Chronicles of Inequality (TOO MUCH, Sept. 1, 2014)
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September 1, 2014 |
| THIS WEEK | |
| [I]n the United States today, you almost have to have some gray hairs on your head to remember a time when the American labor movement really felt like celebrating on Labor Day. But celebrate, once upon a time, labor did indeed do.Back in 1959, for instance, a New York Labor Day parade started up Fifth Avenue at just after 10 in the morning, and the last of the 144,699 marchers didn’t pass the reviewing stand until over eight hours later. Onlookers saw unionized stagehands and actors — in full costume — from My Fair Lady. They saw 200 bands and 57 floats and workers carrying banners from over 500 union locals. A good time would be had by all. And why not? Labor had plenty to celebrate in 1959. In those decades right after World War II, real wages were doubling. America’s working people were marching straight into the middle class.These days, by contrast, average Americans are marching only in place, working ever harder and seeing precious little for their labor. More in this week’s Too Muchon just how little. But more also on how the tide may be turning. |
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| GREED AT A GLANCE | |
If you had a grand fortune, what would you fear more, a home invasion or Armageddon? Today’s super rich, the London Evening Standard reports, are actually pondering that question. Luxury home builders are asking them whether they prefer simple anti-intruder “panic room” hideaways for their abodes or bunkers fortified against biological, chemical, and even nuclear attack. In London, the well-heeled seem to be leaning toward panic spaces that can keep their wealthy occupants safe until the police arrive. In New York, contractors are installing more bunkers, at a unit cost that can top $3 million. Either way, business is booming for safe room contractors. The Panic Room Company has sales up 60 percent since December alone. The wealthier people get, says company founder Paul Weldon, the “more paranoid” they become . . . Apple CEO Tim Cook will be taking his bows next week in Silicon Valley as his tech giant unveils the latest iPhones. Cook, of course, takes more than bows for his labor. Last year he took home $74 million. The secret to his success? No one may be better at corporate tax avoidance. Apple is pioneering the practice of “synthetic cash repatriation,” accountant-speak for using corporate profits stashed in offshore tax havens to fund back-home expenditures — like stock buybacks that boost the value of executive pay packages. Why can’t lawmakers in get their act together and shut down these shenanigans? ExplainsJared Bernstein, the former chief economic adviser for Vice President Joe Biden: “Concentrated wealth is buying the policy agenda it likes.”The last thing the proud owner of a newly delivered special-edition Bugatti wants to see? That would have to be a scratch. Bugatti’s latest special-edition motorcar, the Veyron Grand Sport Vitesse, carries a $3 million price-tag, and the carmaker is sparing no expense to get each of these super cars safely from Europe to buyers. One Grand Sport, Wired reports, just arrived in San Diego, totally wrapped in protective sheathing. How carefully did the good folks at Bugatti do their wrapping? They wrapped each spoke on the wheel rims individually — in cloth, just “what you would expect of a $3 million car,” says Rick Ahumada, the sales manager at the San Diego car dealership that handled the delivery. |
Quote of the Week “Most remedies for inequality include calls for progressive tax reform, for investment in education and training. The more insightful advocate balancing our trade and ending perverse incentives that reward CEOs for plundering their own companies. But none of these reforms is likely without a strong mobilization of workers — a strong union movement — to elect leaders and drive the debate.” |
| PETULANT PLUTOCRAT OF THE WEEK | |
 Next time you see Bruce Rauner, the GOP 2014 gubernatorial candidate in Illinois, don’t call him a 1 percenter. That label seems to peeve him. Rauner, a near-billionaire, resides in much more rarefied air than the mere 1 percent. He owns nine homes. Says Rauner: “I’m probably .01 percent.” Don’t call Rauner the “Mitt Romney of Illinois” either. That label reallyperturbs him. Insists Rauner: “I drink beer. I smoke a cigar. I use a gun.” But Rauner and Romney do have shared interests. Both made fortunes in private equity and both have a fondnessfor Cayman Islands tax havens. Rauner reported $108 million of income on his 2010-2012 returns. His tax rate on that income: under 20 percent. The then top federal tax rate: 35 percent. Rauner has so far spent $10 million of his own cash on his campaign. He’s leading in the polls. |
