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| THIS WEEK | |
What happens when societies let rich people wink at the tax collector? Our latest object lesson comes from Northern Virginia’s Fairfax County, the second richest county in the United States. In this county's wealthiest community, Great Falls, over half the households make $250,000 or more a year. But public schools in Fairfax, despite that wealth, are struggling financially. Last year, the county school system started charging students who want to play school sports — $100 per kid per team. Exemptions only go to kids who qualify for free or reduced-price school lunches. A single mom with two kids and any income over $34,281 income can have to pay as much as $400 extra per year. Think that’s inexcusable? Next door to Fairfax sits America's richest county. Schools in this political jurisdiction, Loudoun County, also have a sports fee — andno program at all to help the as many as 700 unenrolled homeless and “precariously housed” children who live within the county's borders. America's second-richest man has had enough. Last week, in a widely publicized op-ed, Warren Buffett urged higher tax rates on America’s wealthy. The Wall Street Journal, in response, advised Buffett to “go back to his day job.” This week's Too Much has more on Warren Buffett — and the abuse heaped upon him. | |
| GREED AT A GLANCE | |
Hong Kong currently hosts a higher share of households worth $100 million or more than any other society on Earth, save Saudi Arabia and Switzerland. How high has this wealth helped bid up housing costs? Thousands of locals are now living in “cage homes,” rented cubicles so small their occupants can barely stand up. These occupants, for a few hours recently, included Erwin Huang, a top Hong Kong business exec. Huang was “starring” in The Battle of the Poor Rich, the Hong Kong TV hit that turns the city’s “wealthiest business titans into its poorest laborers for a few days.” Huang couldn’t bear the sweltering heat in his “cage home.” He ended up sleeping on the street. Huang also had trouble with his $6-a-day garbage-collection job. He nearly passed out from the stench. ObservesBattle of the Poor Rich executive producer Doris Wong: ”Hopefully we are changing the mindsets of one rich person at a time.”  What should we call a 24-karat gold handbag that takes 300 hours to craft? Or a clutch fashioned from crocodile skin “almost as supple and matte as cashmere”? Exquisitely exclusive handmade luxuries like these are now popping up at posh retail outlets all around the world. Prada, for instance, has just placed 20 customized crocodile bags — running up to $41,000 each — in shops from Beverly Hills and Las Vegas to Milan and Monte Carlo. But the luxury industry, Women’s Wear Daily reported last week, hasn’t yet fixed on a label for this “unapologetically expensive” new retail category. Some retail execs are tagging these new creature comforts “hyper luxury.” The CEO at Fendi, a bagmaker now offering made-to-orders that retail at over $44,000 each, is holding out for “ur-luxury,” as in Sumeria’s ancient city of Ur, luxury’s original hometown . . . America’s richest 400, says Forbes magazine, have a combined wealth that tops $1.3 trillion. Just how much in average-life goods and services could all that money buy? A fascinating new infographic from United for a Fair Economy has some answers. Our 400 richest households could afford to buy, UFE points out, a new car for every family in the United States — or give every single worker in the country a $10,000 bonus. Our 400 richest, alternately, could look to the future. Together, notes UFE, they have enough wealth to triple the number of teachers in America and then provide each of these teachers a $30,000 raise . . . America’s wealthy have more pressing priorities, of course, than education. Bankrolling Presidential candidates, for one. The newest trend in deep-pocket political giving? That has to be, the Washington Post reported last week, the rise of the “super bundler.” Ever since last year’s Citizens United Supreme Court ruling, super bundlers — and the corporations they run — have been able to spend as much on candidates as they choose. Any “wealthy donor,” the Postnotes, can now give $67,000 directly to a White House hopeful and that hopeful’s party, “plus unlimited amounts to super PACs — which must reveal their donors — and nonprofit advocacy groups, which do not.” Comedian Steve Colbert has been spoofing this surreal system with a “super PAC” of his own, Americans for a Better Tomorrow, Tomorrow. But an Iowa TV station is refusing to air the Colbert PAC’s satirical ads. The spots, WOI-TV charges, would be “confusing” to viewers. | |
| INEQUALITY BY THE NUMBERS | |
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| IN FOCUS | |
