December 5, 2001
comments powered by Disqus
A news article in the metro section of today's New York Times begins, "Bringing down the curtain on the first act of a bitter backstage battle, a State Supreme Court justice in Manhattan issued a preliminary injunction against Scott Rudin, the millionaire Hollywood and Broadway producer, that stops him, at least for now, from preventing the production of a long-suffering, long-gestating new Stephen Sondheim musical called 'Gold!'"
What's the relevance of the fact that Mr. Rudin is a "millionaire"? The story never explains. It manages to refer to the show's director, Harold Prince; to Justice Ira Gammerman; to Stephen Sondheim; and to several other theatrical figures without saying whether they are millionaires or without making any reference to their net worth.
It may seem snooty to say so, but given the rise in real estate values, in executive pay and in the value of U.S. stocks in the past two decades, it's not particularly exceptional in many quarters these days to have personal wealth of a million dollars. The Times often refers to other figures in the news who are millionaires -- like, say, Senator Clinton, or the newspaper's own publisher -- without commenting on their personal wealth. If Mr. Rudin were worth more than, say, $100 million dollars, it might be newsworthy and worth mentioning. Or if his wealth were somehow an issue in the court case, and if that were described in the news article.
As it is, the description of Mr. Rudin as a "millionaire" lends the Times news article a breathless, almost tabloid-like quality.
Fuel of the Conflict: The op-ed page of today's New York Times carries an op-ed from the vice president of the Arab American Action Network. A pull-quote says "The occupation, not Yasser Arafat, is the problem," and the article asserts, "it is the occupation that is the fuel of the conflict." It urges America to deal "directly with the root causes of the conflict." What "occupation" is the author talking about? Readers can get a clue with the reference to "all the ugly symptoms of 53 years of repression of millions of people in Palestine." In other words, the problem, according to this op-ed that the Times chooses to run in the wake of suicide bombings that killed 25 Israelis over the weekend, is not "occupation," but the very establishment of Israel in 1948.
News Article: Schumer, Hillary Back Tax Breaks For Investment Banks; 'Payola' Says AEI's Hassett
By BENJAMIN SMITH
The Schumer-Clinton plan, which has been approved by the Senate Finance Committee, includes tax credits of up to $4,800 per employee per year, at a total cost to the federal budget estimated at $2 billion over five years. Some of the biggest beneficiaries would be companies whose employees and executives were big campaign contributors to the senators. While some of the companies have been out of their offices for months, others suffered only relatively minor business disruptions because of the Sept. 11 terrorist attacks.
The legislation's backers say it will offer an instant anchor for businesses that are considering leaving the area. But many companies have already decided to stay in the region -- for them, the tax breaks would come too late to have any effect on their decision-making. In fact, a competing proposal introduced last week in the House leaves out the per-employee credit, focusing more heavily on incentives for investment. And some critics say that Lower Manhattan should recover and rebuild based not on temporary tax credits but on which businesses can be successful there.
"This is just payola," an economist at the American Enterprise Institute, Kevin Hassett, said. "It's not going to have any impact" on what businesses do, he said "but it's going to be a lot of money in their pockets."
The big winners of the $4,800 per-employee credit in the Schumer-Clinton plan would be the financial services firms that dominate the area covered by the legislation, the triangle south of a line formed by Canal Street, Grand Street, and East Broadway. The securities and investment industries are the biggest donors to Senator Schumer. They gave the senator's campaign war chest $2.7 million from 1997 to 2002, the Center for Responsive Politics reports.
Merrill Lynch employees, their families, and its political action committee, for example, gave Mr. Schumer's campaign $152,700; with the company's 9,000 employees in Lower Manhattan, the firm stands to gain more than 500 times that amount in tax breaks. Employees of Goldman Sachs, which owns several downtown offices but said it could not estimate the number of employees in the area, gave Mr. Schumer's campaign $96,000.
"We have a commitment to New York City regardless of what special benefits there might be," said a spokesman for Lehman Brothers, Bill Ahearn. Lehman could claim tax credits for 6,000 employees under the Schumer-Clinton plan.
