When the gods dance...

Monday, January 14, 2013

Swell Time for Swollen Fortunes

Too Much


Men and women in distinctly unequal nations like the United States, scientists all across the world have been documenting for several decades now, live shorter, less healthy lives than men and women in more economically equal nations.

Top U.S. health officials recently asked two eminent institutions, the National Research Council and the Institute of Medicine, to take their own look at the data. The two reported back last week. Americans, they found, do “die sooner and experience more illness” than their counterparts in other developed nations.

Their detailed new report doesn’t explicitly blame this early mortality on inequality. But the report does rule out a slew of other explanations. Do lifestyles, for instance, explain the poor U.S. health performance? Nope. Well-off Americans who don’t smoke — and watch their calories, too — turn out to have more health problems than their counterparts in other wealthy countries.

In the end, this sobering new study calls for more research. That's what blue-ribbon reports usually do. Maybe the rest of us ought to be calling for something additional. Like more equality. This week in Too Much, we do just that.





How much difference can a day make? Just ask Andrew Mack, the chief exec at Teavana Holdings Inc., an Atlanta-based tea retailer. Mack spent the last day of 2012 selling his company to Starbucks. That same day, December 31, he sold $333 million worth of his personal stash of Teavana shares of stock. Why work so hard on New Year’s Eve? By reaping his buyout windfall only hours before the Bush-era tax cuts expired, Mack ended up saving himself over $20 million on his tax bill. Across the country, the Wall Street Journal reports, at least 58 corporate executives each unloaded stock worth at least $10 million in December. The federal income tax rate on capital gains rose on January 1 from 15 to 20 percent. In 2013, under the Obama health care reform act, deep pockets also now face a 3.8 percent Medicare tax on capital gains and other unearned income . . .

Stephen SchuckenbrockHow wasteful — and cluelessly arrogant — can our corporate executive class be? Consider Stephen Schuckenbrock, the hotshot executive Dell computers promoted to run its services division. Dell clearly wanted Steve to feel wanted. The company spent $1.9 million on “relocation benefits” to move Schuckenbrock from just outside Austin to just outside Dallas, a distance of a mere 200 miles. This generous corporate gesture, alas, didn’t make much of an impression on the ambitious Schuckenbrock. Last month, after less than a year in his new executive slot, he left Dell to “seek new opportunities.” The word on the street: Schuckenbrock desperately wants to be a CEO someplace. And why not? Dell CEO Michael Dell pulled in $16.1 million last year.

How many yachts can squeeze into Gustavia Bay on the Caribbean island of St. Barts? The world’s billionaires seem intent on finding out. They voyaged en masse into St. Barts earlier this month for the island's annual New Year's festivities. In all, local marina officials counted 130 giant yachts, 17 of them stretching over 200 feet, the global standard for “super yachts.” Among the yachting gentry on hand: corporate raider Ron Perelman in his 261-foot C2, Microsoft co-founder Paul Allen in his 271-foot Tatoosh, and The Limited retail tycoon Leslie Wexler in his 313-foot Limitless. But this American trio all probably left with a severe case of yacht envy. The big fish in the St. Bart’s pond once again this year: the 557-foot Eclipse of Russian billionaire Roman Abramovich. Other yachts have heliports. The Eclipse carries its own missile defense system.





Quote of the Week

“Economists on both the right and left, fromKenneth Rogoff of Harvard University to the Timescolumnist Paul Krugman, are increasingly talking about the detrimental consequences of high concentrations of economic and political power — concentrations that threaten the innovation that is supposed to be what makes unequal outcomes worth the price.”
Thomas EdsallThe Obama Coalition vs. Corporate AmericaNew York Times, January 9, 2013


Hank GreenbergHank Greenberg, the ex-CEO of insurance giant AIG, likes to sue. In 2009, Greenberg claimed AIG “misrepresentations” had tanked his AIG share value and brought suit against the company. But Greenberg himself, before his forced 2005 resignation, had led AIG into subprime mortgages, the move that collapsed the AIG house of cards. Now Greenberg is suing the United States, claiming that the AIG federal bailout imposed onerous terms that hurt the firm’s top shareholders, Greenberg included. His lawyers are claiming that the AIG bailout actually served to bail out Goldman Sachs and other big banks. True enough. Big banks ended up with 100 percent of the cash AIG owed them. What the lawyers don’t mention: AIG under Greenberg, as one analyst notes, took on billions in “cosmically stupid credit default swap bets” with top banks. The AIG board opted last week not to join Greenberg's suit.






