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Tax rates. Loopholes. Tax enforcement. They all matter. If we lower tax rates on our wealthiest, let them play games with the tax code, and seldom subject their tax returns to serious audit, we’ll pay a price — in ever starker inequality.

A spate of new analyses, released just in time for this year’s April 15 Tax Day, makes all this compellingly clear. Sinking tax rates on high incomes alone, notes historian Colin Gordon, may explain as much as 60 percent of upper-end income gaps between the United States and far less unequal nations elsewhere.

But the past need not dictate the future. We can take steps to make the tax code a vehicle for greater equality, as economist Dean Baker, tax lawyer Bob Lord, and activist Chuck Collins all neatly lay out in new Tax Day reflections.

And for inspiration, suggests analyst David Cay Johnson, we have Jerry Curnutt, a 76-year-old retired IRS agent busy blowing the whistle on a tax-cheating ploy that has saved hedge fund movers and shakers billions of dollars off their tax bills over the last decade. Inside this week’s Too Much: more inspiration still.


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You may be in good hands at Allstate, as the classic ad line goes, but America’s wealthiest are going to stick with their buddies at the Federal Emergency Management Agency’s flood insurance office. Over recent years, an NBC News probe has revealed, FEMA has been redrawing flood maps to benefit the owners of beachfront mansions and luxury condos. The new maps are saving deep pockets as much as 97 percent off their flood insurance premiums — at the same ordinary homeowners in hurricane zones are facing record-high rates. Among FEMA's biggest beneficiaries: Robert Watson, a former Westinghouse top exec with a $19-million beachfront bungalow on Florida’s west coast . . .

Daniel RiccioSmart phones from Samsung may have bigger screens than phones from Apple. But top execs at Apple are pulling in bigger paychecks. Much bigger. In fact, three executive sidekicks to Apple’s CEO each took in more individually in 2012 than the $31-million compensation bill for Samsung's entire four-person top executive team. Apple operations VP Daniel Riccio pulled down just under $69 million for the year, about the same as Apple’s chief financial officer. Apple’s senior VP pocketed another $50 million. Executive rewards in Korea, notes one tech industry observer, run “a fraction of the norms in America.”  But within Korea, as Seoul National University analyst Kon Sik Kim points out, executive pay at Samsung actually runs well above national norms . . .

They call Jorge Bendersky the “Vidal Sassoon of the canine world.” This dog groomer extraordinaire has been attending to New York’s “power pups” since 1992, and his current clients range from Ralph Lauren to global super models. Bendersky charges $300 an hour for a grooming session. He also makes house calls. Clients have flown him from Manhattan to the Hamptons by helicopter — and to Miami by private jet.  One uptown New Yorker “who couldn’t fathom cleaning her dog’s soiled foot,” Business Insider noted last week, once had Bendersky summoned at midnight for an emergency visit.  Bendersky’s professional “signature”: “I tailor every haircut to the specific dog.”



Quote of the Week

“Look around Wall Street. You'll find tribal insularity, short-term thinking, personal irresponsibility, cynicism about playing by the rules, an aversion to socially productive labor, a habit of shameless materialism, an inability to defer gratification, and a lack of concern for what 'message' all this sends to the youth raised in such an environment. In short, you'll find the very things typically imputed to the culture of poverty.”
Eric Liu, How America is rigged for the rich, CNN, April 9, 2014


Doug OberhelmanDoug Oberhelman, the CEO at heavy-equipment maker Caterpillar, can rattle off a long laundry list of what’s wrong with America. The nation, he pronounced last fall, needs to become more “business friendly” and realize that “higher taxes will not bring more jobs.” What will? America, says Oberhelman, needs to invest more in infrastructure, to help the nation’s ports handle the world’s biggest ships. Just don’t ask Caterpillar to help pay for any of that infrastructure. A U.S. Senate panel revealed late last month that the company has shifted $8 billion worth of profits to Switzerland since 1999, a move that has helped the firm avoid $2.4 billion in corporate taxes. Oberhelman took home $22.4 million in 2012, a 32 percent hike over his previous year’s pay.





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China horseshoe hotel

If you already hold a mega-million fortune, do you really need any more luck? The folks at Sheraton, at first glance, seem to think so. They’ve designed their new luxury resort outside Shanghai in the shape of a horseshoe. Sheraton's Huzhou Spring Resort is targeting, says one report, “the affluent business class,” the sort of travelers who may not realize that the hotel’s shape actually reflects the arch of traditional Chinese bridges. Rooms start at about $400 a night.