The largest and most immediate element of the legislation, which was passed by the Senate Finance Committee last month but has not reached a floor vote, would temporarily expand the Work Opportunity Tax Credit to include two categories of employers. Every business located in the designated "New York Recovery Zone" -- that triangle south of a line formed by Canal Street, Grand Street, and East Broadway -- would qualify. So would businesses that the September 11 attack forced to move elsewhere within New York City. The Work Opportunity Tax Credit is a federal program that is ordinarily aimed at encouraging the employment of welfare recipients, disabled veterans, and impoverished ex-felons.
Any business could relocate to Lower Manhattan to participate in the program, and the businesses already there could benefit from the credit for an unlimited number of new hires, in addition to claiming the credit for their existing employees. Businesses that were forced to relocate can claim benefits only for as many employees as they had downtown on September 11. The credits could be claimed from the period from Sept. 11, 2001 through December 31, 2002.
The tricky question is who, exactly, is an "employee." Under the WOTC, a qualified employee is anyone who works at least 400 hours for a business; in the case of Lower Manhattan, workers would have to perform "substantially all the services" for their employer in Lower Manhattan. Qualified employers would be permitted to claim a credit on their tax bill for an amount equal to 40% of the first $12,000 of each employee's salary. Some businesses could end up paying no taxes at all. Employers can carry the tax credits backward against last year's taxes or forward for up to 20 years. But a company that never showed any profit and never owed any tax could not get a check from the government under the credit program.
Another section of the bill backed by Clinton and Schumer would reduce the cost of financing for building downtown by authorizing the issuance of tax-exempt bonds. A third, smaller section would provide incentives for downtown business to invest their insurance proceeds in Lower Manhattan.
Along with the question of whether the targeted tax breaks will end up persuading companies to stay or relocate downtown is the question of whether, even if it did have the desired effect, the policy makes sense.
"If business doesn't want to be there for some reason, then the market is saying something," the director of fiscal policy for the Cato Institute in Washington, Chris Edwards, said. "The market is saying that Lower Manhattan is a very expensive place to do business."
And so, for some businesses, Lower Manhattan may no longer make sense. Higher insurance premiums are unlikely to go away. Transit links with New Jersey and other areas could be fixed -- but until they are, tax credits have to be weighed against thousands of hours of commuting time.
A separate set of problems confront small business that provide services that are no longer needed. Some sandwich shops have lost their delivery businesses to new security precautions. Some shoe-shine stands have lost their customers in the rubble of the World Trade Center or to the flight to New Jersey and other parts of Manhattan. Neither business could be saved by a tax credit; it only makes sense for these services to exist when, and if, their customers return.
"What a small business needs is not federal grants," a senior fellow at the Manhattan Institute, E.J. McMahon, said. "They need business."
Backers say the per-employee tax credit is a stop-gap measure, designed to hold businesses while the area rebuilds. "Keeping businesses here during the transition is key," New York City Partnership Senior Vice-President Tom McMahon (no relation to the Manhattan Institute's Mr. McMahon) said.
But even the Partnership would like to see the bill altered. In particular, the business group would like to see a set of incentives on long-term investment added to the short-term employee tax credit. A House bill sponsored by New York representatives offers tax breaks for building and improving property below Canal Street.
"We're not satisfied that what is currently on the table is all we'll end up with," the Partnership's Mr. McMahon said of the Senate bill.
Aides to Senators Schumer and Clinton did not return calls for comment. In a speech on the Senate floor on November 27, Mrs. Clinton said, "we need some help to put New York back into business so that it will continue as the capital of the global markets, as the capital of the global entertainment and media world." She pointed out that New York runs "a balance of payment deficit between New York and Washington that is $15 to $18 billion a year." So a tax break that is specific to New York would return to the city some of the tax funds that it already pays in.
That's a new tack on taxes from a senator who (along with Mr. Schumer) voted against President Bush's tax cut plan this May. The president's plan, she told Channel 4's Gabe Pressman in March, would be "bad for the country and very bad for New York." Why? Because it's "too skewed toward a small minority of the very wealthy."
Subscribe to the Mailing List
© 2017 FutureOfCapitalism LLC