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The Filthy Rich Shout “Greed Is Good” and Party With The Politicians

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jonathan-tasiniWhen I wrote the “The Audacity of Greed” in 2008, I had a chapter called “Vodka and Penises” which detailed a rather unique birthday party thrown in Sardinia, Italy, in 2000 by Tyko CEO Dennis Kozlowski in honor of his wife–it featured vodka spraying from the penis of a replica of Michelangelo’s David. Kozlowski, who eventually went to jail for stealing lots of company money including the funds to pay for this little soiree, flew seventy-five guests to the Hotel Cala di Volpe where the privileged invitees played golf and tennis, ate fine food, listened to a performance by the singer Jimmy Buffett (who was paid a fee of $250,000 to appear) and enjoyed a birthday cake in the shape of a woman’s breasts festooned with sparklers on top.

It was a symbol of the greed and avarice coursing through American business.

And it ain’t over–as Leon Black is happy to demonstrate.

Let’s set the backdrop first: millions of Americans are without work, millions more can’t find decent paying work, we still are trying to dig out of a financial crisis caused largely by greed and avarice on Wall Street, we have the greatest divide between rich and poor in 100 years, and we are enduring a longer-term attack against the people by a bankrupt “free market” system that values a few CEOs over the rest of us.

No matter. The party must continue:

Last Saturday night, the financier Leon D. Black celebrated his 60th with a blowout at his oceanfront estate in Southampton, on Long Island. After a buffet dinner featuring a seared foie gras station, some 200 guests took in a show by Elton John. The pop music legend, who closed with “Crocodile Rock,” was paid at least $1 million for the hour-and-a-half performance.

And:

Mr. Black had his backyard transformed into a faux nightclub setting, constructing a wooden deck over his swimming pool and building a tent for Mr. John’s concert. After a buffet of crab cakes and steak, partygoers sat on couches with big puffy pillows.

Who was there?

The stars of music and fashion collided with a who’s who of Wall Street. Revelers included Michael R. Milken, the junk-bond pioneer and Mr. Black’s boss at Drexel Burnham Lambert in the 1980s; Julian H. Robertson Jr. , the hedge fund investor; Lloyd C. Blankfein, the chief executive of Goldman Sachs; and Mr. Schwarzman, head of Blackstone Group.Rounding out the guest list were politicians including Mayor Michael R. Bloomberg and Senator Charles E. Schumer of New York, who rubbed elbows with the media celebrities Martha Stewart and Howard Stern.[emphasis added]

And:

On Saturday night, to be sure, there was little talk of carried interest at the Blacks’ home on Meadow Lane, one of the Hamptons most desirable addresses for its panoramic views of the Atlantic Ocean and Shinnecock Bay. He counts among his neighbors Calvin Klein and David H. Koch, the billionaire industrialist.[emphasis added]

So, here is what is important to glean from this obscene affair, which underscores how we have been robbed–and how we will continue to be robbed in the future.

In my most recent book, “It’s Not Raining, We’re Being Peed On,” I wrote about “carried interest”. Private equity firms get a special tax break—it’s called “carried interest”, Rather than being taxed at the top rate of 35 percent, the private equity fund managers like Black only pay 15 percent through a loophole called “carried interest.” To understand carried interest, you have to first understand how money managers get paid in the yacht-sailing, mansion-buying world of private equity.

First, they receive a fee, which is a percentage of the funds they invest. This fee is usually in the range of two percent, and is taxed like your run-of-the-mill wage income.

Second, and far more lucratively, money managers get a fee based on the performance of their fund—a fee in the range of 20 percent. It’s the second fee that is the so-called “carried interest”—and it’s how the money managers of private equity really rake in the big bucks that pay for their Picassos, yachts and mansions.

In the normal world of taxable income (and let me say that nothing in the tax code is simple when it comes to schemes that allow people like Black to shelter their money), carried interest is taxed as investment income—at the capital gains level of 15 percent (much lower than the top wage income rate), even though most of these managers invest very little, if any, of their own money.

So, a private equity big shot honcho hauling down millions of dollars in “incentive” is taxed at a 15 percent rate, while the receptionist who works in his office, or the police officer who guards the equity baron’s property, probably earn $50,000 or so if they’re lucky—and those average working people pay a 25 percent tax rate on that income (not to mention payroll taxes), a far larger share of their income than the fellow who banks “carried interest.”

