Ten Turkeys for Thanksgiving

by Brent Blackwelder

This Thanksgiving is a good time to spot the Golden Fleece Turkey, a bird that epitomizes economic irrationality and environmental destruction. This remarkable breed pollutes air and water and wastes tax dollars, while scamming the public in the process. Although known for its camouflage, especially its ability to hide wrongdoing, the Golden Fleece Turkey regularly treats birdwatchers to astonishing displays of stupidity. Such birds could not exist in a sustainable economy, but the present economic climate provides an ideal habitat, and they’re spreading like many other invasive species.  Below are 10 recent sightings of the Golden Fleece Turkey.

(Note: Wisconsin Senator William Proxmire presented Golden Fleece Awards in the 1970s and 1980s for taxpayer boondoggles.  This Daly News entry is dedicated to his memory.)

1. Animal Factory Slums

Sometimes masquerading under the name of Confined Animal Feeding Operations (CAFOs), these gigantic lots keep thousands of animals in filthy, cramped quarters. They produce over 500 million tons of manure annually, some of which spills because lagoons leak and pipelines break. The spills cause massive fish kills downstream and spread dangerous bacterial contamination. Up to 70% of the antibiotics in the US are used on animals in CAFOs, thereby aggravating antibiotic resistance and jeopardizing one of the miracles of modern medicine. Emissions from these animal slums, tainted with putrid sulfur dioxide, sicken rural neighbors.  “Cheap” food from CAFOs isn’t such a bargain when you add up all the health costs.

2. Continued Subsidies for Nuclear Reactors

In the wake of the Fukushima disaster in Japan (a tragedy that’s still unfolding with more bad news each month), there is a real possibility that damages could top a trillion dollars. Despite such concerns, the nuclear industry keeps fleecing America. The US Congress and the Obama Administration continue to support loan guarantees for new nuclear reactors and to provide liability insurance for nuclear reactor accidents. If reactors are as safe as the industry alleges, one would think that private insurance companies would be eager to make some money here. As we have seen from Japan this year, there is a lot we are not being told, and there’s still a high potential for accidents.

3. The Keystone XL Tar Sands Pipeline from Canada to the Texas Gulf

The extraction of oil from tar sands takes a lot of energy and leaves behind a polluted landscape that native people of Alberta have to live with. The pipeline would pose a threat to every river it crossed en route to the Texas coast. Embarrassed by revelations of shady dealings at the State Department and the announcement of an Inspector General investigation, the Obama Administration has just delayed a decision on whether to approve the biggest pipeline fleece in history.

4. US Automobiles That Travel 200 Miles Per Hour

Ford and Chevrolet have announced their intentions to produce super-fast cars, capable of speeds between 180 and 200 mph. So much for the goals of saving lives, preventing injuries, and conserving fuel. For the past half century 30-50,000 people have died annually in auto accidents, and hundreds of thousands more have been injured.

5. Offshore Tax Havens

It is estimated that the US Treasury loses $100 billion annually as a result of offshore tax havens. This is about the same amount of money the desperate “Supercommittee” of Congress is scrambling to find for deficit reduction by the November 23 deadline ($1.2 trillion over a decade = $120 billion a year). The two biggest bank recipients of taxpayer bailouts are Citicorp and Bank of America. Citicorp operates subsidiaries in 427 tax havens, and Bank of America does so in 115.

6. Tax-Dodging Corporations

Corporate income taxes provided 35% of federal revenue in 1945, but today that total is just 9%. Some of the world’s best known and most profitable companies (e.g., General Electric) play a variety of accounting games and avoid paying any corporate income taxes. Such companies protest that they are obeying the law, but they don’t say that they are lobbying intensively to keep all the loopholes in place. As a result, the American public is told that it will have to endure massive budget cuts to avoid further increases in government debt.

