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How Public Taxes Became a CEO’s Personal Income

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(Image by Mark Fiore for CMD)

As Gary Cohn and Bill Raden point out in a recent Frying Pan News piece, it’s become the pastime of conservatives to skew debates over public employee pensions by singling out the comparatively high retirement benefits of “top-tier city and county executives,” while ignoring the typical pensions earned by the vast majority of government workers. This ploy is also used, naturally, in propaganda decrying the salaries of public sector employees while they are still actively working for states and cities.

The Center for Media and Democracy’s new project, Outsourcing America Exposed, has discovered that there is, in fact, a breed of “government worker” whose members receive sky-high, taxpayer-funded salaries. They are not teachers or librarians, however, but “CEOs whose corporations make billions by taking control of public services.”

Says CMD executive director Lisa Graves: “Taxpayers are being duped by corporate CEOs and Wall Street banks that are siphoning money out of our communities for huge salaries and bonus packages.”

Graves is referring to the gold-plated trough known as privatization, in which private companies assume control of public services or, in the case of education, seize schools by absorbing them into tax-funded charter systems – or even cyber education systems. CMD points to the case of K12, a publicly traded company, and its CEO, Ron Packard. K12 is an online education company and, says CMD, “On its own and as a member of the American Legislative Exchange Council (ALEC), K12 Inc. has pushed a national agenda to replace bricks and mortar classrooms with computers and replace actual teachers with ‘virtual’ ones.”

According to CMD, “In 2013, K12 Inc. took in $848.2 million from its business, with $730.8 million coming from its ‘managed public schools’ and thus the U.S. taxpayer . . . In other words, over 86 percent of the company’s profits are due to taxpayers.”

You could say this arrangement makes a former Goldman Sachs honcho like Ron Packard “America’s highest paid teacher,” as CMD calls him, even though K12 has proved to be a poor school district.

“[O]nly 27.7 percent of K12 Inc. online schools met state standards in 2010-2011, compared to 52 percent of public schools,” notes CMD.

But whose complaining? Certainly not Packard, who “made over $19 million in compensation,” while pay for K12’s “school board” (i.e., its top executives) “skyrocketed 96 percent in 2013.” We can’t wait to see how their pensions pan out when they retire.

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Hearing Shines a Light on Sexual Harassment in the Service Industry

The recent media spotlight on sexual harassment in Sacramento and Hollywood has created an opportunity to address the plight of low-wage workers.

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Assemblywoman Lorena Gonzalez Fletcher, center. (Photo: Joanne Kim)

Assembly Bill 3081 is one of several #MeToo-inspired laws proposed by California legislators.


 

Sandra Pezqueda has racked up some victories recently, but she is not resting easy.

She made the unlikely journey from dishwasher to Time magazine cover story, which featured Pezqueda in Time‘s 2017 Person of the Year issue for her role in fighting sexual harassment at the Terranea Resort, a luxury seaside hotel in Rancho Palos Verdes. In April she settled a lawsuit  for $250,000 against Excellent Maintenance Service, the staffing agency that placed her in the Terranea’s kitchen.

Pezqueda, who is 38 and a native of Mexico, spent Monday evening at a legislative committee hearing in Los Angeles, advocating for a law that would hold companies like the Terranea accountable for the actions of their contractors and temporary workers.


“Many women who work in the hotel industry do not have a voice at all. When they experience something bad, they are afraid to speak up because they might be blamed.”


“I am proud that I can continue to advocate on behalf of other women,” said the poised Pezqueda in Spanish through an interpreter. She described “one of the worst experiences of her life” – a male supervisor who worked for the staffing agency tried to kiss Pezqueda and pressure her for sex. Unlike the vast majority of women who face harassment in the workplace, Pezqueda took action. But her complaint to hotel management led to her firing in 2016, she said.

A sympathetic group of seven California state Assembly members listened to Pezqueda’s testimony and that of three other service industry workers who spoke about some of the barriers that keep many sexual harassment victims in an industry largely staffed by immigrant workers from speaking out.

The chair of the California State Select Committee on Women in the Workforce, Assemblywoman Lorena Gonzalez Fletcher, has been combating sexual harassment since long before the #MeToo movement gained steam. The San Diego-based legislator spearheaded a 2016 bill to address sexual violence against janitorial workers after viewing a 2015 Frontline documentary, “Rape on the Night Shift,” that she says shocked her into action.

The recent media spotlight on harassment in Sacramento and Hollywood has created an opportunity to address “what happens every single day for low-wage workers who, in many ways, are in a more precarious situation” than their counterparts in higher-paid occupations, Gonzalez Fletcher said after the packed hearing, which was held in the basement of the union hall belonging to UNITE HERE Local 11. (Disclosure: The union is a financial supporter of this website.)

Juana Melara and Sandra Pezqueda. (Photo: Joanne Kim)

Assembly Bill 3081, sponsored by Fletcher Gonzalez, would hold companies like the Terranea responsible for sexual harassment of contract workers, and is one of a series of #MeToo-inspired bills in the California legislature this year, some of which have drawn strong opposition from business groups.

The Terranea’s management told the Los Angeles Times that Pezqueda’s lawsuit and allegations “have nothing to do with” the resort. Excellent Maintenance Service reached a settlement with Pezqueda, but has denied wrongdoing.

Gonzalez Fletcher, the daughter of a former farmworker and a nurse, introduced another controversial bill earlier this year, Assembly Bill 3080, which would prohibit employers from requiring workers to sign agreements that force employment disputes into private arbitration proceedings. Mandatory arbitration agreements have proliferated over the last two decades and now cover 60 million workers nationwide, according to a study by the Economic Policy Institute.

The California Chamber of Commerce has labeled the bill banning forced arbitration a “job killer” that could “significantly expand employment litigation.”

The Chamber has also opposed AB 3081, which labor advocates are calling “Sandra’s Law,” arguing that the liability for sexual harassment should rest with the contractor and not with the employer.

Companies already share in civil liability when their labor contractors fail to compensate workers or provide workers’ compensation insurance.

A larger theme underscored the two-hour Monday hearing, which is the powerlessness of women workers in the service industry that, the hearing’s participants said, could be remedied by unionization and diversity in hiring at all levels of companies.

“Only when we have gender balance at every level with every organization will we see sexual harassment really begin to disappear,” said the Feminist Majority Foundation’s executive director, Kathy Spillar, who was one of several experts to speak at the hearing.

Juana Melara, a Westin Long Beach housekeeper who was also featured in the Time magazine 2017 Person of the Year issue for speaking up about sexual harassment, addressed a similar issue. “Many women who work in the hotel industry do not have a voice at all,” she said. “When they experience something bad, they are afraid to speak up because they might be blamed.”

Melara recently helped negotiate a yet-to-be-ratified, first union contract with the Westin Long Beach that will provide “panic buttons” to housekeepers who often work in isolation while cleaning rooms. A legislative requirement that hotels throughout the state provide such buttons to their housekeeping staff members to protect them from sexual assault was also the subject of discussion on Monday.


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Is Tesla a Promise or a Problem for Rebuilding the Middle Class?

Co-published by Fast Company
In Robert Jimenez’s day, California was second only to Michigan in auto manufacturing, and homeownership was a much more attainable aspiration. “We are what’s left of the middle class,” he says.

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Photo: Cindy Chew

Can an industrial giant like Tesla be a factory for middle-class jobs?


Co-published by Fast Company

Both Michael Sanchez and Robert Jimenez owe their fortunes to California’s auto industry. But their personal and professional trajectories couldn’t be more different.

Sanchez, a Tesla assembly line worker, is on a leave of absence due to chronic back pain from a repetitive-motion injury that sidelined him two years ago. He and his wife, Mona Liza Sanchez, rent a “very old broken-down” house in Hayward. Homeownership in Northern California’s pricey East Bay is not on his radar, even in this blue-collar suburb south of Oakland.

They lavish their affections on “our babies,” by which Sanchez, 39, means their cats and dogs. Their economic situation has caused them to delay starting a family.


Source: California Budget & Policy Center analysis of U.S. Census Bureau, American Community Survey and Decennial Census data.

Note: “Middle income” is defined as having household income that is two-thirds to twice the median household income for the county of residence.