Which is how Black can afford to throw obscene birthday parties.

How “carried interest” continue to remain in place can be summed up, in large part, with two words: Chuck Schumer. Schumer has been one of Wall Street’s greatest defenders. And, while there have been calls to eliminate the “carried interest” bonanza, Schumer has blocked that effort time and again, and has also, most recently, flip-flopped on the absurd proposal to give corporate American a tax holiday on the profits companies have stashed over seas.

I understand the movtivation: Wall Street is a huge honeypot for campaign contributions. That is Schumer’s obsession.

But, keeping “carried interest” costs billions of dollars in money lost to our government’s treasury–money for schools, health care for seniors, research, and jobs.

One final point on the private equity world. Even if the “carried interest” is eliminated, we need to keep another point in mind: private equity firms make their huge profits by buying up companies and stripping them of hundreds of thousands of workers in the name of “efficiency”. The longer-term economic crisis is, at heart, a hammering down of wages–which has led to deep despair among the people who can’t make ends meet. Private equity firms have been at the leading edge of feeding that disastrous economic system.

Which is why we should care–and take notice–of the people who party and rub shoulders at these kinds of obscene events.

They just do not care.

Ultimately, for all the rhetoric, this is about the power and wealth of the business and political elite.

It is not about us. Until we torch this system.

*This blog originally appeared in Working Life on August 19, 2011.

About the Author: Jonathan Tasini is the executive director of Labor Research Association. Tasini ran for the Democratic nomination for the U.S. Senate in New York. For the past 25 years, Jonathan has been a union leader and organizer, a social activist, and a commentator and writer on work, labor and the economy. From 1990 to April 2003, he served as president of the National Writers Union (United Auto Workers Local 1981).He was the lead plaintiff in Tasini vs. The New York Times, the landmark electronic rights case that took on the corporate media’s assault on the rights of thousands of freelance authors.

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AFSCME Members Rally to Save Public Services

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Image: James ParksWhile state and local governments and school districts across the country struggle with budget deficits, AFSCME members are standing up to tell their elected representatives that raising revenues is the best solution to a budget crisis instead of cutting critical public services just when they are needed the most.

State and local governments and school districts have a $178 billion budget shortfall this year alone.

In Illinois, more than 3,000 activists, including hundreds of members of AFSCME Council 31, rallied at the state Capitol rotunda in Springfield this month to demand that lawmakers pass legislation to increase the individual income tax rate and expand the state’s sales tax base.

AFSCME members in Washington State lobbied lawmakers to preserve state services.
AFSCME members in Washington State lobbied lawmakers to preserve state services.

Meanwhile, some 1,500 AFSCME members from throughout New York State demonstrated and met with legislators in Albany earlier this month to find a fair way to protect essential public services.

AFSCME President Gerald McEntee told the New York State workers:

Elected leaders are on the verge of destroying vital public services and putting more people out of work. They’re jeopardizing the health and safety of the people and our communities.

In Maryland, a delegation of AFSCME members carried boxes of “Budget Fight Back” cards to their lawmakers in January. Signed by more than 3,000 state employees, the cards propose a plan to generate more than $2 billion in revenue to close a budget gap, including drawing on the state’s rainy day fund, expanding the sales tax to more services and increasing gas and alcohol taxes.

You can read more about efforts by AFSCME members in other states to save public services on AFSCME’s website here.

*This article originally appeared in AFL-CIO blog on February 24, 2010. Reprinted with permission.

About the Author: James Parks had his first encounter with unions at Gannett’s newspaper in Cincinnati when his colleagues in the newsroom tried to organize a unit of The Newspaper Guild. He saw firsthand how companies pull out all the stops to prevent workers from forming a union. He is a journalist by trade, and worked for newspapers in five different states before joining the AFL-CIO staff in 1990. He has also been a seminary student, drug counselor, community organizer, event planner, adjunct college professor and county bureaucrat. His proudest career moment, though, was when he served, along with other union members and staff, as an official observer for South Africa’s first multiracial elections. Author photo by Joe Kekeris


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Taxing Employer Health Benefits: The Poison Pill That Would Kill Health Care Reform

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I was asked today to post a diary to Daily Kos written by my boss, Teamsters General President James P. Hoffa – it is beneath the fold. In this piece we are looking into the fact that a tax hike on health benefits to pay for health care reform is a bitter, bitter pill for middle-class wage-earners to swallow.

