|May 6, 2013|
|The flacks at Fifth Third Bancorp — a 21,000-employee bank based in Ohio — must not, as they say, have read the memo, the memo on keeping a united corporate front against the 2010 federal law that requires companies to reveal the gap between what they pay their top exec and what they pay their workers.Corporate America has been waging, for three years now, holy war against this Dodd-Frank Act mandate. Having to compile pay gap data, business leaders bray, would impose a horribly onerous burden on corporate bean counters.But last week, flacks at Fifth Third Bancorp openly revealed the gap between their CEO and median worker pay, after a Bloomberg News story compared their CEO pay to the banking industry average. The flacks wanted to show their CEO wasn’t grabbing as greedily as the Bloomberg story suggested.In the process of making that point, these flacks quite plainly demonstrated the obvious: that corporations can easily, if they feel a need, supply the pay gap data the Dodd-Frank Act demands. In this week’s Too Much, more on our shameful corporate pay gap — and the tax loophole that keeps it growing.||About Too Much,
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|GREED AT A GLANCE|
|In a society that tolerates grand accumulations of private wealth, can public services — like public schools — survive and thrive? Americans who value public education have a new reason to worry: “parent trigger” laws. Journalist Yasha Levine has just detailed this new danger in a case study of the nation’s first public school privatized under “trigger” legislation. Under this “reform,” if enough parents sign a petition, they can have their local public school turned over to a private contractor. In Southern California, Levine found, a faux grassroots group bankrolled by the heirs to the Wal-Mart fortune engineered just such a petition, but only after subjecting parents to months of harassment and intimidation . . .A luxury car from Ferrari, many people believe, can help you look cool. A Ferrari, beware, can also make you a fool. Just ask Mohammed Nisham, an Indian mega millionaire now in hot water with police after he let his nine-year-old drive his Ferrari F 430, a speedster that retails north of $200,000. The boy’s mom doesn’t understand all the fuss. After all, she told reporters, her son has been driving the family’s Lamborghini and Bentley since he turned five. Meanwhile, stateside in Virginia, Governor Bob McDonnell has his own Italian luxury car issues. McDonnell has been caught accepting — and not reporting — exceptionally generous gifts from a well-heeled plutocratic patron. Among the unreported generous gestures: The patron let McDonnell drive his Ferrari . . .You don’t have to be a mountaineer any more to climb Mount Everest. You just need the $65,000 or so that will buy you the Everest “experience.” The “luxury adventurers” who pay that freight have come to expect the comforts of home as they ascend up Everest, everything from tea in their tents to Wi-Fi, and the Sherpa guides who escort them up have come to feel like servants. Late last month, growing resentment at this servant status exploded into a rock-throwing melee that almost turned deadly for three real mountaineers. Afterwards, one of the three told reporters that Everest’s “increasing numbers of well-heeled” climbers often don’t even bother to learn the names of the Sherpas who carry their huge luxury tents. Everest, he added, “attracts money,” and many Sherpas have become “angry at this financial gap on their mountain.”||Quote of the Week“A growing number of economists believe that our very high levels of inequality are not just whacking the incomes of the ‘have-nots’ but are slowing job growth as well.”
Jared Bernstein, Where Have All the Jobs Gone?New York Times, May 3, 2013
|PETULANT PLUTOCRAT OF THE WEEK|
|“Takers” bug Laurence Fink, the CEO of the giant BlackRock asset manager. That millions of Americans in their 60s take Social Security checks drives him nuts. These Americans, he believes, ought to be out working. After all, says Fink, most jobs no longer demand “backbreaking” labor. The CEO wants the retirement age raised to 70. But Fink, truth be told, takes a bit himself. His BlackRock, notes Institute for Policy Studies analyst Sarah Anderson, “raked in substantial taxpayer dollars” to manage toxic assets after the 2008 financial crash, and BlackRock last year rewarded Fink with $65 million in “performance pay.” Meanwhile, if lawmakers perform the way Fink wants them — and raise the retirement age to 70 — average Americans will suffer about a 20 percent benefit cut.||Like Too Much?
