The protests in Wisconsin could easily spread.  While not every governor will recklessly attack collective bargaining, all states are facing major budget constraints.

This is the strategic moment to dramatically juxtapose the pain of local budget cuts with the scandal of corporate tax dodging.   This April 15th Tax Day, let’s make our national focus be on stopping tax haven abuse and closing corporate tax loopholes.

States must close combined budget gaps of over $102 billion –and most are choosing deep budget cuts.  Meanwhile, thanks to ways that U.S. corporations game the system to reduce their taxes, overseas tax havens cost the U.S. treasury over $100 billion a year.

In England, the movement UK UNCUT, has galvanized street protests, media investigations and legislative action.  They have dramatized the scandal of billions lost thanks to overseas tax havens and corporate loopholes with the human face of federal and state budget cuts.

In every U.S. state, we should be doing the same.  Every time a politician complains that “there is no money” or “we must make these cuts,” we should be pointing to the corporate tax dodging that could immediately close our budget gaps.

We should name names and show up at their branches.  First there are the banks that wrecked our economy and accepted billions in taxpayer funded TARP funds.  These include Wells Fargo, Goldman Sachs and Bank of America.  Our message: Pay up!

Pay up! General Electric, Carnival Cruise lines, Boeing, FedEx, News Corp, ExxonMobil, Pfizer, Proctor and Gamble.  They pretend their profits are earned in tax havens like the Grand Cayman Islands and their losses are earned in the U.S., lowering their tax bills.

These US companies use our shared infrastructure, but don’t pay their fair share.  They enjoy our roads, national defense, emergency services, and federally-funded research.  They are profitable but don’t pay their full freight.  They undercut local businesses that pay their taxes while struggling to compete on an unlevel playing field.

“There’s a direct connection between corporate tax dodging and what’s happening in people’s lives,” said Carl Gibson one of the founders of US UNCUT Mississippi. “If we close those loopholes, we wouldn’t have to be cutting back on firefighters, library hours and student loans.”

Gibson started a web site after being inspired by the movements in England. “I work three jobs and can barely cover my $450 per-month rent,” said the 23-year old Gibson. “But I still pay my taxes.  All I’m asking is that the wealthiest corporations pay what they owe, too.”

US UNCUT is launching the first wave of protests this Saturday, February 26th with a focus on Bank of America. There are actions planned in over 20 states. Bank of America has launched a glitzy PR campaign about how charitable and community-minded they are.  But we should remind them the only way back into our good graces is to “Pay up!”

The Tax Justice Network and Business and Investors Against Tax Havens have been pressing over the last year to keep these issues in the public spotlight. With US UNCUT teaming up with the Other 98 and other coalitions focused on corporate tax dodging, we can anticipate a lively April 15th Tax Day.

Originally Published at Common Dreams www.commondreams.org

Stop the Death Spiral to Plutocracy

In 2010, an essential moral test of a public policy choice is: Does it further concentrate wealth and power in the hands of a few?

Or does it disperse concentrated wealth and power –and strengthen possibilities for a democratic society with greater equality, improved health and well-being, shared prosperity and ecological sustainability?

Does it move us toward Plutocracy or Peace and Plenty?

Supreme Court Justice Louis Brandeis said, “We can have democracy or concentrated wealth.  But we cannot have both.”

By the Brandeis Test, President Obama’s “Tax Deal” fails.  By extending the Bush tax cuts for the wealthy and instituting a significantly weakened estate tax, more wealth will flow into the hands of the richest one percent –and within that to richest one-tenth of one percent.

Most of us are aware of President Obama’s willingness to trade away his campaign promise to let the tax cuts for high income households expire.  This will cost $60 billion next year and an estimated $700 billion if it is permanently extended.

But Obama also backed away from his position on the federal estate tax, which was to freeze it at 2009 levels (wealth exempted to $3.5 million, 45 percent rate).  He now supports the Kyl-Lincoln amendment which would raise the exemption to $5 million ($10 million for a couple) and drop the rate to 35 percent).  The cost difference between these two measures is at least $100 billion over ten years.

For the last generation, this richest one percent, with some admirable exceptions, has been using its considerable wealth and clout to push for public policy changes that have further concentrated wealth.

We are now in what I could characterize as “Death Spiral To Plutocracy.”  As wealth concentrates, a hyper-organized segment of this wealth-holder class uses its wealth, privilege and power to change the rules of the economy to further concentrate wealth and privilege.

