For the second time in as many months, legislative Republicans have turned on their Republican governor for his refusal to back tax increases to help balance the budget. Last month, supermajority Kansas Republicans revolted against Sam Brownback's six-year tax-cutting experiment, which brought the state persistent budget problems and two credit downgrades.
Tonight (July 6) enough Republicans joined with the majority House Democrats to override Bruce Rauner's veto of the Illinois budget (the Senate overrode on July 4 with one Republican vote), ending a two-year battle. Like Kansas, Illinois will now have tax increases, in this case on both the personal and corporate income tax, which are expected to raise $5 billion a year.
The budget also contains 5% budget cuts for most state agencies and a 10% cut to college education, according to the Chicago Tribune. Democrats had fought Rauner for two years over cuts and, as the Tribune reports, Rauner had refused to sign an income tax increase unless there was a property tax freeze and/or cuts to workers' compensation. Amazingly, the budget battle led to state universities receiving no state funding since January; colleges and universities are refunded in the new budget.
Like so many Republicans, Rauner simplistically blames all of Illinois' budget problems on Democrats and unions. His extreme policy proposals have been presented as the only way to tackle the budget for his entire term of office, and he refused to negotiate. As a result, key members of his own party abandoned him on absolute opposition to tax increases. We'll have to wait and see whether this mini-trend will spread to more states.
Showing posts with label Illinois. Show all posts
Showing posts with label Illinois. Show all posts
Friday, July 7, 2017
Monday, August 4, 2014
Illinois' next governor may make Romney look like a saint UPDATED
Does the name Bruce Rauner ring a bell? No, me neither. It turns out he's the Republican nominee for governor in Illinois, which under normal circumstances would mean he's a nobody. But he's been leading incumbent Democrat Pat Quinn in polls all summer, and could actually end up as the state's next governor.
This is a problem, because he is even more out of touch with the middle class than Mitt Romney (Rauner is a private equity near-billionaire) whose idea of transparency is to release the first two pages of his 1040 tax return for 2010-12, and nothing else. Romney at least released his full tax return for each of two years. As Think Progress points out, Rauner is also a big fan of the Cayman Islands as a tax haven, just like Romney. In fact, Rauner is invested in at least five funds there. Also like Romney, Rauner takes full advantage of the "carried interest" tax break that lets him treat his fees, which should be ordinary income taxed at35 39.6%, as capital gains, subject only to a 15 20% tax rate.
Rauner's agenda is insistent on the need to spur job growth, but somehow misses the fact that Illinois' unemployment rate has fallen from 9.2% (seasonally adjusted) in June 2013 to 7.5% in May 2013 (the figure Rauner used) and even more since the agenda was published, to 7.1% in June, the third-largest drop in the country year-over-year. Still a full point worse than the June national unemployment rate, but a lot better than it was.
One place where Rauner is worse than Romney is the minimum wage. Romney, rather surprisingly, supports an increase in the minimum wage, though he did not specify a number. Rauner, in both December and January, called for Illinois to lower its minimum from $8.25 to $7.25, the national rate. After getting a tremendous amount of blowback, he now claims to support an increase.
His agenda says the state "should implement a phased-in minimum wage increase, coupled with workers' compensation and lawsuit reforms to bring down employer costs." No mention of what the rate would be, or the period over which it would be phased it. He references an op-ed he wrote in the January 9th Chicago Tribune (now only available through the Nexis subscription service), where he clearly buys into the "job-killer" meme and drops a reference to the futility of a "$20 per hour" minimum wage, for good measure. Somehow I don't think he really supports an increase.
Not only that, but Rauner proposes turning the Illinois Department of Commerce and Economic Opportunity, the state's investment promotion agency, into what he calls a "public-private partnership." He doesn't say it, but this means there will be less public oversight into the agency's affairs. As Good Jobs First has shown, such privatized agencies have exhibited high levels of abuse in recent years.
Rauner is a living, breathing example of how we have one tax system for the 1%, and another one for the rest of us. His flip-flop on the minimum wage is as phony as the concern he professes for the middle class. Yet there's a very good chance he will be the next governor of Illinois.
UPDATE: Crooks and Liars links to a brief video where Rauner says it may be necessary to go through a period in Illinois like that when President Ronald Reagan fired the air traffic controllers.
Argyrios at Daily Kos reminds me that the tax brackets have increased. Thanks.
Cross-posted at Angry Bear.
