inequality

America's Plutocrats Play the Political Ponies

Sam Pizzigati — Sun, 05 Feb 2012 15:49:44 -0500

Any resemblance between democracy and U.S. Presidential politics has become, in our new super PAC era, purely coincidental. The only mystery: Why aren't billionaires placing even bigger bets?

Life sometimes imitates art. Life also sometimes imitates political cliché. The cliché in this case: the notion that tunnel-vision political reporting has reduced campaigns for American public office to nothing more than mere “horse races.”

This year, in the struggle for the Republican Presidential nomination, that “horse race” analogy has essentially become a literal reflection of reality.

The real horse racing industry follows a simple time-worn pattern: A wealthy connoisseur of horse flesh buys a thoroughbred. The wealthy connoisseur keeps racing that thoroughbred until the connoisseur loses interest.

In the current GOP Presidential “horse race,” we see the exact same pattern. Wealthy connoisseurs of political talent pick a candidate. These wealthy connoisseurs then keep that candidate racing until they lose interest.

Foster Friess, a billionaire mutual fund executive, hasn’t yet lost interest in Rick Santorum. Friess has personally bankrolled the “super PAC” that has enabled Santorum to stay in the primary hunt.

Sheldon and Miriam Adelson, the billionaire casino mogul couple, haven’t yet lost interest in Newt Gingrich. The Adelson family has single-handedly supplied $10.5 of the $12 million that has gone into the super PAC that’s keeping Gingrich in the nominating race.

Mitt Romney, meanwhile, is leading that race, but only because he has more billionaires on his side than anyone else. Four of these billionaires from the hedge fund industry — Paul Singer, Julian Robertson, Robert Mercer, and John Paulson — have each contributed $1 million to the cause of Mitt.

In all, the super PAC run by Romney cronies has collected $1 million from 10 men of immense means, $2 million from one other, and at least $100,000 each from almost 40 additional politically inclined super rich, more than enough to fund the $17 million TV ad campaign that bounced Romney into the nomination lead.

This White House horse race isn’t going to end, of course, until November. By that time, news analysts are predicting, total spending on the 2012 Presidential race will have likely reached over $2 billion, making this year’s election the most expensive in the history of the known universe.

Super PACs — quasi “independent” committees that can accept donations of unlimited size — will do the bulk of that spending. These super PACs, the Los Angeles Times noted last week, are now playing a larger role in politics than the candidates’ own personal campaigns, mainly because candidate campaign committees can accept no donation larger than $2,500.

A string of court decisions have made that $2,500 limit a dead-letter elsewhere across the political landscape. Wealthy individuals and the corporations they run can now contribute as much as they want to political committees that maintain a nominal “independence” from the campaigns of the candidates they support.

These super PACs do have to disclose their donors, and the latest disclosures came last Tuesday. But the disclosures now required leave a good chunk of the campaign finance scene in the dark. Super PACs have been setting up subsidiaries that can qualify for nonprofit status so long as less than half their money goes to politics. These “nonprofits” don't have to reveal their donors.

The bottom line: The wealthy are shoveling even more of their loot into politics than the disclosures that came out last week indicated. In effect, says Campaign Legal Center policy director Meredith McGehee, we have entered “a world of unlimited money in politics.”

In this world, she adds, “those who can marshal enormous amounts of wealth” can “drown out the voices of the average Americans.”

Those who do this marshaling, for their part, never fail to emphasize the nobility of their political engagement. Take, for instance, Harold Simmons, the Dallas billionaire who has dropped $8.6 million into super PACs backing an array of rich people-friendly candidates and causes over the last year.

"Mr. Simmons is a passionate conservative, and he has been for quite some time,” his spokesman, Chuck McDonald, told the press last week.

MacDonald went on to add that Simmons — a leveraged buyout king now worth an estimated $9.6 billion — has no specific policy agenda in mind when he’s making his contributions. He simply believes “in conservative ideology.”

This conservative ideology that has Simmons so passionately committed just coincidentally meshes up quite nicely with the huge payoffs deep pockets like Simmons can ensure themselves via victory on election day.

Just one political decision alone — the tax treatment of so-called “carried interest” — can make an annual difference of tens and even hundreds of millions of dollars for Simmons and his fellow billionaires. Consider the biggest superstar in the hedge fund firmament, Romney-backer John Paulson, a Wall Street whiz who pocketed $4.9 billion in 2010 and another $3.7 billion in 2007.

Most of Paulson's hedge fund income comes as “carried interest” subject to just a 15 percent federal capital gains tax rate, a tax rate well below the 35 percent top marginal rate on “ordinary” income.

In other words, the preferential tax treatment for carried interest all by itself saves hedge fund types like Paulson $20 million on every $100 million in carried interest income they collect.

Republicans in the Senate, with some Democratic help, have repeatedly blocked attempts to repeal this preferential treatment over recent years. But the Democratic senator who has been the most pivotally hedge fund-friendly, Chuck Schumer of New York, now says he’ll vote to repeal the carried interest loophole.

That makes the occupant of the White House all the more important to wheeler-dealers like John Paulson and his friends.

“Of course these guys are going to give a million dollars,” as U.S. senator Al Franken from Minnesota noted last week. “What a bargain — what a bargain to give that to a candidate who they know will veto a bill that makes the carried interest subject to the top” income tax rate.

All the major GOP candidates have so far pledged their fealty to the cause of keeping carried interest exempt from the ordinary top tax rate. That shouldn’t shock anyone, given last week’s super PAC campaign contribution disclosures.

What should shock? That America’s billionaires — given how much at tax time the 2012 horse race could cost them in carried interest income alone — aren’t giving super PACs even more than they already have.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up at Inequality.Org to receive Too Much in your email inbox.

The 'Buffett Rule' in History's Grand Sweep

Sam Pizzigati — Mon, 30 Jan 2012 12:47:31 -0500

President Obama has proposed a specific new minimum tax rate for millionaires. Should America's rich feel angry or relieved? We check the IRS tax data archives for an answer.

The most famous secretary in America works “just as hard” as her billionaire boss — according to her boss, investor Warren Buffett — but pays federal taxes at twice the rate her boss does.

Debbie Bosanek, America learned last week, has been working for billionaire Buffett since 1993. In 2010 she paid 35.8 percent of her income in federal income and payroll taxes. Buffett paid his federal taxes at a 17.4 percent rate.

GOP White House hopeful Mitt Romney sits with Buffett in America’s richest 0.006 percent of taxpayers. Romney, America also learned last week, paid his federal income taxes for 2010 at a mere 13.9 percent rate.

At what rate should wealthy Americans like Warren and Mitt pay their taxes? President Obama last week suggested — for the first time — a specific minimum percentage for what he has been calling, since last fall, the “Buffett rule.”

“Tax reform should follow the Buffett rule,” Obama proposed in his state of the union address. “If you make more than $1 million a year, you should not pay less than 30 percent in taxes.”

The Obama administration will be advancing legislation that fixes this 30 percent figure into law. In effect, a new 30 percent “Buffett rule” minimum would replace the current “alternative minimum tax,” a levy enacted in 1969 that no longer operates as any sort of effective check on super rich tax avoidance.

Would this new 30 percent minimum have an appreciable real-world impact? The Obama administration last week declined to estimate how much new revenue a 30 percent Buffett rule might raise from America’s millionaires.