The logical progression of these policies is a society governed by wealth, a modern high-tech version of the Gilded Age of 1900.

For thirty years, liberal Presidents and Democratic Congress members have cut deals with a growing a bi-partisan (mostly Republican Party) Pro-Plutocracy faction.  We’ve won victories for working families –family leave, increased minimum wage, expanded health care, middle class tax cuts –but the price has always been very expensive tax cuts for the wealthy and corporations.  Under Clinton and Bush II, you couldn’t get anything faintly progressive done without a big bone to the wealthy or corporate class –another capital gains tax cut or corporate loophole.

Such compromises have been central to the Obama political strategy: To get a stimulus package to save the economy, Congress allocates a third of $780 billion for tax breaks to corporations (and still didn’t get one GOP vote).

To get broader health care coverage for the uninsured, lawmakers surrender the “public option” that would have forced competition and cut into the power and profits of the health industry cartel.

To get a Consumer Financial Protection Bureau included in the June 2010 financial reform bill, lawmakers allow Wall Street to keep its risky casino operation in place –laying the groundwork for future bubbles, meltdowns and bailouts.

This is a very costly strategy.  It diverts trillions of dollars from the Treasury that could be used for long overdue investments in infrastructure, education, energy independence –things that could truly boost the real economy.   But worse, it sets up future political battles where the very wealthy and powerful corporations continue to have most of the ammo. In the post “Citizens United” campaign finance environment, this is premeditated surrender.

There are only a few ways to intervene to prevent the “Death Spiral to Plutocracy” –and reverse course.  They all require an engaged citizenry to clearly say: “We want an economy that serves everyone, not just the wealthy.”

The first intervention is through progressive income, wealth and estate taxes.  We urgently need to reinstitute a progressive estate tax. Instead of cutting a deal to institute the Republican estate tax proposal that greatly weakens the law, Congress should press for the Responsible Estate Tax Act which would chip away at concentrated wealth.

The second is through robust campaign finance reform that closes the nexus between wealth and political power.  Anything that puts a speed bump between wealth and political influence helps slow the Death Spiral.

The third is to mobilize the silent faction of the wealthy elites that actually see their stake in the common good.  Not everyone in the wealth-holding class are actively lobbying to protect their power and privilege.  We need a progressive counter-weight to organized defenders of power and privilege.  The Wealth for the Common Good network is an inspiring start –with several thousand business leaders and wealthy individuals advocating for policies to broaden prosperity and opportunity.  They can counter the deep mythology around wealth creation and deservedness that often justify tax cuts for the wealthy and support the positions of engaged citizens.

Senator Bernard Sanders is proposing a filibuster against the tax cuts –and he plans to read hundreds of documents about the dangers of extreme inequality in the U.S.  Let’s all take a similar stand in our own lives –and urge our elected officials to do the same.

A Mighty Mobilization to Prevent a Democratic Cave-in is Underway

After the mid-term elections, the Obama Administration and some Democratic leaders signaled that they might compromise on extending the Bush-era tax breaks for wealthy households.  Compromises include extending them for several years –or raising the income threshold higher to $1 million.

Two years ago, President Obama took enormous lumps for his campaign pledge to let the Bush tax cuts for higher income households expire (Remember “Joe the Plummer”?).  And the polls consistently indicate that the public supports letting the tax cuts for the rich expire, even after Tea Party anti-tax campaigning and a drum beat of misinformation alleging that tax hikes will decimate small business.

Right after the election, the Obama Administration signaled that they would meet with GOP leaders on November 18th to capitulate.  Fortunately, the meeting was postponed until November 30th.  In the meantime, progressives have mobilized with unusual force and clarity.

Americans For Responsible Taxes is coordinating a national mobilization of organizations pressing to extend the middle class tax cut and let the income tax cuts for the wealthy expire.

Net roots groups such as Moveon.org and Progressive Change Congressional Committee, have gathered hundreds of thousands of signatures to petitions urging the President not to cave in.  The Other 98 percent put up a clever graphic campaign illustration, “The $700 Billion Question,” juxtaposing choices such as “Fix every substandard bridge in America,” vs. “Fix America’s Gold-plated foot rests.”  There is a plan to publicly display these petitions in Lafayette Park after Thanksgiving.

