North Carolina's Employee State Income Tax Fraud Scam: Job Piracy! Corporate Welfare!

Taxed by the boss


Across the United States more than 2,700 companies are collecting state income taxes from hundreds of thousands of workers – and are keeping the money with the states’ approval, says an eye-opening report published on Thursday.

The report from Good Jobs First, a nonprofit taxpayer watchdog organization funded by Ford, Surdna and other major foundations, identifies 16 states that let companies divert some or all of the state income taxes deducted from workers’ paychecks. None of the states requires notifying the workers, whose withholdings are treated as taxes they paid.

General Electric, Goldman Sachs, Procter & Gamble, Chrysler, Ford, General Motors and AMC Theatres enjoy deals to keep state taxes deducted from their workers’ paychecks, the report shows. Foreign companies also enjoy such arrangements, including Electrolux, Nissan, Toyota and a host of Canadian, Japanese and European banks, Good Jobs First says.

Why do state governments do this? Public records show that large companies often pay little or no state income tax in states where they have large operations, as this column has documented. Some companies get discounts on property, sales and other taxes. So how to provide even more subsidies without writing a check? Simple. Let corporations keep the state income taxes deducted from their workers’ paychecks for up to 25 years.

It was not always this way. Letting companies keep their workers’ state taxes apparently began in Kentucky two decades ago as a way to retain jobs.

Last July when I wrote about six big companies that pocket Illinois state taxes I knew there was more to this. But I had no idea how pervasive these diversions were until I read an advance copy of the 39-page report by Good Jobs First.

CORPORATE SOCIALISM

Deals cut with the states over the past two decades diverted $5.5 billion from public purposes to private gain, the report says. Close to $700 million more was diverted last year, Good Jobs First estimates.

New Jersey approved $73.2 million in new deals in 2011 on top of $178 million diverted that year alone under previous deals. I calculate that at nearly $80 per household in corporate welfare based on New Jersey’s 3.1 million households.

These deals typify corporate socialism, in which business gains are privatized and costs socialized. They also mean government picks winners and losers, interfering with competitive markets. Leaders in both parties embrace these giveaways because they draw campaign donations from corporate interests and votes from people who do not understand that they are subsidizing huge companies.

Michael Press, a Connecticut consultant on tax incentives, says such deals, however troubling, are an inevitable result of the U.S. Constitution setting up competition between the states.

“In an ideal world we would not provide any corporate subsidies,” Press told me. “It looks like corruption. But if you do it right, if you only target those companies whose behavior you change to create jobs or keep jobs in your state then these targeted temporary arrangements are cheaper – much cheaper – and can be more effective than an overall reduction in tax rates.”

The mission of Good Jobs First is making economic development subsidies accountable and effective. In years of working with their data I have always found it sound. While Greg LeRoy, Good Jobs First’s founder, has rooted out all sorts of hidden subsidies over the years, he emphasizes that he is not inherently hostile to them, only to secrecy, waste and what he calls job piracy and job blackmail.

“Job piracy” occurs when one state diverts taxes to lure an employer across state lines. AMC Entertainmentannounced a deal last year to move its corporate headquarters from Kansas City, Mo., to a nearby Kansas suburb. In return, Good Jobs First said, Kansas will let the multiplex chain keep $47 million of state income taxes withheld from its workers’ paychecks, a drain on public finances that did not create any jobs, but does enrich the Wall Street firms that own AMC including arms of J. P. Morgan, Apollo Management, Bain Capital and the Carlyle Group. AMC declined to answer my questions.

“Job blackmail” occurs when a company threatens to close a plant unless it gets tax money.

In Illinois, the law requires companies to threaten to leave before they can keep taxes withheld from paychecks. Motorola Mobility, now being acquired by Google; the truck maker Navistar; the German manufacturer Continental Tire, and three auto makers – Chrysler, Ford and Mitsubishi – get to keep $346.8 in taxes over 10 years because they threatened to leave Illinois. Navistar can pocket $62.1 million even if it fires a quarter of its Illinois workforce, its contract shows. A recent deal gives Sears $150 million, Good Jobs First reported.

PROMISES OF JOBS

Promising to retain jobs can be lucrative. General Electric invested $126 million updating part of its Ohio operations. In return, GE gets a tax credit equal to $115.3 million of its worker taxes, recovering 92 percent of its investment. A sweet deal for GE, but not its competitors.

Gary Sheffer, GE’s top spokesman, said the company told its workers about the deal. In all, he said, GE is investing around $300 million in Ohio and “the resulting taxes the state will receive will far exceed the tax credits provided to GE.”

That response, I think, misses the point – GE should pay its own bills without taking welfare.

Many figures in the Good Jobs First report are from disclosure reports some states make. Others come from news accounts and company announcements.

Total revenue losses are higher than the report states. First, some states hide the costs. Phil Mattera, the research director at Good Jobs First, said he lists the cost as zero for states that hide the numbers.

Good Jobs First wants to end these diversions, but failing that recommends mandatory disclosure to the workers as the first reform. I concur. It’s the first step in ending corporate welfare as we know it.


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Sources: Reuters, Youtube, Google Maps

Online Sales Tax Revenue & State Governments (Amazon vs North Carolina)

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Visit msnbc.com for breaking news, world news, and news about the economy

Amazon Wins Fight To Keep Customer Records Private



In a Victory for the Free Speech and Privacy Rights of Amazon.com customers, a federal judge ruled today that the company would not have to turn over detailed records on nearly 50 million purchases to North Carolina tax collectors.