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|IMAGES OF INEQUALITY|
|In America’s original Gilded Age, no homes glittered more than the mansions of Long Island’s Gold Coast. Some 500 estates stretched along the Island’s North Shore, the country homes of Wall Street’s grandest tycoons. One of the few that remain, Cobble Court, has just gone on the market for $16 million. Built in 1928, Cobble Court may well be the last hurrah of American plutocracy’s first edition.||Web Gem|
|PROGRESS AND PROMISE|
|To Share Wealth, Share Rising ProductivityThe U.S. economy has become significantly more productive over the last 40 years. In fact, the nation’s productivity has doubled over that span. But American workers haven’t shared in the new wealth rising productivity has created, one huge reason inequality in the United States has skyrocketed. What to do? Jack Metzgar, a retired Roosevelt University scholar now with the Chicago Center for Working-Class Studies, wants the federal Fair Labor Standards Act amended to require that wage increases match productivity increases. In the decades right after World War II, thanks to the presence of a robust labor movement in America, productivity increases did translate into wage increases. If the sharing of U.S. productivity gains had continued after 1973 at pre-1973 levels, Metzgar notes, American workers would now be taking home another $20,000 a year.||Take Action
on InequalityTell the lawmakers you elected to the U.S. House and Senate to fix the entire austerity sequester, not just the parts that inconvenience America’s wealthy.
|INEQUALITY BY THE NUMBERS|
Stat of the Week
Of the world’s 200 richest people, Bloomberg Newsestimates, at least a third “control part of their personal fortune through an offshore holding company” or other entity that helps make income more difficult to tax.
|Hypocrites with Fat Wallets: They Want It AllAmerica’s top corporate executives love lecturing the rest of us about ‘fiscal responsibility.’ They want us to expect less from government. But they expect more, and a new report shows how they’re getting it.Last week, federal unemployment benefits for the 400,000 Californians out of work since last fall dropped almost 18 percent, a $52 cut out of an average $297 weekly check. Similar cuts have already started rolling out in other states.In all, 3.8 million long-term unemployed Americans will on average lose near $1,000 each by September 30, the date that ends the 2012 federal fiscal year.The direct cause of all these cuts: the “sequester,” the $85 billion in federal austerity budget reductions that kicked in this past March 1.
Who deserves the “credit” for this meat-axe sequester? Credit the power suits who occupy Corporate America’s loftiest executive suites. These top corporate executives — organized in groups like “Fix the Debt” and the Business Roundtable — have been lobbying relentlessly for deep cuts in federal spending.
Only significant cutbacks in programs near and dear to average Americans, these executives proclaim, can save the nation from debt disaster.
But these same top executives, says a new reportreleased last week, are actually running up the federal debt — purely to enrich themselves.
The giant firms these execs manage, details this new report from the Institute for Policy Studies and the Campaign for America’s Future, “are exploiting the U.S. tax code to send taxpayers the bill for the huge rewards they’re doling out to their top executives.”
How huge do these rewards go? UnitedHealth Group CEO Stephen Hemsley, a “Fix the Debt” endorser, pulled in $199 million between 2009 and 2011.
A convenient federal tax loophole — in place since 1993 — let UnitedHealth deduct $194 million of that windfall compensation on its corporate tax return. That deduction, in turn, saved UnitedHealth — and denied the federal treasury — $68 million, enough to extend full federal unemployment benefits for the rest of the 2013 fiscal year to over 65,000 jobless Americans.
The loophole UnitedHealth so lucratively exploited lets companies deduct off their taxes every dollar of “performance pay” they shovel into their executives’ personal pockets. UnitedHealth, of course, hardly stands alone here. All American corporate and banking giants play the “performance pay” game.
