wealth

The Growing Danger of Dynastic Wealth

Published by Anonymous (not verified) on Tue, 19/09/2017 - 4:36am in

This post originally appeared at Robert Reich’s blog.

White House National Economic Council director Gary Cohn, former president of Goldman Sachs, said recently that “only morons pay the estate tax.”

I’m reminded of Donald Trump’s comment that he didn’t pay federal income taxes because he was “smart.” And billionaire Leona Helmsley’s “only the little people pay taxes.”

White House National Economic Council director Gary Cohn, former president of Goldman Sachs, said recently that ‘only morons pay the estate tax.’

What Cohn was getting at is how easy it is nowadays for the wealthy to pass their fortunes to their children, tax-free.

The estate tax applies only to estates over $11 million per couple. And wealthy families stash away dollars above this into “dynastic” trust funds that escape additional taxes.

No wonder revenues from the estate tax have been dropping for years even as wealth has become concentrated in fewer hands. The tax now generates about $20 billion a year, which is less than 1 percent of federal revenues. And it applies to only about two out of every 1,000 people who die.

Now, Trump and Republican leaders are planning to cut or eliminate it altogether.

There’s another part of the tax code that Cohn might also have been referring to — capital gains taxes paid on the soaring values of the wealthy people’s stocks, bonds, mansions and works of art when they sell them.

If the wealthy hold on to these assets until they die, the tax code allows their heirs to inherit them without paying any of these capital gains taxes. According to the Congressional Budget Office, this loophole saves heirs $50 billion a year.

Dynastic wealth runs counter to the ideal of America as a meritocracy. It makes a mockery of the notions that people earn what they’re worth in the market, and that economic gains should go to those who deserve them.

The estate and capital gains taxes were originally designed to prevent the growth of large dynasties in the US and to reduce inequality.

They’ve been failing to do that. The richest 1 tenth of 1 percent of Americans now owns almost as much wealth as the bottom 90 percent.

Many of today’s super rich never did a day’s work in their lives. Six out of the ten wealthiest Americans alive today are heirs to prominent fortunes. The Walmart heirs alone have more wealth than the bottom 42 percent of Americans combined.

Rich millennials will soon acquire even more of the nation’s wealth.

America is now on the cusp of the largest intergenerational transfer of wealth in history. As wealthy boomers expire, an estimated $30 trillion will go to their children over the next three decades.

Those children will be able to live off of the income these assets generate, and then leave the bulk of them — which in the intervening years will have grown far more valuable — to their own heirs, tax-free.

After a few generations of this, almost all of the nation’s wealth will be in the hands of a few thousand families.

Dynastic wealth runs counter to the ideal of America as a meritocracy. It makes a mockery of the notions that people earn what they’re worth in the market, and that economic gains should go to those who deserve them.

It puts economic power into the hands of a relative small number of people who have never worked, but whose investment decisions will have a significant effect on the nation’s future.

And it creates a self-perpetuating aristocracy that is antithetical to democracy.

The last time America faced anything comparable to the concentration of wealth we face now, occurred at the turn of the last century.

Then, President Teddy Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” could destroy American democracy.

Roosevelt’s answer was to tax wealth. The estate tax was enacted in 1916 and the capital gains tax in 1922.

But since then, both have been eroded. As the rich have accumulated greater wealth, they have also amassed more political power, and they’ve used that political power to reduce their taxes.

Teddy Roosevelt, a Republican, helped create a movement against dynastic wealth. Trump and today’s congressional Republicans will not follow in his footsteps. I doubt even today’s Democrats would do so if they had a chance. Big money has become too powerful on both sides of the aisle.

But taxing big wealth is necessary if we’re ever to get our democracy back, and make our economy work for everyone rather than a privileged few.

Maybe Gary Cohn is correct that only morons pay the estate tax. But if he and his boss were smart and they cared about America’s future, they’d raises taxes on great wealth. Roosevelt’s fear of an American dynasty is more applicable today than ever before.

The post The Growing Danger of Dynastic Wealth appeared first on BillMoyers.com.

Book Review: After Piketty: The Agenda for Economics and Inequality edited by Heather Boushey, J. Bradford DeLong and Marshall Steinbaum

Published by Anonymous (not verified) on Mon, 18/09/2017 - 9:32pm in

In After Piketty: The Agenda for Economics and Inequality, editors Heather Boushey, J. Bradford DeLong and Marshall Steinbaum bring together contributors to reflect on the influence of Thomas Piketty’s Capital in the Twenty-First Century and to draw attention to topics less explored in Piketty’s analysis. While this is a work of serious scholarship that is suited primarily to an academic audience, these reflections on inequality as an economic as well as moral, social and political issue are of significance for all, finds Asad Abbasi. 

