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  • Exposing the Real Reason behind the Attacks against Public Sector Workers and Their Unions
    Updated On: Aug 28, 2015

    Exposing the Real Reason behind the Attacks against Public Sector Workers and Their Unions

    by

    Seymour Slavin, Ph.D.

    While the country has been swamped with raging snowstorms, the biggest snow jobs have come from corporations, Republican governors and legislators, Chambers of Commerce and their puppets. This chorus of union busters has been joined by the corporate think tanks, the CATO Institute, the Heritage Foundation, American Enterprise Institute and spewed from Fox News. The reasons behind these attacks on public sector workers and their unions can be seen in the differential in salaries between unionized public workers, who can earn $47,000 as a result of union efforts compared to public sector non-union workers who earn $37, 284.[1]

    The false charge that unionized public sector workers are paid too much is wrong. Studies have shown when comparing education and training, most public sector workers compared to private sector workers in similar jobs have an 11% lower salary than private workers who perform similar tasks. Data shows that workers in the private sector earn $66,000 as opposed to $49,132 for public employees with comparable education and skill.[2] Thus, many public sector workers have made salary sacrifices by choosing the public sector. This includes first responders such as police, firefighters and who lives are in jeopardy every time they aid the public.

    Public Sector workers constitute the largest group of union members in the country. By attacking this sector, corporations hope to cripple and destroy the entire trade union movement.  Additionally, in the process, they hope to roll back, privatize or wipe from the books important progressive legislation such as, Social Security, Medicare and protection for minorities and women, much of the agenda that benefit workers, thus, eradicating years of social legislation that unions fought many battles to obtain.

    Their business model for privatization is Enron; and we all know the corruption that ensued from this model. That’s why unions and their allies must organize, resist and defeat such reactionary efforts.

    Those Republican governors and their crony legislators, including some Democrats, are crying wolf about fiscal distress on the part of states is only part of the story. While there may be serious budgetary problems in the states, we will show that there are a number of steps to lessen the impact of a financial meltdown, which these governors and legislators claim.

    Research shows two concrete ways in which states can lessen the impact of budgetary problems. One way, is by instituting certain revenue enhancement polices, such as those advocated by The Institute of Taxation and Economic Policy. Their recent study was of eight states, Arkansas, Montana, New Mexico, North Dakota, South Carolina, Vermont, Hawaii and Wisconsin.[3] These states currently offer substantial tax breaks to a tiny minority of taxpayers. This 1% of taxpayers evades paying a fair share of their taxes, by using tax breaks, claimed as capital gains. Capital gains are profits gained from selling assets, such as art objects, stocks, bonds and investment real estate. In 2008, tax payers with a federal income with less than $50,000 comprised 66% of all tax returns, but constituted only 10% of those claiming any capital gains. In the eight states cited, 95%-100% of the tax breaks went to the richest 20% of tax payers. Over $400,000,000 in revenue is lost to just capital gains alone. Several states recently acted to revise this exclusion, including Rhode Island and Vermont. It should be noted that the most usual assets held by most Americans, such as 401(K) s and IRAs cannot be treated as capital gains. The table that follows (figure 1) shows what a small minority of taxpayers is involved in capital gains:

    Capital Gains Income among Federal Taxpayers in States with Major Capital Gains Preferences, 2008

                     

    Income Group

    (Federal AGI)

    AR

    HI

    MT

    MN

    ND

    SC

    VT

    WI

    US

    Share of all returns filed

    Under $50,000

    72%

    66%

    70%

    71%

    65%

    72%

    67%

    64%

    66%

    $200,000 plus

     2%

     2%

    2%

    2%

    2%

    2%

    2%

    2%

    3%

    Share of all returns with capital gains income

    Under $50,000

    8%

    10%

    15%

    8%

    13%

    7%

    13%

    13%

    10%

    $200,000 plus

    67%

    68%

    75%

    67%

    72%

    69%

    74%

    72%

    70%

    Share of total Adjusted Gross Income

    Under $50,000

    31%

    26%

    28%

    29%

    24%

    30%

    26%

    24%

    22%

    $200,000 plus

    20%

    19%

    20%

    19%

    23%

    19%

    20%

    20%

    29%

    Share of total capital gains income

    Under $50,000

    8%

    2%

    7%

    5%

    6%

    4%

    4%

    6%

    4%

    $200,000 plus

    75%

    83%

    71%

    79%

    71%

    79%

    77%

    76%

    87%

    Capital gains income as a share of Adjusted Gross Income

    Under $50,000

    1%

    0%

    2%

    1%

    2%

    1%

    1%

    1%

    1%

    $200,000 plus

    16%

    17%

    24%

    17%

    18%

    15%

    21%

    14%

    15%

    Source: IRS, 2008 Statistics of Income (SOI) Tax Stats: Historical Table 2[4]

    If one were to compute this for Kentucky, it would be reasonable to believe the results would be the same.

