Defense contractor loophole closed

According to the AP, President Bush closed a loophole yesterday that defense contractors had been using to avoid paying millions of dollars in payroll taxes. [emphasis mine]

Bush signed into law the Heroes Earnings Assistance and Relief Tax Act, which provides tax relief for military families. Included in the legislation is a provision that would treat foreign subsidiaries of U.S. government contractors as American employers. That means they now have to pay the taxes that finance Social Security and Medicare programs. [...]

Lawmakers wanted to end the practice, which has become widespread among American businesses. The Senate Finance Committee estimates that thousands of companies have registered in the Caymans to dodge taxes. The losers, the committee said, are ordinary Americans who foot a larger share of the bill to pay for programs that benefit the elderly and the disabled.

In an example of how much tax revenue was being lost, the Boston Globe reported in April that Kellogg, Brown, and Root, which receives an estimated $16 billion a year for defense contracts in Iraq, avoided close to $100 million a year in payroll taxes by hiring workers through foreign shell companies. That's a large chunk of the nearly $846 million in revenues that The Joint Committee on Taxation estimates will be brought in over the next 10 years by shutting that loophole.

I'm not sure if this will affect Blackwater Worldwide since they're headquartered in Moyock, N.C., but it should since they're violating IRS laws too according to Rep. Henry Waxman.

In a letter to Erik Prince, the Chairman of the Prince Group, which owns Blackwater, Rep. Henry Waxman wrote:

"I have received documents which suggest that Blackwater may have engaged in significant tax evasion. According to an IRS ruling in March 2007, Blackwater violated federal tax laws by treating an armed guard as an “independent contractor.” The implication of this ruling is that Blackwater may have avoided paying millions of dollars in Social Security, Medicare, unemployment, and related taxes for which it is legally responsible.

And according to McClatchy Newpapers:

Waxman’s staff looked at the most recent State Department contract and estimated that between May 2006 and March 2007, Blackwater avoided paying $15.5 million in Social Security and Medicare taxes and $500,000 in unemployment taxes.

That's a lot of tax money they owe the country, but Blackwater can afford it. Since 2001, they've been granted federal contracts worth more than $1 billion - contracts that are being paid for by taxpayers.

As Sen. John Kerry said earlier this year, "Failing to contribute to Social Security and Medicare thousands of times over isn't shielding the taxpayers they claim to protect, it's costing our citizens in the name of short-term corporate greed."


(Cross-posted at Blogging for Michigan.)

DeVos speaks, MIGOP listens

Why are state Republicans still listening to DeVos?

Republicans who control the state Senate got a pep talk Tuesday from GOP businessman and 2006 gubernatorial candidate Dick DeVos.

DeVos, who lost to Democratic Gov. Jennifer Granholm in the November election and is rumored to be eyeing another bid, spoke for 20 to 30 minutes during a Senate GOP caucus meeting at the start of session. [...]

DeVos said Republicans outside Lansing support the GOP's stance that significant structural changes in government must be made before there is any consideration of a tax increase.

I guess the party feels obligated because the man spent millions of dollars of his own money trying to unseat Gov. Granholm, but the fact that he was trounced should be a clue that the public finds him as irrelevant as George Bush.

Seriously. DeVos based his election on somewhat dubious, if not downright untruthful claims. He ran around crowing that, "49 other states are doing great. 49 other states are moving forward. 49 other states are adding jobs. And yet, Michigan is the only one lagging behind," and he placed the blame squarely on Gov. Granholm.

That's not how several papers saw it. As the Ludington News Daily said, "The near collapse of the Big Three is not the fault of the Legislature nor the governor. It’s in part the fault of the Big Three for failing to adapt to a global economy, work together with their unions to comply with that increased competition and changing consumer desires."

It wasn't how the voters saw it either. CNN reported that the economy nearly tied Iraq as the reason voters across the country came out to vote last November.

DeVos also ran a series of ads about our depressed housing market and the glut of homes on the market. The implication was that housing was doing great in 49 other states. Yeah, right. Foreclosures rates have been growing across the country since last spring, right about the time DeVos started running his first campaign ads.

From ABC News:

New data released this afternoon indicates that one in every 656 homes in the United States went into foreclosure during May. [...]

"The principal source of the slowdown in economic growth that began last spring has been the substantial correction in the housing market," said Fed Chairman Ben Bernanke in a speech in late March. [emphasis added]

Michigan currently ranks eighth among states, with one in every 448 homes in foreclosure, but we're certainly not alone in our misery like DeVos wanted us to believe.

Aside from the misleading and disingenuous twisting of facts, why are state Republicans listening to DeVos on taxes? He supports the GOP's stance that structural changes in government must be made before there is any consideration of a tax increase, yet he and his family are willing to let taxpayers help build a new stadium for their basketball team in Orlando. If they don't see this as a double standard, shame on them.