After Piketty: The Agenda for Economics and Inequality. Heather Boushey, J. Bradford DeLong and Marshall Steinbaum (eds). Harvard University Press. 2017.

Find this book: amazon-logo

Life expectancy for people living around Canary Wharf is 89 years. For people at Canada Water, the next stop on the Jubilee line, life expectancy is 78 years. The life expectancy gap of eleven years between these two stations is equal to that between Switzerland and Bangladesh or between British women born in 2011 and British women born in the 1950s.

What explains such a dramatic change in life expectancy within a two-minute tube journey? One probable answer is that London is an unequal city. The richest ten per cent in London own 62.8 per cent of the city’s total wealth. This disparity pervades other forms of inequality such as education, political voice and even the ‘basic unit of inequality’, the life expectancy rate. But how can we account for this unequal distribution?

In 2013, Thomas Piketty’s Capital in the Twenty-First Century provided a sophisticated explanation for inequality in the western world. Unequal wealth, Piketty posited, has less to do with productivity or efficiency than with ‘the process by which wealth is accumulated and distributed’ which ‘contains powerful forces pushing towards divergence, or at any rate towards an extremely high level of inequality’ (2013, 27). Analysing this, Piketty found that historically the return on capital (r) consistently floated above the growth rate (g): r > g. In other words, wealth grows faster than economic output. This implies that the tiny fraction of people with capital will continually receive a larger share of the total wealth of the economy resulting in unequal wealth distribution, such as the one we see in London. Only a shock that increases growth, such as education or technology, or one that decreases capital, such as wars, will lessen wealth inequality.

After Piketty: The Agenda for Economics and Inequality, edited by Heather Boushey, J. Bradford De Long and Marshall Steinbaum, further explores the ‘process by which wealth is accumulated’ and the ‘powerful forces’ that shape the divergence. After Piketty starts with a neat, formal summary of Piketty’s Capital, serving as a solid foundation for anyone not familiar with this work.

Image Credit: (jmettraux CC BY 2.0)

The thrust of After Piketty is not that Piketty got everything wrong in his analysis but that he missed a few important points, which this book highlights. After Piketty is split into five parts. The first discusses reception of Piketty’s Capital, and in the last section Piketty is given an opportunity to respond to the ideas discussed in the volume. The middle three sections, which form the core of the text, are ‘Conceptions of Capital’, ‘Dimensions of Inequality’ and ‘Political Economy of Capital and Capitalism’. The editors have done an astute job assembling chapters of such variety under these categories.

Though George Orwell is referenced in this book, After Piketty is no Animal Farm. Readers without a background in economics will find some chapters daunting, terminology-wise. Each chapter introduces a niche aspect of inequality. Yet, the book binds together at least four common themes. First is praise of Piketty’s work and its transformative influence on academia, policy and legislation. The second articulates the need for better wealth data. The third common theme is the book’s principal focus on the US. Almost all the chapters deal with inequality in the US, except a few in which Europe, Britain and the Global South are discussed. The fourth theme, and the one which I will discuss in this review, is about the ‘process’ of wealth accumulation and the ‘powerful forces’ causing wealth divergence.

What Explains the Divergence?

Image Credit: (Amanda Slater CC BY SA 2.0)

Chapters Two and Three by Robert Solow and Paul Krugman – originally published as reviews for Piketty’s Capital in New Republic (April 2014) and New York Review of Books (May 2014) respectively – lead the discussion of Piketty’s analysis. For Krugman, not wealth but the ‘compensation and income’ (67) of the top tier, at least in the US, are the source of the divergence. Solow, however, agrees with Piketty that r > g causes divergence, but suggests that this equation is ‘not rooted in any failure of economic institution’ but ‘on the ability of the economy to absorb increasing amounts of capital without substantial fall in rate of return’. The absorption of capital, Solow explains, ‘may be good for the economy […] but […] not for equity within the economy’ (55). But is it an inherent quality of economy to absorb capital without a fall in rate of return? Not really.

