Romney's business used tax deduction he claimed he didn't know existed

The Presidential debates are over but that doesn’t mean what was said is now old news.  In fact, something Mitt Romney said in the first debate on October 3^rd is back in the news.  In my blog after that debate I said this Romney statement that should be getting more attention:

ROMNEY: “The second topic, which is you said you get a deduction for taking a plant overseas. Look, I've been in business for 25 years. I have no idea what you're talking about. I maybe need to get a new accountant.”

I said that Romney’s statement didn’t pass the laugh test.  Surely Romney understands our nation’s tax policy and what business expenses are.  After all, that is what Bain Capital was largely about, understanding the intricacies of our tax code in order to offer its clients and own executives ways to avoid paying taxes.

Today’s story in the Huffington Post exposes Romney’s flippant debate response regarding having “no idea” about a business deduction for moving jobs out of the country.  He simply wasn’t telling the truth.

        Bain Capital appears to have benefited from a provision in the U.S. tax code that
        grants companies tax breaks for costs associated with offshoring American jobs.
        Bain profited from the closure of a Denver factory in early 2001, when SEC filings
        list Romney as the sole shareholder and CEO of multiple Bain enterprises.

Stopping businesses from getting tax deductions for moving jobs out of this country is cited by small-business owners as the number one thing government can do to create more jobs at home.  So it is important that we have a President who is on our side on this issue and not pretending the problem doesn’t exist. 

Media correcting the lies

It is satisfying to know that persistence in correcting false information pays off. 

One of the on-going lies about Obamacare is that it imposes a tax on small businesses.  This lie has been told over and over by the National Federation of Independent Business (NFIB) that has taken millions of dollars from GOP-related organizations in order to attack the healthcare reform law.

GOP Vice-Presidential candidate Paul Ryan repeated this lie in his speech at the Republican National Convention Wednesday evening.  Fortunately the national media has heard the truth from those like me who want to see Obamacare successfully enacted. 

In a Washington Post story yesterday under the heading “The true, the false, and the misleading: Grading Paul Ryan’s convention speech” was the following.

Paul Ryan declared that the Affordable Care Act would impose “new taxes on nearly a million small businesses.” The Act changes taxes for small businesses in three ways. It provides a tax credit (pdf) to subsidize insurance coverage for which between 1.4 and 4 million small businesses are eligible. It imposes a tax on medical device manufacturers, of which there were only 5,300 (pdf) in the United States in 2007. Finally, it imposes an employer mandate on businesses that do not provide coverage, which will not affect (pdf) businesses with under 50 employees. Most small businesses, then, get a tax cut, and the number of small businesses facing tax increases is about five thousand, far under a million. Ryan’s claim is just false.

Unfortunately, GOP Presidential candidate Mitt Romney didn’t read the fact-checking reviews of Ryan’s speech because last night he gave an abbreviated version of the lie saying of President Obama, “His plan to raise taxes on small business won’t add jobs, it will eliminate them.”

But as for factual information about small businesses, a Gallup poll released this week shows “small-business-owner satisfaction is up sharply.”

…despite the challenges small-business owners face, 55% are extremely or very satisfied with being a business owner and another 29% are somewhat satisfied, for a combined 84% saying they are satisfied to some degree with being a small-business owner.

This doesn’t sound like all small-business owners have succumbed to the fear the NFIB and some politicians are trying to instill in them with lies about Obamacare.

 

Big business is doing fine

“Big business is doing fine in many places – they get the loans they need, they can deal with all the regulation. They know how to find ways to get through the tax code, save money by putting various things in the places where there are low tax havens around the world for their businesses.”

Those are the words of GOP Presidential candidate Mitt Romney spoken in Minnesota yesterday.

If big business is doing fine, why aren’t they hiring?  Why are small businesses with fewer than 50 employees accounting for about 50% of all new hires every month this year while businesses with over 500 workers accounting for less than 10% of the new workers. 

We have been continuously told that regulations were stopping big business from hiring.  Now Romney says that is not the case because “they can deal with all the regulation.” 

We also know from survey after survey that small businesses don’t think regulations are a big problem and obviously they aren’t because small businesses are leading in job creation.  So Romney’s comment that small businesses are being “crushed” by regulations is simply not factual.

