As I argued last month, the Puget Sound area of Washington state was easily the best place, from a strictly economic point of view, for Boeing to build its new 777x jetliner. This was confirmed when, despite the rejection of its union contract offer by a 2:1 margin and opening an auction for a new facility, Boeing came back to the union with a second contract offer (h/t New York Times). Yesterday, by a 51-49 margin, workers voted to accept the contract.
The new contract ends the company's pension plan in favor of a 401(k), although it does not "affect the pensions already accrued." This was unchanged from the previous offer. However, the company did make concessions on the time to raise to the top of a pay grade (6 years instead of the originally proposed 16) and by adding a second bonus payment, of $5,000, in 2020.
The closeness of the vote shows how difficult a decision this was. In addition, there was a rift between the international office of the Machinists' union, which all but openly supported the contract, and the local union, which quite openly opposed it. Though the workers had a good bargaining position, it's hard to negotiate with a gun to your head, and the company had also shown its willingness to do something stupid (from an economic point of view) when it put a production line for 787 in South Carolina rather than Washington.
So, yet another company ends a true pension plan, contributing to the coming retirement crisis. Washington state gets to set another record for the largest incentive package in U.S. history, although it is surely a violation of World Trade Organization subsidy rules, as was Boeing's 2003 package. And we see yet again the need to ban job piracy, which strengthens the kind of job blackmail we have seen in this case, like so many others.
Cross-posted at Angry Bear.
Saturday, January 4, 2014
Thursday, December 26, 2013
Watch this Link: Will Heritage Scrub Its Obamacare History?
Mike the Mad Biologist leads me to a host of articles on the crazy things going on at Heritage Foundation, especially since former Senator Jim DeMint of South Carolina took over as president of the organization. Mike quotes Alex Pareene at length on how the rise of MBAs running both the Foundation (DeMint) and Heritage Action (Michael Needham) has turned Heritage from a respected think tank into a mainly political organization of the hard right. Pareene, in turn, leads to a good analysis by Julia Ioffe in The New Republic.
As regular readers know, Heritage is an organization that I've already lost most respect for, it being famous both for proposing Obamacare's main components and denying that it is responsible for the individual mandate. This has been well-debunked in both Forbes and The Wall Street Journal, by Avik Roy and James Taranto respectively.
My modest contribution was to note that the January 1989 research report Taranto found in the Heritage archives was actually noted on its cover, "Revised Edition." This pushes the original research back into 1988 at least and clearly refutes Stuart Butler's claim that the individual mandate was a response to Hillarycare. In fact, it was a response to the considerable political groundswell for single payer in the 1980s.
The question is how far the deterioration of the Heritage research mandate will go. I think one clear indicator would be if Heritage decides to take the 1984 "Ministry of Truth" route and delete the research from its website. So far, it has yet to stoop that low. But when "A National Health System for America, Revised Edition," can no longer be downloaded, we will know another big step in the hyper-politicization of Heritage has taken place. Should it happen, and you need a copy, email me and I will send you a copy of the pdf document on a "fair use" basis.
As regular readers know, Heritage is an organization that I've already lost most respect for, it being famous both for proposing Obamacare's main components and denying that it is responsible for the individual mandate. This has been well-debunked in both Forbes and The Wall Street Journal, by Avik Roy and James Taranto respectively.
My modest contribution was to note that the January 1989 research report Taranto found in the Heritage archives was actually noted on its cover, "Revised Edition." This pushes the original research back into 1988 at least and clearly refutes Stuart Butler's claim that the individual mandate was a response to Hillarycare. In fact, it was a response to the considerable political groundswell for single payer in the 1980s.
The question is how far the deterioration of the Heritage research mandate will go. I think one clear indicator would be if Heritage decides to take the 1984 "Ministry of Truth" route and delete the research from its website. So far, it has yet to stoop that low. But when "A National Health System for America, Revised Edition," can no longer be downloaded, we will know another big step in the hyper-politicization of Heritage has taken place. Should it happen, and you need a copy, email me and I will send you a copy of the pdf document on a "fair use" basis.
