That is what nearly everyone did in this town, the birthplace of the century-old technology titan. IBM offered the best salaries, the best benefits, and — best of all — trained Mr. Martin in accounting, management or whatever skill the company needed at a school for IBM employees on its sprawling campus here.
“My whole family was career IBM,” he recalled, a group that included three uncles and an aunt who thought it was simply the best and most admired U.S. company. An IBM staffer starting in the 1960s and 1970s could look forward to many years of generous treatment, from IBM-paid family recreation, child care and golf facilities at the exclusive Heritage Country Club here, to an extremely comfortable retirement with full medical benefits for both employee and spouse. Mr. Martin still cherishes the grandfather’s clock that IBM gave him on his 25th anniversary.
But that was not the IBM from which he retired last year. The company had changed in major ways, mostly to the detriment of its longtime employees.
To prop up its profits and match lower-cost rivals, the company has been on a drive to curb benefits and reduce its North American workforce, replacing thousands of U.S. staffers with lower-paid hires in India, Brazil and other countries. IBM’s U.S. workforce dropped about 30,000 to 105,000 in the past decade while its Indian workforce grew by 9,000 to 75,000. Fewer than one-fourth of people it employs worldwide now are in the U.S. ...
Mr. Martin said that because of his growing difficulties at IBM, he didn’t encourage his children to make their careers at the company — and none of them did. “I don’t miss it. It just kept changing. You’ve got constant churn,” he said. “You’d have to sell yourself, have another skill set” to keep your job. “You didn’t want to be the guy who doesn’t have a chair when the music stops.”
The change over the years at IBM was dramatic. IBM’s founders in the early 20th century went to great lengths to treat employees with dignity, like family members, giving the company a reputation as one of the nation’s most progressive employers. It was the first to offer paid vacations, life insurance benefits and salaries rather than hourly wage rates.
Today, workers are still among the best-paid in the country, but they are treated more like “outside contractors” or “interchangeable parts in a manufacturing process,” Mr. Martin said. ...
In fact, IBM’s latest round of reductions in force this spring set off a hornet’s nest of criticism among insiders in the tech industry. Staffers claim that the company has a road map to cut its U.S. staff by more than half to 40,000 by 2015 through early retirements and layoffs, while increasing staff overseas. ...
“IBM is gutting smart staff for cheap staff,” said Robert Eisenhardt, owner of a computer systems consulting firm in New York. “IBM is cutting jobs not because of the lack of a skill set, but often age and the cost of an American worker. India can get by on $2 an hour. Try living in this country on $2 an hour,” ...
IBM has made no secret of resorting to extensive cost-cutting to maintain profits in the face of falling revenues in recent years. In the past quarter, IBM reported that its earnings rose 6 percent despite a 3 percent decline in revenue. It was the 38th consecutive quarter of net income gains, making IBM a darling on Wall Street. IBM’s stock price has risen from about $75 a share in the depths of the recession to more than $200 earlier this year. ...
The never-ending quest of American corporate management to please Wall Street also plays an important role in the layoffs and offshoring drama. John Campbell, who was let go from IBM in 2007, said he was told that “the four goals of IBM are first quarter, second quarter, third quarter and fourth quarter,” as the company became increasingly focused on placating investors and propping up its stock price.
But the firm employed a plethora of complicated accounting measures to whittle down the amount it owed to the Treasury. Its workings were so complicated they even baffled tax experts. And because the firm is based in Ireland, it can funnel some of its profits across the Irish Sea where they will be charged at a lower tax rate. ...
But even on the earnings declared from its UK branch, IBM should have paid 28per cent corporation tax, the rate that applied in 2010. Instead it only paid £21.7million– an effective tax rate of just 7.2per cent.
The largest measure, described as ‘movement in unrecognised deferred tax’, subtracted £126.5million from the bill. It is believed this could include changes to the liabilities of its pension scheme. ...
A company spokesman said: ‘IBM complies with all tax rules in the UK.’
Selected reader comments follow:
The reason given for the cuts: “They have increased the size of their workforce in India and Brazil and decreased the workforce in the U.S.”