The small business community has pushed back against claims that letting the tax cuts expire would hurt small business. Coalitions of businesses, including Business for Shared Prosperity and Main Street Alliance have made the business case for letting the tax cuts expire.  Business for Shared Prosperity issued a report demonstrating how few small enterprises would pay the tax increase.  Thoughtful accountants like Brian Setzler have pointed out in op-eds that small businesses make hiring and business reinvestment decisions before their income is taxed.

Even some of those who would pay the higher taxes are stepping up to.  Over 415 high income individuals, those who would pay the higher taxes, have signed a “Let Our Tax Cuts Go” petition at Wealth for the Common Good. And a new effort, a group of 45 “Patriotic Millionaires for Fiscal Strength” have issued a call to President Obama to let their tax cuts expire.

The lesson for progressive activists is we can’t depend on President Obama to do the right thing without substantial pressure.  He still may compromise, but at least it won’t because progressives didn’t fight for the right thing.  We knew that already, didn’t we?

Initially Published in Yes Magazine online

“Expecting high-end tax cuts to trickle down as job creation is about as reasonable as pouring gasoline on your hood and expecting it to fuel your car.”

– Lew Prince, owner, Vintage Vinyl, an independent music store.

Congress left town in early October without addressing the future of the Bush-era tax cuts that are scheduled to expire at the end of 2010.   This sets up a “lame duck” session debate over their future in November and December.

After the mid-term election, anti-tax legislators will press to extend tax cuts for households with incomes over $250,000. Anti-tax activist Grover Norquist argues that allowing these tax cuts for higher incomes to expire would be a “body blow to the small business community.”

This isn’t the first time small businesses have been used as a prop by anti-tax lobbyists.  The impact on small business is routinely used in arguments against any policy that would require wealthy individuals to pay higher taxes.

Enter several refreshing new voices in this debate – the American Sustainable Business Council and Business for Shared Prosperity –networks of enterprises rooted in their localities.  In their recent report, “Restoring Top Tax Rates Makes Sense for Small Business,” they make a business case for allowing the top tax rates to expire.

These business organizations point out that very few small businesses are impacted. Less than 3 percent of tax filers with any business income earn over $200,000 as individuals or $250,000 as couples in a year – and many of these are Wall Street investment partners, big business CEOs paid to sit on boards of other big companies, and wealthy folks renting out investment properties and vacation homes.

If Congress wants to help small business, they argue, Congress shouldn’t spend $700 billion over the next decade in poorly targeted tax cuts.

“Letting high end tax cuts expire is a good business decision,” said Frank Knapp, CEO and President of the South Carolina Small Business Chamber of Commerce. “Boosting our local economy by helping real small businesses create jobs should be our goal. We can either cut taxes for CEOs or Wall Street traders, or we can invest the money to generate more customers for small business by keeping teachers, police officers and other Americans on the job rebuilding the crumbling transportation, water, and energy infrastructure small business depends on.”

This longer view is echoed by other small business leaders who lament the decline in public infrastructure and investment that strengthens local economies. They challenge the tired orthodoxy that cutting taxes for high-income households always has a positive impact on economic growth and job creation.

Hiring decisions for small business are driven by consumer demand, not tax cuts.  “As a fellow businessman once told me,” said Rick Poore, owner of Design Wear, an apparel manufacturer based in Lincoln, Nebraska, “Give me more customers and I’ll be forced to buy equipment and hire people to meet demand. Give me a tax break without more customers and I’ll just go to Aruba.”

Under President Obama’s plan to extend the 2001 income tax cuts for families with incomes under $250,000, all taxpayers will get a share of tax cuts.  Higher-income taxpayers would get thousands of dollars more in tax cuts than middle-income households. The congressional Joint Committee on Taxation estimates that extending just the middle class tax cut would provide more than $6,300 in permanent tax relief for families earning more than $200,000, on average, compared to just $916 in tax relief for families earning between $40,000 and $50,000.

Restoring tax rates for high-income households won’t fix our economy.  But it is a step in the right direction to fiscal sanity and being able to make investments that move us toward a sustainable economy.  That’s good for businesses that are committed to their communities.

Chuck Collins is co-founder of Wealth for the Common Good, www.wealthforcommongood.org) a network of business and civic leaders, wealthy individuals and partners promoting fair and adequate taxation to support public investment in a healthy economy.

