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TechnoratiCorporate Executives Overpaid, Undertaxed
In today's mad world, underpaid workers are bailing out banks and corporations run by overpaid, undertaxed bosses who milked their companies and our country like cash cows.
While workers across America were losing jobs, homes and health insurance, Merrill Lynch paid nearly 700 employees more than $1 million each in bonuses last year, amounting to a $3.6 billion bonus bonanza while Merrill lost $27 billion.
Workers have been sacrificing for years. Average worker paychecks are worth less now than in 1973, but CEOs and other rich Americans not only make much more, they pay less in taxes.
Average full-time workers made $41,198 in 1973 and $37,606 in 2008, adjusted for inflation.
CEOs made 45 times as much as workers in 1973 and more than 300 times as much as workers now. The top tax rate was 70% in 1973 and just 35% now; taxpayers pay the top rate on the portion of taxable income that falls within the highest bracket and pay lower rate s on income below that. The top rate for capital gains on the sale of stock and other assets was 36.5% in 1973 and 15% now.
Irrational pay and tax cuts have generated a massive redistribution of income and wealth from workers to CEOs, hedge fund managers and others in the richest 1%.
By 2006, the richest 1% had increased their share of the nation's income to the second-highest level on record. The only year higher was 1928 -- on the eve of the Great Depression.
According to the latest IRS data, excluding tax-exempt interest income from state and local government bonds, the richest 400 taxpayers had an average adjusted gross income of $263 million each on their federal income tax returns in 2006 -- up from $221 million in 2005 and $67 million in 1992, adjusted for inflation.
Remember, that's annual income, not accumulated wealth. $263 million comes to more than $5 million a week.
In 2006, the 400 ultrarich were taxed at an average rate of 17% -- down from 26% in 1992. The ultrarich get most of their income from capital gains. The capital gains tax was cut from 28% in 1992 to 20% in 1997 and cut again to 15% in 2003.
To ma ke matters worse, the rich cheat more on their taxes. Forbes recently reported on a study using IRS data showing that taxpayers with income between $500,000 and $1 million a year understated their adjusted gross incomes by 21% in 2001, compared to 8% for those earning $50,000 to $100,000, and lower rates for those earni ng less.
We should raise taxes at the top so the nation's richest bosses no longer pay lower effective rates than workers and we can start reversing the obscene rise in inequality rather than reinforcing it. President Obama's plan to cap executive cash pay at $500,000 for senior executives at companies on the government dole sounds better than it is, affecting few firms and full of loopholes.
At the very least, President Obama should not delay restoring the top tax rate to the 39.6% rate that prevailed in 2000. The Bush tax cuts saved the top 1% nearly half a trillion dollars between 2001 and 2008, reports Citizens for Tax Justice.
The $79.5 billion in tax cuts for the top 1% in 2008 was more than the budgets of the Department of Education and Environmental Protection Agency combined. In 2008, it took an annual income greater than $462,000 just to get into the top 1 percent.
Even better, we should add a top rate of 50% on income above $1 million, as advocated by Netflix CEO Reed Hastings among others.
People for whom $1 million and above is an annual paycheck should pay more so people for whom $1 million is an unattainable lifetime fo rtune don't have to.
If we don't start taxing the wealthy more now, then you can be sure
that the mountain of debt created by tax cuts and the bailout will be
used to drive "entitlement reform." Workers' last forms of security --
Social Security and Medicare -- will be on the chopping block to pay
for the wrec k the truly entitled made of our economy.
This essay was distributed by McClatchy-Tribune News Service.
30 Comments so far
Show AllThe tax accountant term for rich people cheating on their taxes is "taking a high-stakes gamble" or "taking an aggressive position". And the Eskimos have hundreds of words for snow.
GM, Chrysler seek another $22 billion
And so it goes, party on boys, party on.
Does any know where to find a list naming the names of the uber-wealthy? I know that there is the Forbes list but I'm sure that there are more than those listed.
We need to get the names out of the greedy bastards and start calling them out by name, shaming them and whatever else may follow.