Cons: This is NOT an engineering-led company. Nearly all executives come out of marketing and sales. Nothing is more important than meeting short-term sales numbers.
Cost-cutting has gotten completely out-of-hand. Have to pay for coffee. Buildings are dingy (half of the lightbulbs are burnt out). Often have to purchase your own hardware out-of-pocket.
IBM is committed to being as profitable as possible. This means replacing their US work force with workers in BRIC countries making 80% less. They've already reduced their US workers by about half, and have no plans on stopping. If I were a software developer 35 years or older, I would fully expect to be laid off in the next 2-3 years. The atmosphere is that the executives view employees (and low-level managers) as nothing more than faceless "resources" that can be replaced with cheaper alternatives. Many important senior level software developers have already left, leaving knowledge gaps all over the place.
IBM feels like a company on the decline. They're pulling no stops to appear as profitable as possible, but mortgaging the company's reputation to do so. They're staying alive by cannibalizing other companies.
Employee morale is down-right awful. Management knows this, since I haven't seen an employee satisfaction survey in many years. I get the impression that executives are trying to make the atmosphere as unpleasant as possible to make their U.S. workers leave on their own so that they don't have to pay them severance packages.
Advice to Senior Management: In general, low and mid level management at IBM is good. However, they're pretty much powerless against the whims of the executives who seem to be only interested in short-term profits, and care nothing about employee morale or customer satisfaction.
Advice to executives: Employees are people too. Try treating us with respect. Be honest with us. Don't try to fool us with your fancy marketing-speak, like trying to convince us that replacing pensions with 401k was better for us, or that they're "resource actions" instead of "layoffs". That's just insulting our intelligence. Also, the IBM brand is being seriously tarnished right now, and IBM is getting a bad reputation in the eyes of our customers. IBM is not the unsinkable ship that you think it is.
Many were also caught in the shift from defined-benefit pension plans to 401(k) plans that required workers to contribute toward their own retirement savings. Some didn’t, a choice that will leave them short financially.
Small wonder that, according to the Pew Research Center, boomers are the gloomiest of all age groups about the health and future of their finances. Boomers were more likely than other age groups to tell Pew researchers that they lost money on investments since the recession hit. Nearly six in 10 said their household finances worsened.
Finally, employment-based health insurance for many retirees has been withering away, which is causing older workers to cling to paychecks. Overall, the stage is set for a new normal: Working in retirement.
The typical household income for people age 55 to 64 years old is almost 10 percent less in today’s dollars than it was when the recovery officially began three years ago, according to a new report from Sentier Research, a data analysis company that specializes in demographic and income data. ...
Income drops vary significantly by age, though. Households led by people between the ages of 55 and 64 have taken the biggest hit; their household incomes have fallen to $55,748 from $61,716 over the last three years, a decline of 9.7 percent. ...
Incomes for the oldest Americans, on the other hand, have risen steadily since the recovery began. Among those 65 to 74, the inflation-adjusted median household income rose 6.5 percent (to $42,113 from $39,548), and among those age 75 and older, the increase was 2.8 percent (to $26,991 from $26,244). ...
This may be because older Americans are working longer, taking in more income at more advanced ages. Perhaps they are working longer partly to compensate for the decline in the value of their homes. Rising employment rates among older people predate the housing bust, however.
Whether IBM brings those jobs back or not; US IBMers need to seriously look at the option of joining this union and fighting to win a contract with IBM. IBM is in trouble because of their quality of work and responsibility issues with their customers. US skilled IBMers could make those issues go away if they would unite and demand that IBM provide their customers with the kind of service and dependability that ALL their customers deserve. Offhoring for cost of labor is becoming a tired and worn out strategy for IBM. They will continue to have failures to meet their customers demands and contract obligations. Now is the time to unionize IBM US. Get busy fighting for your job, or get busy losing it. -raisetheroof-
I knew that the whole thing was bogus. It's meant to give the employee a false sense of security. The employee thinks they have a sense of input into their rating, and IBM continues to do exactly what they want.
Your PBC ranking was done months before you even filled out that pbc. How do you think it has anything to do with how you are rated. My mgr even told me that the rating is all about how many managers know who you are. You could be diligently servicing an account saving the company $millions$ a year, or convincing the customer to sign on for more work. If the other mgrs don't know who you are, your rating suffers.
