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| March 5, 2012 |
| THIS WEEK | |
| The best book on inequality since the Great Recession began may soon become a major motion picture playing at a theater near you — if a new independent film fundraising campaign succeeds. Three documentary film artists are now working to give The Spirit Level, the landmark 2010 book by British epidemiologists Richard Wilkinson and Kate Pickett, a fresh new visual dimension. The effort has the blessing of the Equality Trust, the UK organizing initiative The Spirit Level inspired. The Spirit Level mixes text and graphs and makes an incredibly powerful case for the importance of achieving a significantly more equal world. The online “crowd-funding” campaign for the new Spirit Level documentary features a delightful short video that sums up the book’s central findings. Take a look and smile. In this week’s Too Much, we’re offering up still another smile-inducer: the story of the major mainstream global pol who last week busted the consensus that has — for over 30 years — kept a lid on the taxes rich people pay. The details below. |
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| GREED AT A GLANCE | |
| The state agency that operates Hanscom Field outside Boston is expanding the airport’s hangar space by the equivalent of two full football fields. The reason: The airport wants to be able to host the world’s hottest new private luxury jet, the Gulfstream 650. But local citizen activists are blasting the move — and the taxpayer dollars that subsidize the luxury private jet industry. Businesses at Hanscom that ply the luxury trade pay no property taxes, they point out, and the private jets that land at the field pay no landing fees. Nationwide, private jets claim 16 percent of air traffic control resources, but foot just 3 percent of the air traffic control bill. A Gulfstream 650 roundtrip from Boston to China, activists add, consumes enough fuel to power a Toyota Prius for a million miles.
Wags first labeled the U.S. Senate a “millionaires club” some years ago. China’s top legislative body, the National People’s Congress, has now become the world’s first legislative billionaires club. The 70 richest Chinese lawmakers hold a combined net worth of $85 billion, says the Hurun Report, China’s unofficial wealth tracker. America’s top national officials — the 535 members of Congress, the President and his cabinet, and the nine Supreme Court justices — currently hold a combined net worth estimated at just $7.5 billion. China’s National People’s Congress begins its annual meeting this week. Why do so many rich serve in it? Deep pockets who turn lawmaker, notes Northwestern University’s Victor Shih, can prevent commercial rivals from confiscating their property. |
Quote of the Week “Today, when a would-be U.S. president, Mitt Romney, is wealthier than 99.9975 percent of his fellow Americans, and wealthier than the last eight presidents combined, there’s a global conversation raging about the rich, the poor, the gap between them, and the role of vested interests in the significant widening of that gap in advanced economies over the past three decades.” |
| PETULANT PLUTOCRAT OF THE WEEK | |
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Stat of the Week The CEO at private equity giant Blackstone made four times more last year than his firm’s number two. But that second banana, chief operating officer Hamilton James, probably isn’t complaining. James took home $52.6 million. Blackstone CEO Steve Schwarzman’s take-home: $213.5 million. |
| inequality by the numbers | |
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| IN FOCUS | |
| On Taxing the Rich, a Top Pol Breaks Ranks A tax-the-rich bombshell has dropped in the Presidential race. The French Presidential race. But this bombshell’s blast will almost certainly reverberate elsewhere. Maybe even in the United States. Mainstream political leaders in the world’s developed nations have been suffering from political amnesia — on tax policy — for over 30 years now. In the generation before 1980, the world’s top industrial nations routinely subjected their highest income brackets to tax rates as high as 70 and 80 and even 90 percent. But then conservatives swept to power in Britain and the United States — Margaret Thatcher in 1979, Ronald Reagan in 1980 — and obliterated steeply graduated progressive tax rates. By 1986, no dollar of income that America’s richest reported would face more than a 28 percent tax rate. In the UK, the top rate would plummet from 83 to 40 percent. Top tax rates in other developed nations would soon follow the same trajectory — and then largely settle down, after some bouncing around, within a narrow range that ran from 35 percent in the United States to 40 percent in Britain. This tax-the-rich-lightly mainstream political consensus would begin cracking somewhat all across the developed world in 2008. Public anger at banker bailouts and windfalls would start tax rates marching