The 90 giant firms that belong to “Fix the Debt” play the game particularly well. Between 2009 and 2011, the deductions these 90 claimed for top executive “performance pay” added at least $953 million — and maybe as much as $1.6 billion — to America’s national debt.
The U.S. tax code’s exceedingly bountiful “performance pay” loophole has its roots in an earlier epoch of American public outrage at excessive CEO pay. Back in 1992, Bill Clinton campaigned against over-the-top executive pay in his drive for the White House. Congress, just months after Clinton’s inauguration, would go on to pass legislation that lawmakers hailed as a check on CEO excess.
The new law allowed corporations to deduct off their taxes no more than $1 million in compensation per executive. But the law had a huge escape hatch. Firms could exempt any “performance-based” pay from the $1 million limit.
The predictable result? An explosion of “performance-based” compensation, particularly in the form of stock options, an explosion that would keep CEO pay soaring. CEOs had been averaging 42 times U.S. worker pay in 1982. By 1992, the gap had jumped to 201 times. The average gap today: 354 times.
The “performance pay” loophole, the new Institute for Policy Studies and Campaign for America’s Future report stresses, has served “as a critical subsidy for excessive compensation.”
“The larger the executive payout, the less the corporation pays in taxes,” the report explains. “And average taxpayers wind up footing the bill.”
That footing would end if legislation Representative Barbara Lee from California has introduced ever became law. Her Income Equity Act would deny corporations a tax deduction on any executive compensation that runs over 25 times the pay of a company’s lowest-paid workers or $500,000.
Interestingly, the Affordable Health Care Act enacted in President Obama’s first term sets a $500,000 cap, effective this year, on how much health insurers like UnitedHealth can deduct for executive compensation.
With this cap now law for health care execs, notes the new Institute for Policy Studies and Campaign for America’s Future report, “taxpayers won’t have to worry so much about their hard-earned dollars going to subsidize fat paychecks for CEOs like Stephen Hemsley of UnitedHealth.”
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“But,” sums up the study, “taxpayers may want to wonder why — at a time of scarce government resources — their tax dollars are subsidizing fat paychecks at any American corporate giant.”
on WealthLynn Parramore, Interview with David Graeber on Democracy in America,Naked Capitalism, May 1, 2013. If we see democracy as more collective problem-solving than battle of rival interests, we can’t reconcile democracy with vast inequalities of wealth.Samir Sonti, Going Back to Class: Why We Need to Make University Free, and How We Can Do It,NonSite.Org, May 1, 2013. Care about how inaccessible public higher ed has become? Care even more about the inequality that keeps it that way.John Podesta, Inequality and Growth at Home and Abroad, Georgetown University Law Center address, May 1, 2013. The more unequal we become as a society, the harder to garner public support for investments in the commons that build the middle class.
|NEW AND NOTABLE|
|Just How Far Can Taxing the Rich Take Us?David Grusky, Taxing Away Illicit Inequality: A Conversation with Emmanuel Saez, Pathways, Spring 2013.This latest issue of the Pathways quarterly from the Stanford Center on Poverty and Inequality — nowavailable online — features a fascinating interview with Emmanuel Saez, the young Berkeley economist who now ranks as the world’s premiere expert on the historic trajectory of ultra-high incomes.Both Pathways editor David Grusky and Saez agree that much of our contemporary inequality reflects what economists call “rent-seeking” behavior. That is, many of our richest are getting richer by squeezing out monopoly profits or cutting corrupt sweetheart deals or looting their enterprises.But Grusky and Saez don’t agree on solutions. Saez believes that steeply graduated tax rates — the sort of rates we had in the middle of the twentieth century — can reduce “rent-seeking” behavior. Count Grusky a skeptic on that score. Count their dialogue a must-read for anyone interested in our ever-growing inequality — and how to reverse it.||Like Too Much?
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|ABOUT TOO MUCH|
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Chronicles of Inequality [TOO MUCH, 6 May 2013}
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