March 19, 2007
This has been quite some year for protestations against inequality from unlikely sources. First, in late January, we had George W. Bush decrying our current U.S. level of economic inequality. A week later, Fed Reserve Board chairman Ben Bernanke followed suit.
Last week, the sharp words came from the wealthiest elected official in U.S. history, billionaire New York City Mayor Michael Bloomberg.
“This society cannot go forward, the way we have been going forward, where the gap between the rich and the poor keeps growing,” Bloomberg declared. “It’s not politically viable. It’s not morally right. It’s just not going to happen.”
Wow. Is Bloomberg serious about this? If he were, he'd be boosting a intriguing new tax proposal that two leading activists floated last week in New York's state capital. We have the scoop on this innovative proposal — and lots more — in this week's Too Much.
Halliburton, the all-purpose contractor that registered $2.3 billion in profits last year, has announced plans to relocate its top execs from Houston to Dubai, the opulent Arab emirate. The shift, watchdogs note, will likely mean big tax savings for the company. But Dubai has charms that go beyond tax breaks. Count the Dubai International Boat Show as one. This annual affair, held last week, attracts the world’s biggest makers of super-yachts and fine yacht fittings. The big hit at the 2007 show: the debut of the Sensation, a $60-million, four-deck, 164-foot-long yachting wonder layered with oodles of onyx and marble. Operating expenses do add a bit to the boat’s bottom-line. The Sensation takes a crew of 12 to go anywhere . . .
Two leaders of the nation's most successful progressive state “third party” — the Working Families Party in New York — are proposing a fascinating new yardstick for taxing high incomes: “one day’s pay for every half-million.” The 44,000 New Yorkers who make over $1 million a year, the WFP’s Dan Cantor and Bob Master noted last week in an Albany Times-Union op-ed, currently take in more income per year “than New York's entire middle class, the 2.5 million households earning between $50,000 and $150,000 a year.” If everyone of those 44,000 paid in taxes one’s day pay — about 0.4 percent of their income — for every $500,000 in income, New York would collect $11 billion in revenue, enough to “do health care reform right (cover everyone, no exceptions), pay off some bonds, and still let the governor make good on property tax reduction and school funding.”
Robert Toll, the CEO of luxury homebuilder Toll Brothers Inc., took home $29.3 million last year. Laborers union activists, who picketed the company’s headquarters outside Philadelphia last week, are wondering why. Is that $29.3 million a reward for performance? The company’s net income fell 15 percent last year. An incentive to do better in the future? CEO Toll, who received a grant of 250,000 stock options last year, seems to have enough incentive already. He owns nearly a fifth of the 5,500-employee company’s outstanding shares. Or is the $29.3 million the going rate for CEOs in homebuilding? Not exactly. Over the past three years, Toll has taken home almost seven times more than his CEO counterparts. Last Wednesday, at the Toll Brothers annual meeting, shareholders handily re-elected — over Laborers opposition — the Toll Brothers director who chairs the company’s executive compensation committee . . .
The richest 10 percent of Canadian families with children now take home 82 times more in income than the poorest 10 percent, notes a new study from the Canadian Centre for Policy Alternatives. Three decades ago, that gap only stretched 31 times. Some 76 percent of Canadians, the Ottawa Citizen reports, worry that their nation’s “growing gap will lead to more crime and, if left unchecked, Canada could end up more like the U.S.”
Has Imelda won? The widow of Philippine strongman Ferdinand Marcos, internationally infamous for her opulent shopping sprees, has spent most of the two decades since 
her husband’s overthrow dodging criminal probes and running unsuccessfully for office. Now she’s once again back in fashion, at least among Manila’s young urban elite. Imelda’s grandson helps promote the Embassy, the swank nightclub where Imelda herself can sometimes be spotted. The club welcomes up-and-coming go-getters who enjoy flashing “diamond-encrusted necklaces” that retail at 5 million pesos, or $102,600, over 140 times what the 40 million Filipinos who live on $2 a day or less spend in a year. Manila’s affluent young, Reuters notes, just “want to party and pamper.” The city’s top Jaguar dealer sold 60 Jags and Land Rovers in 2006. He expects to move over 100 in 2007.
Quote of the Week
“The argument in favor of stratospheric pay is that at the summit of business life the competition is so fierce, the pace so unrelenting, that only big rewards will do. We're not so sure. You want a demanding job and a relentless pace, try being a night-shift emergency nurse.”
