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#396 - Unfunded Mandates, 29-Jun-1994

An environmental war is being waged quietly in Congress, obscured
within a larger issue called "unfunded mandates." An unfunded mandate
is a federal program enacted by Congress, but which must be financed by
state or local governments without federal assistance. Examples include
requirements that public buildings be made accessible to the
handicapped, and requirements for testing drinking water for
pesticides. According to the WALL STREET JOURNAL (8/18/93, pg. A10),
citing the Advisory Commission on Intergovernmental Relations (a
federal agency), more than 100 new mandates were passed down from
Washington to the states during the 1980s (compared to just 16 during
the 1940s).

The JOURNAL said in an editorial last month (5/18/94, pg. A14) that,
"Public anger about unfunded mandates has been building for years and
is now reaching fever pitch. This year, all seven organizations
representing the key nonfederal players in government --the mayors,
counties, governors, state governments, cities, school boards and state
legislatures --passed identical resolutions supporting 'no money, no
mandate' bills in Congress." There are now some 20 pieces of
legislation floating around Capitol Hill, all aimed in one way or
another at outlawing the practice of passing legislation that imposes
unfunded mandates. Most often the target is ENVIRONMENTAL unfunded
mandates.

The "unfunded mandates" argument does have merit, from the standpoint
of local government. Over the past 40 years, Congress has cut federal
taxes on the wealthy and on corporations, thus pushing a larger and
larger tax burden onto state and local governments. In 1950 all state
and local tax collections amounted to 45 percent of federal tax
collections. Eleven years later, in 1961, the figure had edged up to 50
percent. In 1980 all state and local tax collections reached 64 percent
of federal tax collections; 11 years later, in 1991, that figure has
surged to 82 percent.[1]

A new book by two investigative reporters at the PHILADELPHIA INQUIRER,
Donald L. Barlett and James B. Steele, has documented how Congress has
shifted the tax burden from the wealthy and corporations onto the
middle class and the working poor. They document, for example, that
Chase Manhattan Corporation, the parent corporation of Chase Manhattan
Bank, in the 2-year period 1991 and 1992 had net income (after expenses
but before taxes) of $1.5 billion. Chase paid $25 million in U.S.
taxes, for a tax rate of 1.7 percent, even though the official
corporate tax rate at the time was 34%. Texaco, the oil company, with
before-tax net income of $2.7 billion in 1991 and 1992, paid $237
million in U.S. taxes, a tax rate of 8.8 percent. Ogden Corporation,
which sells incinerators for solid waste (among other things), reported
net income before taxes of $217 million in 1991 and 1992 but Ogden paid
less than $200,000 in U.S. taxes, for a tax rate below 1 percent.
Meanwhile, the average family making $30,000 to $40,000 per year paid
federal taxes at an average rate of 10.6 percent in 1991 and 1992.[2]
In 1954, corporations paid 75 cents in taxes for every dollar paid by
individuals and families; in 1994 they will pay about 20 cents in taxes
for every dollar paid by individuals and families.[3] As Barlett and
Steele document thoroughly, Congress has created two tax laws --the
privileged person's tax law, and the common person's tax law.

As we have seen, Congress's welfare-for-the-wealthy tax program,
combined with unfunded mandates, has had the effect of increasing the
tax burden on state and local governments.

Unfortunately, state and local governments have mimicked Washington and
have provided their own tax breaks for the wealthy and for corporations
--thus saddling the middle class and the working poor with an
increasing share of the costs of government. At the state level,
corporate taxes have dropped during the last 30 years. The difference
has to be made up from property taxes, sales taxes, wage taxes, and
other levies that strike hardest at the middle class and the working
poor. For example, in New York in 1961, corporate income taxes
accounted for 13 percent of all tax revenues; by 1991, it had fallen to
7 percent. In Wisconsin in 1961, corporate income taxes accounted for
13 percent of the state's total tax revenues; in 1991 it was only 6
percent. In 1961, South Carolina derived 9 percent of its total tax
collection from corporate income tax; by 1991, it derived less that 4
percent.[4]

The only real winners in this picture are the wealthy and corporations
who have found their tax burden lifted. Cynically, the wealthy and
corporations are the most vocal proponents of federal legislation to
end "unfunded mandates." Do they really want federal funding for
federally-mandated government programs? No. THEY SEEK AN END TO
GOVERNMENT PROGRAMS.[5] They are betting that, if a law were passed
requiring the feds to ante up the full cost of every federally-mandated
program, the feds would cut programs rather than raise taxes on those
who can best afford higher taxes, namely wealthy individuals and
corporations. Congress is unlikely to raise taxes on the wealthy
because it costs millions to get re-elected and the only reliable
source for that kind of money is the wealthy and corporations: you
don't bite the hand that feeds you, at least not if you hope to get fed
again.

This is a point worth emphasizing, because it is the chief means by
which the wealthy control politics in the U.S. In 1992, the average
U.S. senator spent $3.9 million campaigning for re-election.[6] This
means that each senator had to raise an average of $12,600 each week
for 312 straight weeks (6 years) to pay for his or her re-election bid.
Where do you get that kind of money without becoming beholden to
wealthy individuals and corporations? You don't.