The state had demanded sensitive information including names and addresses of North Carolina customers--and information about exactly what they had purchased between 2003 and 2010.

U.S. District Judge Marsha Pechman in Washington state said that request went too far and "runs afoul of the First Amendment." She granted Amazon summary judgment.

The Tar Heel State's tax collectors have "no legitimate need" for details about the literary, musical, and cinematic habits of so many Amazon customers, Pechman wrote. "In spite of this, [North Carolina] refuses to give up the detailed information about Amazon's customers' purchases, while at the same time requesting the identities of the customers and, arguably, detailed records of their purchases, including the expressive content."

Amazon has provided the state tax collectors with anonymized information about which items were shipped to which ZIP codes. But North Carolina threatened to sue if the retailer did not agree to divulge the names and addresses linked to each order--in other words, by providing personally identifiable information that could be used to collect additional use taxes that might be owed by state residents.

Pechman's opinion did leave open the possibility of North Carolina tax collectors deleting the data they currently have and firing off a narrower request to the online retailer: "Issuing the declaratory relief as phrased does not prohibit [N.C. tax collectors] from issuing a new request for information as to only the names and addresses of Amazon's customers and general product information, assuming that [the state] destroys any detailed information that it currently possesses."

Because Amazon has no offices or warehouses in North Carolina, it's not required to collect the customary 5.75 percent sales tax on shipments, although tax collectors have reminded residents that what's known as a use tax applies on anything "purchased or received" through the mail. The dispute arose out of what had otherwise been a routine sales and use tax audit of Amazon by North Carolina's tax agency.

As CNET previously reported, Amazon filed a lawsuit in April after negotiations with the state tax collectors broke down. Neither side could be reached for comment this evening.

In addition, the ACLU intervened in the lawsuit asking for an even broader injunction against the tax collectors. They wanted Amazon to be prohibited from disclosing customer purchases without a subpoena, which the court did not grant.

In general, as Amazon stressed in its lawsuit, purchases of books, DVDs, Blu-ray discs, and other media enjoy special privacy protections.

In a 2002 decision, the Colorado Supreme Court ruled that the First Amendment protects "an individual's fundamental right to purchase books anonymously, free from governmental interference." The justices tossed out a subpoena from police to the Tattered Cover Bookstore asking for information about what books a certain customer had purchased.

And in a 2007 case, federal prosecutors tried unsuccessfully to force Amazon to identify thousands of customers who bought books online, but abandoned the idea after a judge rebuked them. Judge Stephen Crocker in Wisconsin ruled that "the subpoena is troubling because it permits the government to peek into the reading habits of specific individuals without their prior knowledge or permission."

In addition, a federal law called the Video Privacy Protection Act makes it illegal for anyone selling movies to disclose customer information to anyone, including state tax collectors. The 1988 law specifically covers "prerecorded video cassette tapes," and also sweeps in "similar audio visual material" such as DVDs and Blu-ray discs.

North Carolina's legal setback comes as other states experiment with new ways to collect taxes from online retailers. California may require retailers to report the total dollar value of purchases made by each state resident. A decision is expected at any time in a related case that Amazon filed against New York state.

Update October 26 at 7:06 a.m. PT:

Last night I asked the North Carolina Department of Revenue what its plans were, including: "Will you destroy that information and issue a new request?" I just received a partial response via e-mail, which doesn't answer that particular question. All it says is: "Attorneys with our office are currently reviewing the ruling, and no decision has been made yet about whether or not the State will seek an appeal."

Update October 26 at 10:40 a.m. PT:

The ACLU sent over this response from staff attorney Aden Fine (it's also put the opinion online): "Disclosing the purchase records of Internet users to the government would violate their constitutional rights to read and purchase the lawful materials of their choice, free from government intrusion, and undermine the very basis of American democracy and our cherished freedoms. With this ruling, the court emphatically reemphasized what other courts have found before - that government entities cannot watch over our shoulders to see what we are buying and reading."



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Sources: Amazon.com, CNBC, CNET, MSNBC, Google Maps

North Carolina's Top Tax Man Ken Lay Resigns Under Mysterious Circumstances

Former Charlotte Banker Ken Lay Resigns as N.C. Top Revenue Chief


Gov. Bev Perdue today announced the resignation of state Revenue Secretary Ken Lay and his replacement by outgoing Sen. David Hoyle of Gaston County.

The resignation of Lay, a former Charlotte banker, follows reports in Sunday’s News & Observer that the governor had signed off on a policy that made it harder for taxpayers who overpaid taxes to get refunds.

Perdue spokeswoman Chrissy Pearson said this afternoon the governor had never signed off on such a policy. But Pearson said it was time for “new leadership.”

Revenue officials face a backlog of tens of thousands of cases where taxpayers are owed money.

Pearson said Lay’s resignation takes effect Oct. 22.


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Sources: McClatchy Newspapers, WRAL, Google Maps

Wells Fargo, BOFA Pay No Taxes But Charlotte's Black Citizens Ordered To

Bank of America, Wells Fargo Probably Won't Pay Income Tax For 2009


This tax season will be kind to Bank of America and Wells Fargo: It appears that neither bank will have to pay federal income taxes for 2009.

Bank of America probably won't pay federal taxes because it lost money in the U.S. for the year. Wells Fargo was profitable, but can write down its tax bill because of losses at Wachovia, which it rescued from a near collapse.

The idea of the country's No. 1 and No. 4 banks not paying federal income taxes may be anathema to millions of Americans who are grumbling as they fill out their own tax forms this month. But tax experts say the banks' situation is hardly unique.

