This article was originally published at National Women’s Law Center. Reprinted with permission.
Sorry, America’s middle class: President Donald Trump’s signature tax code overhaul has not generated any meaningful new economic growth that wasn’t already underway, the nonpartisan Congressional Research Service (CRS) has found.
The new numbers inject further complexity into a contentious and ongoing debate around the landmark tax legislation as to who actually benefited from its passage. But the study should also offer additional clarity: With hard numbers now available on the economy’s performance in the first full year of the legislation, it’s easier than ever to talk instead about who got what and how — and the answers, so far, aren’t pretty.
Large corporations with shiny accounting departments ended up being the largest beneficiaries of the tax bill’s largesse, with the rate of tax they actually pay dropping by half in 2018, according to the CRS analysis. But the vanishingly insignificant comparative break Trump’s law gave workaday people lays the game bare. This tax bill is already reshaping the real-world economy in ways that limit the prospects of ordinary people, potentially reinforcing the structural inequities that adversely impact democratic society.
Trump and his congressional allies had forecast massive jumps in GDP growth and working-family incomes from the package. None materialized in year one. Annual growth hit 2.9% – identical to the 2015 mark, well below the 3.3% the Congressional Budget Office forecast when it sought to predict the tax bill’s impact in April of 2018, and right in line with what the CBO had predicted the economy would have done without Trump’s corporate-tax munificence.
The report’s findings underscore the deceitful nature of the administration’s first-term sales pitch.
Working people were supposed to benefit from the slashed corporate income tax rate and related rules tweaks intended to lure offshored profits back into the U.S. economy. American companies weren’t hiding $3 trillion in profit outside the country out of malice, the argument went. Rather, they were afraid of seeing it taxed too sternly, and would happily bring it home to make productive and equitable use of it just as soon as they felt it was safe from the taxman.
Some business heads dutifully followed this script in small and symbolic ways shortly after the law was signed, issuing year-end bonuses to their frontline employees and accompanying them with heavy fanfare in the press. But even the high-end estimates of those bonus payments account for less than 3% of the money corporate payers got handed back to them by the tax law. Those bonuses may have had as much to do with firms’ recognition that falling unemployment rates would make it easier for unhappy workers to leave for greener pastures, the CRS report notes.
So what happened to the other 97% of the money corporate accountants were handed by the government? A trillion dollars of it went to shareholders, as the law triggered a record wave of stock buybacks – an unproductive back-scratching activity that keeps the money firmly ensconced in upper-class hands that have little reason to spend that new cash back into the economy where working stiffs make their living.
This grand act of class solidarity between wealthy elected officials, wealthy corporate executives, and wealthy investors was entirely predictable. Corporate tax repatriation enticements and rates-slashing typically generate this kind of unproductive reshuffling of capital – thereby reinforcing the working class’s sense that they aren’t even being dealt into the hand.
Such stark differences in outcomes for the masses and the privileged few help fuel the populist anger that’s on the march across nearly every developed democracy on the planet.
Wages – a more stable indicator of how much wealth capitalists are allowing to pass through to their labor than any one-off bonus – offer no respite from the gloomy CRS diagnosis. Blue-collar wages rose just 1.2% in 2018 after accounting for inflation, the report’s authors found, which “indicated that ordinary workers had very little growth in wage rates.”
Out of every three taxpayers, roughly two owed the government less this tax year than they had prior to the new tax law. Many people who got a tax cut in year one appear not to have noticed, as the New York Times’ Jim Tankersley and Ben Casselman reported recently, because the annualized cut was spread across a year’s worth of paychecks instead of lumped together at year end.
But whether working families noticed the new money or not, the combined effect of those modest middle-class cuts and the massive corporate giveaways that make up the bulk of the Trump tax law’s price tag were supposed to load the economy’s engine with high-octane juice. The working theory was that this “2 Fast 2 Furious” boom would rain new revenue down on the treasury with such swift thoroughness that the public would neither notice nor care that a large amount of its collective money got handed over to wealthy multinational companies. The cut, its proponents insisted, would pay for itself.
A year on, the tax bill is miles behind the trajectory required to make that promise plausible. The authors of the CRS study calculate that the tax law’s 2018 performance generated “5 percent or less of the growth needed to fully offset the revenue loss” in year one.
“Much of the tax cut was directed at businesses and higher-income individuals who are less likely to spend,” the CRS researchers wrote. “On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy.”