But we can get a sense of what that impact might be by applying a 30 percent minimum to previous years. In 2009, the latest year with IRS data available, taxpayers reporting over $1 million in income paid an average 24.4 percent of their incomes in federal income tax.

If a 30 percent minimum had been in effect that year, these taxpayers would have paid, on average, more than $171,000 additional per taxpayer. Citizens for Tax Justice calculations indicate that a Buffett rule at 30 percent would now raise about $50 billion a year in new revenue.

Would a 30 percent Buffett rule, in and of itself, make the tax code fair? Not by the Debbie Bosanek yardstick. If her boss Warren Buffett had to pay 30 percent of his income in federal income tax, Debbie Bosanek would still be paying total federal taxes at a higher rate than her boss.

The White House seems to understand this reality and, to its credit, is asking for more tax changes than a new 30 percent Buffett rule. For starters, the Obama administration wants to let the 2001 and 2003 Bush tax cuts expire for taxpayers making over $250,000 a year.

That move would raise the top tax rate on capital gains income — the category that includes most of the income that Warren Buffett and Mitt Romney collect every year — from 15 to 20 percent and the tax rate on dividends from 15 to 39.6 percent, the same top tax rate the expiration of the Bush tax cuts would fix on ordinary income from wages and salaries.

The Obama administration also wants to reduce the tax deductions and credits high-income taxpayers can claim.

All these changes would certainly make for a more progressive tax code. But these changes, taken all together, would still leave today’s rich and super rich paying taxes at substantially lower overall rates than America’s rich and super rich used to pay decades ago.

A half-century ago, in 1962, Americans making over what today would be $1 million, after taking inflation into account, paid 42.8 percent of their total incomes in federal income tax. Ten years earlier, they paid even more. In 1952, millionaires — in today’s dollars — paid federal income tax at a 55.2 percent rate, show IRS historical data.

And those rich in 1952 were actually getting a good deal, compared to their counterparts ten years earlier. In 1942, the first full year of World War II, taxpayers who would be millionaires in today's dollars paid their federal income taxes at an overall effective rate that hit 68.9 percent.

Just a reminder: We won that World War II, and the economic boom during the war years would raise millions of Americans into the middle class.

These days, billionaire Warren Buffett notes in another reminder, we’re fighting another war. A class war. In this class war, Buffett adds, his side has awesomely more weaponry than his secretary’s side.

“We have K Street,” Buffett explained last week. “We have Wall Street. Debbie doesn’t have anybody. I want a government that is responsive to the people who got the short straw in life.”

So should we all.

SOTU: He Hasn't Learned Anything More About the Economy in the Past Year

Joseph M. Firestone — Thu, 26 Jan 2012 00:55:31 -0500

Last year I prepared for the SOTU by speculating about the “fairy tales” the President would tell about fiscal responsibility, fiscal sustainability and the debt/deficit problem. That series ended here, and here. Yesterday's SOTU covered many subjects, but once again, the President paid lip service to the irresponsible religion of fiscal responsibility. Here are some comments on the parts of the SOTU related to it.

"A return to the American values of fair play and shared responsibility will help us protect our people and our economy. But it should also guide us as we look to pay down our debt and invest in our future."

The President never does say why we need to pay down the public debt, nor does he consider that attempting to pay it down will, other things being equal, constrain our attempts to invest in our future. There is no “winning the future” if we try to pay back the public debt by withdrawing dollars from the private sector through taxing.

Right now, our most immediate priority is stopping a tax hike on 160 million working Americans while the recovery is still fragile. People cannot afford losing $40 out of each paycheck this year. There are plenty of ways to get this done. So let’s agree right here, right now: No side issues. No drama. Pass the payroll tax cut without delay.

Well, he's right about people not being able to afford ending his payroll tax cut at this point. But he also ought to point out that a really effective payroll tax cut would be a full one on both employers and employees. That kind of cut has the sort of fiscal multiplier that would really bring jobs back. As would State Revenue Sharing, and a Full Employment Job Guarantee Program. (JG)

When it comes to the deficit, we’ve already agreed to more than $2 trillion in cuts and savings. But we need to do more, and that means making choices. Right now, we’re poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans. Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households. Right now, Warren Buffett pays a lower tax rate than his secretary.

I'm all for ending the Bush tax breaks for wealthy Americans but not to “save” more or "reduce the deficit." The Federal Government doesn't need to get back and 'save" money it previously created/spent into the private sector, or enabled the banking system to create, since as the currency issuer it can always make as much as it needs without doing that. The reason why the Government should end those cuts is to reduce the extreme economic inequality that's developed in the United States since it's creating political instability and threatening democracy here.

Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else – like education and medical research; a strong military and care for our veterans? Because if we’re serious about paying down our debt, we can’t do both.

Actually, yes we can, though it's not advisable to keep those tax cuts for “political reasons” in the very broadest sense of that term. Also, we can keep our investments in everything else, and also easily pay off the national debt if we decide to do that. All we need do, if we don't want to change current law is for the President to use proof platinum coin seigniorage to pay off the Federal debt as it comes due. This course won't destroy any net financial assets in the private sector, and that's what makes it much superior to using budget surpluses for that purpose. If, on the other hand, Congress wants to change the law, it could allow the Treasury to deficit spend without issuing debt. This also won't destroy net financial assets in the private sector.

The American people know what the right choice is. So do I. As I told the Speaker this summer, I’m prepared to make more reforms that rein in the long term costs of Medicare and Medicaid, and strengthen Social Security, so long as those programs remain a guarantee of security for seniors.

Sorry. President O, cuts in these programs are not “reform.” They are pure weakening of these programs and the economy. They mean less money in the private sector economy and less security for seniors at the same time, to the tune of perhaps $100 - $200 B per year over the next decade depending on what you and what your deficit hawk friends like Jack Lew think is “prudent.” Both the private economy and seniors need a strengthening of the social safety net by extending its support for everyone, including seniors. Changes that don't do that aren't “reforms,” they are just irresponsible fiscal policy based on false economic theory.

But in return, we need to change our tax code so that people like me, and an awful lot of Members of Congress, pay our fair share of taxes. Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes. And my Republican friend Tom Coburn is right: Washington should stop subsidizing millionaires. In fact, if you’re earning a million dollars a year, you shouldn’t get special tax subsidies or deductions. On the other hand, if you make under $250,000 a year, like 98 percent of American families, your taxes shouldn’t go up. You’re the ones struggling with rising costs and stagnant wages. You’re the ones who need relief.

Well, I agree with part of this, but I think it's much too simple. People making a million a year should be paying 45% of gross income after deductions, and that figure ought to go up incrementally, say by a point for every additional $250,000 in gross income, up to a marginal tax rate of 90% at the top level. How do I know? Because the past 40 years have shown that increasing concentration of wealth in a few hands is dangerous to democracy; and in addition, it's also true that when marginal tax rates were much higher the economy grew much faster than it has over the past 30 years. So experience also tells us that the old New Deal marginal tax rates don't prohibit rapid growth, while they certainly are a factor in sharing the benefits of that growth across the whole population. So, I say to hell with the Buffet Rule. Let's go back to the FDR rule, and really get this "shared sacrifice" thing going.

Now someone will say that at this point, I'm sure that high tax rates will kill the incentives of the rich to work hard and employ us all. Well, my reply is that I don't consider most of the very rich to be talented geniuses who have created so much value that that they have been employing most of the rest of us at a living wage during the past 30 years. Looking at the Forbes 400 list, most of what I see are people who have acquired a great deal of nominal wealth either through inheriting it, or through manipulating the financial system or both.

