REPORT: Progressive Guidelines for Closing State Budget Gaps

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Virtually every state is groping for solutions to budget gaps of historic proportions. Unfortunately, most states are closing the shortfalls in counterproductive ways that deepen the recession, exacerbate hardships for residents, and stifle economic recovery.

UFE’s Tax Fairness Organizing Collaborative recently published report, “Solutions that Work for Main Street: Progressive Guidelines for Closing Recessionary State Budget Gaps,” provides a set of pragmatic principles for closing state budget gaps in ways that enhance economic recovery, ongoing stability, and more widely shared prosperity.

Key points of the Guidelines include:

Closing Recessionary State Budge Gaps

  • Make more money available to state governments
  • Make tax increases and tax reform one and the same
  • Encourage of federal-state revenue sharing

Defending a More Progressive and Economically Sound Approach

  • Don’t equate frugality or efficiency with budget austerity
  • Challenge anti-tax mythmakers

DOWNLOAD THE GUIDELINES (PDF 176KB)

 

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Consumer Protection and Corporate Purses (op-ed)

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"In this period of painfully partisan politics, it's too easy for the focus to be on who won today, instead of the American people's needs. We're witnessing just that in two roiling debates--one over the proposed Consumer Financial Protection Agency (CFPA), another over the recent Supreme Court ruling in Citizens United v. Federal Election Commission. [...]

The new CFPA's sole mandate would be to shield consumers from deceptive and dangerous financial products and practices. It would have the authority to not only write rules to better protect consumers, but also to enforce them. [...]

The Supreme Court's Citizens United ruling in January granted unabated financing of campaign communications by corporations, equating political spending with the right to freedom of speech, as listed in the First Amendment.

The...ruling will only make efforts to re-regulate the financial industry more difficult in the years to come, so long as financial institutions have the ability to amplify their "voices" by simply writing a larger check. [...]"

Read the full op-ed by Mazher Ali on CommonDreams.org.

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The Wealth Gap and Women of Color

Lifting as we Climb thumbnailThe Insight Center for Community Economic Development recently released a report, Lifting as we Climb: Women of Color, Wealth, and America's Future (PDF 493KB), which lays out the massive disparities of wealth between white women and women of color.

 "It's rather shocking," said Meizhu Lui, Director of Insight's Closing the Wealth Gap Initiative and contributor to the report. [...] "Even for those of us who have been looing at the wealth gap for a while, we were shocked and amazed at how little women of color have."

One of the report's most grim findings is that while single white women between the ages of 36 and 49 have median net assets of $42,600, their non-white counterparts have only $5.

Much of the report's data was based on the Center's analysis of the Federal Reserve's 2007 Consumer Finance Surveys released prior to the economic larger collapse, which provides sufficient reason to believe that the numbers are worse today.

The report takes into account various factors exacerbating racial wealth disparities amongst women in the US. These include institutional factors, such as tax structures or access to education or fair lending, generational trends in asset-building, and even family and cultural factors, such as parental or marital situations.

"The popular image is that [women of color] spend too much...running up credit card and consumer debt, but the cost of living has risen faster than income, and they need to go into debt for basic daily necessities," said Lui. "It's compounded because unemployment is twice as hight in the Black community than it is in the white community."

The Insight Center intends to use this report to encourage government officials to implement measures to help close the racial and gender wealth gaps, as has been done with past legislation. Lui notes, "It's not about behavior. It's about government policies. [...] Our government knows how to build wealth for people. They've done it for others and they can do it for all of us."

Read the report (PDF 493KB)

Read commentary on the report by Tim Grant in the Pittsburg Post-Gazette.

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Why the Richest Fare Better in Recession (podcast)

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Sears: "While the economy is still sour for the vast majority of Americans, and for most of the rest of the world as well, the world's billionaires appear to be doing quite nicely. Forbes published is 24th annual list of the world's richest people today. And, though the stock market crash caused a sharp drop in the number of billionaires from 1,125 in 2008 to just 793 last year, like an endangered species in an ideal environment, their numbers are close to being fully restored.

There are now 1,011 citizens of the world with wealth topping seven figures, and the 10 richest--3 of them are Americans--all saw their wealth increase by a total of $342 billion. So if the rest of us are still struggling to get by, why are those who don't need to struggle at all doing so well? Mike Lapham, Director of the Responsible Wealth project at United for a Fair Economy says for the American billionaires, at least, the answer is a combination of several factors."

Lapham: "We have a society that, in general, disproportionately values certain types of work over others. We also give a lot of tax advantages to investment over earned income. For example, the wealthiest folks are getting a huge portion of their income in capital gains. Starting back in 1997, we cut the capital gains rate from 28 percent to 20 percent. We cut it even further under George Bush down to 15 percent.