Meanwhile, Jimenez, who retired in 2005 after 35 years at a Chrysler-owned supplier in downtown Los Angeles, owns a house in Montebello, just east of Los Angeles, and put his two children through college. His career flourished during the auto industry’s golden age, which began after World War II and was nourished by the federal government’s massive investment in road building. In Jimenez’s day, California was second only to Michigan in auto manufacturing, and homeownership was a much more attainable aspiration. “We are what’s left of the middle class,” he says.


Elon Musk’s labor intransigence could upend a decades-old social contract
between employers and workers.


Investment analysts scrutinized Tesla’s announcement, made earlier this month, that it met its 2018 production goals for the mass market Model 3, after the company blew past deadline after deadline. But another critical question looms for taxpayers who, according to a 2015 Los Angeles Times analysis, have invested nearly $5 billion in public aid to Musk’s companies. Can an industrial giant like Tesla be a factory for middle-class jobs – or has the very nature of manufacturing irrevocably changed since the 1960s, when Robert Jimenez first went to work in the auto industry?

Back then, more than 60 percent of California households could be considered middle income, according to Sara Kimberlin, senior policy analyst with the non-profit California Budget and Policy Center. By 2016, that number had dipped to below 50 percent. Some of the decline can be attributed to the loss of thousands of manufacturing jobs, many of them high-paying union jobs, like the ones that afforded Jimenez and his family a piece of the California Dream.

The 2010 opening of the Tesla plant in a shuttered Fremont auto factory gave hope to Sanchez, who, unlike Jimenez, went to school to study the auto trade. He was hired initially as a temp for $17 per hour in 2012. It took him three-and-a half years to earn his first raise, a feat he says he accomplished by sending emails to Musk, the human resources department and “everybody in between.” When he injured himself, Sanchez was making “$20 per hour and change” on the night shift. The starting wage at Tesla has since been raised to $19 per hour.


A successful California union drive could “serve as a model for jump-starting the middle class.”


By contrast, Sanchez’s wife, who is 40, had earned $34 per hour after five years of working on the assembly line at the same plant when it was unionized, according to Sanchez. She left the Fremont factory in 2009, when it closed. It had been operated by Toyota and General Motors in a joint venture.

An overriding concern of Michael Sanchez has been Tesla’s alleged lack of attention to safety. Sanchez worked on the luxury Model X’s underbody with his arms always above his shoulders, his neck straining as he looked up. Tesla should aim to “[make] it where people’s bodies are not going to break down as time goes on,” he says.

Sanchez fell back on a tried-and-true method of raising workplace standards. In the summer of 2016, he joined the United Auto Workers’ effort to unionize the Fremont factory, which currently employs 10,000 people and is California’s sole auto manufacturer. Plant safety is one of the UAW’s chief organizing issues at Tesla, which has received media attention for its higher than average rates of serious injuries, and for injury-reporting lapses, which the company disputes. A successful union drive could also “serve as a model for jump-starting the middle class” in California, according to Harley Shaiken, a University of California, Berkeley professor who specializes in labor and education.


“Imagine if Tesla goes under tomorrow — do you want to lose your job and lose your investment?”


In fact, labor advocates have long argued that unions benefit workers more broadly. A recent study, published by economists Henry Farber, Dan Herbst, Ilyana Kziemko and Suresh Naidu, draws from early polling data to show that high rates of unionization lead to lower levels of income inequality across the board. Shaiken also claims that the benefits of unionization would not just accrue to the workforce but to the company as well. A union could ensure that workers “speak more freely, more openly, now making things more effective in the production process,” he says.

Musk has not greeted the union effort warmly. In May, he wrote on Twitter: “UAW destroyed once great US auto industry & everyone knows it.” He also tweeted that those who joined the union might “give up stock options for nothing,” referring to an employee benefit currently available to all Tesla workers: an equity grant, which vests over a four-year period, and stock they can buy at a discount. The UAW charged that Musk’s statement was an act of retaliation against employees for union organizing and a violation of labor law, in a complaint filed with the National Labor Relations Board in May.



Source: Union Membership and Coverage Database, available at www.unionstats.com, compiled from the US Census Bureau’s Current Population Survey by economists Barry Hirsch of Georgia State University and David Macpherson of Trinity University.


Peter Leyden runs Reinvent, a media company that moderates roundtables with tech entrepreneurs and political leaders concerned about sustainability and the future of work. On the matter of compensation, Leyden suggests that having employees hold an equity stake in the company offers “a different way to think about your involvement at the company” that is “more geared toward the future” than bargaining for wage increases. The growing value of Tesla’s stock, Musk argued in a blog post to employees last year, can make its workers wealthier than their counterparts in unionized plants.


The path to the middle class is not as clear as it once was. The UAW has recently lost votes in right-to-work Tennessee and Mississippi.


Yet Jon Luskin, a certified financial planner at Define Financial, based in San Diego, believes employees are better off with higher wages than stocks. He urges Tesla employees to sell their stocks as soon as they vest. “Imagine if Tesla goes under tomorrow — do you want to lose your job and lose your investment?”

Shaiken says employees should not have to choose between unionization and having a stake in the company’s success. He points out that workers at General Motors, which is covered by a union contract, took home almost $12,000 extra this year due to a profit-sharing deal with the company.

Early last year Michael Sanchez was leafleting the Fremont factory as a volunteer UAW organizer when security guards ordered him to leave. One guard told him that “unions are worthless,” according to testimony that he provided to an administrative law judge during a trial before an NLRB-appointed judge in June, the San Francisco Chronicle reported. The NLRB’s general counsel says the company violated federal law that protects workers’ rights to act collectively. Hearings on the matter are expected to resume in September.


“If you’ve got a kid and mortgage and car payment, you need a predictable income.
That’s what unions do.”


“This has all the hallmarks of 1930s resistance, in the 21st-century context,” says Shaiken. He adds that such resistance could have “real consequences” beyond Tesla, upending a decades-old social contract between employers and workers.

“No one at Tesla has ever, or will ever, have any action taken against them based on their feelings on unionization,” Tesla said in a statement to the NLRB last year.

Of course, the path to the middle class that Robert Jimenez helped forge is not as clear as it once was. When he helped organize the Chrysler-owned auto parts supplier in 1968, union membership in the state stood at about 32 percent. Last year, only 16 percent of California’s workforce belonged to unions, and the union membership rate is far lower in the private sector. The UAW has recently lost votes in right-to-work Tennessee and Mississippi.

Peter Leyden characterizes unions as appropriate for 20th-century mass production, but anachronistic in contemporary high-tech manufacturing. He envisions a “new model” of labor-management relations that he describes as “flexible, adaptable, risk-taking” and “in sync with the entrepreneurial and innovative instincts of the people running the companies.”

But Nelson Lichtenstein, a UC Santa Barbara historian, argues that Musk is shifting risk onto workers rather than encouraging experimentation, since employees who feel less secure in their jobs will be reluctant to speak up. “If you’ve got a kid and mortgage and car payment, you need a predictable income. That’s what unions do,” he adds.

It is Musk and other union critics, says Shaiken, who promote false and outdated notions of auto unions, which often work collaboratively with the companies they represent. As an example, he cites the former General Motors and Toyota joint venture that previously ran the Fremont plant, where “constant improvement was the goal.” Tesla, he claims, is pursuing a “hard ideological argument rather than a pragmatic, high-tech way” of identifying how to optimize the production process and valuing workers at the same time.

“A competitive, profitable Tesla and a union are not incompatible, but that’s up to the workers there,” he says.


Research assistance provided by Jake Conran.

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The ‘Amazon Tax’ Ruling: Disrupting the Disruptors?

Amazon’s continuous resistance to collecting sales taxes made it the first major American company to build its business based on tax avoidance. Contrary to popular belief, the company is still resisting today.

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An Amazon fulfillment center. (Photo: Doug Strickland/Chattanooga Times Free Press via AP)

Amazon gathers sales taxes on products it manufactures and sells directly, but doesn’t collect on behalf of third-party businesses that use its marketplace.


