It’s interesting to note that the very existence of the American Legislative Exchange Council (ALEC), which writes “model legislation” for lawmakers to introduce back in their respective state capitals rests on one ginormous paradox.
For example, consider this mission statement from ALEC’s 4th edition of its state economic competitiveness index entitled Rich States, Poor Stateshttp://www.alec.org/docs/RSPS_4th_Edition.pdf: “ALEC’s mission is to discuss, develop and disseminate public policies which expand free markets, promote economic growth, limit the size of government (emphasis ours), and preserve individual liberty within its nine task forces.”
Yet, for all its breast beating about making government smaller and more accountable, it’s curious and somewhat contrary to that theme that of the top 100 companies in the Fortune 500, fully one-half are—or were—corporate members of ALEC http://money.cnn.com/magazines/fortune/fortune500/2012/full_list/.
In fact, 31 of the 50 largest corporations in America helped pay the bills to wine and dine state legislators at seminars, conferences, planning sessions and annual meetings of ALEC delegates, including the 2011 annual meeting held in New Orleans at which Gov. Bobby Jindal was the keynote speaker.
Fallout over the shooting of teenager Trayvon Martin in Sanford, Florida, last February coupled with ALEC’s endorsement of the controversial “Stand Your Ground” law in that state which was linked to his shooting has resulted in the decision by some two dozen corporations to drop their ALEC memberships.
Among those who have bailed out are Wal-Mart, General Motors, General Electric, Bank of America, Entergy, PepsiCo, Walgreen, Dow Chemical, Marathon Petroleum, Procter & Gamble and Coca-Cola.
Some of those retaining their memberships, however, include Hunt-Guillot of Ruston, ExxonMobil (the largest corporation in the U.S.), Chevron, AT&T, Verizon, UnitedHealth Group, Archer Daniels Midland, Wells Fargo, Pfizer, Boeing, Microsoft, and FedEx.
ALEC’s “small is better” philosophy for government takes a sharp 180 when its corporate membership is placed under the microscope. While 50 of the 100 largest members of the Fortune 500 are ALEC members, that number drops precipitously in the ensuing blocks of 100.
For example, of the corporations ranked in size from 101 to 200, only 29 are ALEC members and for 201 to 300, the number is 17. For 301 to 400, the membership is 13 and for the final group, 401-500, you will find only seven who are ALEC members.
So while the lobbying group maintains that small is better, it appears that it goes after the larger corporate sponsors first and is increasingly disdainful of the smaller companies.
The 116 Fortune 500 companies who are members of ALEC combined for $4.5 trillion in revenues in 2011 and altogether realized net profits of $484.2 billion. Remember, that does not include the other 384 Fortune 500 companies—just the 116 ALEC members.
Just for the record, here are 50 ALEC members from the Fortune 100 with 2011 rankings, revenue and profits in parentheses http://money.cnn.com/magazines/fortune/fortune500/2012/full_list/:
• ExxonMobil—(1; $452.9 billion; $41.1 billion);
• Wal-Mart—(2; $446.9 billion; $15.7 billion—terminated membership);
• Chevron—(3; $245.6 billion; $26.9 billion);
• ConocoPhillips—(4; $237.3 billion; $12.4 billion);
• GM—(5; $150.3 billion; $9.2 billion—terminated membership);
• GE—(6; $147.6 billion; $14.2 billion—terminated membership);
• Ford—(9; $136.3 billion; $20.2 billion);
• AT&T—(11; $126.7 billion; $3.9 billion);
• Bank of America—(13; $115.1 billion; $1.4 billion);
• Verizon—(15; $110.9 billion; $2.4 billion);
• CVS—(18; $107.8 billion; $3.5 billion—terminated membership);