This is a problem, because he is even more out of touch with the middle class than Mitt Romney (Rauner is a private equity near-billionaire) whose idea of transparency is to release the first two pages of his 1040 tax return for 2010-12, and nothing else. Romney at least released his full tax return for each of two years. As Think Progress points out, Rauner is also a big fan of the Cayman Islands as a tax haven, just like Romney. In fact, Rauner is invested in at least five funds there. Also like Romney, Rauner takes full advantage of the "carried interest" tax break that lets him treat his fees, which should be ordinary income taxed at
Rauner's agenda is insistent on the need to spur job growth, but somehow misses the fact that Illinois' unemployment rate has fallen from 9.2% (seasonally adjusted) in June 2013 to 7.5% in May 2013 (the figure Rauner used) and even more since the agenda was published, to 7.1% in June, the third-largest drop in the country year-over-year. Still a full point worse than the June national unemployment rate, but a lot better than it was.
One place where Rauner is worse than Romney is the minimum wage. Romney, rather surprisingly, supports an increase in the minimum wage, though he did not specify a number. Rauner, in both December and January, called for Illinois to lower its minimum from $8.25 to $7.25, the national rate. After getting a tremendous amount of blowback, he now claims to support an increase.
His agenda says the state "should implement a phased-in minimum wage increase, coupled with workers' compensation and lawsuit reforms to bring down employer costs." No mention of what the rate would be, or the period over which it would be phased it. He references an op-ed he wrote in the January 9th Chicago Tribune (now only available through the Nexis subscription service), where he clearly buys into the "job-killer" meme and drops a reference to the futility of a "$20 per hour" minimum wage, for good measure. Somehow I don't think he really supports an increase.
Not only that, but Rauner proposes turning the Illinois Department of Commerce and Economic Opportunity, the state's investment promotion agency, into what he calls a "public-private partnership." He doesn't say it, but this means there will be less public oversight into the agency's affairs. As Good Jobs First has shown, such privatized agencies have exhibited high levels of abuse in recent years.
Rauner is a living, breathing example of how we have one tax system for the 1%, and another one for the rest of us. His flip-flop on the minimum wage is as phony as the concern he professes for the middle class. Yet there's a very good chance he will be the next governor of Illinois.
UPDATE: Crooks and Liars links to a brief video where Rauner says it may be necessary to go through a period in Illinois like that when President Ronald Reagan fired the air traffic controllers.
Argyrios at Daily Kos reminds me that the tax brackets have increased. Thanks.
Cross-posted at Angry Bear.
Friday, January 6, 2012
Job Flight from Canada Highlights U.S. Inequality and Low Wages
The fact that middle class living standards have been falling for decades is no secret. One way to put this in sharp relief, however, is through international comparisons. Alexander Eichler at the Huffington Post reports today that Caterpillar Inc. is demanding that its locomotive manufacturing workers in Canada take a 50% pay cut to bring them more in line with what its workers in Illinois make.
How is it that the Canadian Caterpillar workers get more than twice as much in wages and benefits as their Illinois counterparts when income per capita is lower in Canada than in the U.S.? According to the 2009 UN Human Development Report (Table M, p. 195), gross domestic product per capita in the U.S. in 2007 was $45,592 but only $40,329* in Canada. The first part of the answer is inequality. The same table shows that the U.S. has a Gini coefficient (an inequality measure in which 0 equals complete equality, and 100 when one person has all the income) of 40.8, compared with Canada's 32.6. The richest 10% of Americans make 15.9 times as much as the poorest 10%, while the figure in Canada is only 9.4 times as much.
The second part of the answer is unionization and union strength. As I noted in September, the U.S. has the fifth-lowest unionization rate of the 34 industrialized democracies in the Organization for Economic Cooperation and Development. Only 11.4% of the American workforce is organized, compared with 27.5% in Canada.
As Eichler points out, a third reason wages are often higher in Canada is that its unemployment rate is lower than the U.S. rate, 7.5% vs. 8.5%. Higher unemployment means lower bargaining power for workers.
Caterpillar is not an isolated example. As I discussed in September, Electrolux actually moved from the Montreal suburbs to Memphis, saving over $4 per hour by ditching its unionized workforce for right-to-work Tennessee, and getting a free factory in the bargain.
This comparison with Canada helps us see, from another angle, just how much pressure the middle class is under in this country. The fact that Canada is very similar to the U.S. economically suggests that it is not impossible to strengthen the union movement and hence, the middle class, here.
* Technical note: The comparison of GDP per capita is not adjusted for purchasing power parity. Companies have to pay their workers in actual U.S. dollars or Canadian dollars, so the adjustment is not appropriate for this comparison.
