Monthly Archives: October 2016

State Strategies to Detect Local Fiscal Distress: How states assess and monitor the financial health of local governments

Source: Pew Charitable Trusts, September 2016

From the overview:
…States can do more than just wait to react to the next fiscal emergency; they can work proactively to detect local distress and then use that data to determine the best steps to take. In 2013, The Pew Charitable Trusts explored how and when states intervene in local governments in The State Role in Local Government Financial Distress. The report described the stages of municipal difficulty, from distress to crisis to bankruptcy; the reasons for state intervention; and approaches states can take, including refusing to become involved even when local governments ask for help, intervening on a case-by-case basis, and repeatedly exercising state authority to make decisions for local governments. The report recommended that states monitor the fiscal conditions of local governments with an eye toward helping them avoid full-blown crises, if possible.

This follow-up report examines the range of policies and practices that states have in place to assess and track fiscal conditions at the local level, with a focus on whether and how states try to detect local fiscal distress. To operate a “fiscal monitoring system” for purposes of this research, a state must actively and regularly review the finances of at least some of its general purpose local governments, such as counties, cities, and towns, to monitor fiscal conditions or detect problems. The research includes analysis of relevant state statutes and interviews with officials in all 50 states. To learn about the issue from the perspective of local governments, researchers also talked with officials from municipal leagues across the country. These efforts add up to the most comprehensive study to date of fiscal monitoring across the country….

Offshore Shell Games 2016: The Use of Offshore Tax Havens by Fortune 500 Companies

Source: Richard Phillips, Matt Gardner, Kayla Kitson, Alexandria Robins, Michelle Surka, Citizens for Tax Justice, Institute on Taxation and Economic Policy, U.S. PIRG Education Fund, October 2016

From the summary:
U.S.-based multinational corporations are allowed to play by a different set of rules than small and domestic businesses or individuals when it comes to paying taxes. Corporate lobbyists and their congressional allies have riddled the U.S. tax code with loopholes and exceptions that enable tax attorneys and corporate accountants to book U.S. earned profits to subsidiaries located in offshore tax haven countries with minimal or no taxes. The most transparent and galling aspect of this is that often, a company’s operational presence in a tax haven may be nothing more than a mailbox. Overall, multinational corporations use tax havens to avoid an estimated $100 billion in federal income taxes each year.

But corporate tax avoidance is not inevitable. Congress could act tomorrow to shut down tax haven abuse by revoking laws that enable and incentivize the practice of shifting money into offshore tax havens. By failing to take action, the default is that our elected officials tacitly approve the fact that when corporations don’t pay what they owe, ordinary Americans inevitably must make up the difference. In other words, every dollar in taxes that corporations avoid must be balanced by higher taxes on individuals, cuts to public investments and services, and increased federal debt.

This study explores how in 2015 Fortune 500 companies used tax haven subsidiaries to avoid paying taxes on much of their income. It reveals that tax haven use is now standard practice among the Fortune 500 and that a handful of the country’s wealthiest corporations benefit the most from this tax avoidance scheme.

The main findings of this report are:
– Most of America’s largest corporations maintain subsidiaries in offshore tax havens. At least 367 companies, or 73 percent of the Fortune 500, operate one or more subsidiaries in tax haven countries. ….

– The most popular tax haven among the Fortune 500 is the Netherlands, with more than half of the Fortune 500 reporting at least one subsidiary there. ….

– Approximately 58 percent of companies with tax haven subsidiaries have set up at least one in Bermuda or the Cayman Islands — two particularly notorious tax havens. ….

– Fortune 500 companies are holding nearly $2.5 trillion in accumulated profits offshore for tax purposes. Just 30 Fortune 500 companies account for 66 percent or $1.65 trillion of these offshore profits. ….

– If we assume that average tax rate of 6.2 percent applies to all 298 Fortune 500 companies with offshore earnings, they would owe a 28.8 percent rate upon repatriation of these earnings, meaning they would collectively owe $717.8 billion in additional federal taxes if the money were repatriated at once. Some of the worst offenders include: Apple, Citigroup, Nike ….

