|August 20, 2012|
The new school year has arrived. By next week, classrooms will be full the nation over. Really full. Budget cuts have left America's schools shy tens of thousands of teachers — and classrooms much too stuffed for effective learning.
“In science classes,” asks one teacher leader in Georgia’s Gwinnett County, “do you want 40 students with 30 Bunsen burners?”
How much would the federal government have to pump into Gwinnett County and school districts elsewhere to restore, for school year ahead, all the teaching positions lost since 2009? Just under $15 billion.
How much will the federal government lose this year to tax code provisions that have average American taxpayers subsidizing excessive executive pay? We have that eerily comparable figure — and lots more — in this week’s Too Much.
|GREED AT A GLANCE|
Been noticing more advertising that trumpets the virtues of America’s top defense contractors and the weapons they manufacture? Get set for still another assault on your eyeballs as the top execs at Lockheed and the rest of the nation’s military-hardware makers maneuver to keep the good thing they have going. How good? The top five defense contractor CEOs, Bloomberg News reported last week, pocketed over 43 percent more in total 2011 compensation than the CEOs of America’s five biggest banks. The top five military contractors pulled in $107 million, up from $97 million in 2007 . . .California billionaire Igor Olenicoff may lack for scruples. But he certainly has no shortage of nerve. Back in 2007, the IRS fingered Olenicoff for tax evasion after a contrite staffer at the Swiss bank UBS blew the whistle on him. The billionaire would plead guilty to concealing assets and pay a $52 million penalty. Olenicoff then sued UBS, claiming, notes Forbes, that the bank had misled him about the legality of the offshore accounts where UBS had parked his money. This past April, a U.S. court threw out Olenicoff’s claim that he had been an “innocent dupe,” and last week UBS countersued Olenicoff for his “malicious” lawsuit. But Olenicoff still gets the last laugh. Since his 2007 guilty plea, his fortune has jumped from $1.7 to $2.6 billion . . .
This summer’s hottest “uber splurge” for the uber rich, Fashionista reports, only comes in black. Azature, a small Los Angeles-based global chain of high-end jewelry boutiques, is now offering a diamond-infused nail polish that sports 267 carats of black diamonds and retails for a quarter-million dollars a half-ounce bottle. The catch: Azature will only be retailing one bottle. For deep pockets who miss out on the Azature offer, the British jeweler Models One has a diamond-infused gold nail treatment that runs only $132,800.
Quote of the Week
“The top 1 percent in our nation now possesses more net worth than the bottom 90 percent combined. In 2008, the 400 highest-income taxpayers earned as much as the combined tax revenue of 22 state governments with almost 42 million citizens. It's way past time to reset our moral and economic compass.”
|PETULANT PLUTOCRAT OF THE WEEK|
|his reputation as “the most outspoken business leader in Illinois.” Last year, he even threatened to have Caterpillar exit the state if lawmakers didn't back off on higher corporate taxes. Yet Oberhelman sighed earlier this month that he can’t fathom why so many Americans today “resent” business. Some corporate “bad apples,” he mused, must be to blame. Striking Caterpillar workers in Joliet might just put Oberhelman in that bad-apple barrel. They last week reluctantly ended a 15-week walkout and agreed to a six-year wage freeze that Caterpillar says will make their wages more “competitive.” Oberhelman himself pulled in $16.9 million last year, over six times the CEO pay at Japan's Komatsu, Caterpillar’s top global competitor.Doug Oberhelman, the CEO at heavy equipment maker Caterpillar, relishes|| |
|PROGRESS AND PROMISE|
If you believe the Romney- Ryan gameplan “would take us back to the tax-cutting, deregulatory spree of the past decade, when gains mostly went to the richest,” but worry that President Obama “has yet to lay out the kind of bold proposals” we need to rebuild “a strong middle class,” you don’t stand alone. Yale political scientist Jacob Hacker has just co-authored a “national reform agenda” that has won endorsements from America’s top national labor and civil rights networks. Hacker’s Prosperity Economics revolves around the struggle against economic inequality. Note Hacker and fellow author Nathaniel Loewentheil: “Inequality in the market has translated into inequality in our democracy” — and prosperity won’t return until we directly take on both.
Urge your favorite small businesspeople to sign the petition that urges passage of the Stop Tax Havens Abuse Act, legislation that would end a key unfair competitive advantage that only big banks and corporations can exploit.
|inequality by the numbers|
Stat of the Week
In 2011, 57 U.S. CEOs saved more than $1 million each on their personal tax bills, thanks to the 2001 and 2003 Bush-era federal income tax cuts.
Mega-Million CEOs: Our Tax Dollars at Work
The old robber barons exploited workers and gouged consumers. Today's robber barons are making tens of millions off a lucrative new class of victims: average American taxpayers.
Boeing makes airplanes. But airplanes haven’t made Boeing CEO James McNerney phenomenally rich. Tax avoidance has.
In 2011, the Institute for Policy Studies reported last week, Boeing registered over $5 billion in pre-tax profits. Yet the company didn’t pay Uncle Sam a cent in corporate income tax. Boeing actually collected a tax refund — a “net tax benefit,” to use the technical accounting jargon — worth $650 million.