Billboard Project 06

Larry Chait, for the Billboard Project





Web Gem

The Equality Trust/ This London-based site, inspired by the blockbuster book The Spirit Level: Why More Equal Societies Almost Always Do Better, has just gone through a redesign. You don't have to be British to benefit!



Barbara EngelCEOs worldwide figure to be watching Switzerland this winter. Swiss voters will be casting ballots March 3 on an initiative that bans CEO signing bonuses and golden parachutes — and lets shareholders decide all top executive pay and unelect corporate board members at annual meetings. The bad news for Swiss execs: The Swiss parliament has already adopted some of the initiative’s provisions. The even worse news for Swiss execs: Upcoming later this year will be a vote on an initiative that would limit any Swiss firm’s “maximum wage” to 12 times its lowest. In 2011, the top exec at Switzerland’s Big Pharma giant Novartis took home 266 times the pay of his company’s lowest-paid worker. The pending “1:12” initiative finally puts on the table, notes Swiss Review editor Barbara Engel, the key question: “At what point does greed begin?”


Take Action 
on Inequality

Want to help people better understand the roots of the Great Recession and how our current economic order perpetuates inequality? Get yourself some ace organizer training at the United for a Fair Economy March 14-17Training of Trainers Institute.


Wealth changes




Stat of the Week

Wages, as a share of the U.S. gross domestic product, have fallen from over 50 percent, the mid-20th century norm, to just 43 percent. But the reality for average workersactually runs bleaker than this stat suggests. The share of wage income going to the top 1 percent of wage-earners — think corporate executives — has nearly doubled, jumping from 7.3 in 1979 to 12.9 percent in 2010.



Swell Times for America's Swollen Fortunes

 All those millions that CEOs and hedge fund managers have grabbed over recent decades? Our current tax code won't let us grab them back.

Can a democracy survive if the richest of the rich within it can pass on to their heirs, generation after generation, the vast bulk of their fortunes?

In the United States, that question first became a top-tier topic of political debate back over a century ago. Fortunes of almost unimaginable size were then towering over the nation’s economic landscape. These huge fortunes, Americans feared, could easily become the building blocks for a new aristocracy, for financial dynasties that could leave America's democracy a dead letter.

How could average Americans prevent that ruin? The nation needed, more and more Americans came to agree, to tax — and tax heavily — the fortunes the super rich bequeathed to their heirs.

America, President Theodore Roosevelt declared in 1906, must place “a constantly increasing burden on the inheritance of those swollen fortunes which it is certainly of no benefit to this country to perpetuate.”

A decade later, Congress began to put that burden in place. Lawmakers enacted a federal tax on the grand estates the rich left behind at death, and this new estate tax would eventually have steady support in the White House, from Republicans and Democrats alike.

Vast “inherited economic power,” as Franklin D. Roosevelt opined in 1935, “is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our Government.”

Any society that tolerates a “fabulously wealthy” class, Republican President Dwight Eisenhower would add a generation later in 1960, is asking for trouble.

“Since time began,” Ike reminded America, “opulence has too often paved for a nation the way to depravity and ultimate destruction.”

Depravity here we come. A dozen years ago, America’s political leaders took it upon themselves to start hacking away at the federal estate tax. The last-minute budget deal struck at the end of 2010 extended — and deepened — that hacking.

Our latest last-minute federal budget deal — the “fiscal cliff” bargain reached right on the eve of 2013 — has now locked all that hacking in place. Our rich today can now do exactly what Republican Teddy Roosevelt warned us against. They can easily “perpetuate” their “swollen fortunes.”