7. Corn Ethanol Subsidies

75 cents of every tax dollar spent on renewable energy goes to corn ethanol. US taxpayers are shelling out over $6 billion in subsidies each year for the corn ethanol program. Corn is an energy-intensive crop to grow, and it often involves the use of the carcinogenous herbicide atrazine (banned by Italy and Germany in 1990). The Volumetric Ethanol Excise Tax Credit is a shameful subsidy (45 cents per gallon blended) that should be cut. On top of that, life-cycle studies show that corn ethanol fails to ameliorate greenhouse gas emissions.

8. Clean Development Mechanism (CDM)

The United Nations administers the world’s largest carbon offset program, the CDM, created by the Kyoto climate agreement. The objective is to provide credits to projects that offset greenhouse gas emissions. The idea is to develop useful projects that would not be built without such a subsidy. But there’s a problem: the UN is awarding credits worth billions to projects that are already built or being built — large, environmentally unsound dams provide perhaps the most egregious example. The Clean Development Mechanism is better labeled the Filthy Scam Mechanism. As of October almost 2,000 dams (2/3 in China) were in line for billions in tax credits with no guarantee of compliance with standards of the World Commission on Dams.

9. Leaf Blowers

Doesn’t anyone rake leaves anymore or sweep a sidewalk? Throughout the year, leaf blowers spew dust, debris, and noise in neighborhoods all across America. Of the 220 million tons of carbon dioxide emitted by off-road vehicles and equipment, power lawn mowers and leaf blowers generate a surprisingly large amount — 12% or 26 million tons. Often powered by dirty engines, these leaf blowers can be a serious source of air pollution. And with unpleasant noise, sometimes exceeding 85 decibels, they can make sitting on the porch seem like sitting at the end of an airport runway.

10. Corporate CEO Pay

CEO salaries are now a whopping 325 times higher than the average US worker.  And the Institute for Policy Studies found 25 companies that paid their CEOs more than they paid in federal income tax.

Decent citizens everywhere should be looking to carve up a Golden Fleece Turkey or two. Happy Thanksgiving!

Two “Robin Hood” Taxes for the Price of One

Linking Climate Justice to Tax Justice

Co-authored by James S. Henry, economist, lawyer, and author of The Blood Bankers (Basic Books, 2005) and Dr. Brent Blackwelder, president emeritus of Friends of the Earth

The subject of taxes certainly isn’t the most riveting topic for cocktail party conversations. Most people don’t like thinking about the labyrinthine tax code or filling out convoluted forms. They certainly don’t enjoy paying taxes. But we believe that the time has come to reframe the debate on taxes and build up some popular passion and energy for a few basic adjustments to the tax code. With these simple, easy-to-implement changes, it turns out that we could move the economy in a direction that works much better for people and the planet, including a more stable climate.

We badly need to recapture the public discussion and debate on tax codes from the technical specialists and special interests, as well as the diehard anti-government reactionaries. The tax system is so critical to the functioning of any nation that as concerned citizens, it is essential for us to insist on making values like justice, fairness, and shared responsibility central to any political debate on this issue.

By framing all discussions of taxation with the jaundiced view that “politicians just want to raise your taxes,” critics have actually ended up promoting a tax system that rewards pollution and disproportionately exempts the wealthy from paying their fair share. Since more careful discussions of tax policy have become taboo, governments have ended up being deprived of revenues that are essential to provide services. Thus, the anti-government forces have created a vicious, self-perpetuating cycle: their programs to curtail revenues have often crippled government programs, helping, in turn, to reinforce the notion that government can’t get anything done.

The issue of government revenues has come to the fore as developing nations have tried to grapple with climate destabilization. Quite reasonably, they’ve been asking for assistance from the wealthy nations that, over the long haul, have undeniably been the biggest contributors to the problem, to help them pay the costs of adaptation.

The huge Copenhagen climate summit in December failed to achieve breakthrough results to reduce greenhouse gas emissions, but it did result in a pledge by the U.S. Secretary of State, Hillary Clinton, for $100 billion per year in climate adjustment assistance to poor countries by 2020. The actual amount required may turn out to be even larger, but if we start early and build up a reserve fund, we can be prepared – much like insurance. And the good news is, there is a way to obtain such large sums even in today’s difficult economic climate, while simultaneously helping to clean up and stabilize the global financial system.

