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| THIS WEEK | |
Last week, in the world’s two most unequal nations, people committed to forging a more equal future had reasons to cheer. In the United States, Americans from all walks of life marched en masse — in the heart of Wall Street and beyond — to support the young people now occupying public squares all across the nation. Occupy Wall Street, an object of media ridicule only a few short weeks ago, has emerged as a spirited new social force. The whole world is watching. In Britain last week, far below the global mass media radar, the local lawmakers elected last year to run one of London’s most unequal boroughs adopted what may be the world’s first serious local government action plan for combating inequality “both from the bottom up and — where top pay or pay differentials are excessive — from the top down.” We’ve covered, in past issues of Too Much, the drive for “fairness” in London’s Islington borough. And we’ll have deeper coverage on both Islington and the evolving egalitarian ethos of Occupy Wall Street — “We are the 99 percent!” — in future issues. This week: more on that top 1 percent and its latest depredations. | |
| GREED AT A GLANCE | |
 Lawmakers in Spain have voted to put in place a new “wealth tax” on the 160,000 Spanish taxpayers worth over $950,000. The temporary two-year levy will raise an estimated $2.7 billion this year and next, or just under $17,000 per millionaire. A wealth tax in the United States, two Yale legal analysts noted last month, could easily raise $70 billion a year. Bruce Ackerman and Anne Alstott are advocating a 2 percent annual levy on America’s richest 0.5 percent, those households holding over $7.2 million in assets. The return from such a tax, they detail, could raise “at least half the $1.5 trillion in deficit reduction that Congress' super-committee is aiming to achieve over the next decade.” But this wealth tax bid has a deeper goal: We’re reaching the point, Ackerman and Anne Alstott observe, where “extreme wealth concentration threatens the very existence of democracy.” Did Ronald Reagan, as President, try to incite “class warfare” against America’s rich? The question seems absurd. Reagan, after all, ushered in the deep tax cuts on wealthy Americans that sped inequality in the United States on a spectacular upward spiral. But Reagan, the Center for American Progress pointed out last week, would rate as a “class warrior” by today’s conservative standards. The Center has unearthed a 1985 video that has Reagan decrying the tax loopholes that were letting some millionaires pay taxes at a lower rate than bus drivers. Last month, congressional GOP leaders charged President Obama was making a “move down the class warfare path” when he agreed that billionaire “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett.” You might call it boot camp for billionaires. The Citibank private banking arm that caters to “ultra high net worth” households is running a series of workshops devoted to grooming the young adult offspring of the super rich “for the responsibilities of inheriting vast wealth.” And what do the scion of the super wealthy learn at the Citi sessions? In one workshop this past summer, at Christie's auction house in London, about 30 awesomely affluent 20-somethings engaged in a “simulated” auction — for imaginary works of art — while their deep-pocket elders downstairs bid on real artwork. The evening’s most famous piece up for real sale, Gimcrack on Newmarket Heath by George Stubbs, sold for $35 million, the third-highest winning bid ever for an Old Master painting . . . Artwork and other luxury collectibles have become, ever since the 2008 financial meltdown, an increasingly popular safe haven for the global ultra wealthy. One reason: The wealthy can now borrow against their art and use the dollars banks are willing to loan them, with the artwork as collateral, to invest in other assets. Banks traditionally haven’t made many art-backed loans. But bankers today,notes artwork attorney Pierre Valentin, have become so eager to gain the private banking business of the ultra wealthy that they’re willing to do most anything to get the ultra wealthy’s attention. The new “cash cow” status of artwork collections is helping boost fine art sales to record levels. Over the first six months of 2011, reports the art consulting firm Artprice, 944 artworks sold globally for over $1 million. The previous six-month record, set three years ago: only 735 pieces. | |
| INEQUALITY BY THE NUMBERS | |
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| IN FOCUS | |
