August 20, 2007
If you happen to have a fortune of some immensity invested on Wall Street, you've had some anxious moments the last few weeks. Ready for some good news? We have some: Despite all the recent body blows to your portfolio, you’re still living in an incredibly wonderful time to be rich.
We explain why, with help from newly released IRS income statistics, in this week’s Too Much.
Our globe's super-rich, these days, seem to come in just two basic varieties: those who buy mega-yachts and those who prefer to rent. The renters have plenty of choices. Among the yachts now available for hire: the Princess Mariana, a boat almost as long as a football field that rents for $606,500 a week, not including food, drinks, fuel, and harbor fees. The Princess features a heliport that, with the helicopter aloft, turns into a golf driving range. Households worth at least $10 million will average $384,000 on yacht rentals this summer, says the 2007 Elite Traveler/Prince & Associates Summer Spending Survey . . .
Rupert Hoogewerf. That name ring a bell? Probably not. But Rupert Hoogewerf has become, in one part of the world, a household name. Those households all happen to be rich Chinese ones. Hoogewerf, a Shanghai-based accountant, compiles an annual list of China’s wealthiest. Last week, he announced that China now hosts 150,000 households worth at least $5 million. In 1999, the year Hoogewerf started tracking China’s wealthy, a Chinese deep-pocket needed to be worth only $6 million to make the country’s top 100. Some 2,000 Chinese households, says Hoogewerf, currently sport fortunes worth over $100 million . . .
What’s going to happen to Billionaires for Bush, the deliciously outrageous street theater troupe, once George W. exits the White House? You can find out this September at the Broadway debut of Billionaires Forever, a new musical that envisions billionaire life beyond George — with a cast that features the creative talents that have spent the Bush years celebrating America’s “emerging plutocracy in song and sketch across the country.” The new show, produced by Tony Award-nominee James Simon, will open September 4 for a one-week run at Broadway’s West 45th Street Theatre. For more info on Maura Lee Bankrupt and the rest of her billionaire buddies, check online with TheaterMania . . .
Luxury can be infectious, and Egypt has caught the bug, with dozens of exclusive gated communities now dotting the hills outside Cairo. Asks a worried Al-Ahram commentator, Salama Salama: “Who got it into our heads that Egypt, with its current social and economic situation, can compete with Dubai, Qatar, and the Gulf in luxury lifestyle?” Cairo’s elites “are buying fancy villas and mansions in the desert and on the sand of the sea,” Salama notes, in the process “leaving the crowds behind them, with their poverty and extremism.” This new “immersion in luxury consumption,” he writes, can only “heighten the sense of social injustice and political exclusion” and “destroy the social fabric of our country.” What ought to be done? Egyptian journalist Khaled Diab, now based in Brussels, last month called “for the introduction of a cap on earning, or a maximum wage,” a limit that, if tied to the wage minimum, could help “ensure a fairer distribution of wealth.”
Rich people live longer than poor people. Not much new in that observation. But there’s plenty new in the latest life expectancy data out of central London, a locale that includes both hard-scrabble and intensely wealthy neighborhoods. Rich central London women who hit 65 can now expect to live until nearly 96, the Westminster Primary Care Trust reports. A 65-year-old central London woman of modest means can only expect to hit 77. That gap has analysts buzzing. Why the hubbub? Traditional rich-poor gaps in life expectancy, the Guardian’s Nick Cohen noted last week, “reflected the deaths of poor children in infancy and of poor young men from drug or alcohol abuse.” The new London data have revealed a huge gap “not from the baseline of birth, but of retirement at 65.” One explanation: The contemporary rich, says Cohen, have a much greater capacity to “pay whatever it costs to carry on living.” The “old inequality between who lives and who dies,” he adds, “is being sharpened to a degree never seen before in human history.”
Inequality
by the numbers
Newly revised!
Quote of the Week
“The increasing concentration of income and wealth in the hands of a tiny elite isn't only a gross affront to social justice and any sense of equal worth in a single community. The evidence is clear that greater inequality fuels crime, corrodes democracy, divides our cities, prices people out of housing, skews the economy, is an engine of social apartheid, heightens ethnic tensions, is a barrier to opportunity and stifles social mobility.”
Seumas Milne, Guardian (UK), August 16, 2007
New Wisdom
on Wealth
Hamid Varzi, A debt culture gone awry, International Herald Tribune, August 17, 2007. In the wake of the sub-prime mortgage crisis, says a Middle East banker, fixing the "Ponzi scheme" that the U.S. economy more and more resembles will take, among other steps, "a reversal of tax breaks for the ultra-rich."
Extreme Inequality, a PowerPoint prepared for the Working Group on Extreme Inequality, a new effort by national labor and public interest groups to advance legislation that limits income and wealth concentration.
