Too Much a commentary on excess and inequality

Too Much a commentary on excess and inequality

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January 2016

This Month

You can’t really appreciate how phenomenally unequal the United States has become until you take a gander at America’s peer nations. Consider the UK, for instance. Britain has emerged as one of the world’s most unequal nations. New official UK stats certainly reinforce that reputation.

In the UK, the new numbers show, the richest 10 percent hold 45 percent of the nation’s private wealth. The poorest half own just 9 percent.

But this UK inequality simply pales against the inequity across the pond. In the United States, the latest Federal Reserve figures point out, the top 10 percent owns 75.3 percent of our national wealth. And the households of the bottom half? Their wealth holdings add up to just 1.1 percent.

The good news? This colossal U.S. maldistribution of wealth has at long last become a matter of mainstream political debate in a presidential election year. That rates as progress. But we desperately need, as this month’s Too Much makes especially clear, to make a whole lot more.

 

About Too Much

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Images of Inequality

Ty Warner penthouse

The flacks at midtown Manhattan’s Four Seasons Hotel have labeled the view from their top-floor Ty Warner penthouse “almost surreal in its perfection.” Perfection, of course, costs. The Ty Warner now rents for $50,000 per evening, up from $35,000 just six years ago. But the nine-room suite does come with more than a view. Among the nifty extras: televisions programmed to receive every TV station on the planet and a chauffeured Rolls Royce for hops about town.

 

Greed at a Glance

The mystery that has upper-crusters all agog: Luxury abodes in London's poshest precincts are now selling at twice the square-foot price as comparable pads in New York. Yet the two world capitals have almost identical numbers of Michelin-star restaurants, museums, and galleries, and New York has twice as many millionaires. The current going price for a large family home in London's Knightsbridge: over $14 million for a 4,000-square-foot domicile.

Temperatures worldwide may be hitting all-time highs, but the snow at Courchevel, France’s plushest Alpine ski getaway, remains plentiful. A suite at the resort this winter will run a bracing $10,295 per night.

 

Inequality by the Numbers

January infographic

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Stats of the Month

The median U.S. family has a net worth of $81,000. The Forbes 400 own more wealth than 36 million of these typical American families. That’s as many householdsin the United States that own cats.

The world now sports 49 nations where 15-year-olds have a better shot of living to 60 than they do in the United States, the world's most unequal major nation.

Sitting on a U.S. corporate board of directors now pays an average $258,000. The average time directors say they put in on directing: five hours per week.

Maryland’s Chevy Chase Village, an enclave for the awesomely affluent just outside Washington, D.C., has 11 police officers and only 1,953 residents.

In 2014 the Gates Foundation gained more money ($7.4 billion) than it gave out ($5 billion).

Wealthy people give more to charity, research from Jon Bakija of Williams College shows, when tax rates run higher. The rich gave twice as much of their money to charity in the 1970s, a period with a 70 percent tax rate on income in the top U.S. tax bracket, as they did in 2007, with just a 35 percent top rate in effect.

Presidents at 32 private U.S. universities are making over $1 million annually, the Chronicle of Higher Education reports. Meanwhile, adjuncts averaging under $25,000 make up 75 percent of all higher ed faculty.

The dark age of plutocratic campaign spending: Since January 2010, the Center for Responsive Politics computes, U.S. politicos have grabbed over $500 million from rich donors who do not have to reveal their identities,

The Too Much Interview

A New Look at a Forgotten Egalitarian

In our deeply unequal times, historian Edward O’Donnell reminds us, the life of the 19th century’s most important critic of concentrated wealth remains as relevant as ever.

George-ODonnellBack in America’s original Gilded Age, in the decades right after the Civil War, no American spoke and wrote more compellingly against the nation’s growing inequality than Henry George, a Philadelphia-born journalist whose writing career initially took off in San Francisco.

George’s immensely popular 1879 book, Progress and Poverty, sold millions of copies, and the reform plan he championed — what become known as the “single tax,” a levy to prevent landowners from deriving any profit from mere ownership — captivated a significant chunk of his generation.

In 1897, at George’s death, over 100,000 people walked past his coffin in New York’s Grand Central Station. Many thousands more marched in his honor after the funeral service. In the 19th century, only Presidents Lincoln and Grant went out amid comparable glory.

George’s central message: Extreme inequality will destroy the republic.

Today, by contrast, George remains largely unknown. Holy Cross historian Edward O’Donnell’s new biography, Henry George and Crisis of Inequality: Progress and Poverty in the Gilded Age, aims to change that.

What can we today learn from George’s life? Too Much editor Sam Pizzigati put that question and more to O’Donnell just before year’s end.

Too Much: Henry George entered his 20s right before the Civil War started. What changes in the distribution of America’s income and wealth would he see over the course of his lifetime?