"Oh, yeah, this happens all the time," said Robert Willens, an expert on tax accounting who runs a New York firm with the same name. "Especially now, with companies suffering such severe losses."

Bob McIntyre, at Citizens for Tax Justice, said he opposes the government giving corporations such a break.

"If you go out and try to make money and you don't do it, why should the government pay you for your losses?" McIntyre said. "It's as simple as that."

For 2009, Bank of America netted a $2.3 billion benefit related to income taxes, according to its annual report: It had a benefit of $3.6 billion from the federal government, and an expense of $1.3 billion that it paid to different state and foreign governments.

It's not unusual for a company's debt to the federal government to vary widely from its debt to state governments, as appears to be the case with Bank of America, said Douglas Shackelford, a tax professor at UNC Chapel Hill.

The Federal Government often offers more tax deductions than the states; for example, Bank of America wrote down its federal taxable income with credits from low-income housing and losses on foreign subsidiary stock.

Company tax returns aren't public, so it's difficult to say for certain how much a company pays to, or receives from, tax coffers in any year .

The bank's $3.6 billion current federal tax benefit for 2009 came in a year when it lost $1 billion in the U.S., according to its latest annual report. For the previous year, when the bank had profits of $3.3 billion in the U.S., it listed a current federal tax expense of $5.1 billion.

Wells Fargo was profitable in 2009, with $8 billion in earnings applicable to common shareholders. But its tax payments were reduced because of Wachovia's losses.



Wells netted an overall tax benefit of $4.1 billion in 2009. It got a benefit worth nearly $4 billion from the federal government, and another worth $334 million from state governments. It had an expense of $164 million in foreign taxes. Wells did record an overall income tax expense of $5.3 billion, but that was offset by the tax benefits of the Wachovia losses.


Tax Breaks and Stimulus

The topic of corporate tax breaks has gained buzz recently because of a provision in the 2009 stimulus bill, which allows companies to "carry back" their losses for 2008 and 2009 to the previous five years, instead of just the previous two years.

Homebuilders and other industries that suffered big losses in 2008 and 2009, but made a lot of money in the years before that, stand to gain billions in refunds. However, the stimulus bill provision does not apply for Bank of America and Wells Fargo, because companies that received TARP loans are ineligible.

UNC's Shackelford said the argument for carry backs stems from the belief that it's "arbitrary" that taxes are collected on an annual basis.

"There's no reason we couldn't collect them on a monthly basis or a two-year basis. Then your losses and gains would be offset over the period," he said. "The carryback enables you to not be penalized because your losses got bunched in a different year from your gains."

The stimulus bill provision, he said, was helped by business lobbying. "There's an awful lot of companies that paid a lot of taxes in the 2004 period, then they lost a lot of money, and they went to their legislators and said, 'Please help us,'" Shackelford said.

McIntyre, at Citizens for Tax Justice, co-authored a report in 2004 related to carrybacks, after the Bush administration expanded many corporate tax breaks. The report examined 275 of the country's largest companies and found that nearly one-third paid no federal income taxes in at least one year from 2001 to 2003. The companies overall were profitable in those years, but took advantage of tax breaks.

"If you or I lose money in the stock market, we don't get to carry back our losses to any significant degree," said McIntyre. His group works on closing tax breaks for corporations.

"Getting a refund from the past, that's just weird," he added.






Federal Judge Decides Not To Revoke Bond For Charlotte Pastor Rev. Wright & Wife



The government lost its bid Wednesday to have the pastors of a popular west Charlotte church jailed just two weeks before their trial on tax evasion charges begins.

But in an unusual move, a federal judge ordered Greater Salem City of God pastors Anthony and Harriet Jinwright to live separately to limit their communication with each other.

Prosecutors told the judge the Jinwrights were continuing to commit crimes by not paying two years' worth of taxes -- a violation of their release on bond. They said the pastors owe about $85,000 in taxes for the years 2007 and 2008.

But defense lawyers argued that the Jinwrights don't have the money to pay the overdue taxes. The pastors have been working with the Internal Revenue Service to set up a payment plan, the lawyers said.

"If you put them in jail, they are for sure not going to be able to pay their taxes...," Ed Hinson, Anthony Jinwright's lawyer, told the judge. "It'll hamper our ability to defend (the tax evasion) case."

The Jinwrights are charged with tax evasion, conspiracy to defraud the IRS and filing false tax returns. They are accused in an indictment of not reporting $1.8 million in taxable income.

Both Jinwrights have pleaded not guilty and have been free on bond since their indictments in 2009. Their trial is scheduled to begin April 6.

On Wednesday, U.S. District Judge Frank Whitney rejected the government's motion to revoke the Jinwrights' bonds and jail them. But he said there is probable cause that the pastors are conspiring not to pay their overdue taxes and ordered them not to live together so their communication would be limited.

"The government has shown they are involved in a conspiracy," Whitney said. "I'm going to have to separate them."

But Whitney said he believed revoking the Jinwrights' bonds would be inappropriate. The pastors are not a flight risk or a danger to the community, said Whitney, who allowed the couple to continue to work together at their church and to meet together with lawyers for trial preparation.

"I'm not going to put them in detention," Whitney said. "I am trying to address the issue - to limit the interaction of co-conspirators when they're out on bond."

Prosecutors told the judge about the Jinwrights' lavish spending habits and questioned whether the couple was really unable to pay taxes.