On June 21, the Supreme Court changed the face of online retail, upholding a South Dakota law requiring any business making at least 200 transactions or $100,000 in sales to collect state sales taxes, even if it has no physical presence within a state’s borders. This ends a structural pricing advantage that made the Internet the world’s largest duty-free shop, at the expense of every restaurant, clothier, hardware store and pharmacy whose e-commerce rivals could always charge less.

The decision came too late for brick-and-mortar businesses wiped off the map in the retail apocalypse. It came too late for state and local governments losing between $8 billion and $26 billion per year in never-collected sales taxes — money that could have built roads, improved schools or bolstered the safety net. But now that it’s here, states have choices to make.


Thin profit margins and cutthroat practices pit Amazon’s third-party sellers against each other.


The Supreme Court merely validated South Dakota’s law; other states must pass their own legislation to enable sales tax parity between online and offline businesses. And given the burden of complying with state tax laws, it seems at first blush tricky to design something that allows smaller retailers to still compete with the big boys.

But one California official has a solution that she’s been advocating for several years. It would maximize revenue for states, reduce the load on small sellers, and create a truly level playing field. However, Board of Equalization member Fiona Ma’s strategy requires that California join the tiny number of states willing to stand up to the 800-pound gorilla of online shopping, the source of nearly half of all e-commerce sales: Amazon.

Amazon often receives plaudits for voluntarily collecting sales tax in all 45 states that have one. But such praise ignores Amazon’s scofflaw history. “Amazon was the first major American company that built its business based on tax avoidance,” said Oren Teicher, CEO of the American Booksellers Association, referring to the company’s continuous resistance to collecting sales taxes. Contrary to popular belief, the company is still resisting today.


Jeff Bezos notes that third-party sales represent more than half of the total units sold on Amazon.


While Amazon gathers sales taxes on products it manufactures and sells directly, it doesn’t collect on behalf of third-party businesses that use its marketplace. (Technically, online shoppers are supposed to report untaxed items and pay the taxes; in reality, nobody does.) This may sound like a minor point, but in his annual letter to investors, CEO Jeff Bezos notes that third-party sales represent more than half of the total units sold on Amazon.

Amazon offers essentially no tax assistance to third-party sellers, save for a couple of dry documents on its website. Third-party Amazon merchants can theoretically sign up for tax calculation services, but they must still register with states and file taxes on their own, in potentially thousands of jurisdictions. When states tried to get third-party sellers to collect, Amazon didn’t want any involvement with the effort and refused to publicize it.

The American Booksellers Association recently described the Amazon marketplace as the “Wild West.” Third-party sales on the website doubled in volume from 2014 to 2016. The marketplace puts legitimate, authorized re-sellers and brick-and-mortar retailers alongside counterfeiters, scavengers who re-sell liquidated inventory, and Chinese and Indian importers. It’s nearly impossible for consumers to tell the difference. Thin profit margins and cutthroat practices pit sellers against each other; a merchant who decides to collect sales taxes will lose out to tax-avoiding rivals.

With Amazon reluctant to police its marketplace, such tax avoidance is rampant. A 2017 Government Accountability Office report estimated that third-party sellers collect tax on only 14 to 33 percent of all sales. Sellers have basically followed Amazon’s tax-avoidance path, determined to run afoul of the law.


There’s a simple fix to all of this, says the Board of Equalization’s Fiona Ma: ‘Whoever’s collecting the money should collect the sales tax.’


The big winner in all this is Amazon, which reaps large fees from third parties for access to its platform. Amazon typically takes 15 percent of gross third-party sales and sometimes as much as 20 percent, with fees on top of that for handling and shipping through the “Fulfillment by Amazon” network. This revenue pot has grown from $16 billion to $31 billion in just two years, according to Amazon’s financial disclosures. It’s highly likely that Amazon clears more profit than marketplace sellers on their transactions. So Amazon, by proxy, benefits financially from third-party tax avoidance, and the pricing advantage it provides. And, by not collecting tax, Amazon even avoids liability for mistakes made by third-party sellers that could trigger audits.

There’s a simple fix to all of this, as Fiona Ma stated plainly to me: “Whoever’s collecting the money should collect the sales tax.”

Ma, who is likely to become California’s next treasurer, spent years working on state tax issues as an Assemblywoman. In May 2016 she was serving on the Board of Equalization, which at the time oversaw state sales taxes. A Delaware business that used Fulfillment by Amazon (FBA) services told her it only learned it was responsible for sales tax collection after receiving a bill for three years of back taxes.


Amazon VP on the company’s duty to collect sales taxes:  ‘Well, if the state of California forces us to, I guess we can.’


“I found out that third-party sellers don’t actually know they should be collecting and remitting taxes to California,” Ma said. And while researching the matter, she learned that through its website and FBA, Amazon handled storage, packaging, payment processing, logistics, delivery, customer service and returns. That Amazon wouldn’t also collect the sales tax seemed odd.

In January 2017, Ma flew to Seattle to meet with Kurt Lamp, Amazon’s Vice President of State Tax and Tax Operations. She began by asking Lamp how third-party sellers were supposed to know about sales tax collection. “He said they sign an agreement and there’s a website,” she recalled. “I said, ‘Are you sure everyone’s doing this?’ He said, ‘We don’t know — we tell them to go to the website.’”

Ma found Amazon’s reticence alarming. “I said come on guys, that’s ridiculous, why can’t you collect the sales tax? You’re dealing with everything on the customer level. He said, ‘Well, if the state of California forces us to, I guess we can.’”


Some state officials put the annual amount of revenue lost to uncollected third-party sales taxes at $1.8 billion.


Two months later, a report from a news publication, The Capitol Forum, estimated that California loses $431 million a year on third-party seller tax avoidance. Other state officials have put the number even higher: $1.8 billion in lost revenue every year. Ma couldn’t believe that Amazon’s attitude was essentially, Who cares?

Last August, Ma wrote to state Cabinet Secretary Keely Bosler, asking that Governor Jerry Brown demand Amazon collect sales tax on all orders within the state, requiring California to audit only one company, Amazon, instead of thousands of third-party sellers. This would also pull in millions of transactions that wouldn’t otherwise be captured; just 20,000 third-party sellers generated over $1,000,000 in revenue last year, according to Amazon, and most states wouldn’t audit businesses smaller than that. Plus, taxing all sales would create more equal treatment between Amazon and the state’s local businesses, which create far more jobs and property taxes than Amazon’s handful of warehouses.

Other states have gone this route. In Washington and Pennsylvania, Amazon and other platforms are responsible for collecting all relevant taxes on third-party sales. A similar law in Minnesota kicked in July 1, after the Supreme Court decision.


Why has California been reluctant to force Amazon’s hand? “Number one,” says Fiona Ma, “the governor’s office has been trying to woo Amazon into putting a headquarters here.”


Tellingly, Amazon does not charge sellers anything for this service in Washington and Pennsylvania. The tax itself is just a pass-through to customers, and since Amazon already collects on its own purchases, collecting for third parties represents merely flipping a switch. “They have all the infrastructure, it can’t be very difficult to do,” said Darien Shanske, a law professor with the University of California, Davis.

Amazon has argued that the company is prevented from collecting on behalf of third parties unless states pass marketplace laws like Washington’s or Pennsylvania’s.

But California has not taken Ma’s advice and forced Amazon’s hand. In fact, over the past year the state has become more aggressive against third-party sellers.

Last July responsibility for sales tax oversight shifted to the California Department of Tax and Fee Administration (CDTFA). That department has been threatening third-party sellers with fines and even prison time if they didn’t start collecting sales tax. “Operating unlawfully you can be prosecuted,” reads one email to an Amazon seller, who asked that his name be withheld. The back taxes demanded would bankrupt his business, the seller claimed. “The whole thing is taking a really hard toll on me,” he said. “It’s stressful, I wake up in the night, I cannot get back to sleep.”

CDTFA spokesperson Paul Cambra would not tell Capital & Main how many threats like this have gone out, but the Sacramento Bee put the total at 2,500. Cambra admitted that the agency has not referred any Amazon sellers for criminal prosecution. But several posters on Amazon-seller message boards have complained and posted communications from the state. This January, the CDTFA sent letters to third-party sellers, citing sections of the state tax code to prove that they were liable for collection. A header in the letter, from November 2017, reads “Amazon Fulfillment Services, Inc. and Affiliates.”