So, I'm not in the least worried about their losing their incentive to keep working. In fact, I wish that most of them would just go to their favorite tropical island and leave the rest of us alone.

Can Bossy Billionaires Now Boss Forever?

Sam Pizzigati — Sun, 22 Jan 2012 21:17:01 -0500

Changes in state tax laws now encourage America’s awesomely affluent to create “perpetual” trusts for their heirs. The combination of these new laws and new technology, legal scholars are warning, now allows the “dead hand” of the past to rule over the living. In essence, immortality for the rich.

Money can buy many things. But money can’t buy immortality, right?

That may once have been true, legal scholars Lawrence Waggoner and Michael Vincent argue in two new and chilling scholarly papers, but not anymore.

Billionaires today — and mere mega millionaires, too — now have all the tools they need to impose their values on future generations essentially forever.

Lawrence Waggoner, an emeritus University of Michigan law school prof, traces the modern evolution of these tools back to the 1986 federal tax “reform” that created a monster loophole for the owners of the new grand fortunes then just beginning to pop up all across America’s economic landscape.

The details can get complicated. The simple story: The rich have always been able to create “trusts” for their heirs. In a common trust situation, people of means set aside nest-eggs of multiple millions, let their kids who survived them live off the income from those millions, then had the trust’s millions revert to the grandkids. At that point, the principal in the trust would face estate taxation.

The 1986 legislation created a tax on those trust millions every time a generation passed on, but also gave rich people and their heirs an exemption that shielded part of those original trust millions. Trusts now became even more attractive to the rich — and the longer a trust could last, the better.

But before 1986, trusts couldn't last long. State statutes typically limited trust length to no more than 90 or so years.

The new 1986 loophole gave the rich — and the bankers and lawyers who make fortunes setting up and running trusts — an incentive to kill these state laws that prohibited “perpetual” trusts. In a few years, enough of these state laws died to nurture a new national industry dedicated, Lawrence Waggoner notes, to creating “trusts that can last for several centuries or even forever.”

The old common law “rule against perpetuities” actually went centuries back on its own. Legal philosophers had long warned against letting the “dead hand” of the past rule the lives of the living. And perpetual trusts would give the dead rich that ruling power. Those rich could, for instance, have their trust instruments deny income distributions to heirs who engage in certain behaviors.

Not to worry about this ancient legal wisdom, argue bankers and lawyers who pushed the new state laws that permit perpetual trusts. A trust may now be able to last forever, their argument goes, but human trustees administer trusts.

“Human discretion,” we're assured, will limit any trust restrictions future generations might find untoward — and end the trust altogether if future heirs who hold legal title to a trust property find that termination beneficial.

So we have no need to worry? Not exactly, advises University of Arizona law professor Michael Vincent. The super rich, he points out, don’t just have the legal tools they need to create perpetual trusts. They now have the computer tools they need to take “human discretion” out of the equation.

Vincent takes us into the near-future world of the “robo-trust,” a trust instrument that uses computer “AI” — artificial intelligence — to impose a dead billionaire’s will on generation after generation.

The combination “of breathtaking advancements in computer technology” and “the abolition of the rule against perpetuities,” Vincent explains, lets our contemporary rich create trusts that continue living long after their deaths, in the process perpetuating their “values and beliefs” as if they remained still alive.

Vincent vividly paints the eminently plausible technological possibilities. A rich person’s descendants petition a robo-trust for an income distribution. The robo-trust “analyzes the content and sincerity of the appeal” with face-recognition software, then considers “the person’s income, marital status, net worth, religion, and general life history,” then “decides whether to pay out.”

Far-fetched? Not at all. Notes the University of Arizona's Vincent: “The first computer-run trust may already be waiting in a safe deposit box.”

How can we prevent a robo “perpetual trust” future? Both Michael Vincent and Lawrence Waggoner see the same answer. Congress can simply re-instate the old common-law “rule against perpetuities.” But lawmakers need to act soon.

“Society,” Vincent warns, “must be on guard for the dying man with just enough money to be dangerous — after five hundred years of compounding interest.”

Law and Order 24/7, Except at Tax Time

Sam Pizzigati — Sat, 14 Jan 2012 21:23:36 -0500

The rich don't much like paying taxes when tax rates run high. They don't much like paying taxes when tax rates run low either.

Any tax system that subjects rich people to high taxes is asking for trouble. Or so the politicians who cater to people of means incessantly argue. The higher the tax rate on high incomes, the argument goes, the greater the incentive the rich have to waste time and energy figuring out ways to evade paying taxes.

“Conservatives tend to talk about noncompliance as if it were solely a function of tax rates,” as former Reagan administration policy aide Bruce Bartlett noted last week, a perspective that makes tax evasion “yet another excuse to cut taxes.”

In 2001 and then again in 2003, that convenient excuse helped the Bush White House chop away at the taxes the IRS expects rich people to pay. The tax rate on top tax-bracket income slipped from 39.6 to 35 percent, and the rates on capital gains and dividends both dropped to 15 percent, from 20 and 39.6 percent.

According to rich people-friendly right-wing ideology, these cuts should have boosted tax compliance, since, as Bartlett points out, “the return to evasion fell.”

What did happen? Tax evasion between 2001 and 2006, a new IRS study documents, actually increased. In 2001, $290 billion in individual and business taxes due went uncollected. In 2006, $385 billion.

Need some context for all these billions? The 2006 federal budget deficit red ink totaled $248 billion. If the IRS had been able to collect every dime cheating taxpayers cost Uncle Sam in 2006, the federal treasury would have ended the year $137 billion in the black.

Who’s doing all this tax cheating? Not average Americans.

Average Americans get most of their income from wages and salaries. Almost all this income faces paycheck withholding. The result: Only 1 percent of the taxes due on wages and salary, the new IRS study reports, goes uncollected.

Rich Americans, by contrast, collect huge chunks of their annual income from capital gains, business ownership, and other sources of income that face neither rigorous reporting mandates or withholding.

Tax evasion for the income category that includes capital gains and private equity partnerships, the IRS calculates, ran at an 11 percent rate in 2006, ten times the evasion rate for wages and salaries.

The new IRS report doesn’t break down the new tax evasion data by taxpayer income class. But five years ago, the last time the IRS released a major tax evasion analysis, two analysts — IRS economist Andrew Johns and the University of Michigan’s Joel Slemrod — went through the raw IRS data and did just that.

Americans who make between $500,000 and $1 million a year, the pair found, underreport their incomes by a whopping 21 percent, triple the 7 percent “misreport” rate of taxpayers making between $30,000 and $50,000 and well over double the 8 percent cheating by taxpayers making $50,000 to $100,000.

The new IRS tax evasion numbers cover the 2006 federal fiscal year. Has the tax evasion story improved since then? Some signs certainly do seem positive.

Earlier this month, the IRS announced that audit rates on tax returns reporting over $1 million a year in income have doubled over recent years. In 2011, 12 percent of millionaires faced audits, up from only 6 percent in 2009.

The higher audit rates, says IRS enforcement chief Steven Miller, should assure “those at the lower end of the spectrum” that “those at the higher end of the spectrum are subject to the same rules and enforcement as everyone else.”

And the IRS is toughening up elsewhere as well. The agency has created a “Global High Wealth” unit, an initiative designed “to better cope with the growing complexity of income and assets of the high-income, high-wealth population.”