For Suresh Naidu (Chapter Five), the process of wealth accumulation is not ‘guaranteed, but instead must be maintained via government administration and the legal systems’ (115). Naidu dissects Piketty into ‘Domestic Piketty’, in which politics plays a passive role, and ‘Wild Piketty’, where politics, and in particular institutions, form an important framework for understanding capital. For Elisabeth Jacobs (Chapter 21), the role of the state in Piketty’s work ‘is remarkably sanitized of any question of power dynamics’ (517). Power is ‘everywhere and nowhere’ in Piketty’s history (512). Jacobs uses Albert Hirschman’s categories of voice, exit and loyalty to show the politics behind the ‘powerful forces’.

For Laura Tyson and Michael Spence (Chapter Eight), the ‘powerful force’ causing inequality is digital technology. Digital technology enables two things. First, technology enables capital to move towards cheap labour. Second, it substitutes low-cost workers with machines. For David Weil (Chapter Nine), it is the ‘outsourcing’ of jobs, which ‘allows redistribution of gains upwards’ (224). Through outsourcing, large firms create a ‘competition between service providers’, which results in lower wages for those working for them.

For David Grewal (Chapter Nineteen), ‘legal foundations’ form the powerful force which enables the ‘persistent dominance of capital over the rest of the economy’ (472). Markets are not something ‘in the abstract’ but a type of ‘socioeconomic regime’ (478). And it is the ‘higher order constitutional protection for property’ (485), which is difficult to change, that provides the persistent high rate of return throughout history for the propertied class – the elites.

The elites, Boushey notes in Chapter Fifteen, ‘are increasingly marrying each other’ (374), affecting present income and future bequests (375), thereby resembling the marriage markets of the nineteenth and twentieth centuries. However, elites of our times are unique because they are, according to Gareth Jones (Chapter Twelve), ‘Non-Doms’: mobile and living in several countries at one time. Jacobs makes a similar argument: ‘Global elites can essentially shop for the destination that will treat their resources more favourably’ (537).

Just like the elites, the capital of the twenty-first century is also different from earlier eras. The rate of return is maintained by forming ‘extra legal spaces’, such as tax havens and other offshore jurisdictions which blur legal controls and capital information (290). The City of London, Jones suggests, doesn’t pay its accountants £2 billion per year for accurate information (292).

Even if, as described by Piketty, the process of accumulation and the forces of power that render wealth inequality prove correct  – that is, r > g –  even then, for Branko Milanovic, high inequality is avoidable. The famous ‘Elephant curve’, which appears in Christoph Lakner’s chapter on global inequality, shows that the low-income earners in the west, the blue collar workers, gained zilch from globalisation. Think Brexit. The remedy, Milanovic proposes, is ‘wider ownership of capital’ (256).

For Daina Ramey Berry (Chapter Six), it is important to analyse the initial divergence of income between the rich and the poor. Contrary to Piketty’s ‘anodyne model of capital accumulation’, Ramay writes that the ‘colonial and antebellum 1 percent became rich by exploiting enslaved people’s labour’. For Berry, Piketty ignores ‘the fact that the slave trading and slave labour were at the foundations of western economies from the fifteenth century through nineteenth century’ (129).

In response, if not outright defence, Piketty admits that his book didn’t ‘devote sufficient attention’ to slavery. He does point out that ‘slave value reported’ in his work attempts the ‘first explicit computation’ of a slave economy (549), but also that these are ‘based upon total number of slaves recorded in census, whether they are owned by private individuals, corporation, or municipal governments, so I am not sure they are as strongly underestimated as suggested by Daina Ramey Berry’ (658, n15).

In the final chapter, Piketty explains, defends and elaborates upon Capital. Capital, Piketty notes, embodies multidimensional history, rooted as much in politics as in economics. Capital serves as an ‘introduction’ to this history (548-53). ‘Had I believed’, Piketty quips, ‘in the one dimensional neoclassical model of capital accumulation […] then my book would have been 30 pages long rather than 800 pages’.

Piketty argues that capitalism contains an inherent capacity to produce unequal societies. In order to rein this tendency, he suggests implementing a global wealth tax. More importantly, Piketty hopes that his work provokes discussion on wealth and inequality. After Piketty not only generates such debate, but also deepens it by highlighting the gaps missed by Piketty. For this reason, After Piketty ticks the box as being as much an ‘homage’ to, as a critique of, Piketty’s Capital.

