Gene C. Gerard OrBlog

In 2003 the Bush administration initiated a policy change within the Internal Revenue Service that essentially mandated that corporate audits had to be conducted quickly. The IRS indicated that this was meant to ensure that Big Business wouldn’t get too tied up sorting out their tax bill to Uncle Sam. But a recent article in The New York Times suggests that this policy is being used to prevent IRS auditors from pursuing questionable corporate tax deductions. The auditors complained that top officials within the IRS are pushing them to close audits of major corporations with agreements that allow the companies to pay only a tiny portion of the additional taxes that could be collected.

IRS auditors have been told to limit questioning only to very specific issues that the IRS and the companies had agreed to in advance of the audit. As a result, when other questionable corporate deductions became apparent during the audit, the additional taxes due was ignored. Throughout the nation, the presidents of local IRS union chapters told the newspaper that they have received many complaints from auditors that they are not being allowed to do their jobs. And some of the most experienced and knowledgeable auditors have quit, or plan to retire as soon as they are eligible.

One union president noted that at the IRS, supervisors receive cash bonuses, promotions, and other inducements when audits are closed within prescribed timeframes, rather than on the quality of the audits or the amount of tax dollars collected. And auditors in eight states have complained that IRS managers and officials ordered them to stop audits because it would prevent the audit from closing by the predetermined date. Perhaps never before in American history has one president done so much to help Big Business get even richer.

Oil and gas companies lease federal lands and waters and (sometimes) pay royalties to the federal government based on a percentage of the oil and gas they produce. The Minerals Management Service (MMS), an agency within the Department of Interior, is responsible for collecting royalties from these leases. The department insists that in order to promote oil and gas production (as if it needs any promotion, thanks to SUVs and the like) the government in some cases will grant “royalty relief.” This relief means that the royalties oil companies are required to pay are either waived entirely or vastly reduced.

In 1995 the Republican-controlled Congress passed the Outer Continental Shelf Deep Water Royalty Relief Act. According to a new report from the Government Accountability Office, the non-partisan investigative office of Congress, the royalty relief granted under this act “will likely cost billions of dollars in forgone royalty revenue – at least $1 billion of which has already been lost.” In fact, in 2004 the MMS estimated that royalty relief on deep water leases issued under the act from 1996 through 2000 could cost as much as $80 billion.

Neither of these estimates includes royalty relief under the Energy Policy Act of 2005, another Republican giveaway to Big Oil. This act mandates relief for oil and gas leases in the Gulf of Mexico until 2010, as well as certain areas of Alaska. When the government looses revenue from royalty relief, it must make it up by turning to (yep, you guessed it) the American taxpayers, who have to pay more to make up for the losses. Why do oil companies, many of whom have enjoyed the largest corporate profits in history in recent years, need welfare?

The New York Times reported over the weekend that the Bush administration reached an agreement with a student loan company allowing it to keep $278 million in subsidies that the inspector general of the Department of Education found to be improper. The company, Nelnet, is located in Lincoln, Nebraska. Under the agreement, the department will suspend any future payments to Nelnet until an audit is completed. Why is the Bush administration not seeking restitution of the $278 million? According to Under Secretary of Education Sara Martinez Tucker, the department decided not to pursue it because it might force it to go after other student loan companies that have operated inappropriately.

Good grief! That’s precisely what the Department of Education should do. Senator Edward Kennedy complained this weekend, “The administration should have settled for nothing less than the full recovery of Nelnet’s ill-gotten proceeds from these loans.” The education department’s audit found that Nelnet had inappropriately exploited a subsidy program dating back to the 1980s that guaranteed it a 9.5 percent interest rate on student loans. And when interest rates declined, Nelnet expanded its investment portfolio of loans to almost $3.7 billion in 2004 from $551 million in 2003.

This isn’t the first time the Bush administration has offered what amounts to corporate welfare to a student loan company. In 2005, the education department’s inspector general found that the New Mexico Education Assistance Foundation had improperly exploited the subsidy program to reap millions of dollars in overpayments. Yet the Bush administration opted not to seek restitution from the foundation. It should come as no surprise that some of the largest contributors to leading Republicans and their political action committees in recent years have been student loan companies.

The Wall Street Journal reported that executives at Abbott Laboratories attempted to decrease the populatiry of its AIDS drug Norvir by increasing the price of the drug. The corporation did so because Norvir is used in combination with other drugs made by Abbott’s competitors, and it didn’t want to help the other drug companies generate profits. In 2003 executives at Abbott became worried about competition with its AIDS drug Kaletra, so they devised a plan to encourage HIV positive people to discontinue rival drug combination therapies and instead use only Kaletra.

