| Number 142 | January 25, 2002 |
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This Week:
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Greetings, This week was supposed to be an installment of what I like to call "A Stroll through the News With Nygaard," but it got out of hand and turned into more of a series of short but strenuous hikes. By which I mean that they are a little longer and a little more of a mental workout than a "stroll." I also said that such strolls were an "occasional" feature, which turned out to be a bit of an understatement; The last one was almost two years ago! No wonder I forgot how to do it. Next week I hope to do a real stroll. We'll see. In addition to the ongoing bombing of Afghanistan, our country is also continuing to bomb Iraq-the most recent instance being just this week. If you have not volunteered with or donated money to whatever group in your area is working to end the ongoing attack on that country, now is as good a time as any. Yes, we are still bombing Afghanistan, with enormous human consequences. I haven't talked about it much lately, but I do have quite a few comments. I just ran out of room once again this week, so I urge you to visit one of the many excellent websites I have mentioned in these pages for news about The WAT?! ("War on Terror") I'll add my two cents next week. I was quite overloaded for a while last year, what with personal crises and all, so I was quite delinquent in responding to some of your E-mails. Maybe that's why I seem to be getting fewer notes from you all lately. I'm better now, so please take a moment to send me your thoughts. I don't care what they are, I just love feedback! I read every single bit of mail, and I promise to respond promptly to those of you who are moved to write. Please, keep those letters and E-mails coming! Finally, welcome to the new readers this week. I particularly would appreciate feedback from you. You've got the fresh eyes, after all. Who knows what you may see that we old-timers cannot? See you next week, Nygaard |
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Nygaard Notes has so far mainly focused on the foreign military actions and suffering associated with The WAT?! ("War on Terror"). There are two separate events coming up that will take a good look at the domestic, civil liberties implications of The WAT?! Event #1 "The First Annual Ground Hog Day Convocation" will occur, as one might guess, on Saturday the 2nd of February. This first GHDC will begin at 2:00 p.m. at the William Mitchell School of Law, 875 Summit Avenue, St. Paul, MN. Organizers say, "A growing number of Americans are growing uneasy with the seemingly endless number of government actions that promise physical security while undoing the best of this country: its Constitution, Bill of Rights, the openness and generosity of the American spirit and our aspiration to provide equal justice for all people. If you share these concerns, please bring your ideas, questions, and valiant spirit to the 1st Annual Ground Hog Day Convocation for the preservation and advancement of what is best in America. The event is convened by the Minnesota Chapter of the National Lawyers Guild and is open to all interested in supporting this initiative. For further information, call Caroline Palmer (612) 978-1936 or Peter Brown (612) 824-6533. Event #2 Held just two days later, this event is sponsored by the local Anti-War Committee, and also has a focus on the civil liberties aspects of The WAT?! Monday, February 4th at the Minneapolis Federal Building at 4th Street and 4th Avenue beginning at 4:30 p.m. In their call to action, the AWC states that "Since the terrorist attacks of September 11, the US government has made sweeping changes in the interest of "national security" that threaten our civil liberties of speech, assembly, and privacy. The Anti War Committee is organizing a demonstration against this War at Home. We want this rally to bring peace and justice activists, faith-based activists, students, and civil libertarians together to focus on these issues and to demand political change." This demonstration will call attention to the fact that, under the new and vague definitions of terror, "most active political organizations in the Twin Cities could be considered terrorists for even organizing demonstrations." Also on the agenda are the issues of racial profiling of Arabs and Arab Americans, the USA PATRIOT Act, and President Bush's executive order signed November 13, 2001 that has established military tribunals in violation of international law. Please contact the Anti War Committee if you or your organization are interested in helping publicize this demonstration or if your organization is able to endorse this action. Phone them at 612-879-7543 or email at antiwarcommittee@hotmail.com. |
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Readers and watchers of the media no doubt have the impression that America reveres its public servants as never before. Tales of the everyday heroism are everywhere in the wake of 9/11, and Americans have justly noted how essential and difficult is the work of our nation's public servants. Firefighters, for example. However, despite the "value" we supposedly place on their work, we apparently place a higher value on reducing taxes on the wealthy. The Star Tribune (Newspaper of the Twin Cities!) reported in the Metro section on December 20th that our local heroes in the fire and police departments have been requested to prepare for budget cuts of 5 percent for the coming year. The report states that "the fire department may have to delay hiring nearly two dozen firefighters to reach the $972,000 the [city] council wants cut," prompting the local fire chief to say that "This means less firefighters on rigs, or less rigs. I won't put any firefighters in jeopardy." Good for him, but these cuts then look to leave the rest of us in some kind of jeopardy. The article gives a variety of reasons for the budget squeeze, including "new labor contracts and a reduction in state aid." Two messages here:
It's hardly unique to our governor, of course; the current inability to pay for fire protection and other essential public services cannot be separated from the anti-tax dogma that is running rampant throughout the nation, despite the fact that the U.S. remains one of the lowest-taxed nations in the industrial world. Anyone who has been active in a labor union has figured out that there is a big difference between being told your work is important and valued, which can be done simply by moving the lips, and actually receiving a fair wage for that work, which involves putting one's money where those lips are located. If we really respect and admire our firefighters, we should pay them accordingly. To do otherwise is pure hypocrisy. |