After Piketty is not your typical holiday read. It is work of serious scholarship. The academic language of some chapters pinpoints its intended audience: scholars, students, policymakers and politicians. Yet, the topics discussed in the book affect all citizens. High inequality should concern everyone because it is a moral, social and political issue.

As the United Kingdom negotiates exit terms with EU officials, it seems that ‘decades of inequality’ in Britain, and the EU’s commitment towards the ‘profit making interests of a tiny elite’, resulted in Brexit. In The Age of Uncertainty, John Galbraith warned against the tumultuous effects of unequal wealth: ‘When reforms from the top became impossible, the revolution from the bottom became inevitable’.

Asad Abbasi has a Masters degree in Political Economy of Late Development from the London School of Economics. Currently, he is researching conceptual frameworks of development.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 


True wealth

Published by Anonymous (not verified) on Wed, 06/09/2017 - 7:03pm in

Klaxon: this week sees the publication of National Wealth: What is Missing, Why It Matters, edited by Kirk Hamilton and Cameron Hepburn. The book is a collection based on the Wealth Project, itself a follow up to work by the World Bank on measurement for sustainability. As sustainability inevitably involves thinking about the future, there is a need to measure an economy’s stocks of different kinds of capital assets rather than current income or consumption flows (which is what our GDP lens does).

I have a chapter in the book about the political economy of moving to a new framework of economic indicators from the current system of national accounts. This is a shift analogous to changing a global technical standard, in which enough key participants have to make the move to tip everyone else into following suit. I conclude, though, that for this to come about there has to be enough consensus about what new standard to move to, which is still a work in progress. There’s a proliferation of dashboards and alternative indices. We need just one framework to get the shift.


 What is Missing, Why it Matters


National Wealth: What is Missing, Why it Matters

Price: Check on Amazon

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From oligarchs to Soviets—and back again

Published by Anonymous (not verified) on Wed, 16/08/2017 - 10:00pm in

R-top1

Russia is back in the news again in the United States, with the ongoing investigation of Russian interference in the U.S. presidential election as well as a growing set of links between a variety of figures (including Cabinet and family members) associated with Donald Trump and the regime of Vladimir Putin.

This year is also the hundredth anniversary of the October Revolution, which sought to create the conditions for a transition to communism in the midst of a society characterized by various forms of feudalism, peasant communism, and capitalism. But we shouldn’t forget that, in addition, the Red Century has clearly left its mark on the political economy of the West, including the United States—both in the early years, when the “communist threat” undoubtedly led to reforms associated with a more equal distribution of income, and later, when the Fall of the Wall reinforced the neoliberal turn to privatization and deregulation.

Now we have a third reason to think about Russia, which happens to intersect with the first two concerns. A new study of income and wealth data by Filip Novokmet, Thomas Piketty, Gabriel Zucman reveals just how much has changed in Russia from the time of the tsarist oligarchy through the Soviet Union to rise of the new oligarchy during and after the “shock therapy” that served to create a new form of private capitalism under Putin.

As is clear from the chart, income inequality was extremely high in Tsarist Russia, then dropped to very low levels during the Soviet period, and finally rose back to very high levels after the fall of the Soviet Union. Thus, for example, the top 1-percent income share was somewhat close to 20 percent in 1905, dropped to as little as 4-5 percent during the Soviet period, and rose spectacularly to 20-25 percent in recent decades.

R-top1-1980

The data sets used by Novokmet et al. reveal a level of inequality under the new oligarchs that is much higher that was the case using survey data—a top 1-percent income share that is more than double for 2007-08.

R-shares

Novokmet et al. also show that the income shares of the top 10 percent and the bottom 50 percent moved in exactly opposite directions after the privatization of Russian state capitalism in the early 1990s. While the top 10-percent income share rose from less than 25 percent in 1990-1991 to more than 45 percent in 1996, the share of the bottom 50 percent collapsed, dropping from about 30 percent of total income in 1990-1991 to less than 10 percent in 1996, before gradually returning to 15 percent by 1998 and about 18 percent by 2015.

comparison

In comparison to other countries, Russia was much more equal during the Soviet period and, by 2015, had approached a level of inequality higher than that of France and comparable only to that of the United States.

billionaires

Finally, Novokmet et al. have been able to estimate the enormous growth of private wealth under the new oligarchy, especially the wealth that was captured by a tiny group at the very top and is now owned by Russia’s billionaires. As the authors explain,

The number of Russian billionaires—as registered in international rankings such as the Forbes list—is extremely high by international standards. According to Forbes, total billionaire wealth was very small in Russia in the 1990s, increased enormously in the early 2000s, and stabilized around 25-40% of national income between 2005 and 2015 (with large variations due to the international crisis and the sharp fall of the Russian stock market after 2008). This is much larger than the corresponding numbers in Western countries: Total billionaire wealth represents between 5% and 15% of national income in the United States, Germany and France in 2005-2015 according to Forbes, despite the fact that average income and average wealth are much higher than in Russia. This clearly suggests that wealth concentration at the very top is significantly higher in Russia than in other countries.