IRS investigators are also going to court against Swiss and other foreign banks that have helped the U.S. wealthy hide their assets.

But this momentum may be difficult to sustain. Budget cuts have undermined the IRS enforcement capacity. The agency’s $11.8 billion budget for the current 2012 federal fiscal year stands $300 million under last year’s budget — and $1.5 billion under what the Obama White House requested.

The IRS this year, enforcement chief Miller acknowledges, will have about 3,000 fewer enforcement staff on the job than in 2010. The “imbalance” between the agency’s workload and resources, IRS national taxpayer advocate Nona Olson told Congress last week, “is becoming unmanageable.”

More budget resources would certainly help turn that situation around. Every $1 added to the IRS for enforcement, the data show, yields over $4 in revenue.

But really putting the kibosh on tax evasion will likely take much more aggressive political leadership from the top. On that score, the politicos in Washington could take some inspiration from Mario Monti, the new prime minister in Italy, the home to some of the world’s most notorious wealthy tax evaders.

Italy is losing the equivalent of $152 billion a year to tax evaders, and the rich have for years flagrantly underreported their actual incomes.

On New Year’s, prime minister Monti had his tax police swoop down on luxury ski resorts and seaside spas. Their mission: find evidence of tax evasion. They found plenty. At resorts in Cortina, police found 42 super luxury cars — average price, over $250,000 — registered to owners reporting less than $25,000 in income.

Monti’s aggressive raids on the haunts of the rich and famous have allies of the disgraced former Italian prime minister, billionaire media mogul Silvio Berlusconi, fuming. They figure to be fuming for some time.

The new prime minister doesn’t appear to be content with enforcing current tax law. He’s now hinting support, say news reports, for “a new, higher tax bracket for high-income individuals” and a tax on speculative financial transactions.

And that makes ample sense. If the rich are going to evade taxes when tax rates run low, after all, society might as well jack those tax rates up much higher.

America’s Greediest: The 2011 Top Ten Edition

Sam Pizzigati — Sun, 11 Dec 2011 20:42:12 -0500

One puts on football pageants. Another makes millions on a virtual farm. From Too Much, the Institute for Policy Studies inequality weekly, we present the year's ten most avaricious. All ten remind us just how much needs to change, economically and politically, in 2012 and beyond.

The greediest among us in 2011 probably haven’t been any greedier, as a gang, than any greedy of the recent past. They just seem that way.

Why so? We have a whole new frame of reference. This fall’s sudden — and exhilarating — rise of the Occupy movement has helped us remember what we, as a society, had sadly forgotten: that decent, smart societies never let the few grab away rewards that ought to be shared among the many.

Who grabbed most greedily in 2011? We have no statistical yardstick to help us make that call. You don’t, after all, have to make a million to rate as an all-star greedster. You do have to be ruthless, self-absorbed, and grossly insensitive.

That description, we’ll admit, fits far more folks than our ten dis-honorees below. Maybe next year, we can hope, we’ll have a harder time filling out our top ten.

10/ Paul Hoolahan: Skimming the Sugar

Greed has never been a stranger to professional sports. But this year’s most avaricious sports character works for a nonprofit. Meet Paul Hoolahan, the chief exec at the Sugar Bowl, one of four annual college football postseason games that rotate hosting the national collegiate championship.

The Sugar Bowl enjoys tax-exempt status and regularly touts its contributions to good causes. But Hoolahan’s favorite good cause may be his own. He took home just under $600,000 in 2009, the latest year with figures available, almost quadruple his $160,500 paycheck for the same job 13 years earlier.

Hoolahan and his two top aides are skimming off $1 of every $10 the Sugar Bowl generates, a Washington Post analysis recently noted. At the same time, adds thet Arizona Republic, the Sugar Bowl and its three “Bowl Championship Series” partners are donating to charity only 20 cents from every $10 in revenue.

The Sugar Bowl disputes those figures. Hoolahan’s aides say their bowl never bothers to report many donations “as charitable giving.”

This past September, one of those unreported “donations” came to light. The Sugar Bowl had spent, a Hoolahan flack had to acknowledge, at least $3,000 on political contributions to the governor of Louisiana, a nonprofit tax law no-no.

9/ Michael Duke: Shifting the Goalposts

How do CEOs end up making so much? Ask Michael Duke, the chief exec at retail colossus Wal-Mart. Duke takes home his millions — $18.7 million in his company’s latest fiscal year alone — the old-fashioned way. He squeezes workers.

But sometimes squeezing just can’t get the job done. No big deal for Michael Duke. He just moves the goal posts that determine his “pay for performance.”

Duke moved into Wal-Mart’s CEO suite in 2009. Since then, he has ended “premium pay” for hours worked on Sundays, eliminated profit-sharing, sheared health care benefits, and cut staffing so low, Retailing Today reports, that customers sometimes can’t find shopping carts because the store where they’re shopping has no employees available to collect carts from the parking lot.

This sort of chronic understaffing may help explain why Wal-Mart’s “same-store sales” — the business “metric” that compares a retail chain’s sales at the same group of stores from one quarter to the next — started tumbling soon after Duke took over as CEO and didn’t stop sinking until this past fall.

This same-store nosedive should have cost CEO Duke big time at pay time, since same-store sales, explains a New York Times analysis, accounted for 30 percent of the factors that Wal-Mart used to calculate Duke’s bonus.

But lo and behold, all of a sudden this past spring, Wal-Mart’s board of directors compensation committee eliminated same-store sales from Duke’s bonus calculations. The immediate result: Duke would receive $16 million in “performance” pay — despite Wal-Mart’s stunning same-store sales tailspin.

Duke’s total $18.7 million paycheck for the year would represent 750 times the annual pay of a Wal-Mart worker making $12 an hour, working 40 hours a week.

Some 75 percent of Wal-Mart workers make less than $12 an hour, notes a new report on Wal-Mart’s business model, and few Wal-Mart workers get 40 hours.

8/ Robert Iger: Impersonating Uncle Walt

Imagine if you could live in “the happiest place on earth.” Even better, imagine you ran it! Then you’d be Robert Iger, the CEO of the Disney entertainment empire.

Iger became Disney’s numero uno back in 2005, and this year has been one of his best. In January, Disney announced that Iger’s latest annual compensation topped $28 million, a neat 35 percent increase over the year before.

In October, Iger picked up a new pay deal that extends his CEO contract into 2015 and adds on a cushy final year as Disney “executive chairman” — at $2.5 million — to help him make the transition into fantasyland retirement.

Not enough to make you happy? How about this: This fall Iger became the newest member of the Apple computer board of directors. He’ll get a six-figure tip for the gig, plus a free copy of any new Apple product he wants. Happy, happy, happy.

Unfortunately, some housekeepers who work at the hotels in Disneyland have been raining on Bob Iger’s Disney parade. They went almost four years without a contract because they refused to accept Disney demands they feared would force them to pay hundreds of dollars a year extra for health care.

These spoilsport housekeepers testified earlier this year at a community forum that made poor Bob Iger seem the reincarnation of Uncle Scrooge McDuck. The original Walt Disney, the hotel workers union pointed out, made 108 times what his housekeepers were making in 1966. Iger now makes 781 times as much.

Those housekeepers just don’t understand. Uncle Walt could always whip out a pencil and draw Mickey Mouse when he wanted to feel happy. Robert Iger can only count his money.

Iger may now have to be content with a teeny bit less. Disney officials and hotel workers finally agreed on a new contract the first week in December.

