It's so easy to go after public employees

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The always-insightful Robert Cruickshank has a fascinating piece on Calitics today talking about the investigative reports showing that some state employees save up all their vacation time and get big payouts when they retire. It's true that some state workers walk away with upwards of $100,000, and it's true that it pisses people off, and it's true that there probably ought to be some reforms that limit the amount of vacation time you can save and cash in.

But as Cruickshank notes, the payouts have cost the state $486 million since 2006, and:

$486 million sounds like a lot of money. But that is just 2.43% of the current $20 billion deficit. In other words, if we had eliminated that practice in 2006, or capped it, the budget deficit would not be meaningfully impacted. In fact, given that we've had about $60 billion in budget shortfalls since 2007, these vacation payouts are 0.81% of the overall deficit.

He explains:

Of course, these kinds of articles help build a larger narrative that the budget problem is in large part caused by greedy public sector workers who are paid too much. The actual numbers here indicate that the vacation payouts are not a meaningful part of the budget problem at all. Similarly, Meg Whitman's desire to layoff 40,000 state workers would probably save about $2.5 billion (assuming those workers make the state average). That's a bigger chunk of the projected $20 billion deficit, but it's still only 12.5%. Whitman and other critics of public employees need to come up with solutions for the other 87.5% of the deficit.

Maybe one place to start is by looking at how the rich evade their tax obligations. Last week the LA Times's Michael Hiltzik showed that Frank and Jamie McCourt paid no federal or state income tax between 2004 and 2009. Many wealthy Californians and large corporations have similarly evaded taxes.

So why do the relatively minor excesses by state employees get much more press attention that the vast cheating and looting of the public treasury by the rich and by big businness? Well, after 30 years in journalism, I can tell you one reason:

It's easy.

State employee payrolls are public record. It's easy to find out how much overtime Muni drivers make, or how many city workers earn more than $100,000 a year, or what the firefighters contract allows. Editors love these kinds of stories, because they always stir up populist indignation and outrage.

I've done it myself. We all do.

On the other hand, try to figure out how a big commercial property owner is using complicated stock transfers to hide a change in ownership and avoid tens of millions of dollars in property-tax liability. It's a bitch. That kind of work takes weeks, months of investigation and requires some sophisticated legal and financial knowledge. See, the private sector -- particularly the folks who are hiding behind tax shelters and scams -- is big on secrecy, and the laws don't help reporters.

Investigative reporting on the private sector is expensive. And in these days of diminished news budgets, not that much of it happens any more.

So the message you get in the press is that public employees are busting the budgets, and if we could just quit paying them so much money all would be fine. And the real budget busters, the real scam artists, the real crooks who are sucking the public treasury dry ... they just keep right one going. And nobody's paying attention.

Comments

But Tim, if it is really that difficult to uncover tax avoidance in the private sector, then why are you so sure it exists to the extent that you imply?

Did you invest "months of investigation and requires some sophisticated legal and financial knowledge" yourself?

Also, you should make clear the distinction between tax evasion (illegal) and tax avoidance (legal). The examples you cited are entirely legal and so technically not evasion.

Posted by Tom Foolery on Mar. 01, 2010 @ 12:36 pm

See, Tom, that's the point -- what state employees do to collect big severance checks is perfectly legal, too. But it sparks outrage. Imagine what would happen if the newspapers spent more time reporting on how the very rich can -- legally -- avoid paying the taxes that the rest of us have to pay.

And yeah, in fact, every time I've put in the effort to find out, for example, how local corporations are screwing the city out of property taxes, I've found serious problems.

 

Posted by tim on Mar. 01, 2010 @ 1:38 pm

Tim,

Yes, all legal. I was simply counseling you not to use the word "tax evasion" in that context as that means something different and illegal.

I get your point about media bias. However, I'd contend that it is fairly well known that the rich can often avoid paying much or even any tax, through legal avoidance means. Any CPA worth his salt knows how to do it and, indeed, would be professionally negligent if he didn't suggest the use of such tools. It's no secret.

Our tax system taxes income highly, capital gains much less highly, and wealth not at all. You can be worth a billion and not pay a penny in tax, fairly easily.

But yes, it's probably more juicy for the media to report money that the State and City already has being squandered, than money that they never even get in the first place.

And tax returns have a high degree of privacy afforded them. In most lawsuits, even a plaintiff discovery motion for a 1040 cannot be enforced. So a journalist has a near zero chance.

Posted by Tom Foolery on Mar. 01, 2010 @ 6:15 pm

It's not just tax avoidance. Some public employees are way overpaid, like cops, firemen, and BART workers. And I consider this a fact, not an opinion. The standard for being overpaid is where someone gets paid substantially more for the same work as someone else. For example, a ticket agent for AMTRAK gets about $40K/year. That agent has to sell tickets to and answer questions from sometimes hostile customers, load and unload luggage, and clean the station, including bathrooms. A BART ticket agent sells no tickets, loads/unloads no luggage, and cleans no bathrooms. Yet that agent is paid $60K/year, fully 50% more. Cops say they should make a lot of money because their job is dangerous, but the fact is that people with jobs a lot more dangerous, like truck drivers, make a lot less money. Etc. So, defending public employees, who have it substantially better than the average person, will not get a lot of support from the general public. Nor should it.

Posted by Jeff Hoffman on Mar. 07, 2010 @ 1:43 pm