You will know it has happened when you can no longer download the report from
Wednesday, December 11, 2013
America's Most Wanted: Boeing
Boeing is America's Most Wanted Corporation in two senses. First, now that the Machinists' union in Washington state has refused the company's contract demands, it is shopping production (h/t Pacific Northwest Inlander) of the 777x aircraft nationwide and lots of states are making offers for it. Second, it is emblematic of everything the 1% is doing to destroy the middle class: despite being highly profitable, it pays virtually no taxes; it accepts billions of dollars in government subsidies; it is trying to eliminate pensions and cut salaries for its highly skilled workforce; and it is trying to move production away from its unionized workforce, something it has already accomplished in part.
The first part of the story is nauseating enough. With Boeing already threatening to leave its home in Washington state if it didn't get what it wanted from both the state and the union, Democratic governor Jay Inslee called a special session of the state legislature that took three days to approve subsidies for Boeing. The incentive package is the largest ever in U.S. history for a single company, according to Greg LeRoy of Good Jobs First, an astounding $8.7 billion over 16 years (2025-2040). By my own back-of-the-envelope calculations, this looks to be the largest-ever U.S. subsidy on a present value basis as well as in nominal terms.
By the way, this represents a huge jump from Boeing's current tax break package for the 787 Dreamliner, passed in 2003, which was $160 million a year for 20 years ($2.0 billion in present value, by my calculations). Under the new package, this would more than triple to $543 million annually.
Also of note, the World Trade Organization ruled that the 2003 subsidies are illegal under WTO rules, a finding that was upheld by the WTO's Appellate Body in April 2012. While the U.S. government has eliminated some of the illegal subsidies provided by NASA and the Defense Department, the state and local subsidies found to be in violation of the WTO's Agreement on Subsidies and Countervailing Measures have not been eliminated. As noted in the last source, the European Union was seeking permission from the WTO to apply $12 billion worth of sanctions on U.S. exports. The EU will certainly file a new complaint against whatever state and local subsidies Boeing ultimately receives for the 777x, and on the basis of the last case there is every reason to think the EU would again prevail.
But just days after the legislature approved the subsidy, the union rejected the proposed contract by a 2-1 margin. Though the company described it as a "contract extension," there were major changes involved, including replacing the defined benefit pension with a 401(k) (continuing an economy-wide trend contributing to the coming middle-class retirement crisis), increased health care costs for employees, a lower wage structure for new hires, and smaller raises than in the current contract, all in exchange for a one-time bonus of $10,000 for current workers.
After the contract offer rejection, Boeing announced that it would entertain offers from 15 states that might be interested, including Washington state. The proposals were due in less than a month, with the company imposing a December 10 deadline on prospective suitors. As Good Jobs First reported in its January 2013 publication, The Job-Creation Shell Game, we see a two-sided use of the corporate mobility conferred by a location decision to (as I like to describe it) extract economic rents (superprofits) from governments: Job blackmail directed at Washington state and the Machinists' union; combined with an offer to the other 14 states to engage in job piracy by subsidizing the firm's potential relocation. This is an exercise in raw corporate power.
And to what end? We have already seen the details on how Boeing wants to terminate true pensions, reduce other worker benefits, and create a two-tier employment structure. As Greg LeRoy highlights in a recent post, Citizens for Tax Justice has shown that over the decade 2003-2012, Boeing made $35 billion in pre-tax U.S. profits, yet paid negative tax to Washington state of $96 million and a whopping $1.8 billion in federal income tax refunds over that same period! To put the new deal in perspective, LeRoy points out that should it eventually be approved, the $543 million annual subsidy would be "more than twice what the state provides to the University of Washington." So not only are the labor provisions a direct assault on middle class living standards and retirement security, the opportunity cost of the deal will no doubt further imperil public education in Washington at all levels, undermining one of the very factors that gives the state a trained workforce that is attractive to employers in the first place.