What is holding back small business growth besides the number one problem of lack of consumer demand is lack of financing.  Ever since the economy crashed due to the reckless gambling of Wall Street, financial institutions have severely restricted loans and lines of credit to small businesses making it extremely difficult for these businesses to grow even as consumer demand is picking up.

But not so for big businesses.  Romney admits that they have no problem in getting loans.

So what is holding big business back from investing in American jobs?

Romney makes that very clear—GREED. These multinational corporations and big business giants simply are hording their profits in “low tax havens around the world”, tax avoidance tactics that are available only to big corporations and wealthy individuals.

And Romney knows what he is talking about because his old company Bain Capital is deep into hiding money offshore.  Today’s news reveals a new tax gimmick involving offshore tax havens used by Romney’s investments in Bain Capital and others to hide even more money from being taxed appropriately—blockers.   

My friend Rebecca Wilkins, senior counsel with Citizens for Tax Justice, told ABC news what a blocker is.  “The blocker is a paper company that serves as a buffer between the investor and the fund holding the investments, Wilkins explained.  That means the investment income can be counted as a dividend and in some cases avoid income tax.”

"It just confirms what everyone already believes about the tax system -- that it's rigged. That the rules are rigged to favor the well off,” said Wilkins.

Every tax dollar big business and the wealthy hide from U.S. taxes so they don’t have to pay for government services that they enjoy (military defense, roads & bridges, education, the courts, etc.) is an extra tax dollar small businesses and the average American has to pay to subsidize the tax evaders.

We’re all paying big business’s fair share of taxes.  No wonder they are doing fine.

Patients Would Pay More if Romney Restores Medicare Savings, Analysts Say

New York Times
August 22, 2012

By Jackie Calmes

Mitt Romney's promise to restore $716 billion that he says President Obama "robbed" from Medicare has some health care experts puzzled, and not just because his running mate, Representative Paul D. Ryan, included the same savings in his House budgets.

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.”

Marilyn Moon, vice president and director of the health program at the American Institutes for Research, calculated that restoring the $716 billion in Medicare savings would increase premiums and co-payments for beneficiaries by $342 a year on average over the next decade; in 2022, the average increase would be $577.

Beneficiaries, through their premiums and co-payments, share the cost of Medicare with the government. If Medicare’s costs increase — for instance, by raising payments to health care providers — so, too, do beneficiaries’ contributions.

And those costs would be on top of the costs involved with a full repeal of the health care law, which would eliminate expanded coverage of prescription drugs, free wellness care and preventive checkups.

Read more

Romney-Ryan's promise of austerity for small businesses

With Congressman Paul Ryan on the ticket with Mitt Romney, it is clear that a Romney-Ryan administration would choose eliminating the federal deficit over creating jobs as their economic plan. 

So what does this mean for small businesses if $6 trillion was cut from federal spending over the next 10 years as proposed by Mr. Ryan and supported by Mr. Romney? 

I’ve warned about such an austerity approach.  It is the road Europe chose during the Great Recession and the economic results have been disastrous.  Last Friday I told you about the dramatic rise in abandoned babies and children by families in Europe that can’t afford to feed and clothe them.

In today’s editorial the New York Times writes,

More than three-fifths of the cuts proposed by Mr. Ryan come from programs for low-income Americans. These cuts are so severe that the nation’s Catholic bishops protested the proposal as failing to meet society’s moral obligations, saying the plans “will hurt hungry children, poor families, vulnerable seniors.”

But aside from our concern for the less fortunate, what happens when government stops supporting the vulnerable in our society or helping states and local governments with education and first responder financing or investing in roads and bridges?  The answer is a dramatic drop in money on Main Street. 

The funds for these programs aren’t being spent on European vacations or the buying of more stocks or paying for big bonuses for corporate executives.  That is what the wealthy and big corporations will do with their $4 trillion in tax cuts if the Romney-Ryan plan is enacted. 

The money targeted for the austerity budget is being spent today in your local communities.