Congress is actively debating whether to retain President Bush’s 2001 and 2003 tax cuts for the wealthy that are due to expire at the end of this year.   President Obama supports extending tax cuts for households with incomes under $250,000, but ending the tax breaks for higher income households.

Here are five good reasons for Congress to let them go.

1. Borrowing to Give the Rich Tax Breaks is a Really Bad Idea. We’ve already borrowed $700 billion since 2001 to pay for these tax cuts.   Maintaining them for another decade would cost an estimated $700 billion, plus interest on the national debt estimated at $126 billion.   Does it really make sense to send interest payments to China and millionaire bond-holders in the U.S. –so that we can cut taxes for U.S. millionaires and billionaires?

2.  There are 700 Billion Better Ways to Use the Money.   Consider the superior ways to spend $700 billion. We could use a portion to reduce budget deficits.  We could make long overdue investments in infrastructure such as bridges, roadways, railroads, water treatment facilities, retrofitting buildings –things that make our economy strong and competitive. We could direct funds to make the transition to the new economy that is less dependent on foreign oil.  In the short-term, all these investments would create millions of jobs.  In the long term, it would put the economy on better footing for the future. There are a billion better ways to use the money.

3. Restores Balance to Tax Code. Over the last half century, Congress has steadily reduced tax obligations for the very rich and global corporations. Between 1960 and 2004, the top 0.1 percent of U.S. taxpayers –the wealthiest one in one thousand –have seen the share of their income paid in total federal taxes drop from 60 to 33.6 percent.  Restoring the tax rates to pre-2001 levels would be a very slight increase, yet begin the process of rebalancing the tax code.

4. It Won’t Hurt the Economy. You’ve heard the blather about how taxing the rich is going to hurt the economy.  But cutting the taxes for the wealthy are an ineffective way to help the economy.  A recent analysis by the Congressional Budget Service ranked 11 strategies to spur the economy and create jobs.  Cutting taxes for the rich was the worst ranked strategy.  Here’ the reality: Taxing the rich is different than taxing the middle class.  The rich save more of their tax cuts while working people and middle class spend it in the economy. Over the last decade, the top wealth holders have shifted trillions of dollars into speculative investments that have hurt the economy.

5. Reduces the Dangerous Concentration of Wealth and Power. We’re living in a period of unprecedented economic inequality.  A recent series in the online journal Slate examined the “Growing Divergence” of wealth and income.  Taxes is one of the ways we reduce these inequalities.

A final reason is that the U.S. public supports letting these tax cuts for the rich expire.  A recent Gallup Poll reveals that 59 percent of the population support letting the tax cuts for the rich expire –while 37 percent support extending them.  Polls rarely reveal support for any form of taxation –which indicates that a majority of Americans –including those who will pay the hire taxes – recognize the imprudence of extending them.  Alan Greenspan, who supported the tax cuts in 2001, has now reversed his position and believes the time has come to raise taxes.

Take action:  Organizations such as Wealth for the Common Good and Americans for Responsible Taxes are working to build public support for letting the tax cuts expire.

By Chuck Collins and Sam Pizzigati

Today marks the 100^th anniversary of the most ‘radical speech’ an American ex-President has ever delivered.

Ex-Presidents almost always follow a small number of well-worn scripts. Some rush to cash in on their celebrity. Some do charitable good deeds. Some just lay low.

Exactly one century ago, on August 31, 1910, we had an ex-President who took a brash and bold leap that took him far beyond these narrowly circumscribed roles. On that day, in the middle of Middle America, a former President — Theodore Roosevelt — essentially called on his fellow citizens to smash the nation’s rich down to democratic size.

We need, Roosevelt told a massive assembly of 30,000 listeners, to “destroy privilege.” Ruin for our democracy, he warned, will be “inevitable if our national life brings us nothing better than swollen fortunes for the few.”

Those listeners — in Osawatomie, Kansas — roared their approval. Back East, apologists for grand fortune would be aghast. Editorial writers would label Roosevelt “frankly socialistic,” even “anarchistic.” A later historian, George Mowry, would call TR’s talk, soon to be known as his “New Nationalism” address, ”the most radical speech ever given by an ex-President.”

Time hasn’t dimmed that radicalism. Indeed, TR’s speech speaks powerfully to us today, mainly because we confront, a hundred years after he spoke in Osawatomie, the same concentrated wealth and power that TR so feared.