back upward. But the marching would be modest. In Britain, the highest tax rate on any dollar of rich people’s income would move from 40 to only 50 percent. No major mainstream world political leader would dare suggest anything higher, anything close to the tax rates on the rich once commonplace in the decades right after World War II. In mainstream political circles, a 50 percent top tax rate simply seemed the absolute upper limit on the politically possible. Until last week. Last Monday, in a national TV interview, the candidate that public opinion polls have leading the French presidential race called for a 75 percent super tax on all individual income over $1 million euros, the equivalent of about $1.33 million. On the network news program Parole de Candidat, French Socialist Party presidential standard-bearer François Hollande told the French people that he could not any longer “accept excessive wealth.” “I appreciate the talent, work, merit of those who create and enable France to move forward,” Hollande continued. “I do not agree with excessive wealth — and compensation that has no connection with talent, intelligence, or effort.” Hollande’s vow to enact a 75 percent top tax rate came as a complete surprise — even to his budget adviser. And French conservatives immediately rushed to blast him. The right-wing daily Le Figaro declared that “war has been declared on ‘the rich.’” A top French business leader dubbed Hollande’s proposal “ridiculous.” Hollande’s chief rival in this spring’s upcoming French presidential election, incumbent French president Nicolas Sarkozy, would be derisively dismissive. “Not a single other politician in the world, not one, thinks this is a good idea,” Sarkozy intoned. “And why not a 100 percent rate?” mocked Marine Le Pen, the presidential candidate of France’s ultra-right National Front. The idea of a 100 percent top tax rate — a maximum wage, in effect — actually has considerable support within French progressive political circles. Le Monde Diplomatique, one of France’s most prestigious public policy journals, even ran a major piece last month that traced the roots of the maximum wage notion back to the United States and Franklin Roosevelt. By pledging to enact a 75 percent top rate if elected this May, analysts believe, the politically moderate Hollande is moving to consolidate his support among French progressives. And that move seems to be working. Former presidential candidate Ségolène Royal says Hollande’s proposal honors the progressive tradition “to bring fiscal justice and to push back inequality.” “It’s time for a better distribution of wealth,” Royal pronounced last week. “It’s one of the keys to economic recovery.” France’s current distribution of wealth hasn’t yet neared the levels of disparity that bedevil the United States. The French top 1 percent average less than half the income of the top U.S. 1 percenters. Major French CEOs only average 2 million euros a year, about a quarter the going rate in the United States. But French executive pay has risen markedly over recent years. “How can we accept that?” Hollande asked French TV viewers last Monday. Before last week, Hollande had called for raising the top tax rate on all income over 150,000 euros from 41 percent to a permanent new 45 percent rate. His proposed 75 percent rate on individual income over 1 million euros now sends, says Hollande, a stronger “message of social cohesion.” And the rich who pay at a 75 percent top marginal rate, Hollande told journalists Tuesday, would be engaging in “a patriotic act.” “It is patriotic,” the candidate explained, “to agree to pay a supplementary tax to get the country back on its feet.” France’s top expert on taxing the rich, Thomas Piketty of the Paris School of Economics, would like to see Hollande go beyond a “supplementary tax” and attempt an even more “daring” overhaul of French taxation. But Piketty — a close colleague of the top U.S. tax-the-rich expert, Berkeley’s Emmanuel Saez — considers Hollande’s call for a 75 percent top rate “an important step” that “goes in the right direction.” “Many countries,” Piketty noted last week, “are bound to follow this voice.” The first round of France’s presidential voting will take place April 22. A May 6 run-off round will follow. Like this article? Subscribe and get Too Much in your email inbox every Monday. |
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New Wisdom Max Abelson, Wall Street Bonus Withdrawal Means Trading Aspen for Cheap Chex, San Francisco Chronicle, February 29, 2012. A look at the high flyers who can no longer afford to shell out $500 a month to park their Audis. Kevin Roose, Bonuses Dip on Wall St., but Far Less Than Earnings, New York Times, February 29, 2012. Wall Street earnings down 51 percent, bonus payouts down only 14 percent. Timothy Noah, The One Percent Bounce Back, New Republic, March 4, 2012. In the first year of the U.S. recovery, in 2010, 93 percent of all income gains went to America’s top 1 percent.
