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||November 1, 2010|
The city of Sitka sits on an island off mainland Alaska. Most Americans have no idea Sitka exists. Most of those who do know Sitka likely only know the city as the background for the 2007 bestseller, The Yiddish Policemen's Union, a novel that offered a glimpse of how modern history might have unfolded if European Jews had been offered an Alaskan refuge from Adolf Hitler and the Holocaust.
Now Sitka has another claim to fame. The city’s mayor, Scott McAdams, has run a spirited race for the U.S. Senate — and offered a glimpse of how this fall’s elections might have unfolded if candidates took inequality seriously.
“For far too long,” the Democrat McAdams noted in one TV debate, “the United States Senate has been a millionaires club doing the bidding of billionaires.”
Few candidates this fall have so straightforwardly addressed the grand divide between the rich and the rest of us. Why so few? Most candidates, from both major parties, remain deadeningly dependent on rich people's cash. We have more, on that score, in this week’s Too Much.
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|GREED AT A GLANCE|
Starting this January, IBM will no longer pay a wage “premium” to its U.S. employees who work late shifts and other family-unfriendly hours. This recently announced move will cost these IBM workers up to $200 per week. IBM must be deep in recessionary red ink, right? Well, not exactly. IBM is actually swimming in surplus, a pile of excess dollars high enough to have let the tech giant spend $11.8 billion so far this year buying its own shares of stock back off the open market. This massive buyback has helped jack up IBM’s share price — and that higher price should make 2010 another boffo pay year for IBM CEO Sam Palmisano. The IBM chief exec took home $21.2 million last year, after axing over 10,000 jobs. IBM’s U.S. payroll has now dropped 30,000 since 2003. IBM’s low-wage Indian workforce has, since then, jumped over 60,000 . . .
In India, where billionaire ranks have tripled since 2008, the richest billionaire of them all is now putting the finishing touches on what may be, speculates the Los Angeles Times, “the most expensive home in history.” Press reports are placing the price-tag on petrochemical king Mukesh Ambani’s new abode — an amazing structure that soars 27 stories over the slums of Mumbai — at $1 billion. Servicing all those floors for Ambani, his wife, three kids, and mother will be an estimated 600 staff. The Ambani clan won’t move in for good until late next month. Once in, they may never leave. Their new not-so-humble home features a 50-seat theater and an “ice room” outfitted with a snow flurry-making machine — for escaping Mumbai's oppressive heat. Any Ambani who should want to leave won’t have to hassle the Mumbai traffic. Their new palace boasts three rooftop helipads . . .
In China, you won’t find any billionaires in personal skyscrapers, mainly because China’s super rich simply haven’t yet stashed away as much cash as their Indian counterparts. India's three richest, says the latest Hurun Rich List, hold a greater combined fortune than the 24 richest Chinese. Smaller fortunes have China’s rich concentrating on more prosaic pleasures — like luxury yachts. Azimut, the Italian upscale boatmaker, has sold 30 yachts in China since 2005, at up to $15 million each. Why not more? China lacks a luxury marina infrastructure. But now under construction near Beijing: a 750-berth yacht club. That ought to help speed the cultural shift among China’s rich, says Asia-Pacific Boating editor Ryan Swift. The “wealthy guys,” Swift explains, used to relish “very expensive karaoke bars" and “shiny objects.” Now they’re starting, he exults, “to embrace” the high seas . . .
In Russia, “shiny objects” still seem to have their allure. Late last month, at Moscow’s sixth annual millionaire fair, luxury retailers showcased a diamond-encrusted saucepan with a gold-plated handle. The price: just a bit over $200,000. The millionaire fair did sport more practical offerings. A gold necklace, outfitted with Yakut diamonds and a hidden hands-free USB hub, could be had for only $125,000. Russia currently sports 62 billionaire households . . .
Rupert Murdoch, the 79-year-old media mogul behind Fox News, has no plans to retire anytime soon. But he’s already thinking about the experiences he wants his successor to have had. Chief among these: the experience of calling him dad. One of his six kids, the billionaire has announced, will be “sure” to “emerge” as the next CEO at his News Corp. empire. That one now figures to be the 37-year-old James Murdoch, a Harvard dropout who bankrolled a hip-hop music label before grabbing a News Corp. executive slot. James calls the lessons learned from his father “the greatest advantage I’ve had in life.” In a recent interview, the young Murdoch even cited one specific lesson from dad he holds close to his heart: “the importance of making our own way.”