Amazon has willingly handed over third-party seller data to states like Rhode Island and Massachusetts — helping them target its own marketplace partners.


Paul Rafelson, an attorney for third-party sellers, believes this indicates that Amazon drafted or supplied content for the letter. Cambra responded that the letter “was authored by CDTFA staff members” and “at no point was this letter reviewed or edited by outside individuals or entities.” That doesn’t totally answer whether Amazon had initial involvement in the drafting. Cambra added that the header “was inadvertently left from a previous document.” CDTFA denied a Freedom of Information Act request to obtain communications between its office and Amazon, terming it “confidential taxpayer information.”

Amazon spokeswoman Jill Kerr also said that the company “had nothing to do with that communication. Amazon did not play any role in that.”

In March Rafelson started the Online Merchants Guild, an association advocating for e-commerce sellers. He argues that registering with states and remitting dozens of income tax returns overly burdens small businesses, and that having Amazon collect is the simplest remedy. But he hasn’t had much luck convincing state officials. “When I go to a state like Massachusetts, Illinois, New York and say, ‘You can get Amazon to collect,’ they’re fighting me like I’m the problem,” he said. “Nobody wants to tick off Amazon.”

Amazon has even willingly handed over third-party seller data to states like Rhode Island and Massachusetts, helping them target its own marketplace partners. “It’s striking to me as a citizen that your state’s tax enforcement resources would be deployed [to] going after small fry instead of doing the obvious thing of getting Amazon to collect sales tax,” said Stacy Mitchell of the Institute for Local Self-Reliance, a frequent Amazon critic.

Ma finds the aggressive enforcement of small sellers, when Amazon controls practically every aspect of the transactions, to be unconscionable. But why has California been so reluctant to force Amazon’s hand? “Number one,” Ma explained, “the governor’s office has been trying to woo Amazon into putting a headquarters here. I’ve been pushing and they haven’t wanted to do anything up front.” Indeed, Los Angeles is on the shortlist for the massive HQ2 project.

California’s legislature must author a solution, after the Supreme Court ruling, if the state intends to collect online sales taxes. But Ma wonders whether it will melt under pressure as well. “Republicans are not going to want to do it, and Democrats would have to go against Amazon,” she said. “No one wants to do anything in an election year to stick their neck out.”

A spokesperson for Senate President pro Tem Toni Atkins said her chamber was “looking into next steps” on the issue. Assembly Speaker Anthony Rendon’s office didn’t respond to requests for comment.

This dynamic of apparent subservience to Amazon has played out throughout the country. When Amazon first agreed to collect sales tax, it cut deals with states to delay collection or forgive back taxes, dangling warehouses and jobs as incentives. Mississippi’s Department of Revenue admitted to a local TV news station last year that its agreement with Amazon to collect sales tax didn’t cover “any sales made by an independent third-party seller, even though made through the Amazon marketplace.” That enabled one Mississippian, Keith Bennett, to buy a laptop, mouse and bag worth several hundred dollars off Amazon and pay only $1.87 in sales tax; the computer sale went through a third-party business that literally named itself “Buy Tax Free.”


Sellers have been the foot soldiers for Amazon in avoiding sales taxes for years. Now Amazon has abandoned them to fend for themselves against aggressive state governments.


Backroom deals are bound to occur when a giant company with armies of lobbyists intimidates states from implementing simple solutions. Rafelson, the attorney for third-party sellers, called their plight ridiculous. “It’s like saying if you go to a Walmart in Georgia and buy a Coke, it’s not Walmart’s responsibility to collect the sales tax, it’s Coke’s!”

That’s not to say sellers are blameless. Many willingly followed Amazon’s model of avoiding sales tax to gain pricing advantage over rivals. “Sellers have been the foot soldiers for Amazon on this issue for years and years,” said Stacy Mitchell. Now Amazon has effectively abandoned them to fend for themselves against aggressive state governments. “If you sleep with thieves, they may well steal from you,” Mitchell said.

Only one state, South Carolina, has argued that existing law requires Amazon to collect sales taxes. The state filed a motion in state court, seeking as much as $500 million in uncollected taxes. Amazon is challenging the case, and a hearing is scheduled for November. “Under South Carolina law third parties are not considered sellers but suppliers or consignors; Amazon is the seller,” said Bonnie Swingle, public information director for the South Carolina Department of Revenue.

If South Carolina prevails, other states could potentially seek back taxes from Amazon, creating significant monetary risk, as Amazon has acknowledged in financial disclosures. But states focusing on third parties would relinquish a small fortune, while allowing Amazon to continue to undercut competitors.

Ma has devised an alternative strategy. She’s working with a number of attorneys, including Rafelson, who are considering filing a lawsuit against Amazon on behalf of third-party sellers. But the Supreme Court heard arguments that third-party sellers would suffer from the compliance burden, and dismissed them. Justice Elena Kagan suggested sales tax collection “would be essentially taken over by companies like Amazon… they would do it for all the retailers on their system.” Somebody might want to inform Amazon.


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America’s Middle-Class ‘Squeeze’

Alissa Quart’s new book examines the plights of women and men whose jobs have been devalued by the evolving American economy.

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Today the struggling middle class is finding itself just a short rung above the working poor.


 

Bowed and vulnerable, with her head perched over the toilet, Alissa Quart was beginning to fully comprehend her precarious economic position.

An established New York-based freelance journalist, she thought of herself as a sturdy member of middle-class America seven and a half years ago, but she was going through a difficult pregnancy and was often too sick to work. “I was retching all the time, and I was watching as I spent my savings down,” she recalls during a recent interview.

Quart saw little potential for circumstances to improve for herself and her husband, another freelance writer, as they looked ahead to the costs of pregnancy, birth and parenthood: “I realized I could join the struggling middle class soon, if I didn’t wake up.” That rung of the middle class is just a small step above the working poor.

Yes, her family was in crisis mode.

She responded by doing something few people facing the personal shame of economic struggles do: She sought out people in similar circumstances around the country and painted an array of reportorial portraits of their troubling, sometimes poignant stories.

The result is her latest book, Squeezed: Why Our Families Can’t Afford America (Ecco/HarperCollins), about women and men whose jobs have been devalued by the evolving American economy. In it, she details their struggles to get by—or to pretend they still can—with stagnant or declining incomes, even as their basic costs surge.

Many of Quart’s subjects are people who would likely have done fine in an earlier era, but who now struggle with deep feelings of failure as they patch over the many holes in their finances. There is the adjunct professor on food stamps; the caregiver of other people’s children who rarely had time to see her own; the Southern California engineer who, after having a child, repeatedly changed professions in search of financial stability, and many others.

For middle-income America, she writes in Squeezed, professional and economic stagnation “is experienced as a great loss, as the end of the mobility and flexibility we saw in our parents’ lives. That mobility is so much a part of the American promise that losing it seems like a deep betrayal.”

Working While Pregnant

In Quart’s book, “middle class” refers to a majority of the upwardly mobile population who, by and large, long believed that if they worked hard and made smart choices, then their children would live better than their parents.

People in middle-class professions—teachers, firefighters, journalists, construction workers, cops and others—certainly never got rich from their work, but they could look forward to a time when they would be fairly comfortable and secure. More important, they rarely feared sinking into poverty.


Economic and professional mobility is so much a part of the American promise that losing it seems like a deep betrayal.


“You aren’t reaching for the stars; you’re reaching for the ceiling,” Quart says. “Now, you’re being punished for it.”

And that punishment comes in many forms, especially for parents. Quart lists the increasing costs of parenting—daycare, childcare, family healthcare and lower incomes, and an additional one just for being a mother. “Employers pay $11,000 less for working mothers starting out than for other women, and $13,000 less than men,” she says.

Quart notes that such discriminatory risks have led friends, acquaintances and interview subjects to hide their pregnancies in the workplace for as long as possible with oversized jackets, loose-fitting sweaters and baggy pants.

Donald Trump, during his days on The Apprentice, stated flatly that pregnancy is “an inconvenience” for businesses.


In New York City childcare is often the greatest single cost for families.