This sort of tax gamesmanship has been going on at Boeing for years. Over the past ten years, the aircraft giant has only paid income tax in two. The biggest individual beneficiary of this dancing around the tax code: Boeing chief exec McNerney. He took home $18.4 million in compensation last year.
In 2011, for the second consecutive year, Boeing paid McNerney more in personal compensation than the company paid in federal income taxes.
The worst part of this story? Boeing hardly stands alone. Some 25 other major U.S. corporations, the Institute for Policy Studies reports in its latest annual Executive Excess, last year paid their CEOs more than they paid Uncle Sam.
Among these big-time tax avoiders: Ford Motor, International Paper, AT&T, Halliburton. All together, these 26 all-star tax manipulators reported $28.2 billion in corporate profits last year and received nearly $4.3 billion in tax refunds.
The CEOs at these 26 corporate giants averaged $20.4 million in 2011 compensation, even more than Boeing chief exec McNerney took home.
“In effect, we’re rewarding corporate executives for gaming the tax system,” note Sarah Anderson, Scott Klinger, and the rest of the Executive Excess research team. “Our tax code is helping the CEOs of our nation’s most prosperous corporations pick Uncle Sam’s pocket.”
CEOs do that picking via a variety of tax-avoiding stratagems. Boeing’s McNerney has been partial to the “Research and Experimentation Tax Credit,” a subsidy that “first crept into the tax code as a temporary measure during the 1981 recession,” the new Executive Excess observes.
This “temporary” provision essentially lets taxpayers subsidize research and development that major companies like Boeing would be doing anyway. Boeing, as a prime defense contractor, gets a double dip on tax dollars. The company both claims the “Research and Experimentation Tax Credit” and bills the Pentagon directly for research costs.
Over at AT&T, CEO Randall Stephenson swears by a 2009 “accelerated depreciation” tax break that last year saved his company $5.2 billion.
The more corporations like AT&T save in taxes, the new Executive Excess points out, “the more robust their cash flow and eventual earnings.” And “the more robust these cash and earnings numbers, the higher the ‘performance-based’ pay for the CEOs who produce them.”
The 2011 take-home for AT&T’s Stephenson: $18.7 million. The tax treatment of CEO paychecks this large only adds insult to average taxpayer injury. AT&T and other corporations can deduct off their income, as a “legitimate” business expense, all the “performance” pay they shovel into top executive pockets.
The more CEOs “earn,” in other words, the less their companies have to pay in federal corporate income taxes.
The current U.S. tax code, the new Institute for Policy Studies study goes on to note, also includes three other “direct tax subsidies for excessive executive pay.” These four loopholes together cost taxpayers $14.4 billion a year, enough to “cover the annual cost of hiring 211,732 elementary-school teachers.”
Another study released last week, prepared by Temple University tax expert Steven Balsam for the Economic Policy Institute, puts the cost to taxpayers of just one of these four provisions — the tax deductibility of excessive executive pay — at $30.4 billion for the tax years from 2007 through 2010.
The Institute for Policy Studies has been releasing annual Executive Excess reports since 1993, a span of time that has seen CEO pay rise almost every year. CEOs are now making 380 times the pay of average U.S. workers. Back in the 1970s, the CEO-worker pay gap seldom went over 40 times.
If current trends continue, CEOs a decade or so from now may be taking home, on average, more in a morning than their workers take home in a year.
But current trends, the new Executive Excess stresses, don’t have to continue. A vast array of CEO pay reform initiatives are now either pending before Congress or getting discussed by lawmakers and regulators in other nations.
We don’t, in short, lack for ideas on how to rein in outlandish executive pay. We lack only the political will.
Salvatore Babones, Rising Inequality, Global Warming, and Virgin Galactic, Inequality.Org, August 14, 2012. Space tourism may be the ultimate expression of the moral rot that the extraordinary redistribution of wealth upwards has brought into our world.
Stefan Bach and Gert Wagner, Capital levies for debt redemption, Vox, August 15, 2012. Two top German think tank analysts sum up the case for a stiff, one-time tax on the wealth of the rich to finance debt reduction.
Lisa Gilbert and Barlett Naylor, The pay games CEOs play, The Hill, August 16, 2012. Bank executive bonus boom, bank bust, bailout. Repeat. The cycle can and must end.
Andrea Louise Campbell, America the Politically Unequal, Harvard Magazine, September 2012. A new book from three top US political scientists details how economic inequality makes meaningful political equality impossible.
Matthew O'Brien, The Rich vs. the Super-Rich, Atlantic, August 16, 2012. Two charts reveal how much the super rich depend on capital gains income.
|new and notable|
Jeff Hooke and Michael Tasselmyer, Wall Street Fees and the Maryland Public Pension Fund, Maryland Public Policy Institute and Maryland Tax Education Foundation, July 2012.
Over 3,400 local and state public employee pension funds are currently forking over to Wall Street billions of dollars every year in investment fees. But the investments Wall Street manages for these billions typically end up bringing pension funds a lower rate of return than they could get from investing in simple low-fee stock market index funds. By cutting off the Wall Street fee spigot, this new study details, state and local governments the nation over could save more than $6 billion a year. One added benefit: The fewer dollars to Wall Street, the fewer dollars for Wall Street political warchests that bankroll campaigns to slash taxes on the rich and the public services these taxes fund.
Wealth for the Common Good/ A place for those among the top 1 percent who want to help create an economy that works for everyone.