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| THIS WEEK | |
This Occupy Wall Street business is getting out of hand. You just know that’s what America's deepest pockets must now be thinking. Indeed, the editor at a Web site where corporate lawyers hang out recently warned his fellow attorneys to ready their CEOs for confrontations that could pop up just about anywhere. “Are you planning for protests at your annual meeting?” the stern warning asked. “Your CEO's house? Your CEO's golf game?” Golf game? Yes, the warning went on to note, “Occupy Wall Street-type” protestors had disguised themselves as duffers and invaded a golf resort in California’s Newport Beach. Is nothing sacred anymore? In our top 1 percent's upper reaches, the mega rich are taking warnings like these to heart. Some bankers, news reports note, have even started “going to work in jeans” to make themselves unidentifiable. But the rich and their handlers are doing a good deal more than rethink security. They’re recalibrating their ideological defenses. We explore how in this week’s Too Much. | |
| GREED AT A GLANCE | |
 Eugene Isenberg’s successor as Nabors CEO, Anthony Petrello, also has a contract “change in control” clause. He’ll pick up $56.6 million in cash and stock once his parachute opens. Such golden parachute agreements, a Towers Watson consulting group report noted last week, “remain a staple of the pay package for over two-thirds of top U.S. executives today.” Corporate “change in control” clauses typically guarantee outgoing CEOs severance that equals three times their annual compensation. Most corporations also reimburse — “gross up” — their exiting execs for the special 20 percent federal excise tax that Congress imposed on golden parachute windfalls back in 1984 . . . CEOs don’t have to leave their jobs, of course, to cash in big. They just have to “perform” — and hope workers don’t notice that nearly all the rewards for corporate “performance” are cascading into executive suites. A just-released London School of Economics study has found that pay for British CEOs rises an average 3 percent for every 10 percent rise in share price and dividends. Worker pay, on the other hand, rises just 0.2 percent for each 10 percent hike in shareholder return. Only U.S. CEOs take in more annual pay than UK chiefs . . . Leaders from the world’s 20 most pivotal economies, meeting in Cannes on the French Riviera last week, dipped their toes in some forbidden waters. They actually contemplated imposing a new “Robin Hood tax” on speculative financial transactions, a levy global bankers fiercely oppose. Brazil, Argentina, and South Africa announced their support for a “Robin Hood tax” at Cannes, and 11 nations have now lined up behind the notion. But not the United States, Canada, and the UK. The three “blocked progress” at Cannes on any concrete move to advance the levy. World leaders opposing a financial transactions tax, Robin Hood tax campaigner Max Lawson observed Friday, left Cannes “looking increasingly isolated, having sided not with the 99 percent suffering the effects of the economic crisis but the interests of a privileged few in the financial sector.” Stateside last week, senators supporting a modest jobs initiative to spend $60 billion on rebuilding crumbling U.S. roads, bridges, and mass transit systems needed 60 votes to prevail. In a Thursday vote, they garnered just 51, a Senate majority but not enough a break the GOP minority’s filibustering tactics. The minority’s problem with the legislation: The bill would have raised the $60 billion with a 0.7 percent surtax on income over $1 million. The jobs bill's passage would have meant a $13,500 tax hike for some 350,000 taxpayers who average $2.9 million in income, a less than one half of 1 percent average hike per taxpayer. | |
| INEQUALITY BY THE NUMBERS | |
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| IN FOCUS | |
Rags to Riches: Who Should Really Care? Not the 99 percent. We've let the cheerleaders for the richest among us get away with myths about mobility for much, much too long. Mobility, apologists for America's grand fortunes love to argue, trumps inequality. Our society may be deeply unequal, the argument goes, but that doesn’t really matter — because anybody in America, with a little grit, can get rich. In our “land of opportunity,” no one has any legitimate reason to grouse. Researchers over recent years have unveiled a ton of data that demolishes this “land of opportunity” mobility mythology. Fewer and fewer Americans are getting ahead, they’ve documented, as America has become more unequal. And the world’s most equal developed nations, researchers have also shown, have significantly more social mobility than the distinctly unequal United States. In more equal nations, researchers at the Organization for Economic Cooperation and Development reported last year, it’s “easier to climb the social ladder and earn more than one’s parents.” One statistical indication of how much easier: Of American men born into the nation’s poorest 20 percent, 42 percent stay there their entire lives. In more equal nations, the “immobile” share drops to 25 percent. The wealthier in unequal societies, for their part, tend to hold on longer to the considerable advantages their wealth confers. Six generations have to pass, notes the Economic Mobility Project created by the Pew Charitable Trusts, before family economic leg-up disappears in the United States, but only three in Finland. With America growing increasingly unequal, add Columbia University researcher Wojciech Kopczuk and his colleagues, “the very top is harder to reach unless you start very