7/ Doug Oberhelman: Threatening an Exit

Lawmakers in Illinois, early in 2011, modestly raised their state’s corporate income tax rate to help fill a gaping state budget shortfall. That modest hike soon had the CEO at the Peoria-based Caterpillar strongly “suggesting” that his Fortune 500 firm might have to exit the state.

Mused Caterpillar chief exec Doug Oberhelman: “I have to do what’s right for Caterpillar.”

And maybe himself, too. In 2009, a year that saw only three U.S. corporations lay off more workers than Caterpillar, Oberhelman took home just under $3 million. His last year’s paycheck: $10.4 million.

Caterpillar workers, meanwhile, have a new six-year contract that, one news report notes, includes no wage raises and a big boost in health care premiums.

Caterpillar seems to exploit tax loopholes as systematically as employees. From 2004 to 2009, the company paid in Illinois income tax only 1.04 percent of its $30.4 billion in earnings.

6/ William Weldon: Seeing No Evil

Contact lenses. Hip implants. Over-the-counter children’s medicines. You name it, Johnson & Johnson — the world’s second-largest health care products company — has recalled it over the past three years.

That’s one reason J&J sales have failed to increase the past two years — for the first time since the Great Depression. Jobs at J&J have fallen, too. The company has announced nearly 10,000 layoffs since 2004, the Institute for Policy Studies reports, despite $49.6 billion in profits the last three years alone.

Could any of this profiteering, job cutting, and chronic recalling be related? Absolutely not, says Johnson & Johnson CEO William Weldon. He declared last year that J&J had no “systemic problem.”

That may be right. Johnson & Johnson’s prime problem may be Weldon’s personal greed. In 2007, the CEO “restructured” the company and slashed J&J’s corporate quality control operation by 35 percent. The next two years, a hiring freeze made replacing newly vacant quality positions almost impossible.

These moves were soon paying big dividends — for Weldon. He took home $25.6 million in 2009. Then came the flood of recalls and assorted other scandals from kickbacks to illegal drug marketing. The Johnson & Johnson board response? The company dropped Weldon’s annual pay — to $23.2 million.

This past summer, a special J&J board member investigative panel cleared Weldon and his management buddies of any blame for the company’s recall disasters. Explained the panel: “Senior management never issued any directives to the effect that quality should be sacrificed for production.”

Weldon, notes an Associated Press analysis, also serves as chairman of the Johnson & Johnson board and, as such, has nominated a host of J&J board members to their current positions.

5/ Lloyd Blankfein: Stiffing the Sisters

Back two years ago, Wall Street’s most powerful banker — Goldman Sachs chief Lloyd Blankfein — impishly told a British journalist he was “doing God’s work.”

God apparently pays well. In 2007, on the eve of the financial meltdown banks like Goldman did so much to fire up, Blankfein collected a $68 million bonus, the largest in Wall Street history. The year before, his bonus hit $54 million.

In other words, Blankfein has done more than his share to help make New York one of the world’s most unequal cities. In 2011, Blankfein had a chance to hit the restart button. He didn’t.

In April, a Goldman Sachs required filing revealed that Blankfein, after going two years without taking a cash bonus, had gobbled up $5.4 million in bonus cash for the bank’s latest fiscal year. And plenty more in stock awards and salary. His total pay for the year: $19 million, about double his total pay the year before.

In May, at the Goldman Sachs annual meeting, Blankfein faced a shareholder resolution — brought by four groups of nuns — that would have initiated an investigation into whether executive pay at the firm rated as “excessive.”

Blankfein didn’t seem to think that investigation would be a good idea. At the time, he held a stash of Goldman shares worth $527.6 million. Blankfein and his allies would go on to have the nuns’ resolution crushed in shareholder voting.

4/ Alan Mulally: Shrinking to Riches

Alan Mulally took the Ford Motor CEO reins in 2006. Over his first three years, Ford lost $30 billion. Over his last two, Ford has gained back $9.3 billion, and that gain has become cause for corporate celebration — and a windfall for Mulally.

In March Ford handed the chief exec $56.5 million in stock and then, a month later, announced that Mulally last year pulled down an additional $26.5 million in annual pay. That amounted to 910 times the pay of entry-level Ford workers. They had been making, ever since a 2007 concessions pact, just $14 an hour.

United Auto Workers president Bob King calling Mulally’s spring-time take-home bonanza “morally wrong.”

Added another UAW leader representing Ford’s Canadian workers: “It’s unconscionable that a CEO gets paid this much money as a result, quite frankly, of shrinking a company into profit.”

3/ Larry Ellison: Loving that Real Estate

How much more incentive to “perform” does Larry Ellison, the top exec at business software giant Oracle, need? Apparently, $77.6 million. That’s how much Ellison collected for the Oracle fiscal year that ended this past May 31.

That piece of change added less than two-tenths of 1 percent to Ellison’s $39.5 billion personal fortune, the world’s fifth largest.

Why does Oracle, at this point, bother ladling still more loot on Ellison? His continuing rewards, says the Oracle board compensation committee, rest on a “subjective evaluation of Mr. Ellison's performance, the unique contributions he makes to Oracle as its founder and various other factors.”

Among those “various other factors” may be the annual upkeep of the at least 15 personal residences Ellison owns. That upkeep may be getting to the billionaire. Or maybe just boredom. This past fall Ellison put up for sale a 6.9-acre home and horse farm combo he owns in Northern California.

Ellison is asking $19 million for the property. He paid $23 million for it in 2005. But the $4 million haircut he’s now facing won’t be a big deal. The loss amounts to around one-hundredth of 1 percent of his fortune.

2/ Don Blankenship: Prepping for a Comeback

This past May, West Virginia state investigators found Massey Energy directly to blame for the 2010 blast that left 29 miners dead at the company’s Upper Big Branch coal mine. Massey CEO Don Blankenship’s management team, probers charged, had nurtured a “culture bent on production at the expense of safety.”

Earlier this month, federal regulators agreed. They found “systematic, intentional, and aggressive efforts” to flout basic safety regulations. Under Blankenship, Massey managers kept two sets of books, one accurate for internal use and another fake for regulators.

Says the top federal mine safety official: “Every time Massey sent miners into the UBB Mine, Massey put those miners’ lives at risk.”

That risk taking paid off handsomely for Blankenship. He pocketed $38.2 million from 2007 through 2009, after $34 million in 2005, and retired this past December with a $5.7 million pension, $12 million in severance, another $27.2 million in deferred pay, and a lush consulting agreement.

What about the families of the lost miners? Federal prosecutors have just reached a settlement with Alpha Natural Resources — the company that bought out Massey this past June — that will provide $1.5 million to each family.

Blankenship could still face criminal charges. But we'll more likely see him back in the mine business. The mega millionaire retiree has signed Kentucky state incorporation papers that identify him as the president of a new company that calls itself the McCoy Coal Group Inc. Who says Blankenship has no heart? “McCoy” turns out to be his mom’s family name.

1/ Mark Pincus: Reaping What He Sows in FarmVille

Mark Pincus, the venture capitalist who runs the Zynga online gaming goliath, wants it all. Money and power. Pincus appeared, early in 2011, on track to get them both.

The 45-year-old Pincus had spent the previous four years building up Zynga — and an awesome buzz on Wall Street. Analysts were predicting that Zynga’s initial public stock offering might be the biggest IPO blockbuster since Google.