Clearly, there is nothing “natural” about the distribution of income and the ownership of wealth. This new study demonstrates that different economic structures and political events create fundamentally different levels of inequality in both income and wealth, both within and between countries.

The Russian experience is a perfect example how inequality can fall and then, later, be reversed with radical economic and political transformations—thus creating a new oligarchy that dominates the national political economy and seeks to intervene in other countries.

Not unlike the United States.

Tagged: 1 percent, billionaires, chart, economy, income, inequality, politics, revolution, Russia, United States, wealth

Cartoon of the day

Published by Anonymous (not verified) on Sun, 06/08/2017 - 10:00pm in

Cartoon of the day

Published by Anonymous (not verified) on Sat, 05/08/2017 - 10:00pm in

American myth

Published by Anonymous (not verified) on Fri, 16/06/2017 - 10:00pm in

wealth

One of the most pernicious myths in the United States is that higher education successfully levels the playing field across students with different backgrounds and therefore reduces wealth inequality.

The reality is quite different—for the population as a whole and, especially, for racial and ethnic minorities.

As is clear from the chart above, the share of wealth owned by the top 1 percent has risen dramatically since the mid-1970s, rising from 22.9 percent in 1976 to 38.6 percent in 2014. Meanwhile, the share owned by the bottom 90 percent has declined, falling from 34.2 percent to 27 percent. And that of the bottom 50 percent? It has remained virtually unchanged at a negligible amount, falling from 0.9 percent to zero.

During that same period, according to the U.S. Census Bureau (pdf), the proportion of Americans aged 25 to 29 with a bachelor’s degree or higher rose from 24 percent to 36 percent. (For the entire population 25 and older, the percentage with that level of education rose from 15 to 33.)

So, no, higher education has not leveled the playing field or reduced wealth inequality. In fact, it seems, quite the opposite appears to be the case.

And that’s true, too, for racial and ethnic disparities in wealth. As William R. Emmons and Lowell R. Ricketts (pdf) of the Federal Reserve Bank of St. Louis have concluded,

Despite generations of generally rising college-graduation rates, higher education’s promise of significantly reducing income and wealth disparities across all races and ethnicities remains largely unfulfilled. . .rather than promoting economic equality across all races and ethnicities, higher education unintentionally has become an engine for growing disparities.

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Thus, for example, median Hispanic and black wealth levels decline relative to similarly educated whites as education increases until the very top. Moreover, only about 7 percent of black families and 5 percent of Hispanic families have postgraduate degrees, and wealth disparities remain large even there.

Darrick Hamilton and William A. Darity, Jr. (pdf), who participated in the same symposium, go even further. According to them, the United States has a fundamental problem in discussing wealth disparities according to race and ethnicity:

Much of the framing around wealth disparity, including the use of alternative financial service products, focuses on the poor financial choices and decisionmaking on the part of largely Black, Latino, and poor borrowers, which is often tied to a culture of poverty thesis regarding an undervaluing and low acquisition of education.

Thus, while they agree that a college degree is positively associated with wealth within racial and ethnic groups, it is still the case that it does little to address the massive wealth gap across such groups.

And yet the myth persists. American elites and policymakers still to choose to emphasize the economic returns to education as the panacea to address socially established wealth disparities and structural barriers of racial and ethnic economic inclusion.

The question is, why?

According to Hamilton and Darity, such a view

follows from a neoliberal perspective, where the free market, as long as individual agents are properly incentivized, is supposed to be the solution to all our problems, economic or otherwise. The transcendence of Barack Obama becomes the ideal symbolism and spokesperson of this political perspective. His ascendency becomes an allegory of hard work, merit, efficiency, social mobility, freedom and fairness, individual agency, and personal responsibility. The neoliberal ideology is not limited to race. It more generally places the onus on individual actions, and more broadly leads to deficiency narratives for low achievement, but this is especially the case when considering race and other stigmatized workers. Perhaps the greatest rhetorical victory of this paradigm is convincing the masses that implicit in unfettered markets is the “American Dream”—the hope that, even if your lot in life is subpar, with patience and individual hard work, you can turn your proverbial “rags into riches.”