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| In Review | |
| Like Taking Candy from a Baby, Only Worse Paul Piff, Daniel Stancato, Stéphane Côté, Rodolfo Mendoza-Dentona, and Dacher Keltner, Higher social class predicts increased unethical behavior. Proceedings of the National Academy of Sciences, February 27, 2012. Academe has historically paid scant attention to the rich. Scholars have placed poor people under all sorts of microscopes. Rich people have largely gone unstudied. But that’s changing. Recent years have seen an explosion of academic interest in how affluence affects behavior. This past August, for instance, a team of psychologists reported out research on how the life experiences of the wealthy may leave the rich less altruistic than people of more modest means. Last week brought still another round of research on the rich, this time from scholars at the University of Toronto business school and the University of California at Berkeley. And this latest research seems to be attracting far more media attention than any other research on rich people’s behavior to date. Why all the attention? The new research, as one British daily puts it, delivers “a withering verdict on the upper echelons of society.” The wealthiest among us, the research documents, will routinely lie, cheat, and not stop for pedestrians. They’ll even snatch candy away from little kids. The five investigators behind this new research didn’t set out to demonstrate how abominably people of means can behave. They set out to better “understand the origins of ethical behavior.” To get at these origins, the researchers conducted seven studies, with two of these “field-based” and the rest conducted in lab settings. In the field studies, the investigators concealed themselves at a San Francisco intersection and rated the affluence of motorists who passed through the intersection by car make, age, and appearance. They then contrasted the subsequent behavior of the motorists toward other drivers and pedestrians. Drivers of high-status vehicles, the investigators found, cut off other drivers twice as often as the drivers of low-status cars. Half the drivers in the highest of the five car status levels the researchers tracked — the Mercedes level — didn’t yield for pedestrians. All of the drivers of cars in the lowest status cars did. Similar results showed up across a range of lab experiments that involved everything from dice games to candy jars. In all the studies, the most affluent behaved less ethically than the least affluent. What’s going on here? The five researchers caution against any use of their data to predict how any one wealthy individual will behave. “We’re definitely not suggesting that any upper-class person,” notes Stéphane Côté, an expert in organizational behavior at the University of Toronto business school, “is going to be less ethical than every lower-class person.” But the researchers do believe that “the upper class may be more disposed to the unethical.” Both structural and psychological factors, they explain, contribute to this predisposition. “If you occupy these higher echelons, you start to see yourself as more entitled and develop a heightened self-focus,” as researcher Paul Piff told an interviewer last week. “Your social environment is likely more buffered against the impact of your actions, and you might not perceive the risks of your behavior because you are better resourced, you have the money for lawyers and so on.” In this situation, an affluent individual tends to not particularly care what happens to others. Society, on the other hand, definitely does need to care about the inequality that nurtures this “heightened self-focus.” “Our findings,” sums up University of California psychologist Piff, “suggest that if the pursuit of self-interest goes unchecked, it may result in a vicious cycle: self-interest leads people to behave unethically, which raises their status, which leads to more unethical behavior and inequality.” |
Inequality Links |
Back in 1987, actor Michael Douglas exposed Americans by the millions to the horrors of high-finance fraud. Now 
We can add retired G.E. CEO Jack Welch to the long list of ultra-rich none too happy about billionaire Warren Buffett’s declaration that wealthy Americans “should be paying a lot more in taxes.” 
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