In their 2007 joint tax return, the Jinwrights reported their total wages as $465,507, according to the prosecutors. That, they said, didn't include their housing allowance of $160,833 and car allowance of $45,826.

The prosecutors listed some of the Jinwrights' expenditures that year: about $178,000 for eight vehicles, $4,000 in car wash expenses, $311,000 on their two homes, $4,000 in lawn care, $9,000 in home repairs and upkeep, nearly $3,000 for Time Warner Cable and Direct TV, $4,200 in house cleaning expenses and close to $20,000 for furniture.

Anthony Jinwright received more than $4.1 million from the church from 2001 through 2007, according to the indictment. Harriet Jinwright got more than $1.2 million from the church during that time.

The indictment alleges that since 2001, the Jinwrights have leased 18 vehicles, including a Bentley GT worth $175,232 and a Rolls-Royce Phantom worth $352,500.

The pastors have bought a $990,000 house on Lake Norman and leased a $3.7 million house, according to prosecutors.

"Defendants' contention that they lack the ability to pay their outstanding tax liability of $85,000, given their substantial income, is incredible," prosecutors David Brown and Craig Randall argued in a court document.

"It is a direct slap in the face to millions of honest, hardworking citizens of the United States who earn substantially less income than defendants and still manage to bear their fair share of the nation's financial responsibilities."


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Sources: WCNC, McClatchy Newspapers, WBTV, Wells Fargo, BOFA, Wikipedia, Youtube, Google Maps

NC Tax Code Double Taxes Poor & Middle Class

Study: NC Tax Policy hurts Poor


North Carolinians in lower income tax brackets pay a higher percentage of their income in state and local taxes than the wealthiest taxpayers in the state, according to a study by the Institute for Taxation and Economic Policy.

The 50-state report compiled the amount each income group paid in income, sales, excise and property taxes over a multiyear period. The date shows that most states do, in fact, have regressive tax structures, explained Kelly Davis, the Midwest regional director for ITEP.

“Fairness is, of course, in the eye of the beholder,” reads the study. “Yet almost anyone would agree that the best-off families should pay at a tax rate at least equal to what low- and middle-income families pay. Virtually every state fails this basic test of tax fairness.”

Income taxes are progressive, meaning those who earn more pay a higher percentage. Other state and local taxes, such as sales and property taxes, are regressive. Although they tax everyone equally, those who earn less are paying more proportionally.

“We know that low-income people spent most of what they earned on things that are subject to regressive sales taxes,” Davis said.

The report found that North Carolina families earning less than $17,000 each year give 9.5 percent of their income back to state and local governments. Those earning between $29,000 and $48,000 paid the most, paying 9.6 percent of their annual wages in state and local taxes. Those earning $1,150,400 or more annually, the wealthiest bracket, pay 8.1 percent.

According to the U.S. Census Bureau, the median annual household income in Buncombe County was $43,805 in 2008, roughly 16 percent below the national average.

ITEP's mission is to “keep policymakers and the public informed of the effects of current and proposed tax polices on tax fairness, government budgets and sound economic policy.” But Davis said it is up to voters and legislators to decide what to do with the information.

“Our role is to give data and make people aware of this information,” Davis said. “Making sure people are aware of tax policy is a good first step.”



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Sources: Asheville Citizen Times, John Locke Foundation, Carolina Journal TV, Granitegrok, Google Maps

NC GOP & Sen. Kay Hagan Propose Anti-Corruption, Real Tax Reform Measures...Bi-Partisanship

North Carolina's Unfair Taxation Problem. Part I





North Carolina's Unfair Taxation Problem. Part II





US Senator Kay Hagan introduces Anti-Fraud Software proposal on the Senate Floor. This Software will help eliminate Billions in National Medicaid and Medicare Fraud.







GOP Caucus Proposes Tax Reform, Spending Principles


Sunday's column on tax reform mentioned the General Assembly's Republican Joint Caucus proposal for tax and spending reforms. The proposal, outlined in a news release under the names of House Republican Leader Skip Stam of Wake, NC Senate Republican Leader Phil Berger of Rockingham and Joint Caucus Leader Eddie Goodall of Union.

Proposed Principles for Job Creation through Tax and Spending Reform:

1.) The concept of substantially reducing personal and corporate income tax rates and sales tax rates is good. If that reduction is accomplished by broadening the base in a revenue neutral way, that is the right way to go. But it raises four major issues.

2.) Neither the public nor Republicans trust Democrats to keep the rates low. There must be a mechanism to ensure this. Two possibilities:
a) A Constitutional amendment limiting the state sales tax rate at 3% + and the county sales tax rate to an equivalent. The Constitution currently specifies a 10% limit on tax on net income.
b) A Statute that sets out as a Rule of Order, applicable to each House, that an increase in the rate must be separately passed by both Houses and signed by the Governor, and cannot be combined with any other matter unless by a 2/3 vote of each House.

3.) The base widening must delete the exemptions and refunds which are in current law for political reasons/not because of true economic considerations.

4.) Tax Reform must include spending reform that has passed the House in the past – zero based budgeting, and must include:
a) Procedural reforms must allow “off budget” sources of revenue to be considered as
part of the budget process.
b) The minority party is entitled to proportionate representation on the Budget
Conference Committee.
c) The Governor’s proposed budget must only include the amount of revenue
collected in the prior year (with a recession exception).

5.) In determining what is “revenue neutral” the temporary taxes imposed in 2009 shall be treated as if they had expired.