               

    A second approach is to utilize the huge bonanza millionaires will now enjoy as a result of the Bush tax cut extension for the next two years. The prolongation of the Bush tax cuts means that millionaires will receive a huge windfall of additional income. Thus, if states choose to revise their income tax rates commensurate with this huge windfall income, a new revenue stream would be available. The renewal of the Bush tax cuts effect only 5% of taxpayers in 2011. Thus, this would help mitigate state finances.

    As the table below (figure 2) shows for Kentucky, additional revenues would be forthcoming for the state:[5]

    Impact of Extending the Bush Tax Cuts in 2011 on the Top 5% of Taxpayers in Kentucky

    Taxpayers

    Obama’s Bush tax Cut Extension Plan

    Additional Bush Tax Cut Extensions Proposed by the GOP

    Actual Bush Tax Cut Extensions Enacted in 2010 Compromise

    Income Group

    Average Income

    Total Tax Cuts ($1000s)

    Average Tax Cut

    Total Tax Cut

    Average Tax Cut

    Total Tax Cuts ($1000s)

    Average Tax Cut

    Next 4%

    $198,419

    -$427,794

    -$5,482

    -$14834

    -$190

    -$442,628

    -$5,672

    Top 1%

    $818,173

    -$250,583

    -$12,841

    -$363,234

    -$18,614

    -$613,817

    -$31,455

    Total for Top Income Groups

    -$678,377

    -$378,068

    -$1,056,445

    Note: These figures do not include the Making Work Pay Credit, American Opportunity Credit, payroll tax cut, or estate tax cut.

    It is apparent from the table that in 2010, the top 1% of the taxpayers in Kentucky who have incomes of $818,173 receives total tax cuts amounting to $613,817. If you include the next 4% of top income earners, these folks are getting $1,056,445. Here is a pool of taxpayers, who in the name of fairness should be paying more state taxes.

               

    Politicians and legislators, who are attacking unionized public sector workers, are anxious to dismantle civil service protections. They want to do this, so they can return to the old corrupt days when political machine bosses e.g. (Tammany Hall, Boss Tweed and other machine politicians) filled public sector employment with their cronies. If they could accomplish this, not only would they bust unions and abolish collective bargaining, but professionalism and competence would be absent from the workplace. Collective bargaining by unions reinforces high public service performance standards. What we are witnessing in Wisconsin currently, is a Republican governor trying to abolish collective bargaining, as a precursor to public sector union busting and thereby, destroy engage in the most blatant attempt all trade unions.

    Thus, if state legislators were to reform current tax policies, a more fair and equitable budgetary process could take place. Ultimately, the way to overcome the fog of misstatements is to bring the truth to the American people. Thus, the attack against public sector unions can be viewed in its true light—protect the super rich and disarm the voice of  the people—the trade union movement.

    .

     

    [1] Bender, K. A., and Heywood, J. S., 2010, “Out of Balance? Comparing Public and Private Sector Compensation over 20 Years,” National Institute on Retirement Security”, 4.

    [2] Connell, Tula, Public Employees Paid Less than Private-Sector Workers, http://blog.aflcio.org/2011/01/07 (January 2011)

    [3] Institute on Taxation and Economic Policy “A Capital Idea Repealing State Tax Breaks for Capital Gains Would Ease Budget Woes and Improve Tax Fairness”(www.itepnet.org)

    [4] Institute on Taxation and Economic Policy “A Capital Idea Repealing State Tax Breaks for Capital Gains Would Ease Budget Woes and Improve Tax Fairness”(www.itepnet.org)

    [5]  Institute on Taxation and Economic Policy “State-by-State Figures: Impact of Extending the Bush Tax Cuts on the Top 5% of Taxpayers in 20ll”(www.itepnet.org)


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