It's all who you know, and not how well you perform in this company that matters. If you can blow more smoke against the mirror than your other co-workers you win! Sad but true. -dun-4-
When the Supreme Court decided states could not be penalized for not expanding Medicaid under Obamacare, Republican Governors Bobby Jindal of Louisiana, Rick Perry of Texas, and Rick Scott of Florida quickly announced that their states would not participate. ...
“If we don’t do this, Florida taxpayers will be paying to expand coverage to children and families in other states,” Dr. Peter Gorski, the chief health and child development officer of The Children’s Trust in Florida, told The Fiscal Times. “There is no rational reason not to do this.” ...
Bruce Rueben, president of the Florida Hospital Association, says choosing to pass on Medicaid expansion is “like doubling down on a bad deal. Opting into Medicaid expansion is the best thing for Florida hospitals and the best thing for people we serve.” ...
“Medicaid is a system of inflexible mandates, one-size-fits-all requirements, and wasteful, bureaucratic inefficiencies…expanding it would only exacerbate the failure of the current system and would threaten even Texas with financial ruin,” Gov. Perry said in a letter to Kathleen Sebelius, secretary of the Department of Health and Human Services.
But hospitals in Texas disagree with the governor, and say the state’s large uninsured population needs a health care solution. “With a strained state budget, it’s hard to imagine addressing the uninsured problem in Texas without leveraging these federal funds, which now will go to other states.”
Spending on all federal races this year – for the White House, House and Senate – is expected to reach $6 billion, a nearly 20 percent increase from four years ago. About 15 percent or nearly $1 billion will come from groups whose contributors are no longer bound by limits in the nation’s campaign finance laws, according to Sheila Krumholz, executive director of the Center for Responsive Politics.
And half of those contributions won’t be open to public scrutiny because they went to outside groups that, unlike the Super PACs, don’t have to disclose their donors unless they make “electioneering communications” within 60 days of the election. “The SuperPACs and outside groups will have a profound effect on this year’s election,” Krumholz said. “Most of what we can see is from conservative donors to conservative groups.”
Medicare Advantage is a 15-year failed experiment in privatization. Running Medicare through private insurance companies was supposed to save money through the magic of the marketplace; in reality, private insurers, with their extra overhead, have never been able to compete on a level playing field with conventional Medicare. But Congress refused to take no for an answer, and kept the program alive by paying the insurers substantially more than the costs per patient of regular Medicare. All the ACA does is end this overpayment. ...
As for the cuts in hospital reimbursement, the key thing to know is that the hospital industry itself negotiated those cuts. Here’s how John McDonough’s Inside National Health Reform describes it:
The negotiation involved the White House and high-level Senate Finance staffers. The agreement involved two numbers: $155 billion in reductions over ten years, and health insurance coverage for 95 percent of all Americans. At these numbers, hospital leaders were convinced that the revenue from the added covered lives would more than make up for their losses on the Medicare side, and it was a deal they could embrace.
So, does any of this sound like a devastating blow to seniors’ health care?
The 2010 health care law cut Medicare reimbursements to hospitals and insurers, not benefits for older Americans, by that amount over the coming decade. But repealing the savings, policy analysts say, would hasten the insolvency of Medicare by eight years — to 2016, the final year of the next presidential term, from 2024.
While Republicans have raised legitimate questions about the long-term feasibility of the reimbursement cuts, analysts say, to restore them in the short term would immediately add hundreds of dollars a year to out-of-pocket Medicare expenses for beneficiaries. That would violate Mr. Romney’s vow that neither current beneficiaries nor Americans within 10 years of eligibility would be affected by his proposal to shift Medicare to a voucherlike system in which recipients are given a lump sum to buy coverage from competing insurers.
For those reasons, Henry J. Aaron, an economist and a longtime health policy analyst at the Brookings Institution and the Institute of Medicine, called Mr. Romney’s vow to repeal the savings “both puzzling and bogus at the same time.” ...