Main Street will suffer as it has in Europe and especially in Greece and Italy.  And for what?  Even the Ryan budget plan wouldn’t balance the federal budget for 30 years. 

Government austerity is a failed model.  While there will be no austerity for the wealthy and multinational corporations, there will be plenty for small businesses.

Déjà vu all over again…with a bad twist

Yesterday President Obama reiterated his position that he supports extending the Bush-era tax cuts for the lower 98% of all taxpayers for another year.  Of course, that also means that he supports allowing those same tax cuts for the top 2% of tax payers to revert back to the Clinton-era levels (you remember the 90’s when the economy was soaring and we actually had a budget surplus)—a position shared by most Americans.

Of course the President’s GOP opponents argue that all the Bush-era tax cuts should be extended because to do otherwise would cause the wealthiest to stop creating jobs. 

Sound familiar?  It should.  We’ve been having this debate since 2010 when all the tax cuts were set to end.  The South Carolina Small Business Chamber, the American Sustainable Business Council, Business for Shared Prosperity, the U.S. Women’s Chamber of Commerce and other business groups support allowing the tax cuts for the upper 2% to expire and to use the new revenue for deficit reduction and investment in the nation’s infrastructure, first responders and teachers.

I wrote about this issue in The Hill once in 2010 and again in 2011.  The point is pretty simple.  Very few small business owners (less than 3%) fall into the upper 2% tax brackets and many that do have some business income are K Street lobbyists, hedge fund managers, high-powered consultants, Wall Street bond traders and the wealthiest Americans.  They are not your Main Street small business people.

Plus, businesses do not hire workers based on the business-owners income tax rate.  Businesses hire workers when the demand is there for products and services. 

But here is the new twist to this old debate. 

The traditional line against the tax rates going up for the wealthy is that it would hurt the small business job creators.  This argument recognized that small businesses create most new jobs but distorts the reality of the income of small business owners.  As indicated above, very few have incomes that would cause them to see a tax increase if the Bush-era tax credits on the top 2 tax brackets increased.

But yesterday in a radio interview, Presidential candidate Mitt Romney said, “What the president is proposing is therefore a massive tax increase on job creators and on small business.” 

AND???  Is Mr. Romney now making a distinction between “job creators” and “small businesses”? 

I thought maybe he simply misspoke but Romney spokeswoman Andrea Saul also made the distinction yesterday.  “The president’s latest bad idea is to raise taxes on families, job creators and small businesses,” she is quoted as saying.

This is apparently now the official position of the Romney campaign.  Small businesses are now not to be recognized as the same as job creators. 

Why is this important?  Because one of the few things small business has going for it in government is the deserved reputation as job creators.  But even with that we still don’t get the respect we deserve from government which at all levels heaps attention and incentives on big business while giving crumbs to small business.

If there is now an official effort to decouple job creator status from small businesses, we are in deep trouble.  The billionaires and multinational corporations that are trying to buy this election to totally control our economy and government will have driven the final stake into our hearts.

It’s a bird, it’s a plane, it’s . . . a Tax Penalty!

One of the big political stories yesterday was Republican presidential candidate Mitt Romney correcting his top advisor, Eric Fehrnstrom, thus giving us the accurate description of how the individual mandate to purchase health insurance will be enforced.  Yesterday Mr. Romney called it a tax and on Monday of this week Mr. Fehrnstrom called it a penalty.  So it’s a “tax penalty”.  Neither Mr. Romney nor President Obama has ever promised not to create a new tax penalty that is needed to promote the common good. 

Many people and businesses have experience with a tax penalty.  Don’t pay your taxes on time or file the proper tax forms on time and you get a tax penalty?

And just like existing tax penalties, relatively few ever have to pay them.

Citizens for Tax Justice estimates that “less than three percent of households”, ones that can afford to buy health insurance but choose not to accept personal responsibility ("free riders"), will face this tax penalty. 

The other big political story yesterday was my friend Nick Shaxson’s article in the August issue of Vanity Fair.  Nick, Rebecca Wilkins (Senior Counsel on Federal Tax Policy at Citizens for Tax Justice) and I gave a Congressional staff briefing on offshore tax haven abuse in April last year.  That briefing was sponsored by the Financial Accountability and Corporate Transparency (FACT) Coalition.  

