There Can Be No Genuine Tax Reform Without Addressing Hidden Wealth

paradise-papers- beach-luxury

Wealthy elites around the world are finding ways to hide all their earnings in offshore locations, according to the recently leaked “Paradise Papers.” (Photo: Wikirictor/ Creative Commons)

Just as Congress begins debate on the Republicans’ “Tax Cut and Jobs Act,” new revelations have emerged about how wealthy elites around the world hide their wealth.

The “Paradise Papers” — the result of a leak from the Bermuda-based law firm Appleby — shines additional light onto the shadowy world of hidden wealth and tax dodging.

Efforts to reform the U.S. tax system are fundamentally undermined by a global tax-avoidance system that allows individuals and corporations to shift trillions to offshore havens to escape taxation, accountability, and publicity.

The Paradise Papers, alongside the “Panama Papers” released in April 2016, provide another set of disclosures into a system full of titillating details about how high-ranking global officials have created their own system of rules. The Bermuda leaks disclose the role of high-ranking Trump administration members, including Commerce Secretary Wilbur Ross and White House economic advisor Gary Cohn, in using offshore tax havens.

National groups and political leaders, including Democratic House Leader Nancy Pelosi, are calling for a slowdown of Republican efforts to push through their tax bill to address these abuses.

Oxfam America and the Financial Accountability and Corporate Transparency (FACT) Coalition have called on Congress to hold hearings on the findings and a debate over how to best remedy them. Tax Justice Network international has called on the United Nations to convene a global summit to address tax haven abuse.

The hidden wealth system is used by both wealthy individuals and transnational corporations. Research by Gabriel Zucman and others estimates that households in the top 0.01 percent, those with wealth over $ 45 million, evade 25 to 30 percent of personal income and wealth taxes. This amounts to more than 10 percent of global GDP is hidden in offshore tax shelters.

Zucman estimates that tax haven use has grown 25 percent in the past five years and U.S. citizens have at least $ 1.2 trillion stashed offshore. In all, at least $ 200 billion a year in tax revenue is lost from wealthy individuals and $ 130 billion from corporate tax avoidance.

Hundreds of large transnational corporations use the offshore system to reduce or skirt their tax obligations. According to the Institute on Taxation and Economic Policy, Fortune 500 corporations hold an estimated $ 2.6 trillion offshore. Verizon, General Electric, Boeing, Nike, and Amazon are just a few of the offenders.

One common dodge is to shift paper profits to subsidiaries in low-tax or no-tax countries like the Cayman Islands or Ireland. Companies utilizing these schemes maintain the fiction that their profits are piling up “off shore” while their losses accrue in the United States, reducing or eliminating their obligation to Uncle Sam.

Systematically confronting offshore tax havens will require legislative action, international diplomacy, and sanctions and penalties aimed at both banks and tax-haven jurisdictions. Uniform disclosure and transparency, both of banks and capital flows, should be a fundamental component of all new treaties.

The United States has enormous responsibility and leverage in fixing this broken international system. Unfortunately, the House Republicans’ proposed tax legislation would only make matters worse. Rather than cracking down on offshore tax dodging, the bill would give companies that are hoarding profits in tax havens a $ 500 billion tax cut.

Groups working to oppose the current tax bill, including Americans for Tax Fairness and the Financial Accountability and Corporate Transparency (FACT) coalition, have been advocating to close offshore tax havens. They are pressing for such transparency reforms as disclosure of “beneficial ownership” of shell corporations and entities. “The Incorporation Transparency and Law Enforcement Assistance Act” would require virtually all U.S. companies to disclose who really owns or controls them when they are formed and to keep that information updated.

There can be no genuine tax reform until the hidden wealth system for wealthy individuals and transnational corporations is shut down.

The post There Can Be No Genuine Tax Reform Without Addressing Hidden Wealth appeared first on Institute for Policy Studies.

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We Worked on Tax Reform Under Reagan. Trump’s Is Much Worse.

taxes-one-percent-loopholes

(Photo: Michael Fleshman / Flickr)

President Donald Trump frequently points to Ronald Reagan’s 1986 tax reform as a model for his own tax plan, which would drastically cut taxes on the wealthiest Americans. “Under this pro-America system,” Trump said in an August speech in Missouri, “our economy boomed. It just went beautifully — right through the roof.”

