Nation Under a Microscope: Pain & Hope at the Local Level

By Antionetta Kelly, UFE Intern via the Hampshire College Civil Liberties and Public Policy program

Working as an intern at United for a Fair Economy (UFE) has helped me realize that taxes, economic policy and government play vital roles in improving our communities. UFE warns against and strives to dilute concentrated wealth and power. They work on a national scale to promote progressive economic policies that can enable all levels of government to invest in the common good, and support a grassroots economic justice movement that can bring those policies to fruition.

When we zoom in to see what's happening at the local level, in too many areas we're finding that community development remains stagnant, including in our own, Boston. Here, local decision-makers continue to place the interests of monied special interests above the needs of most residents – especially those in underdeveloped neighborhoods. Here's a snapshot of what we've been dealing with:

In 2009 – despite revenue growth in several tax categories – local officials contended that Boston was in an economic crisis, yet responded with tax breaks for large corporations and threats to lay off hundreds of teachers, public safety and other city workers.

Even more disheartening, the city has forfeited opportunities to generate significant revenue through property sales. Last year, the City of Boston sold twenty-five lots at far less than their assessed values. In one instance, a property assessed at $99,400 (currently at $114,400), was sold to a city employee for only $5,000! And, in spite of this period of austerity, our local officials have approved hefty tax breaks for corporations, relinquishing tens of millions of dollars in corporate tax revenue.

Meanwhile, our communities continue to deal with unacceptable high school drop-out rates, municipal unemployment of 8.2%, and too many neighborhoods reeling from the effects of concentrated foreclosures. In spite of that, our local officials have asked us to make sacrifices regarding public services like libraries and schools because of insufficient funding. Just before his 2009 re-election campaign Mayor Thomas Menino asserted that there wasn’t enough money to fund teaching, public safety and community outreach jobs, and when union workers in these areas refused to accept his proposed wage freezes, he threatened them with hundreds of layoffs and building shutdowns. More recently, there have been proposals to close several library branches, and claims that funding isn't available to provide enough summer jobs for local teens. 

Our local government could do more to extend employment opportunities to marginalized communities, or at the very least, enforce the policies that are designed to support those efforts, like the Boston Residents Jobs Policy (BRJP). The BRJP mandates that developers hire 50 percent Boston residents, 25 percent people of color and 10 percent women; however, those quotas have been consistently brushed aside. 

These types of policy decisions – ones that prioritize special interests over the residential majority – undermine our city's economic well being. The social consequences can be extremely severe – increased unemployment, wider-spread foreclosures, diminished public safety, escalating crime and violence, increased community health risks, a widening racial divide, and ultimately, the creation of economic deserts. And, the longer the causes go unaddressed, the more difficult it will be to reverse the cycles of poverty.

Boston's current socioeconomic situation isn't unique. Budget deficits are an epidemic, affecting communities in every part of the US. But, there is so much our governments -- local, state and federal -- could do to alleviate the pains millions of Americans are experiencing as a result of this recession. We can no longer allow corruption or cowardice to steer our economy in the wrong direction. It's up to us and our communities to make that change.

As Justice Louis Brandeis once suggested, state legislatures are our nation's "laboratories for democracy." Well, local governments are our nation's vanguards. Both the innovations and the power of a democratic system come from the ground up, and progressive social change will only come about when communities rise up against injustice.

Well, we can say that there is at least one good egg in the Senate. Bernie Sanders called out the hypocrisy of the born again deficit hawks who – just nine years ago – were telling us that “deficits don’t matter." Two wars, two huge sets of tax cuts and a spate of record setting debt accumulation later, we are now in a hole that only leaders as outspoken and honest as Sanders can get us out of.

His recently proposed Responsible Estate Tax Act would be a great way to raise much needed revenue in a way that would only affect multi-millionaires and billionaires. The so-called deficit hawks seem to have a problem with it.