6.) We should also look at other reforms that take advantage on behalf of our citizens as federal taxpayers of federal deductibility issues. This could save our citizens $1 billion a year in federal income taxes.





Anti-Fraud Software included in NC State Budget


NC State Rep. Paul Stam's proposal to buy anti-fraud software for Medicaid was included in the state's budget.

Early in the legislative session, Stam, an Apex Republican, pitched the idea that buying software meant to prevent fraud before Medicaid payments are made could save millions every year.

The idea has been previously pushed, particularly by Republicans. Stam said he found a more receptive audience among the Democrats who wrote the budget this year since the state was facing a deficit.

"I think what changed is they were desperate for money and they realized if they were going to be short on Medicaid money they had to stop wasting so much of it," Stam said.

U.S. Sen. Kay Hagan is pushing an amendment to federal health care legislation that would implement similar software meant to prevent billions of dollars of fraudulent claims.





US Senator Kay Hagan: NC Tools Prevent Fraud, Waste


U.S. Sen. Kay Hagan (Dem) says a North Carolina initiative and software sold by a Cary company could save billions in wasted and fraudulent health care expenses.

Hagan was speaking on the Senate floor Tuesday in support of an amendment to the health care reform package that is meant to lower costs by preventing fraud and waste.

Hagan spoke in favor of a program meant to catch Medicare and Medicaid fraud before payments are made, rather than having investigators try to recover spent money. SAS has written software that would catch irregularities that suggest fraud before payments are made, she said.

Hagan also spoke in favor of bringing a state program to the national level. ChecKmeds NC, a program of the N.C. Health and Wellness Trust Fund, provides free consultation with seniors about their medications. The cost of patients not following doctors' orders on medications is $290 billion a year, Hagan said.

In the state's program, seniors bring all their vitamins, prescriptions and over-the-counter medications to a participating pharmacist who offers a review and consultation.

Pharmacists discuss ways to save money by switching medications or potential problems and pitfalls with combinations of medications. Hagan said the program, which served 15,000 seniors in 2007, saved $10 million and avoided countless health care problems.




NC State owes Feds $300 Mil for Medicaid Overbilling


The State of NC must repay about $300 million to the Federal Government for overbilling Medicaid.

Starting last November, public hospital Medicaid payments were improperly billed to the federal government rather than to a state account, according to the NC State Department of Health and Human Services, Lynn Bonner reports.

The state has agreed to repay $200 million by the end of the month, and the rest by the end of the year.

"This mistake should not have been made," NC DHHS secretary Lanier Cansler said in a statement. "Originating almost eight months ago, it should have been identified and reported earlier. I have discussed the matter with the Governor, and I am aggressively working to strengthen the internal controls and will take whatever other remedial actions may be necessary."






North Carolina Slashes Medical Assistance Funding For State's Poorest Citizens

Legislative leaders who monitor North Carolina’s mental health system are surprisingly positive after negative actions they took last month to close a budget hole.

They’re pleased with new Department of Health and Human Services leaders who oversee treatment for more than 300,000 mentally ill patients, substance abusers and the developmentally disabled.

However, spending cuts for treatment reaching as high as $400 million this fiscal year mean there’s no doubt patients will lose local treatment options and see other services curbed.

“I’d be optimistic if we didn’t cut the budget 20 percent,” said Dave Richard, executive director of the Arc of North Carolina, which advocates for the mentally disabled. “You can’t do what they’re doing without hurting thousands upon thousands of people in the state.”

The cuts had to be deep, according to Democrats who calculated the budget gap for this year at more than $4 billion. But improved cooperation with the department helped prevent patient cuts from getting worse, said Sen. Martin Nesbitt, D-Buncombe.

“We now have people we can work with,” said Nesbitt, co-chairman of the Legislature’s mental health oversight committee. “This (reduction) is what we had to do to preserve the system.”

The good feelings contrast with eight years of frustrations and setbacks for a mental health reform effort that a legislative watchdog agency said in July ultimately wasted up to $635 million in government money on one initiative alone.

The positive vibes are traced to Secretary Lanier Cansler, who was hardly a newcomer when Gov. Beverly Perdue appointed him in January. The former House member, from Buncombe County like Nesbitt, was deputy secretary during then-Gov. Mike Easley’s first term before a brief consulting career.

Under Easley, the department struggled to carry out a 2001 law designed to shift the state’s mental health programs away from institutional care to community-based treatment offered by private providers.

Lawmakers and advocates clashed with the department under then-Secretary Carmen Hooker Odom because they said she didn’t seek their input enough. But advocates say Cansler wasn’t part of the problem.

Relations improved in late 2007 when Dempsey Benton, a career bureaucrat in state and municipal government, succeeded Hooker Odom and pledged to fix the department. But his time was short and marked by the fallout from hospital patient deaths and hemorrhaging cash with the Community Support program.

Cansler, a Republican in a Democratic administration, seemed to have bipartisan support on the oversight committee last week. Nesbitt said he had never seen committee members listen so intently to a department secretary.

“I think we’ve got somebody that’s very capable,” said Rep. Fred Steen, R-Rowan, a committee member who acknowledged the panel has been accused at times of micromanaging.

Cansler acknowledged current cuts, among them $55 million less to “local management entities” that evaluate patients and find them community treatment, a $16 million reduction for in-home services and lower Medicaid reimbursement rates for providers, will hurt families and those that treat patients but his agency is working to minimize the harm.

“There will be some Providers out there that will not survive,” Cansler said. “There are going to be repercussions and there’s no way to avoid it when you take $350, $400 million out of the system.”