We were Senate staffers for Democrats back in 1986. There’s a lot about the Reagan reform that today’s Republicans appear to be forgetting. Indeed, what’s being proposed now is far, far friendlier to the rich and big corporations — and more harmful for everyone else.

Read the full article on TIME.

The post We Worked on Tax Reform Under Reagan. Trump’s Is Much Worse. appeared first on Institute for Policy Studies.

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States and Local Advocates Lead the Way for Criminal Justice Reform

Stealing From The Mouth of Public Education to Feed the Prison Industrial Complex

It can be easy to overlook the role of our deeply broken criminal justice system in perpetuating the cycle of poverty and rising inequality.

While Congress stalls on any semblance of progress on criminal justice reform, a number of states are taking matters into their own hands.  Kimberly Hart, a life-long New Haven, Connecticut resident is using her own personal story to bring about change in her home state.

Hart is a community advocate and mother of a 15-year-old son. She was convicted of a felony 30 years ago, but the sentence has carried on long after she exited prison. She knows first hand the economic disadvantages placed on the formerly incarcerated and has dedicated her life to helping others like her navigate in an economy tilted against them.

The United States has the largest criminal justice system in the world spending over $ 80 billion annually. The Sentencing Project found that U.S. incarceration rates have increased by more than 500 percent in the last 4 decades, despite a decrease in crime rates across the country. The incarcerated population today is 2.2 million people.

According to the Friends Committee on National Legislation, 600,000 individuals are released from prison every year, with very few access to programs that could ensure a smooth transition back into society, leading them to face barriers in getting a job, securing stable housing and much more. They are often shut out of government provided opportunities that would lead to stability such as employment, housing, and education.

“Because my felonies are all larcenies, I can’t get a living wage job. I can’t get a job at a retail store.” Hart goes on to explain how she can’t even get trained to become a Certified Nursing Assistant because potential employers are too afraid to let her into clients’ homes. “I told myself, I don’t do those things anymore. Why am I still being held accountable for it? I’ve already paid my dues, why do I have to pay for the rest of my life?”

Shutting out formerly incarcerated people from these essential programs creates massive economic problems not limited to this population but for the nation as a whole. The Center for Economic Policy Research estimated that excluding people with criminal records out of the job market results in “a loss of as many as 1.9 million workers and costs the U.S. economy up to a whopping $ 87 billion each year in lost gross domestic product.” With people of color occupying 60 percent of the current prison and jail population, they face the brunt of these economic burdens.

Having been exposed to advocacy at a young age thanks to her parents, Hart became involved with the organization Mothers For Justice, a grassroots women’s advocacy group that focuses on welfare reform, prison re-entry, and affordable housing. “In order to affect change, you have to affect policy. I join advocacy groups that address the problems that I’m going through because I know that I’m a part of the solution. That’s when I learned that legislators work for me and I have the power to hire and fire,” Hart says.

In 2016, she worked with Mothers For Justice to push the Connecticut state legislature to pass the “ban-the-box” law that prohibits employers from requesting past criminal history on initial employment applications. While this law is a step in the right direction, it chips a small piece away at the large wall that stands between those with felony records and financial security.

For the past few years, Hart’s best chance at employment has been with a telemarketing company that doesn’t do background checks, where she has to deal with the harsh reality of receiving no benefits, no paid holidays, or paid sick time. “I get paid off of commission and I have to work hard because if I don’t make a sale, my fifteen-year-old son and I can’t eat.” Because of this, Hart still has to rely on government safety net programs such as the Supplemental Nutrition Assistance Program (SNAP).

Hart is concerned over the future of SNAP as the program faces funding cuts under the Trump Administration’s proposed 2018 budget. She explains how food is a basic necessity that people need to build better lives for themselves. “If you cut SNAP that means my child will go hungry. When you’re hungry you can’t sleep or learn. In order for my child to become self-sufficient and not have to rely on social services, he’s going have to get a decent education, go to college, and land a decent job so he can be a productive member of society. You can’t do any of that hungry.”

Kimberly Hart now works with the organization Witnesses to Hunger where she sits on the New Haven Food Policy Council working to eradicate hunger in New Haven. Among other issues related to poverty, Hart ensures that her voice remains one that represents people like her who are victims of the criminal justice system.

