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|November 24, 2014|
Ever feel that America has become just a bit too unequal? The new top exec at Cadillac, the General Motors “premium” brand since 1909, believes you ain’t seen nothing yet. Cadillac’s Johann de Nysschen is predicting that his GM auto division will by 2029 have become a proud purveyor of “ultra-luxury.”
“It is too early today for a $250,000 Cadillac,” de Nysschen opined last Wednesday in an interview at the annual Los Angeles auto show. “Fifteen years from now, it won’t be.”
The current most expensive Cadillac retails at about $70,000, a pittance compared to the half-million-and-up that automakers like Rolls Royce and Bentley are asking for their motor cars. Cadillac sees this ultra-luxury market growing — and wants in. Cadillac, in effect, wants a more unequal America.
We don’t. Plenty of reasons why in this week’s Too Much.
|GREED AT A GLANCE|
Back in 2007, three MIT grads were taking jobs on Wall Street for every one who went to work for a software company. Now two are choosing Silicon Valley’s flip-flops and beanbag chairs for every one who goes high finance. But banking giant Goldman Sachs is fighting back — with a charm offensive that’s highlighting Wall Street’s fantastically lucrative rewards. Notes Goldman tech exec R. Martin Chavez: “As soon as we start talking to the candidates about what our starting packages look like, the lifestyle questions about flip-flops and beanbags really start to go away.” Profs who teach tech are decrying this new pressure on young grads to cash in quick. Laments Duke’s Vivek Wadhwa: “It breaks my heart when my engineering students use the talents I taught them to engineer the financial system instead of engineering solutions to the world’s problems.”
Gil Dezer, America’s “youngest developer of luxury high rise residential,” may soon be America’s richest developer of luxury high rise. Dezer is teaming with Austria’s Porsche Design on a new 60-story “ultra-luxury” tower now rising in South Florida. The new tower, once complete in 2016, will host 132 residents — and two to four cars per household, all parked in “sky garages” right outside the condo living rooms. Dezer has already racked up $600 million in sales for his new “Porsche Design Tower,” and the future occupants so far include 22 billionaires. The billionaire interest doesn’t surprise Dezer. As he told the Miami Herald: “You don’t spend $5 million on a condo if you only have $15 million.” The tower’s four-story penthouse will actually run $32.5 million . . .
More evidence that the super rich are leaving the merely very rich behind: A new City private bank report is noting that sales of smaller private jets dropped 17 percent last year. But sales of king-sized private jets rose 18 percent. Some super rich, to be sure, do seem to prefer buying a private jet ride over buying a private jet. For these souls, the Four Seasons hotels are offering for the 2015 ski season a $65,000 private jet excursion that winds up in Wyoming’s Jackson Hole, where Olympic gold medalist Tommy Woe himself will join the jet-set skiers for slaloms. Observes wealth watcher Robert Frank on the new super-rich scene: “For decades, a rising tide lifted all yachts. Now, it is mainly lifting megayachts.”
Quote of the Week
“That someone who labors all year to gross $80,000 bears the same federal income tax burden as someone making $5 million per week illustrates how much the tax cuts signed into law by Presidents Bill Clinton, a Democrat, and George W. Bush, a Republican, benefited investors rather than workers.”
|PETULANT PLUTOCRAT OF THE WEEK|
This past June Forbes declared Travis Kalanick, the 38-year-old CEO of the Uber “ride sharing” service, a billionaire several times over. Ruthlessness apparently pays. Kalanick had spent the previous four years bulldozing over local public officials, complaining customers, competitors, and his own underpaid drivers. Proclaimed Kalanick last year: “We don’t have to beg for forgiveness because we are legal.” That “win-at-all-costs” attitude has infused Kalanick’s $18.2-billion Uber. Last week, the news surfaced that one of Uber’s senior execs had outlined for a group of New York influentials a plan for digging up dirt in the private lives of journalists who’ve written critically about Uber’s tactics. Kalanick spent last week apologizing — but, tellingly, didn’t fire the errant exec.
|IMAGES OF INEQUALITY|
Things are really hopping for the luxury jeweler Fabergé. The company’s sales jumped 50 percent in 2014’s third quarter over the previous year. Fabergé’s top seller? The rings in the company’s “Emotion” collection. Each $38,000 bauble sports a bedazzling array of 300 emeralds, sapphires, rubies, and diamonds. No one quite knows what emotion — outside avarice — the rings signify.
