Teachers Fired To Pay For Huge Corporate Tax Cut — Why?

This post originally appeared at Speak Out California
I’ve been asking around and it seems that most Californians don’t know that the budget deal that fires so many teachers also has a huge tax cut just for big, multi-state and multi-national corporations.
But it’s true. Last month’s budget deal that fires teachers, cuts essential government services, and guts the investments that bring future economic benefits also has a huge tax cut for the largest of corporations. While this part of the deal has been kept pretty quiet, the LA Times had a story, Business the big winner in California budget plan. From the story,

The average Californian’s taxes would shoot up five different ways in the state budget blueprint that lawmakers hope to vote on this weekend. But the bipartisan plan for wiping out the state’s giant deficit isn’t so bad for large corporations, many of which would receive a permanent windfall.
About $1 billion in corporate tax breaks — directed mostly at multi-state and multinational companies — is tucked into the proposal.

But wait, won’t a big corporate tax cut cause companies to come to California, creating jobs? No, they are already here and it will drive them away, because it is paid for by firing teachers.

A study by the nonpartisan Public Policy Institute of California, released in 2005, found that most companies decide where to locate based not on tax breaks but on factors such as the availability of a highly educated workforce. California’s proposed plan would cut spending on higher education by hundreds of millions of dollars.

So how did this happen? This was part of the deal to get a few Republican votes. And why did the Republicans want this so bad? Because they understood who really elected them.
If you look at the independent expenditure reports for the 2008 California election you’ll see a massive amount of last-minute money. For example, in the 19th Senate District, a political action committee (PAC) named “Californians for Jobs and Education” put almost $1 million into just one race: $570,653 into defeating Democrat Hannah-Beth Jackson, and another $373,778 to help elect her opponent, Republican Tony Strickland. When you look this group up on ElectionTrack you learn that this money came from corporations like Arkansas’ Wal-Mart, Blue Cross of Ohio (Ohio?), Reliant Energy, major real estate companies, and from other PACs.
Now it gets interesting. Many of the contributions to that PAC came from other PACs, especially one called Jobs Pac. When you track down Jobs PAC you find that it is a conduit for huge, huge amounts of money coming from large corporations like Philip Morris, ATT, Chevron, Safeway, Sempra Energy, Verizon, big insurance companies, big pharmaceutical companies, big real estate companies … and other conduits like the Chamber of Commerce.
Why did these huge corporations put so much money into California state elections? Because we let them, and because of the return on investment they receive from tax cuts like the one that is forcing us to fire so many of our teachers.
There is a key lesson to learn from this. When it comes time to choose, that is when you can really see who is for or against something — where their priorities really are. And in this case, when push came to shove, in the end who did the conservatives come through for? The large corporations. They danced with the ones that brung them.
Click through to Speak Out California

2 thoughts on “Teachers Fired To Pay For Huge Corporate Tax Cut — Why?

  1. And here your arch liberal and my kind conservative view align again.
    Do you realize that Geithner is defending every bondholder of the major Financial for 100% assurance of return. 30% of Citi’s debt could be cleared by simply swapping the Bondholders position for stock. “Why aren’t the bondholders doing this voluntarily? Simple. Why should they, when Geithner is promising them your money and mine to defend 100% of their claims?” Here is John Hussman:
    We will continue to observe larger dislocations than necessary until our policy makers get the response right, which is to approach the bondholders of distressed and undercapitalized financial institutions, and tell them that the companies will (appropriately) go into government receivership unless a portion of those bondholder claims are moved lower in the capital structure (essentially swapping some of the debt and giving them equity instead, which can then be counted as “Tier 1” capital). Why should the American public (and eventually our children) foot the bill to protect the full interests of corporate bondholders? Has everybody gone completely insane, or is it simply not clear that the sum total of the government’s response to-date has been to squander public funds to defend private bondholders?
    Remember that roughly 30% of even Citigroup’s liabilities represent debt to its own bondholders. Less than two-thirds of its obligations are to depositors and other customers. You could literally wipe out 30% of Citigroup’s assets without customers or taxpayers losing a dime if bondholders were appropriately held accountable for the hit through the receivership process. With $600 billion in bondholder liabilities, why should the U.S. public be putting up funds to defend Citi’s bondholders? You could swap a fraction of those bondholder liabilities into equity capital, let Citigroup continue to operate, and there’s a good chance that the bondholders would be made whole over time anyway (especially if the mortgage obligations were restructured using property appreciation rights, which are essentially debt-equity swaps on the mortgage side).
    Why aren’t the bondholders doing this voluntarily? Simple. Why should they, when Geithner is promising them your money and mine to defend 100% of their claims? Meanwhile, the excitement of investors last week about Citigroup posting an operating profit in the first two months of the year simply indicates that investors may not fully understand the term “operating profit.” Citigroup could burst into flames while Vikram Pandit sells lemonade in the parking lot, and Citi would still post an operating profit. Operating profits exclude what happens on the balance sheet.
    Because Geithner is defending the “System”, Hussman sees much deeper drag in economy, lower profits, BAD TIMES etc

  2. More corporation bashing:
    “In terms of corporate incompetence, Wagoner now owns the all-time record. Since he became CEO of GM, the stock has fallen from more than $70 to around $2. And the company lost close to $90 billion. He was CEO for roughly 3,000 days. So… he lost about $30 million per day as the CEO of General Motors. That is, without a doubt, the longest and largest corporate losing streak of all time. GM had about 300,000 employees during the period. Instead of making cars, Wagoner could have simply paid each employee $300,000 back in 2000 and closed the doors. GM would have lost the same amount of money, but at least the employees could have done something profitable with the last 10 years of their lives. There’s no bigger burden on an economy than an unprofitable business. It wastes resources… and time.”
    Stansberry Investment research

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