Federal estate tax policy has been a contentious issue since the establishment of Bush’s tax policy in 2001. While its most adamant opponents deem it the “death tax,” supporters of the estate tax maintain that – besides being a sizeable revenue source –  it represents the fundamental American ideal of meritocracy. The estate tax helps to ensure that one achieves success by her own hard work, rather than by the fortune of his or her parents.

As I listened to United for a Fair Economy’s teleconference on the estate tax, I was amazed by Abigail Disney’s simple, yet powerful argument. She dispelled the myth that the estate tax impedes economic success. Disney – who paid a sizeable estate tax herself – pointed to her own family’s financial triumphs, noting that they were possible “not in spite of, but because of the American system of taxation." She reminded us that were it not for federal investment in highways, Disneyland would never have succeeded, or that if we did not have a strong court system Mickey Mouse’s trademark protection would not have endured.

The experiences of the Disney family serve as a poignant reminder of the ways that meaningful public investment can enable the culture, innovation, and values that define us as Americans. More importantly they show us that individual success and adequate government funding need not be described in opposition, but rather that they are woven together as the fabric of a nation’s prosperity.

The estate tax seems like a fitting way for the very wealthy to enable others to share in and expand this prosperity that America represents. It presents a symbolic bridge between individual success and our coveted democratic ideals. The adoption of strong estate tax legislation will not force us to choose between the individual and the nation, or the short term and the long run. Rather, it will serve all of the above.

Four months ago, 300 plus workers from the Shaw’s distribution center in Methuen, MA went on strike. This month, they're celebrating a victory.

The strike was born when workers voted in opposition to a contract that would cut their healthcare benefits. Shaw’s refusal to absorb the cost of an increase in premiums would cause workers a loss of $28 per week, which accumulates to $1,456 annually. Shaw's management stubbornly moved forward by hiring replacement workers and terminating healthcare for the striking workers.

In late May, the workers’ union, United Food and Commercial Workers Union, Local 791, organized a 60-mile, 5-day “March for Justice” beginning in Methuen and ending in Boston. Public officials, including Sen. John Kerry and Rep. Michael Capuano, urged Shaw's/Supervalu president and CEO Craig Herkert to reach a settlement.

The workers approved a new four-year contract–including wage increases and more affordable healthcare–on July 8th, ending the bitter strike. The temporary workers will be phased out gradually, allowing for the union workers to resume their positions. 

A joint press release by UFCW and Shaw's stated, “The four-year contract continues Shaw’s long-standing history of providing good wages, comprehensive and affordable health care and a generous retirement plan,” although the original contract didn't exactly live up to this commitment. Many continue to feel that the ratified contract isn't enough–especially considering the months of lost pay–but the victory is about more than the final terms.

This resolution demonstrates the perseverance of the workers and the commitment of the union and communities to stand behind them. Supervalu was greedy and determined to break the union with intimidation, but the workers were unbending and rallied an enormous amount of support, ultimately forcing the company to renegotiate the contract.

The victory was made possible, in part, by the Commonwealth of Massachusetts, which granted unemployment benefits that were vital to the workers’ ability to sustain the strike. Additionally, a strike fund, for which over $180,000 was raised, played a key role in giving the Shaw's workers the financial wherewithal and morale to continue the strike.

Anthony Zuba, leader of the Interfaith Committee for Worker Justice, said healthcare should never be used as an “economic weapon,” and this 4-month battle is a lesson in why. The workers, union, advocacy groups and communities stood bravely and found their own weapon in a collective voice for workers' rights.

Conservative bluster about the Bush Tax Cuts for the wealthy reminds Kevin Drum of conservative bluster about the estate tax. He harkens back to the heat of the estate tax debate under President Bush.