That mathematically correct conclusion misses an important wider point about public policy choices. The bill has had a huge effect on what kind of economy we have, if not on the size of that economy as measured in the stats these analysts parse. Inasmuch as the costs of the bill could have been spent on other people if their government had made other choices, the tax law is redistributing wealth upward, providing the wealthy investor class a jolt of money they have no reason to spend.
Everyone else saw a relative pittance – enough money to make a difference to a working family, but a tiny fraction of the public money federal lawmakers chose to give to private companies and their shareholders through these changes – and none of the wider opportunity-sparking growth promised by the people marketing the bill 18 months ago.
Tax cuts that don’t pay for themselves are not automatically illegitimate. When such subsidies are bestowed on Main Street economies, they can boost the virtuous cycles of consumer spending that working-class communities need in order to provide a stable economic foundation.
The tax cut former House Speaker Paul Ryan (R-WI) put on Trump’s desk has instead subsidized the wealthy, just as the GOP intended.
This article was originally published at Think Progress on May 30, 2019. Reprinted with permission.
Uber’s gotta pay—with interest.
The infamous ride-sharing app admitted Tuesday that it had been underpaying its New York drivers since November 2014 due to an accounting error that took out more than the company’s 25 percent commission, the Wall Street Journal first reported.
Uber typically takes its commission after taxes and fees are deducted from a driver’s fare, but the accounting glitch that took it out beforehand resulted in a larger pay deduction for drivers. Uber’s terms of service did not specify that it took commissions out of gross fare earnings.
To make things right, Uber is repaying an average of $900 per driver with interest, which is estimated to cost a total of at least $45 million. One driver is receiving a $7,000 payout, Recode reported.
“We made a mistake and we are committed to making it right by paying every driver every penny they are owed, plus interest, as quickly as possible,” Uber’s regional manager in the U.S. and Canada, Rachel Holt, said in a statement. “We are working hard to regain driver trust, and that means being transparent, sticking to our word, and making the Uber experience better from end to end.”
Uber has had a rough year with multiple public relations disasters spanning a consumer and driver backlash for the company’s tepid response to the Trump administration’s immigration ban and a sprawling sexual harassment scandal. But the company’s issues with drivers over pay have also persisted.
In January, Uber settled a lawsuit that claimed the company misled drivers regarding earning potential and conditions of the company’s auto financing program. Drivers protested against poor pay throughout 2016, demanding higher pay.
Through it all, Uber has fought drivers on granting employee status and benefits, fair pay, and unionization. But despite the influx of lawsuits, it appears that drivers are going to keep fighting the company on issues.
Following news of Uber’s repayment of New York drivers, the Independent Drivers Guild, which represents more than 50,000 app drivers, called for a widespread investigation into the company’s payment practices.
“Drivers have been complaining about this and other shady accounting tactics to no avail,” said IDG’s executive director Ryan Price in a statement. “Drivers are relieved to be paid the money they are owed plus interest and we hope other companies follow suit.”
“We also call for regulators to launch an immediate investigation into ride hail applications fare and payment practices in our city.”
This article was originally published at ThinkProgress.org on May 24, 2017. Reprinted with permission.
About the Author: Lauren C. Williams is the tech reporter for ThinkProgress with an affinity for consumer privacy, cybersecurity, tech culture and the intersection of civil liberties and tech policy. Before joining the ThinkProgress team, she wrote about health care policy and regulation for B2B publications, and had a brief stint at The Seattle Times. Lauren is a native Washingtonian and holds a master’s in journalism from the University of Maryland and a bachelor’s of science in dietetics from the University of Delaware.
People who want multi;national corporations to be held accountable for their tax-dodging tactics only have a few more hours Thursday to tell the Security and Exchange Commission to support a tough rule that would go a long way toward making that happen.
The SEC is soliciting comments until 11:59 p.m. Eastern time on a new business and financial disclosure rule that would require corporations to make public more information about their overseas subsidiaries.
This rule would affect the estimated $2.4 trillion in profits that corporations ranging from Apple to Walmart have shunted offshore in order to avoid paying U.S. corporate taxes. Right now, the rules for disclosing corporate use of offshore tax havens is, as the tax code itself, riddled with loopholes.