What Mr. Romney proposes to restore to Medicare, however, is not money but additional costs, for higher payments to hospitals, insurers and other care providers. Lobbying groups representing some care providers accepted those reductions during the health care debate, and in exchange they got the law’s mandate for nearly all individuals to have insurance, which meant that providers and insurers would have millions of new paying patients and policyholders. ...
Mr. Romney has been especially critical of the cuts for insurance companies that provide Medicare Advantage, a popular private-policy alternative to Medicare. “This is the president’s plan: $716 billion cut, four million people losing Medicare Advantage and 15 percent of hospitals and nursing homes not accepting Medicare patients,” he said in a recent campaign appearance.
But Medicare Advantage, which was created 15 years ago in the hope that private-market competition for beneficiaries would result in lower prices, has consistently cost more than standard Medicare — costs that Medicare beneficiaries must help subsidize through their premiums.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
In his 2010 "Road Map for America's Future," the Wisconsin congressman proposed a plan to allow younger workers to divert more than one-third of their Social Security taxes into personal accounts that they would own and could will to their heirs.
Ryan wrote that the accounts would provide workers an opportunity "to build a significant nest egg for retirement that far exceeds what the current program can provide." Workers 55 and older would stay in the current system.
The America Ryan longs for seems more like 1912 than 2012. Certainly, it was a simpler time a century ago. The majority of Americans were white, God-fearing Protestants who lived on farms or in small towns. Only a tiny elite went to college. The rich were very rich while the broad working class earned modest incomes through long days of labor in mines, factories and fields. Women stayed at home. Black Americans were kept in their place. Politicians were in the pockets of the wealthy. Only wild-eyed Socialists dreamed of helping the elderly with government-provided pensions and medical care.
Once again, that’s because the specific commitments Romney has made just don’t add up. Remember, Romney has called for revenue-neutral tax reform that would cut rates by 20 percent while retaining and, in some cases, adding to current expenditures that he counts as “incentives for saving and investment” and eliminating the estate and alternate minimum taxes. The problem is that there just aren’t enough deductions, exclusions and credits remaining to make up the revenue lost just from the rich. ...
The obvious conclusion is that the priorities in his plan are the specific rate cuts and tax advantages for upper-income filers. They are not about protecting the middle-class, and they certainly are not revenue neutrality. Indeed, the obvious conclusion is that those are the ultimate priorities for the Republican Party, and Romney has the nomination only on the condition that he will back massive tax cuts for the rich. The same condition, that is, that got George W. Bush the nomination.
Here’s a thought: Wouldn’t it be nice to start thinking about bonus payments for regulators – for the folks who are responsible for monitoring Wall Street – that compare with those on Wall Street itself? I’m not suggesting that they be as lavish as those awarded to top traders – after all, Wall Street compensation is so high in part because the jobs offer precious little in the way of security, especially when contrasted with government work. But we should want some of the best people on Wall Street to find working for the government attractive enough that the departments or agencies responsible for overseeing financial giants find it easy to recruit the foxes that are most skilled at protecting the chicken coop. Why wait until we have another MF Global; another London Whale; another LIBOR scandal? Instead, why not find a way to attract Wall Streeters to cross party lines and help to prevent such occurrences in the future? Surely the increased confidence in the health and integrity of our financial system would be worth the investment. ...
And while we’re pondering extending Wall Street’s approach to compensation to the public sector, why not include the idea of clawbacks? When a denizen of Wall Street has overseen the destruction of a firm – wittingly or unwittingly – his compensation now will be “clawed back” under the increasingly popular provisions adopted by a majority of Wall Street firms. But what about the regulators? If there’s a blowup on their watch, that they missed opportunities to catch before it became a systemic crisis, they, too, could forfeit some of their own compensation. Think, for instance, of the opportunities that the SEC had to stop Bernie Madoff’s Ponzi scheme in its tracks.
The tax code also empowers CEOs to save money in other ways unavailable to ordinary workers. Among the most lucrative are the executive deferred compensation programs at many large corporations. When ordinary workers, age 50 and up, put money in tax-deferred 401(k) or IRA retirement plans, the amount of income we can shelter is usually no more than $22,000. These rules don't apply to CEOs. Uncle Sam lets any and all of their earnings grow tax-free until they're withdrawn. ...