The tragic earthquake in Haiti, although not caused by climate destabilization, graphically illustrates the sheer magnitude of physical and monetary magnitude of relief and adaptation measures that scientists predict may well be needed by poor nations as the earth’s climate is disrupted.

Our revenue plan involves two very modest, complementary transnational “climate change surcharges” on groups that not only could readily pay them, but also richly deserve to pay them: major banks and their superrich, often tax-dodging global corporate and individual clients.

The first component is a variation on the well-known “Tobin tax” on foreign currency transactions, originally suggested by Keynes in the 1930s. The version of the Tobin tax that we are proposing would be even less intrusive. It would only apply to wholesale foreign exchange transactions, not to retail customers. Nor would it really be an international tax, imposed on countries by some faceless OECD bureaucracy. Each country signatory would agree to introduce legislation to adopt its own national version of a “model” tax. Each country’s own tax authorities would be responsible for collection and enforcement. Given the astonishing $4 trillion per day of such transactions, a tax of less than a dime per $1,000 of transactions would yield at least $50 billion per year. A similar low marginal tax rate on all international financial transactions, including stocks, bonds, options, and derivatives, could readily collect at least twice that amount.

The second new revenue stream that we propose is an “anonymous wealth” tax. This involves levying a modest 0.5% annual “climate aid” withholding tax on the estimated $15 to $22 trillion of liquid private financial assets — bank deposits, money-market funds, mutual funds, public securities, and precious metals — that we and other analysts have estimated now sit offshore, almost entirely untaxed, in anonymous accounts, trusts, and foundations. This tax could raise at least $25 billion to $50 billion per year.

Furthermore, the administration of all these “private banking” assets is heavily concentrated in the hands of a comparative handful of leading First World banks, including all of the key players in the wholesale currency market, as well as the leading players in the recent financial crisis, and the largest recipients of “too big to fail” assistance.

This means that the anonymous wealth tax and the transactions tax complement each other neatly. The first one addresses the huge stock of undisclosed offshore wealth and income that has fallen through the cracks, while the other addresses the ongoing speculative activity that has been fueled by the accumulation of all this restless, internationally mobile private capital. From an administrative standpoint, major international banks, the “systems operators” for this highly problematic global financial industry, are perfectly positioned to help clean up its “bads.” In that sense, we can view these two modest taxes as “financial pollution” taxes, which will help to compensate the rest of us for bearing the costs and the risks of easy tax avoidance and excessive speculation.

In sum, we believe that these two modest tax proposals constitute a bold new potential solution to the problem of paying for climate adaptation, and a way of linking “climate justice” to “tax justice.” They not only are administratively and politically feasible, but most important, they also happen to be the right things to do on ethical grounds.

Administrative feasibility. This year the G20 and the IMF have already had very serious discussions of several variations on the Tobin tax, and just this week the European Parliament passed a resolution supporting it. Nevertheless, for reasons that are unclear, the U.S. Treasury Department and White House economists have been resisting. Apparently the economists are concerned about “market efficiency,” while the Treasury is still concerned about Wall Street.

These concerns are overblown. Of course all taxes interfere with perfect markets to some extent, but no one except radical anarchists are proposing that we all return to the mythological Eden of a tax-free world. This is especially true in a world with highly imperfect markets, where facts of life like imperfect information, excess financial speculation, financial crimes, ineffective law enforcement, and pollution often justify tax policies that offset these market imperfections.

The question in any real world situation is always whether the revenue generated is worth the price of any extra inefficiencies. We believe that in the case of our two specific proposals, the revenue gains dwarfs the inefficiency, if any. For example, in the case of the .005% levy on all wholesale and interbank foreign currency transactions among major currencies and cross-currency derivatives, such a tax could be implemented at very low cost, with limited opportunities for evasion. The wholesale foreign exchange market is already completely electronic, and highly concentrated. Indeed, in 2009, for example, more than 60 percent of all trading was handled by just five global banks — Deutsche Bank, UBS, Citigroup, RBS, and Barclays. This growing market generated over $4 trillion of transactions per day, more than twice the volume in 2004.