The three of us in this photo taken on the Capitol steps are joined by another friend, Chuck Collins (naturally on the left), a senior scholar at the Institute for Policy Studies.

In the Vanity Fair piece, Nick “delves into the murky world of offshore finance” and discusses Mr. Romney’s “familiarity with foreign tax havens” such as his assets sitting in Bermuda, Luxembourg and the Cayman Islands.  Nick specifically points to the example of a “Bermuda-based entity called Sankaty High Yield Asset Investors Ltd.” formed in 1997, a corporation wholly owned by Mr. Romney.  The fact that Mr. Romney failed to report this business on his financial disclosure statements prior to 2010 and that Mr. Romney continues to not reveal the value of the corporation has reignited interest in the use of offshore tax havens to avoid paying U.S. taxes. 

And as we should all know by now that when the wealthy and multinational corporations hide their money to avoid paying our taxes, the rest of us end up subsidizing all the benefits of America—our infrastructure, education, military, courts, etc.—that have helped these “free riders” be financially successful.

An email on healthcare reform for the Supreme Court and public

If the GOP conservatives were distraught over the last few days because Mitt Romney selected Michael Leavitt (a supporter of parts of Obamacare) to head his transition team should he win in November, then they will be in full buyer’s remorse after reading today’s story in the Wall Street Journal.

Calling for the full repeal of national healthcare reform has been developed into a reflexive mantra of the Republican Party base.  Mr. Romney is still having difficulty securing the love of conservatives because of his past support in Massachusetts of much of what is in Obamacare including the individual mandate. 

So even while the GOP Presidential nominee calls for total repeal of Obamacare from the stage, Mr. Leavitt’s appointment caused quite a push-back from conservatives and raised their suspicion of Mr. Romney even higher.

But today’s Wall Street Journal story is more than just more fuel for the ABR primary voters (Anybody but Romney); it is an educational opportunity for the public and even the Supreme Court.

In spite of the Romney gubernatorial staff efforts to erase every trace of emails during his term of office in Massachusetts (they had every email on the governor’s office server computer removed and bought 17 hard drives from personal computers owned by the state—so much for transparency), the Wall Street Journal found a Romney cabinet member who obviously couldn’t find the delete button.

The emails obtained by the paper show Governor Romney and his aides as big supporters of the individual mandate within their healthcare reform plan.  Mr. Romney was intimately involved in creating every detail of the plan and pushed the mandate onto reluctant state Democrats.

In one uncovered email a top healthcare aide to Governor Romney wrote, “We must have an individual mandate for any plan to work.”  Mr. Romney himself drafted an opinion editorial to run the day before he signed his healthcare reform legislation.  In that piece Mr. Romney says, “Either the individual pays or the taxpayers pay.  A free ride on government is not libertarian.”

After Governor Romney signed his healthcare reform—individual mandate and all—into law, he sent the same top healthcare aide an email saying (according to the Wall Street Journal story), “Quite a day! … You have made a huge difference, for me and for hundreds of thousands of people who will have healthier and happier lives… Best, Mitt”

That is the message the country and the Supreme Court needs to hear. 

Look who pays less in taxes than Buffett and Romney

The Hill's Congress Blog

By Scott Klinger, tax policy director, Business for Shared Prosperity

03/01/12 03:12 PM ET

Corporations pay a lower effective tax rate than Warren Buffett and Mitt Romney, but you wouldn’t know it from all the complaints that our corporate tax rate puts our country at a competitive disadvantage. Last year, U.S. corporations paid just 12.1 percent of their earnings in federal corporate income taxes. Buffett’s tax rate is 17.4 percent; Romney’s reported 2010 tax rate was 13.9 percent.

The corporate tax system is riddled with loopholes and subsidies that do create competitive problems, but not the ones CEOs are talking about. Our broken tax system blesses U.S. multinational corporations with lots of loopholes that enable them to pay less in taxes than Main Street businesses. It allows large companies, even those in the same industry, to pay vastly different tax rates. It has starved our government of revenue, adding to the pressure for deep budget cutbacks rather than the investments needed to rebuild our crumbling infrastructure, educate our children and support the innovation needed for economic success.