Some analysts even floated a $20 billion figure for Zynga’s total corporate net value. The Pincus personal net worth? Forbes put that at $2 billion.

This past March, in a preview of the IPO bonanza to come, Pincus would sell off a chunk of his Zynga shares and clear a neat $110 million.

This lucrative sale in no way loosened the Pincus lock-grip over Zynga. The Harvard MBA had structured the company’s stock to make him the only owner of Zynga’s “Class C shares,” stock that has 70 times more voting power than Zynga’s regular shares. Elsewhere in the high-tech industry, special shares typically carry only ten times the voting power of regular shares.

But then this fall things started unraveling.

High tech start-ups typically attract talent by offering shares of stock in their new concern, and Pincus had done just that with Zynga. But Pincus had apparently concluded, with the big IPO pending, that he had given away too many shares.

In early November, the Wall Street Journal revealed that Zynga management had demanded that various employees “give back” their stock “or face termination.”

Pincus, in response to the Journal story, sent out what amounted to a non-denial denial. But follow-up news reports would soon reinforce the image of Zynga as more shark tank than romper room of inspired gamers.

The New York Times would describe a “messy and ruthless” Zynga workplace chock-full of “loud outbursts from Mr. Pincus, threats from senior leaders, and moments when colleagues broke down into tears.”

This coverage would come on top of news that the Securities and Exchange Commission, the federal watchdog over Wall Street, had told Zynga to stop using certain “non-traditional accounting measures” that could mislead investors.

Industry insiders were also starting to question Pincus’ supposed strategic business genius. The online future of gaming, analysts pointed out, rests in the mobile market. Other companies in that market were eating Zynga’s lunch.

And those other companies wanted nothing to do with Pincus. Several, including the maker of Angry Birds, rejected Zynga’s offers to buy them up, fearing that “Pincus' hard-driving personality and iron-fisted control” was going to make keeping talent a constant uphill battle.

Early in December, amid the torrent of negative news, Pincus and Zynga signaled that the company would be asking no more than $10 per share in its upcoming IPO. That put the company’s total value at about $7 billion, only a little more than a third the estimated value that had floated around earlier in the year.

Pincus, our greediest American of 2011, still insists he’s only creating a “meritocracy” at Zynga. The question he can’t answer: What has he — or anyone, for that matter — ever done to merit a billion dollars?

On Wall Street, Still Tis the Season to Be Jolly?

Sam Pizzigati — Sun, 04 Dec 2011 15:48:13 -0500

Financial industry insiders are grousing about a big downturn in annual bonuses. They should be thanking the rest of us — bombshell new research shows — for their continuing awesome good tidings.

Wall Street’s power suits aren’t humming along, this December, with all the holiday jingles. Bankers, traders, and law firm partners are quite frankly feeling kind of foul. End-of-year Wall Street bonuses, experts predict, are going to be down from 2010 levels — by as much, on average, as 35 percent.

Total 2011 pay for the typical bond-trading managing director at a top Wall Street securities firm will likely be off, says Options Group New York co-founder Michael Karp, nearly 40 percent.

But those typical managing directors should be able to survive the holidays quite nicely. Pay cuts will leave average high-powered bond traders with $1.8 million for their daily labors in 2011. The average U.S. worker would have to labor 43 years — an adult lifetime — to take home that same $1.8 million.

In other words, by any real-world yardstick, Wall Street’s finest are doing just fine. And they owe their good fortune, blockbuster new research makes clear, to the generosity of Uncle Sam’s one and only central bank, the Federal Reserve.

During the financial meltdown, a new analysis of 29,000 pages of previously secret documents shows, central bankers at the Fed had $1.2 trillion in dirt-cheap loans shoveled out to the nation’s financial institutions, at the crisis peak, and overall committed an incredible $7.77 trillion, as of March 2009, to the financial rescue, taking into account guarantees and lending limits.

This massive wave of subsidies, note the Bloomberg news analysts who broke the story last week, amounted to a bailout over ten times larger than the $700 billion funneled to banks via the Treasury Department’s controversial Troubled Asset Relief Program, or TARP.

Bloomberg reporters had to win a court case to access the stunning new bailout data. How stunning? The $7.77 trillion the Fed committed to the nation’s financial industry, observes Bloomberg, equaled “more than half the value of everything produced” in the entire United States during the key crisis year.

To put the bailout in more homespun terms: The Fed provided banks the equivalent of over $25,000 per American.

The nation’s six biggest banks — J.P. Morgan, Bank of America, Citibank, Wells Fargo, Goldman Sachs, and Morgan Stanley — grabbed $460 billion of the secret loans. Morgan Stanley took in $10 billion in publicly visible TARP bailout dollars and $107 billion from the hidden Fed loan program.

All the TARP dollars came with modest strings on executive pay. To end run the strings, big banks rushed to pay back their TARP bailout and then loudly proclaimed themselves healthy and stable enough to resume business as usual.

Meanwhile, at that same moment, these “healthy” banks were taking advantage of the secret Fed loans to register billions in new profits — with no executive pay strings attached.

The Fed loans came with interest rates as low as 0.01 percent. The banks lent out these loan dollars at much higher rates and made, Bloomberg estimates, at least $13 billion on these transactions. That $13 billion, notes economist Dean Baker, essentially rates as a pure “gift” from taxpayers.

But the Fed's total giving to America's biggest banks has run much higher than that $13 billion. By backstopping big banks so energeticaly, former U.S. senator Ted Kaufman from Delaware points out, the Fed has served notice that the federal government would never let the big banks fail — and that notification continues to translate into favorable borrowing rates for the big banks.

The big banks, for their part, have pooh-poohed all the hubbub about the enormous subsidies they’ve received. They’ve argued that no one should be bent out of joint, since the banks have paid their loans back.

The big banks, counters financial analyst Steve Randy Waldman, have definitely not paid back the lucrative freedom from downside risk that the Fed and Treasury Department have so graciously provided them.

In financial markets, Waldman explains, “risk-bearing” has always been “the ultimate commodity.” The Fed and Treasury underwrote this risk-bearing — for big banks — at next to nothing. Middle class Americans, by contrast, have to pay for their own risk-bearing. They pay, for instance, their fire insurance bills year in and year out, without ever expecting that the Fed is going to foot the bill.

Massive federal bailout subsidies, adds analyst Les Leopold, have had another spin-off benefit. They've “allowed banks to step up their lobbying efforts.” These lobbying efforts, in turn, have saved the banks countless billions more.

One example: Bank political pressure has forged a federal housing crisis policy that protects banks from the “downside” of the crash of the housing market.

But the generosity of top federal officials to America’s banks has gone still further. We learned last week, notes Reuters analyst Felix Salmon, that Treasury secretary Hank Paulson was “giving inside information to his old Wall Street buddies” right as the financial crisis was unfolding, insider info that helped Goldman Sachs-connected hedge fund managers score millions in easy profits.

The bottom line of all this generosity? The total assets of America’s top six banks jumped from $6.8 trillion in September 2006 to $9.5 trillion in September 2011. The trading arms of big banks and other independent firms, the Washington Post reports, have generated over $83 billion in profit over the last two and a half years, $6 billion more than they generated over the previous eight.

Returns this massive, in turn, translated last year into the biggest bank compensation haul in history. Wall Street salaries in New York averaged $361,330 in 2010, five times the city's average private-sector pay.

