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Big Employers Extorting States, Pocketing Employee Income Tax Withholding

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Wonder why states are broke? It isn’t just the global financial crisis induced knock-on effects of a plunge in tax receipts and a rise in social safety net payments. Nor is it just pension fund time bombs (note that despite the press hysteria, the problem is unmanageable only in a comparatively small number of states, with New Jersey way out in front, thanks to 15 years of the state stealing from the workers’ kitty, plus a decision to take big risk at exactly the wrong moment, in 2007, which resulted in large losses). A significant unrecognized culprit is companies managing to divert tax revenue from stressed states to their coffers. The device, in this case, is demanding the right to keep state income taxes withheld from employee paychecks.

David Cay Johnston detailed this stunning development in an April 12 column and a related interview late last week (hat tip p78). He suggests that this movement is driven by banks, since financial players and private equity fund owned firms are heavily represented among these corporate welfare queens. His discovery seems to have gone largely unnoticed and I hope readers circulate this clip widely.

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49 comments

  1. chitown2020

    Bloomberg news reporting the FED to scold their banks for the model they are using for their stress tests. They are insolvent. Bernanke knows it. He is a bold faced crook who needs to be locked up.

    1. chitown2020

      Ron Paul said today “Inflation is theft.” Damned straight. The debt of the FED banks is unsustainable and can never be repaid. Stop the robbery and the illegal and unconstitutional bankrupting of the American people by the FEDSTER for the debt of their perps.!

      1. F. Beard

        Ron Paul said today “Inflation is theft.” chitown2020

        So is deflation if practiced in a government enforced monopoly money supply for private debts. And inflation is not theft without said monopoly.

        The solution is coexisting government and private money supplies per Matthew 22:16-22.

        1. Susan the other

          In the Paul v Paul vid Krugman said an interesting thing when Ron Paul suggested private money. Krugman said that private money in the form of repos (wherein the banks were allowed to use the money instruments they invented out of thin air as collateral) was a big part of the way we got in this mess in the first place. That it was private money as much as anything else, handled by the banks of course, that made everything pyramid much faster. Faster than anyone could check.

          1. F. Beard

            We don’t really have private money; instead we have all sorts of government privileges for FRNs and the banks.

            BTW, RP’s approach to private money is backwards. We should not attempt to define what private money is but what government money is. Any attempt by government to define what private money is fascist. Any attempt to make government money anything other than inexpensive fiat is also fascist.

          2. chitown2020

            The citizens of Chicago were warned to keep an eye on Rahm Emanuel taking private money for things. Next day the local news had him talking about using private investor money to rebuild the city’s infrastructure and blaming ex-Mayor Daley. Many politicians and other unknowns filed maritime liens before he took office. Some think it is because he is planning to give the city away to these private investors.
            About the fraudulent mbs ‘s..I am sure that you know that the crooks never held title in the first place because of the Origination Fraud. Therefore, all they sold investors was an interest in a gamble. Those gambles crapped out long ago. But, they were all insured against the risk with the CDS INSURANCE. Have you watched the movie Inside Job? They explain this.

          3. JurisV

            Good catch STO –

            This also was the only (and slight) mention of private credit/debt in the entire segment.

            Is anyone else noticing that in all of the hoo-hahing about DEBT it’s always about Government debt. The real culprit as Bezemer and Keen keep pointing out, it was the Private Debt creation that was the real and over-riding actor that led to the financial crisis/depression. Plotted on the same graph the Government debt, even with the “explosive increase” since 2008, is trivial in comparison. Private debt/credit creation can be extremely toxic unless rigidly regulated. Read Dirk Bezemer’s INET paper for an idea of the excess to which it was taken. Better yet watch the video of his presentation. How much credit creation is too much.

            http://ineteconomics.org/sites/inet.civicactions.net/files/bezemer-dirk-berlin-paper.pdf

            Following Carville — “It’s the Private Debt, Stupid.”