A paltry 16 percent of paid American workers enjoy paid parental leave, according to the Bureau of Labor Statistics. Quart interviewed one of the many women who set up GoFundMe pages to obtain donations to pay for their pregnancy leaves. (The United States is the only industrialized nation without paid maternity leave.)

And then there is childcare. In New York City, where Quart lives, it is often the greatest single cost for families. Some parents spend one of every $3 in take-home pay for a stranger to look after their kids, Quart discovered.

Economic ‘Prisoners of Love’

Quart’s book explores some of the ways that nurturing professionals are manipulated into working for less than they are worth. “The idea is that these people—nurses, teachers, childcare professionals—will be trapped by feelings of love, and they’ll work for lower wages,” she writes.

While that is a longstanding issue, today it comes with new twists. The ride-sharing company Uber realized that some of these workers desperately needed more money to get by—and that they were great for its brand—so they actively sought to hire teachers, Quart notes. As the brand established itself as a massive moneymaking machine, it made videos highlighting the company’s sociable and responsible teacher-drivers. In Oregon, Uber has even used an emoji showing a stack of books to signal to customers that a driver is also a teacher.


The gig economy is not an arrangement that allows people to survive.
It keeps people in place.


The problem, as Quart makes clear, is that such side hustles rarely come with health care and paid vacations for employees, nor do such gigs provide a way to “transcend their economic circumstances.”

“It is a sort of set-up. It is not an arrangement that allows people to survive,” she says. “They keep people in place.”

While Quart didn’t frame it this way, the prisoner-of-love thesis she examines in the book can be applied to many journalists.

Successful freelance journalists in the 1990s commonly earned $2 per word from magazines that, in many cases, now pay 50 cents. The number of editorial jobs at most of the print publications that still exist are almost universally a fraction of the size they were in the old days. The Los Angeles Times, which has lost nearly two in every three members of its editorial team since 2003, is one of countless examples. And the many digital media jobs that have sprung up almost invariably pay far less and come with weaker job security and fewer, if any, benefits.

Journalists who have stayed in their devalued field have generally done so because they feel their work is crucial to society.

Quart, now the mother of a young daughter, has stabilized her own family’s situation by diversifying. Her soft spot for creating solutions-oriented journalism has been bolstered by writing books and by her role as executive editor of the Economic Hardship Reporting Project.

Co-founded with old-school working-class muckraker and author Barbara Ehrenreich, the EHRP funds journalism focused on the sort of destabilized people Quart’s pregnancy brought her so much closer to. (Disclosure: the EHRP is supporting a small project proposed by this author; also, Alissa Quart is a member of this website’s board of directors.)

Reporting and writing Squeezed proved to be a revelatory experience for Quart and, she says, some of the subjects of the book. In sharing their stories, they came to see the broader context for their struggles, and that they are not failures.

Where does all of this leave the middle class?

“It is a fantasy category that has resonances of the past, but what I’m trying to do is help make that shift for people so they don’t blame themselves and don’t feel stigmatized,” she says. “They can’t own a home. They can’t have a career; they have a different set of jobs.

“I think books like mine are part of this process of getting people to see where we really are.”


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After ‘Janus’: Labor’s Recommitment Campaigns Energize the Rank and File

Co-published by The American Prospect
In the wake of the Janus ruling, well-funded right-to-work groups are preparing digital and door-to-door campaigns aimed at California’s public-sector workers.

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Bill Raden

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Union protester outside the Supreme Court last February. (AP Photo/Jacquelyn Martin)

For union organizers, the stakes are summed up by Flint, Michigan, the poster child for a city stripped of a robust public sector
and laid bare to privatizers.


 

Co-published by The American Prospect

The first email arrived a month before the U.S. Supreme Court’s June 27 Janus v. AFSCME decision, which struck a blow against the nation’s public-sector unions. On May 17, all 35,000 teachers in the Los Angeles Unified School District found personally addressed notes concerning their union, United Teachers Los Angeles, titled “UTLA’s new ‘irrevocable’ membership card.” The message had been sent on the district’s computer messaging system.

Sent by “Jami” on behalf of the stridently anti-union Freedom Foundation, the email ominously warned of the “fine print” on UTLA’s new, “Janus-proofed” membership authorization form. “Be aware of UTLA’s financial motivation before granting them the power to garnish your wages indefinitely,” it cautioned before inviting recipients to “pay less” by becoming an agency fee payer. (Agency fees are non-dues moneys collected from all employees to cover the costs of union operations, including contract negotiations, even if the employees don’t belong to union representing their interests.)


“[Janus] is lighting a fire under us, and it’s put us at a crossroads of sorts, where we understand that we have to do things differently.”


A second letter, sent by Amanda Burke of the Betsy DeVos-funded Mackinac Center for Public Policy, arrived in teachers’ inboxes on the very day of the Janus ruling.

“We don’t necessarily believe that just because there are a considerable number of individuals who have not opted out of their union necessarily means that that is their express desire,” explained Mackinac’s vice president of strategic outreach, Lindsay Killen, by phone. “So we want to make sure that we get them the information that they need.”

The emails are just part of the digital and door-to-door campaigns that anti-union groups have in store for California’s government workers. Yet unions have been preparing for Janus for several years and the response from organized labor might represent a paradigm shift that could transform public-sector organizing in the post-Janus world. California has already erupted in a virtual fever of union organizing and membership-building unseen since the public-sector labor movement’s formative heyday in the 1960s and ‘70s.

“It’s basically our new mode of operation,” UTLA’s Strategic Research and Analytics director Grace Regullano explained in a phone call to Capital & Main. “The plan is basically to talk with every single member in our union at some point every year about what the union means, and about recommitting to our union and our fight for public education. … It’s not just that you give us money and we go do the work for you, it’s that we are building power together.”

“This is motivating our union members and leaders to do things that they haven’t done before,” agreed the Los Angeles County Federation of Labor’s organizing director, Chloe Osmer. “[Janus] is lighting a fire under us, and it’s put us at a crossroads of sorts, where I think we understand that because of the attacks on our resources and our budgets, we have to do things differently.”

It’s also paying off. In 2016, 82 percent of UTLA members voted to raise their annual dues by about a third, to $1,000 a year. Though Regullano wouldn’t share specific numbers for UTLA’s ongoing “All In” membership campaign (“to deny the Mackinac Center and the Freedom Foundation a roadmap”), she estimated that organizers had successfully “cut in half” the number of fee-payers that had opted out of joining the union before the campaign.

That jibes with the net membership gains reported around the state by other organizing efforts. Though the campaigns are tailored to the memberships and political culture of each local, to some degree they are all modeled on membership conversations developed by home health care unions after the Supreme Court’s 2014 Harris v. Quinn decision declared unionized caregivers to be only “partial” public employees — and opened them to home visits from paid Freedom Foundation canvassers.

“The home care workers were kind of like the front line for this attack from the Freedom Foundation,” said Osmer. If public sector organizers have an ace in the hole, it may well be the public employees themselves. “The idea is not just, ‘Let’s go out and sign up people to join the union, but let’s identify and recruit new leaders within existing union members and really strengthen our network of member leadership. … How do we do it in a way that really builds long-term capacity and strength for the labor movement?”

The Mackinac Center and Freedom Foundation are betting that unionized workers, now “freed” by the Supreme Court will behave like neoliberal “rational actors” by defecting en masse from dues-paying to free-riding, thereby bleeding the unions. But the recommitment successes California organizers claim to have racked up suggests that the language of the marketplace might be an alien tongue for a workforce in public service.

“People who serve the public are mission-driven,” noted Debra Gabrelle, executive director of San Francisco’s  International Federation of Professional and Technical Engineers (IFTPE) Local 21, the union that represents the city and county professionals and technical engineers. “They’re making sure that we’re all safe.” Local 21’s new “Gold Card” sign-up program invites members to recommit to the union by declaring their intention to remain in it and authorize dues deductions — despite the Janus decision. (Disclosure: The union is a financial supporter of this website.)

Local 21 member Anna Roche is a special projects manager for the San Francisco Public Utilities Commission, where she works on climate change-related issues, including the chronic erosion and sea level rise that are threatening San Francisco’s wastewater infrastructure at Ocean Beach. But she began her career in the private sector as an environmental biologist until a stint as a Peace Corps volunteer made it personally impossible for her to return.