So if you're one of the top 400 taxpayers, you probably have about two-thirds of your income in capital gains and you're getting taxed a much lower rate than you're getting taxed on other things. That's one of the simplest ways that wealthy folks are amassing more and more wealth. But, if you're in one of the bottom quintiles in our society, you're paying almost all of your income on basic necessities...so you're not gaining much year over year.

The  folks at the very top have figured out how to invest in things that are sheltered. They can invest in things that give them tax credits. They can take advantage of loopholes with the amount of money that they have that the average person just doesn't have. [...]"

Download and listen to the full interview (MP3)

 

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Black Leaders Ask: Where's Our President?

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"President Obama met Thursday afternoon with members of the Congressional Black Caucus, ostensibly to talk about efforts to get health care legislation passed. But the leaders also discussed jobs and high unemployment in the African-American community.

After the meeting, the White House in a statement said the president 'acknowledged the progress that has been made on the economy, while also expressing his concern for long-term unemployment. He requested that members provide specific recommendations to the challenges concerning job creation.'

Studies have shown that blacks and Latinos have been disproportionately hit by the dismal economy. According to the organization United for a Fair Economy, unemployment in those communities hit a 27-year high in 2009.

Democratic Rep. Barbara Lee of California, chairwoman of the 43-member Congressional Black Caucus, attempted to mute her members' public complaints about the president that preceded the caucus' White House meeting Thursday.

Emerging from the White House, Lee said caucus members have 'been working with the president since before he was the president,' and that she didn't know where reporters had heard 'grumblings' about Obama."

Read the full story by Liz Halloran on NPR.org.

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How Goldman Sachs Hurts Communities of Color

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"William Diaz of the 462nd Transportation Battalion feels like he's fighting a war on two fronts. In April, the 39-year-old U.S. Army Reserve corporal is being deployed to Kuwait for a year-long tour.

But for the past few months, Diaz has been fighting another very painful battle in his own backyard: American Servicing Corp., a division of Wells Fargo, is seeking a court order to foreclose on his two-family home in Elizabeth, N.J., a predominately Latino city. [...]

'I am being deployed. I can't say no. If I do, I face court martial. But I feel like I am being forced to choose between my family and my duty to my country,' says Diaz.

For cash-strapped families like his, all it takes is one hiccup—a jump in interest rates, an illness, the loss of a job, a pay cut—to find themselves staring down the barrel of financial ruin.

These days, the contrast between struggling families on Main Street and bankers on Wall Street who are prospering at their expense could not be sharper. In the midst of the worst financial crisis since the Great Depression, with the U.S. unemployment rate hitting 10 percent and more than 1.4 million Americans filing for bankruptcy in 2009, Goldman Sachs celebrated one of the most profitable years in its 141-year history. In January of this year, Goldman Sachs doled out a hefty $16 billion in bonuses for the 2009 year, up from $10.9 billion in 2008—a pretty staggering feat given that a little more than a year ago, Goldman was forced to take American-taxpayer dollars just to stay alive.

The human tragedy all too frequently goes unnoticed amid the noise and finger-pointing in Washington, D.C., and Wall Street over who is to blame for the subprime debacle and its ensuing economic ramifications. But the trauma, the hardship, the heartache being felt by millions of ordinary Americans who have lost their jobs, their homes and their life savings—most of them Black and Latino—is still very real and still very raw. [...]

In fact, a study by United for a Fair Economy examining housing and racial bias found the subprime-lending mess has caused the greatest loss of wealth to Blacks and Latinos in modern U.S. history. During the past eight years, Black borrowers have lost between $72 billion and $93 billion from subprime loans, while Latino borrowers have lost between $76 billion and $98 billion during that same time period, according to the report.

Ironically, the tax dollars that supported the bailout of Wall Street's 'too-big-to-fail' banks and helped pad their bonus coffers came largely from struggling middle-class families—from people like Diaz, already working hard to make ends meet. [...]

As the real-estate market pushed to its peaks in 2005 and 2006 and home prices across the nation literally doubled, new homes couldn't be built fast enough. This voracious demand encouraged lenders to loosen their guidelines by offering loans to borrowers with even the shakiest credit. Wall Street banks cheered them on, extending generous credit terms to lenders and offering loan officers extra money to push subprime mortgages. [...]

And today?

Goldman continues to profit handsomely from the subprime-mortgage fallout. During the boom, Goldman Sachs bought thousands of subprime mortgages, many of them from some of the most toxic lenders in the business, and packaged them into high-yield bonds. [...]

In fact, Wall Street investment banks, including Goldman Sachs, were subprime-mortgage lenders' single most important source of capital and therefore had a lot of power and influence in the subprime-mortgage market, according to a report issued by Center for Public Integrity. [...]"