And so the myth of college and the American Dream is perpetuated, while the unequal distribution of wealth—across the entire population, and especially with respect to ethnic and racial minorities—which has been growing for decades, continues unabated.

Tagged: academy, American Dream, blacks, college, Hispanics, inequality, United States, universities, wealth

Now Just Five Men Own Almost as Much Wealth as Half the World’s Population

Published by Anonymous (not verified) on Wed, 14/06/2017 - 1:00am in

This post originally appeared at Common Dreams.

Last year it was 8 men, then it was down to 6 and now it’s almost 5.

While Americans fixate on Trump, the super-rich are absconding with our wealth, and the plague of inequality continues to grow. An analysis of 2016 data found that the poorest five deciles of the world population own about $410 billion in total wealth. As of 06/08/17, the world’s richest five men owned over $400 billion in wealth. Thus, on average, each man owns nearly as much as 750 million people.

 
Why Do We Let a Few People Shift Great Portions of the World’s Wealth to Themselves?

Most of the super-super-rich are Americans. We the American people created the internet, developed and funded Artificial Intelligence and built a massive transportation infrastructure, yet we let just a few individuals take almost all the credit, along with hundreds of billions of dollars.

Defenders of the out-of-control wealth gap insist that all is OK, because, after all, America is a “meritocracy” in which the super-wealthy have “earned” all they have. They heed the words of Warren Buffett: “The genius of the American economy, our emphasis on a meritocracy and a market system and a rule of law has enabled generation after generation to live better than their parents did.”

But it’s not a meritocracy. Children are no longer living better than their parents did. In the eight years since the recession the Wilshire Total Market valuation has more than TRIPLED, rising from a little over $8 trillion to nearly $25 trillion. The great majority of it has gone to the very richest Americans. In 2016 alone, the richest 1 percent effectively shifted nearly $4 trillion in wealth away from the rest of the nation to themselves, with nearly half of the wealth transfer ($1.94 trillion) coming from the nation’s poorest 90 percent — the middle and lower classes. That’s over $17,000 in housing and savings per lower-to-middle-class household lost to the super-rich.

A meritocracy? Bill Gates, Mark Zuckerberg and Jeff Bezos have done little that wouldn’t have happened anyway. ALL modern US technology started with — and to a great extent continues with — our tax dollars and our research institutes and our subsidies to corporations.

 
Why Do We Let Unqualified Rich People Tell Us How To Live? Especially Bill Gates!

In 1975, at the age of 20, Bill Gates founded Microsoft with high school buddy Paul Allen. At the time Gary Kildall’s CP/M operating system was the industry standard. Even Gates’ company used it. But Kildall was an innovator, not a businessman, and when IBM came calling for an OS for the new IBM PC, his delays drove the big mainframe company to Gates. Even though the newly established Microsoft company couldn’t fill IBM’s needs, Gates and Allen saw an opportunity, and so they hurriedly bought the rights to another local company’s OS — which was based on Kildall’s CP/M system. Kildall wanted to sue, but intellectual property law for software had not yet been established. Kildall was a maker who got taken.

So Bill Gates took from others to become the richest man in the world. And now, because of his great wealth and the meritocracy myth, MANY PEOPLE LOOK TO HIM FOR SOLUTIONS IN VITAL AREAS OF HUMAN NEED, such as education and global food production.

  • Gates on Education: He has promoted galvanic skin response monitors to measure the biological reactions of students, and the videotaping of teachers to evaluate their performances. About schools he said, “The best results have come in cities where the mayor is in charge of the school system. So you have one executive, and the school board isn’t as powerful.”
  • Gates on Africa: With investments in or deals with MonsantoCargill and Merck, Gates has demonstrated his preference for corporate control over poor countries deemed unable to help themselves. But no problem — according to Gates, “By 2035, there will be almost no poor countries left in the world.”

 
Warren Buffett: Demanding To Be Taxed at a Higher Rate (As Long As His Own Company Doesn’t Have To Pay)

Warren Buffett has advocated for higher taxes on the rich and a reasonable estate tax. But his company Berkshire Hathaway has used “hypothetical amounts” to ‘pay’ its taxes while actually deferring $77 billion in real taxes.