“Dealing with clients that only cared about making money and didn’t really have any interest in protecting the environment just wasn’t very fulfilling for me,” she reflected. “I feel a greater sense of pride and fulfillment knowing that the work I’m doing is to keep San Francisco a place that people are proud of and . . . [that] we’re doing important work to protect the city against changes related to climate change.”

As a volunteer organizer for Local 21’s “Conversations and Cards” campaign, Roche is at the center of one of California labor’s most successful post-Janus recommitment drives. Modeled after the work of the United Domestic Workers of America health care workers, the campaign claims it has already increased her local’s dues-paying membership 11 percent from pre-Janus levels to today’s 91 percent.

“My experience is that people will pretty readily sign, because they’re already union members and they get it, Roche said. “I can understand that people have [problems] with unions, but you have to look at the overall good. The facts are that people that are represented by unions tend to do better in terms of salaries and benefits and treatment.”

If the immediate aim of Conversations and Cards is getting workers to sign Local 21’s new Janus-proofed union “Gold Card,” then the heart of the campaign, Gabrelle emphasized, is galvanizing the recommitment through the employee-to-employee conversation — connecting what’s at stake and the meaning of solidarity to produce a more active and long-lasting union member.

For IFTPE’s organizers, the stakes are summed up by Flint, Michigan, the poster child for a city stripped of a robust public sector and laid bare to privatizers. Flint’s lead contamination water disaster was notoriously abetted by Republican Governor Rick Snyder’s widely condemned emergency manager legislation, which itself was drafted with the help of the Mackinac Center. The irony that the same money from Mackinac’s billionaire funders (Betsy and Dick DeVos, the Walton family, the Koch brothers) is also behind both Janus and the California union-busting campaigns is not lost on IFTPE or Ken Jacobs, the chair of the University of California, Berkeley Center  for Labor Research and Education.

“What people don’t realize is that as much we’re a labor town — there’s been a push to privatize here in San Francisco,” said Local 21 volunteer organizer Frances Hsei, a senior policy analyst for San Francisco’s Office of Civic Engagement and Immigrant Affairs, who has personally signed up 35 Gold Card recommitments. “Unions have been fighting those corporate forces.”

“You go through a wide range of public services, where unions have been a central voice in stopping privatization, the central voice in assuring quality public services,” observed Jacobs. “Look at the Koch Brothers, who have been funding both the anti-union efforts with other billionaires and conservative foundations— their long-term goal had been to destroy public services and shrink government. So unions are an essential part of our democratic system, our democracy.”


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Unions Get Ready to Fasten Their Seatbelts After ‘Janus’

According to Seattle University law professor Charlotte Garden, today’s Supreme Court decision won’t be the end of the legal assault on the public-sector labor movement.

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Bill Raden

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“The most surprising thing was the court’s signaling that it might not be done with big decisions that affect how public-sector unions can be organized.”


 

In what could be the worst setback to workers’ rights since 1947’s Taft-Hartley Act, the U.S. Supreme Court on Wednesday dealt a potentially crippling blow to the nation’s public-sector unions in Janus v. AFSCME. The 5-4 decision struck down Abood v. Detroit Board of Education, the 41-year-old precedent that has allowed public-sector unions to require all employees at a workplace to equally bear the costs of collective bargaining through “agency” or “fair share” fees.

The National Right to Work Legal Defense Fund, on behalf of Mark Janus, a child support specialist employed by the state of Illinois, argued that forcing workers to help pay for even the nonpolitical administrative costs of collective bargaining operations infringes on their First Amendment right to freedom of speech.

The court agreed. Writing for the conservative majority, Justice Samuel Alito said that the agency fee arrangement “violates the free speech rights of nonmembers by compelling them to subsidize private speech on matters of substantial public concern.”

At issue now are laws in 22 states that allow fair share fees, as well as employment contracts and a host of workplace rules covering nearly eight million unionized public-sector workers. But the ruling’s crushing financial impact to unions will curtail their ability to lobby and support worker-friendly candidates, who are predominately Democrats.

According to Seattle University associate professor of law Charlotte Garden, today’s court decision won’t be the end of the legal assault on the public-sector labor movement. Capital & Main spoke by phone with Garden in an interview that has been edited for concision and clarity.


Capital & Main: What is the biggest threat to labor from today’s decision?

Charlotte Garden: This decision will have vicious-cycle effects on unions in two ways. One is just the microeconomics: If you’re a worker that’s represented by a union, you now have an economic incentive to opt out of paying dues, even if you like the service you get from your union and value it. Workers who remain members and are still paying may increasingly feel that they are being overburdened by the cost of paying for their free-riding coworkers and then decide themselves to opt out of paying for representation. And so the cycle goes.

On a more macro level, we could easily see this decision contribute to the election of politicians who will reduce the scope of public-sector or private-sector bargaining rights through the legislative process. There’s research showing that right-to-work laws depress Democratic vote share, and so today’s decision can have the potential to harm the ability of working people to elect candidates that will enact policies beneficial to them.

Did the decision surprise you?

The most surprising thing was the court’s signaling that it might not be done with big decisions that affect how public-sector unions can be organized. The court seemed to indicate that it was open to a challenge to exclusive representation, which is the system that is used in the private-sector and in the entire public-sector with the sole exception of teachers in Tennessee.

Doesn’t the decision also open up the possibility that employees within a public-sector workplace could begin suing government employers outside the union, over, say, better benefits or other workplace issues?

Yes — it could well be the case that if a public employer tried to fire or discipline teachers or other public employees that engaged in a walkout or some other collective action, that those teachers would have a much stronger First Amendment defense than they would have had before today’s decision. That raises the question of how consistently the decision is going to be applied, but I agree the argument is there.

In her blistering dissent, Justice Elena  Kagan predicted that overturning Abood would cause real-world chaos for the laws and worker contracts based on Abood. Is that a genuine fear?

I think it is. Justice Kagan points out that in a worst-case scenario — in a contract that doesn’t have a severability clause — this might mean going back to the drawing board on the entire contract. So certainly unions and public employers are facing some turbulent times as they try to grapple with those fallouts of today’s decisions.

There are current court cases that challenge other aspects of public-sector collective bargaining. Here in California, they include Yohn v. CTA, which also targets exclusive representation. Are there other significant anti-labor cases that we should be aware of?

We should expect attacks. States are taking [steps] in response to Janus, doing things like allowing unions to put on orientations for new workers — New York [has] adjusted the scope of the duty of fair representation as applied to nonmembers. I would expect cases challenging all of those innovations on First Amendment grounds.

A former Texas solicitor general who, like most of the conservative majority, is also a member of the right-wing Federalist Society, just brought class action suits in California and four other states, asking for the recovery of all agency fees already paid by dissenters. Does a case like that stand a chance because of Janus?

We have a bit of precedent here. There were a number of lawsuits trying to recover back-dues from before the day Harris v. Quinn was decided, and those cases lost. And so I think it’s likely the same thing will happen here — unions won’t be on the hook for agency fees that they collected before today’s ruling.

How much of Janus is rooted in ideology rather than law? Has something fundamental shifted since the court decided Abood?

It’s undeniable that ideology plays a role in law. One thing is that a Republican president will appoint Supreme Court justices who see law in a way that is favorable to Republicans, and so you’ll get this kind of Balkanization of the judiciary. And then another way that plays out is the kind of attitudes or the receptiveness of different justices to some of the fundamental premises in a case like this.

When looking at the way this conservative court majority has flexed the First Amendment to choke the collective voice of public employees, one can’t help but see it in the light of its 2010 Citizens United decision, which has had a similar partisan political impact. Is that a fair comparison?

Your point about Citizens United is a really apt one. Citizens United freed corporations and unions to participate in politics in this very unbridled way, except that there were already restrictions in place on what money the unions could spend in politics, because of the rule from Abood. Now there’s no equivalent rule for corporations restricting their ability to spend, say, shareholder value when shareholders object. So the supposed parity between unions and corporations in Citizens United was always sort of illusory, and now even more so, because unions are going to have to spend dues money paid by members to fund the representation of free riders instead of other things, including participating in politics.