“If the state of CT looked at me as Kimberly Hart who happens to have a 30-year-old felony conviction instead of looking at me as a convicted felon whose name is Kimberly Hart then they could be more humane about this,” Hart said. “All we want is a second chance, life happens but it definitely doesn’t define who I am today.”

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Corporate Allies in Washington Take Aim at CEO Pay Reform

CEO-pay-median-worker

(Photo: Fred Ho / Shutterstock)

It’s not easy defending America’s overpaid CEOs, but somebody’s gotta do it. At least that seems to be the sentiment of the corporate lobby groups, politicians, and regulators who make up what might be called Washington’s CEO Pay Apologists Club.

Lately, this bunch has been on quite a tear. House Republicans’ health-care law will eliminate an Obamacare tax penalty on excessive compensation among insurance executives. Their Wall Street reform plan, scheduled for a vote this week, nixes several Dodd-Frank executive-pay reforms, including a ban on risk-inducing Wall Street bonuses and a regulation requiring publicly held corporations to report their CEO-worker pay gap.

These assaults take a certain amount of political courage at a time when corporate CEOs are making even President Donald Trump look like Mr. Popularity. In a March 2017 Harris poll, Americans gave corporate chieftains a favorability rating of only 24 percent, about half the share who approve of Trump’s job performance.

Even a majority of self-identified Republicans favor a fixed ceiling on CEO pay. Of course, none of the modest Obama-era reforms now on the chopping block went anywhere near that far. But that hasn’t dampened GOP hostility toward them.

Read the full article on The American Prospect.

 

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Reagan’s Tax Reform Was A Bipartisan Effort of Surrender to America’s Deepest Pockets

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(Photo: Wikimedia Commons)

Bitter partisanship. Hopeless gridlock. A tax code littered with loopholes that only special interests could love.

Washington’s latest attempt to overhaul the federal tax code, the first under Donald Trump, is getting underway with all these familiar realities in place. But despair not, former U.S. senator Bill Bradley advises in a prominently featured New York Times commentary, we can overcome all these obstacles.

President Ronald Reagan signs the Tax Reform Act of 1986. The legislation dropped the tax rate on income in America’s top income bracket to 28 percent, a level down from the 70 percent America’s richest faced in 1980 and the 91 percent they faced as late as 1963. Credit: White House photo.

How can Bradley, a New Jersey Democrat, be so sure? He cites his own personal experience within the convoluted legislative process that produced the Tax Reform Act of 1986. Lawmakers involved in that process, Bradley informs us, faced a similar set of obstacles. They overcame them all, says Bradley, “showing that clear principles, legislative skill, and persistence could change a fundamentally unfair system.”

We do, today, certainly live in different times, Bradley acknowledges, but “perhaps the lessons of the past show a way forward.” Now as then, he asks us to keep in mind, a little “trust and mutual respect” — a willingness to compromise — can go a long way.

Bradley’s particular take on the 1986 Tax Reform Act actually offers up nothing particularly new. Washington insiders have considered the 1986 tax bill a smashing success for quite some time. They mourn the loss of the bipartisan comity that made the effort possible – and blame our current tax mess on that loss.

Blame belongs elsewhere. Yes, we do need to learn the lessons of 1986, as Bradley suggests. But we first need to recognize what the 1986 Tax Reform Act represented. What Bradley and his wistful insider buddies hail as a success amounted much more to a surrender — to America’s deepest pockets.

In the years right after World War II, these deepest pockets fell under siege. In the new America that emerged out of the New Deal, America’s wealthiest faced tax rates that soared above 90 percent on earned income over $ 400,000. These rates ate away, year by year, at the top 1 percent’s share of the nation’s income and wealth.

America’s middle class, by contrast, prospered as never before. In the immediate post-war decades, the real incomes of average Americans doubled.

Bradley and his Wall Street wing of the Democratic Party have a different story to tell about the postwar years.

“After World War II, federal tax rates rose steadily, loopholes proliferated, and the tax code grew more complex,” writes Bradley, now a managing director for a New York investment bank, in his New York Times piece. “By the 1980s, its unfairness was indisputable.”

