Bloomberg News

Former Union Leader Says Obama Ultimately May Ease Tax Rule

June 23, 2011

June 23 (Bloomberg) -- Andy Stern, former head of the fastest-growing U.S. labor union and a close ally of President Barack Obama, predicted the White House will drop its opposition to the easing of tax rules to encourage companies with overseas profits to return the cash to the U.S.

In the same way that Obama switched positions to support the extension of President George W. Bush’s tax cuts, Obama will accept repatriation legislation “when it’s time,” Stern, the former president of the 2.2 million member Service Employees International Union, said in an interview with Bloomberg Television’s “Conversations with Judy Woodruff,” to be broadcast this weekend. “This is where Washington makes decisions.”

Stern said Congress should avoid the pitfalls of similar 2004 legislation that resulted in some companies taking the repatriation tax break and shedding jobs. “That was wrong. I don’t think we should let that happen again,” he said, adding that the breaks shouldn’t go to companies that cut jobs.

Legislation introduced in the House of Representatives would let U.S.-based companies repatriate, for one year, income earned overseas at a 5.25 percent rate instead of the 35 percent statutory corporate rate. The measure would penalize companies that take the holiday and reduce their workforces.

Money ‘Sitting Overseas’

Stern’s support of repatriation legislation puts him at odds with most of the leaders of organized labor.

“The money is sitting overseas, and I still don’t understand how people think $1 trillion in foreign banks is better than $1 trillion in the United States,” he said. Stern also said he expects the administration and Republicans to reach a deal on a payroll tax holiday.

“Something can happen because I think the Republicans always like tax cuts,” he said, while opposing including employers in the holiday. “The people who go to work every day would love to see 2 percent more in their pocket. And if the price of that is doing something on the business side as well, we may very well see it.”

As a labor leader, Stern, 60, kept his union’s profile high with attacks on big business, including banks and Wall Street. That’s a technique he now says he could have done differently.

“I was awfully tough on the private equity and the banks,” he said. “Some of it was totally appropriate; others of it was probably a little bit out of hand.”

‘Better Friend’

Looking ahead to Obama’s 2012 re-election bid, union members will likely feel “generally positive” about the president’s record on labor issues, Stern said.

Obama “has been a better friend” to the labor movement than the previous Democratic president, Bill Clinton, he said. “They both did a fairly decent job,” Stern said. What Obama “did in the long run about health care” is “good for working people in this country. Clinton tried. He wasn’t successful.”

Still, union members may feel less enthusiasm for Obama in 2012 than when they first helped elect him in 2008, Stern said.

“Some of the change that we hoped would have happened by now has not happened,” he said. “People feel that at times the president needs to stand up more for working people.”

Stern said the labor movement itself needs to make some changes in strategy to reverse the decades-long slide in union membership. “It’s going to take a very long time,” he said. “It’s probably going to take another generation.”

Unions must become stronger advocates for efficiency in government and public pension plans, Stern said. Also, the must find better ways to “align ourselves with businesses,” he said.

Union membership fell to 11.9 percent of the U.S. workforce last year from a high of 28.3 percent in 1954. Unions represented a record low of 6.9 percent of all non-government workers last year, down from 36 percent in 1955.

The primary government agency that mediates union elections, the National Labor Relations Board, is “rather outdated” and also needs to change, Stern said.

--Editors: Robin Meszoly, Jim Rubin.

To contact the reporter on this story: Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.


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