The rest of us ordinary Americans have seen our wages plummet below the cost of living and the value of our homes and retirement savings sink. We've seen our teachers go from the classroom to the unemployment line. We've seen libraries close, roads and bridges crumble, and public safety threatened with police and firefighter layoffs. And we've heard CEOs and politicians declare that cutbacks in Medicare and Social Security are essential for the national bottom line.
Meanwhile, wealthy CEOs are enjoying million-dollar tax breaks. It's time to change course.
Rather, Romney is being evasive about exactly what he plans to do on tax reform. Rates and rate cuts, he’ll spell out: Romney proposes an across-the-board 20 percent reduction in the existing marginal rates, while keeping the 15 percent top rate on capital gains, except for filers who make less than $200,000; for them, capital gains would be tax-free.
As for which deductions and special breaks Romney would eliminate to offset the lower rates — well, he’s getting back to us on that.
onsider Romney’s position on one notorious tax break: the favorable treatment of “carried interest.” Mainly enjoyed by private equity and hedge fund managers, this break is a big reason Romney’s own tax bill was no more than about 14 percent of his multimillion-dollar income in recent years.
The carried-interest break not only accentuates income inequality but also overincentivizes the formation of investment partnerships, diverting capital — financial and human — from other, more productive uses. President Obama has sensibly proposed getting rid of it.
But the well-dressed crowd that gathered in May for a luncheon on the 24th floor of a New York law firm easily could have figured that the group had a different purpose: Helping Mitt Romney win the presidency.
Brooks, the group's executive director, showed the 100 or so attendees two coalition-funded ads taking aim at President Barack Obama. Then Brooks made a pitch for a $6.5 million plan to help Romney in battleground states, reminding guests that their donations would not be publicly disclosed by the tax-exempt group.
"Contributions to the RJC are not reported," Brooks told the people sitting around a horseshoe-shaped table. "We don't make our donors' names available. We can take corporate money, personal money, cash, shekels, whatever you got."
The Republican Jewish Coalition and similar organizations enjoy tax-exempt status in exchange for promoting social welfare. In this election, the most expensive in U.S. history, they also have emerged as the primary conduit for anonymous big-money contributions.
Forget super PACs, their much-hyped cousins, which can take unlimited contributions but must name their donors. More money is being spent on TV advertising in the presidential race by social welfare nonprofits, known as 501(c)(4)s for their section of the tax code, than by any other type of independent group. ...
Congress created the legal framework for 501(c)(4) nonprofits nearly a century ago. To receive the tax exemption, groups were supposed to be "operated exclusively for the promotion of social welfare." The IRS later opened the door to some forms of political activity by interpreting the statute to mean groups had to be "primarily" engaged in enhancing social welfare. But neither the tax code nor regulators set out how this would be measured. ...
An investigation by ProPublica, drawing on documents filed with the Internal Revenue Service and the Federal Election Commission, offers the most detailed picture to date of how 501(c)(4) groups have used their tax status for purposes likely never intended. Our examination shows that dozens of these groups do little or nothing to justify the subsidies they receive from taxpayers. Instead, they are pouring much of their resources, directly or indirectly, into political races at the local, state and federal level.
While there is no evidence that his actions violated the law, abuse of the foreign tax credit has been a problem for the Internal Revenue Service. The agency has prosecuted a number of international fraud cases in the last few years involving such credits. And the size of Romney's claim in 2008 raises questions about the sources of his foreign income.
"This could definitely be a contributing reason for Romney's unwillingness to disclose prior years' returns," said New York University School of Law professor Daniel Shaviro, a tax expert. ...
Much of Romney's foreign banking activity is also shrouded in secrecy. He has not released a 2010 tax form that details his foreign bank account holdings. He has, however, disclosed the existence of a Swiss bank account. Such accounts are prized by global elites for Swiss banks' extreme levels of secrecy, which has allowed thousands of American taxpayers to shield offshore income from the IRS by stashing it in Swiss accounts. There is no evidence that Romney broke the law with his Swiss account.