On a Rogue Billionaire, the Banging Begins Investor Warren Buffett last week made an insightful case for higher taxes on America's rich. The reaction to that case, from our wealthy's most ardent defenders, offers insights, too — on our plutocracy. In the United States today, phenomenally rich people pay a smaller share of their income in federal taxes than average Americans. Billionaire Warren Buffett, the CEO of the Berkshire Hathaway investing empire, has been noting this simple fact for years now, in a series of speeches and interviews.. In one 2007 NBC interview with Tom Brokaw, Buffett even bet $1 million — against any of “his fellow rich guys” who might choose to challenge him — that all the billionaires on the annual Forbes 400 list were paying, on average, less of their incomes in federal taxes than their receptionists. No billionaire in the Forbes 400 ever took Buffett up on that bet. But Buffett, until last week, had never stopped to spell out, in a prominently placed written commentary, his overall perspective on rich people and taxes. Now he has, and his newly published op-ed in the New York Times — Stop Coddling the Super-Rich — is giving apologists for those rich a major case of heartburn. Warren Buffett poses a major problem for these apologists. They can’t challenge his accuracy. Receptionists for billionaires do pay federal taxes at higher rates than their bosses. And apologists can’t, of course, rationally defend this state of affairs either. No political philosophy — outside the law of the jungle — justifies taxing receptionists more burdensomely than billionaires. Apologists for the awesomely affluent have learned, over the years, not to waste their energy trying to defend the indefensible. They go on the attack instead — against the credibility of anyone who dares object to our current taxing realities. The attacks typically follow a predictable pattern. “You’ve never met a payroll,” the apologists shriek at progressive lawmakers who call for high taxes on high incomes. “You’ve never worked in the real world” goes the retort to tax-the-rich academics. “You’ve never had to risk capital” runs the response to labor advocates for ending tax breaks for wheeler-dealers. None of these put-downs work against Warren Buffett. He has “risked” capital and met payroll. He has “succeeded” — to the tune of a personal fortune worth almost $50 billion — in the “real world.” So how did America’s rationalizers for grand private fortunes respond last week to Warren Buffett’s widely publicized class heresy? They assaulted Buffett’s character — and our intelligence. The character smears began almost as soon as Buffett’s New York Times column started bouncing through America’s media echo chamber. Grover Norquist, the nation’s most feared champion of “no new taxes” orthodoxy, set the tone. “Warren Buffett says he ‘wants’ to pay higher taxes,” Norquist sneered in a Twitter blast. “Okay, Warren, just write the check. What are you waiting for? Hypocrite.” Politicos who carry the water for America’s wealthy immediately picked up on the Norquist theme. If Warren Buffett “wants to pay more taxes and send more of his money to Washington,” sniped Brad Dayspring, a spokesman for House majority leader Eric Cantor, “why doesn't he just do it?” “For tax-raising advocates like Warren Buffett,” sarcastically added the National Republican Senatorial Committee chairman, Senator John Cornyn from Texas, “I am sure Treasury would take a voluntary payment for deficit reduction.” “Write a big check today,” echoed GOP Presidential candidate Michele Bachmann Tuesday at a South Carolina rally. “There’s nothing you have to wait for.” “Why doesn’t he set an example and send a check for $5 billion to the federal government?” former Presidential candidate Pat Buchanan would go on to demandon MSNBC’s Morning Joe. “You get all this noise from these big rich folks. Let them send checks and set an example instead of writing op-eds.” All this piling on serves to obscure, quite intentionally, Buffett’s main point. Buffett never once says in his Times op-ed that he “wants” to pay more in taxes. His op-ed’s actual takeaway: Especially today, with so many Americans “truly suffering,” America’s mega rich should do their part to “deal with our country’s fiscal problems” by paying federal taxes at a significantly higher rate. America’s mega rich, if Buffett or any other single billionaire “mailed in” a check, would still not be doing their part. They would still be dodging their responsibility — and sacrificing, at tax time, nothing significant. By not sacrificing, these mega rich would be continuing to exploit those Americans who do. Other affluent Americans, besides Warren Buffett, do understand this reality, as two co-founders of Wealth for the Common Good, Chuck Collins and Alison Goldberg, noted last week. But the nation, the two add, needs many more of these wealthy to step up and speak out. And America needs, even more, the “bottom 98 percent” actively engaged, as never before, in the nation's tax fight. The alternative? Collins and Goldberg put that starkly: “Austerity for everyone but the rich — and a growing economic apartheid.” | |
