Behind the Lines

Corporate Tax Cut Mania

CRS found that average state and local taxes on the profits of non-financial corporations dropped from 4.9 percent in 1990 to just 3.8 percent in 1998. The average tax rate has dropped nearly half in two decades - down from 6.5 percent in the 1980s.

"Almost the entire drop in average corporate tax rates [in the past two decades] can be attributed to a drop in state and local collections," CRS says.

Observers say many corporations turned their tax-cutting energies to the states after a number of federal corporate income tax loopholes were closed in 1986, and after federal rates were raised in 1993.

"By packaging corporate tax cuts as Œeconomic development,' corporations have been able to play states against each other and win cuts no longer available from Uncle Sam," says Greg LeRoy of the Washington, D.C.-based Good Jobs First.

According to LeRoy, corporate income taxes now make up only about 7 percent of state tax revenues.

The CRS study did not address the growing use of corporate tax shelters or the exclusion of certain types of income from taxation.

The combined federal, state and local average corporate tax rate of 27 percent represents a sharp drop from the 1960s, when the average rate was 37.5 percent.

Russia's Enviro Free-for-all

The World Bank approved another Russian natural resources project in August despite the continued lack of any independent state environmental agency.

The Multilateral Investment Guarantee Agency (MIGA), the World Bank's political risk unit, has joined with a Lloyd's of London insurer to offer the New Arian Resources Corporation $26 million worth of political risk insurance to expand a gold mining operation in the Russian Far East. The insurance is intended to protect a $66.3 million underground gold and silver mine against "the risks of currency transfer restriction, expropriation and war and civil disturbance," according to MIGA.

The decision comes just months after Russian President Vladimir Putin abolished the State Committee on Environmental Protection.

Russian and foreign environmentalists have called on the Bank to stop backing environmentally sensitive projects in Russia until an independent environmental agency is established.

"MIGA's involvement in the project requires that its design and implementation are in full compliance with Russia's existing environmental laws and regulations, and also with the relevant World Bank (MIGA) environmental guidelines and policies," MIGA explained in a statement issued in response to critics.

"Many private investments in developing countries go forward without environmental safeguards," MIGA stated. "MIGA's involvement in private projects should therefore provide comfort to all parties who share our concerns about protecting the environment."

"Even if it's a well-designed project, without an environmental regulatory enforcement agency, the ability to ensure such mines are in compliance with Russia's laws is gone," says Doug Norlen of the Pacific Environmental Resources Center in Washington, D.C. "MIGA only has a small band of independent consultants who couldn't hold a candle to the now-abolished agencies."

The Beef with Glickman

Family farmers and ranchers have denounced new rules that the U.S. Department of Agriculture (USDA) says will ensure fair competition in the livestock, poultry and meatpacking industries, arguing the rule will do nothing to stop the vertical integration threatening the viability of their operations.

USDA's much awaited announcement of new regulations to promote fair competition in livestock markets comes in response to a 1996 petition from the Western Organization of Resource Councils (WORC) which seeks to restrict captive markets - the use by packers of cattle they own and feed themselves - or cattle procured through long-term contracts, not on the open market.

Although the new rules will require full disclosure of contract terms and require packers to specify why they pay different prices for the same quality cattle, Secretary of Agriculture Dan Glickman says USDA still needs to gather information before responding to WORC's petition for rulemaking on captive supplies.

"The USDA has been studying the proposed rules for years, and I don't understand what further evidence is needed," says Gilles Stockton, chair of the Agriculture Task Force of the Northern Plains Resource Council, a member organization of WORC.

"The Packers and Stockyards Act clearly gives Glickman the authority and obligation to stop anti-competitive practices," Stockton says. "We can only conclude that he is sacrificing independent cattle producers and the free market for big money and global corporations."

During the four years that USDA has sat on WORC's petition, the average level of captive supplies in the major cattle-feeding states has increased from 20 percent to 40 percent of total heads slaughtered. USDA's own studies demonstrate that higher levels of captive supplies result in lower open market prices, resulting in less money for independent cattle producers.

- Charlie Cray