          4. ArmchairRevolutionary

            That is disengenuous of Krugman. He is talking about private money that was used for moving risk off balance sheet. Ron Paul was talking about a currency that could be used by anyone. Clearly we do not have private competitive currencies. I cannot legally create my own currency that would compete against the dollar.

  2. chitown2020

    The Chicago business model of corruption has gone nationwide. Ex-Mayor Daley stated that Cook County property taxes will go up $155 billion dollars by the year 2015 to cover for all of the missing fireman’s and policeman’s pension money. These corrupt crooks are taxing us out of our homes and businesses. Pretty soon the city will be empty with only banks and corps left to steal from each other. Then we will see how well they will do. The local media reported that Mayor Rahm Emanuel closed 3 more mental health facilities today. Some of the patients paid him a visit at City Hall today. I hope they visit him regularly.

    1. Woodrow Wilson

      “Cook County property taxes will go up $155 billion dollars by the year 2015 to cover for all of the missing fireman’s and policeman’s pension money.” -

      You don’t seriously think Sen. John Kerry will take a loss do you?

      http://pfds.opensecrets.org/N00000245_2010.pdf

      Of course, here in Massachusetts, where PRIT/PERAC still expect 8.25% returns:

      http://ftpcontent.worldnow.com/wfxt/pdf/State-Pensions-Over-80000.pdf

      Nothing like taxpayer backed funding, no matter the economy. Of course there’s no correlation with the unemployment RATE and SNAP benefits rising 50k per year for the past 5 years here.

      At the same time, my company gets fined $40 million for kickbacks (second offense), and get a $39 million tax break.

      Nothing to see here.

    2. But What Do I Know?

      Not do disagree with your main point, but do you mean $155 million, not billion?

      1. chitown2020

        That’s billion. The local media reported Chicago is the most corrupt city in the country. It is hard to believe that Illinois is only the third most corrupt state in the country. Illinois has had how many Governors go to prison..? I lost track. Our property taxes are still being calculated at the bubble price. I was at the County Recorders office downtown recently. I was talking to the clerk about the mortgage fraud. He told me just look at the property tax bills…He said he is thinking about moving because he can’t afford the taxes. One woman was on the news remarked, If I am going to pay tax bills like this I should be living next door to J Lo. Someone told me a while back that Illinois has the highest tax base in the country …more than Beverly Hills. A while back, I called the bank about an escrow shortage. The woman couldn’t believe my tax bill was for a single family home. This is all because of mass corruption. Now Rahm Emanuel wants to rebuild the infrastructure of the city with INVESTOR MONEY…..! No doubt the same crooks who have been robbing us. Lisa Madigan, Gov. Quinn and others all filed maritime liens before Rahm Emanuel took office. We were warned to watch him
        using outside investors for projects. I think the fear is he will give the city away.

        1. chitown2020

          The debt because of fraud and corruption is unsustainable. I think it was ex- Mayor Daley who filed maritime liens..not Gov. Quinn-ler. Many are pondering this action on the Internet. The conclusion so far is that Emanuel must be up to something really shady for these politicians to file maritime liens before he took office.

    3. Paul Jurczak

      “Cook County property taxes will go up $155 billion dollars by the year 2015″ – surely there must be some mistake here. Cook County collected a total of $11.69 billion of property taxes in 2010. Are you suggesting they will collect $166.69 billion in 2015?

      1. chitown2020

        How would I know…? Ask the crooks who stole it how they are going to pull this one off in this horrible economy. I would say if there is that much money missing its time for a federal probe.

        1. Paul Jurczak

          What I meant, is that your numbers are bogus. $150 billion tax hike is not possible and no one proposed anything like that. I share your sentiment about high level of corruption in Cook County, but please check your numbers before you make claims of this magnitude.

        2. Paul Jurczak

          I did. $11.69 billion property tax collected in 2010 is a public record (Cook County Assessor Office). Median real estate property taxes paid for housing units with mortgages in 2009 (Cook County): $3,897. It would increase to $53,901 assuming uniformly applied tax hike you wrote about. See the problem?

