always at the core of true value. Supply is a critical variable, especially with finite resources - like water and oil - in determining the correct price.

Milwaukee's water rate, even with the proposed increase, along with the quality of the water we produce, seems to be competitive and justified, despite dubious and business-pandering warnings from the Journal Sentinel.

For Further Reading:
Draining The Blue Planet
Drought Turns Off Subsidized Federal Tap
Large Subsidies to Corporate Farms in the West
The Price of Water
Water Subsidies Now Under Fire

Tuesday, May 4, 2010

Ranking Rubbish

The meme - oft repeated by corporate hucksters with their hands out - about an improving "business climate" in conjuction with (the always necessary) tax cuts, leading to an injection of new jobs and companies, was given more ink by the Journal Sentinel recently.

And, as usual in this flawed prescription, the Tax Foundation is cited as the "business climate" authority. But, as shown here, here, here, here, here, here, here, and here, their methodology is sloppy, to say the least.

For Futher Reading:
Doing Business to Eliminate Worker Protections
Grading Places
Torinus' Taxed Reality
What Do Business Climate Rankings Really Tell Us?
Wisconsin: Open For Business

Saturday, May 1, 2010

Self-Serving Surplus

Milwaukee, City and County, was on the brink of insolvency, or so we were told. Budgets were cut. Programs were cut. Workers were cut and furloughed.

Milwaukee finishes year with $23 million surplus

Milwaukee County expects $8.9 surplus for 2009

Were the public employees and the programs/services they provide decimated simply to score political points for the mayor's and county executive's attempt to be governor?

Wisconsin CEO Performance Evaluation

Of 19 area CEOs, 6 saw their compensation increase/decrease at a higher/lower percentage than their company's stock value.

Gale Klappa, Wisconsin Energy, Compensation +22.74%, Stock Value +7.08%
Paul Jones, A.O. Smith, Compensation +25.10%, Stock Value +22.92
Michael Crowley Jr., Bank Mutual, Compensation -6.84%, Stock Value -20.50%
Thomas Florsheim Jr., Weyco Group, Compensation -14.48%, Stock Value -15.67%
Douglas Gordon, Waterstone Financial, Compensation -11.61%, Stock Value -38.67%
Kerry Wood, Ladish Co., Compensation 101.58%, Stock Value -11.16%

[Stock value was measured over the fiscal calendar; Oct 1, 2008 to Sept 31, 2009]