Editorial, Montreal Gazette, March 14, 2007
New Wisdom
on Wealth
Progressive Maryland, Should Maryland reward corporate practices that nurture defective enterprises? Testimony by Maryland's leading labor-community advocacy group on behalf of legislation that would deny companies tax deductions on excessive executive pay.
Daniel Howden, The two faces of Sao Paulo, The Independent (UK),
March 12, 2007. A moving profile of a city after “500 years of the concentration of wealth and power.”
Decent societies don’t let young children die. Unequal societies do.
New research in the Journal of Public Health, released last week, documents that children under five in rich countries that distribute their wealth in a relatively equal fashion die half as often — and less — as young children in rich countries that let wealth tilt to the top.
The four analysts behind the new research, all from Scotland’s University of Dundee, compared 21 nations that sport similar levels of gross income per capita, countries that range from the United States and Japan to Finland and Australia.
Their data reveal, the researchers report in the Journal of Public Health, “a very strong association between income inequality and under-five child mortality.”
The analysts — David Collison, C. R. Dey, Gwen Hannah, and Lorna Stevenson — measured inequality by contrasting, within each rich nation, the share of national income going to the top 20 percent of households to the share going to the bottom 40 percent.
The United States, the data show, has the widest gap between top and bottom and the highest child death rate. Eight children, per thousand live births, die before age five in the United States.
In Japan, the most equal nation in the study, only 4.25 children per thousand die before five.
In Sweden, a nation almost as equal as Japan, only 3.25 children per thousand die before five.
Back in 1960, the authors of the new Journal of Public Health study note, the two rich countries with today’s worst child death stats — the United State and the UK — rated much more favorably in the international child mortality rankings.
The United States ranked 11th on child mortality, out of 24 rich nations, in 1960. The UK ranked eighth. Since then, in both countries, richer households have substantially boosted their share of national income.
The latest annual surveys on executive pay in the United States will start emerging in just a few weeks. We don’t yet know, of course, what the new surveys will reveal about overall executive pay.
But one key reality already stands clear: The soon-to-be released executive pay surveys will not include many of the biggest paychecks that went to U.S. business executives in 2006.
The reason: These pay surveys cover only companies with shares that trade publicly on Wall Street. The surveys carry no information about “privately held companies,” those corporate enterprises that don’t trade on Wall Street and, as a result, don’t have to reveal what they pay their top players.
These top players make a good bit, particularly at “private equity companies,” those investor groups that specialize in buying out publicly traded companies, jacking up their profits by any means necessary, then reselling them — at a premium price — back on Wall Street.
The resulting personal windfalls for private equity execs can be enormous. Private equity managers typically collect, as a fee, 1.5 to 2 percent of the assets they manage every year. On top of that, they pocket 20 percent of the profits that pour in when they sell the companies they gobble up.
The resulting windfalls can quickly add up. Steve Schwarzman, the top gun at the Blackstone Group, a major private equity powerhouse, has amassed a $3.5 billion fortune, the 73rd largest in the United States, according to Forbes.
That’s not all. Private equity kingpins pay taxes on almost all their earnings at the 15 percent federal income tax rate now in effect for capital gains, not the 35 percent rate that applies to the “ordinary” income that goes to the execs at publicly traded companies.
Senator Charles Grassley from Iowa, the ranking Republican on the Senate Finance Committee, has been hinting lately that maybe this humongous tax loophole ought to be plugged. But Grassley hasn’t yet translated his musings into an actual legislative proposal.
Private equity companies are taking no chances. They’ve opened a new lobbying arm, the Private Equity Council, to help make sure Congress keeps hands off their golden eggs.
Meanwhile, trade unionists are rallying to regulate the largely unregulated global private equity industry. Last week, labor leaders from 20 countries, including the United States, met in Paris. Their immediate goal: to start fashioning a strategy that can counter the negative impact of private equity wheeling and dealing on workers.
Does any corporation in the United States value human life more than Amazon? The Internet retailer spent $1.1 million on security last year to protect the life of just one person. That one person just happened to be the company’s billionaire CEO, Jeff Bezos. Amazon, notes the Seattle Post Intelligencer, spent 22 times more protecting Bezos than Microsoft spent protecting Bill Gates, the world’s richest man.
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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E-mail: editor@toomuchonline.org.
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