Read the full article by Sam Ali, Luke Visconti and Barbara Frankel on DiversityInc.com. Scroll down for additional commentary from Luke Visconti in dialogue with readers.

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Should the Jobs Bill Be Held Up for an Estate Tax?

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"There is a push underway by Republicans in Congress to trade their support for a jobs bill for a more favorable estate tax.

The left says it is a blatant case of the rich holding the poor hostage. The right say it is the only way to get a reasonable compromise on the estate-tax issue. [...]

Republicans want a full repeal of the tax or a version more along the lines of a proposal by Senate Minority Whip Jon Kyl (R., Ariz.) and Sen. Blanche Lincoln (D-Ark.), which would cap the tax at 35 percent on estates worth more than $5 million.

Republicans aren’t likely to win a full repeal (especially not in these populist times) but they may get something close to the Kyl-Lincoln plan.

Lee Farris, Estate Tax Policy Coordinator at the left-leaning United for a Fair Economy called the plan to link the estate tax to the jobs bill 'an outrage.'

'Why are Senators Kyl and Grassley more worried about enriching the heirs of multimillionaires than about helping Americans hit hardest by the recession?' she said in a statement. [...]"

Read the full blog by Robert Frank.

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Unemployment Benefits Used As Bargaining Chip In Estate Tax Battle

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"In a series of comments over the past few days, Senators Kyl and Grassley have made clear their willingness to hold up unemployment benefits for struggling Americans as a bargaining chip to permanently weaken the federal estate tax, and further enrich America's wealthiest families.

'Why are Senators Kyl and Grassley more worried about enriching the heirs of multimillionaires than about helping Americans hit hardest by the recession?' asks Lee Farris, Estate Tax Policy Coordinator at United for a Fair Economy (UFE). 'It is an outrage that they are willing to hold struggling Americans hostage in their efforts to secure another huge tax cut for the wealthy Wall Street crowd that crashed our economy in the first place!'

The $15 billion jobs bill that passed on Wednesday did not extend unemployment benefits or the COBRA health insurance subsidy. As a result, more than a million people will run out of benefits next month if the deadline is not extended, prompting Congress to begin debate over extending those benefits. But Senators Kyl and Grassley are ready to block it to get their way.

Minority Whip Senator Kyl, who has been a leader in efforts to weaken the federal estate tax, stated on Feb. 24 that Republicans will block consideration of the new unemployment benefits bill unless they get 'a path forward fairly soon' to voting on a permanent, and weakened estate tax. And earlier this month, Senator Grassley said that 'timely consideration of permanent bipartisan estate and gift tax reform' is 'essential to completing action on' a previous jobs bill."

Read the full press release on CommonDreams.org.

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Tuesday Evening Bilingual (Spanish & English) Training of Trainers

Beginning Tuesday, March 2nd, UFE will host a four-session, bilingual (Spanish & English) Training of Trainers series at our office in downtown Boston. UFE's Popular Economics Education workshops transform dry economic statistics into memorable learning experiences that connect with people’s lives and lead to action. This Training of Trainer series will give participants an opportunity to learn and practice the methodology behind the workshops, as well as engage with information about the roots of economic inequality and what we can do to move the struggle for economic justice forward.

Registration & Food at 6:00 pm
Training Session from 6:30 - 8:30 pm
All sessions will be held in UFE's Conference Room, 29 Winter St., 2nd Floor, Boston


The cost is $10 per session. Space is limited, so please RSVP to Steve Schnapp (617-423-2148 x110) or sschnapp@faireconomy.org to register.

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2010 Shareholder Resolutions

2010 Shareholder Resolutions

In 2009/2010, Responsible Wealth members have filed shareholder resolutions on the following issues:

  1. Say on Pay (the right of shareholders to vote on executive compensation packages)
  2. Pay Disparity (the gap between CEO compensation and average worker pay)
  3. Virtual Shareholder Meeting
  4. Proxy Voting
  5. Succession Planning
  6. Board Diversity

Say on Pay

While the economy has been in a deep recession, triggered by the financial crisis that began in 1998, many executives, particularly in the financial sector, have continued to receive outsized compensation packages. Responsible Wealth members have expressed their concern through “Say on Pay” shareholder resolutions, which propose giving shareholders a non-binding advisory vote on the pay of senior executives in the company. Responsible Wealth is part of a broad coalition of socially responsible investors, foundations, pension funds and others who together filed over 100 Say on Pay resolutions in both 2008/2009 and 2009/2010. To date, over 40 companies have adopted Say on Pay policies, and legislation is moving in Congress to require such votes at all publically traded companies.  