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Breaking News: Supreme Court Rules Against Unions in ‘Janus’

Led by Associate Justice Samuel Alito, the five-member majority issued a decision that is the culmination of a multi-year effort that has its roots in right-wing judicial organizations, foundations and think tanks.

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Danny Feingold

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Today’s U.S. Supreme Court’s ruling in Janus v. AFSCME should surprise no one who has been watching its conservative justices’ crusade to undermine the influence of American unions — and the political causes they support. Led by Samuel Alito, the five-member majority issued a decision that is the culmination of a multi-year effort that has its roots in right-wing judicial organizations, foundations and think tanks. These entities correctly determined that the long-term political success of the right would be immeasurably enhanced if unions representing government workers could be weakened.

That’s exactly what the high court’s ruling will do, though the full extent of the damage won’t be known for years, and will depend on the tenacity and creativity of the response by unions and their allies. What we do know is this: A 41-year-old precedent has fallen, one that required workers who decline union membership but nevertheless benefit from collective bargaining agreements to pay “fair share” fees to the unions that negotiate these contracts.

Later today, labor law professor Charlotte Garden will tell Capital & Main readers what the ruling says about the politicization of American jurisprudence, and what lies ahead for public sector unions.

For a deeper understanding of the lead-up to today’s decision, visit Capital & Main’s special section on Janus v. AFSCME.


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Labor & Economy

Santa Cruz Leads the Push for Affordable Housing

California’s housing shortage has made it difficult to be middle class and harder to be poor. Today’s median-priced California home costs more than twice the median-priced U.S. home, according to Zillow.

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Santa Cruz's Victorian Cope Row Houses.

California has been more expensive than most of the country for a long time, but the gap became a chasm beginning in the 1970s.


 

John Holguin should be in a celebratory mood. He is just about to close escrow on his first house. But like too many Californians, he’s feeling a sense of diminished possibilities.

Holguin, 48, works for the Santa Cruz County Department of Public Works, striping roads and maintaining the county’s bridges and storm drains. His wife is a school receptionist, and their combined annual income of $82,000 places them squarely in Santa Cruz County’s middle class.



Yet Holguin had to withdraw from his retirement fund to afford his piece of the California Dream: a house in Watsonville, an agricultural community that has seen home prices shoot up as Bay Area tech workers and investors snatch up homes in the region.

His $3,200 monthly mortgage payment will eat up 75 percent of his take-home pay, he says. When he does retire, eight years later than planned, he and his wife will probably head for Arizona, where some of his high school classmates have already settled.


Activists and civic leaders are recognizing the extent of California’s housing crisis. They are organizing around changes to housing codes, rent control, and local and state bond measures.


Holguin’s two kids, junior college students, will help with the mortgage on the new home, but he does not expect them to remain in the state. “They know if they want to buy something, if they want to succeed, it’s not going to be here in California,” he says.

California’s housing shortage has made it difficult to be middle class and harder to be poor. But there are signs in Holguin’s home county, and elsewhere in the state, that activists and civic leaders are recognizing the extent of the crisis. They are organizing around changes to housing codes, rent control, and local and state bond measures.

At a June 12 Santa Cruz County Board of Supervisors meeting, Supervisor Zach Friend suggested that residents may have “reached a real tipping point” in their willingness to support new affordable housing. He was responding to almost a dozen community, business and nonprofit leaders who spoke in support of the board’s unanimous vote that day to direct staff to prepare revisions to the county housing code to ease the way for more affordable housing development.


“It’s one thing to say that you are in favor of affordable housing,” but when a project is proposed in your neighborhood, “you can find a lot of reasons as to why you don’t support it.”


But it may take time to fix a problem that has been decades in the making, and it will certainly take political will to build and maintain affordable housing in sought-after coastal regions. Santa Cruz activists hope that Friend and other supervisors will vote this summer to place a bond measure of up to $250 million on the November ballot that could fund affordable rental housing, support first-time homebuyers, and provide housing for the homelessness.

Funding and policy changes are only the beginning. City and county officials must greenlight projects, sometimes over neighborhood opposition.

“It’s one thing to say that you are in favor of affordable housing,” Friend noted at the June 12 meeting, but when “a project actually comes forward, especially one in your neighborhood, you can find a lot of reasons as to why you don’t support it.”

California has been more expensive than most of the country for a long time. But the gap widened beginning in the 1970s when home prices grew from 30 percent above national levels to more than 80 percent higher by the end of the decade. Now the median-priced California home costs more than twice the median-priced U.S. home, according to Zillow.

Research suggests that the public “feels the pain” but is “not really enamored by some of the most obvious solutions,” says Jim Mayer of California Forward, a nonprofit organization that focuses on fiscal and government reform. “They’re really not supportive of a whole lot more homes if they think it is going to lead to more traffic and congestion, and more crime, and impact the schools.”

California would need as many as 100,000 more housing units a year than it is currently building to meet the demands of its growing population, according to the state’s Legislative Analyst’s Office.

Meanwhile, some of John Holguin’s co-workers rise in the dark to commute from Los Banos, a small bedroom community some 80 miles east. Others stay with family in Santa Cruz during the week, only to travel 150 miles home to Sacramento on the weekend. (Holguin’s 17-mile commute from Watsonville along Highway 1 will take as long as 45 minutes because of traffic.) “Only in California do we have watersheds and commute sheds,” says Mayer.

“My parents bought their first place at 25, and I’m 48,” Holguin notes. “To me it seemed like they had it easier back then.” He’s right about his parents’ generation of homebuyers. Back in 1975, the median home price in the state was $193,774 (in 2017 dollars). Last year, according to the California Realtors Association, it was $537,860 — nearly three times that much.

Of course, Santa Cruz is a particularly pricey slice of the California real estate market. Its sun, surf and scenery draw tourists, as well as tech industry workers from “over the hill” in Silicon Valley, who have money to spend. The median price for a single family home in Santa Cruz County shot up to $935,100 in March, a record high, the Santa Cruz Sentinel reported.

Santa Cruz County is home to lower-wage agricultural and service industries, making affordability a particular challenge for those who work there. Also, local redevelopment agencies, one of the few funding sources for affordable housing available to local governments, were eliminated in 2012, contributing to the housing shortage across the state.

Small-town Santa Cruz also faces pressure from its University of California campus, whose chancellor announced plans last fall to increase its student body by as many as 10,000 students by 2040. In a sign of voter frustration, the city of Santa Cruz approved a non-binding measure opposing the university’s growth plans by a margin of 76-23 percent.

And then there is the resistance on the part of some residents to accommodate growth. Some simply want to “preserve the open space and restrain the growth” as much as possible, says Don Lane, one of the leaders of Affordable Housing Santa Cruz County, a local coalition that is advocating for a housing bond measure to be placed on the November ballot. “But you’ve just got all this high-priced housing, and it’s still crowded, and traffic is still getting worse.”

Lane, a former mayor of the city of Santa Cruz, says denser “infill” housing in commercial corridors will lead to a more efficient and effective use of space without compromising the region’s preservationist traditions.

The plight of Santa Cruz’s middle-income residents is not as dire as that of its poor, of which there are many. The county has among the highest poverty rates in the state. Farmworkers live in overcrowded and sometimes dangerous conditions. At the June 12 board meeting, Ann López, the director of the Center for Farmworker Families, relayed an instance of 16 people living together in a home of less than 1,000 square feet.

Matthew Nathanson, a public health nurse with the county, was motivated to advocate for an affordable housing ballot measure after witnessing the clients he serves “falling into homelessness” because of their inability to afford rent. The median rent for a two-bedroom home in Santa Cruz was $2,450 a month in May, a 4.7 percent increase from a year ago, the Santa Cruz Sentinel reported.

Nathanson, who is also a regional vice president with Service Employees International Union Local 521, says that housing has become a central issue for city and county workers like Holguin, who are becoming increasingly difficult to recruit. Road workers who are on call during the rainy season need to live “within a reasonable distance” of their jobs, he adds. And pay increases won at the bargaining table risk being “all wiped out” by the cost of housing.