Abbott quadrupled the price of Norvir, which is used in conjunction with the drugs Reyataz (manufactured by Bristol-Myers Squibb) and Crixivan (manufactured by Merck). The cost of Norvir jumped from $51.30 to $257.10 for 30 pills, making the yearly cost of the drug increase by more than $5,000. The corporation hoped that this would discourage AIDS patients from using multiple drugs, and opt for the cheaper cost of Kaletra alone.

The attorney general of Illinois is investigating to determine if this violated that state’s consumer fraud laws. Abbot Laboratories has already settled a lawsuit regarding this matter with the AIDS Healthcare Foundation. And the corporation is currently facing a lawsuit in California, brought by several HIV-positive people. While all companies are in business to turn a profit, this effort to make a buck at the expense of those who are sick explains why many Americans view drug companies as having ethics just a little below those who sell porn.

On Wednesday the House of Representatives ethics committee completed their work from last year, finding that two more Republican Congressman violated ethics rules. The old adage “absolute power corrupts absolutely” has never been more strikingly true than with the Republican Party this last year. The House ethics committee found that Florida Representative Tom Feeney took a trip to Scotland with disgraced and now-incarcerated former lobbyist Jack Abromoff, in violation of Congressional rules.

In 2005, when questioned by various news outlets, Representative Feeney denied that Mr. Abromoff funded the trip. Congressman Feeney has now agreed to pay the Treasury Department $5,643 for the trip, which was determined to be for “recreational purposes.”

Outgoing Representaive Curt Weldon of Pennsylvania was found to have violated ethics rules concerning gifts when he took a trip with his family in 2003. The ethics committee wouldn’t release many details regarding the trip. But it appears that his family’s travel expenses were paid by the sponsor of the trip, in violation of House rules. Now that Congress is in the hands of the Democrats, I suspect we’ll see more Republicans coming before the ethics committee in the House.

One of the first acts the new Democratic Congress is likely to work on is raising the minimum wage. For the past nine years Republicans refused to vote on raising the wage, maintaining that this would increase unemployment and cut into corporate profits. But a recent report by Dr. Paul Wolfson, a professor at Dartmouth College, which was conducted on behalf of the Economic Policy Institute, shows that there is no reason not to raise the minimum wage.

The report tracked the consequences of the 17 states and the District of Columbia that raised the wage between 1997 and 2005. The report concludes that there was little impact on either employment or labor supply. And that raising the minimum wage in those states had a positive effect on wages. Dr. Wolfson’s report indicates that raising the wage not only increased wages but also did so without reducing employment for teenagers.

And the report found that raising the wage lead to higher overall wages without reducing employment or discouraging the labor supply for young adults and those lacking a college education. Since President Bush recently stated that he now supports raising the minimum wage, the new Congress should move quickly to help those at the bottom of the economic ladder, who need help the most.

The Food and Drug Administration (FDA) is responsible for overseeing direct-to-consumer (DTC) advertising on prescription drugs by pharmaceutical companies. If the FDA identifies a violation of law or regulation in a DTC advertisement, the agency typically issues a regulatory letter asking the drug company to take specific action to correct the violation. But according to a recent report by the Government Accountability Office (GAO), the non-partisan investigative office of Congress, the FDA under the Bush administration has been doing a poor job of monitoring DTC advertisements. This should come as no surprise, given the administration’s close ties to Big Business.

 
The report found that the FDA only reviews a small portion of DTC materials it receives. And the agency has only informal criteria to prioritize the materials for review.  The Congressional report also noted that the FDA “has not documented these criteria, does not apply them systematically, and does not track information on its reviews.” Since President Bush took office, the agency has taken longer to send regulatory letters and sent fewer letters than was the case previously. From 2002 to 2005, it took the FDA on average four months to send a regulatory letter. During the Clinton administration, it took on average only two weeks!

 
The effectiveness of the FDA’s regulatory letters at stopping the distribution of unlawful DTC materials has been limited, according to the report. The agency only issued 19 letters in 2004 and 2005, and they were issued on average eight months after the materials were distributed. The report also complained that this has been an ongoing problem. A GAO report in 2002 noted, “by delaying the issuance of regulatory letters, the…policy had adversely affected FDA’s ability to enforce compliance.” Which is precisely what the Bush administration intended.

The U.S. Geological Survey (USGS), a division within the Department of Interior, has new rules regarding almost any written reports or public speeches. The USGS studies global warming, among many other scientific issues. The rules now require that the USGS communications office be “alerted about information products containing high-visibility topics or topics of a policy-sensitive nature.” And the agency’s director must be informed of “findings or data that may be especially newsworthy, have an impact on government policy, or contradict previous public understanding to ensure that proper officials are notified and that communication strategies are developed.”