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November 17, 2014 |
| THIS WEEK | |
| Four years ago, in the Dodd-Frank Act, lawmakers in Congress required America’s top corporations to annually disclose the ratio between their CEO and median — most typical worker — pay. This disclosure, corporate lobbyists immediately claimed, would cost firms millions of dollars a year to prepare.These lobbyists then began pounding on the federal regulators responsible for writing the regulations to implement Dodd-Frank’s disclosure mandate. They demanded relief. They’ve won delay. Regulators still haven’t issued the needed regulations. No corporation has yet had to disclose any CEO-worker pay ratio.This long delay, interestingly, has even begun frustrating some corporations. One firm, Noble Energy, has gone ahead and voluntarily computed its CEO-worker pay ratio. Noble’s CEO turns out to make 85 times typical Noble worker pay.U.S. corporations currently pay their CEOs 331 times average U.S. take-homes. Companies like Noble want the chance to look good by comparison. Can’t blame them. But we can blame federal regulators for dragging their feet on Dodd-Frank. Lots more on those to blame — for inequality — in this week’s Too Much. |
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| GREED AT A GLANCE | |
Some people think CEOs in America are getting away with murder. That may not be quite true. A federal grand jury in West Virginia has just indicted Donald Blankenship, the former chief exec at Massey Energy, for his criminal role in the 2010 explosion that left 29 Massey miners dead at the company’s Upper Big Branch coal mine. Blankenship, the indictment charges, flouted safety rules to speed production and “make more money.” Along the way, say prosecutors, the CEO schemed to cover up safety violations when inspectors arrived on surprise visits. Blankenship retired not long after the mine explosion with a $5.7 million pension, $12 million in severance, another $27.2 million in deferred pay, and a lush consulting agreement. The families of dead miners received $1.5 million each from the company that swallowed up Massey after the explosion . . . America’s fracking king has lost his queen — and $995.5 million in the process. An Oklahoma judge ruled last week that billionaire oilman Harold Hamm is going to have shell out about a billion in one of the biggest divorce settlements ever. Oklahoma law requires divorcing spouses to share whatever they “made through skill” during their marriage. Hamm argued that the billions he made from the North Dakota shale fields represented more luck than business acumen. The court didn’t buy that. One reason: The company Hamm runs, Continental Resources, had spent recent years lauding his “leadership and business judgment” to shareholders. Hamm’s ex, a former Continental exec herself, also gets the couple’s $17.5 million California ranch and an Oklahoma home worth $4.7 million. Sue Ann Hamm plans to appeal for more . . .How could the execs at Mercedes-Benz be so dumb? Back in 2011, with the global luxury market still stumbling after the 2008 financial crash, those execs ended production of their super-luxury Maybach line. That decision left the super-luxury motor car market to Rolls-Royce and Bentley, and these two elite brands — with a wide variety of offerings hovering around $500,000 and up — went on to post all-time luxury sales records. Now Mercedes has decided to relaunch the Maybach brand. The first new model launches this month. Frankfurt-based auto analyst Juergen Pieper is calling the Mercedes about-face a “logical move.” One reason: As of mid-2014, the Credit Suisse Research Institute reports, 128,200 deep pockets across the globe hold fortunes that top $50 million. |
Quote of the Week “The evidence overwhelmingly suggests that money, above a certain modest sum, does not have the power to buy happiness, and yet even very rich people continue to believe that it does: the happiness will come from the money they don’t yet have.” |
| PETULANT PLUTOCRAT OF THE WEEK | |
 One of America’s richest lawmakers — Wisconsin senator Ron Johnson — will this January become the new chair of the U.S. Senate panel that oversees the federal workforce. His agenda? Slash federal jobs and the pay and benefits of any employees who survive the cuts. Federal workers have just gone through a three-year pay freeze. But Johnson claimedin a post-election interview that they remain overpaid. The Tea Party multi-millionaire — he owns somewhere between$5 and $25 million of financial industry stock — is also calling federal workers “unrealistic” to believe they can avoid pay and benefit reductions. Last month, an independent studyfound that white-collar federal employees are now averaging 35 percent less pay than their private-sector counterparts. |
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| IMAGES OF INEQUALITY | |
 The latest craze in luxury real estate? Bathrooms with a view! What most people want from living rooms, says New York realtor Vickey Barron, the rich now want from their bathrooms. Manhattan’s new luxury towers feature tubs sitting by huge windows that let bathers see out and anyone outside see in. Says architect Gary Handel: “Some people don’t mind showing a little, and some don’t mind showing a lot. They are totally comfortable in their bodies.” And $12,000 tubs. |