Bradley’s story, in other words, starts with rising tax rates, a frame of reference that neatly jibes with the conservative Republican world view. Outrageously high tax rates, this view holds, will always trigger a mad — but understandable — scramble for loopholes. Lower the high rates, and loopholes will go the way of the dodo.

Progressive Democrats in the years after World War II saw that scramble for loopholes. But they also saw enormous value in high tax rates on high incomes. Their political response: fight to plug the loopholes.

In 1961, the newly elected Kennedy administration started down that loophole-battling road, then backed away, unwilling to expend the political capital necessary to prevail. President Kennedy instead ending up pushing for across-the-board tax cuts. He asked Congress to cut the tax rate on top-bracket income from 91 to 65 percent. Congress did eventually opt to drop the tax rate, to 70 percent, in 1964.

The rate remained at that top level until 1981, when the newly elected President Ronald Reagan signed legislation, backed by a sizeable cohort of Democrats, that slashed the top rate down from 70 to 50 percent. That reduction set the stage for what Bradley sees as the heroic grand compromise of 1986: Democrats agreed to lower top rates even further and Republicans agreed to plug loopholes.

By signing this 1986 compromise into law, Bradley believes, Ronald Reagan was acting reasonably and presidential. But Reagan had no real reason not to sign the legislation. The 1986 Tax Reform Act gave Reagan the significantly lower tax rates — 28 percent on income in the top tax bracket — he had been fighting for ever since he first confronted tax rates over 90 percent as a Hollywood movie star.

And what did Reagan and his fellow deep pockets have to give up in return for this substantially lower top rate? An assortment of loopholes they mattered much less with a top tax rate that had shrunk so low.

The most significant loophole plug in the 1986 Tax Reform Act, adds veteran Phoenix tax attorney Bob Lord, happened to involve the passive activity loss rules. This plug drove a stake in the heart of the tax shelter industry.

“But the truth is,” notes Lord, “that the IRS was clobbering tax shelter investors in court anyhow.”

The “compromising” the Reaganites did in 1986, Bill Bradley believes, shows that a bipartisan spirit can work political miracles. In fact, the 1986 miracle worked overwhelmingly one way. The Reaganites didn’t compromise away any of their core commitments. The Democrats did.

In the Tax Reform Act of 1986, Democrats like Bradley essentially rubberstamped the Reagan Revolution against a more equitable distribution of America’s income and wealth. They abandoned what little remained of the New Deal’s opposition to grand concentrations of income and wealth.

With their “bipartisan” support for the 1986 Tax Reform Act, Bradley and his lawmaker soulmates only hastened that concentration, as data compiled by Thomas Piketty and other economists for the World Wealth and Income Database make plain.

In 1980, the year of Ronald Reagan’s election, America’s top 1 percent accounted for 9.4 percent of the nation’s income. America’s poorest 50 percent that year took home almost twice that, 17.8 percent.

By 1985, the top 1 percent had closed that gap. Their share of national income after four years of the Reagan Revolution, had jumped by nearly a third. Americans in the bottom half of income-earners, meanwhile, saw their share dip by a third.

By 1989, the year Reagan left office, America’s top 1 percent was taking home nearly as much income as the bottom 50 percent. Since then, the 1 percent share has increased still higher, to over 20 percent. We’ve gone from an America where the bottom 50 percent earned double the income of the top 1 percent to an America where the top 1 percent makes double what the bottom 50 percent earns.

The really scary part? That 1 percent share could go even higher if we embrace the lessons of 1986 that Bill Bradley so wants us to cheer.

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The Failure of Bill Clinton’s CEO Pay Reform

President George H. W. Bush’s January 1992 trip to Tokyo will be forever remembered as the time he vomited in his Japanese host’s lap at a fancy banquet.

What made many Americans more nauseated, though, was the stark contrast between the 12 over-paid American CEOs who accompanied Bush on the trade promotion trip and their modestly compensated, yet high-performing Japanese counterparts. When Bill Clinton entered office a year later, he vowed to do something about skyrocketing CEO pay, through a proposed cap on the tax deductibility of executive compensation. But the reform that ultimately passed Congress was watered down, creating an epic loophole that pushed CEO pay even further into the stratosphere.

new report I co-authored for the Institute for Policy Studies shows how Clinton’s reform has functioned as a perverse incentive for excessive pay and reckless behavior in the industry where such problems are most dangerous — Wall Street. As income inequality continues to rise, Hillary Clinton must fix her husband’s mistake and close this egregious loophole.