 
Jeff Bezos: $50 Billion in Less Than Two Years, and Fighting Taxes All the Way

Since the end of 2015 Jeff Bezos has accumulated enough wealth to cover the entire $50 billion US housing budget, which serves 5 million Americans. Bezos, who has profited greatly from the internet and the infrastructure built up over many years by many people with many of our tax dollars, has used tax havens and high-priced lobbyists to avoid the taxes owed by his company.

 
Mark Zuckerberg (6th Richest in World, 4th Richest in America)

While Zuckerberg was developing his version of social networking at Harvard, Columbia University students Adam Goldberg and Wayne Ting built a system called Campus Network, which was much more sophisticated than the early versions of Facebook. But Zuckerberg had the Harvard name and better financial support. It was also alleged that Zuckerberg hacked into competitors’ computers to compromise user data.

Now with his billions he has created a “charitable” foundation, which in reality is a tax-exempt limited liability company, leaving him free to make political donations or sell his holdings, all without paying taxes.

Everything has fallen into place for young Zuckerberg. Nothing left to do but run for president.

 
The False Promise of Philanthropy

Many super-rich individuals have pledged the majority of their fortunes to philanthropic causes. That’s very generous, if they keep their promises. But that’s not really the point.

American billionaires all made their money because of the research and innovation and infrastructure that make up the foundation of our modern technologies. They have taken credit, along with their massive fortunes, for successes that derive from society rather than from a few individuals. It should not be any one person’s decision about the proper use of that wealth. Instead a significant portion of annual national wealth gains should be promised to education, housing, health research and infrastructure. That is what Americans and their parents and grandparents have earned after a half-century of hard work and productivity.

The post Now Just Five Men Own Almost as Much Wealth as Half the World’s Population appeared first on BillMoyers.com.

Hiding the surplus

Published by Anonymous (not verified) on Mon, 05/06/2017 - 11:00pm in

46panamapapers

Most of us pay the taxes we’re required to pay. That’s because there aren’t many ways to avoid them. Sales, property, payroll, or income—the tax is paid at the time of the purchase, the amount is deducted from our paychecks, or the records go directly to the government. There’s no real way around them. And we pay those taxes out of wages and salaries more or less willingly, since that’s how government services are financed.

Not so for those who are able to capture the surplus. Large corporations and wealthy individuals pay far less than their fair share of taxes. Their ability to evade taxes is only matched by their insistent demand that their tax rates be lowered even more.

We’ve known for a long time that large corporations use a variety of mechanisms—from claiming tax deductions and using loopholes to stashing profits in tax havens abroad—to lower their effective tax burden.

corp-taxes

source

Thus, for example, according to Oxfam America (pdf), between 2008 to 2014, the top 50 companies in the United States paid an effective tax rate (to the federal government as well as to states, localities, and foreign governments) of just 26.5 percent overall, 8.5 percent points lower than the statutory rate of 35 percent and just under the average of 27.7 percent paid by other developed countries. And then they use their tax savings to lobby for even more tax advantages.

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One of the results of corporate tax evasion is, I’ve argued before, the tax burden has been shifted from corporations to individuals.

tax evasion

But not to wealthy individuals. As new research by Annette Alstadsaeter, Niels Johannsen, and Gabriel Zucman has shown (pdf), the top 0.01 percent of the wealth distribution—a group that includes households with more than $40 million in net wealth—evades about 30 percent of its personal income and wealth taxes. This is an order of magnitude more than the average evasion rate of about 3 percent.

The main reason those at the very top of the wealth distribution are able to evade a large portion of their tax burden is because they’ve managed to use their cut of the surplus to accumulate personal wealth—and then to hide that wealth offshore.

Ownership of wealth is, of course, extremely concentrated. Offshore wealth even more so. According to Alstadsaeter et al., the top 0.01 percent of the distribution owns about 50 percent of offshore wealth, which means the top 0.01 percent manage to hide about one quarter of their true wealth.

We now have an economy in which more and more surplus is captured by a small number of large corporations and wealth individuals, who in turn manage to evade a larger and larger portion of their fair share of taxes by hiding the surplus.

Oxfam’s view is that

Rather than engaging in a mutually destructive race to the bottom, the US should stake out a leadership role in addressing structural problems in the global tax system. The US should push for a truly inclusive process where all governments are able to build mutually beneficial tax rules that improve information sharing, transparency and accountability globally.