          This was a common-sense approach, now lets try googling:

          “Lame duck Chicago Mayor Richard Daley has urged the Illinois General Assembly to amend a bill that aims to solve the Chicago’s pension crisis. The bill currently places a large burden on citizens. The bill would give the city 30 years to get to a 90 percent funding ratio, and cost Chicago citizens $550 million in a property tax increase in 2015.” (http://www.statebudgetsolutions.org/blog/detail/daley-talks-il-police-and-firefighter-pension-crisis-2)

          ” Retired Chicago police and firemen receive lavish, gold-plated pensions, and, according to Jim Tobin, President of the Illinois Taxpayer Education Foundation (ITEF), the reason Governor Patrick Quinn signed Senate Bill 3538, the $500,000,000 Chicago property tax increase, is to pump more taxpayer dollars into extravagant city pensions.” (http://www.taxpayersunitedofamerica.org/news-releases/retired-chicago-police-and-firemen-getting-rich-from-locally-funded-pensions)

          See the problem?

          1. chitown2020

            Paul….I know what I heard. The local media reported last year that ex -Mayor Daley said that there would be a $155 billion tax increase by the year 2015 to replace all of the missing fireman’s and policeman’s pension money. Could he have meant STATEWIDE….? Illinois is a big state and he was saying that massive property tax increase was 4 years away. EVERY COUNTY IS OVERPAYING…My sister lives in Lake County Illinois and she is paying as much property tax as I am in Cook County for a smaller house than mine and hers is not brick construction. Our commercial property tax doubled overnite from $16000.00 to $32,000.00 overnite…no explanation….the property is now worth half of what we paid for it. If you do the math we are getting robbed from every direction. There needs to be criminal investigations.

          2. chitown2020

            BTW…I see the problem is corruption on a massive scale. As far as the Golden pension plans go. Mayor Daley is collecting 2 pensions. One from the City and one from the State and he is getting a lot of other perks being paid for by the taxpayers. This greed has to stop. There is a tremendous amount of money missing and the people of the State of Illinois are sick of paying for it.

  3. Hugh

    As kleptocracy becomes more deeply entrenched, it starts dropping more and more of the pretenses it once needed to hide itself. It is a theme that runs through all of today’s posts: corporations ignoring their duties to the states, lawyers coaching witnesses and obstructing justice, and complicit municipalities violating Constitutional guarantees. The bad news is that until kleptocracy is overthrown, matters like these will become more frequent and only get worse.

    1. Mike S.

      yes, pretenses are increasingly dropped.
      yet the populace is largely comprised of unthinking dolts. too bad for the rest of us.
      even worse, it’s really a problem of willfull ignorance rather than stupidity.

      some of the most intelligent, successful people that I have had the pleasure to meet, both my undergraduate and graduate research advisors, have also ultimately revealed themselves to be fully capable of willful self-delusion when it comes to matters outside their own specialities.
      Academically I’ll never compete with these guys, additionally they are decent human beings, they treat their students with dignity and are generally reasonable, yet they will make assertions such as ‘but those are business decisions’, as though decisions in this realm were somehow sacrosanct and necessarily beyond reproach, even when lawbreaking is being discussed.

      The human race is a wretched, execrable thing.

  4. cwaltz

    Does anyone happen to know anything about Virginia law that he references? I definitely will be talking to my representative since our county just increased property taxes by 12 cents and had to cut teaching positions. I definitely want to ask my GOP rep why it is that the state is giving away tax dollars to large corporate interests.

  5. PaulArt

    There is a silver lining in this, the more they do this sort of thing the more its likely to be noticed and understood by the people. Its unfortunate this article was not covered widely.

  6. Klassy!

    Wow. You can get the whole report here: http://www.goodjobsfirst.org/taxestotheboss

    This may sound overly Pollyanish, but I urge others to look at the report (with a handy database included) and write a letter to your local paper. The hook? Talk about property taxes– everyone can relate to that.