Unfortunately, the "unfunded mandates" argument has now been seized by
the anti-environmental movement in the U.S., a movement funded by
global corporations who convince embattled and befuddled grass-roots
citizens to become advocates for their corporate views. You first read
about it in the NEW YORK TIMES March 24, 1993: "After the city [of
Columbus, Ohio] issued a report on its problems, all of a sudden
Columbus's leaders were joined by hundreds of city officials, state
leaders, and many private homeowners across the country as they
advocate a cause that until now big business has been arguing most
forcefully: that many of the nation's environmental regulations bring
enormous expense for little real benefit." The TIMES went on: "Now
nearly 1000 other cities have asked to see the report. And prompted by
the Columbus study, the National League of Cities has made updating the
nation's environmental laws --and through that reducing costs --one of
its top five political priorities in Washington..." [pg. A16].

The Columbus Report was written by Michael J. Pompili, an official with
the Columbus health department, and published in May 1991. The Ohio
League of Cities promptly put Mr. Pompili in charge of a larger project
to study the costs of unfunded environmental mandates in eight Ohio
cities. In September 1992 this project produced The Ohio Report, as it
has come to be known.[7] The Ohio Report has become famous, at least
among anti-environmental activists and politicians.

The Ohio Report says that unfunded environmental mandates were killing
local governments in Ohio, or that's what people THINK the Ohio Report
says. The report estimated that unfunded environmental mandates would
cost 8 Ohio cities a whopping $2.85 billion during the decade 1991-
2001. This enormous cost-projection was picked up enthusiastically by
the "sagebrush rebellion" (followers of James Watt, who was Ronald
Reagan's first secretary of interior) and its descendants, the so-
called "wise use" movement (the anti-environmental movement that
cynically uses grass-roots people as shills for corporate mining,
ranching and logging interests in the western states). The Ohio Report
has been widely quoted because it is chock full of numbers, charts, and
graphs. It appears to be factual. Unfortunately, until recently almost
no one seems to have actually read the Ohio Report.

Now a well-known researcher has looked carefully at the Ohio Report and
has found that it badly misrepresents the costs of environmental
unfunded mandates. "The 'Ohio Report' is more fiction than fact," says
David Sarokin of the Public Data Project in Washington, D.C.[8] The
Public Data Project is an advocacy organization promoting citizen
access to information about social and environmental impacts of
corporations. "The conventional wisdom on unfunded mandates is all
wrong," says Sarokin. In his analysis of the Ohio Report, Sarokin
reveals that report really shows that environmental unfunded mandates
are costing people at the local level anywhere from $8 per person per
year to a maximum of $103 per person per year --not thousands of
dollars per person per year.

The Ohio report presented its data in terms of "costs per household per
decade." In most Ohio cities, a household was taken to mean 3 people.
This way of presenting the data multiplied the annual per capita costs
by 30, making them appear huge. Aggregating the cost data has been used
effectively by others promoting an anti-environmental message: "The tab
for unfunded mandates is staggering," NEW YORK NEWSDAY'S Glenn Kessler
said recently.[9] For instance, Kessler says, in 1993 New York City
spent about $475 million to comply with seven federal laws including
the Clean Water and Clean Air Acts. What Kessler fails to point out is
that New York has 13 million residents, so $475 million represents only
$37 per person per year --not a huge price to pay for 7 major laws
protecting the environment, if imperfectly, from uncontrolled dumping
by corporate polluters.

--Peter Montague

=====

[1] Donald L. Barlett and James B. Steele, AMERICA: WHO REALLY PAYS THE
TAXES? (New York: Simon and Schuster, 1994), pg. 293.

[2] Barlett and Steele, cited above, pgs. 144-146.

[3] Barlett and Steele, cited above, pg. 23.

[4] Barlett and Steele, cited above, pgs. 299-302.

[5] Paul A. Gigot, writing in the WALL STREET JOURNAL 10/22/93, pg.
A14, points out that Republican House leader Newt Gingrich of Georgia
has targeted "unfunded mandates" as a key issue. Gigot said of
Gingrich: "He doesn't want merely to defeat Democrats. He wants to
defeat their vision of how American should be governed.... 'We are the
reform threat to the welfare state,' Mr. Gingrich says."

[6] Larry Makinson, THE PRICE OF ADMISSION (Washington, D.C.: Center
for Responsive Politics, 1993), pg. 8.

[7] David Sarokin, UNFUNDED MANDATES: TAKING A SECOND LOOK (Washington,
D.C.: The Public Data Project [3734 Appleton St., N.W., Washington, DC
20016; phone (202) 363-5856], 1994). For a paper copy of this brief
report, send us a stamped, self-addressed envelope, or request an e-
mail copy from: erf@igc.apc.org.

[8] Kessler quoted in GREENWIRE June 15, 1994, story #5. Greenwire is a
"daily executive briefing on the environment" publishged on-line; phone
(703) 237-5130.

[9] Michael J. Pompili and others, OHIO METROPOLITAN AREA COST REPORT
FOR ENVIRONMENTAL COMPLIANCE (Columbus, OH: Ohio Municipal League,
September 15, 1992). While copies last, available free from: Ohio
Municipal League, 175 S. 3rd Street, Suite 510, Columbus, OH 43215-
7100. Phone: (614) 221-4349.

Descriptor terms: unfunded mandates; laws; regulations; congress;
legislation; taxation; tax rates; donald barlett; james steele; chase
manhattan; texaco; ogden martin; columbus, oh; keith schneider; new
york times; philadelphia inquirer; national league of cities; anti-
environmental movement; wise use; sagebrush rebellion; james watt;
ronald reagan; david sarokin; public data project;