Boeing has already shown its willingness to move work away from Washington state, when it built a 787 Dreamliner assembly line in South Carolina despite the billions in subsidies it received from Washington. However, the South Carolina site has been plagued with production problems, which some see as strengthening the bargaining position of the Machinists in Washington.
Personally, I tend to believe that the Machinists do have a strong negotiating position. It is hard to imagine other states coming up with some 20,000 highly skilled workers to take on the job. While I think it is possible that part of the production could be moved away from Washington state, for instance the wing assembly only, I think the company will have to leave most of the work in Washington. Moreover, Boeing only gets the $8.7 billion in tax breaks if it produces the entire project there. Missouri, by contrast, has only offered $1.7 billion in subsidies to attract the facility, which I consider to be unlikely to be successful because Boeing workers in St. Louis are also Machinist union members. But really, there is no way to tell for sure whether the company's desire to weaken the union will overwhelm what looks like a compelling case for staying in Washington.
We do know, however, that Boeing is displaying everything that is wrong with corporate America today. As I wrote recently, there needs to be a federal law against states providing subsidies to move existing jobs out of another state. Banning job piracy would also weaken companies' ability to engage in job blackmail by reducing the economic viability of actually relocating to another state. With Boeing's auction sure to set a new standard in the annals of job blackmail, the sooner we can get action on relocation subsidies, the better.
Cross-posted at Angry Bear.
The first part of the story is nauseating enough. With Boeing already threatening to leave its home in Washington state if it didn't get what it wanted from both the state and the union, Democratic governor Jay Inslee called a special session of the state legislature that took three days to approve subsidies for Boeing. The incentive package is the largest ever in U.S. history for a single company, according to Greg LeRoy of Good Jobs First, an astounding $8.7 billion over 16 years (2025-2040). By my own back-of-the-envelope calculations, this looks to be the largest-ever U.S. subsidy on a present value basis as well as in nominal terms.
By the way, this represents a huge jump from Boeing's current tax break package for the 787 Dreamliner, passed in 2003, which was $160 million a year for 20 years ($2.0 billion in present value, by my calculations). Under the new package, this would more than triple to $543 million annually.
Also of note, the World Trade Organization ruled that the 2003 subsidies are illegal under WTO rules, a finding that was upheld by the WTO's Appellate Body in April 2012. While the U.S. government has eliminated some of the illegal subsidies provided by NASA and the Defense Department, the state and local subsidies found to be in violation of the WTO's Agreement on Subsidies and Countervailing Measures have not been eliminated. As noted in the last source, the European Union was seeking permission from the WTO to apply $12 billion worth of sanctions on U.S. exports. The EU will certainly file a new complaint against whatever state and local subsidies Boeing ultimately receives for the 777x, and on the basis of the last case there is every reason to think the EU would again prevail.
But just days after the legislature approved the subsidy, the union rejected the proposed contract by a 2-1 margin. Though the company described it as a "contract extension," there were major changes involved, including replacing the defined benefit pension with a 401(k) (continuing an economy-wide trend contributing to the coming middle-class retirement crisis), increased health care costs for employees, a lower wage structure for new hires, and smaller raises than in the current contract, all in exchange for a one-time bonus of $10,000 for current workers.
After the contract offer rejection, Boeing announced that it would entertain offers from 15 states that might be interested, including Washington state. The proposals were due in less than a month, with the company imposing a December 10 deadline on prospective suitors. As Good Jobs First reported in its January 2013 publication, The Job-Creation Shell Game, we see a two-sided use of the corporate mobility conferred by a location decision to (as I like to describe it) extract economic rents (superprofits) from governments: Job blackmail directed at Washington state and the Machinists' union; combined with an offer to the other 14 states to engage in job piracy by subsidizing the firm's potential relocation. This is an exercise in raw corporate power.
