The Two Americas, continued

Louis Proyect lnp3 at
Tue Sep 10 10:42:23 MDT 2002

(Another two articles from the front page of the NY Times business section. 
Juxtaposed against one another, they illustrate how class society operates. 
Based on obvious editorial discretion around these sorts of questions and 
nervousness over the impending war with Iraq, one gets the sense that a 
division in the ruling class is opening up.)

Shriveling of Pensions After Halliburton Deal

In June, puzzling letters began appearing in the mailboxes of hundreds of 
employees of the Dresser-Rand Company, saying that they had become eligible 
for retirement benefits even though they were still working.

To request their money, they were told to call the Halliburton Company, 
which acquired Dresser-Rand in 1998.

Over the summer, many of the employees had done so and concluded that what 
the letters portrayed as an early payment of benefits was actually a 
reduction, brought on by the Halliburton merger and a spinoff less than two 
years later. Halliburton has given the workers 90 days, which ends later 
this month, to sign up for a much smaller payment than promised earlier, or 
forfeit their right to a lump sum forever.

In addition to the current employees who got those notices, some recent 
retirees received letters saying that they had been paid too much and 
should return thousands of dollars in pension money to Halliburton. After 
comparing notes, a few of the employees and retirees have estimated that 
the group is being stripped of $25 million in benefits, reflecting roughly 
$50,000 on average for about 400 people.

While Halliburton appears to be within its legal rights as the current 
sponsor of the workers' pension plan, its handling of their retirement 
benefits contrasts starkly with its treatment of Vice President Dick 
Cheney, who was chief executive of Halliburton during the acquisition and 
then the spinoff. The Dresser-Rand workers have lost their early retirement 
provision, and must now work until 65 to qualify for their full benefits.

When Mr. Cheney left in August 2000 to become the Republican Party's vice 
presidential candidate, Halliburton's board voted to award him early 
retirement — even though he was too young to qualify under his contract. 
That flexibility enabled him to leave with a retirement package, including 
stock and options, worth millions more than if he had simply resigned.



A Tax Break for the Rich Who Can Keep a Secret

When most Americans sell stock they must pay taxes on their profits by the 
following April 15. But a few Americans are delaying taxes on their stock 
profits for years or decades — or, in some cases, never paying at all.

It's all perfectly legal — but only if you have $5 million of stocks and 
bonds. And only if you promise to keep it secret. It's one example of how 
the tax laws currently grant certain favors only to the very wealthiest.

The deals work this way: Executives and investors with $5 million of stocks 
and bonds contribute at least $1 million of their stock in a single company 
to a pool into which others in the same situation contribute their own 
shares. In return they receive shares of a partnership that owns the pool.

When they are ready to withdraw from the pool, the partnership gives them 
not their original shares or cash but instead shares of a variety of stocks 
held by the pool. As a result, someone with too much money in one stock can 
quickly diversify into a more balanced portfolio. But unlike other 
investors, who have to pay taxes on profits when they sell a stock, no 
taxes are owed on the profits of the shares contributed to the pool.

If investors stay in the pool for seven years, the stocks they get when 
they withdraw their investment do not incur the tax on investment profits 
that other investors must pay. Only if the investors then sell the various 
stocks they received from the pool are they supposed to pay taxes.

Those taxes are by law owed on their investment profits all the way back to 
the time they bought the stock that they put into the pool. But cheating is 
easy because the investors can merely report only the profit made since 
they took back the stocks from the pool. An Internal Revenue Service 
auditor would have to know about the pool, and do a lot of work, to 
determine the full profit made on the original stock contributed to the pool.


Louis Proyect

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