Sunday, May 6, 2012

Corporate Welfare By Job Blackmail

by Robert Oak on Tue, 05/01/2012 - The Economic Populist
You know how States are hurting? How budgets are in the red to the point some towns cannot even hold elections? Adding insult to injury comes the news States are allowing corporations to pocket taxes they take out of your paycheck and pocket the money for themselves. I kid you not.
Nearly $700 million a year in state income taxes withheld from worker paychecks in 16 states is being used to provide lavish subsidies to corporations rather than paying for vital public services. These diversions have gone to more than 2,700 companies, including major firms such as Sears, Goldman Sachs and General Electric. Few if any of the affected workers are aware, because no state requires they be informed on their pay stubs.
David Cay Johnston put together this nifty video overviewing how corporations manage to take state taxes out of your paycheck yet pocket the money.


The problem with these subsidies is the lie they are used to create jobs. Instead, corporations move from state to state, counting the jobs lost from one state as new jobs in another, all to get the tax subsidy. From the Taxes to the Boss report:
Many of the programs analyzed in this study are routinely used in deals that involve interstate job piracy
Revealingly, none of the 22 programs examined here has any form of interstate job piracy prohibition. And when counting “new jobs,” none requires a company to distinguish between truly new jobs versus existing jobs that have been merely relocated from another state.
On the Good Jobs First website is a spreadsheet listing the tax subsidy amount and the number of jobs created, or claimed to be created by businesses receiving these state tax subsidies.

General Electric actually had one of the largest job creations, 5,000. Yet their subsidy, from Ohio, was $115.34 million. That is $23,000 per job. In other words, Ohio could simply remove the subsidy and pay 5,000 state residents directly $23,000 and get the same result, particularly in this day and age of permanent employment being an oxymoron phrase and firings happen routinely. This is also assuming the G.E. jobs listed are actually new and not using foreign guest workers or moved from another state. Many of the subsidies list no jobs data at all in the spreadsheet, which one would think would be mandatory to be publicly reported and verified if a business is getting a tax credit to supposedly create jobs.

The spreadsheet list is quite amusing. Arkema Inc., for example, in 2008 received $8 million in subsidies. The number of jobs counted? 10. Thank Kentucky for this lovely use of taxes paid by existing workers as corporate welfare. Not to be outdone, Carbide Industries LLC, also in Kentucky, received $6.5 million in subsidies, to create a whopping 9 jobs. General Aluminum Manufacturing Co. managed to get over $1 million dollars by creating zero, count 'em, jobs.

The title of the tax credit which enabled a free, cool 1 mil to be handed to General Aluminum Manufacturing from Ohio workers is the Job Creation Tax Credit. You might ask yourself, is this a joke? Why, yes it is and the joke's on you, worker bee.

Organizations who clearly are questionable as job creating businesses are on this list. Take Benjamin Zolper, M.D. dba Northeast Pain Management. He received over $45 thousand for creating 9 jobs. Think about a individual MD getting a tax subsidy for 9 jobs and consider his clinic title, pain management. Now think about the pain Ohio goes through to provide basic services to state residents.


David Cay Johnston also went digging further and outlined his additional findings in the below interview.


This isn't by far the only corporate welfare scheme going. Apple just hit the news with an effective 9.8% tax rate, achieved by using the double dutch corporate tax loophole. The moving of assets around the globe in order to pay no taxes is the same trick Google and a host of other corporations use. The only businesses paying a high tax rate in the United States are the ones who cannot afford teams of corporate tax attorneys figuring out how to pay none. That's the little guy folks and squeezing regular people until the stone bleeds dry has become our new national mantra.


Naked Capitalism also covered this latest corporate tax gem. Good jobs first also has an online subsidy tracker so you too can see who the latest corporate welfare recipient is as your roads go unpaved, your water supply is undrinkable and your local police are laid off.