Back in the day, one of the key Republican arguments against the estate tax was that it forced hardworking, salt-of-the-earth children of small farmers to sell the family plot in order to pay their taxes after dad died. It was a sad story, but with one problem: no one could find even a single small farmer who had been forced to liquidate in order to satisfy Uncle Sam's voracious maw. Even the American Farm Bureau Federation was eventually forced to admit that it couldn't come up with a single example, and a few years later the Congressional Budget Office estimated that under the now-current exemption level, only a tiny handful of small farms were likely to owe any estate tax to begin with — and of those, only about a dozen lacked the assets to pay their taxes. And even those dozen had 14 years to pay the bill as long as the kids kept running the farm. In other words, the story was a fraud from beginning to end.

The same argument is still being made by the anti-tax lobby to smear the estate tax, and it is still nonsense. That's why we're still putting out the facts about family farms and the estate tax. The new variation to the nonsense is the claim that small business owners will bear the brunt of ending the Bush income tax cuts on the top tax bracket. Prompted by Senator Chuck Grassley's (R-IA) public dare, Drum takes that argument apart in four quick steps.

Step 1: The Brookings Tax Policy Center estimates that only 1.9% of small businesses are in the two top brackets that would be affected. That's a little better than the dozen small farms affected by the estate tax, but not by much.

Step 2: About half of that 1.9% aren't really small business owners at all. They're high-income investors who get part of their income from investments in small businesses. So we're down to about 1% of small businesses that would be affected.

Step 3: The top brackets are just that: brackets. When the top rate goes up, it doesn't affect your entire income, just the portion in the top bracket. So if the top rate goes back up from 35% to 39.6%, it only affects the portion of income above approximately $400,000. A small business owner making $500,000 would see an increase of about $5,000. This is a fairly modest amount for someone making a half million dollars, and anything higher than that is hardly a "small" business to begin with. And the marginal effect is even smaller for the second highest bracket.

Step 4: The Office of Management and Budget estimates that the 10-year cost of these upper-income tax cuts is $678 billion, the vast majority of which hits wealthy individuals, not small businesses no matter how you define them. That's a fair chunk of change for anyone concerned about the deficit.

So that's the case. Letting Bush's tax cuts for the rich expire affects only a tiny number of small businesses; it doesn't affect them very much; and it generates revenues of $678 billion. If the only thing you care about is keeping taxes low for rich people, you won't be convinced. For the rest of us, it's a no-brainer. [emphasis added]

The $678 billion dollar figure does not include additional tens of billions of dollars that will either be generated in revenue or added to the deficit based on what we decide to do with the estate tax this year. Remember, the estate tax was gutted by the same Bush tax cuts, and like the rest of the Bush tax cuts, the estate tax cuts are set to expire at the end of this year too.

There's some real big choices to make this year. Should we hand out billions of dollars in tax breaks to the richest of the rich, or should we generate some much needed revenue? Should we keep a few dollars in the pockets of millionaires and billionaires, or should we generate start to turn around the trend of growing economic inequality?

The Financial Reform bill has been passed by both houses of Congress and now awaits President Obama's signature. When the President signs his name, the new law will be the biggest improvement to regulation of the financial industry in generations. It's a big change with a lot to it, but reigning in Wall Street and the excesses of finance will not be accomplished with one new law alone. But for now, it's time to celebrate what truly is an historic victory.

Of the many good things in the final package, the new consumer protections may be the sweetest. The new Consumer Financial Protection Bureau made it through in a reasonably strong form, and has a chance to truly protect consumers from many of the abuses that plumped up bank profits and bonuses at the expense of the public. Members of UFE and our Responsible Wealth project deserve to be particularly proud for standing up for the consumer financial protection in this bill.

Chris Sturr at Dollars and Sense (a magazine you should subscribe to if you don't already) runs down some more details. He links to an excellent explanation of what's in the bill, what got cut out, and what never even had a chance.

Some more reactions:

• Shahien Nasiripour (who has also become a must read) teams with Ryan Grim at the Huffington Post for a wrap up on passage of financial reform.

• Ezra Klein highlights some of the positives.

• Simon Johnson is hard to please, but he sees some encouraging similarities to past regulatory efforts.

• And Kevin Drum made a good the case for the bill when it's passage was still, at least somewhat, in doubt.