The Walmart 1%/ This artful site explores the exceedingly wealthy people behind the Walmart empire, with a special focus on the six Walmart heirs who control more wealth than the bottom 42 percent of Americans combined.
|antidotes to inequity|
This past June, delegates to the annual Unitarian Universalist Association General Assembly adopted “Escalating Inequality” as the pressing social issue that local Unitarian congregations will be exploring over the next four years. Staff at the religious denomination, a social change pacesetter, have just released a study guide to help congregations better understand inequality — and act to overcome it. The new guide, now available online, highlights questions and resources that any interested local religious congregation might be able to put to good use.
Do you belong to a religious congregation concerned about today’s deep economic divides? Why not act on that concern? To help get started, check this new Unitarian resource.
|inequality by the numbers|
Stat of the Week
The CEOs running the U.S. companies bought up in this year’s 10 largest merger deals will rake in $430 million worth of severance, researchers from Equilar conclude in a just-released report.
Uncle Sam Needs Some Better Nephews
The kingpins of Congress have spent years carving tax loopholes that help America’s CEOs fleece the federal treasury. Now these kingpins are pushing a corporate tax ‘reform’ that ignores the loopholes.
Average Americans have a choice at tax time. They can pay their taxes or risk going to jail for tax evasion.
America’s corporate CEOs have a different set of tax-time choices. These CEOs can have the corporations they run pay Uncle Sam or they can have their corporations pay more to their CEOs.
Guess which way lots of CEOs are leaning. Better yet, read Fleecing Uncle Sam, the just-released report from the Institute for Policy Studies and Center for Effective Government that tallies up the choices top CEOs are actually making.
This new Fleecing Uncle Sam study looks at the 100 U.S. corporations that last year shelled out the most in CEO pay. Of these 100 companies, 29 paid Uncle Sam less in taxes than they paid their CEO in compensation.
How could that happen? Did these firms simply have bad years in 2013 and end up with not much income to tax? Not exactly. In fact, not at all. These 29 companies last year together grabbed a robust $24 billion in U.S. pre-tax profits.
And the CEOs at these 29 companies — major outfits like Boeing, General Motors, and Verizon — pulled in handsome paychecks for those billions in profits. The CEOs averaged, note Fleecing Uncle Sam co-authors Sarah Anderson and Scott Klinger, an impressive $32 million each.
Top-tier American corporations, in other words, are stiffing Uncle Sam at the same time they’re piling up profits and extravagantly rewarding their top execs.
These corporations have no magical super powers that make taxes disappear. They do have friends in high places — the U.S. Congress, for one.
Over recent decades, as Fleecing Uncle Sam relates, lawmakers have lavished upon Corporate America “lucrative loopholes and tax credits that have taxpayers picking up the normal costs of business that corporations used to pay for themselves,” tens of billions in annual subsidies “for everything from company research and development expenses to normal equipment purchases.”
Average American taxpayers are even picking up the tab for all those tens of millions that corporations lay on their CEOs as compensation. The current federal tax code essentially lets corporations deduct off their taxes whatever windfalls cascade into America’s executive suites.
Average taxpayers are picking up another tab, too: the bill for all the public services — from highways to clean water — that benefit everyone and every institution in our society, corporations included. With corporations shirking their fair share at tax time, the nation’s basic tax burden falls on average Americans.
Just how much tax shirking are corporations doing? The new Fleecing Uncle Sam report offers one suggestive clue. If the seven largest U.S. firms that pay Uncle Sam less than they pay their CEOs had paid taxes last year on their profits at the standard 35 percent U.S. corporate tax rate, the study calculates, these seven companies would have owed $25.9 billion in federal taxes.
In real-life 2013, these seven corporations, taken together as a group, didn’t pay any federal corporate income tax. Instead, notes Fleecing Uncle Sam, the seven gobbled up $1.9 billion in tax refunds. The difference between what they could have paid in taxes and what they claimed in refunds: $27.8 billion.
What could America do with $27.8 billion? That sum would be enough to make free pre-K education a reality for every four-year-old in the entire United States.
The billions that could be helping four-year-olds are helping CEOs instead — to ever higher rewards. Between 2003 and 2012, recent research shows, America’s top 500 corporations spent 54 percent of their lightly taxed profits “buying back” shares of their stock off the open market, a maneuver that serves to boost a company’s share price — and the CEO rewards tied to that share price.
Now CEOs do, of course, have to pay personal tax on the corporate pay they receive. And they do now face, thanks to the 2013 expiration of the Bush tax cuts on income over $250,000, somewhat higher personal income tax rates on their rising incomes. The top-bracket U.S. tax rate now stands at 39.6 percent, up a bit over the 35 percent top rate of the George W. Bush years.
But CEOs don’t have to sweat that higher rate right now, thanks to still another convenient tax loophole that Fleecing Uncle Sam co-author Scott Klinger examines in another study released earlier this month.