For one thing, companies are not required to report their tax liabilities on a country-by-country basis, so the public – including investors in these companies – have no way to accurately judge how a company is lowering its tax liabilities or what would happen if a country decides to radically change its tax policies. Nor do companies routinely report the names and locations of their subsidiaries; no one knew, for example, that Walmart had 78 subsidiaries in overseas tax havens, with $76 billion in assets, before researchers for Americans for Tax Fairness ferreted out the information.
Another Americans for Tax Fairness report found that the pharmaceutical company Pfizer was holding twice as much of its offshore profits in overseas subsidiaries as it was reporting to the public.
This lack of transparency does harm to investors – who should know details of how the companies they invest in are funneling their profits and the risks associated with their tax-avoidance strategies – and harms the public as a whole, which is shortchanged every time corporations game the system to avoid paying the taxes they owe.
That is why it’s important for people to take a few minutes now to tell the SEC to require corporations to tell the truth about their overseas subsidiaries. After all, expecting a corporation to be honest about how and where it earns its profits should not be too much to ask.
This blog originally appeared at OurFuture.org on July 21, 2016. Reprinted with permission.
Isaiah J. Poole worked at Campaign for America’s Future. He attended Pennsylvania State University and lives in Washington, DC.
The idea of putting a small “Robin Hood” tax on financial transactions has been kicking around for a while, but in the last month the idea has picked up some real steam.
The Financial Transaction Tax (FTT), also called a “Wall Street Speculation Tax,” proposal asks for a small tax on financial transactions. Such a tax would slow down extreme speculation while raising money to pay for essential public services. The idea has been called a “Robin Hood Tax” because it takes from the rich. The FTT is a very tiny tax. Some proposals have suggested a tax of just three hundredths of a percent – a mere 30 cents on a $1,000 stock transaction.
This small tax would raise a lot of money, largely from automated “high-frequency trading.” This is an extreme practice of using computers to place extremely high volumes of stock orders at extremely high speeds, buying and selling the same shares sometimes in a fraction of a second. As much as half or more of all stock trading volume now comes from this high-speed trading. This practice makes extreme profits from a few traders but increases “volatility” (risk) in the market while doing nothing that benefits the economy.
A small FTT would make high-speed trading more costly, slowing it down while raising money for public services. For stocks, bonds and other financial transactions, the tax would be so small as to be practically unnoticed, while still raising significant sums because of the volume of trading.
An FTT has been endorsed by the 2016 Democratic Party Platform draft, which says:
“We support a financial transactions tax on Wall Street to curb excessive speculation and high-frequency trading, which has threatened financial markets. We acknowledge that there is room within our party for a diversity of views on a broader financial transactions tax.”
Hillary Clinton’s financial services reform proposal include a piece of the idea, applying it only to high-frequency trading:
Impose a tax on high-frequency trading. The growth of high-frequency trading has unnecessarily placed stress on our markets, created instability, and enabled unfair and abusive trading strategies. Hillary would impose a tax on harmful high-frequency trading and reform rules to make our stock markets fairer, more open, and transparent.
Bernie Sanders proposed an FTT on “high-speed trading and other forms of Wall Street speculation; proceeds would be used to provide debt-free public college education.” He hadalso supported previous FTT proposals, the 2011 and 2013 Harkin-DeFazio bills calling for a 0.03 percent tax on the sales of stocks and bonds.
A year ago Jared Bernstein explained the benefits in a New York Times op-ed, “The Case for a Tax on Financial Transactions,” writing:
An itty-bitty, one-basis-point transaction tax (a basis point is one-hundredth of a percentage point, or 0.01 percent) would raise $185 billion over 10 years… That would be enough to finance an ambitious expansion of prekindergarten programs for 3- and 4-year-olds and restore funding of college assistance for low-income students.
What’s more, a financial transaction tax could significantly reduce the amount of high-frequency trading.
… A one-basis-point tax on $1,000 worth of stock would cost the stock trader a dime. A $100,000 trade would generate a tax of only $10.
[. . .] 75 percent of the liability from the tax would fall on the top fifth of taxpayers, and 40 percent on the top 1 percent. The tax would also fall more on high-volume traders than on long-term investors, of course.
