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January 30, 2012 |
| THIS WEEK | |
The “Buffett rule” now has a new human face — and a number. Before last week the only face on the “Buffett rule” — the notion that the mega rich ought to pay at least as much in taxes as average Americans — belonged to Warren Buffett, the billionaire who revealed last summer that he was paying less of his income in federal taxes than his secretary. Last Tuesday, we had a chance to meet that secretary, Debbie Bosanek, who sat next to First Lady Michelle Obama during the President’s state of the union address and then did a network television interview afterwards. “I represent the average citizen who needs a voice,” Bosanek noted in that interview. “Everybody in our office is paying a higher tax rate than Warren.” Exactly how much of their incomes should Warren and the rest of America’s super rich pay in taxes? President Obama last week helpfully suggested an exact percentage. How does the President’s number stack up against current tax rates — and history? We do some exploring in this week’s Too Much. |
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| GREED AT A GLANCE | |
Over 2,500 global political and economic leaders gathered at the Swiss resort of Davos last week, for the annual World Economic Forum. The question at the forum’s first debate: “Is 20th-century capitalism failing 21st-century society?” One answer came from the nearby Swiss resort of Klosters, where several thousand deep-pocket “polo enthusiasts” were frolicking at the village’s eighth annual “snow polo” tourney. This year’s festivities had eight teams of horses and riders competing “to hit a ball between goalposts shaped like giant champagne bottles” while onlookers savored “roast saddle of veal with morel mushroom mousse.” The tourney has grown mightily over recent years. Says founder Daniel Waechter: “Despite the financial crisis, we’ve never had so many team requests.”
Corporate America’s most exclusive club — the $50 million-a-year pay gang — may need to get a bigger clubhouse. The first national surveys on 2011 executive pay won’t be appearing until later this winter, but corporate filings made public so far are hinting at what ought to be a boffo year. Among the CEOs already in this year’s $50 million club: Qualcomm’s Paul Jacobs ($50.6 million), J.C. Penney’s Ron Johnson ($51.5 million), Starbucks’ Howard Schultz ($68.8 million), Tyco International’s Ed Breen ($68.9 million), and Apple’s Tim Cook ($378 million). Disney’s Robert Iger figures to be a club mainstay for quite some time. His new pay deal steered $52.8 million his way in 2011 and guarantees him at least $30 million a year more through 2015. |
Quote of the Week "The system is not working because of extraordinary greed, extraordinary inequality, and attacks on workers' rights that are leading to a crash in demand. What business has to realize is that they will not survive if demand continues to collapse."
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| PETULANT PLUTOCRAT OF THE WEEK | |
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Stat of the Week Mitt Romney has company at tax time. The number of America’s super rich paying less than 15 percent of their incomes in federal taxes has tripled since 1999. In 2008, 131 of the nation’s top 400 incomes had an under 15 percent tax liability. . |
| inequality by the numbers | |
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| IN FOCUS | |
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The 'Buffett Rule' in History's Grand Sweep President Obama has proposed a specific new minimum tax rate for millionaires. Should America's rich feel angry or relieved? We check the IRS tax data archives for an answer. The most famous secretary in America works “just as hard” as her billionaire boss — according to her boss, investor Warren Buffett — but pays federal taxes at twice the rate her boss does. Debbie Bosanek, America learned last week, has been working for billionaire Buffett since 1993. In 2010 she paid 35.8 percent of her income in federal income and payroll taxes. Buffett paid his federal taxes at a 17.4 percent rate. GOP White House hopeful Mitt Romney sits with Buffett in America’s richest 0.006 percent of taxpayers. Romney, America also learned last week, paid his federal income taxes for 2010 at a mere 13.9 percent rate. At what rate should wealthy Americans like Warren and Mitt pay their taxes? President Obama last week suggested — for the first time — a specific minimum percentage for what he has been calling, since last fall, the “Buffett rule.” “Tax reform should follow the Buffett rule,” Obama proposed in his state of the union address. “If you make more than $1 million a year, you should not pay less than 30 percent in taxes.” The Obama administration will be advancing legislation that fixes this 30 percent figure into law. In effect, a new 30 percent “Buffett rule” minimum would replace the current “alternative minimum tax,” a levy enacted in 1969 that no longer operates as any sort of effective check on super rich tax avoidance. Would this new 30 percent minimum have an appreciable real-world impact? The Obama administration last week declined to estimate how much new revenue a 30 percent Buffett rule might raise from America’s millionaires. But we can get a sense of what that impact might be by applying a 30 percent minimum to previous years. In 2009, the latest year with IRS data available, taxpayers reporting over $1 million in income paid an average 24.4 percent of their incomes in federal income tax. If a 30 percent minimum had been in effect that year, these taxpayers would have paid, on average, more than $171,000 additional per taxpayer. Citizens for Tax Justice calculations indicate that a Buffett rule at 30 percent would now raise about $50 billion a year in new revenue. Would a 30 percent Buffett rule, in and of itself, make the tax code fair? Not by the Debbie Bosanek yardstick. If her boss Warren Buffett had to pay 30 percent of his income in federal income tax, Debbie Bosanek would still be paying total federal taxes at a higher rate than her boss. The White House seems to understand this reality and, to its credit, is asking for more tax changes than a new 30 percent Buffett rule. For starters, the Obama administration wants to let the 2001 and 2003 Bush tax cuts expire for taxpayers making over $250,000 a year. That move would raise the top tax rate on capital gains income — the category that includes most of the income that Warren Buffett and Mitt Romney collect every year — from 15 to 20 percent and the tax rate on dividends from 15 to 39.6 percent, the same top tax rate the expiration of the Bush tax cuts would fix on ordinary income from wages and salaries. The Obama administration also wants to reduce the tax deductions and credits high-income taxpayers can claim. All these changes would certainly make for a more progressive tax code. But these changes, taken all together, would still leave today’s rich and super rich paying taxes at substantially lower overall rates than America’s rich and super rich used to pay decades ago. A half-century ago, in 1962, Americans making over what today would be $1 million, after taking inflation into account, paid 42.8 percent of their total incomes in federal income tax. Ten years earlier, they paid even more. In 1952, millionaires — in today’s dollars — paid federal income tax at a 55.2 percent rate, show IRS historical data. And those rich in 1952 were actually getting a good deal, compared to their counterparts ten years earlier. In 1942, the first full year of World War II, taxpayers who would be millionaires in today's dollars paid their federal income taxes at an overall effective rate that hit 68.9 percent.