Read the full article on Politico’s website.

The post The Failure of Bill Clinton’s CEO Pay Reform appeared first on Institute for Policy Studies.

Sarah Anderson directs the Global Economy project at the Institute for Policy Studies.

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These States are Taking Tax Reform into Their Own Hands

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(Photo: SEIU Local 509)

States across the country are taking on the issue of tax fairness with vigor, looking to raise significant revenue and put a halt to the growing economic divide. Revenue raising campaigns in California, Massachusetts, and Oregon want to increase taxes on millionaires and the most profitable corporations at the ballot.

In light of growing inequality, other states should take notice.

The income of the top one percent is over 25 times higher than what the bottom 99 percent is paid across the country. In certain states, according to a new report from the Economic Policy Institute, that figure is more than 40 times higher.

Perhaps more troubling, in 15 states the top one percent took all of the income gains in the wake of the Great Recession. Not most of it, all of it.

While there is no panacea for dramatically reducing this level of inequality, one part of the solution comes from the tax code: raise taxes on the very wealthy and invest the revenue on programs of social uplift.

Three states have stepped up to begin to address this rising inequality through changes in their tax codes, providing a model other states should consider emulating.

Massachusetts

A ballot initiative campaign is underway in Massachusetts to pass a millionaires tax in the Commonwealth. The Raise Up Massachusetts coalition supporting the campaign claims the initiative received a 70 percent approval rating and will raise about $ 2 billion per year in revenue for education and transportation infrastructure in the Bay State. The campaign recently received support from 135 of the 200 representatives in the state legislature and will appear on ballots in the 2018 election.

California

In 2012, the Golden State temporarily raised state level income taxes on millionaires to the highest in the country with a rate of 13.3 percent on incomes over $ 1 million. In the years following, the California economy has seen significant growth, disproving conservative economists‘ predictions that calamity would ensue. Voters will decide in November whether to make the tax increase, and the $ 5 billion in annual revenue that comes with it, permanent.

Oregon

Corporate taxes on large and profitable corporations in Oregon are the lowest in the country. Voters will weigh in on whether to change that this November thanks to a ballot initiative campaign from A Better Oregon. The initiative raises rates on corporations with over $ 25 million in sales in the state with revenue earmarked to fund early education, K-12 education, health care, and senior services.

These states are not alone. Efforts to raise taxes on the wealthy are also underway in Minnesota, Maine, and Colorado according to Bloomberg News.

With Congressional inaction guaranteed at least until after the election, and likely long after that, it’ll be up to the states to take the fight against inequality in their own hands. Activists and legislators in states not currently taking action should draw inspiration from these states and consider launching campaigns of their own.

The post These States are Taking Tax Reform into Their Own Hands appeared first on Institute for Policy Studies.

Josh Hoxie directs the Project on Opportunity and Taxation at the Institute for Policy Studies.

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Forced labor shows back-breaking lack of reform in Myanmar military – Reuters


Reuters
Forced labor shows back-breaking lack of reform in Myanmar military
Reuters
The military, which ruled the former Burma for nearly half a century before handing power to a semi-civilian government in 2011, has vowed to end forced labor. President Thein Sein, a former general, promised in 2012 to eradicate … Along with 31

and more »

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Forced labor shows back-breaking lack of reform in Myanmar military – Reuters


Reuters
Forced labor shows back-breaking lack of reform in Myanmar military
Reuters
The military, which ruled the former Burma for nearly half a century before handing power to a semi-civilian government in 2011, has vowed to end forced labor. President Thein Sein, a former general, promised in 2012 to eradicate … Along with 31
Myanmar military press-gangs Rohingya into forced labourSydney Morning Herald

all 39 news articles »

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The Harsh Reality of ‘Ban the Box’ Reform Efforts

(Image: Shutterstock)

(Image: Shutterstock)

One in three Americans has a criminal record. Regardless of conviction, circumstances, age, and severity of crime, this record can and does have significant effect on that person’s ability to find housing, employment, education, food assistance and even essential health care.