As President, between 1901 and early 1909, Roosevelt had taken on a plutocracy just as entrenched as ours today. He won some battles and ducked many others. But he left the White House feeling the nation, under his successor William Howard Taft, would be headed in the right direction.

But Taft disappointed Roosevelt and outraged the progressive wing of Roosevelt’s Republican Party. TR saw a burning need to spell out a clearer vision for his nation’s future, and he jumped at the invitation from Osawatomie to help dedicate the historic small city’s John Brown Memorial Park.

The event quickly figured to be the biggest in Kansas political history. Roosevelt had just finished a triumphal global tour. He ranked, observers agreed, as the “world’s most popular citizen.”

Kansans would pull out all the stops to set the stage for a memorable speech. By the appointed day, Osawatomie had never looked better. Bands and dignitaries would be everywhere.

“We are ready for plutocrat and peasant,” wrote one local editor, “to honor the ground where John Brown made his decisive stand for freedom.”

Plutocrats never did show. But average Kansans did. They started coming the day before TR’s scheduled appearance, in a driving rain, via “foot, bicycles, motors, buggies, wagons, trains.”

The rain, fortunately, would stop before the mud became too deep. Roosevelt would have open skies when he stepped up onto his podium, a kitchen table, to begin his address. The “surging throng,” says historian Robert La Forte, “continually cheered” for the next hour and a half.

Most Americans today would cheer, too. Are you outraged by the BP oil disaster in the Gulf of Mexico? Our national resources, Roosevelt pronounced, “must be used for the benefit of all our people, and not monopolized for the benefit of the few.”

Think corporations wield too much clout?

“The Constitution guarantees protections to property, and we must make that promise good,” Roosevelt noted. “But it does not give the right of suffrage to any corporation.”

We must “prohibit the use of corporate funds directly or indirectly for political purposes,” TR enunciated, and hold corporate officials “personally responsible when any corporation breaks the law.”

Again and again, Roosevelt urged his listeners to demand state “and, especially, national, restraint upon unfair money-getting.” The absence of that restraint, he noted, “has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power.”

But TR didn’t stop there. Restraining fortunes based on “unfair money-getting” had to be only a first step. A fortune “gained without doing damage to the community,” he added, deserves no praise. Americans needed to set a higher standard. We should permit fortunes “to be gained only so long as the gaining represents benefit to the community.”

And even those fortunes, Roosevelt added, needed to be checked, because the “really big fortune, the swollen fortune, by the mere fact of its size acquires qualities” that “differentiate it in kind as well as in degree from what is possessed by men of relatively small means,” qualities that help ensure the “political domination of money.”

To check the growth and limit the power of these fortunes, Roosevelt called for a progressive income tax and an “inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the sizes of the estate.”

Three years after TR’s Osawatomie speech, we would have an income tax in the United States. Six years later after Osawatomie, we would have an estate tax. By the middle of the 20^th century, many of the corporate regulatory reforms that Roosevelt demanded on that August day a century ago would be the law of the land.

By that mid century, the plutocracy that Roosevelt decried had essentially disappeared. The United States had become a middle class nation where average workers, as TR envisioned in 1910, had “a wage more than sufficient to cover the bare cost of living, and hours of labor short enough” to leave them “time and energy” to bear their “share in the management of the community.”

Now that mid 20^th century middle class has disappeared. We live amid plutocracy once again. In fact, 2010 marks the first year since 1916 that we don’t even have an estate tax on the books. The heirs of the super rich can this year inherit billions in inheritance totally tax-free.

A hundred years ago, Theodore Roosevelt refused to accept these sorts of concentrations of enormous wealth. At Osawatomie, he helped inspire a generation-long struggle to break up these concentrations. That struggle succeeded.

Our struggle has only just begun. We can succeed, too.

***

Chuck Collins, a senior scholar at the Institute for Policy Studies, is the co-author, with Bill Gates Sr. of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes. Sam Pizzigati, an Institute associate fellow, edits Too Much, an online weekly on excess and inequality.

My Meeting with the  Sherrods in 1982 to Preserve New Communities

Lost in the chatter about the firing of Shirley Sherrod and subsequent USDA apology is the unquestionable fact that she had devoted her entire life to economic justice.

In my view, she is a moral giant compared to shameful media celebrities, like Sean Hannity or Bill O’Reilly, that wrongly accused her of racism.

I met Shirley Sherrod in 1982, when I was 22 years old.