    1. cwaltz

      Thanks for the link. It is an awesome resource. While my state was not detailed in the report the web page had a US graphic that leads to a subsidy watch web site for each state. I was able to get some information. I definitely am going to be doing some research on Volvo. It’s in this area. And as I pointed out in one of my above comments our area has recently had a 12 cent increase on property tax and the area still had to layoff teaching staff. Volvo benefits from an educated work force so they definitely shouldn’t be getting a free ride on the backs of taxpayers.

      1. Klassy!

        I ran off a copy and am really impressed with how clearly it is written and how well they explain all the different incentives offered by the states.

  7. But What Do I Know?

    I’d have to disagree that the state pension problem is manageable in the long run–although you are correct that only a few states (I’m looking at you Illinois) will have acute problems in say, the next ten years. But simply increasing state contributions to pensions is not an answer long-term. Maintaining the current level of payouts will demand increased taxes and/or reduced services every few years going forward. I’m not ideologically motivated in this (at least consciously)–it’s simply a matter of numbers. Some reform of pension payouts is also necessary, IMHO–perhaps a reduction in benefits about a certain level ($40,000 annually???) would do the trick.

    1. chitown2020

      Here’s proof this is getting ridiculous. The Mayor of Chicago shut down 3 more mental health facilities yesterday but, he is going to rebuild the City’s infrastructure with private investor money but, he won’t reveal who these so called private investors are. Something stinks.

  8. Susan the other

    This was amazing. David Kay Johnson is not very high profile. He should be. How have we allowed capitalism to destroy the civilization it was meant to benefit? This tax heist is good because we can, as taxpayers, force every corporation and every city council into court to explain themselves. Another long and exhausting task. Why can’t we get some permanent injunctions against all these robber barons until the courts can hear and decide some ofd these issues? I don’t believe that all our courts are corrupt and lazy. They can’t all be bribed.

    When DKJ tied in most favored nation regulations/laws he was clearly blaming global trade stresses for corporate misbehavior. We do not enforce environmental law, product quality law and dumping, subsidy violations, or fair employment law on China. How are our corporations to compete? By sucking money out of our schools, governments, fire departments, etc. until we are decimated? I think it is way past time to back away from global trade until these questions are resolved.

    1. Aquifer

      DCJ has written a lot about issues like this – good book “Free Lunch – How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) – ’07
      This income tax business is only one example ….

      1. Ms G

        + 1. Great book. Should be required reading for anyone seeking to understand the deep layering of kleptocracy in our faux-republic/democracy and this particular layer involving corrupt municipalities and states giving away taxpayer money and assets with abandon to the FIRE sector.

        We ignore the kleptocratic schemes occurring at the local level at our peril, as they are not merely caricatural (“yeah, well all the local agencies politicians are corrupt”). These are the local tendrils of the Giant Squid Syndrome. The “Public-Private-Partnership” form is looting public assets, taxes, pensions and savings plans on a scale every bit as large as the Bank-Government combine.

    1. JurisV

      Not a biggie … a minor nit. The last name is Johnston, with a “t”

      I too am very surprised that he’s not highly visible. But then again, the powers that be don’t like him for pointing out their theft!

      1. Klassy!

        He did win a Pulitzer and was a finalist a couple of times, but my guess is enough people just don’t get worked up enough about this stuff. And of course you’re right about the Powers that be.

        1. Enjoying Oneself

          “Perfectly Legal” was widely distributed. Check it out, it really takes the edge off of decades of distorted falsehoods still being pumped 24-7 by Industrial Nooze.

      2. Ms G

        You are right. For one thing, DCJ focuses on how money actually moves around the economy (basically, from workers to corporations and the rentier class, with the assistance of lawmakers and regulators). This is a type of “economics” (I think he identifies himself as an economist) that illuminates on-the-ground realities that Krugman, because he is hostage to his Neo-Lib paycheck and grandeur, is unable or unwilling to trumpet loud and clear from his very central soap box.

