Erika Eichelberger

Erika Eichelberger

Reporter

Erika Eichelberger is a reporter in Mother Jones' Washington bureau. She has also written for The NationThe Brooklyn Rail, and TomDispatch. Email her at eeichelberger [at] motherjones [dot] com. 

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Expert: Congress Shouldn't Listen to Apple's Tax Plan

| Fri May. 24, 2013 7:54 AM PDT

The revelation that Apple used a web of baroque tax strategies to legally pay little to no taxes on tens of billions of dollars it earned overseas has re-ignited the debate over reforming the US tax code. But the non-partisan Center on Budget and Policy Priorities (CBPP) warned this week against proposals pushed by Apple and other large multinational corporations that would reduce taxes on offshore profits in order to encourage companies to bring that money back home.

Offshore profits are currently taxed at the same rate as onshore profits: 35 percent. Big US corporations have lobbied aggressively for the United States to shift to what is called a territorial tax system, in which foreign profits would be subject to low or no US taxes. The idea was a cornerstone of former Republican presidential candidate Mitt Romney’s economic platform last year. Now, Apple CEO Tim Cook is calling for a single-digit tax rate on overseas profits, as well as a reduction of the overall US corporate tax rate to the mid-20s.

Chuck Marr, the director of federal tax policy at the CBPP, explains that such a system would only make overseas profit-making more attractive—and that would weaken the US economy:

Multinational companies like Apple currently have a strong incentive to defer US corporate taxes by shifting and keeping profits overseas… [A] territorial system would create greater incentives for those companies to invest and book profits overseas rather than at home—and that, in turn, risks reducing wages at home by encouraging investment to flow overseas, increasing budget deficits by draining revenues from the corporate income tax, or raising taxes on smaller companies and domestic businesses to offset the revenue loss.

Democrats and trade unions agree, arguing that the United States should move in the other direction and tax foreign profits in the years they are made. They contend this would stem the corporate practice of deferring tax payments until the cash is brought back to the United States.

"We are dismantling vital government services because we don’t have revenue to support them," Damon Silvers, the policy director of the AFL-CIO told the Financial Times earlier this week. "And we have one of the most profitable corporations in the world [Apple] stashing $100 billion in [low-tax] jurisdictions."

Other high-tech companies are increasingly shifting profit-making overseas. The revelations about Apple's shenanigans—which apparently are legal—have drawn attention to similar behavior by many high-tech firms, including Google, HP, and Microsoft. "These [tax] incentives are creating unfair advantages for multinationals and draining much-needed tax revenue," says Marr. "The president and Congress should resist the lobbying campaign and instead focus on reducing the incentive to shift profits and operations overseas."

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Elizabeth Warren Attacks House GOP on Student Loan Bill

| Fri May. 24, 2013 7:52 AM PDT

On Thursday, Sen. Elizabeth Warren (D-Mass.) slammed a Republican student loan bill the House just approved that would allow interest rates on student debt to skyrocket.

"The student loan bill passed by House Republicans takes a bad situation and makes it worse," she said in a statement.

On July 1, rates for federal student loans called Stafford loans are set to double from the current rate of 3.4 percent to 6.8 percent. The GOP bill, which passed the House on a mostly party-line vote of 221 to 198, would allow interest rates on those loans to rise or fall from year to year with the government's cost of borrowing, ending the system in which rates are fixed by law. Because market rates are low right now, the initial rate for those loans would be about 4.4 percent, but in coming years it could increase up to a cap of 8.5 percent.

Warren, who has proposed her own student loan plan which would cut student loan rates to near zero, accused Republican lawmakers of making students into cash cows:

Our students should not be a profit center for the government, and the July 1 deadline should not be turned into an opportunity to make more money at the expense of young Americans who are working hard to get an education. This is about our values. We should be investing in higher education to strengthen our economy and grow the middle class.

The student loan bill proposed by Warren, a version of which was introduced in the House by Rep. John Tierney (D-Mass.), is called the Bank on Students Loan Fairness Act. Under Warren and Tierney's plan, student loan interest would be cut to the low .75 percent interest rate that banks pay to the Federal Reserve for short-term loans. After a year, a longer-term student loan solution would be drawn up.