The Internal Revenue Service has just released the latest batch of stats on how much Americans are making — and paying in taxes. The new numbers cover 2005.
What do the numbers tell us? Numbers, of course, don’t tell us anything unless we place them in perspective. So let’s do that. How about the perspective of a decade?
Back in 1996, the first year of the decade that ended with 2005, only 110,912 of the 120.4 million tax returns the IRS processed reported $1 million or more in income. These 110,912 returns — just under 0.1 percent of the nation’s return total — accounted for 6.8 percent of the nation’s personal income.
In 2005, 119,277 tax returns reported at least $2 million in earnings. These returns also represented just under 0.1 percent of the nation’s taxpayers. But this 0.1 percent in 2005 took in 10.4 percent of the nation’s personal income, a considerably larger income share than the top 0.1 percent pocketed in 1996.
In other words, the share of the nation’s income that went to America’s most affluent tenth of 1 percent jumped by 53 percent over the decade that ended with 2005.
Almost half the income that this top 0.1 percent reported in 2005 — 5.1 percent of the nation’s total income — actually went to the richest of the rich, the top hundredth of the nation’s most affluent 1 percent. These top 0.01 percent tax filers, all 13,776 of them, each reported incomes of $10 million or more in 2005. They averaged $27.3 million.
To put that $27.3 million into a truly enlightening perspective, we really need to go back more than a decade. Let’s try a half century.
We have, for 1955, IRS data for the 13,983 highest-income returns, a group that almost exactly matches the total of 13,776 returns that made up the top 0.01 percent in 2005. Each of the top 13,983 returns in 1955 reported, in 2005-level dollars, at least $873,355 in income. The average income for these returns: $1.8 million, in 2005 dollars.
Notice the difference? The 13,983 highest-income returns of 1955 reported just one-fifteenth of the income that went to 2005’s top 13,776.
But that’s hardly all. The rich in 1955 didn’t just make considerably less than the rich of 2005. The rich half a century ago paid a higher percentage of their incomes in taxes, a much higher percentage, than the rich of 2005.
In fact, the wealthy Americans who filed 1955’s 13,983 highest-income returns paid well over twice as much of their total earnings in federal income taxes as did the richest 13,776 of 2005.
The 1955 rich, after exploiting every tax loophole they could find, paid 47.4 percent of their total incomes in federal income tax. The rate for 2005’s richest: just 20.9 percent.
You don’t have to step into the urban canyons of Wall Street — or onto Silicon Valley’s lush suburban corporate campuses — to see wealth concentrating in the United States. The rich are also getting significantly richer deep in America’s rural heartland, thanks in no small part to federal tax dollars.
Federal farm subsidies have been enriching already rich farm owners, individual and corporate, for years now. But until just recently just who exactly was getting how much remained unclear. Over the last two months, that’s all changed.
In June, the Environmental Working Group crunched data from “previously unpublished USDA subsidy records” to generate a first-ever comprehensive look at federal farm subsidy beneficiaries. Nearly half of the $34.8 billion in federal crop subsidy checks that went out from 2003 through 2005, this new research found, went to just 5 percent of subsidy check-cashers.
The top 1 percent of beneficiaries, the data reveal, averaged $377,484 each in subsidy checks over this three-year period. The bottom 80 percent of the farm operations that qualified for subsidies, by contrast, averaged just $4,508.
Earlier this month, the Nebraska-based Center for Rural Affairs added an even more troubling twist to this rural inequality story. The Center compared, over three-year stretches, the federal tax dollars going to the 20 largest crop subsidy beneficiaries in each of 13 rural states with the federal economic development aid going to the 20 most struggling rural counties in those same states.
Overall, this new research found, the 260 most favored beneficiaries of federal crop subsidies in the 13 states surveyed are receiving more federal aid dollars than the nearly 3 million people who live in the states' 260 most hard-pressed rural counties.
Residents in these distressed counties have averaged, over the latest three years with data available, $53 each in federal development aid. The top 260 crop subsidy beneficiaries have averaged, in their most recent three years of federal subsidies, just over $1 million each.
The federal legislation that directs the distribution of crop subsidy dollars expires this September. The U.S. House of Representatives has already passed a bill that renews the subsidies, largely as is. The Senate will take up the reauthorization early next month.
Lawmakers, says the Center for Rural Affairs, face a simple choice, “whether to continue massive subsidies to a limited number of mega-farms or limit farm program payments in order to invest in the future of rural communities and the millions that live there.”
The answer may well determine just how unequal rural America turns out to be.
Stat of the Week
The chief executive of ConAgra, the agricultural commodities giant that now concentrates on marketing packaged foods, collected $13.45 million in fiscal 2007, the company reported last week. ConAgra CEO Gary Rodkin’s compensation amounted to 426 times the take-home of an average job in rural America, according to the latest U.S. Department of Agriculture figures.
Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954.
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