The ease of this perpetuating hasn’t come across in most news accounts of the fiscal cliff deal. These accounts typically note that the deal allows a wealthy person to leave behind, tax-free, the same $5 million that the 2010 tax deal wrote into the tax code. But this $5 million figure only hints at the huge free pass America’s lawmakers have handed America’s most awesomely affluent.

That $5 million, for starters, gets adjusted annually for inflation. In 2013, this adjustment will up the exemption to $5.25 million. This $5.25 million, in turn, only applies per spouse. A couple will this year be able to totally exempt from estate taxation $10.5 million.

Even this arithmetic doesn’t tell the full story.

Decades ago, Congress realized that dynastic fortunes would flourish if the rich could avoid estate tax liability at death by giving away, while they were still living, the bulk of their fortunes to heirs. The solution: the gift tax, a federal levy on substantial transfers of cash and other assets.

The gift tax and the estate tax have worked in tandem. The substantial gifts the wealthy give to their heirs during their lifetimes get subtracted from the total allowable estate tax exemption. In 2013, a wealthy couple that has bestowed $2 million in gifts will only get to exempt, at death, another $8.5 million.

Or so the tax theory goes. In reality, the rich can “gift” their way to a much greater estate tax exemption. In 2013, the gift tax will only kick in when a single wealthy person gives a single individual more than $14,000 within a single year.

A wealthy couple, under this lucrative loophole, can together give $28,000 a year to as many individuals the two spouses choose, for as many years as they want, and face not one penny of gift tax.

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Consider, for instance, a CEO with two grown children and four grandkids. This exec and spouse can gift $168,000 a year to their six nearest and dearest without paying any taxes at all on the gift.

And those six nearest and dearest? They don’t have to pay a penny of personal income tax on any of that $168,000. They don’t even have to report the $168,000 on their tax returns. Nor will these six heirs face any taxes on — or even have to report — the additional mega millions they’ll eventually inherit.

We’re letting, in other words, our grandest fortunes swell without any reasonable limit. Our progressive forbears didn’t accept that swelling. Neither should we.





New Wisdom
on Wealth

Matt Stoller, Shared sacrifice – except for CEOsReuters, January 8, 2013. Surely, if CEOs get large salaries, then they’d have to pay higher taxes under the fiscal cliff deal, right? Actually, no. Welcome to the lucrative world of deferred pay.

Harold Meyerson, A tax deal only the ultra-rich could loveWashington Post, January 9, 2013. How much do the newly enacted tax hikes on the wealthiest Americans actually affect the uber rich? Hardly at all.

Lawrence Mishel, John Schmitt, and Heidi Shierholz, Assessing the job polarization explanation of growing wage inequalityEconomic Policy Institute, January 11, 2013. Why getting more young people to complete college won't end the inequality that ails us.

Bill Moyers, The ‘Crony Capitalist Blowout,’ Moyers & Co., January 11, 2012.
The same CEOs who want to cut Social Security to balance the federal budget just rushed to deny Uncle Sam a tiny bit more of their personal windfalls.



The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class cover

In the January issue of the ColdType online magazine: a chapter-length excerpt from The Rich Don't Always Win, thenew book by Too Mucheditor Sam Pizzigati


A Guide to Understanding Our Unequal World

Linda Pinkow, Sam Pizzigati. and the Dollars & Sense collective, editors, The Wealth Inequality Reader, fourth edition. Economic Affairs Bureau, 202 pages.

Wealth Inequality ReaderAbout a decade ago, the folks at Boston's Dollars & Sensecombined the most incisive pieces on America’s growing concentration of wealth that had appeared in their monthly magazine with some brand-new analyses and published aWealth Inequality Reader. This jargon-free volume quickly became an educator staple. Now a fourth edition has been published, and this latest edition may be the best yet. From the intro chapter that lays out the latest stats on U.S. and global wealth distribution — wonderfully illustrated by Nick Thorkelson — to a final section that spotlights strategies for undoing the colossal inequality all around us, this newWealth Inequality Reader ably touches all the bases.







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