• IBM—(19; $106.9 billion; $15.9 billion);
• UnitedHealth Group—(22; (101.9 billion; $5.1 billion);
• Wells Fargo—(26; $87.6 billion; $15.9 billion—terminated membership);
• Procter & Gamble—(27; $82.6 billion; $11.8 billion—terminated membership);
• Archer Daniels Midland—(28; $80.7 billion; $2 billion);
• Marathon Petroleum—(31; $73.6 billion; $2.4 billion);
• Walgreen—(32; $72.2 billion; $2.7 billion—terminated membership);
• Medco Health Solutions—(36; $70.1 billion; $17.8 billion—terminated membership);
• Microsoft—(37; $69.9 billion; $23.2 billion);
• Boeing—(39); $68.7 billion; $4 billion);
• Pfizer—(40; $67.9 billion; $10 billion);
• PepsiCo—(41; $66.5 billion; $6.4 billion—terminated membership);
• Johnson & Johnson—(42; $65 billion; $9.7 billion—terminated membership);
• State Farm Insurance—(43; $64.3 billion; $845 million);
• Dell—(44; $62.1 billion; $3.5 billion—terminated membership);
• WellPoint—(45; $60.7 billion; $2.6 billion);
• Caterpillar—(46; $60.1 billion; $4.9 billion);
• Dow Chemical—(47; $60 billion; $2.7 billion);
• Comcast—(49; $55.8 billion; $4.2 billion);
• Kraft Foods—(50; $54.4 billion; $3.5 billion—terminated membership);
• Intel—(51; $54 billion; $12.9 billion);
• UPS—(52; $53.1 billion; $3.8 billion);
• Best Buy—(53; $50.3 billion; $1.3 billion—terminated membership);
• Prudential—(55; $49 billion; $3.7 billion;
• Amazon.com—(56; $48.1 billion; $631 million—terminated membership);
• Merck—(57; $48 billion; $6.3 billion—terminated membership);
• Coca-Cola—(59; $46.5 billion; $8.6 billion—terminated membership);
• Express Scripts Holding—(60; $46.1 billion; $8.6 billion);
• FedEx—(70; $39.3 billion; $1.5 billion);
• DuPont—(72; $38.7 billion; $3.5 billion—terminated membership);
• Honeywell International—(77; $37.1 billion; $2.1 billion);
• Humana—(79; $36.8 billion; $1.4 billion);
• Liberty Mutual Insurance Group—(84; $34.7 billion; $365 million);
• Sprint Nextel—(90; $33.7 billion; –$2.9 billion);
• News Corp.—(91; $33.4 billion; $2.7 billion);
• American Express—(95; $32.3 billion; $4.9 billion);
• John Deere—(97; $32 billion; $2.8 billion—terminated membership);
• Philip Morris—(99; $31.1 billion; $8.6 billion);
• Nationwide Insurance—(100; $30.7 billion; -$793 million).
Of course, ALEC also pushes its agenda of lower taxes very strongly (who do you think helped write Gov. Jindal’s proposal to eliminate the state individual and corporate income taxes in favor of increase sales taxes? Surely, one would not believe he came up with that all by himself).
It’s no coincidence that Louisiana is pushing to ditch the state income tax at the same time as several other states, including Nebraska, Missouri, Oklahoma, Kansas, and North Carolina. Each state has read the ALEC playbook.
“Money is spent more efficiently by the private sector than by governments, so it is reasonable to expect that states with lower overall taxes have better economic environments than states with high taxes and more government spending,” the Rich States, Poor States report says.
Apparently the authors of that statement did not bother to review the histories of the subprime mortgage crisis, junk bonds, Enron, Bernard Madoff, Stanford Financial Group, the savings and loan crisis of the 1980s, collateralized mortgage obligations (CMOs), Tyco, WorldCom, AIG, Lehman Brothers, and the bursting of the dotcom bubble.
Be that as it may, let us go back to ALEC’s mantra of lower taxes and see how that might apply to its corporate membership.
General Electric is the poster child for tax dodges. With $19.6 billion in net profits for the years 2008-2011, GE managed not only to pay no taxes, but got $3.7 billion in tax refunds.