And to what end? We have already seen the details on how Boeing wants to terminate true pensions, reduce other worker benefits, and create a two-tier employment structure. As Greg LeRoy highlights in a recent post, Citizens for Tax Justice has shown that over the decade 2003-2012, Boeing made $35 billion in pre-tax U.S. profits, yet paid negative tax to Washington state of $96 million and a whopping $1.8 billion in federal income tax refunds over that same period! To put the new deal in perspective, LeRoy points out that should it eventually be approved, the $543 million annual subsidy would be "more than twice what the state provides to the University of Washington." So not only are the labor provisions a direct assault on middle class living standards and retirement security, the opportunity cost of the deal will no doubt further imperil public education in Washington at all levels, undermining one of the very factors that gives the state a trained workforce that is attractive to employers in the first place.
Boeing has already shown its willingness to move work away from Washington state, when it built a 787 Dreamliner assembly line in South Carolina despite the billions in subsidies it received from Washington. However, the South Carolina site has been plagued with production problems, which some see as strengthening the bargaining position of the Machinists in Washington.
Personally, I tend to believe that the Machinists do have a strong negotiating position. It is hard to imagine other states coming up with some 20,000 highly skilled workers to take on the job. While I think it is possible that part of the production could be moved away from Washington state, for instance the wing assembly only, I think the company will have to leave most of the work in Washington. Moreover, Boeing only gets the $8.7 billion in tax breaks if it produces the entire project there. Missouri, by contrast, has only offered $1.7 billion in subsidies to attract the facility, which I consider to be unlikely to be successful because Boeing workers in St. Louis are also Machinist union members. But really, there is no way to tell for sure whether the company's desire to weaken the union will overwhelm what looks like a compelling case for staying in Washington.
We do know, however, that Boeing is displaying everything that is wrong with corporate America today. As I wrote recently, there needs to be a federal law against states providing subsidies to move existing jobs out of another state. Banning job piracy would also weaken companies' ability to engage in job blackmail by reducing the economic viability of actually relocating to another state. With Boeing's auction sure to set a new standard in the annals of job blackmail, the sooner we can get action on relocation subsidies, the better.
Cross-posted at Angry Bear.
Friday, November 22, 2013
Subsidy Insanity in Western Missouri
I have written before about the gross waste of taxpayer monies on retail in the St. Louis region. According to the East-West Gateway Council of Governments (p. 18), governments in the bi-state metropolitan area pumped about $2 billion worth of subsidies into retail projects from 1990 to 2007, but only saw a net increase of 5400 jobs, meaning that each low-wage, low-benefit retail job cost the cities of the region $370,000 apiece. The price is only this low on the generous assumption that the subsidies were solely responsible for this job creation. However, given the growth of incomes in the metro area during that time period, it is likely that most if not all the jobs would have been created without the incentives provided.
It turns out something similar has been happening in the Kansas City region. As regular readers of this blog know, the border job piracy in the Kansas City metro area is probably the second-worst in the country, after metro New York City. As it turns out, there has recently been data released on the scope of job piracy there.
Less than a year after Governors Jay Nixon (D-Missouri) and Sam Brownback (R-Kansas) told New York Times reporter Louise Story, on camera, that there was no way they would back off of their wasteful poaching, a new Times story reveals that Nixon is now calling for an end to their futile battle.
Part of the reason for his change of heart probably lies with a recent study by the Hall Family Foundation showing that since 2009 alone, Missouri and Kansas City have spent $212 million on relocation subsidies to drag existing operations across the border, sometimes more than once as in the case of Applebee's. The net effect, however, has been virtually nil: 3200 jobs moved to Kansas, while 2800 move to Missouri, for a net movement of 400 jobs.