President Obama has called for corporate tax reform that is “revenue neutral” – using any revenues gained from closing loopholes and ending subsidies to pay for lowering the statutory corporate tax rate and extending or introducing other tax breaks. The problem with “revenue neutral” tax reform is that it locks in the corporate share of our government’s bills at historically low levels. Tax reform that results in GE paying more and Wal-Mart paying less is not a step forward.

Contrary to common perception, U.S. corporations pay far less toward the cost of public services and infrastructure than they did in decades past, and less than foreign competitors pay in their countries today. In the 1950s, corporate federal income taxes accounted for nearly one-third of federal government revenue; in 2011, corporate taxes accounted for less than 8 percent.
U.S corporate profits account for more than 10 percent of GDP, a 50-year high. Federal corporate income taxes collected as a percent of GDP are at a 50-year low.

U.S. corporate tax revenues as a percent of national GDP are lower than all but one industrialized country – Iceland. U.S. corporate taxes accounted for 1.2 percent of U.S. GDP in 2009, compared to 2.3 percent among the 26 industrialized nations of the Organization for Economic Cooperation and Development (OECD) that collect and report tax data.

Meanwhile, U.S. multinational corporations are reporting record levels of profits to shareholders. And their balance sheets are loaded with record levels of cash – more than $2 trillion at last count.

President Obama's tax framework addresses important issues such as curtailing the abuse of offshore tax havens, but the devil is in the details. For example, a proposed minimum global tax could reduce the incentive of U.S. multinationals to disguise domestic profits and shift them to low or no-tax corporate tax havens around the world. But if the rate, now unspecified, is set too low it could become a permanent tax break for U.S. multinational corporations whose accountants are expert at assigning expenses to the domestic side of the ledger for U.S. tax deductions while assigning profits to the “foreign” side. And it doesn’t take a large rate gap between the corporate tax rate and a minimum global tax to produce large tax savings for corporations with revenues in the billions.

One way Congress could address closing loopholes right now is through the Cut Unjustified Tax Loopholes Act introduced by Senators Carl Levin of Michigan and Kent Conrad of North Dakota. It would crack down on offshore tax haven abuses and close tax loopholes that encourage corporations to move jobs abroad.

The challenge of corporate taxes and competitiveness is not that rates are too high, but loopholes, preferences and subsidies make corporate tax collections far too low. Rather than focusing on revenue neutral corporate tax reform which locks in corporate tax revenues at bargain-basement levels, President Obama would be wiser to insist that all profitable U.S. corporations – big and small – are expected to pay their fair share of taxes.

Big businesses want all the benefits of government spending – from government contracts, a publicly educated workforce, transportation networks and courts to enforce property rights, to scientific research they are happy to commercialize, and bailouts in the billions. Their increasing unwillingness to pay for the public services and infrastructure that underpin our economy is the real threat to America’s competitiveness.

Click here for original article

Scott Klinger is tax policy director of Business for Shared Prosperity, a national network of business owners, executives and investors.

Definition of "conservative"

Iowa’s vote Tuesday clearly showed one thing—Mitt Romney isn’t the darling of the conservative GOP base.  Part of Romney’s problem is that while he keeps claiming he is as conservative as all his Republican opponents, he doesn’t seem to understand the definition of “conservative”.

Last month in an MSNBC interview, Romney defended the individual health insurance mandate he supported in Massachusetts when he was governor.  His state health care reform program has been correctly tagged with being the father of President Obama’s health care reform because central to both is the requirement that most individuals must purchase health insurance. 

Realizing that his health insurance mandate is one of his Achilles’ heels of his Presidential hopes, Romney is spinning the individual mandate as “conservative” as long as state’s do the mandating.  “The best idea is to let each state craft their own solution because that’s, after all, the heart of conservatism:  to follow the Constitution,” Romney said.

Romney’s effort to confuse the public on this issue is understandable.  Is he trying to say that he is conservative because he believes in following the Constitution?  Well, so does everybody else.  We just need the courts to figure out what is constitutional and what isn’t.  Then we all follow the Constitution.  So I guess we’re all conservatives by that definition.