Web Gem

Democracy at Work/ Inspired by the work of economist Richard Wolff, this online presence explores the world of worker self-directed enterprises and other alternatives to wealth-concentrating corporate giants.





Michel BarnierThe European Union’s executive arm has just proposed new executive pay reforms that put a fresh twist on shareholder “say on pay.” U.S. shareholders currently have the right to take “advisory” votes on corporate executive pay levels. The new EU proposal would give shareholders in EU nations the right to a binding vote, once every three years, on the executive pay policies of Europe's 10,000 publicly traded companies. These policies, under the proposed rule, would have to spell out a maximum annual payout for top execs and indicate the pay ratio between those execs and their average workers. EU debate on the pay proposal will likely take place this fall. Current executive pay levels, EU financial services chief Michel Barnier told reporters last week, do “leave you with a pretty bitter taste in your mouth.”


Take Action
on Inequality

The latest AFL-CIO PayWatch edition goes live this week with a spotlight on the high-paid CEOs of America’s most notorious low-wage employers. Check the site, starting April 15, to see what you can do to help narrow the nation’s income gap.

inequality by the numbers

Income comparison



Stat of the Week

CEOs of major American corporations last year took home over twice the pay of their German counterparts, concludes a new Towers Watson analysis. The German top execs walked off with an average $8.2 million. The U.S. CEO average: $17.9 million. CEOs at major European firms outside Germany averaged $9.6 million.




Taxes, the Rich, and Our Known Universe

Pundits and political scientists are always searching for that simple theory that'll explain just what makes our politics tick. Where should they be looking? How about in the eyes of a billionaire at tax time?

Physicists the world over have been all abuzz lately. A new research breakthrough has them tantalizingly close to a “grand unified theory” of how absolutely everything in the physical universe actually works, the holy grail of modern physics ever since the days of Albert Einstein.

A “grand unified theory of everything,” of course, could also come in handy for our political universe. Just imagine how much more comprehensible our world would seem if we had a single “grand” proposition to help us make sense of the strange and unconnected political realities we see all around us.

And what might that grand proposition be? In honor of this week's tax filing deadline, let's try this one: Rich people really really don’t like paying taxes.

Can a proposition this simple explain everything?

Well, go ahead. Pick a political phenomenon in the United States today. Somewhere in the shadows, if you dig deep enough, you'll find a billionaire feverishly pulling levers to avoid paying higher taxes. Or some pol, just as fevered, working to remain in that billionaire’s good graces.

Take, for instance, the stunning fall into political irrelevance of David Camp, the long-time conservative Republican congressman from Michigan who chairs the powerful House Ways and Means Committee.

Journalists almost always use the word “powerful” when they describe the Ways and Means panel. Only real players in Washington’s power circles ever rise to the top of Ways and Means. David Camp certainly rated as one of these players.

Camp has also always fancied himself a serious legislator, and, a few years back, he launched a mammoth effort to “simplify” the U.S. tax code. Camp took no shortcuts. His panel created 11 bipartisan working groups and conducted 30 separate hearings, then sought feedback on three substantial draft proposals.

Late in February, in a deeply polarized Congress, Camp revealed the surprising fruits of this intense labor, a proposal that actually made an effort to appeal across the political aisle. Most notably, Camp’s plan called for an end to some of the tax breaks and loopholes nearest and dearest to America’s super rich.

One prime target in the Camp proposal: the “carried interest” loophole, the tax code provision that lets private equity and hedge fund wheelers and dealers claim the bulk of their income as capital gains and, in the process, cut their tax bills by almost 50 percent on every million of carried-interest income.

Camp made no move to hide what he was proposing. “Stop Subsidies for Excessive Compensation,” the promo package for his plan trumpeted. “Wall Street tycoons,” the text continued, “receive compensation packages riddled with special tax-exempt treatment — courtesy of hardworking taxpayers.”

Camp’s overall plan, to be sure, did have a rich people-friendly cast, mostly from cutting the top tax rate on ordinary income from 39.6 to 25 percent, with a 10 percent surtax on income over $464,000 for joint filers.

The bottom line: Most of the nation’s wealthy wouldn’t feel any significant new tax bite from the Camp plan at all. But some would. And that possibility terrified Camp’s GOP congressional leadership colleagues. They didn’t just refuse to rally around his proposal. They recoiled from it. The Camp plan, three years in the making, sank out of political sight in an instant.

