This Week

Is anything more important to GOP leaders in Congress than cutting the taxes rich people pay? Apparently not. Just before 2 a.m. this past Saturday morning, after years declaring that raising the minimum wage would “hurt” poor people by destroying jobs, House leaders gleefully pushed to passage a bill that raises the minimum wage.

Why the about-face? The House leadership's post-midnight minimum wage bill just happened to also include a provision that slashes the estate tax, the only federal tax on grand fortunes, by $267.6 billion. We have more below.

We also have more on one former House GOP leader who seems to be moving in a different direction. Chris Cox, until last year the House Policy Committee chairman, now chairs the SEC. Last week Cox announced new regulations that will complicate life for America's greediest CEOs. What's up here? We explain in this week's Too Much.

Greed at a Glance: Gut the Estate Tax, Plan B

Is Maynard G. Webb, the high-powered Internet executive, about to do his imitation of Maynard G. Krebs, the celebrated “beatnik” slacker character from the 1959-1963 hit comedy series, The Many Loves of Dobie Gillis? America's first famous Maynard G., played by the late Bob Denver, introduced an anti-rat race ethos into prime-time television. Webb, America's second notable Maynard G., has been a rat-race superstar, as the chief operating officer at eBay. Now 50, Webb is retiring this August, having cleared over $90 million in personal stock option profits over his six eBay years — and millions more in regular salary and bonus. eBay has “no plans to fill Webb's role after he goes.” Maybe his slacking off started early . . .

Readers of Colorado's Aurora Daily Sun & Sentinel opened their papers late last month to find a most unusual commentary: a column — by the newspaper's publisher, H. Harrison Cochran — calling for a “maximum wage.” Cochran's column contrasted the 24 percent slump in the value of the minimum wage since 1973 with the six-fold soaring of CEO pay since 1990, noting that much of that CEO pay pumping came from “cutting jobs, holding pay raises down, reducing benefits and outsourcing.” Cochran's answer? America needs a maximum wage tied to worker pay. Asks Cochran: “What if the most a CEO could make was 100 times the average worker pay?” Answers Cochran: With that cap in place, CEOs would gain an incentive “to grow productivity to support higher wages and benefits.”

GOP leaders in Congress have been scrambling, ever since their bid last month to ax the estate tax came up three Senate votes short, to figure out how to gut the estate tax without having to win a straight up-or-down vote on repeal. They first tried to add an estate tax cut into a totally unrelated pension bill. But that effort fizzled. Their next move? They stripped from the pension bill a slew of popular tax credits, then, in the wee hours Saturday morning, passed a bill that couples these tax credits, a hefty cut in the estate tax, and a hike in the minimum wage. Senate Democrats will now have to choose between a higher wage minimum and preserving an effective estate tax. GOP leaders, Senator Edward Kennedy charges, are playing “a cynical game of politics with the lives of millions of hard-working American families.” Senate Majority Leader Bill Frist will likely try to rush the House bill through the Senate this week . . .

The Bush administration, meanwhile, seems to have hit upon an even cleverer strategy for shielding the nation's most fortunate from estate tax liability. The White House has decided to wink at the wealthy who scheme to avoid paying their estate taxes. The IRS, reports the nation's top tax journalist, David Cay Johnston, has begun eliminating the jobs of 157 of the 345 lawyers who currently audit federal estate tax returns. Notes Rep. Steve Rothman, an estate tax supporter from New Jersey: "The American people are tired of the Bush administration making up its own rules and bankrupting our economy to help the wealthiest Americans at the expense of everyone else."

George W. Bush and his friends in Congress, to be fair, don't deserve credit for every political move that shifts tax dollars into the pockets of America's most wealthy. The nation abounds with lawmakers quite capable of legislating Robin Hood-in-reverse all by themselves. In Ohio, for instance, state legislators are now holding hearings on a just-introduced bill that would cut the state's capital gains tax rate by almost half, down to just 3 percent in 2009. If this bill passes, households in Ohio's richest 1 percent — average 2007 income, $812,000 — would see $7,164 in tax savings over the next three years. Families in Ohio's middle 20 percent would see, from this same bill, tax savings that average $1 a year.

Your Vacation Too Short? Blame Inequality

Summertime and the living is easy. Except in the United States. Once again this summer, working Americans will enjoy far less time off than their counterparts elsewhere in the developed world.

