Archive for April, 2019

Loss of Federal Corporate Taxes is Small Potatoes Compared to Local Property Taxes

April 30, 2019 Comments off

Profitable Giants Like Amazon Pay $0 in Taxes. Some Voters Are Sick of It“, a recent NYTimes article by Stephanie Saul and Patricia Cohen, provides a series of human interest stories that reflect the way members of the public view the impact of corporate tax loopholes. Unsurprisingly, the majority of voters find it appalling that they are required to pay their fair share of taxes while a long list of corporations not only avoid taxes altogether, but also receive rebates. Amazon, the poster child for this reality, issued a factual but appalling fact to defend themselves:

In a statement, the company said it “pays all the taxes we are required to pay in the U.S. and every country where we operate.”

Left unsaid is that Amazon also works hard to ensure that the taxes they are “required to pay” are as low as possible. Mss. Saul and Cohen also offered this tidbit on GM, another company that paid no taxes, a tidbit that perfectly displays the deep flaws of the concept of shareholder primacy:

General Motors, one of the companies on the zero-tax list, recently idled a large plant near Youngstown that produced the Chevrolet Cruze, a decision that helped increase the company’s stock price even as G.M. paid no federal taxes on $4.32 billion in income.

The article makes no explicit mention of another problem of corporate taxes: not only do these large profitable corporations like Amazon and GM avoid paying FEDERAL taxes, they also receive huge tax breaks to locate their operations in cities that are struggling to fund basic services but who need the low-wage high-stress jobs to keep their cities and towns afloat. Here’s a paragraph on Akron, Ohio, whose mayor is taking to keep unemployment low and attract business:

Akron, about an hour west, is faring better economically. Mayor Daniel Horrigan won’t confirm or deny it, but Amazon is believed to be the company he has recruited to move into the old Rolling Acres Mall, which closed in 2008. Amazon would not comment on whether it planned to open a facility there.

An article by Doug Livingston in the Akron Beacon Journal describes some background on the deal struck by the mayor to secure Amazon, a deal that is described as “shrouded in secrecy“:

To acquire the land, the project developer used a private equity firm to pay $600,000 for 40 acres owned by the city and $16.5 million for seven privately owned lots, some of which sold for as much as $3 million an acre, according to county property records. In a deal negotiated by Mayor Dan Horrigan’s economic development team and approved by everyone on City Council but Zack Milkovich, Akron has agreed to refund the developer the $17.1 million cost for all the land through property tax rebates.

The net impact on taxpayers and government services is difficult to calculate. Essentially, the developer would be made whole over the next 30 years with reduced tax revenue from the property for the city’s schools and diverted tax revenue for the county’s libraries, developmental disability board, children’s services, metro parks, zoo and more.In exchange, Amazon promises $30 million in annual payroll for at least 10 years. The Beacon Journal/ calculates that it would take 24 years to amass $17.1 million in income taxes from that minimum level of payroll, assuming Amazon’s corporate profits are paid somewhere other than Akron.

In the end, it’s a trade of property taxes supporting countywide services for income taxes and new jobs directly benefiting the city, plus the revitalization of a once bustling mall that sat empty and blighted for a decade.

Readers of this blog know that FoxConn offered essentially the same kind of “deal” in Wisconsin and after receiving the deeply discounted property prices and property tax cuts decided it wouldn’t be brining in the jobs it promised. And this seems to be standard operating procedure for corporations: they secure tax breaks in exchange for jobs and when those jobs don’t materialize the tax breaks remain in place.

I hope Akron has a different experience in the long run… but it is evident that for the short run they will have a spiffy new Amazon warehouse where a shopping mall once stood and less money for their “…city’s schools and diverted tax revenue for the county’s libraries, developmental disability board, children’s services, metro parks, zoo and more. Maybe the schoolchildren can take field trips to the warehouse and play in the empty parking lots when the jobs fail to materialize.