Until that happens, the rest of us—who are not members of the boards of directors of large corporations or wealthy individuals—will continue to be forced to shoulder the burden of paying taxes to finance government services. And the distribution of income and wealth will become, year by year, increasingly unequal.

Tagged: corporations, income, rich, surplus, taxes, United States, wealth

End of Second Great Depression

Published by Anonymous (not verified) on Mon, 08/05/2017 - 11:00pm in

Greg Kahn

I am quite willing to admit that, based on last Friday’s job report, the Second Great Depression is now over.

As regular readers know, I have been using the analogy to the Great Depression of the 1930s to characterize the situation in the United States since late 2007. Then as now, it was not a recession but, instead, a depression.

As I explain to my students in A Tale of Two Depressions, the National Bureau of Economic Research doesn’t have any official criteria for distinguishing an economic depression from a recession. What I offer them as an alternative are two criteria: (a) being down (as against going down) and (b) the normal rules are suspended (as, e.g., in the case of the “zero lower bound” and the election of Donald Trump).

By those criteria, the United States experienced a second Great Depression starting in December 2007 and continuing through April 2017. That’s almost a decade of being down and suspending the normal rules!

Now, with the official unemployment rate having fallen to 4.4 percent, equal to the low it had reached in May 2007, we can safely say the Second Great Depression has come to an end.

However, that doesn’t mean we’re out of the woods, or that we can forget about the effects of the most recent depression on American workers.*

GDP.jpg

For example, while Gross Domestic Product per capita in the United States is higher now than it was at the end of 2007 ($51,860 versus $49,586, in chained 2009 dollars, or 4.6 percent), it is still much lower than it would have been had the previous trend continued (which can be seen in the chart above, where I extend the 2000-2007 trend line forward to 2017). All that lost output—not to mention the accompanying jobs, homes, communities, and so on—represents one of the lingering effects of the Second Great Depression.

HS  college

And we can’t forget that young workers face elevated rates of underemployment—11.9 percent for young college graduates and much higher, 30.9 percent, for young high-school graduates. As the Economic Policy Institute observes,

This suggests that young graduates face less desirable employment options than they used to in response to the recent labor market weakness for young workers.

income  wealth

Finally, the previous trend of growing inequality—in terms of both income and wealth—has continued during the Second Great Depression. And there are no indications from the economy or economic policy that suggest that trend will be reversed anytime soon.

So, here we are at the end of the Second Great Depression—no longer down and with the normal rules back in place—and yet the effects from the longest and most severe downturn since the 1930s will be felt for generations to come.

 

*As if often the case, readers’ comments on newspaper articles tell a different story from the articles themselves. Here are two, on the New York Times article about the latest employment data:

John Schmidt—

Any discussion about “full employment”, when there are so many people who’ve essentially given up looking for work or who’re working in low-skill or unskilled labor positions, seems like the fiscal equivalent of rearranging deck chairs on the Titanic. Based on data from the Fed and the World Bank, GDP per capita has doubled since 1993, while median household income has risen ~10%. Most of the newly-generated wealth and gains from productivity increases are being funneled upward, such that the average worker very rarely sees any sort of pay increase. Are we expected to believe that this will change now that we’ve [arguably] passed some arbitrary threshold? Why should we pat ourselves on the back for reaching “full employment”? Shouldn’t we be seeking *fulfilling* employment for everyone, instead, at least inasmuch as that’s possible? Shouldn’t we care that the relentless drive for profit at the expense of everything else is creating a toxic environment where the only way to ensure a raise is to hop from job to job, eroding any sense of two-way loyalty between companies and their employees?

I’m not sure what the solution is, but I know enough to see there’s a problem. Inequality of this sort is not sustainable, and it’s not going to magically disappear without some serious policy changes.

David Dennis—

There is a critical parameter missing from full employment data. very critical. Here in Pontiac, Michigan before the collapse of American manufacturing, full employment meant 10, 000 jobs working at GM factories and Pontiac Motors making above the mean wages with excellent health insurance as well as retirement pensions. You can not compare full employment at McDonalds and Walmart with the jobs that preceded them. The full employment measure doesn’t mean much if it isn’t correlated with a index that compares that employment with a standard of living as it relates to a set basket of goods, services, and benefits.

Tagged: chart, GDP, Great Depression, history, income, inequality, Second Great Depression, underemployment, United States, wealth, workers

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