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Stealing the Economy in 6 Easy Steps

How Does So Much Wealth End Up in the Pockets of CEOs and Wall Street Firms?

1. Companies buy other companies using borrowed money.
Since the 1980s, corporate raiders, corporations and hedge funds have looked to take over any company they could. But here’s their secret.

2. Raiders use the assets of the targeted company to pay for the costs of the acquisition.
The target company is weakened because it has to pay back millions of dollars. Worse, the corporate raiders pay themselves from the assets of the acquired company, too, in fees and special dividends. The CEOs and bankers get their cut as well. Not much left to share with the workers from a once-successful company.

3. CEOs get paid with stock incentives. That means when a company’s stock goes up, CEOs get even more money.
Unfortunately, in the U.S., most CEOs are focused on very short-term goals, like improving their own compensation. They most likely aren’t looking at long terms goals like increasing productivity or reinvesting in research and development. They aren’t interested in increasing workers’ real wages and benefits. So what does the CEO do?

4. CEOs use company earnings not to invest in better equipment or operations, not to pass along gains to workers, but to buy more stock, because that raises the stock prices and raises the CEO’s salary.

The company downsizes, and workers get laid off. Jobs are shipped offshore. Pension funds are frozen. Wages and benefits are cut.

6. Result: the earnings of the corporation are redistributed to executives and Wall Street bankers.

What’s left for workers?

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Stop Financial Strip Mining


It’s a big word that’s causing big problems for working families.

Financialization is the strategy that corporate and wealthy interests are using to get and keep an even bigger share of the economic pie. It’s the “financial strip-mining of America,” writes Les Leopold, director of the Labor Institute of New York City, in “Runaway Inequality.” And it’s destroying the American Dream for millions of working families.

Since the early 1980s, corporations and the wealthiest have been lobbying to:

  • Cut taxes on the rich and big corporations.
  • Cut government regulations, especially on the financial sector.
  • Cut government social spending to pay for the tax breaks for the wealthy.
  • Damage the power of unions and collective bargaining.

Unfortunately, they’ve succeeded.

The corporate share of federal taxes has dropped from 32 percent in 1952 to just 9 percent in 2013, thanks to outrageous tax loopholes and the ability of corporations to invest their profits in foreign subsidiaries and foreign countries where they pay no U.S. taxes. The percentage of the U.S. economy subject to regulation dropped from 11.5 percent in 1975 to under 3 percent in 2006. The social safety net to support people in need has been shredded. Bargaining is tougher than ever, with less than 7 percent of private sector workers represented by a union.

Today, Wall Street calls the shots, thanks to deregulation and tax loopholes that allow corporate raiders and hedge fund managers to take over companies and sell off their parts, throwing away workers’ jobs in the process.

Corporate tax loopholes, like “inversions” and the “Reverse Morris Trust” make it all too easy. In 2007, Verizon used the “Reverse Morris Trust” loophole to structure the sale of its telephone operations in northern New England to financially strapped FairPoint Communications, in order to avoid paying any federal taxes on the profits of the sale and to gain a $600 million tax windfall.

The “inversion” loophole is what pharmaceutical giant Pfizer is using to dodge U.S. taxes. By merging with Allergan, which is headquartered in Ireland, Pfizer will dissolve its U.S. ties but still remain in charge of the new company. Analysis by Americans for Tax Fairness shows what’s wrong with this move. ATF estimated that Pfizer’s effective tax rate on its worldwide income was just 7.5% in 2014, not the 25.5% rate the company reported in its Securities and Exchange Commission (SEC) filings. And Pfizer had as much as $148 billion in profits parked offshore at the end of 2014, on which it has paid no U.S. income taxes, ATF found.

One way to put the brakes on this Wall Street excess is a financial speculation tax. It’s a small tax, maybe 10 or 30 or 50 cents on the sale of every $100 worth of stock, bonds, derivatives or other investment vehicle.

It’s not a tax on workers’ 401 (k) plans, despite the hype by financial interests. It is designed to raise revenue from the Wall Street churn of financial trades – many conducted in less than half of one-millionth of a second – and to require these “high frequency traders” to consider before entering into highly speculative trades with little profit.

Taking on Wall Street is the only way we will restore the American Dream to the 99 percent living on Main Street.

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New York Times Calls for a Financial Speculation Tax

A New York Times editorial today called for a financial speculation tax, writing,

A well-designed financial transaction tax — one that applies a tiny tax rate to an array of transactions and is split between buyers and sellers — would be a progressive way to raise substantial revenue without damaging the markets.

Click here to read the full editorial.

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