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I have never before commented on the "News Of The Weird" feature that is syndicated in hundreds of newspapers around the world. But last week, on January 17th, the news considered "weird" by editor Chuck Shepherd was the news that U.S.-based transnational corporations (TNCs) sell things to themselves at wildly manipulated prices in order to avoid paying taxes. The practice is known in the trade as "transfer pricing," and it's a beautiful thing for corporations wishing to legally cheat on their taxes. Here's how it works: About 40 percent of all the stuff that is imported and exported between countries in the world consists of things that TNCs sell to themselves. For example, USX (that's a real corporation!) might sell a prefabricated building to their subsidiary in Mexico. When USX sells that building to Mexico, the tax gets paid to the U.S. at the point of sale. Conversely, when USX Trinidad sells a ball-point pen to USX in the USA, the tax is paid to Trinidad. Now, here's where it gets beautiful: USX, or whichever TNC it may be, simply sets up a subsidiary in a low-tax country, then proceeds to buy and sell like crazy, manipulating the prices they are paying (to themselves) to maximize their "tax advantage." This is apparently quite legal. So, finance professors Simon Pak and John Zdanowicz at Florida International University in Miami decided to check out some of these prices that TNCs charge themselves, in an attempt to assess how much U.S. tax revenue is lost each year due to transfer pricing. They came up with some things that looked just slightly, er, shall we say, dishonest. For example, the prefabricated building I mentioned (not necessarily sold by/to USX) is selling right now for $1.71. (Yes, one dollar and seventy-one cents.) One could pick up a U.S.-made car in Ecuador for $17.13. How about a bulldozer or a rocket launcher, available for $387.83 or $59.50, respectively, in Venezuela? As expected, the items sold back to the U.S. from the TNCs' subsidiaries in relatively low-tax or no-tax countries can get a little pricy. Hacksaw blades from Canada cost $7,000 each these days. Or, a liter of mineral water can be had for a mere $3,050.00. The Trinidadian ball-point pen runs about $8,500.00, and flashlight lamps from Taiwan are fetching $3,875.00 each in the Alice In Wonderland world of transfer pricing. The Pak and Zdanowicz study shows the large scale of the problem, which comes to a tax loss to the U.S. of about $122 million a day, every day, about enough to provide medical care to about 10 million low-income Americans. These common accounting practices are not really "weird." I first learned of the practice more than 25 years ago by reading a book by Richard J. Barnet and Ronald Mueller called "Global Reach: The Power of the Multinational Corporations," now out of print. Although it is not "weird," it certainly might seem like a front-page story to Nygaard Notes readers, especially considering that Senator Byron Dorgan of North Dakota issued a press release on November 21st calling attention to this study. What if we were to get ongoing reporting in the media that would help us understand how our increasingly corporate economy works? Now, THAT would be weird... |
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Despite intense competition for the prize of "Most Unbelievable Reporting of The 2nd Biggest Scandal of the Year (after the War on Terror) So Far," I must nominate a story headlined "Enron Avoided Income Taxes in 4 of 5 Years," from the front page of the New York Times ("All the News That's Fit to Print") of January 17th. Let's just look at a couple of the best parts: Some words are considered to be too crude and uncouth to use in the Respectable Media, such as the word "lying," as illustrated by the reluctance of the Times to use the word in paragraph 14, which reads: "If shareholders had read just the large print in Enron's financial reports, they might have come away thinking the company did pay income taxes. The reports say the company paid hundreds of millions of dollars in corporate income taxes over the last five years. But company financial reports often disclose numbers different from what the companies actually pay because of such matters as when income is recognized and when expenses are deducted. So only in the fine print—the footnotes—of Enron's reports does it become clear that no tax was due." A few facts: Enron's reported profits for the years 1996-2000 were about $1.8 billion. The corporate tax rate in the United States is supposedly 35 percent, which means that Enron should have paid more than $600 million in taxes during that period. Not only did they not "pay hundreds of millions of dollars in corporate income taxes" over the period, they actually received rebates of about $381 million. That's about a billion-dollar difference between how much tax the law theoretically says was due and what actually happened in Enron's case. Note the use of the word "legitimate" in the following paragraph from the Times' story: "Tax experts said corporations create offshore subsidiaries in tax havens for many legitimate reasons, including keeping profits earned overseas from being taxed in the United States, avoiding American regulation and insulating foreign business partners from American tax law." It would not be difficult to find some other "experts" who would argue with the idea that the intentional evading of regulation and taxes is "legitimate," but don't expect the corporate media to look too hard. In paragraph 22, in fact, the Times finds an "international tax lawyer" who states for the record that such evasion "is neither illegal nor unethical." This expert on ethics preferred to remain anonymous. As an aside, I should mention that one of the other "legitimate" reasons for creating these bogus subsidiaries is the often-lax bank reporting requirements in these countries, which allows poorly-run companies to refrain from reporting their financial shenanigans. These shenanigans can be pretty serious, as Enron has taught us. Enron had set up about 2,800 such subsidiaries, about 30 percent of which "were located in officially designated offshore tax and bank havens." |