I was traveling in the South with Chuck Matthei, my colleague at the Institute for Community Economics.  Our organization was a national technical assistance provider to community land trusts for affordable housing, agriculture and land control.

It was hot-as-blazes when we pulled up to a small home and office on a rural byway outside Albany, Georgia.  Chuck knew the Sherrods from civil rights organizing days in the 1960s and 1970s and was trying to prepare his young colleague to meet people he considered as “movement elders.” (Shirley was a movement elder even then!).

“Reverend and Mrs. Sherrod were leaders in the “Albany movement,” Chuck explained to me.    “Shirley had been active in the Student Nonviolent Coordinating Committee and had worked with Rev. King on desegregation struggles in the deep South.”

“The Sherrods,” Chuck explained with obvious respect, “had devoted their lives not just to civil rights protections –but also to reversing several generations of black land loss in the rural south. They were interested in nonviolent action for civil rights, but were also greatly influenced by Gandhi’s ideas of nonviolent economics and village economics.”

The Sherrods were co-founders, in 1965, of a bold initiative called New Communities, Inc.  With help from Bob Swann and the Institute for Community Economics, they had acquired almost 6,000 acres of land to develop a land trust for housing and small farmers.

The Sherrods greeted us at their door and graciously welcomed us their kitchen table, serving us cold lemonade. We talked about the history and fate of New Communities. Later, we walked sections of the land and visited at some of the farm projects.

The vision for New Communities was that the organization would retain ownership of the land –but lease the land for homes, farms and business.  With the larger structure of support and financing, individual black families and farmers would be less vulnerable to losing their land.

Part of their inspiration was the Jewish National Fund.  The founders of New Communities had traveled to Israel to explore models of land tenure, like the kibbutzim, that held land in common for community advancement and development.

The Sherrods were gracious, but distraught.  The New Communities vision, by 1982, was on the ropes.  The hopes of raising large grants and resources for community development had been dashed. Ronald Reagan was President and his U.S.D.A was refusing to provide needed financing for farmers and support for irrigation projects at New Communities.

A large national insurance company held the remaining New Communities mortgage and was threatening to foreclose.  We strategized about ways to hold on to land by the agonizing process of selling off sections of it.

Over the following years, I talked to Shirley and Charles on the phone in our unsuccessful efforts to prevent the loss of New Communities.  It was heart-wrenching to hear the stress in their voices and I remember wishing we could do more.  Shirley went on to work with the Federation of Southern Cooperatives to provide technical assistance to farmers.

In 2009, a lawsuit fully vindicated the Sherrods.  The court decision acknowledged racial discrimination on the part of the U.S. Department of Agriculture in the years 1981 to 1985.  New Communities was awarded $13 million for loss of land and income.  The Sherrods were each awarded funds for their personal pain and suffering, anguish that I personally witnessed.

The community land trust movement continues.  The National Community Land Trust network (www.cltnetwork.org) provides support for existing and emerging community land trusts.  At the last network convention, Shirley Sherrod was the inspiring keynote speaker.

In my mind, Shirley Sherrod is someone to lift up and celebrate.  I hope that the recent attention drawn to her will lead to a fuller telling of her contribution to economic justice.

Pushing Back Against An Unlevel Playing Field for Local Business

Kate’s Café and AAA Appliance probably pay a higher percentage of their income in taxes than profitable Fortune 500 companies.

In the U.S., thanks in part to overseas tax havens, we have one tax system for multinational companies and wealthy individuals –and another for small businesses and ordinary taxpayers.

Tax havens enable the rich and U.S. multinationals to move income and assets between global subsidiaries and dodge taxes.  Responsible businesses and individual taxpayers are left to pay for U.S. infrastructure, defense, education and all the public investments that contribute to a healthy business climate and economy.

How does this work?  A U.S. company creates a subsidiary in a secretive low tax haven such as the Luxemburg, Bermuda or the Republic of Mauritius. In the Grand Cayman Islands, one building called Ugland House, houses over 19,000 of these corporate subsidiaries.

These corporations moving assets and income between these subsidiaries so that profits appear to be generated overseas while losses are deducted from U.S. taxes.  Because of the lack of transparency it is difficult to assess just how much money is loss, but estimates range from $43 billion to $123 billion per year for both individual and corporate tax avoidance.