New DeFazio FTT Bill Introduced
This week Rep. Peter DeFazio (D-Ore.) introduced a FTT bill. His bill would raise $417 billion over 10 years, which could be used to fund national priorities like free higher education or job-creating infrastructure repair. At a news conference DeFazio said:
“Thanks to the reckless greed of Wall Street over the past few decades, the American economy is a grossly unbalanced playing field,” said Rep. DeFazio. “The only way we can level it is if we rein in reckless speculative financial trading and curb near-instantaneous high-volume trades that create instability in the stock market and our national economy. These financial practices have no intrinsic value, and exist to make a quick buck for already-wealthy speculators. If we want to give middle-class families a fair shot at a strong economy that works for all Americans, we need to put Main Street first.”
This post originally appeared on ourfuture.org on July 14, 2016. Reprinted with Permission.
Dave Johnson has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.
It’s back. No matter how many times working people reject the Bowles-Simpson “B-S” budget plan that cynically claims it would “promote economic growth “—but would actually snuff out the recovery and cut lifelines for working families—it keeps coming back to the table.
Erskine Bowles and Alan Simpson released another tired plan today that would cut Social Security COLAs to pay for lower tax rates for corporations and the wealthiest Americans, among other things.
AFL-CIO President Richard Trumka released the following statement:
Once again, Bowles and Simpson have produced a plan that tells working people to “drop dead.” In December 2010, Bowles and Simpson put forward a budget blueprint that proposed to cut tax rates for corporations and the richest Americans and eliminate taxes on overseas corporate profits, and then pay for these lower tax rates by cutting Social Security benefits, shifting Medicare costs to individuals, taxing health benefits and cutting federal employees’ pay, benefits and jobs. The updated budget blueprint Bowles and Simpson put forward today cuts tax rates for the richest Americans and corporations and pays for these lower tax rates by cutting Social Security COLAs, taxing health benefits and cutting federal employees’ health and retirement benefits. For working people and the future of our nation, it is dead on arrival.
In recent actions and a call-in day to Congress, working families have urged their representatives and senators to:
- Protect Social Security, Medicare and Medicaid from benefit cuts.
- Repeal the “sequester” and close loopholes for Wall Street and the wealthiest 2% of Americans instead.
This post was originally posted on AFL-CIO on Feb. 19, 2013. Reprinted with Permission.
About the Author: Jackie Tortora is the blog editor and social media manager at the AFL-CIO.
A constant conservative charge against President Obama is that he is inherently anti-business. However, businesses keep defying the storyline by making larger and larger profits, rebounding nicely out of the Great Recession.
In the third quarter of this year, “corporate earnings were $1.75 trillion, up 18.6% from a year ago.” Corporations are currently making more as a percentage of the economy than they ever have since such records were kept. But at the same time, wages as a percentage of the economy are at an all-time low, as this chart shows. (The red line is corporate profits; the blue line is private sector wages.):
Meanwhile, workers are getting the short end of the stick. As CNN Money explained, “a separate government reading shows that total wages have now fallen to a record low of 43.5% of GDP. Until 1975, wages almost always accounted for at least half of GDP, and had been as high as 49% as recently as early 2001.”
This post was originally posted on Think Progress on December 3, 2012. Reprinted with Permission.
About the Author: Pat Garofalo is the Economic Policy Editor for ThinkProgress.org at the Center for American Progress Action Fund. Pat’s work has also appeared in The Nation, U.S. News & World Report, The Guardian, the Washington Examiner, and In These Times. He has been a guest on MSNBC and Al-Jazeera television, as well as many radio shows. Pat graduated from Brandeis University, where he was the editor-in-chief of The Brandeis Hoot, Brandeis’ community newspaper, and worked for the International Center for Ethics, Justice, and Public Life.
According to Good Jobs First, an organization that promotes accountability in economic development, several states allow corporations to literally pocket their employees’ tax payments. Rather than having those taxes go towards public services, the companies withhold money from their workers’ paychecks and just keep it, never remitting it to the state, under the guise of a job creation program.
Good Jobs First found that “nearly $700 million is getting diverted each year. And it is very unlikely that the affected workers are aware, given that no state requires that the diversion be disclosed on pay stubs.” Now, Pennsylvania is considering becoming the latest state to participate, as the Philadelphia City Paper reported:
Republican Governor Tom Corbett is deciding whether or not to sign legislation that would require some workers to pay taxes to their bosses. Yes, you read that right. The bill, which would allow companies that hire at least 250 new workers in the state to keep 95-percent of the workers’ withheld income tax, is an effort to to recruit Oracle to the state.