Representative Linda Sanchez (D-CA) introduced a new estate tax proposal in the House of Representatives. The specifics are very similar to the Responsible Estate Tax Act (S.3533) introduced in the Senate in late June.

It is a good bill. Representative Jim McDermott's Sensible Estate Tax Act (HR 2023) is still the best proposal in the House. It stays closest to the AFET guidelines for good estate tax reform. However, the release of matching proposals in the House and Senate from Sanchez and Sanders, looks like a sign that progressive lawmakers are serious about fighting for a strong estate tax.

Congress needs to get serious about taxes. With the Bush tax cuts expiring and conservatives returning to their nonsensical rhetoric, the fight for progressive taxation is on.

The good news is that the American public strongly favors higher taxes on the rich, poll afterpoll after poll (pdf, page 16) backs up that fact. The estate tax, of course, is paid exclusively by millionaires, which is exactly the kind of tax the public wants. And, we're rallying more support for our nation's most progressive tax. 

Stay tuned for more news coming out of our press conference on July 21st.

Good stuff from Sarabeth Guthberg at 1115.org (via Steve Benen) taking apart Senator Kyl (R-AZ) for his most recent bit of idiocy about taxes. The second ranking Republican in the Senate told the world that he believes there is no reason to offset the cost of tax cuts. His comments drew a lot of attention, and so he tried to explain himself. Sarabeth goes to town on his clarification.

"First of all, o confused eminent personage of the Republican persuasion, the question wasn’t how to offset increased spending, the question was how to offset reduced tax collections.

Secondly, increased spending gets offset by reduced savings? If the government spends more and saves less, that’s a deficit-neutral plan? This entirely backward “reasoning” explains a hell of a bloody lot, doesn’t it, about why the deficit and the national debt got to where it is?

Thirdly, even if the master plan is to shrink government — in fact, especially if the master plan is to shrink government — the budget effect of a tax cut has to be offset. Kyl doesn’t even seem to realize that the deficit-shrinking tool kit includes spending cuts. Or that, if you want to shrink the government, it’s not enough to cut taxes, you have to bloody well cut spending too. Then, and only then, does the government shrink. And — this will probably come as a very rude shock to the guy, so as an act of Christian charity, we should make sure that Jon Kyl is sitting down when this is broken to him — the spending cut offsets the tax cut, to make it deficit-neutral."

Well said.

Of course, this is nothing new for Kyl who routinely sponsors horrible estate tax legislation and just a few months back tried hanging the unemployed out to dry to get his way. But the problem goes deeper than Kyl. Ezra Klein gets sad by paying attention to Mitch McConnel (R-KY) and finding that the problem is endemic to Republican leadership in the Senate.

For the record, that's the two highest ranking Senate Republicans (and in McConnel's words, "the view of virtually every Republican") denying the existence of facts about taxes.

Photo credit: Hazboy

Long before I moved to the Boston area in 1977 I had no love for the NY Yankees. Despite the fact that I grew up just a few blocks from Yankee Stadium, my family divided it’s loyalties between the Brooklyn Dodgers — the first team to break baseball’s color barrier — and the Giants (we would walk to the Polo Grounds to watch Willie Mays’ show off his amazing talents. To our working class sensibilities, the Yankees represented the ruling class of baseball, dominating the sport with the largest team payroll year after year, and displaying arrogance both on and off the diamond.

George Steinbrenner, who inherited his wealth from his father’s shipbuilding company and bought the team from CBS in the early 1970s with money from the family business, raised the level of pin-stripe hubris to new heights. In his first 17 seasons as owner, Steinbrenner hired and fired 17 managers; skipper Billy Martin was fired five times! His temper tantrums were legendary and his willingness to doggedly pursue free agents — the Kansas City Athletics were jokingly referred to as the Yankees’ farm team — ensured a steady stream of stars. Off the field, George’s antics included illegal contributions to Richard Nixon’s presidential campaign. Apparently, Steinbrenner had an affinity for employing seedy characters to bring down one’s enemies: he once hired gambler Howie Spiro to find dirt on on Dave Winfield, his own player, during contract negotiations.