| IN REVIEW | |
Art Dealers to the Barricades? Clare McAndrew, The Role of Art Dealer and Antique Dealers: An Added Value. CINOA Historical and Future Perspectives, June 2011.  The art world may well be humanity’s most natural constituency — beyond the rich themselves — for “trickle-down” economics. Only the affluent, after all, buy fine art. The more money in affluent pockets, ergo, the better off everyone in art. Or so most everybody in the art world seems to believe. What’s good for the rich, the industry assumes, must also be good for all of art. This conventional wisdom may need some updating. The trade association for art dealers worldwide — originally known as the Confédération Internationale des Négociants en Oeuvre d’Art, or CINOA for short — has just released a 75th-anniversary study that details trickle-down’s dark side. Fortunes for the world’s rich, notes study author Clare McAndrew, may be soaring. But the men and women who deal art are sinking. They’re hurting financially in their wallets — and professionally in their hearts. About 375,000 people around the world currently make their living selling artwork and fine antiques. They “average” about $87,000 in annual earnings. “In reality,” McAndrew points out, most dealers make do with considerably less — since only 5,000 dealers worldwide rack up half the sales dealers record. And all dealers, those top 5,000 included, now face enormous competition from giant global corporate auction houses, most notably Christie’s and Sotheby’s. Auction houses used to serve as wholesalers to the trade. Now they compete at the retail level. Wealth in the art world, in short, is concentrating as fiercely as wealth in the overall economy. And this concentration, inside art galleries and out, has altered how art dealers go about their daily work. Dealers used to pride themselves in their understanding and knowledge of art. They took great professional pride in cultivating the tastes of their clients. Their clients, in turn, appreciated their guidance. Many art buyers today, Clare McAndrew explains in her new study, still do collect “art for its own sake.” But “many more” come to the art market as investors pure and simple. “Motivations have shifted over time,” McAndrew writes, “to considerations of returns, risk, and portfolio balance.” Artists, in effect, now paint for plutocrats. The super rich bid up the cost of artwork. The “upper middle class” — the art-loving bread-and-butter, historically, for the vast majority of art dealers — cannot keep pace. McAndrew’s study, released just last month, does seem to be making an impact. “Those who think that the policies consolidating the power of the super rich can only benefit the art world as a whole,” notes art editor Ben Davis in one rave review, might do well to “think again.” | |
Quote of the Week
“Our leaders have asked for 'shared sacrifice.' But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.”
Warren Buffett, billionaire investor, Stop Coddling the Super-Rich, New York Times, August 15, 2011
Stat of the Week
How equal do Americans want America to be? In “blind testing,” says Duke University's Dan Ariely, 93 percent of Democrats in the United States and 90.5 percent of Republicans pick Sweden's more equal wealth distribution over the more unequal distribution in the United States.
New Wisdom
on Wealth
Big Ideas to Fix the Economy: Cap CEO Pay, The Takeaway with John Hockenberry and Celeste Headlee, August 17, 2011. TV personal finance guru Alvin Hall wants to limit CEO pay to $5 million. The corporate savings, he argues, could create 100,000 new jobs.
Returning to the scene of the class war, Feministe, August 18, 2011. A compelling critique of the claim that we ought to consider the mega rich “job creators.”
Citizens for Tax Justice,Warren Buffett Is Right, the Wall Street Journal Is Wrong, August 17, 2011. A point-by-point counter to last week's prime media blast against raising taxes on America's rich.
Chuck Marr, Yes, There’s Real Money at the Top,Off the Charts, August 18, 2011. Returning the average federal income tax rate on the top 1 percent of U.S. taxpayers to its 1996 level, notes this Center for Budget and Policy Priorities analyst, would raise $1 trillion over the next decade.
Michael Hiltzik, Measuring executive pay — and responsibility, Los Angeles Times, August 21, 2011. A top-notch analysis of the corporate push to kill the Dodd-Frank reform provision that will shortly require U.S. companies to annually disclose the ratio between their CEO and median worker pay.
Inequality Links
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