That’s one hundred million Americans. Stunning. Thanks to cell phone video and social media, more and more of us are witnessing the injustice and brutality of racial profiling and criminalization of low-income, black, Latino, and transgender people nationwide. These realities have given rise to #BlackLivesMatter, investigations into Ferguson-type revenue extortion for minor code violations, moves to end destructive Zero Tolerance policies in poor, majority-black schools, and to reforms of unjust mandatory minimum sentencing laws. There is even a rare bi-partisan recognition that our shocking levels of mass incarceration are in need of reform.

Incremental Reform Underway

In the vein, over 6,000 federal prisoners won early release and streamed home—or to overcrowded halfway houses or immigrant detention centers—this weekend. This is a tiny fraction of the 2.2 million incarcerated people in the US, but it means everything to those released and their loved ones. And it’s arguably very important symbolically.

President Obama travelled to Newark, New Jersey in the wake of the release to highlight some obstacles that returning citizens face after release from prison. One of the most significant barriers is the barrier to employment. Studies show that job applicants who must check the box revealing criminal records are only half as likely to advance past the application process than those without records. It’s even worse for black applicants with record; they are only one-third as likely to advance in the application process.

To begin to address the pervasive problem, President Obama repeated his call to to ‘ban the box‘ for formerly incarcerated people This policy takes several forms, but usually eliminates the box on job applications which someone with a criminal record would otherwise need to check. Employers can still run background checks on the internet of course, and may inquire about criminal records later in the process. Over 100 cities and 19 states have some form of this policy. It may apply to local or state, private or public employers, depending on the legislation. Obama is calling for it at the federal level in some circumstances.

On the face of it, it’s a good first step. However, when you consider that it is black people who disproportionately have criminal records, and that employers will hire white people with criminal records over black applicants with no records, how far does it really go? Indeed, could it even give the formerly incarcerated white applicant an added advantage over the black applicant?

Other Collateral Consequences

This is just one of the many issues we must confront as the political climate has grown more intolerant of over-crowded prisons. What are formerly incarcerated people coming home to? Over-crowded halfway houses? Effectively prolonged sentences because no half-way house is available? Exclusion from over 800 occupations? No access to housing, to food assistance, to health and mental health services? Disenfranchisement? Further indenture through private parole companies? Even an initiative with the good intention of eliminating the barrier of the criminal record box on job applications may turn out to have negative consequences for some black home-comers.

Take the Injustice Out of the Criminal Justice System

Wouldn’t it be better not to lock up so many people in the first place? Mass incarceration and the ‘war on crime’ didn’t decrease the crime rate. Indeed violent crime rate came down aswe started reducing the prison population. Children suspended, expelled and referred to the juvenile justice system haven’t been helped. They’ve been sentenced to a stunning lack of opportunity and a drastically increased possibility of much more time behind bars as adults.

The black unemployment rate still hovers around 10%, nearly double that of whites in October 2015. The poverty rate for black Americans is nearly three times higher than that of whites. Though black children make up only 18% of the preschool population, they are about half of those suspended. We’re talking 3- and 4-year-olds. Black schoolgirls are six times more likely to be suspended than their white peers. And all black students are three times more likely to experience suspensions, expulsions and referrals to the criminal justice system than their white peers for similar offenses. Over 70% of suspensions, expulsions and referrals are of black and Latino students.

And this matters. Just one suspension doubles a child’s chances of never finishing high school. Children with expulsions are three times more likely to end up in the juvenile justice system. Once in the juvenile justice system, that child’s re-incarceration by age 25 is nearly 70%.

It’s madness. It’s racist. It’s unjust. It’s inhumane. Bringing home 6,000 federal prisoners a few months early and delaying disclosure of criminal records for federal job applicants are both better steps to take than no action at all. Indeed it represents a positive change in the way we think about mass-incarceration and obstacles to re-entry. It no doubt will have a trickle-down effect to state prisons and state laws where the vast majority of people are suffering unjustly. But is a “trickle-down” effect enough?

 

The post The Harsh Reality of ‘Ban the Box’ Reform Efforts appeared first on Institute for Policy Studies.

Karen Dolan directs the Criminalization of Poverty project at the Institute for Policy Studies.

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