A new campaign, Business and Investors Against Tax Haven Abuse, signals an interesting convergence of domestic manufacturers, community banks, and small businesses that are fed up with how porous the global corporate tax code has become.  They launched a petition drive on July 20th with 400 initial business signers.

“Small businesses are the lifeblood of local economies,” said Frank Knapp, President and CEO of the South Carolina Small Business Chamber of Commerce and one of the lead signers.  “We pay our fair share of taxes, shop locally, support our schools and actually generate most of the new jobs.  So why do we have to subsidize multinationals that use offshore tax havens to avoid paying taxes?”

Senator Carl Levin (D-MI), a long-time champion of closing tax havens, stated that the “campaign represents the first time in recent years that business people who believe tax havens are bad for business are mobilizing publicly to end the abuse.”

The campaign estimates that corporations using tax havens avoid over $37 billion in taxes (a number that does not include wealthy individuals).  These funds, they argue, could be better used for public infrastructure and support to small businesses which generate over 65 percent of new jobs.  It could pay for initiatives like the recently introduced Small Business Jobs Act and the seed capital for a $30 billion Small Business Lending Program through community banks.

In the coalition’s first report, Unfair Advantage: The Business Case Against Tax Havens, they argue that overseas tax havens foster an unlevel playing field where small and domestic U.S. businesses that pay taxes are forced to compete against tax dodgers. For example, Wainwright Bank, a socially responsible local lender based in Boston, paid federal taxes of 11.8 percent of their income in federal taxes in 2009.  Yet they have to compete against Bank of America who paid no federal taxes in 2009, thanks in part to overseas tax havens.

The report points out that tax havens contributed to the global economic meltdown by permitting companies to hide risky investments and behavior.  Scratch the surface behind the most shady dealings of the last decade and you’ll find an overseas tax haven. In a special investigative series, McClatchy News documented how Goldman Sachs, working through Cayman Island subsidiaries, “peddled billions of dollars in shaky securities tied to subprime mortgages on unsuspecting pension funds, insurance companies and other investors when it concluded that the housing bubble would burst.”

TransOcean, owner of the Deepwater Horizon oil platform that exploded, killed 11 workers, and led to a devastating oil disaster in Gulf of Mexico, is itself an overseas tax haven.  In 1999, TransOcean moved its incorporation from the United States to the Cayman Islands and then later to Switzerland, with the stated purpose of lowering its taxes.

There is some progress in closing these loopholes, thanks to the Congressional leaders such as Sen. Levin and Rep. Lloyd Doggett.  The Foreign Accounts Tax Compliance Act of 2009 increases transparency of cross border transactions.  The “Economic Substance Doctrine,” which was included in the health care reform bill, requires companies to have a business reason for shifting assets other than tax avoidance.

But there is plenty of further work to do.  Congress should ban phony offshore corporations and block transfers of intellectual property, such as patents, designed to evade taxes.  The campaign, Business and Investors Against Tax Haven Abuse, have identified nine specific policies to ban shady practices and generate tens of billions in revenue.

If local businesses are waking up, so should ordinary taxpayers.  We can’t build healthy and economically vibrant communities when our wealthiest citizens and corporations maintain an unfair advantage.

Senate Progressives Introduce Responsible Estate Tax Act

Would you trust Senators Max Baucus and Blanche Lincoln to design the next estate tax, our country’s only levy on inherited wealth?

Unless progressives stand up, Baucus and Lincoln will team up with the GOP’s anti-tax point person, Senator John Kyl, to push through a bad estate tax reform.  The Kyl-Lincoln reform proposal would gut the law and give additional tax breaks to multi-millionaires and billionaires.

Fortunately, Senate progressives have just introduced an estate tax reform with some spine.  The Responsible Estate Tax Act (S.3533) proposes graduated rates on larger estates, closes loopholes, exempts farms and small businesses, and encourages conservation easements.   It imposes a “billionaire surcharge” rate of 65 percent on estates over $500 million.

Led by Senator Bernard Sanders (I-VT) and joined by Sherrod Brown (D-OH), Tom Harkin (D-IA) and Sheldon Whitehouse (D-RI), this progressive estate tax would raise at least $264 billon over ten years. “At a time when we have a record-breaking $13 trillion national debt and a growing gap between the very rich and everyone else, people who inherit multi-million and billion dollar estates must not be allowed to avoid paying their fair share in estate taxes,” said Senator Sanders in a prepared statement.