Average Americans, Klinger explains in this paper, can currently defer from their annual taxes no more than $18,000 in 401(k) contributions.
CEOs, by contrast, can defer from taxes an unlimited amount of their executive compensation every year, via special corporate retirement plans that have enabled America’s chief executives to build up huge retirement stashes. The CEOs of Starbucks, Honeywell, McKesson, and Walmart each held earlier this year over $140 million in total retirement assets.
Former Walmart CEO Mike Duke last year parked $19 million in his own special deferred pay account and, with that parking deferral, saved almost $7 million off his personal 2013 federal income tax bill.
Walmart workers, Scott Klinger adds, haven’t been “nearly so lucky.” In October, Walmart announced plans to raise health insurance premium costs for 1.2 million employees and end health insurance entirely for 30,000 part-time employees.
Various pieces of legislation designed to end the corporate tax loopholes that let America’s CEOs stiff Uncle Sam — and get fabulously rich in the process — are now pending in Congress. Fleecing Uncle Sam has the particulars on all these legislative initiatives.
But the “corporate tax reform” leaders in Congress are now pushing incorporates none of these bills. Average taxpayers are going to have to push back.
Mark Thoma, When Piketty Argued for Income Redistribution, He Changed Economics, Fiscal Times, November 18, 2014. Economics may now be evolving for the better.
Bill Bigelow, How the Koch Brothers Are Sneaking Their Way into Public Schools, Zinn Education Project, November 18, 2014. The right-wing billionaires have a plan to shape social studies curricula nationwide.
Laura Gottesdiener, A Tale of Two Detroits, Separate and Unequal, In These Times, November 18, 2014. America’s future? In the new Detroit, pockets of wealthy live in comfortable privately guarded enclaves while most locals worry about access to water.
Benjamin Dangl, Who Rules the World? Telesur, November 19, 2014. How concentrated wealth undermines democracy.
Pam Martens, Wiseguys: Drawing Parallels Between the Mafia and Wall Street, Wall Street on Parade, November 19, 2014. Have you seen JPMorgan Chase's rap sheet lately?
Marino Donati, Use public procurement to tackle inequality, says Oxfam, Supply Management, November 20, 2014. A business group highlights Oxfam’s call for contracting that rewards firms with low CEO-worker pay ratios.
Doug Short, Five Ugly Decades of Middle-Class Wages in America, Wolf Street, November 21, 2014. The flip side of rising corporate executive pay.
Peter Ormond, Greed or Green, It’s Your Choice, Hamilton Spectator, November 21, 2014. Investments need to do more than enrich the few.
If you hire them, pay will come, Economist, November 22, 2014. Surprise: CEOs earn more when they hire compensation consultants
In 1916, Congress raised the tax rate on income over $2 million to 15 percent, and lawmakers declared that tax rates had reached their “very highest notch.” Just two years later, America’s top tax rate was sitting at 77 percent.
What happened? Too Much editor Sam Pizzigati tells that story — and many more — in his gripping history of the triumph over America’s original plutocracy. Read the intro online, then get the special publisher discount.
A Sobering New Portrait of Our Super Rich
Wealth-X and UBS, World Ultra Wealth Report 2014, November 2014, 100 pp.
UBS, the Swiss banking giant, and Wealth-X, a Singapore-based research group, have just published their second annual “essential reference for those who want to engage the most commercially significant wealth segment today — the ultra wealthy.”
What makes an affluent an ultra? A fortune worth at least $30 million, pronounces the new UBS and Wealth-X World Ultra Wealth Report 2014. As of mid 2014, a record 211,275 individuals around the globe fit that bill, a 6 percent increase over the year before.
These ultras make up a mere 0.004 percent of the world’s adult population. They control, calculate UBS and Wealth-X, almost 13 percent of the world’s total personal wealth.
This latest World Ultra Wealth Report paints a rather vivid portrait of our global richest few. You can find in these pages everything from breakdowns on their hobbies (17.8 percent of male ultras go ga-ga over aviation) to their philanthropic priorities (the super wealthy give over seven times more to their alma maters than to human services agencies).
The average ultra, the report adds, spends $1.1 million a year on luxury goods and services and owns 2.7 homes. Ultras on average connect socially with seven other ultra-rich individuals, “at least one of whom is a billionaire.”
And, oh yes, ultras turn out to be more likely to live in the United States than any other nation on earth. The U.S. ultra population now sits just shy of 70,000. The nation with the next highest population of ultras, Germany, hosts just 19,095.
|About Too Much|
Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: email@example.com | Unsubscribe.