Baltimore Sun: Constellation and Occupy Baltimore, a tale of our times
media mentionPSC hearings draw out some of same issues as the occupy movement
November 05, 2011|By Jean Marbella, The Baltimore Sun
You might have seen the news footage of the guy in the orange construction vest who a couple of weeks back angrily yelled at the Occupy Baltimore encampment that he was “working his butt off to support you guys,” apparently referring to the unemployed among them.
If he really wanted to protest where his tax money may be going, he could have walked a couple of blocks from McKeldin Square. The findings of a new study indicate that because of corporate tax breaks, rebates and loopholes, many Fortune 500 companies pay little or no federal income taxes on their profits.
But then, that would raise other problems for the guy, including, (a) he probably wouldn’t get past security guards at any corporate offices, and (b) Baltimore has only one remaining Fortune 500 company, Constellation Energy, and it’s in the process of merging with the Chicago-based energy giant, Exelon Corp.
The proposed corporate nuptials, which at $7.9 billion dwarf even Kim Kardashian’s recent and already defunct $10 million wedding, is under review by the Maryland Public Service Commission. The agency has some sway here — akin to wedding guests asked to speak now on any objections to the union or forever hold their peace — because Constellation is the parent company of BGE, which as a local utility answers to state regulators.
The agency is holding public hearings, which began last week and continue this week, before it decides whether to give its blessing. By accident of the calendar, the hearings are offering a glimpse into a local corporate boardroom at a time when the occupy movement has been shining its flashlight big business, and what it sees as culpability in the recession and in the well-documented rise in income disparities.
The big news so far came Thursday, when Exelon executive Christopher M. Crane said some 600 corporate jobs would be lost in the merger. While hedging on where these cuts would come, Crane acknowledged what everyone already knows: Given that Exelon is buying Constellation, and that the headquarters of the newlyweds will be in Chicago, the cuts will be “most impactful” in Baltimore.
Well, no kidding. We’ve seen this movie before, even down to the same starring role played by Mayo A. Shattuck III, the Constellation chief who was president of Alex. Brown when the legendary investment firm was bought first by Bankers Trust and then by Deutsche Bank, each acquisition leading to hundreds of jobs either being cut or transferred out of its hometown.
And yet Shattuck’s reputation as a corporate superstar has only grown over the years, providing Baltimore with its own version of what the occupy movement has been protesting: the kind of corporate culture that rewards top execs with huge salaries and bonuses even as underlings get laid off.
Constellation has been assuring us that the merger would be “net jobs positive,” but critics say some of those jobs gained would be temporary construction ones, not the kind of more permanent positions a corporate headquarters offers. The savings in merging two companies into one, of course, come in eliminating overlap.
Big corporations appear to be saving on taxes as well, according to a new study by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, which have been described as liberal-leaning research and advocacy groups. That may well lead to their findings, which are based on SEC filings, to be dismissed by some. Interestingly enough, though, these are the same groups that in the 1980s issued widely praised reports that helped lead to the 1986 tax reform act that closed corporate loopholes and was signed by President Ronald Reagan.
But since then, according to the study, large companies are managing to pay less than the official 35 percent corporate income tax rate, often through favorable legislation they’ve successfully lobbied for in Congress. Some even have a negative tax rate, courtesy of various subsidies and rebates, the report says.
Wells Fargo, for example, was found to have received the most tax subsidies, almost $18 billion over the last three years. Yes, the Wells Fargo that drew notoriety for its high-interest subprime “ghetto loans,” as one company loan officer called them when questioned as part of a lawsuit filed by the City of Baltimore.
(Companies that have responded to the study have said it’s distorted or that the groups have an agenda or simply that they comply with the current tax code and pay what is required.)
While the study looked at more than half of the Fortune 500 companies of the last three years, Constellation wasn’t among them. The groups only included the companies that had profits each of those years, and the local — for now — energy company posted a loss of $982.6 million last year.
Its counterpart to the south, Pepco Holdings, was found by the study authors to have the lowest effective tax rate over the three years, in the negative range, so maybe the guy who wants to yell about where his taxes go may have to travel a little further from McKeldin Square.