Americans with full-time jobs now average 3.9 weeks a year in vacation and paid holidays combined, notes a new statistical round-up from the Washington, D.C.-based think tank, the Economic Policy Institute.

Workers in Germany, Italy, Austria, Denmark, and the Netherlands average nearly twice as much paid time off a year. In Ireland, the European country with the least vacation and holiday time, full-time workers still have nearly two more paid weeks off from work than American full-time workers.

Time off from work stats offer one of the best yardsticks for measuring power dynamics within a society. In societies where wealth — and power — concentrate at the top, average working people invariably have less political and economic clout, less of an ability to win time off, either via legislation or at the bargaining table.

In the United States, the developed world's most unequal nation, no laws guarantee full-time workers a minimum number of vacation weeks a year. In Europe, Germany, Italy, the UK, Belgium, Finland, Ireland, Norway, Portugal, Spain, and the Netherlands, statutes guarantee full-time workers at least four vacation weeks a year.

France, Denmark, Austria, and Sweden guarantee full-time workers, by law, at least five weeks vacation.

The SEC Speaks: No More CEO Pay Secrets

This past January, the federal government's top corporate watchdog, the Securities and Exchange Commission, released draft regulations on CEO pay disclosure.

Agency officials then sat back and waited for comments to come in. And they did. In torrents. The SEC received, in all, over 20,000 comment letters, more letters than the SEC had ever received, on any single issue, in the agency’s entire 72-year history.

Last week, amid appropriate fanfare, SEC chair Christopher Cox released the end-product of this intense comment period, a set of new standards that will — starting next year — force corporations to disclose substantially more information about how much they pay their executives.

“This is a red-letter day for shareowners,” quickly noted one corporate reformer, Council of Institutional Investors spokesperson Amy Borrus.

Even business leaders smiled. The new SEC rule, proclaimed Office Depot CEO Steve Odland, “strikes a good balance.” The new standards, added Business Roundtable president John Castellani, leave CEOs “pleased.”

How could CEOs be “pleased” with the same standards that have CEO pay critics celebrating? Corporate leaders are smiling because they know they’ve dodged a bullet. The new SEC regs do nothing to actually cut CEO pay.

The new regs, for instance, do not require that shareholders get a chance to vote, even on an advisory basis, on executive pay packages.

Even so, most CEO pay critics are giving the new SEC disclosure rule, if not a standing ovation, at least a hearty round of applause. Under the rule, these critics point out, companies will have to show almost everything their top five executives are making, perks, lifetime retirement benefits, and “golden parachute” severance packages included.

The new CEO pay disclosure rule, some observers note, could help heat up pressure on Congress to take on executive pay in a more meaningful way. SEC chairman Christopher Cox, for his part, has clearly concluded that taking on CEO pay as an issue can pay political dividends.

Cox, as a high-ranking GOP congressional leader, consistently carried the legislative water for Corporate America. Corporate reform activists opposed his SEC appointment, figuring Cox would roll over for corporate interests once he became SEC chair.

But Cox has been, in fact, an aggressive SEC chair. Why? He may be angling to position himself as a people’s champion against executive pay excess, in an attempt to separate himself from the Republican field in a future contest for a GOP presidential nomination.

Still, Cox is only going so far down the road toward more reasonable CEO pay.

“It’s not the job of the SEC,” he told reporters last week, “to place limits on what executives get paid.”

Limits, in other words, remain off the table for polite political discussion. So long as that remains the case, so will any real change in CEO compensation.

We have more on the new SEC CEO pay regs.

Stat of the Week: Income Gains Settling at the Top

The most affluent 1 percent in the United States — those households with at least $315,000 in annual income — collected 41 percent of the nation's income gains in 2004, the most current year with statistics available. Over half this increase in the top 1 percent's income share “actually went to the top one-tenth of 1 percent of households.”

Source: Aviva Aron-Dine and Isaac Shapiro, New Data Show Extraordinary Jump in Income Concentration in 2004, Center for Budget and Policy Priorities, July 25, 2006

Quote of the Week: The Biggest Story in America

“The biggest story in America today is one most people don't know much about, one which seriously threatens to destroy this nation.

“And no, it is not the war in Iraq. That is only damaging our economy, killing tens of thousands and making enemies of much of the world.

“What's much more dangerous to us at home is the vast transfer of the nation's wealth now going on. A transfer, that is, from the poor and the middle classes, not only to the rich but to the super-rich.”

Jack Lessenberry, What Really Threatens Us,
Detroit Metro Times, July 26. 2006

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