close to it.” How have apologists for America’s top-heavy distribution of income and wealth reacted to this hefty body of mobility myth-busting research? The hard-line free marketeers simply ignore the evidence and keep regurgitating the old claims. America’s “poor don't stay poor, the rich don't stay rich,” as one defiant newspaper editorial proclaimed last week. But the more sophisticated defenders of our unequal status quo have tweaked their tune. Most Americans, these sophisticates recognize, are resonating to the themes Occupy Wall Street is shoving onto America’s political stage. More and more Americans feel trapped in a “99 percent” that has no future. In this political climate, savvy conservatives like Wisconsin congressman Paul Ryan seem to clearly realize, the traditional defenses for inequality no longer have the credibility they once enjoyed. Ryan and like-minded defenders of our contemporary top 1 percent still do celebrate America as a “land of opportunity.” But they’ve started acknowledging how hard average Americans today have to struggle to get by. And in these troubled times, as Ryan openly admitted in a major address he delivered late last month to the right-wing Heritage Foundation, many Americans may begin to “question” just how much opportunity we really do have. But struggling Americans, Ryan went on to exhort, must not let themselves fall prey to those who argue that “government’s role is to help them cope” — or entertain the notion that “most differences in wealth and rewards are matters of luck or exploitation, and that few really deserve what they have.” “That’s the moral basis of class warfare,” objected Ryan, “a false morality that confuses fairness with redistribution and promotes class envy instead of social mobility.” So what answer for our troubled times do Ryan and his fellow defenders of privilege have to offer? We must, they insist, end the government meddling with the “free market” that they claim created our current inequality in the first place. “Absolutely, there’s huge income inequality, and it started right here in Washington,” as Ryan’s congressional colleague, Bill Flores from Texas, recently told a Politico reporter. “The way we fix that is getting the government out of the way of the private sector so we can put these people to work.” The concentration of wealth and power within the top 1 percent, the Ryan crowd is in other words maintaining, isn’t gutting the American dream and creating inequality. Government is. A clever — and totally bogus — assertion. Government has been “getting out the way” for over three decades now, and that’s why Americans are hurting. Lawmakers over these years have undone the federal and state regulations that protect consumers and workers from corporate greed grabs. They’ve slashed the taxes rich people pay and squeezed the tax-funded government programs that help average Americans enter into — and thrive inside — the middle class. Analysts have noted the irony here. Ryan and friends want to cut and eliminate the redistributive and social investment policies — everything from progressive taxation to quality early childhood education — that have successfully fostered mobility across generations in the world’s more equal nations. But just observing this irony leaves unchallenged the myth at the core of the right wing’s defense of inequality: the notion that any society where people can go from rags to riches is working just fine — and needs no overhaul, no matter how unequal that society may be. We should have challenged the absurdity of this claim ages ago. That some people can go from rags to riches, after all, tells us precious little about a society's basic goodness. Take, for instance, the American slave South before the Civil War. No Americans in their right minds today would consider the slave South a good and decent society. We see that era as a time of exploitation and inhumanity. Yet the slave South had its rags-to-riches stories. Under slavery, in certain situations, slaves could “buy” their freedom. Some freed slaves actually accumulated appreciable wealth. But these rags-to-riches stories in no way, of course, made slavery any less reprehensible. Paul Ryan, predictably enough, talked up rags to riches in his widely ballyhooedHeritage Foundation address. A “recent survey of over 500 successful entrepreneurs,” he triumphantly noted at one point in his speech, had “found that 93 percent came from middle-class or lower-class backgrounds.” The defenders of privilege just don’t seem to get it. In truly decent societies we measure success by how many people are leading rich, fulfilling lives, not by counting how many people are becoming rich beyond measure. | |
| IN REVIEW | |
For Top 1 Percent, a 50 Percent Tax Discount Robert S. McIntyre, Matthew Gardner, Rebecca Wilkins, and Richard Phillips,Corporate Taxpayers & Corporate Tax Dodgers 2008-10. A Joint Project of Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Washington, D.C., November 2011. Over a quarter century ago, in 1984, the Washington, D.C.