Quote of the Week
“Imagine an election in a Third World nation where a small number of millionaires and billionaires spent massive sums to push the outcome in their preferred direction. Wouldn't many people here condescendingly tut-tut over such a country's 'poorly developed' sense of democracy and the inadequacy of its political system? That, of course, is what is going on in our country as you read this.”
Stat of the Week
If incomes in America's bottom 90 percent had increased at the same annual rate after 1980 as they did between 1950 and 1980, families in the bottom 90 percent would have averaged $52,051 in 2008, or $406 more per week than they actually did, notes tax.com. Incomes of America's richest 0.01 percent, by contrast, increased five times faster between 1980 and 2008 than they did between 1950 and 1980.
|inequality by the numbers|
Why We Still Suffer with Our Suffrage
Let's try to get more precise. America's super rich aren't 'buying' our elections. They're making an 'investment' in prosperity. Their own.
And so what have Americans learned from the now-concluded 2010 mid-term election campaign, aside from the existence of an Aqua Buddha?
Not much. In fact, given the gap between the severity of our current national economic crisis and the substantive emptiness of this fall’s campaigning, we have may just experienced our most inane election season ever. The level of our political discourse has probably never, at least in modern times, been lower.
The level of cash spent on our electioneering, meanwhile, has never been higher. This year’s federal mid-term contests will likely eat up an all-time record $4 billion. That’s enough, says the watchdog Center for Responsive Politics, to “treat each and every American to a Big Mac and fries.”
This $4 billion, we ought to keep in mind, doesn’t include any of the cash spent on this year’s plentiful gubernatorial and state legislative races. The nation’s overall campaign expenditure total will likely top $5 billion. And even this figure understates the massive cash deluge cascading over the American body politic.
None of the campaign spending totals, for instance, include the $108 million spent by “independent groups” to advertise against the health care reform legislation — after that legislation’s passage last March.
Where’s all this cash coming from? Certainly not from average Americans. With unemployment still near double-digits and consumer confidence running at record lows, most Americans simply don’t have any cash to spare.
Some 53 percent of Americans, the Washington Post reported last week, say they now worry “about not having enough money” to pay their rent or mortgage. That shouldn't be surprising. The middle fifth of American households, note Census data released in September, averaged only $49,534 last year, over $2,000 less than these households averaged in 2007, after adjusting for inflation.
Not all Americans, of course, are worrying about their wallets. America’s awesomely affluent have survived the Great Recession quite comfortably. But we didn’t know exactly how comfortably until midway through last month, when officials at the Social Security Administration released the first detailed official federal data on how the nation’s wealthy fared in 2009.
The nation’s wealthy, the new data show, fared just fine. And the wealthiest of the wealthy, the same data show, fared fantastically.
Americans who took home over $1 million in paycheck income in 2009 averaged over $2.3 million, the Social Security wage data indicate. Americans who made over $50 million in paycheck income in 2009 did spectacularly better.
Despite the Great Recession, the 72 Americans who took home over $50 million worth of paycheck dollars last year ended up averaging over $84 million each. Together, these 72 enjoyed a $6.1 billion payday in 2009.
These super rich actually pocketed considerably more than $6.1 billion in personal income. The Social Security Administration data only cover income subject to Medicare payroll tax. Left uncounted in these data sets: income our rich make buying and selling stocks and bonds and other assets, as well as other flavors of investment income ranging from rent to dividends and interest.
In other words, the new Social Security wage data don’t tell us anything about the earnings of hedge fund managers and other Wall Street investment superstars who report the bulk of their income as capital gains. The top-earning 25 of these hedge fund managers, Alpha reported earlier this year, collected $25.3 billion from hedge fund operations in 2009, an average of over $1 billion each.
How much in total personal income did these 25 hedgies pull in last year? We won’t have any official data on the total 2009 incomes of the nation’s highest-earners until midway through next year. That data will come from the IRS.
But here’s what we do know about how much cash our super rich stashed away in 2009, America’s worst year economically since the 1930s: The 72 Americans who show up at the top of the new wage data list and the 25 other Americans who top the hedge fund list together took home $31.4 billion last year.
These 97 ultra rich could have footed the entire $5 billion 2010 election campaign bill, out of their 2009 earnings, and still have, on average, over $220 million each left over from all the loot they stuffed into their pockets last year.
How much did these 97 ultra rich actually plow into the 2010 mid-term elections? We don’t know — and likely never will. The Supreme Court’s Citizens United ruling last January, as public interest analyst Charlie Cray notes, has “opened the floodgates” for “front groups wishing to keep their funders anonymous.” In effect, says Cray, “a powerful ‘shadow party’ has emerged on the conservative right.”
This shadowy network has no trouble whatsoever raising millions from America’s wealthy. For these wealthy, political contributions offer a return few other investments can match.
