Opinion

David Cay Johnston

In New York, gifts circumvent a ban

David Cay Johnston
Nov 29, 2011 16:26 UTC

By David Cay Johnston
The opinions expressed are his own.


Taxpayers can expect ever more picking of their pockets by businesses with political clout thanks to the Nov. 21 decision by Judge Theodore Jones and four colleagues on the New York Court of Appeals.

At issue is $1.4 billion in state gifts whose primary beneficiary is a microchip maker, GlobalFoundries, a company controlled by Abu Dhabi’s hereditary ruler, Sheikh Khalifa bin Zayed Al Nahyan, one of the wealthiest people ever. The gifts, labeled economic development grants and made through a state-sponsored corporation, work out to about a million dollar subsidy per job at the plant near Albany.

The New York Court of Appeals said the 50 taxpayers who sued over the deal and over gifts to apple and wine trade associations have no standing to challenge the gift because it is proper.

While this case concerns only New York, it illustrates how corporate socialism has become our de facto economic policy and how the ideal of competitive markets and self-reliance are fading in significance.

State and local gifts to corporations now run at least $70 billion per year nationwide, according to an estimate by Professor Kenneth Thomas of the University of Missouri-St. Louis.

GOP inaction means higher taxes

David Cay Johnston
Nov 22, 2011 19:03 UTC

The author is a Reuters columnist. The opinions expressed are his own.

Thanks to Republicans who signed Grover Norquist’s pledge never to raise taxes, your taxes are automatically scheduled to go up in January — unless you are a plutocrat.

The law that created the congressional super committee set a target of this week for reducing budget deficits. The committee failed to meet the target.

Republican members were willing to cut programs that benefit millions, but they would not raise taxes on the hundreds of thousands of families whose annual income is in the millions and, in a few cases, billions of dollars.

Closing Wall Street’s casino

David Cay Johnston
Nov 18, 2011 20:26 UTC

The author is a Reuters columnist. The opinions expressed are his own.

A superb example of a sound rule in law and economics that needs reviving, because it can halt the rampant speculation in derivatives, is the ancient legal principle that gambling debts are not enforceable through court action.

Not so long ago — before casinos, currency and commodities speculation, and credit default swaps became big business — U.S. courts would not enforce gambling debts.

Restoring this principle offers a simple way to shrink the rampant speculation in derivatives that was central to the 2008 meltdown on Wall Street.

Meltdown redux

David Cay Johnston
Nov 15, 2011 15:30 UTC

The author is a Reuters columnist. The opinions expressed are his own.

KANSAS CITY, Mo. –  The U.S. politician-businessman that Congress put in charge of determining the reasons for the 2008 financial crisis has a sobering message for us: “It’s going to happen again.”

Phil Angelides, the real estate developer and former California state treasurer who chaired the Financial Crisis Inquiry Commission, said on Friday that “all across the marketplace the warning signs were there” of a coming disaster but the mechanisms and political will to stop it were not.

He and I both spoke at a University of Missouri-Kansas City Law School symposium on the financial crisis and the commission set up to examine it.

A history of audit failures

David Cay Johnston
Nov 11, 2011 20:07 UTC
The author is a Reuters columnist. The opinions expressed are his own.

The admission by Olympus Corp that it falsified financial reports for more than a decade should not shock anyone. The shock is that, for years, auditors failed to detect such massive fraud.

The failures of auditors to uncover cooked books, which run the gamut from Adelphia to Waste Management Inc, are a cancer on the accounting industry.

The failures go back years. How about Al Dunlap’s manufactured numbers at Sunbeam in 1998? Or teenage con man Barry Minkow’s ZZZZ Best, which turned out to be a Ponzi scheme and collapsed in 1987? Or Equity Funding, with its computer program to fabricate life insurance policies, in 1973? Or the National Student Marketing “pooling of interests” fraud in 1970, which gave birth to the Financial Accounting Standards Board? Or the 1938 McKesson & Robbins scandal, which gave us the first American audit standards? Or Ivar Kreuger’s 20 percent dividends Ponzi scheme in 1932?

You’re paying taxes, so why aren’t energy companies?

David Cay Johnston
Nov 8, 2011 17:42 UTC

By David Cay Johnston

The views expressed are his own.

In a competitive market, economists argue endlessly about who bears the burden of corporate income tax. Is it owners, who get a smaller net return? Or workers, who make less? Or suppliers, who get lower prices? Or customers, who pay higher prices?

In one sector of the U.S. economy, however, the answer is clear-cut. Corporate-owned utilities (mostly electric and natural gas) and pipeline partnerships, all of them legal monopolies, pass their income tax burdens on to customers.

Now a study, released last week, provides powerful new evidence that these two industries convert corporate income taxes from a burden to a benefit.

A gift, from NY to Abu Dhabi

David Cay Johnston
Nov 1, 2011 16:37 UTC

The author is a Reuters columnist. The opinions expressed are his own.

How does being taxed to give money to the oil-rich kingdom of Abu Dhabi and its hereditary ruler strike you?

The cost, if you live in New York State, comes to about $1.4 billion, or roughly $190 per household, for an economic development deal with a privately held company called GlobalFoundries to build a microchip plant near Albany.

As you ponder this forced transfer from you to the chip-making giant, which is controlled by Abu Dhabi‘s ruler Sheikh Khalifa bin Zayed Al Nahyan, keep in mind that Abu Dhabi says its citizens enjoy the world’s third-highest per capita income, a third higher than Americans’.

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