The math of course is simple: $212 million/400 equals $530,000 per net moved job. And remember, these aren't net new jobs, merely net moved jobs. As I've written on numerous occasions, job piracy is the least defensible use of development incentives, precisely because it creates no new jobs. Good Jobs First had a detailed analysis of the issue overall and the Kansas-Missouri border war in particular in January 2013.
However, if the most recent Times article is to be believed, we could be on the verge of ending this particular border war. Mind you, don't hold your breath. The two states tried before, according to Good Jobs First, and failed miserably. Indeed, there has yet to be a successful voluntary no-raiding agreement between states, even though there have been at least three attempts. But in this case, there has been a strong push for a cease-fire from a number of prominent Kansas City businesses, so there is a better-than-usual chance that this could be successful.
Really, though, there oughta be a law. A federal one.
Cross-posted at Angry Bear.
It turns out something similar has been happening in the Kansas City region. As regular readers of this blog know, the border job piracy in the Kansas City metro area is probably the second-worst in the country, after metro New York City. As it turns out, there has recently been data released on the scope of job piracy there.
Less than a year after Governors Jay Nixon (D-Missouri) and Sam Brownback (R-Kansas) told New York Times reporter Louise Story, on camera, that there was no way they would back off of their wasteful poaching, a new Times story reveals that Nixon is now calling for an end to their futile battle.
Part of the reason for his change of heart probably lies with a recent study by the Hall Family Foundation showing that since 2009 alone, Missouri and Kansas City have spent $212 million on relocation subsidies to drag existing operations across the border, sometimes more than once as in the case of Applebee's. The net effect, however, has been virtually nil: 3200 jobs moved to Kansas, while 2800 move to Missouri, for a net movement of 400 jobs.
The math of course is simple: $212 million/400 equals $530,000 per net moved job. And remember, these aren't net new jobs, merely net moved jobs. As I've written on numerous occasions, job piracy is the least defensible use of development incentives, precisely because it creates no new jobs. Good Jobs First had a detailed analysis of the issue overall and the Kansas-Missouri border war in particular in January 2013.
However, if the most recent Times article is to be believed, we could be on the verge of ending this particular border war. Mind you, don't hold your breath. The two states tried before, according to Good Jobs First, and failed miserably. Indeed, there has yet to be a successful voluntary no-raiding agreement between states, even though there have been at least three attempts. But in this case, there has been a strong push for a cease-fire from a number of prominent Kansas City businesses, so there is a better-than-usual chance that this could be successful.
Really, though, there oughta be a law. A federal one.
Cross-posted at Angry Bear.
November Tax-Cast Highlights Fiscal Secrecy Index and Retrospective on President John F. Kennedy
This month's Taxcast from the Tax Justice Network highlights the results of the newest edition of the Financial Secrecy Index as well as U.S. President John F. Kennedy's attempts to rein in tax havens 50 years ago. These are definitely worth your while!
Thursday, November 14, 2013
Columbia U. Conference Shows Incentives Pervasive but Controls Work
Day one of the Columbia International Investment Conference in New York has concluded, and the takeaways are very clear. The topic is investment incentives, prompted by Louise Story's "United States of Subsides" series last December. Story moderated panel 1, which covered the pervasiveness of subsidies. How widely used are investment subsidies? As the presentations made clear, they are used by virtually every country in the world. That is depressing takeaway number one.
The second big lesson is that for most types of foreign direct investment, the use of incentives has no effect at all. Resource companies, companies seeking strategic assets, and companies needing to sell in a particular market are coming regardless of the use of incentives. (I would qualify the last part to say that only applies when coming to markets that aren't divided into a number of competing jurisdictions, such as the US and EU, where the member states can engage in subsidy wars, related but gated article here.) It is only for "efficiency seeking" or cost minimization investment that incentives can make some difference in location decisions.
