Activists Shut Down BoA Branch in D.C., and more

Bank Crime Shouldn't Pay
Bank Crime Shouldn't Pay

(1) NPA Activists Shut Down BoA Branch in D.C. From today’s Democracy Now!:

Activists Shut Down Bank of America Branch in D.C. in Tax Protest

In Washington, D.C., 600 activists with National People’s Action shut down a branch of Bank of America Monday to protest the bank’s record of dodging taxes. National People’s Action recently issued a report about how Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley have avoided paying billions of dollars in taxes. The study found that over the past two years, the six banks paid income tax at an approximate rate of 11 percent of their pre-tax earnings in the United States, far less than the 35 percent that they are legally mandated to pay. By avoiding the taxes, the banks saved $13 billion. National People’s Action reports this potential tax revenue could have been used to cover more than two years of salaries for some 132,000 teachers who lost their jobs since the economic crisis began in 2008.

We covered National People’s Action’s “Showdown in America” campaign for banking reform, of which this BoA branch takeover appears to be part.  (The article, by D&S intern Maureen Kellett, is about NPA’s efforts to pressure state attorneys general to do get a good settlement from the big banks for the foreclosure fraud scandal; that pressure led the Obama administration to get in on the act recently with their own proposed settlement.) NPA also had their annual national meetings this past weekend in D.C., which I am sure juiced them up for this action.  Let’s hope there are many similar actions to come. (Hat-tip to D&S fan Larry S.; credit for the above photo, which appears in our March/April issue, goes to Jed Brandt.)

(2) Psst!  Wisconsin Corporations Don’t Pay Taxes! Until another website linked to it recently, I had forgotten about a blog post I did more than four years ago (!) about how corporations were evading Wisconsin taxes, long before Scott Walker lowered corporate taxes even more as a pretext for busting public-sector unions.  The post is still timely, down to the Chamber of Commerce-types maligning unions.  (The post was based on an item I wrote for the “Short Run” section of the magazine; hat-tip (again) to Phineas Baxandall for this item.)

An obscure state law allows any Wisconsin resident to find out the taxes paid (or owed) by any taxpayer—including any corporation. You just have to fill out a simple form, which is exactly what researchers from the Institute for Wisconsin’s Future (IWF) did to find out about taxes paid by dozens of corporations doing business in Wisconsin.

What they found: among corporations with more than $100 million in revenue, more than 60% paid no state income tax. These included non-Wisconsin companies like Kraft Foods, McDonald’s, Microsoft, and PepsiCo, and Wisconsin-based companies like Johnson Controls, Manpower, Kohl’s, Harley-Davidson, and Rockwell Automation. They also found that of the total tax revenue in the state, only 3% came from corporations; in contrast 36% came from property taxes, 29% from sales taxes, and 26% from individual income taxes.

Information about corporate tax payments is notoriously difficult to obtain, though it’s supposed to be public. Even Wisconsin’s relatively progressive law has some bizarre restrictions. “No person may divulge or circulate” the information obtained through the law, with two exceptions: publication by a newspaper or disclosure by a public speaker. So IWF couldn’t send out a press release, since this would have involved “divulging or circulating” the information. Instead the group had to hold a press conference, invite newspaper reporters, and give out the scandalous figures orally. Only when the story had circulated in the media could IWF even post the findings on its own website.

The state’s largest business group, Wisconsin Manufacturers and Commerce, tried to discredit the report, claiming that IWF is “a very left-leaning institute that’s heavily funded by labor and public employee unions.” Meanwhile, an affiliate of the group, Forward Wisconsin, which tries to lure businesses to the state, boasts on its website about Wisconsin’s business-friendly tax policies and cites tax rates that are even lower than what IWF alleges. Seems like low corporate tax payments aren’t so much of a secret after all, depending on your audience.

(3) James K. Galbraith on Property Taxes: Huffington Post has posted Jamie Galbraith’s Testimony on Sensible Tax Reform, at the Senate Finance Committee’s hearing on Principles of Efficient Tax Reform yesterday (hat-tip to Mason Gaffney, whom Galbraith quoted in his testimony).  The full testimony is worth a read, but the part I liked best was his plug for taxes on rent, i.e. land taxes, i.e. property taxes.  This fits nicely with our current lead article by Polly Cleveland, Restore the Original Wealth Tax. Here’s that part of his testimony:

Should we tax capital, labor — or rent? Is it a good idea to shift the tax burden from high-income to low-income Americans, in the guise of shifting the tax burden from capital to labor, in order to promote “saving and investment”? In particular, will this create new jobs? History say not: we have been shifting this burden for decades with no appreciable effect on savings, investment or jobs.

And there is also no shortage of capital in our economy. As the economist Mason Gaffney wrote in a paper delivered to the National Tax Association in 1978: “The key to making jobs is changing the use and form of capital we already have. Tax preferences for property income, in their present and proposed forms, bias investors against using capital to make jobs, doing more harm than good.”

Economists from Smith to Ricardo to Mill understood that fixed investments, however useful, do not generate many permanent jobs. What creates jobs is the revolving capital that supports payrolls. A tax policy aimed at supporting employment would shift the tax burden away from labor, and off of short-term capital, and place it instead on long-term capital accumulations. If this reduces the investment in fixed capital that is desired for other reasons — in particular, investment with broad public benefits — then that sort of investment should be done by public authority, funded by an infrastructure bank.

Thus as a general rule fixed assets — notably land — should be taxed more heavily than income. The tax on property is a good tax, provided it is designed to fall as heavily as possible on economic rents. This basic argument, going back to Ricardo, remains sensible, for it aims to not-interfere where there is, in fact, no public purpose to interfere with private decision-taking. Payroll taxes and profits taxes do interfere directly with current business decisions. Taxes effectively aimed at economic rent, including land rent and mineral rents, and at “absentee landlords” as Veblen called them, do not.
An important question is how best to treat the “quasi-rents” due to new technology and thus the incentives for innovation. These are presently held as long-term capital gains and they tend to escape tax to a very large degree, with the consequence that a small number of successful innovators (and patent holders) have become an oligarchy of never-before-equaled wealth.

The incentive for innovation is an important public policy objective. But it does not require the vast prizes presently available. And it does not require that those prizes escape tax indefinitely. A sensible approach is to tax unrealized capital gains after a certain amount of time has elapsed — perhaps at fates that rise with time — and again subject to a full charitable deduction. In the final analysis — that is to say at death — once again setting the estate tax at a high rate with a high exemption encourages the early transfer of large quasi-rents to independent foundations or other non-profit institutions (universities, hospitals, churches), and into activities consistent with public purpose. I would also favor raising required foundation payout rates, so as to assure that foundations do not last in perpetuity unless they find new donors.

Mason’s enthusiastic response: “He’s got it!”  Let’s hope the senators get it too.

–Chris Sturr

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