Web Gem Odds in Our Favor/ An imaginative new effort that’s working to help The Hunger Games franchise highlight the social and economic injustices the books and movies revolve around. Starting this week, you can tell your Hunger Gamesstory. Learn more. |
| ANTIDOTES TO INEQUITY | |
| In Congress a century ago, moves at “reform” involved attempts to check the power of America’s most fortunate few. Over recent decades, the wealthy and powerful have expropriated the “reform” label for their own use. Flush from their 2014 election victory, conservatives in Congress are now vowing to push for a “corporate tax reform” in the next Congress that aims to lower overall corporate tax rates and let corporations bring home, at a tax discount, the billions in profits they’ve stashed away overseas. Real corporate tax “reform,” analyst Harold Meyerson pointed out last week, would involve quite different reforms. One example: “How about reducing taxes on corporations that don’t exceed a 100-to-1 ratio of chief executive pay to that of their median employee,” Meyersonsuggests, “and raising taxes on those corporations with higher ratios?” |
Take Action CEOs at Pepsi, Amazon and a host of other U.S. corporations are evading billions in corporate taxes through tax loopholesconveniently provided by top pols in Luxembourg. Tell those pols you object! |
| INEQUALITY BY THE NUMBERS | |
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Stat of the Week America’s poorer half owns a smaller percentage of national wealth — just 1.3 percent — than the bottom half of any other major nation. Other than Russia, where the bottom half holds a 1.9 percent wealth share, every other major nation’s poorest half holds at least double the wealth share the bottom half holds in the United States, calculates the latest Credit Suisse Research Institute Global Wealth Databook. |
| IN FOCUS | |
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Some ‘Old’ News for a New Congress The nonpartisan Congressional Budget Office has just released its latest appraisal of America’s income breakdown. Whatever yardstick you use, the CBO study makes plain, the rich are winning. Big. How much income do America’s households take in? How much do they have left after taxes? Do federal taxes leave the nation less or more unequal? Questions don’t get much more basic than these. Or more complicated either. How, for instance, do we define income? Everyone agrees, of course, that anything anyone collects from a paycheck should count as income. As should any interest collected from a bank account or any profits from the sale of an asset. But what about the money an employer shells out to cover an employee’s health insurance premiums? Or contributes into an employee’s 401(k)? Should these dollars be counted as income for the employee? Calculating how much taxes people pay can pose similar puzzlers. How do we treat the taxes corporations pay on their income? Who in the end bears that burden? Shareholders? Consumers? These sorts of questions can carry a political edge. One example: Conservatives regularly dismiss stats on inequality that researchers draw from the income people report on their tax returns. These stats, their argument goes, overstate the income share of the rich because they don’t take into account the value of the government benefits — like food stamps — that the poor collect. Analysts at the Congressional Budget Office, the nonpartisan research unit of the federal legislative branch, have heard this argument. Some years ago, they began producing reports that address it — by expanding how we define income collected and taxes paid. Last week, the CBO released the latest report in this series, and conservatives who consider America’s affluent the victims of an oppressive, tax-hungry federal government have already begun scouring the CBO’s new study for data that make their case. They’ve found some. In 2011, the new CBO numbers show, America’s top 1 percent took in 14.6 percent of all income and paid 24 percent of all federal taxes. So should we now all be feeling sorry for America’s most affluent? Has the nation done them wrong? Do the latest CBO numbers back the case for trimming taxes on America’s most awesomely affluent? Hardly. The new CBO study actually reinforces what most Americans already suspect: In modern times, things have never been better for America’s wealthiest. They sit comfortably atop a staggeringly unequal nation. And that inequality stands out starkly even when researchers make definitional choices that tend to deflate the income share — before and after taxes — of the rich and inflate the income share of everyone else. In its latest Distribution of Household Income and Federal Taxes report, the CBOhas included within the income of poor and middle class Americans not just wages, not just Social Security checks, but nearly every possible benefit that low- and middle-income