And what about the millions of taxpayer dollars that benefit his brother-in-law, Eric Prince, owner of Blackwater Security? I've never heard DeVos raise objections about that money, not even when it came to light that Rep. Henry Waxman wrote Sec. Donald Rumsfeld requesting answers as to why taxpayers paid exorbitant prices for Blackwater's services. Waxman is still waiting for those answers (and so is the public).

And why are state Republicans listening to DeVos when they should be questioning him and his family about Blackwater's lack of transparency and accountability: Blackwater Heavies Sue Families of Slain [Fallujah] Employees for $10 Million in Brutal Attempt to Suppress Their Story.

If taxpayer money provides funding for Blackwater Security, then taxpayers deserve to know if the company cut corners in order to maximize profit - and in the process jeopardized those mens' lives. Surely, Michigan's GOP believes in accountability and transparency, right?

Whatever their reason for listening to DeVos, there's an old adage they might want to consider: When you lie down with dogs, you get up with fleas. They need to ask themselves if that's a risk they're willing to take. It hasn't worked out so well for many Bush loyalists and it just might not work out so well for them either.

Forget Blackwater, Stick with the National Guard

Something I read on Libby's blog - The Impolitic - caught my attention. She was talking about Kansas' crippled efforts to conduct a proper search and rescue attempt after their tornado because of their strapped National Guard units, and she concluded with this:

Our National Guard should be here at home doing the job they signed up for, rendering service on the homefront, rather than being sent thousands of miles of away for years on end in the name of imperialistic follies. Instead, when the next disaster strikes a major metro area, the taxpayer will be footing the bill for Blackwater mercenaries at ten times the price.

Libby may be onto something with her comment about Blackwater. Consider this article:

Increasingly a magnet for controversy, Blackwater USA has encountered a bumpy road implementing its national and international expansion plans.

The Moyock, N.C.-based private military company's plans to open an Asian branch in the Philippines have been scrapped and one stateside proposal has drawn considerable heat.

"We are no longer pursuing a facility in the Philippines," Anne Tyrrell, a company spokeswoman, said this week. [...]

Closer to home, Blackwater's drive to open a West Coast outpost has run into a buzzsaw of public opposition. More than half the registered voters of a tiny rural community east of San Diego, the proposed site of "Blackwater West," have signed a petition opposing the project. [...]

Meanwhile, Blackwater's new northern base in Illinois - where the company had no local regulatory hurdles to overcome - opened quietly this week, offering a variety of courses in firearms use, law enforcement and military tactics.

It is curious that the company quietly goes around expanding their facilities when according to an article in the Metro Times they have an extensive training facility in North Carolina.

Blackwater has a private fleet of more than twenty aircraft, including helicopter gunships and a surveillance blimp division. Its 7,000-acre headquarters in Moyock, North Carolina, is the world's largest private military facility. It trains tens of thousands of federal and local law enforcement agents a year and troops from "friendly" foreign nations.

Maybe they're positioning themselves to be accessible as emergencies arise in the south, out west or in the heartland in order to secure government contracts like they did after Hurricane Katrina. Privatization is a big, big story, according to what Jeremy Schahill told Metro Times:

[...] "Blackwater is a company that's engaged to tell a much bigger story. We are living right now in the middle of the most radical privatization agenda in the history of this country," Scahill tells Metro Times. "The Bush administration has used the private sector to essentially double the size of the occupation using troops whose deaths don't get counted in the official death toll and are operating outside the official system of law."

Scahill was reporting on the aftermath of Hurricane Katrina in 2005 when he met several Blackwater "operatives" as he calls them. The company originally said its services were "donated" to the relief effort, but then it was awarded a no-bid contract with the Department of Homeland Security's Federal Protective Services to defend reconstruction projects and several private businesses, Scahill reports. [...]

"I feel like Hurricane Katrina provided us a window into the future of what could happen in this country with natural disasters or national emergencies," Scahill says. "Training and putting arms into the hands of private contractors who are accountable to no one, to me, is a very disturbing trend in this country."

If you don't find that disturbing, consider this statement from Metro Times:

"As one U.S. Congressmember observed, in strictly military terms, Blackwater could overthrow many of the world's governments."

I don't have a problem with privatization if it saves the taxpayer money, provides equal or better service, and is bid on in an open and honest matter. I do have a problem with no-bid contracts that end up costing us more. In Blackwater's case, the company has cost the taxpayers lots more money as I've posted before, and here's another example from Metro Times:

In contrast to active-duty soldiers who are poorly paid, Blackwater's guards were given six-figure salaries. "Standard wages for PSD (personal security detail) pros [in Iraq] were previously running about $300 [per man] a day," Fortune magazine reported at the time. "Once Blackwater started recruiting for its first big job, guarding Paul Bremer, the rate shot up to $600 a day."

I'm not sure what Blackwater's motivation is, but we don't need their services. We have National Guard troops available to help us in national emergencies that could use an infusion of cash to replace their missing equipment. Oh, and if the Bush administration really wants to spend more money, give the National Guard members a raise. They need it more than Erik Prince, millionaire owner of Blackwater.