But what Romney is really trying to get the GOP voters to buy is that “conservatism” is the same thing as the principle of “states' rights”.   But the two aren’t the same.  Using this Romney definition of “conservatism”, every action by state government is conservative.  If every state wanted to dump their constitutionally mandated “no deficit spending” policies and run up big budget deficits, that would be “conservative” under Romney’s definition. 

As one of my Tea Party friends put it in when I shared Romney’s comments with him, “Mitt obviously has no idea what conservative means.”  

Romney's bad business idea

With all due respect to my friend SC Treasury Curtis Loftis who is the state chairman of the Mitt Romney campaign, the GOP Presidential candidate has the wrong business approach to the housing and foreclosure crisis.

In a recent interview with the Las Vegas Review Journal, Romney said that the solution to both the housing and foreclosure problems is the same—let home foreclosures “hit the bottom”.  Government should just get out of the way and let the banks foreclose as fast as they can.  According to Romney, investors would then buy up the highly devalued properties and turn them into rental units.  With all the foreclosures out of the way then the housing construction industry would get back on track.

Besides Romney being viewed as cold and uncaring toward all the families he quickly wants to put on the street and the current small investors in rental property he wants to throw under the bus, his approach is a pretty lousy business plan.  

Romney and I both agree that the current supply of housing needs to be stabilized with owners that can pay the mortgages.  Only then will new houses start being built creating the construction jobs we really need to lift the economy.

But Romney’s approach requires that all property values continue to decrease (even for people who continue to live in their homes).   Generations of middle class Americans and those trying to break into that category will never recover the little wealth they’ve accumulated.   As the middle class goes down so will our vibrant small business economy both from a lack of customers and their own foreclosure problems.

Here is a better way to stabilize the housing market.

According to a recent McClatchy Newspapers analysis:

-2.2 million homes whose owners have received initial foreclosure notices or notices of default but haven't yet been foreclosed on.

-1.9 million properties whose owners are 90 days or more behind on their payments but haven't yet been served with foreclosure notices.

That’s 4.1 million homes that are soon to be put into the foreclosure bucket.  To put that into perspective the official number of all houses for sale in the nation is only 3.5 million.

Romney wants the economy to wait until all these houses are foreclosed on and resold, a process that will take years and a terrible toll on most Americans and even the banks holding the mortgages.

But here is a better business proposal for our country and the banks, one that I’ve blogged about before.

Let’s muscle the private banks and Fannie and Freddie to do everything in their power to keep the current home owners in their homes by letting them refinance at today’s rock bottom rates (no questions asked) and, if necessary, reducing the principle they owe. 

The banks know that the value of their housing portfolios isn’t worth anything near what they claim on their balance sheet.  So let’s stop the charade and force the banks to write down the losses right now.  If they all do it together, it will be alright for all of them. 

We’ll keep 4.1 million families in their homes, stop the slide in real estate values and immediately create demand for new housing.  And it can be done a lot faster than Romney’s prescription. 

The Obama Administration is expected to roll out a plan in the next few days to help homeowners refinance at today’s interest rates.  We’ll see what the plan is but I suspect that it won’t take on the banks and force them to do what really needs to be done. 

The Administration and Congress to start kicking butt.

Amazon and Mitt

Below are two must-read editorials from this weekend. The first by Cindi Scoppe, Associate Editor of The State, accurately analyzes the meaning of the recent House vote to give Amazon.com an exemption from collecting sales tax.

But most legislators acknowledge that there was a serious question of fairness in this case. So what’s the cost of fairness? Where, between 1,249 and 2,000 jobs, does unfairness become a reasonable price to pay? Would we sacrifice fairness for 1,800 jobs? For 1,500? And where will the line be drawn next time? If Amazon decides to hold up its end of the bargain, what will legislators do if it threatens to leave in five years unless it gets another five-year exemption? What about the next company that comes looking for extra incentives, whether they involve unfair competitive subsidies or just bigger tax breaks?

She concludes in her editorial, as I did in last Friday's blog, that at least the state now has a better deal with Amazon because of the political fight and she was kind enough to recognize the South Carolina Small Business Chamber’s efforts.