And average Americans? Their economic status continues to slide. A new Rutgers University study out last week documents that just 7 percent of those Americans “who lost jobs after the financial crisis have returned to or exceeded their previous financial position.” Two million construction workers have lost jobs since the housing collapse began. The industry has hired back only 47,000.

That housing collapse keeps collapsing. Over a quarter of American mortgages, 28 percent, have now sunk “underwater,” up from 23 percent last year.

Some context for these numbers: The $107 billion in Fed loans that one bank alone, Morgan Stanley, pocketed in September 2008 would have been enough, notes Bloomberg, “to pay off one-tenth of the country’s delinquent mortgages.

So what ought to be done? For starters, former New York governor Eliot Spitzer urged last week, Congress ought to require banks to use the profits they made investing their almost interest-free money from the Fed “to write down the value of mortgages of those who are underwater.”

Nassim Nicholas Taleb — a New York University risk engineer, best-selling author, and a hedge fund investor — has a longer-term solution. He wants the feds to start regulating Wall Street pay. No one at a company that would require a taxpayer-financed bailout if it failed, says Taleb, should “get a bonus, ever.”

“Consider that we trust military and homeland security personnel with our lives, yet we don’t give them lavish bonuses,” he explains. “They get promotions and the honor of a job well done if they succeed, and the severe disincentive of shame if they fail.”

For bankers, Taleb adds, the opposite holds. They get “a bonus if they make short-term profits and a bailout if they go bust.”

Reforms like these still seem, at our current political moment, sheer fantasy. New research from the Center for Responsive Politics helps us understand one reason. Nineteen current members of Congress last year held personal investments in Wall Street’s most notorious bank, Goldman Sachs. These investments averaged well over three-quarters of a million dollars.

Nine of these 18 investors just happened to sit on the congressional committees that oversee the financial industry. Two of the 18 not on one of these committees just happened to be the two most powerful leaders in the House, speaker John Boehner and majority leader Eric Cantor.

The Alchemy of Our Awesomely Affluent

Sam Pizzigati — Sun, 27 Nov 2011 21:05:53 -0500

Today's super rich can't turn tin into gold. But they can get Uncle Sam to loan them free money. At the expense, of course, of America's bottom 99 percent.

How much money is pouring into the pockets of America's richest 1 percent? How much of this income are America's richest paying in taxes?

Major media outlets have been asking questions like these ever since the Occupy Wall Street movement first started gaining traction earlier this fall. But the numbers in their answers, suggests a groundbreaking new analysis from Bloomberg reporter Jesse Drucker, aren’t telling the full story.

America’s mega rich are actually taking in much more in income, Drucker shows, than their tax returns indicate. Hundreds of millions more. And this hidden income has reduced their effective tax rate — a figure already lower than the rate average Americans pay — even lower.

We’re not talking patently illegal tax evasion here. We’re talking complex financial transactions that would do medieval alchemists proud.

Those alchemists long ago struggled mightily to turn common metals into gold. Lawyers and money managers for today’s mega rich can routinely pull off a trick almost as lucrative: They can make money off unrealized capital gains.

This trick carries various arcane labels like “variable prepaid forward contracts.” But the goal always remains simple and straightforward: to grab as much tax-free cash as possible out of assets that have increased in value.

How does the trick work? Imagine yourself a major corporate CEO. You hold a huge stash of stock in your company. That stock has appreciated. If you sold your shares, you could clear a quarter billion dollars in personal profit. But you would also immediately face a capital gains tax on that quarter billion.

Now that prospect shouldn’t leave you particularly upset. The capital gains tax you face, after all, only runs 15 percent. That’s less than half the 35 percent you would be paying if capital gains were taxed at the same rate as ordinary income.

Some super rich in this situation do indeed just take their capital gain, pay Uncle Sam his 15 percent, and buy a bigger yacht. Others get creative. They don’t pay Uncle Sam. They get Uncle Sam to pay them.

These super rich go ahead and sell their shares — for colossal sums — but don’t deliver them to the buyer until a few years after they cut the deal.

At delivery time, these mega rich do report the income from the sale on their tax returns and pay the capital gains tax upon it. But in the meantime they’ve enjoyed what amounts to an interest-free loan from Uncle Sam.

Setting these deals up can cost the super rich millions in dollars in fees. But the returns make that outlay to accountants and tax lawyers well worth the expense. The rich, observes former New York State Bar Association tax section chair David Miller, “can use complex transactions not available to most Americans to get cash from their appreciated stock without paying any taxes at all.”

Dole Food chairman David Murdock, notes Bloomberg’s Jesse Drucker, played this game in 2009 when he pocketed $228.6 million for his Dole shares. He won’t “deliver” them until next November. Hank Greenberg, the former CEO at insurance giant AIG, parlayed a “prepaid forward agreement” into $278.2 million. Clear Channel Communications founder Red McCombs grabbed $259 million.

“Prepaid forward” deals first became all the rage for the wealthy about a decade ago, the New York Times reports. The IRS is still playing catch-up. An IRS crackdown of sorts did start in 2008. But the super rich haven't flinched much.

One reason: The odds of getting audited remain low. Another: Even if wealthy taxpayers do get challenged on prepaid forwards, notes New York tax analyst Robert Willens, they can count on a tax court settlement that lets them keep a hefty chunk of whatever the prepaid forward helped them make.

“Who wouldn’t want that?” asks Willens.

Maybe the 99 percent. And what could protect the 99 percent from the continuing super-rich drive to exploit appreciated assets? David Miller, the New York State Bar Association tax expert, wants the super rich to have to pay a tax on the annual increase in the value of their immense stock holdings.

Such a tax, even if only levied on America’s richest 0.1 percent, could raise as much as three-quarters of a trillion dollars over a decade’s time. At that prospect, even the super rich might have to flinch.

America's Affluent and the New Bunker Down

Sam Pizzigati — Sun, 20 Nov 2011 18:50:01 -0500

Just 40 years ago, most Americans rubbed elbows with neighbors from a fairly wide cross-section of income levels. But today's rich, Census data show, are keeping everyone else at arm's length — and more.

How many neighborhoods have you ever seen with oodles of rich residents — and poor schools? Or, vice versa, how many neighborhoods do you know with lots of poor people and richly appointed schools?

Silly questions. We all know the answers. Kids in affluent neighborhoods don’t go to schools with leaky roofs, tattered textbooks, and uncertified teachers. Kids in poor neighborhoods do.

And what goes for schools, of course, goes for every other public service as well — from parks and libraries to road repair and garbage pick-up. You’re going to be much better off, as a person of modest means, if some of your neighbors have more substantial means.

Back in 1970, the vast majority of Americans lived in neighborhoods that did mix people of substantial and modest means. No more. In fact, says a new study just released by the Russell Sage Foundation and Brown University, the share of Americans living amid intense income segregation has more than doubled.

America’s rich haven’t just become richer, show the study data from Stanford University sociologists Sean Reardon and Kendra Bischoff. They’ve become far more likely to live among their own kind. The same for the poor.

Reardon and Bischoff have gone through Census data from all the U.S. metro areas with populations over 500,000. They define as “affluent” those neighborhoods where most families have incomes that run at least 50 percent over the typical family income of the entire metro area. Poor neighborhoods have most families making less than two-thirds the metro median income.

In 2007, in the nation’s most typical metro areas, neighborhoods that rated as affluent in the Stanford research schema had over half their families making over $112,500. Poor neighborhoods had over half their families making under $50,000.