It seems that rich people living in wealthy enclaves are the worst when it comes to thinking of the poor. In ZIP codes where more than 40 percent of taxpayers make more than $200,000 per year, residents give an average 2.8 percent of their discretionary income to charity. Many of those rich residents give no money to charity at all. ...
The rich are not redistributing that money back to society. Total tax rates are roughly flat in effect across income levels, according to Citizens for Tax Justice. And on average, the rich aren't giving away extra money to charity either, according to this new study.
The bottom line: Rich people are making much more money before, and they're keeping it for themselves.
Ryan’s statement consists of two parts; the first is gross understatement, the second gross misstatement. It is the misstatement that is the essence of the case Republicans are putting before American voters: That President Obama has made the economy worse. Getting voters to believe that assertion is probably the Republicans’ only hope of winning the election. ...
The following graph, which I put together using data from the Bureau of Labor Statistics, traces the annual rate of job creation under Democratic and Republican administrations from Harry Truman to Obama — with 2009 separated out as a year in which any fair-minded person would agree that the “difficult situation” Obama inherited was the main driving force. It dramatically illustrates just how wrong Ryan’s assertion is. ...
Here is a second graphic illustration of what has happened in job creation under George W. Bush and Barack Obama. It also uses data from the Bureau of Labor Statistics.
In the eighteen months from the beginning of 2008 through the middle of 2009, a period fully shaped by the Bush economic program to which Republicans now want to return, (but before the Obama stimulus had a chance to take effect), approximately 7.5 million jobs were lost.
Over the most recent 18 months of the Obama administration, approximately 2.8 million jobs have been added.
While all sectors of society experienced a decline in income, the middle class is the only one that also got smaller. It shrank from 61 per cent of adults in 1971 to 51 per cent last year.
“The notion that the middle class always enjoys a rising standard of living is a part of the idea of America,” said Paul Taylor, executive vice-president of the Pew Research Center. “Now the middle class has a smaller slice of a smaller pie.”
In its 19th annual report on "Executive Excess," the Institute for Policy Studies, a Washington-based think tank, focused on how U.S. tax laws encourage exorbitant executive pay and then grant tax breaks and reduced rates to those same executives as well as their businesses. For example, last year Apple paid a record $374 million to Timothy Cook, its new CEO, at a time when journalists were reporting on how Apple contract manufacturers in China overworked, abused and underpaid workers making iPhones.
As a result of these incentives in the tax code, 26 out of the 100 highest paid CEOs received more in overall pay than their companies paid in federal income taxes (and many of those corporations actually received tax refunds). With few exceptions, these were profitable companies. ...
Simply by declaring that its pay to the CEO is for his or her performance, a corporation can write off on its taxes any amount, not just up to the limit of $1 million for standard compensation. Taxpayers also effectively pay for other incentives to high CEO pay--unlimited deferred compensation, double standards on accounting for stock options, and preferential treatment for "carried interest" in hedge, private equity and other investment funds (where payments that should be taxed like regular income are instead taxed at a much lower rate). ...
Corporations, now paying a record-low 7.9 percent of federal revenues, further avoid taxes on the business itself. IPS cites the use of tax havens--where rich individuals have stashed somewhere between $21 and $32 trillion--as places that also shelter corporate profits. Its researchers found that the 100 corporations with the highest paid CEOs operated a total of 537 subsidiaries in tax havens, where accountants can place disproportionate shares of income, for example, by assigning patents and other intellectual property rights to the tax haven.
This is supposed to be in defense of not releasing his tax returns.
Assume, for the sake of the argument, he’s telling the truth. Since when are charitable contributions added to income taxes when judging whether someone has paid his fair share?
More to the point, Romney admits to an income of over $20 million a year for the last several decades. Which makes his 13 percent — or even 20 percent — violate the principle of equal sacrifice that lies at the core of our notion of tax fairness.
Even Adam Smith, the 18th century guru of free-market conservatives, saw the wisdom of a graduated tax embodying the principle of equal sacrifice. “The rich should contribute to the public expense,” he wrote, “not only in proportion to their revenue, but something more in proportion.”
