|July 23, 2012|
Hot enough for you? Last month “broke or tied 3,215 high-temperature records across the United States,” one new report has it, and this month already rates as another scorcher. But the real heat these days seems to be on Mitt Romney — for his refusal to release any of the federal tax returns he filed before 2010.
Assorted tax experts and pundits spent last week speculating on why the GOP Presidential hopeful has dug in his heels against disclosure. Did Mitt have a fortune in Swiss bank accounts? Did he take advantage of the amnesty the IRS offered in 2009 to taxpayers who had fraudulently concealed offshore income?
Or did Romney parlay paper losses in his investment portfolio into a zero tax rateon his mega millions? We may never know.
One thing we do know, thanks to a blockbuster report on tax havens released yesterday: The world's ultra rich have far more wealth than we ever imagined. How much more? Think trillions, people. This week's Too Much has the details.
|GREED AT A GLANCE|
This past spring, French presidential candidate François Hollande pledged that “if there are sacrifices to be made — and there will be — then it will be for the wealthiest to make them.” Hollande, now president, seems to be making good on that pledge. He has unveiled a revised 2012 budget “weighted overwhelmingly,” the Financial Times notes, “towards taxes on the rich and big companies.” And on tap for 2013: a new 75 percent tax rate on French income over 1 million euros, about $1.3 million. The top U.S. tax rate? Still just 35 percent. But Americans support raising that rate by a two-to-one margin, says a new Pew Research poll. Less than half the nation's Republican voters, just 41 percent, feel that hiking taxes on income over $250,000 would “hurt the economy.”On CEO pay, says a new London School of Economics study, top corporate boards haven't grasped that classic definition of insanity. They keep “doing the same thing” over and over “expecting a different result.” Lavishly paid CEOs, in the meantime, continue to disappoint. Someone want to pass this study to Yahoo's corporate directors? They’ve just hired theirfourth CEO in four years. The latest, Marissa Mayer, will be raking in $59 million to start. She replaces Scott Thompson. He stood to make $26 million his first year, but Thompson only lasted four months. His predecessor, Carol Bartz, signed on for $32 million. She followed Yahoo founder Jerry Yang, who put in a brief stint after his hand-picked successor Terry Semel flamed out, but not before cashing in $204 million worth of personal option profits in 2004 . . .
Over the next five years, Yahoo CEO Marissa Mayer could pocket as much as$129 million from her new pay deal. That may just earn her a place on a futureMother Jones list of America's “ten most outrageously overpaid CEOs.” Atop the latest outrage list, released earlier this month, sits new Apple CEO Timothy Cook and the $378 million pay deal he inked last summer. Just by coincidence, on the same day this outrage list appeared, Deadline New York unveiled a list of a dozen media moguls who last year took home what the trade journal deems “not out-of-whack” compensation. Not out of whack? The top execs on the list averaged $12.6 million in 2010, quadruple the average pay of the nation’s top three CEOs in 1970 and 1980, after adjusting for inflation.
Quote of the Week
“It’s still amazing that someone as smart as Romney didn’t understand that in an era of growing income inequality and increasing economic hardship, the combination of ostentatious wealth and aggressive tax avoidance would rub a lot of voters the wrong way. But that fact in itself explains the country’s current predicament — the wealthiest Americans have become so disconnected from the rest of us that they simply can’t conceive of the political ramifications of their actions.”
|PETULANT PLUTOCRAT OF THE WEEK|
|prominent commodity futures executive has confessed, after a failed suicide attempt, to “misappropriating” customer cash for almost 20 years. Some $200 million, authorities say, is missing. But the Peregrine CEO has no regrets about misleading federal regulators. The 64-year-old still considers them the “Gestapo.” Wasendorf also denies living large. Contends the chief exec: “I don't live a lavish lifestyle.” Wasendorf’s non-lavish lifestyle includes a million-dollar condo in Chicago, a near-million-dollar home in Iowa, a private jet valued at over $7 million, and a $100,000 wine collection. Wasendorf is now facing criminal charges that could keep him jailed “for decades.”Russell Wasendorf Sr., the CEO of Peregrine Financial, has come clean. Sort of. The|
Stat of the Week
A tale of two governors of Massachusetts — and rising U.S. inequality: In 1987, the year before he ran for President. Michael Dukakistook home four times the average American income. In 2011, Mitt Romney took home 400 times that average.
|INEQUALITY BY THE NUMBERS|
Sign this petition to urge Congress and the White House to reject the Bush tax cuts and add new tax rates of 45 percent on income over $1 million and 49 percent for billionaires.