The measure, which would require a two-thirds vote of the public, would be paid for by commercial and residential property owners, according to Lane. The original proposal was for $250 million, but he says the bond measure is now “looking more like $150 million” and could benefit between 1,500 and 2,000 households.

The campaign was inspired by the success of housing measures in Alameda and Santa Clara counties, he says. Another $4 billion housing measure will be on the state ballot this November.

Still, once the funding is in place, the projects will need to get approved by local governments and built. The bond measure proposed for November is only one piece of the puzzle, according to Nathanson.

“It took us a long time to get into this situation,” he says. “I think there is a shift going on, but it’s going to be a struggle.”


Research assistance provided by Jake Conran.

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Culture & Media

‘Skeleton Crew’ Is a Play With a Moral Spine

Set in a Detroit automobile outfitting plant, Dominique Morisseau’s drama grabs you from the start with its focus on blue-collar men and women, and their struggle for dignity and self-respect.

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Kelly McCreary and Caroline Stefanie Clay. (Photo: Chris Whitaker)

Working-class men and women of color are rarely front and center in today’s media and, likewise, are presented all too occasionally on the American stage. So it’s buoying to see that trend bucked in playwright Dominique Morisseau’s percipient and well-crafted drama, Skeleton Crew. The play is the final installment in her Detroit  Project Trilogy; the first, Paradise Blue, is set in the 1940s amidst displacement caused by urban renewal and gentrification, while the second, Detroit ’67, transpires on the eve of the 1967 Detroit riots sparked by a police action.

Directed by Patricia McGregor at Los Angeles’ Geffen Playhouse, Skeleton Crew is a play with a moral spine. It takes place in 2008, when the shrinking U.S. auto industry is being further downsized. Morisseau’s engaging quartet of characters — Faye (Caroline Stefanie Clay), Dez (Armari Cheatom), Shanita (Kelly McCreary) and Reggie (DB Woodside) – are employed at an automobile outfitting plant. Faye, Dez and Shanita are workers on the line while Reggie (who has a wife and kids, and has pulled himself together after a troubled youth) is their supervisor.

The first three customarily mingle in their break room (designer Rachel Myers’ impressively cluttered, dingy and detailed set), trading the sort of familiar barbs and genuine concern for each other common among longtime co-workers. They also face off on philosophy: Upper-middle-aged Faye and the younger, pregnant Shanita take pride in their labor, while Dez, though a good worker, is a malcontent scornful of management and firm in the belief that everyone needs to watch out for himself. He’s a thorn in Reggie’s side, for while Reggie wants to be supportive of his workers, he must act at the behest of higher management. For his part, Dez resents Reggie’s authority, and a palpable unease exists between them.

Besides this male matchup, we’re made privy to Dez’s attraction to Shanita, who mostly turns away his advances, but every now and then displays a hint of interest. Most poignant is Reggie’s regard and affection for the lesbian Faye, which has roots in his boyhood when she loved, and lived, with his now-deceased mom.

These people’s various predicaments intensify when rumors spread of the plant’s shutdown — a disaster for all, but a particular calamity for the already near-broke Faye who, one year short of retirement, would lose her pension. The crisis forces each of these people to make a choice.

A sound piece of social realism, Skeleton Crew grabs you from the start in its focus on blue-collar men and women, and their struggle against odds for dignity and self-respect. Morisseau not only furnishes these characters a platform for their travails, she endows them with strong values, big hearts and the opportunity to choose between right and wrong.

DB Woodside and Amari Cheatom. (Photo: Chris Whitaker)

Unfortunately, the performance I attended did not soar. Many exchanges lacked a fresh edge. The actors certainly had their characters down, but too often they appeared to be coasting on technique. (This seemed particularly true of Clay, who performed the role to great accolades in Washington, DC in 2017, also under McGregor’s direction). Additionally, some of the stage movement was not entirely fluid; in confrontations, actors sometimes would just stand and face each other in an artificial way. And Cheatom’s interpretation of Dez struck me as a bit overly churlish and depressive: I needed more glimpses of the intelligence and edge that would secretly attract the strong, self-directed Shanita.

The most compelling moments belong to Woodside, well-cast as a man trying his best in difficult circumstances to do the right thing.


Gil Cates Theater at the Geffen Playhouse, 10886 Le Conte Ave., Westwood Village; Tues.-Fri., 8 p.m.; Sat., 3 & 8 p.m. Sun., 2 & 7 p.m.; through July 8. (310) 208-5454 or www.geffenplayhouse.org

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Labor & Economy

Upending the Nation’s Financial Giants With Beneficial State Bank’s Kat Taylor

On the latest episode of “The Bottom Line” podcast, CEO Kat Taylor lays out her strategy for proving that a bank can be profitable, pay its employees well, and pursue an agenda of economic justice and planetary health.

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Photo by Joanne Kim

Before the financial crisis in 2007, the nation’s largest banks reported returns on equity of more than 20%. Even today, in a less frothy time, Wells Fargo maintains a target of between 12% and 15%. But Beneficial State Bank will never surpass 10% when it comes to this closely watched metric—and that’s all by design.

“I don’t think there is another bank who has an upper end on their range of return on equity,” Kat Taylor, Beneficial’s CEO and co-founder (along with her husband, Tom Steyer, the hedge fund billionaire and political activist) told me on the latest episode of my podcast, The Bottom Line. If you’re seeking to maximize profits for your shareholders, she notes, “you’re going to be happy to make as much as you can.

“We disagree with that principally for two reasons,” Taylor adds, explaining that if Beneficial’s return exceeds 10%, “we’re likely either overcharging our customers or underpaying our colleagues”—and that “would be in defiance of our mission.”

Not that Beneficial is cavalier about being financially sustainable. It is aiming for a return on equity of at least 6%—a mark that the bank has reached before and is diligently pushing to hit again as it digests its merger this year with Albina Community Bank. Because of the transaction, Beneficial now has more than 250 employees at 17 locations throughout California, Oregon, and Washington. It boasts about $1 billion in assets.

Of course, that’s miniscule compared with the behemoths of the banking industry, like JPMorgan Chase and Bank of America, each with assets topping $2 trillion.

But Taylor believes that at its current size, or perhaps a bit bigger, Beneficial can help upend the sector by demonstrating that a bank can “thrive competitively,” loan money in a way that boosts “economic justice” and is restorative to the planet, and still pay its workers 150% of a living wage (as calculated by MIT).

“We need to sort of part the waves so that others can follow us,” Taylor says.

Indeed, her theory of change is that as some of the large regional banks see Beneficial’s plan succeeding, they will realize that pursuing a similar path will enable them to attract two increasingly important groups: socially conscious consumers as well as talented employees who “will not take a job in opposition to their values if they can at all avoid it.”

“All of those large regional banks compete with the biggest banks in the system,” Taylor notes, and they may well be compelled to “take up our behaviors and . . . our commitments solely for the purpose of winning what I call the market share wars.”

Taylor grew up with banking in her blood. Her grandfather was the president of Crocker National Bank in San Francisco, and after getting her JD/MBA at Stanford she found her way to Wells Fargo’s credit training program.

But she left Wells after 18 months, going on to raise four children and becoming deeply involved in a number of nonprofits, many of them centered on civil rights—a lifelong passion. Decades passed.

Then in 2004, George W. Bush won the White House, and Taylor and Steyer decided that they would do all they could “to exert progressive values in an unprogressive time.” Among the ideas suggested to them, Taylor says, was to launch a “next-gen banking organization.” They found the notion compelling because banks are “so central to everyone’s life.” OneCalifornia Bank, Beneficial’s predecessor, was chartered in 2007.

Despite her family history and her stint at Wells, Taylor stresses that she was soon plunging into a foreign world.

“I really had very little training to go into banking,” Taylor says. “But sometimes I think that’s a good thing, to have one person in the leadership of an organization who does not think that past is prologue, who does not think this is the way we’ve always done banking so this is the way we’ll always do it going forward.”

You can listen to my entire interview with Taylor here, along with Megan Kamerick reporting on why front-line bank jobs are generally so miserable and Karan Chopra exploring the need for employers and educators to build new bridges in an era of lifelong learning.

 

The Bottom Line is a production of Capital & Main

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