Tax the Millionaires

photo from the movie, "Wall Street"


It's been awhile, but in demanding new taxes on millionaires and an end to the Bush tax cuts for those earning over $250K, President Obama has stood up for something we can rally behind. If only he doesn't give in to the Republicans in the coming months. He can use his pulpit to dispel their hollow claims that taxes on the rich freeze economic and job growth.

If Obama and progressive Democrats speak honestly and forcefully about the lopsided distribution of wealth and income in the U.S., they may be wildly successful. In an article, "Wealth, Income, and Power", updated in July, 2011, G. William Domhoff points to a recent study (Norton & Ariely, 2010) that

"reveals that Americans have no idea that the wealth distribution is as concentrated as it is..... They did not come close on the amount of wealth held by the bottom 40% of the population. It's a number I haven't even mentioned so far, and it's shocking: the lowest two quintiles hold just 0.3% of the wealth in the United States.

Americans from all walks of life were also united in their vision of what the "ideal" wealth distribution would be, which may come as an even bigger surprise than their shared misinformation on the actual wealth distribution. They said that the ideal wealth distribution would be one in which the top 20% owned between 30 and 40 percent of the privately held wealth, which is a far cry from the 85 percent that the top 20% actually own. They also said that the bottom 40% -- that's 120 million Americans -- should have between 25% and 30%, not the mere 8% to 10% they thought this group had, and far above the 0.3% they actually had. In fact, there's no country in the world that has a wealth distribution close to what Americans think is ideal when it comes to fairness. So maybe Americans are much more egalitarian than most of them realize about each other, at least in principle and before the rat race begins"

Domhoff points to recent income studies that would knock the socks off most Americans if they knew......

"The rising concentration of income can be seen in a special New York Times analysis by David Cay Johnston of an Internal Revenue Service report on income in 2004. Although overall income had grown by 27% since 1979, 33% of the gains went to the top 1%. Meanwhile, the bottom 60% were making less: about 95 cents for each dollar they made in 1979. The next 20% - those between the 60th and 80th rungs of the income ladder -- made $1.02 for each dollar they earned in 1979. (Johnston, 2006).

But the increase in what is going to the few at the top did not level off, even with all that. As of 2007, income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01% -- that's one-hundredth of one percent -- receiving 6% of all U.S. wages, which is double what it was for that tiny slice in 2000; the top 10% received 49.7%, the highest since 1917 (Saez, 2009). However, in an analysis of 2008 tax returns for the top 0.2% -- that is, those whose income tax returns reported $1,000,000 or more in income (mostly from individuals, but nearly a third from couples) -- it was found that they received 13% of all income, down slightly from 16.1% in 2007 due to the decline in payoffs from financial assets (Norris, 2010)."

How Do You Measure Progress?

a quote from Robert Kennedy that I read in Mark Kurlansky's book, "1968" that eloquently puts economic measurements in perspective....

"We will find neither national purpose nor personal satisfaction in a mere continuation of economic progress, in an endless amassing of worldly goods. We cannot measure national spirit by the Dow Jones Average, nor national achievement by the Gross National Product. For the Gross National Product includes air pollution, and ambulances to clear our highways from carnage, It counts special locks for our doors and jails for the people who break them. the Gross National Product includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missiles and nuclear warheads....

And if the Gross National Product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.....the Gross National Product measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to country. It measures everything in short except that which makes life worthwhile, and it can tell us everything about America - except whether we are proud to be Americans.

Protest Movement in Israel

Photo by TheeErin

My old friends Michael and Gayle just returned from a month in Israel. They lived there for 15 years in the 70's and 80's. Michael told me about the social uprising that has been going on all summer with tent encampments in the medians along busy streets and in parks. Many thousands are part of it, frequently going to work in the day and returning to the encampments for the nights. The mass protest is against the high cost of housing that make it difficult - especially for young people - to cover rent - even when they have jobs. They are protesting the huge gap between rich and poor in the country, and policies that favor the rich and raise the cost of living. Michael said it's common to make about $400/month but have rent of $1200 in Tel Aviv for a one bedroom apartment.

There are numerous encampments with particular demographics such as single mothers. There are performances, workshops and speakers who come to particular encampments for public events open to everyone. It sounds like the teach-ins and campus building takeovers of the late 60's and early '70's. Michael heard it began when a young woman who was fed up told her friends that she was going to camp out along a boulevard in Tel Aviv. Facebook helped fuel a mass movement and within weeks, there were tents everywhere, and in several cities. On July 30th a mass demonstration in Tel Aviv numbered at least 150,000 in a country of 7 million.

Photo from The Adovcacy Project

Michael said the protesters are purposely not discussing the Palestinian issue and relations with Arab neighboring countries as that would enable the powers that be to divide them against each other. For now they have some support in the government. The police have let them be. The mayor of Rosh Pinna, joined the protestors there. Several of Michael and Gayle's Israeli friends now have kids who are very involved in the tent cities - yet another opportunity for us to comment on how quickly the years have passed.

This uprising may fizzle as the school term begins again in the coming weeks, but it has been huge and inspiring. Maybe something transformative will come out of it. I was hardly aware of it. I went to YouTube and found a few videos that provide some visuals and context.

http://www.youtube.com/watch?v=Eyl_r7Sz3Bw
http://www.youtube.com/watch?v=TBYVo8raLbc&feature=related
http://www.youtube.com/watch?v=QCoRBHCZl6E&feature=related
http://www.youtube.com/watch?v=Sx0YCI-2qhA&feature=related
http://www.youtube.com/watch?v=t8u8cjS-TiM&feature=related
http://www.youtube.com/watch?v=PTMfIuTCzSY&feature=related

Richie Rich

Picked up "The Ultra Rich: How Much Is Too Much?" by Vance Packard – published in 1989. In my life that doesn't seem so far back, but in the modern history of U.S. wealth, it appears to be ancient history. He writes about the years just after Forbes Magazine started publishing their annual "Richest 400 Americans."

In 1982, there were 14 U.S. billionaires and five years later there were 49. I see that in this year's list, every single one of the richest 400 Americans had at least 1.3 billion dollars.

Packard writes that in 1983, the Joint Economic Committee of Congress did a study that estimated the top 1% of wealthy Americans had 34% of all the wealth. That meant one out of every 100 people feast on one third of the pie. It's closer to 43% of the pie when you subtract the value of people's homes and just look at their other wealth. The good news is that ratio has stayed relatively stable these 25 years, but it's so incredibly disproportionate to begin with.

In 1987, the Forbes #1 was Sam Walton of Wal-Mart with an estimated 8.7 billion. In the 2011 Forbes list the Walton wealth has passed on to the Walton "children" and their collective wealth is $90 Billion Dollars. An increase of 81 billion dollars in 24 years! Packard quotes billionaire, Edgar Bronfman, "To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable."

In 2010, the combined wealth of the Forbes 400 was 1.27 TRILLION dollars. That's more than the combined wealth of the lower 60% of Americans ($1.22 trillion for the lower 60%, according to a March 2010 study by Edward Wolff, an economist at New York University). My guess is that most Americans would be shocked to know that the lower 40% of U.S. citizens - 120 million people - account for only 3/10's of one percent of the country's wealth. (Source: Norton & Ariely, 2010.)

According to Forbes, nearly half of the 45 new members in the 2011 class, made their fortunes in hedge funds and private equity. I still can't fathom how much harder they work than a passionate high school teacher, or a doctor in an emergency room, to merit all that reward.