Third, one of the biggest cost of incentives consists of funds given to firms that were coming to your location even if they had not received the subsidy, according to Louis Wells, the panel 2 moderator. He says most studies place this at 60% to 70%. A more recent study by Peter Fisher (p. 8) says that a more typical figure for the amount of jobs is only about 9%, versus the 30-40% implied by Wells. This means that the real cost per job of projects is at least 2.5 times as large as reported cost per job, and may be up to 11 times higher. And don't forget that there is also a big opportunity cost based on the value of other possible uses of the funds given away. As I have pointed out, all the public sector jobs lost since December 2007 could be replaced if incentives were abolished.
Fourth, the good news is that there are control methods that do work. I have written before about this, and a conference presentation by Investment Consulting Associates (p. 3) illustrates this with a comparison of incentives in the United Kingdom and the Czech Republic. Recall that European Union state aid policy aims to direct bigger incentives to poorer regions of the EU. ICA's database shows that the mean incentive was more than twice as large ($8.61 million vs. $3.41 million) in the Czech Republic than in the UK; the mean "aid intensity" (subsidy/investment) was 36% in the Czech Republic compared to just 15% in the UK; and mean cost per job was $67,088 in the Czech Republic versus only $20,288 in the UK. These are precisely the outcomes the European Commission wants to achieve with the state aid rules, creating a reliable bias in favor of poorer regions (and at the same time the poorer regions have subsidy limits holding down what investors can receive).
Tomorrow (Thursday, November 14) will have panels on "What are the alternatives" and my panel, "The way forward," where we will discuss EU rules and other methods of controlling out-of-control incentive wars. You can follow the action on Twitter at #CIIC13.
Cross-posted at Angry Bear.
The second big lesson is that for most types of foreign direct investment, the use of incentives has no effect at all. Resource companies, companies seeking strategic assets, and companies needing to sell in a particular market are coming regardless of the use of incentives. (I would qualify the last part to say that only applies when coming to markets that aren't divided into a number of competing jurisdictions, such as the US and EU, where the member states can engage in subsidy wars, related but gated article here.) It is only for "efficiency seeking" or cost minimization investment that incentives can make some difference in location decisions.
Third, one of the biggest cost of incentives consists of funds given to firms that were coming to your location even if they had not received the subsidy, according to Louis Wells, the panel 2 moderator. He says most studies place this at 60% to 70%. A more recent study by Peter Fisher (p. 8) says that a more typical figure for the amount of jobs is only about 9%, versus the 30-40% implied by Wells. This means that the real cost per job of projects is at least 2.5 times as large as reported cost per job, and may be up to 11 times higher. And don't forget that there is also a big opportunity cost based on the value of other possible uses of the funds given away. As I have pointed out, all the public sector jobs lost since December 2007 could be replaced if incentives were abolished.
Fourth, the good news is that there are control methods that do work. I have written before about this, and a conference presentation by Investment Consulting Associates (p. 3) illustrates this with a comparison of incentives in the United Kingdom and the Czech Republic. Recall that European Union state aid policy aims to direct bigger incentives to poorer regions of the EU. ICA's database shows that the mean incentive was more than twice as large ($8.61 million vs. $3.41 million) in the Czech Republic than in the UK; the mean "aid intensity" (subsidy/investment) was 36% in the Czech Republic compared to just 15% in the UK; and mean cost per job was $67,088 in the Czech Republic versus only $20,288 in the UK. These are precisely the outcomes the European Commission wants to achieve with the state aid rules, creating a reliable bias in favor of poorer regions (and at the same time the poorer regions have subsidy limits holding down what investors can receive).
Tomorrow (Thursday, November 14) will have panels on "What are the alternatives" and my panel, "The way forward," where we will discuss EU rules and other methods of controlling out-of-control incentive wars. You can follow the action on Twitter at #CIIC13.
Cross-posted at Angry Bear.