Now Camp has decided to sink out of sight, too. Two weeks ago, a month after the frightfully fast flame-out of his life’s legislative labor, the 60-year-old Camp announced he would not be seeking re-election to Congress. Rich people, David Camp had failed to remember, really don’t like to pay taxes.

This same “grand unified theory” for all things political in 21st-century America works just as well on a more defining phenomenon of our time: the incredibly over-the-top conservative opposition to Obamacare.

On its face, this unrelenting opposition to President Obama's Affordabe Care Act makes little sense. The basic policy framework of the Obama health care reform, after all, comes from a conservative think tank. That framework first translated into actual law, at the state level, under a Republican governor.

So why have GOP leaders spent the last four years ranting against Obamacare and making full-throated hostility toward it their political end-all and be-all?

Some suggest a purely partisan explanation: Whatever President Obama pushes, Republicans must oppose. But the Obama White House has also pushed hard on a controversial education agenda that revolves around a widely unpopular — at the grassroots — high-stakes-testing regimen.

Why have conservatives in Congress done so little to make Obama pay for this unpopularity? Why have they focused so single-mindedly on Obamacare?

Maybe because rich people don’t like to pay taxes — and Obamacare does more to raise taxes on the rich than any legislation over the last two decades. The Obama Affordable Care Act puts in place a 0.9 percent payroll tax and a 3.8 percent tax on investment income for couples making more than $250,000.

The Affordable Care Act also sets a welcome corporate tax precedent. Under the legislation, health insurance corporations will no longer be able to deduct off their taxes any top executive pay they shell out that runs over $500,000 per exec.

The combination of all these tax measures amounts an appreciable hit on the incomes of America’s most financially fortunate. And those fortunate have done their best, right from the start, to wipe that hit away.

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Remember that initial summer 2010 Tea Party explosion of anger at Obamacare? Paid for and delivered by the millions of billionaires like the Koch brothers.

Our grand unified theory of contemporary America’s political universe may not wind up explaining every phenomenon that streaks across our political landscape. But we live in a plutocracy. The longer this plutocracy lingers, the grander an explanation our grand theory will surely be.


New Wisdom
on Wealth

Eduardo Porter, In New Tack, IMF Aims at Income Inequality, New York Times, April 8, 2014. The guarantor of global financial stability now considers limiting income gaps part of its “core mandate.”

Matt Bruenig, John Rawls on Unlimited Political Contributions, Policy Shop, April 8, 2014. Reflections from America's top political philospher on concentrated wealth and democracy.

Larry Bartels, Rich people rule! Washington Post, April 8, 2014. A political scientist looks at the new evidence on elite domination of American politics.

Laurie Penny, A tale of two cities: how San Francisco’s tech boom is widening the gap between rich and poor, New Statesman, April 9, 2014. This city by the bay has become a place where you have to step over the homeless to buy a $20 artisan coffee.

Dana Goldstein, How Higher Ed Contributes to Inequality, Atlantic, April 9, 2014. An interview with Cornell political scientist Suzanne Mettler.

Lisa Keister, Meet America’s Uber Wealthy ‘Double Rich,’ Inequality.Org, April 10, 2014. We usually define top 1 percenters either by income or wealth. But to understand privilege we need to look at both.

Atif Mian and Amir Sufi, Family Structure and Inequality, House of Debt, April 10, 2014. Which came first, the disintegration of the two-parent family or rising income inequality?

Harvey Kaye, Fighting for the Four Freedoms, Bill Moyers & Co., April 11, 2014. A top progressive historian discusses how FDR's words helped make America “freer, more equal, and more democratic than ever before.”








The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class cover

Learn more about Too Much editor Sam Pizzigati's new history of the triumph over America’s original plutocracy. Read the Intro online and check what readers are saying.


NEW AND notable

Deconstructing Exactly Who Has What

New Class SocietyEarl Wysong, Robert Perrucci, and David Wright, The New Class Society: Goodbye American Dream? Rowman & Littlefield, fourth edition, 2014. 393 pp.

A sense of history infuses this new edition of The New Class Society, and that may be why the book makes for such an effective guidebook to how economic classes in the United States segment and interrelate — in an increasingly unequal nation.

The authors — veteran sociologists from Indiana University, Purdue, and Wichita State — offer a new structural take on America’s class structure. Their “double diamond” places the “1 percent” in a detailed perspective that carefully subdivides America’s “privileged” and “new working class.”

Educators across the country have been using earlier editions  of The New Class Society for over a dozen years. This fourth edition deserves a wider audience.




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