 

By Teamsters General President James P. Hoffa

Congress is finally beginning to grapple with a way to give all U.S. citizens access to affordable health insurance. Unions support universal coverage like a large majority of Americans.

Almost 15 years have gone by since lawmakers considered comprehensive reform to our nation’s health care system with the goal of making sure every American can access health care. How to pay for health care reform was the problem then — and it’s the problem now.

Sen. Max Baucus (D-Mont.), the powerful chairman of the Finance Committee, is suggesting an enormous new tax on employer-sponsored health insurance.

Such a tax would raise hundreds of billions of dollars. That tax revenue would help pay for a public government-sponsored plan for individuals and families.

For those who have employer-provided coverage, creating a “public” plan is a sensible way to make health insurance available to people who can’t get it through their employer and don’t qualify for Medicaid or Medicare. But a tax hike on health benefits to pay for health care reform is a bitter, bitter pill for middle-class wage-earners to swallow.

Most Americans find the prospect of such a tax downright obnoxious. Fortunately, Members of Congress are aware of the public’s hostility to taxing employer-based insurance. A recent national survey by Lake Research Partners shows 80 percent of likely voters oppose taxing health benefits.

Sen. John McCain (R-Ariz.) made the mistake of floating the idea during his presidential campaign. Candidate Barack Obama lashed out with a television commercial calling it “the largest middle-class tax increase in history.” Obama’s opposition to taxing employer-based health insurance was a big reason the Teamsters supported him for president.

For all those reasons, it seems extremely unlikely that a tax on employer-sponsored health insurance will ever become a reality. Or, let us hope.

If it did, it would destroy employer-sponsored health insurance.

Adding a tax onto an already crushing expense for employers and employees would create a huge disincentive to buy employer-sponsored health insurance.

It would mostly burden people who are older or sicker, women of childbearing age, employees of small businesses and residents of high-cost communities.

It would set off a stampede to the public plan. And the public plan would lose a major source of revenue.

There is no reason that revenue to pay for health care reform has to come out of the current health care system. Middle-class taxpayers just gave Wall Street the biggest bailout in history. Wall Street can well afford to return the favor.

We know Members of Congress can be creative when they need to find revenue offsets. Let them use that creativity just as they did for Wall Street to prevent another tax on those of us who live on Main Street.

Eliminating subsidies and preferences for the wealthiest Americans would go a long way to pay for the health care reform this country so desperately needs.

President Obama is suggesting a limit on itemized deductions for the 3 million wealthiest people in this country. That would raise about $270 billion over 10 years.

Another good suggestion is to extend the 2.9 percent Medicare tax, which applies only to wages, to ALL adjusted gross income, would raise $38.1 billion.

Imposing a 1.05 percent surtax on the Medicare tax on single people who earn more than $200,000, or couples that earn more than $250,000, would raise $7.2 billion.

Raising the capital gains tax to 28 percent — the rate under President Ronald Reagan — in top income brackets would raise $34.7 billion.

Limiting tax deductions for stock options and the write-off for intangible assets would add $15 billion to the federal Treasury.

Let’s make health care reform cover the uninsured but not penalize hard-working American families and individuals who have employer-sponsored plans. For those who claim this is class warfare, I’d say it’s been going on for quite a while and it’s time for that to change. Middle-class families — the backbone of this country — deserve better.

James P. HoffaJames P. Hoffa grew up on picket lines and in union meetings. He is the only son of James R. Hoffa, former General President of the International Brotherhood of Teamsters. On his 18th birthday, Hoffa received his own union card and was sworn in by his father. Prior to becoming Administrative Assistant to Michigan Joint Council 43, Hoffa was a labor lawyer in Detroit for 25 years.

Hoffa is recognized as one of the foremost authorities on Union issues. As the most visible and outspoken critic of government trade policies and anti-worker corporate agendas, Hoffa is recognized as a leader on issues that affect working people.

(bio taken from excerpts of http://www.teamster.org/content/leader-issues-affect-working-people with permission from the author)

This article originally appeared in Daily KOS on June 30th and is reprinted here with permission from the author.


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