        DCJ’s writings on Social Security are also critical for any real understanding. Especially the account of the Greenspan group (in the 1980s) that raised the income level to which SS tax was applied in order to “have reserves down the road” (paraphrase). Well, the additional collections were taken, but the money apparently isn’t there anymore (if you listen to Democratic and Republican government people).

        I never understood why this brazen and multi-trillion dollar heist did not get coverage during Bush’s “everyone into 401ks” war. I am at a complete loss as to why nobody is calling our current President on this shameful truth as he steamrolls ahead to kill Social Security and Medicare.

        Time for “Occupy Social Security”!

          1. Klassy!

            This is a type of “economics” (I think he identifies himself as an economist) that illuminates on-the-ground realities that Krugman, because he is hostage to his Neo-Lib paycheck and grandeur, is unable or unwilling to trumpet loud and clear from his very central soap box.

            I liked this. Especially the “on the ground realities”. (but I think DCJ would identintify himself as a journalist rather than economist)

            1. Ms G

              Klassy, right. And as a journalist, DCJ’s soapbox needs to be much broader than Reuters. Or as the scales fall off the eyes of NYT/NPR/Nation (etc.) readerships, one hopes for a massive shift of the eyeballs (and brains?) to the Reuters pages. I’m Occupying Optimism here, I know. Sigh.

  9. indio007

    This is disgusting. I would refuse to pay income tax. I would claim exempt. Go ahead and sue me GE.

  10. Frank Occupado

    ‘DCJ suggests the movement to steal is driven by the Banks.’
    Is this really a surprise? An employee of one of these big companies is under signifigant restraint too. They can’t start getting uppity about employer tax shakedowns, since their duff is on the line. Start acting up, criticizin’. Goin’ on ‘about social justice, freedom, and collective bargainin’. I don’t know how people can tolerate working for these big corporations. They must be brainwashed into assuming their is no other way to spend their days. A propaganda victory in of itself. Quit! Default! Resist! Dissent! Seize the day and your country! uurp

  11. Enjoying Oneself

    Snip -

    “Stephen King, writer, rich guy and philanthropist, who’s fed up with 1 percenters who “float serenely over the lives of the struggling middle class like blimps made of thousand-dollar bills” and “would rather douse their dicks with lighter fluid, strike a match, and dance around singing “Disco Inferno” than pay one more cent in taxes.” “

  12. furiouscalves

    my employer (sadly a lower tier PE company) has decided to take Illinois up on her offer.

    they plan to take the tax credit for film production in the state (maybe even the EDGE credit, not sure). 7 figures yearly for 10 years (yeah right) on a company of maybe 100-120 people was mentioned. it is kind of funny, this afternoon I heard that we hired an independent auditor for the deal (bunch of $- local our local acct. already said it was a bust in terms of savings) and though we will lose most talent from MN and MT to competitors and spend all that tax credit savings and then some the first 2 years on the move, infrastructure, training and lost clients, they think they can pawn this bitch off on another even lower tier PE firm with this tax credit as a selling point. it is a joke. the company is dead in the water if they do this deal.

    The hook is that it is none other than PE magnate leo hindry that writes for the huffpost about “american” job creation and a kinder gentler PE firm who is behind the deal. I have come to the conclusion that his portfolio companies are doomed. He and his hires have no ability to maneuver in tight quarters and are exposed for the charlatans they are. they need to roll their debt and are sweating bullets. i know GE capital gave them money a few years ago. only people like that think that shopping between states to move your core growth business is a kind of new business strategy.

    I looked at the goodjobsfirst site and saw that the film credits in IL get a 0/100 for reporting and opacity. perfect. all that is happening in this deal is that tax revenue for both state is disappearing. the company is being looted and left with no core sustainable business. and leo hindry cashes another check at a citibank atm while he writes another ode to the worker for his muse and pet project the huffingtonpost as he sips some very middling WA pinot.

    I would run from illinois if this is representational of what happens in business there. scary stuff indeed.

  13. psychoanalystus

    These capitalist pigs are truly shameless.

    How about we boycott these pigs. Let’s start with AMC theaters and General Electric.

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