How is it that the Canadian Caterpillar workers get more than twice as much in wages and benefits as their Illinois counterparts when income per capita is lower in Canada than in the U.S.? According to the 2009 UN Human Development Report (Table M, p. 195), gross domestic product per capita in the U.S. in 2007 was $45,592 but only $40,329* in Canada. The first part of the answer is inequality. The same table shows that the U.S. has a Gini coefficient (an inequality measure in which 0 equals complete equality, and 100 when one person has all the income) of 40.8, compared with Canada's 32.6. The richest 10% of Americans make 15.9 times as much as the poorest 10%, while the figure in Canada is only 9.4 times as much.
The second part of the answer is unionization and union strength. As I noted in September, the U.S. has the fifth-lowest unionization rate of the 34 industrialized democracies in the Organization for Economic Cooperation and Development. Only 11.4% of the American workforce is organized, compared with 27.5% in Canada.
As Eichler points out, a third reason wages are often higher in Canada is that its unemployment rate is lower than the U.S. rate, 7.5% vs. 8.5%. Higher unemployment means lower bargaining power for workers.
Caterpillar is not an isolated example. As I discussed in September, Electrolux actually moved from the Montreal suburbs to Memphis, saving over $4 per hour by ditching its unionized workforce for right-to-work Tennessee, and getting a free factory in the bargain.
This comparison with Canada helps us see, from another angle, just how much pressure the middle class is under in this country. The fact that Canada is very similar to the U.S. economically suggests that it is not impossible to strengthen the union movement and hence, the middle class, here.
* Technical note: The comparison of GDP per capita is not adjusted for purchasing power parity. Companies have to pay their workers in actual U.S. dollars or Canadian dollars, so the adjustment is not appropriate for this comparison.
Tuesday, July 19, 2011
Defending Against Relocation Threats with Retention Subsidies -- Paid with Employee Taxes
When companies threaten to relocate, often desperate states and cities will give almost anything to keep them. As I mentioned in a previous column, New York City and Kansas City have been among the larger victims of this dynamic. In his most recent column, David Cay Johnston (now at Reuters) lays out a depressing, newish, way that states are cannibalizing their tax revenues to retain existing businesses: letting companies keep withheld taxes of their employees.
As Johnston shows, these deals were almost entirely for retention of existing facilities. Motorola, Chrysler, Ford, and Mitsubishi were not required to create any new jobs, while Continental Tire has to create 400 new jobs. Navistar, however, is getting this subsidy despite the fact that it will lay off 900 of its 3100 current workers. (Note that Illinois did some one-off deals using this tactic before the new law went into effect.)
I mentioned that keeping one's employees' taxes is not entirely new. For example, in Missouri, cities with an earnings tax (St. Louis and Kansas City) can use those anticipated revenues in tax increment financing subsidies. In 2004, Kansas City did just that, giving H&R Block a brand new headquarters building worth $308.4 million, paying $292.3 million of the cost through its TIF (KC Star, March 4, 2004), a more than 94% subsidy! This project was a relocation within Kansas City, under threat of relocation to Kansas.
The threat of relocation of such large projects is a huge one and can generate gigantic windfalls for the companies exploiting their mobility. Ultimately, we need national rules against job piracy so retention subsidies become unnecessary.
Painful as it feels to have a lot of hard-earned income taken from your paycheck for taxes, a new Illinois law does something Americans may find surprising. It lets some employers pocket taxes for 10 years.
You read that right -- in Illinois the state income taxes withheld from your paycheck may be kept by your employer under a law that took effect in May.
As Johnston shows, these deals were almost entirely for retention of existing facilities. Motorola, Chrysler, Ford, and Mitsubishi were not required to create any new jobs, while Continental Tire has to create 400 new jobs. Navistar, however, is getting this subsidy despite the fact that it will lay off 900 of its 3100 current workers. (Note that Illinois did some one-off deals using this tactic before the new law went into effect.)
I mentioned that keeping one's employees' taxes is not entirely new. For example, in Missouri, cities with an earnings tax (St. Louis and Kansas City) can use those anticipated revenues in tax increment financing subsidies. In 2004, Kansas City did just that, giving H&R Block a brand new headquarters building worth $308.4 million, paying $292.3 million of the cost through its TIF (KC Star, March 4, 2004), a more than 94% subsidy! This project was a relocation within Kansas City, under threat of relocation to Kansas.
The threat of relocation of such large projects is a huge one and can generate gigantic windfalls for the companies exploiting their mobility. Ultimately, we need national rules against job piracy so retention subsidies become unnecessary.
Subscribe to:
Posts (Atom)