OYE el pensador
"To make matters worse, the rich cheat more on their taxes. Forbes recently reported on a study using IRS data showing that taxpayers with income between $500,000 and $1 million a year understated their adjusted gross incomes by 21% in 2001, compared to 8% for those earning $50,000 to $100,000, and lower rates for those earning less."
Yet the IRS increased the number of audits of those earning between $25,000 and $100,000. The increase was even greater if these individuals (same income bracket) were freelancers, consultants, or owners of very small businesses, filing a Schedule C. Several years ago the IRS contacted me and insisted I pay them back after I had qualified for EIC while working part-time and going to school. I had done my own taxes and had no access to an attorney or tax accountant. For the next year, every month I sent the IRS a check for $50--which hurt me greatly. It makes me sick that those of us who can't afford to hire attorneys and CPAs end up at the mercy of the IRS, while the government is cheated out of millions (maybe billions) of dollars every year.
Excellent article! We should also mention that the US has by far the greatest income inequality of any wealthy nation. By several measures, most countries in the world are less unequal than the US. See http://en.wikipedia.org/wiki/List_of_countries_by_income_equality.
Emmanuel Saez, a UC Berkeley economics professor, has a stunning figure on his website that shows that the incomes of the top 1% are now in the same relation to the bottom 99% as they were in 1928 (and before). In other words the US has made absolutely NO PROGRESS in closing the gaps between the rich and the rest of us. ALL of the gains in the past 80 years have been erased! See: figure A1 in the 1st article in http://elsa.berkeley.edu/~saez/ complete with an Excel spreadsheet with enough data to cry over.
Addressing income inequality should be a top priority for progressives. Wealth = Power. Democracy cannot coexist with unlimited wealth. Vast differences in income aren't just an economic problem, they are political, social and cultural problem also. When it comes to running for office, more and more only the millionaires and their friends need apply.
100 years ago, Eugene Debs called the US a plutocracy -- a government of by and for the rich. Unfortunately, it's just as true today.
The distribution of wealth in this country is badly skewed upward. In 2004, the richest 1% had 34.4% of the wealth; the next richest 9% had 36.9%; the next 10% had 13.4%. The poorest 80% of people had only 15.3% of the wealth. Since then, more has trickled upward.
To see most of these obscene numbers in pie chart form, go to:
http://www.inequality.org/
Click on "By the Numbers" and page down to the pie charts.
The Economic Policy Institute:
http://www.epi.org/
has more information but it's harder to dig through. Look at references to their book "The State of Working America" and read some of the excerpts.
Great resource, especially for math, statistics and economics teachers, Jr. High and up. Too bad stats end in 2004. I am sure things changed a lot in 2008, and not for the better.
Joe
"According to the latest IRS data, excluding tax-exempt interest income from state and local government bonds, the richest 400 taxpayers had an average adjusted gross income of $263 million each on their federal income tax returns in 2006 -- up from $221 million in 2005 and $67 million in 1992, adjusted for inflation.....Average full-time workers made $41,198 in 1973 and $37,606 in 2008, adjusted for inflation."
That's what some of us would call "backward growth" for the many and "advanced growth" for the few!
Personally, I think that ALL "earned income" should be taxed at the same rate while "unearned income" should be taxed at a higher (graduated) rate; the more you earn without working for it, the more you should pay on that income. It's as simple as that! You earn it, you keep it; if you dont' earn it, it gets taxed at a higher rate.
A higher (graduated) tax structure on "unearned income" would force the swine hedge-funders and others on Wall Street to pay their fair share of taxes on what is finally being exposed as questionable unearned income.
All loopholes or any kind or write-offs should be eliminated. A simple and fair tax structure is all that most working people want.
It is the nature of greed.
I hope I am wrong, but there is no evidence that any of those at the top will sacrifice their ill-gotten gains, and those of us making sacrifices will get caught up in the meltdown and subsequent revolution.
I pray it is a non-violent revolution, however the course we are on now is not sustainable.