A Lesson in Economics 101: Teacher Pay Diminishes as Teacher Shortages Increase

April 27, 2019 Comments off

The Economic Policy Institute’s Sylvia Allegretto and Laurence Mishel just issued a report on teacher compensation that indicated the disparity between teacher’s wages and those of other college graduates just hit an all time high and appears to be widening. The result is unsurprising to anyone who took a basic economics course in high school or college:

The deepening teacher wage and compensation penalty over the recovery parallels a growing shortage of teachers. Every state headed into the 2017–2018 school year facing a teacher shortage (Strauss 2017). New research by García and Weiss (2019) indicates the persistence and magnitude of the teacher shortage nationwide:

The teacher shortage is real, large and growing, and worse than we thought. When indicators of teacher quality (certification, relevant training, experience, etc.) are taken into account, the shortage is even more acute than currently estimated, with high-poverty schools suffering the most from the shortage of credentialed teachers. (1)

And, as Ms. Allegretto and Mr. Mishel indicate, the states are not short of money:

Spending cuts over the recovery were not the result of weak state economies. Rather, many state legislatures and governors cut spending in order to finance tax cuts for the wealthy and corporations.

As corporate taxes diminish so do the revenues for public services and, again unsurprisingly, so does the quality of those services. Sadly, for children, education is no exception and so the quality and depth of the teaching pool is diminished.

Providing teachers with a decent middle-class living commensurate with other professionals with similar education is not simply a matter of fairness. Effective teachers are the most important school-based determinant of student educational performance.1 To promote children’s success in school, schools must retain credentialed teachers and ensure that teaching remains an attractive career option for college-bound students. Pay is an important component of retention and recruitment.

The report notes that teachers across the country are uniting and demanding higher pay, particularly in those states where the wage disparity is the highest. The report also examines the benefits teachers receive as compared to other college graduates and acknowledges that there is a favorable gap in that area. But even with that taken into consideration, the total compensation gap is wider now than it has been in any year since 1960!

In their concluding paragraphs, Allegretto and Mishel describe the compensation gap and its consequences, and note that any alternative compensation plans like performance pay will not solve the problem unless total compensation is increased:

It is good news that teachers are able to bargain for a total compensation package—though it seems they may have forgone wage increases for benefits recently: As we’ve documented, teacher wages have been stagnant since the mid-1990s; public school teacher weekly wages have not grown in the 22-year period from 1996 to 2018! This makes the wage penalty, on its own, critically important, as it is only wages that families can put toward making ends meet—only wages can pay for expenses such as rent, food, and student loan payments.

Raising the level of teacher compensation, including wages, is critical to recruiting and retaining teachers who have the qualifications associated with teacher effectiveness in the classroom. Policies that focus solely on changing the composition of current compensation (e.g., merit or pay-for-performance schemes) without actually increasing compensation levels are unlikely to be effective. Simply put, improving public education in this country—by preventing teacher turnover, strengthening retention of credentialed teachers, and attracting young people to the teaching profession—requires eliminating the teacher weekly wage and compensation penalty.

EPI’s research is thorough and even handed… and it’s results prove the laws of supply and demand. If you demean a profession, lower the compensation for that profession, and limit job security in that profession it is difficult to find employees.

Tennessee’s ESA Shenanigans Illustrate Why Delegating Education Policy to States is a BAD Idea

April 25, 2019 Comments off

A friend on Facebook shared a blog post from Momma Bear, a group of concerned Tennessee parents, grandparents, citizens, and– in a ll probability— teachers who are appalled at what is taking place in Tennessee. It seems that the Governor wants to get a voucher bill passed and in order to secure the votes he needed to do so was offering enticements to legislators if they voted in favor of his plan and threatening funding shortfalls for those who didn’t. The post describes how the House went from a 49-49 deadlock to a tie-breaking 50-48 vote on the voucher bill… and it seems that very few of the votes were cast in favor of the voucher policy itself… rather they were cast to secure funding for better roads and avoiding vengeance.

This is Lamar Alexander’s legacy for weakening the Federal policy guidelines and handing them off to the states…. and I rest my case for the flaws in the ESA legislation.