Although “Say on Pay” resolutions are relatively new, studies have shown that they have increased the quality of communication between shareholders and board members/executives. Say on Pay allows shareholders to provide valuable input in the formulation of CEO compensation packages by opening up dialogue between top executives and shareholders and holding executives more accountable for the company's long-term performance as reflected in their compensation.  For 2010, we have re-filed Say on Pay resolutions with Target and Yahoo.

Pay Disparity

Over the past few decades, the growth of CEO pay packages has far exceeded that of the national average income. This resolution asks companies to take a look at the CEO pay/average worker pay gap by asking the company to report on the following:

  1. A comparison of the total compensation package of senior executives and employees’ median wage in the United States in July 2000, July 2004 & July 2009.
  2. An analysis of changes in the relative size of the gap and an analysis and rationale justifying this trend.
  3. An evaluation of whether senior executive compensation packages (including, but not limited to, options, benefits, perks, loans and retirement agreements) are “excessive” and should be modified to be kept within reasonable boundaries.
  4. An explanation of whether sizable layoffs or the level of pay of the company’s lowest paid workers should result in an adjustment of senior executive pay to “more reasonable and justifiable levels” and whether the firm in question should monitor this comparison going forward.

For 2010, we filed Pay Disparity resolutions with JP Morgan Chase, Morgan Stanley, and Comcast.  The Comcast resolution was subsequently withdrawn due to a filing technicality (the filer owned the wrong class of shares).

Virtual Meeting

We strongly support the use of new technologies to make annual meetings accessible to stakeholders who cannot attend in person. This will make “attendance” simpler for many investors globally and is a creative tool for expanding outreach to owners. But we do not believe that Internet-only meetings should be substituted for traditional in-person annual meetings. Instead, the use of video or audio conferencing should be complementary to the physical meeting. We believe the tradition of in-person annual meetings plays an important role in holding management accountable to stockholders. By making all meetings purely virtual, executives and board members are able to manipulate the conditions of discourse to their advantage. This resolution asks to maintain a physical meeting as a means of ensuring the both the accountability of executives/board members and the quality of representation of stockholders. For 2010, we filed a virtual meeting resolution with Intel. Intel agreed to hold a physical meeting in 2010 and Responsible Wealth withdrew our resolution.   

Proxy Voting (specific to State Street Corporation)

As part of its fiduciary duty, State Street Corporation is responsible for voting proxies of companies in which it holds stock on behalf of its clients. However, its proxy voting record seemed to ignore State Street’s proclaimed environmental commitment and stated position regarding the impact of key environmental factors on shareholder value. We believe a thoughtful fiduciary must carefully review the economic rationale for all proxy initiatives. This resolution requested that the Board initiate a review of State Street Global Advisor’s Proxy Voting Policies, taking into account State Street’s own corporate responsibility and environmental positions and the fiduciary and economic case for each shareholder resolution presented. This resolution was filed with State Street Corporation. State Street has agreed to revise its proxy voting policy and we have withdrawn our resolution.

Board Diversity (specific to Intel Corporation)

The goal of this resolution is to raise the issue of introducing racial diversity within Intel’s board of directors. While Intel is by no means the epitome of board homogeneity (breaking the gender gap with three women serving on the board of directors), there is currently no racial diversity on the board. A growing body of research has shown that board diversity is a component of sound corporate governance and a key attribute of a well-functioning board. In an increasingly complex and diverse U.S. and global marketplace, the ability to draw on a wide range of viewpoints, backgrounds, skills, and experience is critical to a company’s success. After a good-faith discussion with Intel about strengthening its practices with respect to recruiting diverse candidates for board seats, we agreed to withdraw our resolution. 

Succession Planning (specific to Intel Corporation)

CEO succession is one of the primary responsibilities of a board of directors.  This resolution asks the board of directors to initiate a process to include in the company’s corporate governance guidelines a written and detailed succession planning policy. The resolution proposes that the new policy should require: an annual review of succession strategies; criteria for ensuring that the CEO position reflects the needs of the company; a plan to identify and develop internal candidates for the CEO position; initiation of a non-emergency succession planning committee at least three years before any anticipated transition, and an emergency succession plan; and the creation of a annual report to shareholders on the company’s succession planning.  This resolution was filed with Intel Corporation and withdrawn after negotiation with the company and assurance from the company that it is adequately focused on this issue and will provide greater transparency on this issue in the future.

Please follow the links below to see the text of the 2010 resolutions.

Company Issue Documents
Comcast Pay Disparity Resolution
Intel (I)
Virtual Meeting Resolution
Intel (II)
Board Diversity Resolution
Intel (III)
Succession Planning Resolution
JPMorgan Chase Pay Disparity Resolution
Morgan Stanley Pay Disparity Resolution
State Street Proxy Voting Resolution
Target "Say on Pay" on Executive Compensation Resolution
Yahoo! "Say on Pay" on Executive Compensation Resolution
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