Edward O’Donnell: Beginning in the late 1860s, George began to notice two troubling new trends: concentrated corporate power — or what people in the Gilded Age called “monopoly” — and increased numbers of people living in poverty.

Read the rest of the full Too Much interview . . .

 

Quotable

“Let’s be clear: The reason we haven’t solved climate change isn’t because we’re not doing our part, it’s because a small subsection of the 1 percent are hell-bent on doing everything in their power to block action.”
Bernie Sanders, Energy industry ‘hell-bent’ on climate change apathy, The Hill, December 7, 2015

“Many people steeped in the culture of capitalism have been taught to believe that an equal sharing of the world’s resources would result in a drab sameness — a gray, sackcloth-and-ashes existence. But the opposite is true: Equality would produce a flourishing of creativity and constructive diversity. The cultivation of talent that is possible now for only the privileged few would be possible for all.”
Michael Schwalbe, A Brief for Equality, CounterPunch, December 29, 2015

“The very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the ‘income defense industry,’ consisting of a high-priced phalanx of lawyers, estate planners, lobbyists, and anti-tax activists who exploit and defend a dizzying array of tax maneuvers.”
Noam Scheiber and Patricia Cohen, For the Wealthiest, a Private Tax System That Saves Them Billions, New York Times, December 29, 2015


Petulant Plutocrat of the Month

James StuntBillionaire James Stunt lives in a 123-room Los Angeles manse that may well be America’s lushest private residence. But he and his wife Petra, the daughter of billionaire Bernie Ecclestone, have a problem. They can’t seem to find a butler who knows his place. One former family butler is now suing Stunt for denying him overtime and rest breaks. Another recently resigned after Stunt shoved him against a wall and spit in his face, screaming homophobic slurs. That butler’s offense? He accidentally tripped Petra’s 17-month-old niece, the butler says, while serving Stunt chili oil to pour over his pizza. Stunt may simply be expecting his butlers to do too much. Back in Downton Abbey days, after all, no lords and ladies had butlers cleaning their private family bowling alley.

 

Plutocrats at Play

Witanhurst, the Queen Anne-style mansion now going through an extensive makeover in London, will soon feature a two-story basement complete with cinema, sauna, and swimming pool. The remodeled property will be worth an estimated £300 million, or $452 million.

Antidotes to Inequality

A New Brake on High-Finance Fortunes

If you buy a stick of gum at any corner store in America, you’ll pay a sales tax. If you buy a stack of stocks on Wall Street, you pay no tax at all, one reason why financial industry movers and shakers make up about 20 percent of the nation’s richest 0.1 percent.

White House hopefuls Bernie Sanders and Martin O’Malley are both pushing for a “financial transaction tax” to end this preferential tax treatment for Wall Street. Legislation introduced by Sanders in the U.S. Senate would place a 0.5 percent tax on all stock trades, a 0.1 percent tax on bond trades, and 0.005 percent levy on derivative speculation.  

The subsidy for CEO ‘performance pay’ costs taxpayers $10 billion a year.

How much revenue could such tiny tax rates raise? Lots. A 0.01 percent tax on all financial transactions, the Tax Policy Center estimates, would raise $185 billion over 10 years.

Could such a levy on financial speculators actually become enacted into law? Last month brought some encouraging news on that front — from Europe. On December 8, Germany, France, and eight other European nations came to what they described as a “core” consensus on implementing a financial transaction tax.

That consensus represents a major victory for the economic justice activist groups working for a meaningful tax on financial speculation — and a major defeat for the global financial industry.

Financial heavy-hitters in Europe, notes Institute for Policy Studies analyst Sarah Anderson, had argued for loopholes that would have completely exempted derivatives trades and applied the tax only to the net value of securities transactions at the end of each trading day. The new European consensus rejects both of these loopholes.

Observers expect a final European financial tax agreement sometime midway through 2016. That agreement will apply to both buyers and sellers in financial transactions, and that feature will give the new tax an impact that goes far beyond Europe’s borders.

“A U.S.-based hedge fund,” as Anderson explains, “will be taxed on trades with a German firm.”

 

Take Action
on Inequality

In today’s post-Citizens United America, an ambitious new Democracy Spring call to action notes, “the super rich dominate the ‘money primary’ that decides who can run for office” and almost half America’s states “have passed new laws that disenfranchise everyday voters, especially people of color and the poor.”

That’s why thousands of Americans are supporting a citizens march early this spring that will go from Philadelphia’s Liberty Bell to the U.S. Capitol, in a protest that will end with a week-long series of mass nonviolent sit-ins April 11-15 at congressional offices.