Hedge fund kingpins, for instance, have so far whacked aside every legislative effort on Capitol Hill to end the “carried interest” loophole, the tax code provision that lets hedgies claim the bulk of their income, for tax purposes, as a “capital gain.” This loophole last year saved the top 25 hedge fund earners an average $200 million each.
And the 72 Americans who reported over $50 million each on their w-2s last year? By refusing to undo the George W. Bush tax cuts for the rich, after George W. left office, lawmakers saved these 72, on average, almost $4 million each in 2009.
If deep pockets like these wealthy Americans emerge victorious in this November’s elections, House speaker Nancy Pelosi warned last month, “it would mean we are now a plutocracy.”
In truth, the United States has already become a plutocracy. Maybe someday we’ll have a political party with enough spunk to stand up and openly fight it.
Note: The original of this story included Social Security Administration data that have since been corrected. The story above reflects the SSA corrections.
Francesca Rheannon, Political Warfare Among the Rich, Corporate Social Responsibility Newswire, October 26, 2010. A thoughtful analysis into why “super-rich progressives and conservatives” may be “more united than divided.”
Mark Ames and Yasha Levine, How Meg Whitman Failed Her Way to the Top at eBay, Collecting Billions While Nearly Destroying the Company, AlterNet, October 26, 2010. The story behind the making of the easiest billion-dollar fortune in U.S. history.
Bill Gates Sr. Promotes 'Robin Hood' Tax on Washington's Wealthy, October 28, 2010. The father of the world's richest man explains in this brief video why we literally need to “soak the rich.”
Holly Sklar, Don't Vote with Wall Street, Raleigh News & Observer (McClatchy-Tribune News Service), October 28, 2010. At stake in election 2010: Wall Street's “freedom” to gamble with our money.
A Guidebook for Getting the Rich to Play Nice
Organization For Economic Co-Operation and Development, Offshore Voluntary Disclosure: Comparative Analysis, Guidance, and Policy Advice. Paris, September 2010. 60 pp.
The world’s major economies, recent news reports all agree, are most definitely getting tougher on wealthy taxpayers who hide away income in secret overseas accounts. But are they getting tough enough?
The OECD, the official economic policy think tank for the world’s most significant economies, has one answer to this most important of questions. But you may have another after perusing this new OECD guidebook for helping governments get their wealthy to pay their taxes.
At the moment, many wealthy aren’t paying. Many, many wealthy. The world's rich, the London-based Tax Justice Network estimates, are currently holding about $11.5 trillion “offshore,” an asset hoard that’s costing governments $250 billion a year in lost tax revenue.
How should nations go about lassoing in all that lost revenue? The 39 nations now cooperating on offshore tax evasion, says this new OECD guide, are doing exactly what they ought to be doing. They’re sharing information. They’re signing bilateral tax agreements. They’re pushing transparency.
In this changing environment, this OECD guide notes, taxpayers with undisclosed income and assets “are increasingly realizing that in the very near future there will be no more safe havens for money on which tax has been evaded.”
And that reality, adds the OECD, is creating “a unique opportunity” for governments to recoup huge chunks of lost tax revenue — by offering the delinquent rich incentives to come clean and voluntarily declare the income and wealth they’ve been concealing.
The OECD experts, in this new guide, never quite come out and detail what they consider the optimal incentive mix of carrots and sticks for changing the tax behavior of the super rich. They detail instead the specific carrots and sticks that 39 different economically significant nations have chosen to try out.
Some of the carrots and sticks turn out to be universal. All 39 nations — countries ranging from the United States and Canada to Chile and China — levy monetary penalties on wealthy tax evaders who get caught before they come clean. All also require delinquents who get caught to pay interest on the tax evaded.
But the penalties and interest charges vary enormously. Rich delinquents in the Czech Republic face a flat 20 percent penalty. In Belgium, the penalty can run up to 200 percent of taxes left unpaid.
U.S. wealthy who have failed to file “complete and correct” foreign asset statements will find themselves subject to a penalty of either $100,000 or 50 percent of the total foreign asset balance, whichever runs greater.
The carrots the various nations offer — to get tax evaders to voluntarily “fess up” — vary just as widely. Of the 39 nations surveyed, 21 waive all monetary penalties for wealthy evaders who come clean. In 28 of the nations, evaders who come clean get a no-imprisonment guarantee.
That seems a good deal — for the rich. If you rob a bank, after all, and then have second thoughts, you may have trouble getting a no-imprisonment guarantee, even if you choose to graciously return every dime of your ill-gotten gains.
|About Too Much|
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