Even the head of the state small business chamber of commerce — who has been nearly as outspoken in his opposition as the people on WalMart’s payroll — acknowledged that “the principled opposition has at least translated to a better deal.”

The second editorial below is in honor of Mitt Romney’s visit to the Midlands this weekend. Mitt is still trying to explain why his “RomneyCare” in Massachusetts is not the same thing as “ObamaCare” for the rest of us. It is and if he weren’t ready to announce his candidacy for President, Mitt would probably be very happy with this New York Times editorial.

Despite all of the bashing by conservative commentators and politicians — and the predictions of doom for national health care reform — the program he signed into law as governor has been a success. The real lesson from Massachusetts is that health care reform can work, and the national law should work as well or even better.

Enjoy!

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May 22, 2011
The State

The Amazon turn-around

By CINDI ROSS SCOPPE
Associate Editor

ON A spreadsheet, with nothing to consider but dollars and cents, the Amazon sales tax exemption always made sense: Give the online retail giant a pass on collecting sales taxes that it’s not currently collecting from S.C. residents, and the state gets $10 million in annual payroll taxes, and Lexington County gets $1 million a year in property taxes. Refuse, and we get no payroll taxes, no property taxes, no sales taxes, nothing.

Throw in 1,249 jobs — now bid up to 2,000 — and all the income, sales and other taxes the newly employed would be paying and the unemployment checks they wouldn’t be drawing, and it looked like a no-brainer.

It would be nice to think that the reason the deal initially ran into trouble was the almost embarrassingly wonkish concern about the degradation of our state tax policy. The fundamental problem with the Amazon exemption is the same as the problem with all tax breaks: It gets piled on top of hundreds of other tax incentives that already have pushed our tax system to the breaking point, making it a Swiss cheese monument to special-interest influence that is more holes than cheese.

This new hole is more worrisome than most because e-commerce is the big problem facing state tax systems — particularly those that are as obscenely reliant on sales tax collections as ours. And by exempting the rare company that actually meets the Supreme Court requirement that businesses have a physical presence in a state in order to be required to collect sales taxes, the Amazon incentive gives away what tiny bit of leverage our state has.

Unfortunately, that wasn’t the hang-up. What made those pretty numbers insufficient on first glance was a very human complication: local merchants who had the moral high ground when they argued that it was unfair for their state to subsidize a competitor intent on running them out of business.

Last month, the House said overwhelmingly that giving an unfair advantage to their competition was not a reasonable price to pay for 1,249 jobs. On Wednesday, representatives said even more overwhelmingly that it is a reasonable price to pay for 2,000 jobs. I realize that the decision wasn’t nearly so rational. It also turned on belatedly smart lobbying by Amazon backers, and resentment among House Republicans over what they saw as Gov. Nikki Haley putting them in a no-win position and then belittling their concerns. But we should be able to assume that it involved some degree of rationality.

Even those of us who worry about tax policy understand that big corporations are highly skilled at playing the incentives game — pitting state against state in a race to the bottom — and so sometimes we just have to give in and let them have their way with us. The question is where to draw the line. How much is a job worth?

That’s not a terribly difficult question when the job-purchasing currency is only money — or at least it wouldn’t be if recruiters were required to give the public more details about the deals they cut: Just pull out your spreadsheet, and you’ve got an answer. Of course when you accept the idea that there’s no cost to the state because a company won’t pay any taxes anyway if we can’t entice it to come here, you run the risk of the eventual spiral down to the elimination of all taxes — or even paying companies to move here. But that just gets us back to bad tax policy, and not enough money to pay for the services that those companies require, which most legislators don’t lose any sleep over.

But most legislators acknowledge that there was a serious question of fairness in this case. So what’s the cost of fairness? Where, between 1,249 and 2,000 jobs, does unfairness become a reasonable price to pay? Would we sacrifice fairness for 1,800 jobs? For 1,500? And where will the line be drawn next time? If Amazon decides to hold up its end of the bargain, what will legislators do if it threatens to leave in five years unless it gets another five-year exemption? What about the next company that comes looking for extra incentives, whether they involve unfair competitive subsidies or just bigger tax breaks?