“Day after day,” predicts this new Democracy Spring campaign, “Congress will have a choice: to put hundreds of disciplined, dignified democracy defenders in handcuffs, or simply do its job to listen to the people and fix this broken system.”

For more info, and to add your support, check Democracy Spring online.

 

Reports

A quick look at major new inequality-related research efforts

Stocking StuffersCEO Stock(ing) Stuffers
Scott Klinger and Sarah Anderson, Center for Effective Government and Institute for Policy Studies, December 22, 2015

Over the course of the 2014 tax year, this new look at the U.S. tax code details, 10 American corporations shaved $182 million off their taxes by claiming deductions for the “performance pay” they shoveled into their executive suites.

The biggest beneficiary: the pharmaceutical giant McKesson. The firm’s CEO, John Hammergren, pocketed $112 million in fully deductible stock options and other “performance pay” in 2014, a windfall that entitled McKesson to $39 million in tax savings.

Ending this taxpayer subsidy for executive excess wouldn’t take much. Congress would just need to cap the total amount of an executive’s compensation that corporations can deduct from their taxes as a legitimate business expense.

Tax law currently lets corporations fully deduct all executive pay the companies self-define as “performance-based.”

Options to Reform the Deduction for Home Mortgage Interest
Chenxi Lu, Joseph Rosenberg, and Eric Toder, Tax Policy Center, December 8, 2015

Who needs help affording housing the most in the United States today? Not a tough question. Poor Americans need that help.

Who actually gets the most help? America’s affluent. And those affluent use that help to build and buy ever-larger houses — and waste ever-higher amounts of energy heating and cooling all that extra space.

That help comes through the federal income tax mortgage interest deduction. Over half of the tax savings this deduction makes possible, 52 percent to be exact, go to the nation’s richest 10 percent. The share of benefits that go to America’s poorest 20 percent? A miniscule 0.1 percent.

This new Tax Policy Center report outlines how we could start flipping those percentages. We could, for starters, make only the interest on the first $500,000 of a mortgage deductible. Affluent households can currently claim deductions on mortgages up to a million.

Dropping the deduction cap would bring in $95 billion over 10 years, enough for a tidy downpayment on real support for America’s ill-housed.

CIPD reportAlso out last month: A new study from the UK Chartered Institute of Personnel and Development has found what the business group calls a “seething discontent” with corporate executive pay. The study — The view from below: What employees really think about their CEO’s pay packet — quizzed over 1,000 British workers. Only 23 percent feel their enterprises depend “to a great extent” on their CEO, and 71 percent view their CEO pay as “generally too high.” About 60 percent consider current CEO pay demotivating to their on-the-job performance, and only 14 percent see no problem with executive paychecks.

 

New Wisdom
on Wealth

Chuck Collins, Have We Hit Peak Inequality? OtherWords, December 2, 2015. The richest 400 Americans have more wealth than the 190 million poorest.

Steven Thrasher, Income inequality happens by design, Guardian, December 5, 2015. The more wealth concentrates, the shorter those without it live.

Facundo Alvaredo, Tony Atkinson, and Salvatore Morelli, The importance of wealth concentration and why it is so difficult to measure, Vox, December 8, 2015. A UK case study.

Suzy Khimm, The Year the Fight Against Inequality Went Mainstream, New Republic, December 9, 2015. On the limits of the elite's path to greater equity.

Claire Cain Miller, Class Differences in Child-Rearing Are on the Rise, New York Times. December 17, 2015. These differences have far-reaching consequences.

James Surowiecki, Martin Shkreli and the Temptations of Self-Dealing, New Yorker, December 18, 2015. The long line of CEOs who have treated their companies as personal piggy banks.

Jonathon Orta, The Koch-Like Family You’ve Never Heard Of Influencing State Legislatures, Political Research Associates,  December 22, 2015. The billionaires of Amway.

Harold Meyerson, How to end the stock buyback deluge, Washington Post, December 30, 2015. The last Post column by the only national pundit who has focused on the “evisceration of the American middle class at the hands of the American rich.”

David Dayen, Democrats, Beware: Billionaires Can Still Buy Elections Very Easily, New Republic, December 30, 2015. How deep pockets are making an under-the-radar difference.
 

Retorts

Handy rejoinders to the apologists for our top-heavy status quo

Does Big Giving Justify Big Fortunes?

The claim: Today’s rich are giving more than ever to make the world a better place, and we should all be cheering this magnificent generosity.

Have you heard? Facebook founder Mark Zuckerberg and his wife, Dr. Priscilla Chan, are giving away 99 percent of their Facebook stock, a contribution currently worth about $45 billion.

You probably have heard. Zuckerberg and Chan announced their new philanthropy on Facebook, and the post quickly drew 1.5 million thumbs-up — and headlines worldwide. Their gift, reporters noted, over doubles the combined wealth of the Ford, Rockefeller, and Carnegie foundations.