Cansler talked about a new effort to provide more financial accountability within the department and get divisions to work together to meet common goals.

He’s also hired outside the department, a Tennessee behavioral health consulting firm director, a Lumberton hospital executive and Sandhills-area local treatment manager among them, to take key mental health positions.

“Sometimes when you have a new set of eyes with a different background, different understanding, you see issues that those who have been within the forest for many years don’t see,” Cansler said during a break in last week’s meeting.

The good relations were tested in last week’s oversight meeting, the first since the session ended.

Legislators complained how Cansler’s department allocated $55 million in cuts to the 24 local management entities.

They spent most of the afternoon peppering new state Medicaid director Dr. Craigan Gray over the phaseout of the Community Support program, which provides non-medical care for 33,000 mental health patients living at home.

The Legislature agreed to eliminate the program by next June after a series of unflattering reviews that found overpriced care — such as paying $61 per hour to take clients to the movies or shopping.

But lawmakers were worried that patient transition to other treatment programs left out more fundamental assistance like teaching patients life skills.

By meeting’s end, Cansler said the department would provide more data to legislators to help them decide if they believed lower-skilled treatments needed to be restored, according to Nesbitt.

Nesbitt quipped: “Isn’t that refreshing?”



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Sources: McClatchy Newspapers, Under The Dome, News & Observer, Charlotte Observer, Daily Southerner, Wikipedia, Youtube, Google Maps

Will Health Care Reform's Hidden Taxes Hurt America's Middle Class?

Reps. Cantor & Hoyer spar over the Health Care Reform Bill vote.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Could health care reform lead to hidden taxes?


As a candidate and president, Barack Obama has had one core message for the middle class: I won't raise your taxes. The White House has pledged that only the wealthy — families earning more than $250,000 — would face a boost in income, capital gains, or other taxes. For the 97 percent of Americans below that level, no increases are in store.

But as Congress inches closer to forging a massive package of health-care reforms, it's increasingly clear how difficult it will be to keep that pledge. To pay for the near trillion-dollar health-care system overhaul — not to mention reining in the deficit and funding other ambitious plans Obama has laid out for the years ahead — many outside the White House believe the middle class will not be spared. Republican critics contend that the White House is misleading the public about who will ultimately shoulder much of the cost of extending coverage to tens of millions of uninsured Americans.

True, most won't see direct tax hikes, per se. Few believe Obama will go back on his vow to keep income tax rates the same for all but the top brackets when the Bush tax cuts expire at the end of 2010. And top White House economic adviser Lawrence H. Summers says Obama can keep his pledge while finding more than enough cost cuts and revenue elsewhere. "There is substantial scope for expenditure reductions in health care and for raising enough revenues from people with incomes over $250,000 and from companies," he says.

A key question, though, is whether over the next couple of years, middle-income families will face a host of surcharges, fees, reduced tax breaks, or other increased costs. Daniel Clifton, a Washington-based policy analyst for Strategas Research Partners, argues that Congress has purposely loaded onto the corporate sector the increased taxes needed to pay for the reforms to avoid politically unpopular individual tax hikes. But the added costs will eventually be shifted to customers. "It all depends on what your definition of 'tax' is. Everyone is mincing words here," says Clifton. "There isn't enough money available in just extracting more from corporate taxes or rich Americans."

Consider the Senate's proposal to impose a 40 percent excise tax on so-called Cadillac health insurance plans valued at more than $21,000. The idea, say backers, is to discourage the excessive health-care spending said to result from such generous plans. The proposed tax on the plans would raise $202 billion, more than half the new funds needed to help pay for extending insurance coverage. Rather than tax policyholders directly, the hit would be on insurers who offer those plans.

Worried unions

The insurers, though, likely will cut benefits or raise premiums as a result. That point hasn't escaped union leaders, who oppose the proposal because it would target many of their members, who have negotiated generous health benefits. Richard L. Trumka, the head of the AFL-CIO, argues that roughly 15 percent of insured families and 19 percent of individuals—most solidly middle-class—have plans that would fall under the new tax. For many members, he says, the result would be higher medical costs. "What [they are] actually saying is that cost of covering the uninsured should be borne by the middle class," Trumka says.

Summers counters that the tax is intended to curb wasteful health-care spending; the goal, he says, is to get employers to offer less pricey insurance policies and raise wages instead. But labor leaders remain unconvinced, and they're lobbying to kill the measure.

GOP opponents of the reforms have also intensified their attacks. Senator Chuck Grassley (R-Iowa), the ranking Republican on the Senate Finance Committee, argues the pending bills would leave many worse off. "The vast majority of middle-class Americans would pay higher taxes and premiums," he says. He, too, cites the Cadillac tax increase, along with other changes such as a rise in the threshold on deductions for medical expenses from 7.5 percent of adjusted gross income to 10 percent. Quoting figures compiled by the bipartisan Joint Committee on Taxation, he says that by 2019, when the bill would be fully in effect, families earning over $75,000 would see a net hike in taxes.

On another front, the Senate is counting on hefty excise taxes assessed on the different players in the medical industry for a big chunk of funding. Altogether, insurers, drug companies, and device makers could be on tap for roughly $120 billion in fees over the next decade. Problem is, a big portion of those taxes are likely to be recouped in the form of higher prices or increased premiums. "It's a fiction," says Roberton Williams, a former Congressional Budget Office official now with the nonpartisan Urban Institute's Tax Policy Center. "The excise taxes won't be paid by the companies; they'll be passed right back to their customers."