Monday, November 4, 2013
Ted Cruz's Tax Haven Past
A version of this post was previously published at US News and World Report's "Economic Intelligence" blog: http://www.usnews.com/opinion/blogs/economic-intelligence/2013/10/25/ted-cruz-will-vote-against-tax-haven-reform
Reprinted here under the terms of my contract with US News and World Report.
Cruz’s spokesperson also issued a statement: “This
story is much ado about nothing. It concerns a 15-year-old business
venture from which Sen. Cruz entirely divested more than a decade ago. He
holds no equity interest in any Caribbean business, and has not had any such
interest, compensation, or income for more than 10 years. Upon divesting from
the venture in early 2003, the Senator received a partial payment and also a
promissory note from his business partner and college roommate. That
promissory note--on which [Time’s]
entire article is based-- is technically still owed (and thus was voluntarily
disclosed), but it has never been paid and Sen. Cruz has never attempted to
collect on it.”
Reprinted here under the terms of my contract with US News and World Report.
Time (h/t TPM)
reports that Texas Senator
Ted Cruz invested $6000 in a company with his college roommate/debate
partner, David Panton, which has turned into at least $100,000. While this is
true on paper and required Cruz to make multiple amendments to his Senate
financial disclosures, the story is of more interest to me for Cruz’s use of a tax
haven company.
The tax haven in this case is the British Virgin Islands. Caribbean
Equity Partners Limited was founded by Panton, Cruz, and two other partners in
1998. Cruz’s $6000 plus help starting the firm gave him a 10% ownership stake,
according to a spokesperson for Cruz in response to my email inquiries. The
other partners owned 30% apiece, she said.
Caribbean Equity Partners Limited consisted of two separate
units, Caribbean Equity Partners Limited (Jamaica) and Caribbean Equity
Partners Limited (BVI). Cruz held stock in both of them. In the Jamaica
corporation, he held 100 regular shares plus 250 Class “C” Preference Shares.
He held 5000 shares of the British Virgin Islands-incorporated company. This
information comes from a Certificate of Divestiture dated January 6, 2003,
filed when his wife, Heidi Cruz, took a job in the Department of the Treasury,
one of many documents published by Time (see link above).
The Cruz spokesperson confirmed his ownership in both companies.
This divestiture, about five years after the company was
founded, netted Cruz $100,000, consisting of $25,000 in cash and a $75,000
promissory note from a different company, CEP Investments Holdings Limited.
This firm is headquartered in Jamaica but domiciled for tax purposes in the
British Virgin Islands, Cruz told Time.
He also told the magazine that it is “effectively” a promissory note from
Panton, as the company is owned by Panton. Based on what the Time story describes as an “oral
provision” with Panton to pay reasonable interest on the note, it has now grown
to over $100,000 in value as noted in an October 1 amended disclosure and
confirmed by the Cruz spokesperson. As the promissory note shows, it was
originally scheduled to have been paid December 31, 2003, but according to
Cruz’s spokesperson he and Panton have an oral agreement to postpone payment
indefinitely. (For this reason, his $6,000 investment may never grow beyond the $25,000 he has already collected.)
Cruz’s ownership of a firm with a tax haven-based unit does
not augur well for him to oppose tax havens, as did some Republicans in the
past. Notably, former Senator Norm Coleman (R-Minnesota) co-sponsored the
Stop Tax Haven Abuse Act of 2007. Moreover, we find from opensecrets.org
that Cruz has received campaign contributions from Goldman Sachs (where his
wife now works) PAC and Credit Suisse Group PAC, in addition to tens of
thousands of dollars from employees of the two companies. According to the Government Accountability Office,
as of 2009 Goldman Sachs had 29 tax haven subsidiaries, including 15 in the
Cayman Islands and one in the British Virgin Islands. Credit
Suisse, of course, is a Swiss bank under criminal investigation for assisting
at least some of its American clients to commit tax evasion.
Bottom line: Senator Cruz is almost certainly a vote against tax haven
reform.
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