Equal sacrifice means that in paying taxes people ought to feel about the same degree of pain regardless of whether they’re wealthy or poor. Logically, this means someone earning $20 million a year should pay a much larger proportion of his income in taxes than someone earning $200,000, who in turn should pay a larger proportion than someone earning $50,000.
But Romney’s alleged 13 percent tax rate is lower than that of most middle class Americans who earn a tiny fraction of what he earns.
"Our church doesn’t publish how much people have given," Romney tells Parade magazine in an edition due out Sunday. "This is done entirely privately. One of the downsides of releasing one’s financial information is that this is now all public, but we had never intended our contributions to be known. It’s a very personal thing between ourselves and our commitment to our God and to our church." ...
University of Utah political scientist Matthew Burbank says Romney may have a point about disclosing his finances since he never intended to make his LDS donations public. "I can understand why you wouldn’t want that information out there," Burbank says. However, the professor points out, if Romney were to release more years of tax returns, journalists and opponents would likely be more interested in Romney’s wealth and where he parks his money.
"The amount of money given to the church is probably not going to attract the most attention," Burbank says. "People will look at that and say that’s nice but it’s not likely to draw a lot of comment or concern."
In a last-ditch effort to save the jobs that the overwhelmingly female and middle-aged workforce has relied on to raise their families–often for several decades–Randecker and her co-workers have been trying to meet with candidate and Bain co-founder Mitt Romney to ask him to intervene.
They went to Romney campaign offices in Davenport, Iowa, and in Madison, Wis., where campaign staff called the police to disperse the workers–many of whom have voted for Republicans in past elections. ...
After years of making good quality products and healthy profits for their employer, workers were stunned when Sensata managers announced last year they were closing the plant right after buying it. Only recently, Randecker said, did management offer an explanation: Labor and materials are cheaper in China.
Randecker notes, however, that Chinese labor is less skilled. She claims that in some cases, it will take 13 Chinese worker to do what one Freeport worker did. Some analysts argue that markets for the products are shifting to China, but Randecker points out that U.S. auto companies–who have large U.S. market needs–are among Sensata's major customers.
As middle-class households -- which the report defines as those making between two-thirds and twice the national median income -- feel they're struggling to make ends meet, their wealthier neighbors are making gains.
Over the past four decades, upper-income Americans have increased their share of overall U.S. household income, from 29 percent in 1971 to 46 percent in 2010, according to the report. During the same period, the middle-class share of income dropped from 62 percent to 45 percent.
While Romney was caving to pressure from Paul supporters, the platform committee itself made a surprising move. The GOP refused to put itself on record as supporting the mortgage interest deduction, writes my Bloomberg News colleague James Rowley. The idea is that Romney’s tax plans rest on eliminating deductions and loopholes he has not specified, so the party wants to give a President Romney ample room to maneuver by taking interest on mortgages off its protected list. However, on the same day, the platform group voted to retain its support for deductions granted to charitable donations.
The mortgage interest deduction is the nation’s largest tax benefit. The government forgoes about $90 billion per year to the millions of American homeowners that claim it. It is cherished by the middle class, and some economists consider it the bedrock of the housing market. The mortgage interest deduction has many critics, but by virtue of its popularity among voters, killing it would amount to political suicide. That’s why you’ll find plenty of politicians who advocate getting rid of tax credits and loopholes, but you’d be hard-pressed to find a single one publicly opposing the mortgage interest deduction.
The high debt, or “leverage,” greatly multiplies the profit on successes, but also increases financial instability. The loans must be paid off even if business slows–a minor worry for the private equity fund, because it isn't responsible for those payments. Instead, the purchased business owes the debt created to buy it. The interest on this debt is tax-deductible (meaning that these deals are taxpayer-subsidized), but paying down the principal still puts pressure on the acquired businesses. They in turn typically squeeze employees as the easiest, quickest way to meet interest payments and profit targets.
After Bain-style buyouts, employees often face wage and benefit cuts or mass layoffs. Businesses can also use takeovers to renege on implied contracts or to engineer bankruptcies, thus avoiding obligations to workers such as pension payments.
After a few years, maybe a decade, the fund's partners typically try to sell the business at a profit. But the funds also have quicker ways to make money. They sometimes arrange for the businesses they buy to borrow money to pay extraordinary dividends in the first year, so that a firm such as Bain can quickly return to the general partners many times their original investment.