What’s surprising isn’t that the House agreed to the deal — the Legislature signs off on almost any tax give-away that’s labeled economic development; and the bar gets lower every time. What’s surprising is that it didn’t swallow automatically, but instead held out for a better deal than the Commerce Department negotiated.

The bill the House passed Wednesday is clearly an improvement over the original proposal and over most incentives legislation: It expires in five years. The specific time and job requirements make it unlikely that any other company could use it. And it requires Amazon to stick to its latest oral promises in order to cash in: If it doesn’t employ 2,000 full-time workers with “a comprehensive health plan” and spend $125 million by the end of 2013, it loses the exemption; if employment drops below 1,000 before the 2016 expiration date, it loses the exemption. Even the head of the state small business chamber of commerce — who has been nearly as outspoken in his opposition as the people on WalMart’s payroll — acknowledged that “the principled opposition has at least translated to a better deal.”

And maybe, given the complete disinterest that most legislators have in smart, or even fair, tax policy, that’s the best we can hope for.

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571.

http://www.thestate.com/2011/05/22/1827231/scoppe-the-amazon-turn-around.html

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May 21, 2011
The New York Times
Editorial

Health Reform in Massachusetts

Mitt Romney’s defense of the Massachusetts health care reforms was politically self-serving. It was also true.

Despite all of the bashing by conservative commentators and politicians — and the predictions of doom for national health care reform — the program he signed into law as governor has been a success. The real lesson from Massachusetts is that health care reform can work, and the national law should work as well or even better.

Like the federal reform law, Massachusetts’s plan required people to buy insurance and employers to offer it or pay a fee. It expanded Medicaid for the poor and set up insurance exchanges where people could buy individual policies, with subsidies for those with modest incomes.

Since reform was enacted, the state has achieved its goal of providing near-universal coverage: 98 percent of all residents were insured last year. That has come with minimal fiscal strain. The Massachusetts Taxpayers Foundation, a nonpartisan fiscal monitoring group, estimated that the reforms cost the state $350 million in fiscal year 2010, a little more than 1 percent of the state budget.

Other significant accomplishments:

The percentage of employers offering insurance has increased, probably because more workers are demanding coverage and businesses are required to offer it.

The state has used managed-care plans to hold down the costs of subsidies: per capita payments for low-income enrollees rose an average of 5 percent a year over the first four years, well below recent 7 percent annual increases in per capita health care spending in Massachusetts. The payments are unlikely to rise at all in the current year, in large part because of a competitive bidding process and pressure from the officials supervising it.

The average premiums paid by individuals who purchase unsubsidized insurance have dropped substantially, 20 percent to 40 percent by some estimates, mostly because reform has brought in younger and healthier people to offset the cost of covering the older and sicker.

Residents of Massachusetts have clearly chosen to tune out the national chatter and look at their own experience. Most polls show that the state reforms are strongly supported by the public, business leaders and doctors, often by 60 percent or more.

There are still real problems that need to be solved. Small businesses are complaining that their premiums are rising faster than before, although how much of that is because of the reform law is not clear.

Insuring more people was expected to reduce the use of emergency rooms for routine care but has not done so to any significant degree. There is no evidence to support critics’ claims that the addition of 400,000 people to the insurance rolls is the cause of long waits to see a doctor.

What reform has not done is slow the rise in health care costs. Massachusetts put off addressing that until it had achieved universal coverage. No one should minimize the challenge, but serious efforts are now being weighed.

Gov. Deval Patrick has submitted a bill to the Legislature that would enhance the state’s powers to reject premium increases, allow the state to limit what hospitals and other providers can be paid by insurers, and promote alternatives to costly fee-for-service medicine. The governor’s goal is to make efficient integrated care organizations the predominant health care provider by 2015.

The national reform law has provisions designed to reduce spending in Medicare and Medicaid and, through force of example, the rest of the health care system. Those efforts will barely get started by the time Massachusetts hopes to have transformed its entire system. Washington and other states will need to keep a close watch.

http://www.nytimes.com/2011/05/21/opinion/21sat1.html?_r=1&nl=todaysheadlines&emc=tha211