Mitt's Offshore Shenanigans: The Bigger Story
All those official government stats on the maldistribution of wealth in the United States — and the world — vastly understate the actual extent of our contemporary inequality, says a landmark new study.
Are America’s rich getting richer? They’re certainly making much more than ever before. Every official income measure we have shows that America’s most affluent are upping their incomes at a much faster clip than everyone else.
How fast? Between 1980 and 2010, notes an analysis of IRS tax data this past spring by economists Emmanuel Saez and Thomas Piketty, incomes for America’s top 1 percent more than doubled, after inflation, to an average $1.02 million.
Average incomes for the nation’s top 0.1 percent, over that same span, more than tripled, and at the tippy top of America’s economic summit — the top 0.01 percent — average incomes more than quadrupled, to $23.8 million in 2010.
And what about the rest of us? After inflation, average incomes for America’s bottom 90 percent actually fell — by 4.8 percent — between 1980 and 2010.
Income stats tell us how much people make. Wealth stats, by contrast, tell us how much people have. The two, common sense tells us, ought to be related. If incomes are becoming much more unequal, then the distribution of our national wealth ought to be becoming much more unequal, too.
But that doesn’t seem to be the case, at least not according to the household wealth data collected by the Federal Reserve Board. Last week, the nonpartisan Congressional Research Service released an analysis of the latest Fed data that shows no significant expansion in the gap between the wealth of the awesomely affluent and the rest of America over the last two dozen years.
In 2010, the Fed data indicate, America’s top 1 percent held 34.5 percent of the nation’s wealth, almost the same exact share of the nation’s wealth that the top 1 percent held in 1995 and not all that much more than the 30.1 percent share that America’s top 1 percent held in 1989.
The income and wealth numbers, in other words, just don’t add up. How could the top 1 percent share of America’s wealth be holding relatively steady over the same span of time that top 1 percent incomes have been soaring and bottom 90 percent incomes have been sinking?
We have ourselves a paradox here. What could explain it? One explanation might be that the Federal Reserve hasn’t adequately counted the wealth of the wealthy. Indeed, Fed researchers do acknowledge that they don't take into account — for privacy reasons — the wealth of anyone in the annual Forbes list of America’s 400 richest. In 2010, this top 400 held a stunning $1.37 trillion in net worth.
But even if the Federal Reserve had taken this wealth into account, the top 1 percent share of U.S. wealth would have increased by not much more than a percentage point, not enough to solve the inequality paradox.
So what else could explain our paradox? Maybe the rich are simply living over-the-top, wasting their excess income on expensive food and frolic. But wasteful consumption can’t explain the inequality paradox either. Deep pockets in America’s top 0.01 percent could shell out $5,000 every single day of the year and still have 93 percent of their annual incomes left to spend.
So what can explain the disconnect between the extraordinary income gains of the rich and the modest rise in their share of national wealth?
The London-based Tax Justice Network has an answer. The world’s super rich, the international group has just reported, are stuffing — and concealing — phenomenal quantities of their cash in secret global tax havens.
The Network’s new global tax-dodging study, the most detailed ever conducted, “conservatively” computes the total wealth sitting in these havens, as of 2010, at $21 trillion. That total could plausibly run as high at $32 trillion.
“Almost all these hidden assets are owned by the world’s wealthiest individuals,”note Tax Justice Network analysts, a reality that means that all previous studies “exploring economic inequality have systematically underestimated the wealth and income enjoyed by the world’s wealthiest individuals.”
The lead researcher on the Tax Justice Network’s new research, James Henry, formerly served as the chief economist at the prestigious McKinsey corporate consulting group. In the Network’s new report, The Price of Offshore Revisited, he mines a wide range of public and private sector data sources to gauge capital flows in and out of “offshore” secrecy jurisdictions all around the world.
notes Henry, host over 3.5 million paper companies, thousands of shell banks and insurance companies, and “tens of thousands of shell subsidiaries for the world’s largest banks, accounting firms, and energy, software, drug, and defense companies.”These havens,
This vast web, aided and abetted by weak and poorly enforced government regulations, has enabled fewer than 100,000 people — just .001 percent of the world’s population — to “control over 30 percent of the world’s financial wealth.”