While the Wall Street Journal eulogized Steinbrenner, praising his success in turning the Yankees “into a financial powerhouse,” they declined to mention that the wealthiest team in baseball received $362 million from New York City to build the lavish new stadium (New York State Assemblyman Richard L. Brodsky, D-Westchester, said the taxpayers' tab for Yankee Stadium eventually will total $4 billion, including potential property tax revenue over 40 years given up in the deal). The promised benefits to the neighborhood that, due to the construction, lost their ball fields and parks — where I played as a kid — have still not been replaced as promised.

And, oh yes, George Steinbrenner died with an estate worth about $1.3 billion, not a penny of which will return to public coffers through an estate tax. Due to the tax cut package George Bush signed into law in 2001, the Estate Tax was phased out step-by-step until January 1, 2010 when it ceased to exist all together. George is the fourth billionaire in the US to die so far this year leaving all their vast wealth to their heirs and designees alone.

Fortunately, the tax cut law has a sunset provision which means that on January 1, 2011, the estate tax will be restored to its 2001 level. Of course, the folks who think the Great Recession is no reason not to push through even more tax cuts for the wealthy are fighting the sunset tooth and nail. So if like me, you think George born-with-a-silver-spoon-in-his-mouth Steinbrenner will not appear on your list of the top 10 human beings who passed in 2010, you might consider contacting your Senators and Representatives and telling them to restore a responsible estate tax in “honor” of the Yankee capitalist.

After a 19-day protest, the Student Immigrant Movement (SIM) and allied organizations celebrated a victory in their campaign, Mass Hope 2010, for the Massachusetts legislature to overturn a budget amendment laden with anti-immigrant language.

For those 19 days, SIM members staged a 24/7 vigil in front of the State House, risking arrest by local law enforcement, as a stand in solidarity with immigrants, both documented and undocumented, in Massachusetts.

SIM initiated Mass Hope in late May when the state legislature's conference committee released its budget proposal for the new fiscal year, which was laden with provisions  that would have been an affront to the rights of immigrants and children of immigrants with regard to employment, housing, education and public services.

The anti-immigrant legislation, amendment 172.1, was not only a threat to immigrants' civil liberties, but would have also been costly for taxpayers and highly inconvenient for a state government that's already stretched thin by the ongoing recession.

Amendment 172.1 would have exemplified government at its worst. Its wasteful and punitive measures were neglectful of its impacts on the families of undocumented immigrants, and Massachusetts' immigrant communities as a whole. And, it would have done absolutely nothing to address the root causes of unlawful migration to the US.

SIM's mobilization succeeded in getting the conference committee to take their proposal back to the drawing board. The outcome was, in large part, a win for immigrant rights. While most of the proposed new restrictions and regulations were struck down, the final budget proposal contained provisions that codified existing practices and regulations as law.

The Massachusetts Immigrant and Refugee Coalition (MIRA) expressed mixed feelings about the final budget. In the process of drafting their final budget proposal, the conference committee eliminated a program that has been providing state-subsidized healthcare for nearly 30,000 documented immigrants, raising concerns for the physical and financial well being of thousands of men, women and children. Another concern MIRA has conveyed is the closed-door message the immigrant-related codifications send to future immigrants to Massachusetts, which has come to be known as one of the most immigrant-friendly states in the US.

The budget is now headed to the Governor's desk for review. Although most involved in Mass Hope are content with the conference committee's decisions, MIRA still cautions Gov. Deval Patrick to carefully consider the implications of the immigrant-related provisions they've deemed as problematic.

The vigil has officially ended, but SIM and other activists will keep up the pressure on their state legislators to defend and expand the basic rights of immigrants in Massachusetts. UFE is proud to have participated in Mass Hope. UFE staffers participated in the vigil, in rallies, provided support, resources and a space of community for the campaign planners, protesters and others involved.