"If we can invest in big banks by giving them low interest rates on government loans," Warren said in the statement, "we certainly can do the same to help students get an education."

The Republican bill faces opposition in the Democratic-controlled Senate, and President Obama has threatened to veto it.

GOP Food Stamps Proposal Would Discriminate Against African-Americans

| Thu May. 23, 2013 7:15 AM PDT

On Wednesday the Senate agriculture committee approved a GOP proposal that would amend the farm bill the Senate is considering to ban "convicted murderers, rapists, and pedophiles" from getting food stamps. On its surface, the idea sounds unobjectionable, but the measure would have "strongly racially discriminatory effects," according to the non-partisan Center on Budget and Policy Priorities (CBPP).

The amendment, introduced by Sen. David Vitter (R-La.), and agreed to by unanimous consent in the committee, would bar anyone who has ever been convicted of certain violent crimes—even if they committed the crimes in their youth and have served their sentence—from ever getting food stamps (called SNAP benefits) ever again. CBPP president Robert Greenstein slammed the amendment in a statement Tuesday, calling it "stunning." Because African Americans are incarcerated at a higher rate than other races, he says, "the amendment would have a skewed racial impact. Poor elderly African Americans convicted of a single crime decades ago by segregated Southern juries would be among those hit." Under current law, there is only a lifetime ban on food stamps for convicted drug felons, and many states have opted out of that ban.

The measure wouldn't just hurt ex-cons. Greenstein points out that "the amendment would mean lower SNAP benefits for their children and other family members."

Plus the amendment could cause higher rates of recidivism. "Ex-offenders often have difficulty finding jobs that pay decent wages," Greenstein says. "The amendment could pose dilemmas for ex-offenders who are trying to go straight but can neither find jobs nor, as a result of the amendment, obtain enough food to feed their children and families."

The House of Representatives has also voted to cut food stamp funding from the farm bill; their plan would throw some 2 million people off the program.

There's still time to rethink the senators' ill-conceived plan, though, Greenstein says. "The farm bill is still on the floor, and the amendment can still be modified," he says. "Senators should gather the courage to step up to the plate and address this matter."

VIDEO: Elizabeth Warren Grills Treasury Secretary on Too Big to Fail

| Tue May. 21, 2013 5:03 PM PDT

At a Senate banking committee hearing Tuesday, Sen. Elizabeth Warren (D-Mass.) grilled Treasury Secretary Jack Lew on too-big-to-fail banks—financial institutions that are so large that their failure would endanger the entire financial system.

"How big do the biggest banks have to get before we consider breaking them up?” she asked.

Too big to fail is far from over. The largest financial institutions are still ballooning in size. In the past few years, banks have been beset by one scandal after another—from money laundering, to rate-fixing, to foreclosure fraud, and have mostly received wrist-slaps as punishment—probably because, as Attorney General Eric Holder recently warned, prosecuting too-big-to-fail banks for bad behavior might spook the entire financial system.

Too big to fail almost died three years ago. Warren noted that as the 2010 Dodd-Frank financial reform law was being crafted, an amendment was proposed that would have broken up the banks, but it didn't pass—in large part, she reminded Lew, because the Treasury Department (then under Treasury Secretary Timothy Geithner) was against it.

"Have you changed your position," Warren demanded, referring to the Treasury department. "Or are you still opposed to capping the size of banks?"

Lew responded that "ending too big to fail is our policy and we're aiming to do it." But Warren wouldn't let him weasel out of the question with generalities. "I want to focus you in here," she pushed. "My question is about capping the size of largest financial institutions."

Lew refused to commit. "Our job right now is to implement…Dodd-Frank," he said. "I think this is not the time to be enacting big changes."

"Let me try the question a different way," Warren persisted. "How big do the biggest banks have to get before we consider breaking them up?" she asked, adding that the largest American banks are 30 percent larger than they were five years ago. "Do they have to double in size? Triple in size? Quadruple in size? Before we talk about breaking up the biggest financial institutions?"

