Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Thursday, December 20, 2012

Transparency for unions and other 'little people'

I had a good old-fashioned knock-em-down drag-em-out debate with Ian Lee from Carleton University on CBC's Power and Politics about Bill C-377.

There were a number of "zingers" from Prof. Lee that are worth considering:

- He said "hundreds of thousands" of Ontarians have their salaries listed on the government's sunshine list (reporting salaries of those who earn over $100,000). Of course it's not "hundreds of thousands," and at any rate unions are not tax-financed organizations.

- He took a very aggressive swipe at Ontario Labour Minister Linda Jefferys (who just wrote to the Senate with her concerns about C-377) for not mentioning the Ontario sunshine list in her letter, which was an odd line of reasoning. I don't see how C-377 is comparable to the sunshine list: its motivations, target, requirements and effect are all very different, so I don't see the point.  If C-377 simply required unions to disclose salaries of anyone earning over $100,000 (as the Ontario government used to require), then perhaps there would be an analogy.

- He said that corporations have to release detailed information on salaries and finances through their 10-K reports and other financial disclosures. First of all, these rules apply only to publicly traded businesses (not privately held firms, including Canadian subsidiaries of foreign corporations). The disclosure of publicly traded companies is enforced through securities regulators, not directly through government. Secondly, financial statements of publicly traded companies do not break down aggregate financial data (in the way that C-377 would require unions to disclose details on any expense over $5,000). 10-K forms and other disclosures list only the salaries of the top 5 executives, including the CEO and the CFO (not every employee obviously, and not everyone over $100,000).

- Ian accused unions of following a "Leona Helmsley theory of politics. Little people get their salaries disclosed, but not big shots like union executives, that's what Jim is saying." There are no "little people" in business who have their salaries disclosed; only the top 5 executives in a (publicly traded) company. Unions were invented to help the little people earn a wage or salary that can cover the costs of modern life, let alone get someone elevated to a "sunshine list."

The show also featured a quote from MP Russ Hiebert (sponsor of C-377) that is worth challenging:

"The taxpayer gives up $500 million a year in support of these institutions…. When the taxpayer, you and I, support institutions, like charities, labour organizations, or other institutions, I believe there's a corresponding obligation for accountability and transparency, because it's our tax dollars that are being used to support them."

This line of argument is not credible. Unions do not receive tax subsidies from the government. Union members can deduct their dues from gross income and then pay tax on the net amount. I have been making an analogy between the tax deductibility of union dues, and the tax deductibility of any other expense that a person may incur in order to earn income. Think of an investor, for example: they deduct the cost of their investment advisor, their management fees, their safety deposit box, and even interest costs on money they borrowed to finance their investments. The net difference is their taxable income. (Of course, in addition to those write-offs, the investor gets preferential tax rates for capital gains and dividend income. That's a separate issue.) Throughout the tax code, if you have to "spend money to make money," you pay tax on the difference. There is no subsidy or special treatment for unions in this regard at all. I think we should push back hard against the idea that unions are somehow supported by taxpayers and hence owe some information back to taxpayers. Unions are financed by their members, and owe full information re their finances to their members.

Following Mr. Hiebert's logic, any organization in society that benefits from a tax expenditure (no matter how indirect) should be required to post similarly detailed and intrusive financial and expenditure data on a government website. Here is the current listing of federal tax expenditures. Every organization connected to any expenditure listed in that catalogue (whether the personal, corporate, or HST sections) should be ready for the precedent set by C-377. A partial list of "supported" institutions would include: every small business, anyone who owns farming or fishing property, any company that declared a capital gain, any logging company, any company claiming accelerated depreciation, any company offering flow-through shares (and any investor owning one), anyone with an RRSP or RESP, any mutual fund or life insurer, and financial service provider. In short, everyone and every business is "supported" by the taxpayer, just like unions. Hence each owes us an equivalent degree of accountability and transparency. Some critics of C-377 from within the business community actually worried about the precedent set by this legislation, one day being applied to them.

Another point I've used lately is the asymmetry of the disclosure requirement given the nature of the relationship between unions (who have to disclose anything over $5,000) and businesses (who do not, if they are privately held, have to disclose anything). Unions by their nature confront employers in many bargaining, representation, and organizing situations. Under C-377, the employer will now much detail about how much the union is spending, and on what. In many cases, that will be valuable intelligence for a company resisting a union organizing drive, bargaining demand, or representation case. The union, however, knows nothing about how much the company is spending. That creates a very uneven playing field.

Imagine if the TD Bank had to disclose everything it spent over $5,000 on. As one wag put it on Twitter yesterday, all those fancy Bay Street restaurants would be out of business in a week if every bill in excess of $5,000 had to be posted on a government website!

Regarding the analogy between unions and charities, I do not think that charities face disclosure requirements that are comparable to C-377. Here is the core form (T3010) that charities have to file with CRA.

The charity must report, in aggregate, the broad categories of expenditure. There is nothing in there about all items over $5,000. Charities must report several broad aggregate categories of expenditures. Schedule 3 requires the charity to list the number of employees who fall into several compensation bands (and also the total budget for staff compensation), but does not list individuals. Most of the financial data reported on these forms would be transferable from an organization's regular financial statements. I am not an expert on charity tax law, obviously, but I do not think that the requirements on charities are comparable at all to the level of detail contemplated in C-377.

By the way, the salary of the CAW president, secretary-treasurer, and staff representatives is described in the CAW's constitution, which has always been publicly available (see p. 26 of this link).

Original Article
Source: rabble.ca
Author: Jim Stanford

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