Your taxes would get withheld by your boss like normal, but they would then keep them and spend it on private jets or monogrammed bathroom fixtures or whatever instead of turning them over to the state–turning your tax dollars over to the state being the whole reason they were ostensibly “withheld” in the first place.
“These deals typify corporate socialism, in which business gains are privatized and costs socialized,” wrote Reuters David Cay Johnson. “Leaders in both parties embrace these giveaways because they draw campaign donations from corporate interests and votes from people who do not understand that they are subsidizing huge companies.” The Pennsylvania Budget and Policy Center listed a host of reasons that Gov. Tom Corbett (R-PA) should reject the law, including its effect on state revenue and its loopholes that will allow companies to collect their workers’ tax payments even if they create no new jobs.
This post originally appeared in ThinkProgress’s Wonk Room on October 24, 2012. Reprinted with permission.
About the Author: Pat Garofalo is an Economic Policy Editor for ThinkProgress.org at the Center for American Progress Action Fund. Pat’s work has also appeared in The Nation, U.S. News & World Report, The Guardian, the Washington Examiner, and In These Times. He has been a guest on MSNBC and Al-Jazeera television, as well as many radio shows. Pat graduated from Brandeis University, where he was the editor-in-chief of The Brandeis Hoot, Brandeis’ community newspaper, and worked for the International Center for Ethics, Justice, and Public Life.
One common strategy used by companies to cut labor costs is to classify as much of its work force as “independent contractors” as possible. A company does not have to pay payroll taxes for independent contractors nor does it have to worry about pesky labor code requirements pertaining to minimum wages, overtime, meal and rest breaks, or expense reimbursement requirements. Additionally, a company does not have to cover independent contractors under workers’ compensation insurance, and is not liable for payments under unemployment insurance, disability insurance, or social security.
Given these cost savings, it should, perhaps, not be surprising that there has been a trend in companies classifying more of their workforce as independent contractors. A 2007 study by the General Accounting Office estimated that the number of workers classified as independent contractors rose by almost two million between 1995 and 2005 alone.
However, just calling someone an independent contractor does make it so and many companies do so without considering the legal distinctions between employees and independent contractors. Indeed, there is a presumption that workers are employees (Labor Code Section 3357) and a company that wishes to rebut this presumption will be required to undergo a multi-factor test which includes questions regarding whether the company has control, or the right to control, how the work is done and the manner and means by it is performed. See, S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341. If they are unable to do so, then the worker will be classified as an employee and the company will potentially be on the hook for four years of overtime wages, meal and rest premiums, etc.
The New Law
S.B. 459 was chaptered by California’s Secretary of State as Chapter 706, Statutes of 2011. It will appear as Sections 226.8 and 2753 of the California Labor Code. The new law:
- Prohibits the “willful misclassification” which is defined as “avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.”
- Prohibits charging a misclassified individual “a fee or making any deductions from their compensation for any purpose, including for goods, materials, space rental, services, government licenses, repairs, equipment maintenance, or fines arising from the individual’s employment where any of the acts… would have violated the law if the individual had not been misclassified.”
- Subjects violators to dramatic civil penalties of at least $5,000 and as much $15,000 per violation, in addition to any other penalties or fines permitted by law. Violators who are determined to have engaged in a pattern of violations are subject to a civil penalty of at least $10,000 and as much as $25,000 per violation.
- Gives the Labor and Workforce Development Agency authority to assess penalties and includes special requirements for licensed contractors subject to the Contractors’ State License Board.
- Subjects non-lawyers who advise an employer to misclassify a worker to joint and several liability with the employer.
Although independent contractor misclassification cases are nothing new, the new law will lead to an increase in such lawsuits. Perhaps the most significant change is the addition of the new penalties. To wit, a company engaged in 100 violations could be liable for $2,500,000 in penalties under the new statute, in addition to the existing remedies (such as attorney’s fees and costs under Labor Code Section 218.5, penalties under Labor Code Section 203 and 226, interest).
The bottom line– Companies should think twice before misclassifying their work force to avoid paying employees premium wages and avoid payroll taxes!
About the authors:Brad Yamauchi is a partner and Kevin Allen is a litigation associate at Minami Tamaki LLP in San Francisco, California. The firm has litigated individual and class action wage and hour, civil rights and financial and consumer fraud cases for 35+ years. It is currently handling class action misclassification claims in the hi-tech, restaurant, retail, communications and trucking industries on behalf of thousands of employees.