But Zuckerberg and Chan haven’t actually given away anything yet, and that $45 billion isn’t going to any foundation. Those billions will be going instead to a new “limited liability corporation” that Zuckerberg and Chan have created — and completely control.

Facebook founder Mark Zuckerberg is giving the world a new twist to ‘giving.’

Limited liability corporations, unlike foundations, can do virtually whatever they like. They can invest in profit-making ventures. They can lobby lawmakers. They can donate to political campaigns. Unlike foundations, limited liability corporations also don’t have to fully disclose what they’re doing or give away at least 5 percent of their value every year.

In effect, as tax expert Michael Graetz notes, Zuckerberg and Chan are transferring their assets from one pocket to another. So why all the hoopla? The transferred assets, Zuckerberg and Chan assure us, will only go for the betterment of humanity.

“We have a moral responsibility to all children in the next generation,” Zuckerberg and Chan noted in their Facebook announcement, “We believe all lives have equal value.”

But if all lives have equal value, shouldn’t all the people living those lives have somewhat of an equal say in determining humanity’s future?

The new Chan Zuckerberg Initiative is taking us in the opposite direction. The pair have promulgated, quips analyst James Quack, what amounts to a “keeping pledge,” not a giving pledge. They pledge to keep all their wealth and use a lot of it to make the world a better place, as long as they get to define “a lot” and “better.”

The wealthy have the power to impose their personal visions of the common good.

We also need to keep in mind, adds Institute for Policy Studies wealth tracker Josh Hoxie, that Zuckerberg owes much of his fortune to the public investments made possible by the tax dollars of average citizens.

These investments, Hoxie points out, funded “the public schools that educate his employees, the judicial system that protects his intellectual property, the public telecommunication networks that enable people to use his product.”

Shouldn’t the public, the source of those public investments, now have a say in where the Zuckerberg billions go?

In fact, observes the Guardian’s Gaby Hinsliff, we already have “a centuries-old system” for ensuring the public that say, “for ensuring the very rich can do good for others.” We call that system taxation, and, in a healthy democracy, the public gets to decide where tax dollars go.

The very rich have little patience for this process. The Chan Zuckerberg Initiative, sums up policy analyst Joanne Barkan, ought to refocus our attention on mega philanthropy’s most fundamental contradiction: that “the wealthy have the power to impose their personal visions of the common good on everyone else while calling it charity.”

“Many will view donations like Mr. Zuckerberg’s,” the Economist business magazine observes, “as a reason not to worry about the intense concentration of wealth.”

We should still worry.

 

What to Watch

A sprightly new NBC video highlights Billionaire Bonanza, the new Institute for Policy Studies report that dramatically breaks down the staggering concentration of America's wealth.

 

Now featured on
Inequality.org

Josh Hoxie on affluenza, an outrage in all its forms

Chuck Collins with an invitation for America’s wealthy

Larry Checco on time for solutions to inequality

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on Inequality.org postings

 

 

Books

World Wealth: A More Complete Picture

Hidden Wealth of NationsThe Hidden Wealth of Nations:
The Scourge of Tax Havens

Gabriel Zucman
University of Chicago Press, 129 pp.

All those statistics about the wealth of the fabulously wealthy? Take them with a grain of salt, suggests this slim and eminently accessible volume from economist Gabriel Zucman. The super rich actually hold far greater fortunes than the world’s official stats proclaim.

Missing from those official stats: any serious appraisal of the vast sums hidden in offshore tax havens.

How vast? Zucman, a colleague of Thomas Piketty, has calculated that at least 8 percent of the world’s financial wealth sits in offshore havens.

Since 1980, Zucman shows, the volume of U.S. equities held by tax haven investors — from hedge funds in the Cayman Islands to banks in Switzerland — has more than quadrupled. America’s rich now have at least $1.2 trillion in financial wealth concealed offshore.

Why should we care? One reason: The income that wealth generates goes completely untaxed. The tax revenue loss: at least $36 billion a year.

 

If today’s rich get any richer, does our democracy have a future? History offers an answer. Starting a century ago, amid an inequality greater than our own, Americans actually sheared grand fortune down to democratic size. You’ll find that story in The Rich Don’t Always Win, Too Much editor Sam Pizzigati’s lively history of the triumph over America’s initial plutocracy. Try the first chapter online.

RDAW cover


About Too Much

ISP logoToo Much, an Institute for Policy Studies monthly publication | Institute for Policy Studies, 1112 16th Street NW, Suite 600, Washington, DC 20036 | 202-234-9382

Editor: Sam Pizzigati | editor@toomuchonline.org | Archive | Unsubscribe

 

 

 

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