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| IMAGES OF INEQUALITY | |
Anybody see Spartacus in the neighborhood? No, you’re actually not looking at a slave-holding estate in ancient Roman days. You’re looking at a “hilltop Italianatepalazzo” that realtors have been hawking all this summer in California’s Laguna Beach. The seven-bedroom manse sits on three acres overlooking the blue Pacific, and the new owners, unlike their Roman Empire counterparts, won’t have to worry about beating back slave revolts. The asking price: $38,888,888. |
Web Gem What should you be making?/ Or, to rephrase the question, what would you be making today if America’s corporate elite were not siphoning off the lion’s share of the gains from the nation’s increased economic productivity? This interactive Economic Policy InstituteLabor Day site can help you see what inequality is costing you at paycheck time. NOTE: For a real experience of what this type of excess means, click here to take the tour of the palazzo. |
| ANTIDOTES TO INEQUITY | |
| Consumers the nation over have been protesting all this summer against CEOs who’ve been plotting “tax inversions,” deals that have U.S. companies acquire foreign firms and then re-emerge headquartered in that foreign country — to avoid U.S. taxes. These protests have so far forced Walgreens CEO Greg Wasson to back off an inversion plan. Now activists are targeting Burger King. But consumer campaigns can only work against firms that sell directly to consumers. What about those that don’t? Lawmakers Rosa DeLauro of Connecticut and Lloyd Doggett of Texas are trying to leverage the power of the public purse. They want Congress to deny federal contracts to firms that invert. A step in that direction, a DeLauro-Doggett amendment that denies federal contracts to U.S. firms that reincorporate in Caribbean tax havens last month won a House floor vote. |
Take Action Tell Burger King CEO Daniel Schwartz you’ll dine elsewhere if the fast-food giant completes a pending tax-avoidance deal with Canada’s Tim Hortons. |
| INEQUALITY BY THE NUMBERS | |
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Stat of the Week How adept at avoiding taxes have America’s CEOs become? This adept: In 2013, corporate profits jumped $93 billion, says the Commerce Department, but the taxes U.S. corporationspaid on those profitsdropped by over $15 billion. |
| IN FOCUS | |
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Finally Revealed: Obamacare’s Hidden Gem An obscure provision in the Affordable Care Act, a new report details, raises taxes on firms that overpay their top execs. The only problem: The provision so far only applies to corporations in one industry. The Institute for Policy Studies has been releasing annual reports on CEO pay for 20 years now, and these Executive Excess studies have built up quite a following. One reason: The studies offer what few other CEO pay reports do: context. Anyone with the patience to plow through annual corporate filings can, after all, show that CEO paychecks are keeping America’s top execs on the fast track to fortune. The Executive Excess series shows just how. America’s most lavish corporate rewards, past editions have detailed, are going to CEOs who downsize jobs, pocket bailouts, profiteer off defense contracts, cook their corporate books, contribute big to pols, and stiff Uncle Sam at tax time. All this context can make for engaging — and enraging — reading. America’s CEOs aren’t just grabbing way more than their fair share, Executive Excess documents. They’re poisoning our economic and political life in the process. The latest annual Executive Excess, released last week, has no shortage of new enraging stats. One stands out: The health insurance industry’s top 57 executives — the top five execs of the industry’s top 10 companies, plus their mid-year replacements — last year snared $300 million in total personal compensation. But the new Executive Excess 2014, despite numbers like these, will likely leave readers feeling more invigorated than infuriated. We now have, the new study makes clear, a concrete reason to feel hopeful about reining in executive excess. And that new reason for hope sits in the unlikeliest of places: Obamacare, the controversial Affordable Care Act enacted back in 2010. What does Obamacare have to do with executive pay? A virtually unknown provision in the legislation ends — for health insurers — the free ride on executive compensation the federal tax code hands Corporate America. Until last year, all U.S. corporations could deduct off their corporate