Similarly, in the case of the withholding tax on anonymous offshore wealth, the top 50 private banks in the world have more than $8 trillion in private financial assets under management, and another $4 to $5 trillion in assets under custody. Indeed, the top 10 alone account for nearly half of this amount. So long as the taxes were implemented uniformly across anonymous customers, it would be simple for these institutions to levy .5% annual withholding taxes on these assets.

Political feasibility. In principle, the revenue plan proposed here should be by far the most politically pain-free way of fulfilling Secretary Clinton’s Copenhagen climate aid pledge. It concentrates the costs on a very tiny, privileged group that is supremely able to afford them — the world’s wealthiest 10 million people on a planet with 6.8 billion humans.

From this angle, this proposal should attract widespread support from religious congregations and other nongovernmental organizations that are concerned about equity and global development. It should also attract support from national tax authorities, law enforcement agencies, and homeland security agencies that continue to see a large share of proceeds from international tax evasion and the underground economy slip through the cracks, despite their best efforts. Of course it should also attract support from environmental groups, and from public officials who are concerned about finding ways to pay for essential government activities without going deeper into debt.

Finally, this proposal could gain traction from the public outrage over the lingering effects of the financial crisis and the taxpayer bailouts that have been received by wealthy financial institutions that were “too big to fail.”

Moral justification. The moral foundation of this proposal is the idea of combining “global climate justice” with “global tax justice.” Global climate justice reflects the polluter pays principle — the judgment that it is fundamentally fair for rich countries to pay for most of the costs of adapting to climate change, since they have been overwhelmingly responsible for greenhouse gas emissions in the first place.

The concept of “global tax justice” reflects the judgment that it is fundamentally fair for the financially wealthiest citizens and corporations in both poor and rich countries alike to pay at least some taxes on their worldwide incomes and/or wealth to support their home countries.

One key source of the trillions in private funds that we propose to tax is underreported capital flight — money that is secreted offshore and invested abroad beyond the reach of domestic tax authorities. A second major source is under-taxed corporate profits and royalties that have been parked offshore in tax havens by way of rigged transfer pricing schemes. A recent report by the charity Christian Aid estimated the annual cost of these transfer pricing schemes to developing countries, in terms of lost tax revenues, at $160 billion per year. A third source is the myriad illicit activities that constitute the global underground economy — corruption, fraud, insider trading, drug trafficking, “blood diamonds,” and innumerable other big-ticket, for-profit crimes.

The ownership of the trillions in untaxed financial wealth is incredibly concentrated. At least 30 percent of all private financial wealth, and nearly half of all offshore wealth, is owned by world’s richest 91,000 people — just 0.001% of the world’s population. The next 51 percent is owned by at most 10 million people, comprising only 0.15% of the world’s population. About a third of all this offshore wealth has been accumulated from developing countries, including many of the largest “debtors.” And almost all of it has managed to avoid any income or estate taxes, both in the countries where it has been invested and the countries where it originated.

Tax policies are at their best when they provide the right incentives, secure funding for needed public goods and services, place the burden of payment on the right parties, and make progress toward a more equitable society. The proposed “Robin Hood” taxes on anonymous wealth and foreign exchange transactions meet all these criteria, and they are easy to administer. They are precisely the kind of progressive tax changes that we should all be happy to discuss, even at a cocktail party.

Read All About It

The Daly News, your source of information for innovative ideas about building a better economy, is set to launch. Each week, The Daly News will provide a thought-provoking feature essay that challenges the predominant economic paradigm and explores creative solutions to our profound economic and environmental problems. The first essay by Herman Daly will appear March 1. In addition to Professor Daly, the core rotation of authors at The Daly News includes Brian Czech (wildlife biologist, ecological economist, and author of Shoveling Fuel for a Runaway Train), Brent Blackwelder (former president of Friends of the Earth and founder of American Rivers), and Rob Dietz (environmental scientist and executive director of CASSE).

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