These days, billionaire Warren Buffett notes in another reminder, we’re fighting another war. A class war. In this class war, Buffett adds, his side has awesomely more weaponry than his secretary’s side. “We have K Street,” Buffett explained last week. “We have Wall Street. Debbie doesn’t have anybody. I want a government that is responsive to the people who got the short straw in life.” So should we all. |
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New Wisdom George Monbiot, Only a maximum wage can end the great pay robbery, Guardian, January 23, 2012, A top UK columnist makes the case for capping executive compensation. Eric Pfanner, At Davos, a Big Issue Is the Have-Lots vs. the Have-Nots, New York Times, January 24, 2012. Setting the scene for the World Economic Forum. George Lakey, How Swedes and Norwegians broke the power of the ‘1 percent,’ Waging Nonviolence, January 25, 2012. An inspiring examination of an unfamiliar history. Paul Buchheit, The Pathology of Inequality. Common Dreams, January 25, 2012. Steal $10, go to jail. Steal billions, pay a fine. Maybe. Katrina vanden Heuvel, The Occupy Effect, Nation, January 26, 2012. A look at the massive impact of the Occupy movement on mass media coverage of inequality and greed. Broc Romanek, The Furor over Income Inequality: Directors Need to Look In the Mirror, Corporate Counsel, January 27, 2012. A corporate attorney blasts the myths corporate insiders use to justify stratospheric CEO pay.
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| In Review | |
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Where Have All the Apologists Gone?
Political leaders who carry the water for the world’s awesomely affluent have always been able to find cover at top global economic institutions like the World Bank and the International Monetary Fund. We’re not pushing rich people-friendly policies because the rich have bought our allegiance, these pols have routinely claimed in the past. We’re just following policies that make sense to top independent global economic observers. These “sensible” policies would just as routinely turn out to privilege “growth” over equity. Any policies that might leave a society’s distribution of income and wealth more equal, technocrats at global economic institutions would reliably argue, don’t recognize the basic trade-off between growth and inequality. If you want to grow your economy, you have to tolerate growing inequality. But something strange has been happening over recent years at the global economic institutional giants. The old reliable apologists for inequality have started changing their tune. Top economists from the World Bank and the IMF are now regularly denying any link between inequality and prosperity — and actively warning against policies that leave income and wealth concentrated at a society’s economic summit. This past week has brought still another technical broadside against inequality from a global economic institution, this time the Organization for Economic Cooperation and Development, the Paris-based research body bankrolled by the world’s developed nations. The economists responsible for this new blast against maldistributed income and wealth aren’t beating around the bush either. “Rising inequality is one of the major risks to our future prosperity and security,” OECD chief economist Pier Carlo Padoan told reporters last week. “The main challenge facing governments today is implementing reforms that get growth back on track, put people to work, and reduce the widening income gap.” The new OECD inequality paper — a chapter in a forthcoming OECD book, Economic Policy Reforms 2012: Going for Growth — describes a variety of “double dividend” economic policies that can both spur prosperity and reduce inequality at the same time. Among those policies: cutting back on mortgage interest tax breaks for wealthy households and ending the preferential tax treatment of capitals gains income from the sale of stock, bonds, and other assets. The new OECD paper also finds “little justification for tax breaks for stock options and carried interest,” the prime generator of fortunes in the private equity world. Private equity kingpins, the super rich in general, and the lawmakers they all underwrite will have to start looking elsewhere for their technocratic cover. |
Inequality Links Patriotic Millionaires
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| 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: editor@toomuchonline.org | Unsubscribe. |
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Right-wingers had a 
Bankers and traders at Wall Street’s Morgan Stanley “were crying in the bathrooms,” say 
Organization for Economic Cooperation and Development, Reducing income inequality while boosting economic growth: Can it be done? January 23, 2012.