– Some companies that report a significant amount of money offshore maintain hundreds of subsidiaries in tax havens, including the following: Pfizer, PepsiCo, Goldman Sachs ….

– The proliferation of tax haven abuse is exacerbated by lax reporting laws that allow corporations to dictate how, when, and where they disclose foreign subsidiaries, allowing them to continue to take advantage of tax loopholes without attracting governmental or public scrutiny. ….

– Congress can and should take action to prevent corporations from using offshore tax havens, which in turn would restore basic fairness to the tax system, fund valuable public programs, possibly reduce annual deficits, and ultimately improve the functioning of markets. ….

Quarterly Survey of Public Pensions: Second Quarter 2016

Source: U.S. Census Bureau, Tip Sheet, Release Number: CB16-TPS.138, September 30, 2016

This report provides national summary data on the revenues, expenditures and composition of assets of the largest defined benefit public employee pension systems for state and local governments. This report produces three tables: Tables 1 and 3 include data on cash and security holdings and Table 2 provides data on earnings on investments, contributions and payments.

The Union-Buster’s Toolkit

Source: J. Lepie, Employee Responsibilities and Rights Journal, Online First, October 3, 2016
(subscription required)

From the abstract:
Anti-union campaigns conducted by specialists are widely employed and generally successful. Although they have been described in some detail, there has been little analysis as to how they are able to persuade workers to vote against their interests. This study proposes a model of the anti-union campaign in which different personality types gravitate into one of three camps: union supporters, union opponents, and swing voters. Anti-union messages evoke different reactions from each and are intended to drive a wedge between swing voters and union supporters. This model suggests several ways unions could make their campaigns more effective by taking personality differences into account.
Introduction to “The Union-Buster’s Toolkit”
Source: Victor G. Devinatz, Employee Responsibilities and Rights Journal, Online First, September 24, 2016
(subscription required)

Making America Worse: Jobs and Money at Trump Casinos, 1997-2010

Source: Jonathan C. Lipson, Temple University – James E. Beasley School of Law, September 24, 2016

from the abstract:
This paper questions Donald Trump’s claim that his business success in creating jobs means that he can also create jobs as President. Using publicly available data, I find that, on average, Atlantic City casinos owned or controlled by Trump between 1997-2010 (the Taj Mahal, Marina, and Plaza) lost far more jobs and revenue than other Atlantic City casinos: 900 more jobs/casino and about $50 million more in revenue/casino. All Atlantic City casinos suffered losses in this period, when neighboring states licensed new gaming facilities, but Trump’s casinos lost about 37% more jobs and one-third more revenue than their rivals. The differences are statistically significant in a mixed model linear regression.

The Trump casinos used chapter 11 bankruptcy four times. That, itself, is a record, as no other large business has apparently done so more than three times. Despite repeatedly obtaining relief in bankruptcy, Trump’s casinos underperformed rivals in conditions analogous to those facing U.S. workers and companies: the loss of jobs and revenue due to “foreign” competition. Even as Trump casinos performed poorly and went through multiple bankruptcies, Trump continued to take significant amounts of money from those businesses for himself – including about $3.2 million per year from 2001-2005.

Trump claims he should be President based on his demonstrated ability to save jobs and make money. Using the best available evidence, this study finds that, when it came to doing so in the face of “foreign” threats, Trump’s Atlantic City casinos were not the “best,” and not even “average” – they were the worst.
Can Trump create millions of jobs? Don’t bet on it
Source: Jonathan C. Lipson, Teh Conversation, September 30, 2016

….Trump’s business background is one of the top reasons people cite for supporting him. His claims of corporate success and the creation of “tens of thousands” of jobs invite scrutiny, however, which I provide in my new working paper, “Making America Worse: Jobs and Money at Trump Casinos, 1997-2010.”
In the paper, I compare the performance of his three Atlantic City casinos – the Trump Taj Mahal, the Trump Plaza, and the Trump Marina – against that of their rivals over a 14-year period.
Even if one does not ordinarily vote on the basis of evidence, I hope that the details presented in my paper help clarify a critical issue in this election…..