-based Citizens for Tax Justice released its first in-depth report on how much America’s top profitable corporations were actually paying in taxes. America’s top companies, this initial study found, were paying only 14.1 percent of their profits in taxes, less than a third of the corporate tax rate then in effect. That startling report left a bit of an uproar in its wake. Corporate tax loopholes would go on to figure prominently in the 1986 tax reform debate. The tax legislation eventually enacted would plug a host of them. But the 1986 tax reform legislation also slashed tax rates on high personal incomes. Corporate earnings now faced a higher tax rate than the income wealthy Americans reported on their personal tax returns. What happened next? The obvious. Businesses that could easily change their tax status, to take advantage of the new lower personal tax rates, reorganized into “sole proprietorships” and the like. Income that had been taxed at corporate rates now began showing up on individual tax returns. This tax-status makeover would not be an option for America’s biggest corporate powerhouses. G.E. could not become a “sole proprietorship.” So execs at these corporate giants did the next best thing. They invested heavily in politics and had their lobbyist legions carve out huge new loopholes in the tax code. The latest Citizens for Tax Justice corporate tax report, released last week, details the result: America’s top corporations are now getting what essentially amounts to a 50 percent discount off their tax bills. By current statute, corporations are supposed to face a basic 35 percent income tax on their corporate profits. Over the last three years, the new Citizens for Tax Justice report documents, top U.S. corporations have actually been paying only 18.5 percent of their profits to Uncle Sam. Corporations, in effect, have achieved total tax loophole parity with America’s individual super rich. The nation’s top 400 income-earners, the latest IRS stats show, are supposed to be paying taxes on their top-tax bracket income at a rate of 35 percent, the same as the current corporate rate. These 400 mega millionaires and billionaires are actually paying taxes at an effective rate of only 18.1 percent. How are corporations getting what amounts to a 50 percent tax discount? The new Citizens for Tax Justice research walks us through all the major loopholes. Corporate executives, the group’s new report explains, are shifting and stashing their corporate profits overseas. They’re taking huge “accelerated depreciation” write-offs on suspect investments. They’re even, incredibly enough, turning their own stock option windfalls into super corporate tax savings. This infuriating stock option loophole works like this: Corporations grant their top execs “options” to buy millions of shares of company stock at a cost below the going market rate. The companies then deduct off their corporate taxes the difference between the price executives pay to get the shares and the higher marketplace price they get when they sell them. Two-thirds of the 280 corporations Citizens for Tax Justice examines in the group’s new corporate tax report claimed these option deductions over the 2008-2010 period. These deductions saved the 185 corporations involved $12.3 billion. Overall, the 280 profitable companies that the new Citizens for Tax Justice study focuses in on grabbed a combined $1.4 trillion in profits over the 2008-2010 time span. These 280 could have paid, under the tax code, over $473 billion in federal corporate incomes taxes. They actually paid only $250.8 billion. The tax subsidy “discount” for 2010 alone: $85.1 billion. Over a decade, that level of annual tax avoidance adds up to well over three-quarters of a trillion dollars, enough to fill all sorts of holes in the federal budget — and “avoid” massive cuts in public services. Another perspective on the new Citizens for Tax Justice numbers: In the 1950s tax dollars from corporations offset about a quarter of federal outlays. Last year, corporate tax dollars covered only 6 percent of federal expenditures. Shutting off corporate tax loopholes, concludes Citizens for Tax Justice, would bring “real benefits” for Americans, everything from “reduced federal budget deficits” to “more resources to improve our roads, bridges, and schools — things that are really important for economic development here in the United States.” But closing off corporate tax loopholes would not bring “real benefits” to everybody. The power suits who run America’s top corporations are enjoying “real benefits” that plugging tax loopholes would immediately jeopardize. In 2010, Institute for Policy Studies researchers revealed earlier this year, CEOs at 25 of America’s largest corporations — major firms that range from Boeing to Verizon — took home more in personal compensation than the companies they run paid in federal income tax. These top execs averaged $16.7 million each. Rewards this impressive give top corporate executives a powerful incentive to continue their tax avoiding ways. In the 1950s, by contrast. this incentive did not exist. CEOs back then had a distinctly limited income upside. A powerful trade union presence in America’s workplaces and tax rates as high as 91 percent on personal income over $400,000 served to keep huge corporate executive windfalls off the table. Those windfalls now cover our corporate table. We need to knock them off. | |
Quote of the Week
“If the widening chasm between the rich and the rest of us is not addressed, our society will devolve into a jungle — and not even billionaires will enjoy living there.”
Jim Hightower, The disuniting of America,Laconia Daily Sun, November 3, 2011
Stat of the Week
Which candidate for the GOP Presidential nod has the most generous tax plan for America’s mega rich? Rick Perry and Herman Cain are both putting in strong bids for that dubious distinction. Cain’s plan would save taxpayers in America’s most affluent 0.1 percent an average $1,356,078 each, says the Center for Budget and Policy Priorities. Perry’s proposal, calculates the Tax Policy Center, would knock $495,558 off the tax bills of a somewhat larger group, taxpayers making over $1 million a year.
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