Summers disputes that notion and argues that the excise taxes "are designed so they will likely be difficult to pass on." And he points out that the estimates Grassley cites do not take into account expected cost savings and other benefits of reform. "Many of those same firms will no longer have the burdens associated with paying for uncompensated care," he argues.

However the numbers are sliced, they add up. All told, by imposing new taxes on health-care providers, the Senate Finance Committee is counting on raising some $340 billion to help pay for reforms. An additional $42 billion would come from trimming tax breaks for such things as health savings accounts and medical expenses, according to fiscal watchdog US Budget Watch. It remains to be seen how much of that tab average Americans will end up shouldering.


Sources: MSNBC, Business Week, Flickr

North Carolina Uses Obesity As Excuse To Deny Health Care Claims...Monopolies & Lobbyists Win!

(July 15th, 2009: SEANC organized a protest in front of the Blue Cross Blue Shield North Carolina headquarters in Chapel Hill. Attended by over 60 members of SEANC, HCAN, Acorn, AFL-CIO and other progressive groups, the event highlighted Blue Cross' use of taxpayers and customer money to fight against affordable health care for all.)




N.C. to penalize obese workers, those who smoke


North Carolina is poised to become only the second state to penalize state employees by placing them in a more expensive health insurance plan if they're obese.

Smokers will feel the drag of higher costs, too, as North Carolina and South Carolina state employees who use tobacco are slated to pay more for health insurance next year.

N.C. officials, coping with a steady uptick in health care costs for state employees each year, are aiming to improve state workers' health, which saves money in medical expenses.

"Tobacco use and poor nutrition and inactivity are the leading causes of preventable deaths in our state," said Anne Rogers, director of integrated health management with the N.C. State Employees Health Plan. "We need a healthy workforce in this state. We're trying to encourage individuals to adopt healthy lifestyles."

State workers who don't cut out the Marlboros and Big Macs will end up paying more for health insurance. Tobacco users get placed in a more expensive insurance plan starting in July and, for those who qualify as obese, in July 2011.

Some state employees, though, are criticizing the planned changes. The State Employees Association of North Carolina opposes the tobacco and obesity differentials as invasive steps that could have been avoided if the legislature had fixed the plan.

"It's my understanding they're talking about testing (for tobacco use) in the workplace which, to me, would create a hostile environment," said Kim Martin, a sergeant at Piedmont Correctional Institution in Salisbury. "And it's an invasion of privacy. This is America, the land of the free. I don't think (body mass index is) a very good measure. I know some folks who would have a high body mass index because they're muscular."

The health plan covers more than 600,000 state employees, retirees and teachers at a total cost last year of $2.6 billion. Last spring, the legislature bailed out the plan with an infusion of $250 million to pay the bills after rising costs and inaccurate projections left little money for claims. Over the next two years, the state general fund will pump about $408 million into the health plan.

While officials have not yet estimated any potential savings from the obesity requirement, the higher costs for smokers could save $13 million in the 2010-2011 budget year, Rogers said, emphasizing that the plan's priority is to improve health and save money in the process.

The idea of penalizing unhealthy lifestyles and rewarding healthy conduct is hardly new among insurance plans. Public health insurance plans in other states already penalize smokers or reward nonsmokers in insurance costs. South Carolina's state employees health plan is scheduled to add a $25-per-month surcharge on smokers in January. Elsewhere in the southeast, Kentucky and Georgia impose surcharges, and Alabama gives nonsmokers a discount.

Alabama was out front on weight testing. Starting in January, state workers will have their blood pressure, cholesterol, glucose and body mass index checked by a nurse. If they're in a risk category, such as a body mass index of 35 or greater or a blood pressure of 160/100 or greater, they are charged an extra $25 per month on their insurance premium. If they go to a health screening, either offered by the state or by their personal physician, then the $25 is subtracted, according to Gary Matthews, chief operating officer for the Alabama State Employees Insurance Board.

North Carolina will allow state workers with a BMI of up to 40 to keep the discount, although a BMI of 30 is considered obese by some experts.

Private sector employers appear to have been targeting tobacco and weight in their insurance pricing ahead of state health plans.

"We're beginning to see a lot of employers extremely interested in this," said Tim Smith, president of BioSignia, in Durham, which provides for private employers a system of measuring employees' risk factors for the onset of chronic disease. The company presents only aggregate data to the employers and does not disclose information about individuals, Smith said.

Tobacco and obesity are leading risk factors for ailments such as heart disease, stroke, Type 2 diabetes and chronic breathing disorders. BioSignia is not under contract with the state health plan, but Smith said that employers like the state are trying to catch employees who are in pre-disease stages to save both lives and money.

Only a fraction of employers, though, offer financial incentives for healthy behavior or wellness programs, such as gym memberships or smoking cessation, according to a Kaiser Family Foundation study last year. Differences in employees' education, health literacy and access to basic health care could affect the usefulness of financial incentives in reducing health-care costs over time, the study said.

The results are not yet in. The higher costs for smokers and the obese don't appear to have been in place long enough for any state to boast a healthier workforce yet, according to officials in several states.

"I don't know that any states have a lot of hard data on this," Rogers said.

The policies have generated a backlash among at least some state workers. Some workers are anxious about the idea of tests for smoking. The tests involve examining a saliva sample for cotinine, a derivative of nicotine found in the system of tobacco users. Health plan officials recognize those concerns and are getting ready to take bids from companies that will perform the tests.

