Devil in the Details



Although the congressional opponents of an increased minimum wage eventually gave in, they did manage to deliver a few goodies to their friends in the small-business lobby. Chief among these provisions was a measure that allows employers to pay a lower training wage to young workers during their first 90 days of employment.

Backers of the measure say they were merely preserving an existing feature from the 1989 minimum-wage law, the measure the new legislation supersedes. Yet while it's true the 1989 legislation had allowed for a similar training wage, it also came with a sunset provision that phased out the wage after three years, before this summer's deliberations. The new law has no such sunset provision.

Of more interest, however, may be another subtle change. The 1989 legislation prohibited an employee from working for the training wage more than twice in a lifetime. Furthermore, if an employee was on his or her second stint receiving a training wage, the employer had to file a detailed training plan to justify the lower pay. These provisions were designed to prevent firms from exploiting young workers as a source of cheap labor.

The new law includes no such limits. Thus, a young worker can potentially spend his or her teen years drifting from 90-day "training" job to 90-day "training" job, earning the official training wage of $4.25 an hour--which just happens to be the same as the old minimum wage.


On the campaign trail Bob Dole tempered his promise to "end the IRS" with the qualifier, "as we know it." His former Republican colleagues on Capitol Hill offered no such qualification when they introduced H.R. 3039, which they boast will "abolish the dreaded IRS."

Perhaps they should take a closer look at their own legislation.

H.R. 3039 is the National Retail Sales Tax bill, brainchild of Representatives Dan Schaefer of Colorado and Billy Tauzin of Louisiana. In addition to closing the Internal Revenue Service, the legislation repeals personal and corporate income taxes, estate and gift taxes, plus excise taxes on alcohol and tobacco, replacing them all with a 15 percent national retail sales tax.

But as long as there are taxes--whether they be sales taxes or income taxes--somebody has to collect them. As Robert McIntyre of Citizens for Tax Justice has pointed out, that means the government can't simply shut down the IRS without putting somebody else in the government in charge of revenue collection--which is precisely what the Schaefer-Tauzin bill would do.

For starters, because Schaefer and Tauzin retain the Social Security payroll tax on wages and self-employment income--they don't dare tinker with Social Security--they move the IRS agents in charge of collecting these duties to the Social Security Administration. There, the agents will do exactly the same job as before, only under the auspices of a different department. In addition, the legislation only abolishes a handful of federal excise taxes. To deal with the ones that remain--including the gas tax and customs duties--the Schaefer-Tauzin bill creates a brand new bureaucracy called the Excise Tax Bureau.

The Schaefer-Tauzin bill deals with sales tax collections by allowing states to handle collections of the proposed federal sales tax, but states without sales taxes would likely ask the Treasury Department to handle such collections for them. What's more, vendors with retail establishments in five or more states can choose to have the Treasury Department administer both state and local taxes. So we could have a situation where state bureaucracies and a new federal tax collection agency are remitting sales taxes back and forth to each other.

In an interview with the The American Prospect, Schaefer admitted that the bill's "abolition" of the IRS was more like a grand reshuffling. "A lot of IRS people will have to go to the Social Security Administration and Treasury," he conceded. "But a lot of them will just be fired."

Maybe so, but even if all of the reshuffling does add up to a net reduction in tax collectors, it would still mean replacing the current tax system with a highly regressive alternative. That won't fly with the voters, which may help explain why the Republicans spend so much time making exaggerated claims about what they'll do to the IRS and so little addressing the question of whether their tax plans are fair.


Ideology and polls were the driving forces behind the 1996 welfare bill, but the campaign finances of a leading House Republican suggest that special-interest money may have played a bit part as well.

By giving states more leeway in determining how they run public assistance programs, the law opens up new opportunities for consulting and information management firms, which can bid to win state contracts for managing the welfare rolls. Already, the defense giant Lockheed Martin has entered into a high-stakes bidding war with Andersen Consulting and Electronic Data Systems, Ross Perot's old company that made a fortune more than 20 years ago when it began computerizing Medicaid billing and welfare eligibility information, over the contract to administer Texas's $500-million-a-year welfare operation. Deloitte and Touche and KPMG Peat Marwick--both accounting and consulting firms like Andersen--are also perfectly suited to enter into the new privatization market, according to one state welfare administrator.

Perhaps it's not surprising, then, that all of those companies (and several of their registered lobbyists) are on the donor list for E. Clay Shaw, the Florida congressman who shepherded the welfare bill through the House, where he is the chairman of the Ways and Means subcommittee on welfare. According to fundraising records maintained by the Federal Election Commission, the political action committee for Deloitte and Touche gave Shaw's primary campaign $5,000, the maximum donation allowed under federal law. Lockheed, EDS, Andersen, and KPMG each gave $1,000.


Hillary Clinton did some legal work for a failed thrift institution, but what if she had served on its board? No problem, apparently, if you are a good conservative politician. Take Henry Hyde, the darling of the right who chairs the House Judiciary Committee.

As reported in the Illinois Legal Times, Hyde used to serve on the board of directors of the Clyde Federal Savings and Loan in North Riverside, Illinois, an institution that failed in 1990 at a cost of approximately $65 million to the taxpayers. This gives Hyde the distinction of being the only sitting member of Congress to have served on the board of a defunct thrift.

The board, of course, is legally responsible for overseeing the S&L's activities. So the Resolution Trust Corporation is suing Hyde and the rest of the former board members for gross negligence, seeking $17.2 million in damages. Hyde's lawyer, William J. Harte, says that Hyde served on the board at the request of a friend and that during that time "he acted on the advice of lawyers, accountants, the management, [and] business people." In addition, Harte said, Hyde severed his ties to the institution before it finally failed.

The matter is pending before the Federal Deposit Insurance Corporation, which took over the case when the RTC's jurisdiction ran out, but-surprise-nary a disparaging word about this affair has emerged from congressional Republicans or the conservative press.

It should be noted that while Hyde did once lend his name to a publicity packet on Whitewater from the Republican Policy Committee, he has been relatively quiet about Whitewater, at least compared to some of his colleagues. Perhaps this explains why.

["Protecting His Hyde" by Amy Burke, other items by Jason G. Zengerle.]

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