But will the ultra-rich give up a little to allow a just world? No, because they think we should be grateful to them for creating this bubble fantasy - they don't understand their greed and lack of power sharing will eventually lead to a gross restructuring in a time of great pain.
Historically it always happens - some times in a reasonable way, sometimes with great violence and upheaval, but never instituted by those at the top.
Only by REALLY pressuring our leaders to invest in infrastructure and education, and stop the give-aways (e.g. wars for profiteers) will we have a chance.
Obama needs to lead, and stop with the appeasement of those who are driving the boat off the edge of the world.
Very well said, and very true, coopersy. It's very sad.
kivals: "...Property is just a concept, a social construct, that most of us accepted when we felt it was utilitarian, i.e. providing the greatest good for the greatest number...used to justify the greatest good for the few at the expense of the many, then it becomes worthless..."
Slavik, the few vs. the many argument is astute. However, the problem is that *any* hierarchical organization favors the "few over the many." We are, in essence, stuck with hierarchical organization as a dominant social construct at least for the time being. Thus, our social constructs and laws simply need to ensure that the distribution of responsibility and reward in any hierarchical organization is within "reasonable" limits.
Yes, but in playing the game, one often must reach for the extreme in order to achieve the "reasonable." One might call it a "negotiating position."
No surprise here:
"President Obama is aiming to water down Democratic proposals on pay caps for banking executives because he fears a “brain drain” on Wall Street.
In a move that has angered leaders of his own party, the President has indicated his concern that new caps on compensation — inserted into his $787 billion stimulus Bill, which he signs into law today - are too draconian and could limit banks' co-operation with his plan to stabilise the stricken financial sector."
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5748716.ece
These jerks would be jumping off of buildings if it weren't for the taxpayer's subsidizing their obscene expectation of entitlement. Considering who Obama has surrounded himself with, it comes as no surprise that there is no one there to advise him that the all-encompassing objective of amassing hugh heaps of money for oneself is the environment that created the disaster to begin with. Obama is a naive fool if he really believes that self-absorbed greed equals braininess, it never seems to occur to him to even question the priorities of pandering to Bush's base.
The 'brain drain argument is biggest crock; men with integrity are worth a thousand times more. We're worried that the buzzards might leave? We should give them a kick in the rear as we slam the barred door behind them!
Banksters and Corporadoes are also underrepresented in the US Prison population, a situation that must soon be remedied.
We all know the ultra-wealthy have gone way too far. But if they absolutely must spit at concepts like "the common good," then it is time for the rest of us to spit at concepts like "private property." Property is just a concept, a social construct, that most of us accepted when we felt it was utilitarian, i.e. providing the greatest good for the greatest number. But when it comes to be used to justify the greatest good for the few at the expense of the many, then it becomes worthless as a concept. And we should consider discarding it.
"Corporate Executives Overpaid, Undertaxed"
___________________________________________
Sun Rises in East, Sets in West
Tide Goes Out, Comes Back In -- Film at Eleven!
· Yr Obd't Servant
Tax rates is the wrong dimension to solve the underlying problem of a skewed distribution of income.
Cap the total compensation ratio of highest paid to lowest paid person in an organization at 12-16:1. This means that the highest paid person earns no more than 12 to 16 times the lowest paid in *total compensation*.
Here's how I arrived at the ratio:
- 4 for skill/education (the creative aspect)
- 4 for stress (management/responsibility aspect)
- 4 for risk (the innovation/ownership aspect)
- 0-4 discretionary (well no scheme is perfect, we need an escape hatch).
Furthermore, in an organizational hierarchy, cap the compensation ratio to 3 times at every level. This accounts for people who would try to subvert the system by flattening a hierarchy just for financial gain.
CostCo already has a similar ratio of 14:1 in the organization. The CEO makes at most 14 times the lowest paid worker. And CostCo is doing just fine.
Bring back the potlatch. What if your status was determined by how much you could provide for others?