Americans receive from government or their employers. The new CBO report, as its authors acknowledge, “strives to measure income as broadly as possible and thus includes in income some items that people may not usually consider to be part of income.” Employer-paid health insurance premiums? In this new CBO study, they count as income for the working families that receive them. The employer share of payroll taxes for Social Security, Medicare, and federal unemployment insurance? That counts in the CBO tally, too — as well as the benefits lower-income households receive from social safety net programs ranging from food stamps to free school lunches. Meanwhile, on the tax side, the CBO makes the assumption that the dollars corporations pay in taxes on their profits amount to a tax on rich people, since rich people own the bulk of corporate assets. In the CBO breakdown, 75 percent of corporate taxes paid gets counted as taxes paid by America’s most affluent. The sum total of all these definitional choices? Lower-income people, under the CBO lens, end up looking richer than they do on the income tax returns they file and higher-income people end up looking poorer. But inequality, all the same, keeps getting worse, even after all the CBO adjustments that maximize the financial well-being of the poor and minimize that well-being for the rich. How much worse? Between 1979 and 2011, the CBO numbers show, the after-tax and inflation-adjusted income of America’s top 1 percent tripled, rising 200 percent to an average $1,453,100. This hefty increase for the nation’s top 1 percent ran over four times the after-tax and inflation-adjusted income increase that America’s poorest fifth of households realized between 1979 and 2011 and five times the income increase that went to Americans in the middle three-fifths of the income distribution. Like this article? Sign up In other words, as the Washington Post’s Philip Bump notes, we shouldn’t be surprised “that the top 1 percent pay an inordinate amount of overall taxes.” These rich, he notes, “also make an inordinate amount of the income.” |
New Wisdom Stephen Gottlieb, I Don’t Get It, WAMC, November 11, 2014. A law prof asks: How can our billionaire oligarchs be winning? Chuck Collins, Leave No Generation Behind,OtherWords, November 12, 2014. A tax on inherited wealth could eliminate student debt while reducing growing inequality. Inae Oh, The Richest 0.1 Percent Is About to Control More Wealth Than the Bottom 90 Percent,Moyers & Company, November 13, 2014. The basic stats. Jared Bernstein, Inequality and the economic ‘shampoo cycle’: bubble, bust, repeat, Washington Post, November 14 2014. Why the gap between the rich and everyone else matters so. Fabian Kindermann and Dirk Krueger, High marginal tax rates on the top 1%,VoxEU, November 15, 2014. Current top tax U.S. rates run lower than would be optimal, and increasing them would likely benefit society as a whole. “Make room for The Rich Don’t Always Win on your bookshelf right next to Howard Zinn’s A People’s History of the United States.”
Too Much editor Sam Pizzigati’s gripping historyof the 20th century’s forgotten decades traces the battle against America’s original plutocracy. Read the intro online, then get the special publisher discount. |
| NEW READS | |
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Divining the Desires of the World’s Ultra Rich
All across the world today armies of accountants, lawyers, bankers, and realtors are rising every morning with one burning question on their minds. They proceed to spend their every waking hour searching for the answer. What do rich people, they all desperately want to know, really want? Find the right answer, these professionals well understand, and grand fortune awaits. This new report represents still another effort to get at this most energetic of the financial world’s intellectual pursuits. Sotheby’s International Realty has just queried deep pockets in four of the world’s densest centers of awesome affluence: the United States, the UK, China, and Brazil. The answer Sotheby’s offers? The rich in different places want different things. One example: Wealthy Americans — here defined as anyone with over $2 million or more above and beyond the value of their residential property — don’t particularly care if a new home they purchase has space to display an art collection. Only 22 percent rate this space as a priority. The Chinese rich, by contrast, really do care about display space for their art collections. Over half of them, 51 percent, rate this space as essential. And what do rich Americans want? Multi-car garages big enough to display their automobile collections. These garages excite 28 percent of America’s rich and only 18 percent of China’s. Brazil’s wealthy, by the way, go ga-ga over homes with helipads at over twice the rate that America’s wealthy do. Thank you, Sotheby’s, for sharing. |
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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. | |
Luxury Lifestyle Report: A Study of High Net Worth Real Estate Consumers, Sotheby’s International Realty, May 2014.