Lew said that too big to fail "is an unacceptable policy", but urged Warren to have some patience.

She'd have none of Lew's excuses: "What we've seen…is one scandal after another in these largest financial institutions," she said. "It's clear they have not changed their risk bearing practices nor have they decided that they're suddenly going to start following the law."

Obamacare Doesn't Make Employers Cover Spouses. Does That Matter?

| Mon May. 20, 2013 3:00 AM PDT

Despite the 37 bills to repeal it and the scores of lawsuits filed against it, Obamacare, a.k.a. the Affordable Care Act, is going to be in full swing soon. But the historic health insurance reform law is going to face many more bumps in the road as it is rolled out. One corner of Obamacare that hasn't gotten much attention is the fact that it will not require employers to cover spouses, which experts say could lead some employers to drop coverage for Americans' significant others.

The Affordable Care Act mandates that employers offer health insurance to workers and their dependents. But the law defines dependents as children, not spouses. And although some health care law experts say this is not going to result in any big changes in the way that employers provide insurance for husbands and wives, others contend that implementation of the law could end up leaving some spouses out of family plans, forcing them to buy insurance elsewhere.

"Right now there are virtually no employers that just offer coverage for the employee and their children," says Tim Jost, a health care law scholar at the Washington and Lee University School of Law who regularly consults with Obama administration officials on implementation of the Affordable Care Act. "Whether that will change or not, who knows. We will probably see at least some employers who will offer individual and child coverage, but not coverage for spouses."

If you live in a household that is in the upper-income range—one that takes in more than $94,000 a year (above 78 percent of households)—and you get dropped from your spouse's coverage, you won't be able to get a government subsidy to purchase insurance on the government-run insurance exchanges being set up by the health law. So, say there's a family in which each parent makes $47,000 a year, but only one has coverage. The spouse that is not covered would have to buy private insurance, which costs hundreds of dollars a month.

If you're middle income or poor, and your spouse's employer drops you from her health coverage, you'll be able to shop on the exchange with a subsidy. Even though your coverage would not be free, the idea is that at least it would be kind of affordable. Unless it's not. When people buy coverage on the exchange, their subsidy will be based on household income. As Jost points out, the problem is that household income for people using the exchanges will be measured before the household pays for the employer-provided health insurance. So the employee could be paying up to 9.5 percent of her income on health insurance for herself (the most that Obamacare will allow insurers to charge for employer-sponsored plans), or an even greater share of her income for individual and child coverage, and still her spouse's subsidy on the exchange would be based on that much higher pre-health-care-costs income level.

"It's a potential problem," says Ethan Rome, executive director of Health Care for America Now, a group that backs Obamacare. "There could be some folks that get lost in the shuffle. And that is not insignificant…If you're one of few people adversely affected by something, it doesn't matter that everyone else on the planet is getting the benefit." (The Department of Health and Human Services declined to comment for the story.)

But Rome adds that the situation "has to be put in context." He points out that this potential glitch doesn't change the fact that some 30 million people currently without insurance will get coverage under Obamacare. And Jonathan Gruber, an MIT economist who helped craft Obama's health care law, notes that "we're still a hell of a lot better off than we are today."

Judy Solomon, vice president for health policy at the nonpartisan Center on Budget and Policy Priorities, adds that it's unlikely that too many employers will drop spouses anyway. "Family coverage is valued employee benefit," she says. "I don't see that this provision is going to change what employers do." Rome agrees: "If you are an employer and you provide good quality health care for your employees, including dependent coverage, it's because you understand that a good benefits package is the best way to recruit and retain top-notch employees."

Still, Rome says that Obamacare advocates would like to be able to address technical issues in the law, such as this potential spousal coverage problem, but that the Republican-controlled House makes that impossible. "It is an imperfection in the law and there are some things many of us want to fix," Rome says. "And we could if we did not have a GOP House of Representatives obsessed with repealing the law."

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