income taxes almost everything they pay their top execs. The new Obamacare tax provision ends this subsidy in the health insurance industry. Health insurers now only get to deduct off their taxes the first $500,000 they pay each executive. What does losing this deduction mean in real corporate life? The 2014 edition ofExecutive Excess, The Obamacare Prescription for Bloated CEO Pay, has probed the pay records of the nation’s 10 largest health insurers for an answer. These 10 insurers lost $207 million in deductions, thanks to Obamacare, on the compensation that went to their 57 top-paid executives. The loss of these deductions upped their tax bill by $72 million. But that $72 million, notes Executive Excess lead author Sarah Anderson, only hints at the revenue the Obamacare executive pay provision will raise over coming years. Many more than 57 executives in the health insurance industry overall made more than $500,000 last year. Obamacare will likely raise the industry’s total tax bill over $50 billion over the next 10 years. A significant sum, to be sure. Still, says Anderson, the Obamacare executive pay provision’s real significance doesn’t come from those billions. That significance comes from the precedent the new deductibility standard for health insurers sets. “All corporations,” says Anderson, “should get the same medicine.” Outside the health insurance industry, current law has since 1993 limited the tax deductions corporations can claim on executive pay to $1 million per executive. But that limit comes with a huge loophole: Corporations can deduct “incentive pay” over $1 million that they define as “performance-based.” Obamacare ends this “performance” loophole, drops the $1 million limit to $500,000, and applies that $500,000 limit to all health insurer executives. All other corporations only have their five highest-paid officers under pay scrutiny. The health insurance industry, predictably, now feels picked upon. “Requiring plans to pay higher taxes does nothing to make coverage more affordable or accessible,” groused Brendan Buck of America’s Health Insurance Plans, the top industry trade group, after last week’s Executive Excess release. So the health insurance industry is looking for ways to make health insurance “more affordable”? How about, for starters, not shelling out $300 million a year for just 57 executives? |
New Wisdom Harold Meyerson, In corporations, it’s owner-take-all, Washington Post, August 26, 2014. Companies are devoting nearly all their profits to executives and other shareholders, leaving next to nothing for employees. Robert Kuttner, The Snake in the Market Basket,American Prospect, August 28, 2014. The CEO loved by this New England supermarket chain’s employees for worker fairness had to partner with a private equity firm to win back his place. Kenneth Thomas,Understanding Piketty,Angry Bear, August 29, 2014. An engrossing analysis of what Capital in the Twenty-First Century offers on taxing the rich.
Learn more about Too Mucheditor Sam Pizzigati’sgripping history of the triumph over America’s original plutocracy. Read theintro chapter online. |
| NEW READS | |
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Concentrated Wealth, Concentrated Influence
To what extent do wealthy people run the world’s most unequal developed nations? This new study has an answer for the only major industrial nation that rivals the United States on the inequality front. Britain’s Social Mobility and Child Poverty Commission has analyzed who holds the jobs that most directly influence the UK’s political process and public opinion. In all, Elitist Britain?examines the backgrounds of over 4,000 influentials, paying particular attention to where they attended school. Those students who attend private schools in the UK, the report points out, “tend to have parents with a high income or wealth.” And these private school students, the commission found, dominate the UK’s political life. Private school grads make up only 7 percent of the British public as a whole, for instance, but 71 percent of senior judges and 43 percent of newspaper columnists. And grads of the UK’s two elite universities, Oxford and Cambridge, make up less than 1 percent of the public but 59 percent of cabinet ministers. The UK, says commission chair Alan Milburn, risks becoming a society run by “a small few” exceedingly “familiar with each other but far less familiar with the day-to-day challenges facing ordinary people.” That can never be, he adds, “a recipe for a healthy democratic society.” |
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| ABOUT TOO MUCH | |
| Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: editor@toomuchonline.org | Unsubscribe. | |