Nearly one out of three families in America’s large metropolitan areas, the Stanford analysts found, spent 2007 in either a severely segregated rich or a severely segregated poor neighborhood.

In 1970, by contrast, only one in seven American families lived in neighborhoods that rated as segregated rich or poor.

In that same year, 65 percent of Americans lived in neighborhoods where over half the resident families rated as middle income. By 2007, that share of Americans living in middle-class neighborhoods had dropped to 44 percent.

The isolation of America’s rich, the authors of this new income segregation study note, is actually getting more intense than the isolation of the poor. And that isolation, they point out, deeply matters.

“The increasing concentration of income and wealth in a small number of neighborhoods,” the two authors note, “results in greater disadvantages for the remaining neighborhoods where low- and middle-income families live.”

New Jersey hosts some of the nation’s most income-segregated areas, and this segregation, Newark Star-Ledger commentator Tom Moran observed last week, is taking an ever heavier toll on our political psyche.

Growing income segregation, explains Moran, “means people of different means don't rub elbows as much, their kids don't play together as much, the parents don't chat over the back yard fence.”

In this segregated environment, people know less and less about people not like themselves. They more easily embrace stereotypes. Politicians from neighborhoods where rich people only interact with other rich people will gravitate more glibly to mean-spirited austerity budget cutbacks.

These pols don’t see the threats austerity poses to the well-being of real people with real needs. They see instead the “lazy” poor.

This phenomenon has been swirling around the U.S. political scene ever since modern American inequality first began skyrocketing in the 1980s. In 1991, Robert Reich, soon to become the U.S. secretary of labor, gave the phenomenon a label: the “secession of the successful.”

America's top earners, Reich would note, “feel increasingly justified in paying only what is necessary to insure that everyone in their community is sufficiently well educated and has access to the public services they need to succeed.”

The nation’s “stark political challenge in the decades ahead,” Reich added back in 1991, will be trying to reaffirm that we remain “a society whose members have abiding obligations to one another.”

We are, the new Stanford data tell us, most definitely losing that challenge.

The Global Super-Rich Stash: Now $25 Trillion

Sam Pizzigati — Sat, 12 Nov 2011 14:58:13 -0500

Another super-slick global financial analysis firm has just tallied how much net worth is sloshing around in the pockets of the world’s most spectacularly wealthy. So when will the time finally come to stop the counting — and start the taxing?

In today’s astoundingly unequal global economy, banks can go either of two routes — or both — to bag ever bigger returns. They can squeeze the 99 percent with nuisance fees and penalties. Or they can cater to the richest of the rich.

But both routes have bumps. The 99 percent can squeeze back, as they did earlier this month when Americans by the tens of thousands shut down their Bank of America accounts to protest the bank’s $5 debit card greed grab. And the richest of the rich? To cater to these fortunates, you have to first find them.

That can be difficult. Fortunately, financial industry consulting firms have stepped up to help. These firms have started publishing annual global wealth surveys that pinpoint where banks — and luxury retailers and anyone else who wants in on top 1 percent action — can find “high” and “ultra high” net-worth individuals.

Last week, a new global firm — the Singapore-based Wealth-X — entered the global wealth survey fray, joining a crowded field that already includes Capgemini and Merrill Lynch, the Boston Consulting Group, Credit Suisse, and Deloitte LLP.

Each of these firms has tried to carve out a unique market niche. The Wealth-X specialty? The world of the ultra rich, those individuals who can claim at least $30 million in net worth. And the researchers at Wealth-X haven’t just counted these ultras in their first annual global wealth census. They’ve tiered them.

For the entire world — and major nations — Wealth-X teases out subsets of the super rich, from the $30-to-$50 million set to the $1 billion and up. For the first time, thanks to Wealth-X, we can compare the barely ultra with the comfortably ultra and those super ultras who can make the comfortables seem pinched.

“Our report maps exactly where the biggest money is located,” Wealth-X CEO Mykolas Rambus boasted at a Geneva news conference last week, “and just how much there is.”

The Wealth-X research answers “how many” as well. The firm counts 185,795 individuals worldwide with at least $30 million net worth. These ultra high net-worth individuals — UHNWs — hold $25 trillion in combined wealth.

The global economy may be tottering, the new Wealth-X World Ultra Wealth Report 2011 goes on to inform us, but the “lifestyle habits of UHNW individuals have not been severely impacted.“

“Simply put,” the Wealth-X analyst team gushes, “the world’s wealthy elite are in a class of their own.”

In that class, Americans pack a bunch of the rows. Of the near 186,000 global ultra rich, 57,860 — 30 percent — carry U.S. passports. These American ultras hold a combined net worth of $7.6 trillion, an average of $131.4 million each.

That average masks a huge concentration of wealth at America’s summit. The 455 deep-pocketed Americans worth at least $1 billion hold half a trillion more in wealth than the 29,415 Americans in the Wealth-X $30-to-$50 million tier.

These numbers need a bit more context to have any real meaning, and we can take a stab at providing that context by glancing over at the “super committee” deficit-reductions deliberations now underway in Washington, D.C.

The 12 lawmakers on this congressional super committee — six Republicans and six Democrats — are trying to trim $1.2 trillion off federal red ink over the next ten years. On their chopping block: Medicare, Social Security, and assorted other programs essential to the well-being of America’s 99 percent.

The super committee reporting-out deadline comes next week. No one knows how much budget-cutting pain the panel will be recommending. But panel members could actually avoid all that pain — and raise over $1 trillion in new money for investing in America — simply by subjecting all U.S. individual net worth over $30 million to a modest wealth tax.

Our U.S. ultra wealthy, Wealth-X calculates, together hold almost $5.9 trillion over this $30 million threshold. An annual 5 percent wealth tax on this overage would raise over $293 billion a year, or $2.9 trillion over the next decade — more than double the $1.2 trillion the super committee is so desperately looking to find.

The most amazing part of this? America’s ultra rich could easily pay this 5 percent annual wealth tax for the next ten years and remain as rich as ever.

That’s because wealth begets wealth. All those trillions of dollars America’s ultras are currently holding don’t sit under some mattress. The ultra wealthy have those trillions invested in assets that generate short- and long-term returns.

If America’s ultras averaged returns on those investments not that far above 5 percent over the next ten years, they could pay the wealth tax and still end the decade with higher personal net worths than when the decade began.

Back in the 1990s, a public-spirited financial industry superstar — multimillionaire San Francisco money manager Claude Rosenberg — spent a sizeable chunk of his personal fortune campaigning to get a similar message across about the enormous wealth of the wealthy.

Rosenberg’s particular point: America’s fabulously rich could hike their annual contributions to charity by tenfold and still end up with higher personal fortunes. Rosenberg started a research group dedicated to sharing this message and the analysis behind it. He wrote a book and peppered the periodicals that rich people read with op-eds that detailed his group's number crunching.

In the year 2000, Rosenberg’s researchers would document, households with $1 million or more in income could have given $128 billion more to charity than they actually did in fact give, without losing any net worth over the course of the year.

Claude Rosenberg died three years ago at age 80, his message to the super rich essentially totally ignored. The vast increase in charitable giving by the rich he had hoped to inspire never materialized.

The message to the rest of us from Rosenberg’s noble effort?

The excess wealth our ultra wealthy hold, if put to the public good, could change the trajectory of America’s future. The ultra wealthy don’t seem to be willing to do that putting on their own.

With a few tweaks of our tax code, we could do that putting for them.