Americans make up, we know from various previous surveysof the world’s ultra rich, almost a third of the global super wealthy. That would put the American share of unrecorded offshore private assets as high as $10 trillion.
Add this $10 trillion to the wealth of America’s top 1 percent and the inequality disconnect between wealth and income largely disappears. The top 1 percent share of the nation’s household wealth, a steady one-third according to the Fed Reserve data, jumps to the neighborhood of nearly one half.
Paradox solved. The distribution of wealth in the United States has become more top-heavy at a ferociously fast rate, just like the distribution of income.
Now we have a much bigger problem to solve: ending the march to ever greater inequality, narrowing that vast gap between wealthy tax dodgers and the rest of us. Shutting down tax havens might make a great place to start.
Robert de Vries, Could inequality have caused the financial crisis?Inequalities, July 12, 2012. A solid survey of the two schools of thought on how inequality has ushered in financial calamity.
Carl Gibson, Time for a Maximum Wage, Rim Country Gazette, July 15, 2012. A co-founder the US Uncut campaign against corporate tax dodging makes the case for capping income.
Dean Baker, Technology doesn't cause inequality,Guardian, July 16, 2012. Apologists for inequality like to blame technology for income concentration. But don't blame high tech. Blame changes in public policy.
Shawn Fremstad, Family structure is overrated as an explanation of inequality, Center for Economic and Policy Research, July 16-17, 2012. A New York Times front-page story on single moms diverts attention from the real driving forces behind America's great economic divide.
Dylan Matthews, What’s so special about equality of opportunity? Washington Post, July 16, 2012. Those who consider equality of opportunity more important than economic equality are ignoring economic reality. The two go hand-in-hand.
Sylvia Allegretto, The wrecking ball, Berkeley Blog, July 16, 2012. Observations on the wealth of the wealthy from one of nation's top authorities on wealth distribution.
David Callahan, High Profits, Low Wages, and the Growth of Inequality,Policy Shop, July 19, 2012. Most low-wage U.S. workers aren't laboring at struggling start-ups. They're working for major corporations that richly reward their top execs.
Out of Berlin, an Austerity Alternative
Stefan Bach, Euro crisis, public debt, and private wealth. German Institute for Economic Research (DIW Berlin), July 11, 2012
Bankers chase after grand personal fortune. Their reckless behavior places the entire private financial industry at the brink of collapse. Public sector officials rush to the rescue. But the rescue pumps up the public debt. To cut that debt, public officials then demand austerity budgets that devastate average families.
What’s wrong with this picture? Just about everything, says a leading German think tank that has just proposed a simple and straightforward alternative to making working families pay for the recklessness of the rich.
That alternative: a “capital levy,” a one-time 10 percent tax — payable over a multiple-year span — on any personal wealth for couples that runs higher than 500,000 euros, the equivalent of about $615,000.
would impact only the wealthiest 8 percent of Germany’s adult population and raise the equivalent of $283 billion.A capital levy along these lines, notes Stefan Bach of the German Institute for Economic Research in Berlin,
How much could a similar one-time wealth tax raise in Europe’s most debt-ridden states? Bach’s Institute isn’t making a specific projection, mainly because Spain, Italy, and Greece don’t have wealth distribution stats available as current as Germany’s.
But the data that do exist, says Bach, show clearly that the wealthy in Spain, Italy, and Greece have private assets “that total considerably more than the sovereign debts” these nations have amassed.
The German Institute for Economic Research work on the wealth tax notion also offers no estimates of what a one-time 10 percent wealth tax in the United States might raise. That sum would be substantial, much higher than the $283 billion a German wealth tax would raise.
One big reason why: Wealth remains much more concentrated at the top in the United States than in Germany. In 2007, according to official government stats, Germany’s richest 1 percent held 23.3 percent of the nation’s wealth. That same year in the United States, according to official Federal Reserve stats, the share of American wealth that sat in top 1 percent pockets stood at 34.6 percent.
The new German Institute for Economic Research call for a wealth tax, released earlier this month, so far appears only in German. But last summer the Institute released an in-depth background paper on wealth taxes in English as well.
This background paper explains how exactly a one-time wealth tax might work — and points out that a one-time wealth tax already has worked. In the early 1950s, a capital levy in Germany helped raise enough revenue to fund an appreciable chunk of the nation’s postwar reconstruction.
History just might repeat. Germany’s two ruling parties do remain dead set against any capital levy. But key regional leaders in Germany’s biggest opposition party are aleady pushing the wealth tax notion.