In a Vanity Fair article, reporter Nicholas Shaxson relates what happened after Bain took over and merged two medical firms in 1994. First, Bain cut Dade Behring's research budget to half its competitors' level and began closing branches, even where the two firms had recently received location-based tax incentives for job creation. It converted traditional pensions to inferior alternatives (saving up to $40 million) and nickeled-and-dimed employees on benefit payments. Then Bain had Dade Behring borrow $421 million to pay itself, Goldman Sachs and some top managers $365 million in dividends. These participants had only invested $85 million. Romney continued to profit from the deal until at least 2001, one year before Dade went bankrupt. ...
General partners also benefit from the notorious “carried interest” loophole. It allows their pay for managing the fund, which would be taxed as regular income, to instead be taxed as capital gains at a rate less than half of what most would otherwise pay. ...
Appelbaum also finds that when private equity firms take over, they do not create jobs faster than comparable businesses, but they do destroy jobs faster. (So much for “job creation.”) Meanwhile, Shaxson reports that a Bain internal study concluded that there is “little evidence that private equity owners, overall, added value” to the companies they took over.
All this means that even when a private equity firm “succeeds” (usually after buying an above-average business), much of their gains are reaped simply by transferring large amounts of wealth to themselves. The losers are usually the companies they acquire, their investor partners, taxpayers, government agencies and workers–ultimately, the entire economy.
As part of his retirement agreement with Bain, Mr. Romney has remained a passive investor in the company’s ventures and continues to receive a share of the firm’s investment profits on some deals undertaken after his departure. ...
Bain private equity funds in which the Romney family’s trusts are invested appear to have used an aggressive tax approach, which some tax lawyers believe is not legal, to save Bain partners more than $200 million in income taxes and more than $20 million in Medicare taxes.
Annual reports for four Bain Capital funds indicate that the funds converted $1.05 billion in accumulated fees that otherwise would have been ordinary income for Bain partners into capital gains, which are taxed at a much lower rate. ...
In a blog post Thursday, Victor Fleischer, a law professor at the University of Colorado, said that there was some disagreement among lawyers, but that he believed: “If challenged in court, Bain would lose. The Bain partners, in my opinion, misreported their income if they reported these converted fees as capital gain instead of ordinary income.” ...
A typical private equity or hedge fund pays its managers in part with a management fee based on the size of the fund, and in part with a share of the profits earned by the fund. Those profits are considered “carried interest” and taxed at capital gains rates, which in recent years have been 15 percent, assuming that the underlying investment profits qualified for that treatment.
The tax strategy Bain appears to have used is intended to convert the remaining management fee — the part not based on investment profits — into capital gains. Mr. Romney appears to benefit from the carried interest structure in these funds, but it is not clear from the documents made public whether he also benefits from the fee waiver. The Romney campaign declined to comment.
In an article that appeared in the journal Tax Notes in 2009, Gregg D. Polsky, a tax law professor at the University of North Carolina School of Law, called the tax strategy “extremely aggressive” and said it was “subject to serious challenge by the I.R.S.” ...
The documents also showed that some of the funds owned equity swaps, which have been used to avoid taxes that would otherwise be owed on dividends paid by American companies to foreign-based investors, like funds based in the Caymans.
The documents show -- once again -- how sophisticated business people have myriad ways to avoid taxes and, in the case of Bain anyway, will readily skirt or break the law.
The main revelation so far is that Bain seems to have pushed the envelope and misrepresented some of its income -- saying that management fees, which would be taxable as regular income, were actually capital gains, which are taxed at a much lower rate thanks to the infamous "carried-interest" loophole. ...
You would think that the super wealthy might shrug at paying taxes they can easily afford, but here the opposite appears to be the case: Bain's wealthy partners have been hyper-aggressive about lowering their tax bill.
The Medicare dodge is especially notable, given how conservatives endlessly trumpet the financial troubles of that program. Capital gains are not subject to payroll taxes, which means that one effect of the carried-interest loophole -- which the right defends -- is that it weakens the financial situation of Medicare and Social Security.
This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.