The state plan has not yet developed a procedure to monitor members for the obesity standard due to take effect in 2011.

"We're going to have to work out those logistics," Rogers said.

South Carolina and Tennessee rely on self-reporting instead of tests for illicit tobacco use, and Tennessee found the percentage of smokers in voluntary reports match public surveys.

Martin, the prison sergeant in Salisbury, doesn't smoke but considers herself overweight. Instead of financial penalties, she would like to see financial subsidies.

"If they're going to hold us accountable," Martin said, "pay for a gym membership or part of a membership. Give us an incentive, a way to combat it."




Gov Bev Perdue says missing Health Care Reform signature not a sign

Gov. Beverly Perdue says there's a good reason why she didn't join most of the nation's other Democratic governors in signing a letter supporting health care reform.

Perdue says she was too busy with an economic development trip to consider the letter.

The letter was assembled by the Senate Majority Leader and the Democratic Governors Association, Talking Points Memo reports.

It's a standard letter addressed to Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell, Speaker [Nancy] Pelosi and Minority Leader Boehner, telling them states "will only achieve the health care security and stability they need if we succeed in working together with the Congress and the President to achieve health care reform."

Perdue was one of six Democratic governors who did not sign the letter. Talking Points Memo and some bloggers have read the missing signatures as a sign of how tough the health care battle is.

In North Carolina's case, that may be overstating things. Perdue was given a copy of the letter Wednesday between meetings, Perdue spokeswoman Chrissy Pearson said.

"She didn't feel she had enough time to give it due consideration," Pearson said. "Her focus that day was the trip to New York City. It was a very grueling schedule."

Pearson said Perdue agrees with the points made in the letter.

"She did not sign it but wants to make it clear that she remains committed to working with the Obama administration on health care reform," Pearson said. "She has continued the dialogue that began a few months ago whenever the White House asked North Carolina to host one of their forums on health care reform and she continues to remain concerned about the fact that while she believes reform is needed, such reform should not place an undue financial burden on the state."

Here is the text of the letter:

Dear Speaker Pelosi, Majority Leader Reid, Minority Leader McConnell and Minority Leader Boehner:

We are writing to express our support for your efforts to reform our nation’s health care system. As the chief executives of our states and territories, we realize that the status quo is no longer an option and we support getting health reform done this year.

Sky-rocketing health care costs hurt families, force businesses to cut or drop health benefits and cause already strained state budget deficits to significantly grow. We believe reform can relieve these burdens by reining in costs and making coverage more affordable, both for our citizens and our state budgets.

Efforts at the federal level, like the recent and critical investments through the Recovery Act that support states’ HIT and prevention initiatives, are beginning to work to lower health care costs. Our citizens and our states, however, will only achieve the health care security and stability they need if we succeed in working together with the Congress and the President to achieve health care reform.

We commend you and your colleagues for provisions included in your bills that will help states and territories. Many of the provisions will allow states and territories to achieve long term savings and help cover those who currently go without coverage. We recognize that health reform is a shared responsibility and everyone, including state governments, needs to partner to reform our broken health care system.

We thank you for your leadership in this historic effort and look forward to continuing to work together to get health reform passed this year.



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Sources: McClatchy Newspapers, Charlotte Observer, News & Observer, Democratic Governors Association, WCNC, Talking Points Memo, Think Progress, Google Maps

Study Reveals State Tax Revenues Rapidly Declining...At Record Lows

NY Times----

The anemic economy decimated state tax collections during the first three months of the year, according to a report released Friday by the Rockefeller Institute of Government. The drop in revenues was the steepest in the 46 years that quarterly data has been available.

The blow to state coffers, which the report said appeared to worsen in the second quarter of the year, reflects the gravity of the recession and suggests the extent to which many states will probably have to resort to more spending cuts or tax increases to balance their budgets.

Over all, the report found that state tax collections dropped 11.7 percent in the first three months of 2009, compared with the same period last year. After adjusting for inflation, new changes in tax rates and other anomalies, the report found that tax revenues had declined in 47 of the 50 states in the quarter.

All the major sources of state tax revenue — sales taxes, personal income taxes and corporate income taxes — took serious blows, the report found.

As more people lost their jobs, took pay cuts or worked fewer hours, personal income tax collections fell 17.5 percent in the quarter. Weak retail sales sent sales tax collections down 8.3 percent. Corporate income tax collections, which are often highly variable, declined 18.8 percent.

States in the Far West had the largest declines in tax revenue, the report found. Arizona reported the largest drop in personal income tax collections, at 56.1 percent. Alaska experienced the largest overall drop in tax collections, 72 percent in the first quarter, and that was attributed to the state’s unusually high revenue collections in recent years because of high oil prices.

Local governments have fared better during the downturn. The report found that local tax collections rose 3.9 percent in the first quarter, largely because of increased property tax collections, which tend to be relatively stable and which are often based on assessments of value that do not keep pace with true market conditions.

As bad as the first quarter was, the second quarter is shaping up to be even worse, the report said. Preliminary data for the first two months of the quarter, April and May, collected from 45 states, indicated that tax revenues declined by 20 percent compared with the same period last year.

That will force states — many of which are already raising taxes or fees, resorting to layoffs or furloughing employees — to come up with more ways to raise or save money.

“The continuing sharp decline in revenues will likely force more unwanted choices for states in the months ahead,” wrote the report’s authors, Donald J. Boyd and Lucy Dadayan.



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Sources: NY Times, Rockefeller Institute of Government, Charlotte Observer, Flickr, Google Maps