Other ALEC members, their net profits and taxes/refunds for years 2008-2011 include: http://www.ctj.org/pdf/notax2012.pdf
• PG&E—($6 billion; $1 billion refund);
• CenterPoint Energy—($3.1 billion; $347 million refund);
• Duke Energy—($5.5 billion; $216 million refund);
• Con-way—($422 million; $23 million refund);
• Ryder System—($843 million; $46 million refund);
• DuPont—($3 billion; $325 million paid in taxes—10.8 percent, less than one-third the standard 35 percent tax rate);
• Consolidated Edison—($5.9 billion; $74 million refund);
• Verizon—($19.8 billion; $758 million refund);
• Boeing—($14.8 billion; $812 million refund);
• Wells Fargo—($69.2 billion; $2.6 billion paid in taxes—3.8 percent, barely 10 percent of the 35 percent standard rate);
• Honeywell International—($5.2 billion; $102 million—2 percent).
Some of the CEOs for ALEC member corporations received more in compensation in 2010 than their companies paid in taxes. Here are a few with salaries first, followed by taxes paid: http://www.dailyfinance.com/2011/08/31/ceo-pay-vs-corporate-taxes/
• International Paper: $249 million refund; CEO John Faraci received $12.3 million;
• Prudential: $722 million refund; CEO John Strangfeld received $16.2 million;
• Verizon: $705 million refund; CEO Ivan Seidenberg paid $18.1 million;
• Chesapeake Energy: paid no taxes; CEO Aubrey McClendon paid $21 million;
• eBay: $131 million refund; CEO John Donahoe paid $12.4 million;
• Coca-Cola: paid $8 million taxes; CEO John Brock paid $19.1 million;
• Dow Chemical: $576 million refund; CEO Andrew Liveris paid $17.8 million;
• Ford: $69 million refund: CEO Alan Mulally paid $26.5 million.
If you still believe that ALEC favors smaller government over, say, being able to exercise control over government taxation and spending, then consider the General Services Administration’s list of $69 billion in federal contracts held by these ALEC members in fiscal year 2011: https://www.fpds.gov/fpdsng/index.php/reports
• Boeing: $21.6 billion;
• Northrop Grumman: $15 billion;
• Raytheon Co.: $14.8 billion;
• Humana: $3.4 billion;
• General Electric: $2.8 billion;
• Honeywell International: $2.2 billion;
• Dell: $1.4 billion;
• IBM: $1.7 billion;
• FedEx: $1.6 billion;
• Merck: $1.3 billion;
• Shell: $913 million;
• Pfizer: $1.2 billion;
• UPS: $701 million;
• AT&T: $743 million;
It’s easy to preach small government and lower taxes but to achieve this, a lot of ALEC members would stand to lose a chunk of business with Uncle Sam.
And that doesn’t even include state and local contracts like the $18.3 million in state contracts currently held by ALEC member Hunt, Guillot & Associates of Ruston and the $11.4 million state contract awarded to Northrop Grumman.
Smaller, more streamlined and accountable government sound great, most would agree. But the implementation of changes across the board may well affect one’s bottom line and that, as they say, is when the cheese gets binding. It is then that we simply must follow the money.
Charter schools and vouchers, for example, would benefit investors who see a fortune to be made in private education—especially when most of that money would be paid by the state.
The continued growth in the number of private prisons (along with more laws that send more people to prison) would be quite a windfall for those operators who contract with state and local governments to incarcerate lawbreakers.
Elimination of personal and corporate income taxes in favor of sales tax increases would further lighten the financial burden of business and industry—and shift that burden onto the backs of low- and middle-income citizens.
The rejection of a federal grant to build a broadband internet system for rural Louisiana certainly benefitted commercial cable companies like AT&T which contributed $250,000 to the Supriya Jindal Foundation.
Likewise, relaxed environmental regulations endorsed by ALEC certainly aided member Dow Chemical which coincidentally kicked in $100,000 for the Supriya Jindal Foundation. Soon after that donation, proposed fines of subsidiary Union Carbide for allowing the release of a toxic pollutant and failing to notify authorities of the leak were dropped.
Or Marathon Oil, whose $250,000 donation to the foundation may have greased the skids for the awarding of $5.2 million in state funds to a Marathon subsidiary.
Instead of listening to the rhetoric of ALEC’s membership, one would do well to watch how certain specific proposals might affect that membership.
In other words, don’t listen to what they say; watch instead for what they do.