Do Plutocrats Need to Worry about Potholes? One luxury automaker is betting big that America's affluent feel no responsibility to the greater society crumbling all around them. Audi, the luxury automaker, has a new ad campaign out. You may have seen theTV spot. The new campaign is running full-page newspaper ads as well. Who’s Audi targeting? People of means, obviously. People who can afford, even in Great Recession times, a $50,000-plus automobile. These affluents already have, of course, plenty of choices, and that makes life rather difficult for luxury car makers like Audi. They need ever fresher messages to attract the affluent into their showrooms. And Audi now has one. You won't find, in Audi’s new ad campaign, any clichéd references to “tasteful hand-finished appointments.“ Or “head-turning style.” Audi has ripped its new sales message straight from the Forbes and Wall Street Journal headlines that scream “budget crisis” and “government funding cutbacks.” “The roads are underfunded by $450 billion,” the Audi message pronounces. “With the right car, you may never notice.” Subtle? No. Powerful? Yes. Audi is speaking straight to the anxieties of America’s affluent — and offering a reprieve from an increasingly revolting reality. Sure, the new Audi ads acknowledge, the country really is falling apart. Potholes everywhere. But you don’t have to worry. You can buy your way out. As a “successful” person, the Audi ads preach, you have a responsibility only to yourself. Those shrinking highway maintenance budgets? Not your problem. And you, as a person of means, certainly shouldn’t have to pay any more in taxes to get those potholes fixed. You’ve made it. You can afford a car smart enough to dodge any pothole those crumbling roads throw at you. Michael Halloran heard this message loud and clear when he read the Audi ad that appeared in the New York Times. Halloran, a past president of the Rhetoric Society of America who teaches communications theory and practice, pays fairly close attention to the rhetorical appeals that regularly bombard us. Halloran also, with a little jiggling of his “spending habits,” could afford the new “smart” A6 luxury model Audi is now pushing. “I could enjoy the temperature-controlled leather seats and state-of-the-art audio system,” he noted earlier this month, “while letting the Audi quattro drive system, Google Earth navigation system, and Audi drive select system take care of our crumbling roads.” But Halloran is passing up the Audi opportunity. He’d rather, as an affluent American, pay “more in taxes to get started on a serious effort to fix our deplorable roads.” Why? “For one thing,” Halloran explains, “neither Audi nor any other car manufacturer has yet developed a soft-landing system to protect me from a bridge collapse. For another, I have grandchildren, and I'd rather not bequeath to them an America bidding for third-world status.” Affluent Americans like Michael Halloran, relates Demos think tank analyst Dianne Stewart, “think of themselves not merely as taxpayers, but as citizens, and they view taxes not just as dollars out of their pockets, but as civic capital that finances America’s quality of life.” Back in the mid 20th century, a time of much greater income equality in the United States, most affluent Americans felt that way. The 1950s rich faced tax rates much higher than the rich do today, and yet, as the New Yorker’s Malcolm Gladwell noted last month, they “paid their taxes and went about their business.” “The wealthy of that era,” Gladwell adds, “could have pushed for a world that more closely conformed to their self-interest and they chose not to.” Our wealthy today face the same choice. They can pay more in taxes or let budget cuts continue to decimate our roads, our public schools and hospitals, our firefighters and police. Audi’s betting, suggests Diane Stewart of Demos, that today’s affluent will “simply buy the cars, the school tuition, the health care, and the private security services that will allow them not to notice the giant holes in local, state, and federal budgets.” Plenty of nationally prominent politicos in the United States are essentially making that same bet. If they win, we all lose. Even the affluent. “In the long run,” as Theodore Roosevelt, then a former President, told his fellow Americans back in 1912, “this country will not be a good place for any of us to live unless it is a reasonably good place for all of us to live in.” Teddy will likely never make it into an Audi ad. | |
| IN REVIEW | |
How Corporations Built to Loot Lobby to Win  Need a job? You might want to dial up WIN America, the business lobby that’s calling on Congress to declare a “tax holiday” on the profits U.S. firms have sitting overseas. WIN America — short for “Working to Invest Now in America” — didn’t exist until earlier this year. Since then, the 18 major corporations and 24 trade associations that make up the group have spent a remarkable $50 million on their “tax holiday” campaign. They’ve hired, news reports last week revealed, 160 lobbyists. Now that’s job creation. Of course, your shot at getting one of those jobs will rise enormously if you happen to be a Capitol Hill insider. The WIN America new hires include at least 60 former staffers of congressional leaders — with 42 of those formerly employed at the House Ways and Means and Senate Finance Committees, the two panels that write up all America’s tax laws. Why does WIN America need all these insiders? To get a new “tax holiday” into law, the corporate giants that make up WIN America are going to have pull an inside job. WIN America’s proposed “tax holiday” may be the most outrageously rich people-friendly piece of legislation now pending before Congress. That’s not, of course, how WIN America’s small army of lobbyists is positioning the measure. They’re claiming that corporations will “repatriate” all those profits they have overseas as soon as Congress gives them a tax “incentive” to do so. Those repatriated dollars, WIN America pledges, will help create jobs in America. In theory, that sounds swell. But we don’t have to depend on theory to gauge the value of a corporate “tax holiday.” We can look to past practice. Incredibly recent past practice. Congress, turns out, gave Corporate America a tax holiday on overseas profits just seven years ago, in 2004. That tax holiday handed 843 U.S. companies a tax break that cost the U.S. Treasury $92 billion. What did American taxpayers get back? Not much. In fact, the Institute for Policy Studies revealed last week, not anything at all. Most of the firms that claimed a tax holiday in 2004 went on to reduce their workforces. The new IPS report, America Loses: Corporations that Take ‘Tax Holidays’ Slash Jobs, looks at the 58 corporate giants that together accounted for almost 70 percent of the overseas profits repatriated after the 2004 tax holiday. These 58 job destroyers — led by Citigroup, Hewlett-Packard, Bank of America, Pfizer, Merck, Verizon, Ford, Caterpillar, Dow Chemical, and DuPont — went on to shed almost 600,000 jobs after their tax holiday tax break. But don’t these companies have a perfectly reasonable defense? Haven’t we experienced a Great Recession since 2004? We surely have. But these 58 corporate giants aren’t hurting. They're currently holding over $450 billion in spare, excess cash. Of the 58 big firms that the new IPS report puts under the microscope, notes co-author Scott Klinger, only eight reported losses between 2008 and 2010 — and 43 have registered profits every single year through Great Recession hard times. “If companies were struggling, and unprofitable, then dramatic downsizing might be warranted,” adds Klinger. “But when companies are prospering, sitting on record levels of cash and saying they need tax cuts to hire workers, their argument makes no sense.” Tax holidays, on the other hand, do make sense for top execs. A huge share of the overseas profits these execs generate come, the new IPS report notes, “from accounting acrobatics that shift profits generated from sales in the United States to foreign tax havens where corporations face little or no income tax.” Tax holidays give these executives a second bite at the tax-avoidance apple. They don't pay taxes overseas or, thanks to tax holidays, back home either. Tax holidays, as IPS report co-author Chuck Collins puts it, give preferential treatment to companies “built to loot” over companies “built to last.” The new IPS America Loses study suggests a variety of steps we ought to be taking to end this preferential treatment. Passing one key reform now before Congress, the Stop Tax Haven Abuse Act, would shut off most of the tax loopholes that encourage profit shifting overseas — and raise an estimated $100 billion a year. Congress can do a great deal, the new IPS report sums up, “to strengthen the U.S. economy and create and protect jobs.” But a “tax holiday” that rewards CEOs who pile up profits by shedding jobs and sashaying around the tax code only strengthens — and protects — our most shameless corporate looters. | |
Quote of the Week
“In its broadest terms, the Occupy Wall Street protest is over the nation's gaping economic inequality. The protesters, while largely leaderless, have for weeks been braving the elements, mass arrests, and pepper-spray-bearing police to represent the '99 percent' of Americans for whom there are no government bailouts.”
Robyn Blumner, Tampa Bay Times, October 9, 2011
Stat of the Week
The 5.6 percent surcharge on income over $1 million that U.S. Senate majority leader Harry Reid from Nevada proposed last week would raise the tax bill of only the wealthiest 0.2 percent of Americans, a Citizens for Tax Justice analysis shows. In only one state, Connecticut, would as much as 1 percent of taxpayers face a higher tax bill. In over half of the nation’s states — 27, to be exact — the surcharge proposal would impact only the richest 0.1 percent of taxpayers.
New Wisdom
on Wealth
Zaid Jilani, How Unequal We Are: The Top 5 Facts You Should Know About The Wealthiest One Percent Of Americans, Think Progress, October 3, 2011. Here's one: The top 1 percent own half of the country’s stocks, bonds, and mutual funds.
Donald Low, The Four Myths of Inequality in Singapore. Online Citizen, October 4, 2011. A useful debunking of the apologists for inequality in all countries.
Naomi Klein, Occupy Wall Street: The Most Important Thing in the World Now, Occupied Wall Street Journal, October 6, 2011. The only thing that can stop the top 1 percent from exploiting the current economic crisis: the bottom 99 percent.
David Cay Johnston,Occupy Wall Street, Reuters, October 7, 2011. America's most noted tax journalist on the potential of the new occupations to end the dominance of the super rich “who steal not with guns, but something called derivatives.”
Bruce Bartlett, 7 Top Republicans Who Taxed the Super Rich, Fiscal Times, October 7, 2011. Historically, notes this former Ronald Reagan aide, “taxing the rich has been supported by both parties across the ideological spectrum.”
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