Uh, Obama already flipped on taxing the wealthy by procrastinating taxing the uberwealthy by at least a year. Obama's phony package is nothing but an extension of Dubya's bullshit.
This article (and Obama) fail to mention how little taxation is imposed on the corporations who over compensate their top dogs.
In 1970 corporations paid 29% of US income tax. Today they pay 6%. Within 10 years they will pay 0%.
SOMEBODY has to pay the taxes and if its not the corporations, its YOU.
If Obama was serious about change, one of his goals would be to return to the 1970 ratio within 8 years.
Neocons argue that corporations should not pay taxes because they pass the cost of taxation on to consumers by increasing service and product prices. Under the current system of little or no corporate taxation, you and I are subsidizing the corporations whether we buy anything from them or not. Higher corporate taxes would function as an equitable user fee where you only enrich corporations when you buy something from them.
Exactly! I have tried to explain this concept so many times to people who complain about subsidizing those on welfare. We pay so very much more to subsidize corporations.
Thank you for saying what I've been harping on since Reagan started it. The idiocy of giving those who already have more than they can ever need in hopes that they will "trickle down" their magnificence on those who are paying for their largess is insurmountable. And just like I said 28 years ago, it's costing us the whole game.
Jane M: The place it came from is the Reagan era. It was the "great communicator" who told us all that we are nothing but a collectin of individuals with no accountability or responsibility for each other, and very little for even ourselves. I remember quite clearly when he stood up and told us all that it was our "right" to hate whoever we wanted, our friends, our family, our neighbors, or the other political party. From that moment on, we have been aiming at the lowest common denominator of human behavior, and living down to it every day.
In General: It's time to undo not just the W tax cuts, but the REAGAN tax cuts. It's time that the rich and ultra rich paid for their share of this coutnry for a change. They deserve nothing more than the rest of us, and in some respects deserve less. WE work, they profit. It's time for this nonsense to end. It's clearly unsustainable, and it's time that we start calling the Reagan economic plan what it is: Alzheimer's economics. Only those afflicted with such a brain killing disease could possibly think it's a workable system.
Trickle down= Getting pissed on
Trickle down= Getting pissed on
Reagan's expert stage prescence made Americans feel good about themselves and in return they gave him a license to steal with no expiration date. They love him more now than they did when he was president.
Unless the mindset of a majority of Americans changes soon to viewing Reagan as the president who enabled the destruction of the working class, the US will become a third world country.
This country is already a third world country. We are deeply in debt, more than we can probably ever repay. Our elections are highly suspect. We export huge amounts of raw materials and import huge amounts of finished goods. We have a huge and growing disparity between the classes, with a large lower class and a miniscule upper class, who have far more than they will ever need, and just keep on getting more. We spend an inordinate amount of our national money on the military. We import more of our food than we grow anymore. Those are just off the top of my head, but those all pretty much add up to "third world" by most definitions.
As to Reagan, I couldn't stand to look at him or listen to him back then, and I can't help but flip off his image whenever I see it on TV or in a picture now. I didn't see how anyone could NOT see through his lying, his disingenuous crap, and his fake smile. I also didn't see how people could avoid seeing just a few years in the future to see how badly he was leading us, and how wrong the direction was. I didn't like him then, and I can't stand him now, considering him to be one of the top ten WORST presidents we have ever had. You can't rush a country into bankruptcy and be a great leader.
These CEOs are even more overpaid than professional athletes. Sometimes the athletes deliver.
Good post, all great ideas. There is no executive worthy of $5m a week!
In addition, however, we should be taxing every transaction on Wall St. Just a few pennies, but I read somewhere that could add up to billions a year. If you're a small player, it won't amount to much, but if you are, you'll pay and you should.
When did we get the idea that we don't have to pay? Where did we get this entitlement ethic? I'm rich so I'm entitled to more benefits? In Switzerland, for example, they pay alot for healthcare, but the wealthy feel it is their duty to pay more so the poor can have healthcare as well. Here, well, you're on your own.
"There is no executive worthy of $5m a week!"
No, not even if it could walk on water!