The politics within the Democrats on the estate tax are bizarre.  In 2009, thanks to Senate inaction, the federal estate tax expired on January 1, 2010.   In March, a Texas oilman became the first billionaire in U.S. history to die without any estate tax in place, costing the treasury billions.

The good news is that on January 1, 2011, the estate tax returns at its year 2000 level –with a wealth exemption of $1 million and 55 percent rate.  This is what will happen if the Senate takes no action, which seems to be the norm.

Now to us common folks, its seems like a tremendous bargain position for Senate Democrats.  If nothing happens, we get a strong estate tax law.  So how is the Senate Democratic leadership using this huge leverage?

You guessed it.  They’re like poker players with three aces in their hand and are ready to fold.  Instead of using their leverage to press for something like the Responsible Estate Tax Act, they’re allowing Lincoln and Baucus to dominate the stage.

Fair tax advocates are mobilizing to build support for the Responsible Estate Tax Act. Wealth for the Common Good, a network of business leaders and wealthy investors, is backing the legislation and has compiled fact sheets and other resources.

If Democrats are going to address the political impasse created by “deficit politics,” they have to step up and support progressive revenue proposals like the Responsible Estate Tax Act.

Angry about the greedy financial speculation that wrecked the economy?  Got a deficit headache?  Anxious about where the money will come from for long overdue investments in energy independence that will create good jobs in the new economy?

How do we spell relief?  Try F.S.T. – which stands for Financial Speculation Tax.

A financial speculation tax is a modest levy on financial transactions such as the purchase and sale of stocks, bonds, derivatives, and swaps.  England and Taiwan have such taxes on securities that encourage productive investment and discourage reckless trading behavior.

Leaders in the U.S. Congress have introduced a proposal to collect a penny on every four dollars of financial transactions, a fraction of what people pay in broker fees. This FST would exempt retirement funds and the first $100,000 of individual investment transactions.   So it would target the fast-buck flippers, the same financial gamblers who crashed the economy through reckless speculation.

The financial speculation tax would raise an estimated $177 billion a year –which makes it the potentially biggest revenue raiser on the table right now.

The deficit hawks should be thrilled about a financial speculation tax.  Last week, President Obama issued a directive to federal agencies to propose ways to cut their budgets by 5 percent. The Sustainable Defense Task Force identified $960 billion over ten years in wasteful military spending that could be eliminated without compromising national security. Combine that military savings with a financial speculation tax and we have key components to a new budget and spending plan.

As President Obama heads to Toronto on June 26th for the Summit of the G-20 leaders, he’s going to find lots of other presidents asking about the F.S.T.   German Chancellor Angela Merkel and French President Nicolas Sarkozy have renewed calls for a financial speculation tax.

President Obama will argue in support of his bank tax proposal which will raise an estimated $9 billion a year.  The G-20 leaders may also debate a proposal from the International Monetary Fund to institute a “financial activities tax” on profits and employee compensation of all financial institutions.  We estimate such a tax would raise $28 billion a year in the U.S.

Yet given our national revenue challenges, why wouldn’t we consider the biggest potential revenue raiser, a financial speculation tax?  According to a new report that I co-authored, Taxing the Wall Street Casino a financial speculation tax will raise 20 times as much as President Obama’s proposed bank levy and six times as much as the IMF’s proposed Financial Activities Tax.

A financial speculation tax would have tremendous benefits.  It would discourage the short-term investment outlook that lay at the heart of the financial crisis.  And it would encourage a healthier marketplace in real goods and services.  “We have lost the distinction between real investment in the real economy and short-term speculation,” said John Fullerton, a former JP Morgan Managing Director.  “A financial transactions tax should, at the margin, shift investment horizons out to longer holding periods by making high turnover trading strategies marginally less profitable.”

Other leaders from business and finance have stepped up to talk about the value of a financial speculation tax.  Wealth for the Common Good has initiated a campaign of business leaders and investors who support the tax.  John Bogle, the founder of Vanguard Mutual Fund, supports the tax as “a way to slow the rampant speculation that has created such havoc in our financial markets, but also for its revenue-raising potential in this time of staggering government deficits.”

Obviously what stands in the way of implementing such a common sense proposal is the powerful banking and finance lobby, the same interest group that tried to block and is now trying to water down financial reform.  But while Wall Street lobby groups have formidable political and economic clout, a growing global “people power” campaign behind financial speculation taxes has a good chance of winning.