Apologists for the Rich Are Scraping the Bottom of the Barrel
By Sam Pizzigati,
Alternet: July 1, 2009
In tough economic times, work for some people can suddenly become
significantly more difficult. Take, for instance, the analysts and academics
who have decided, for whatever reason, to devote their careers to justifying
the wealth of the wealthy. In normal times, these flacks for grand fortune
can waltz through their workdays with the greatest of ease. They merely
invoke the prospect of catastrophic economic collapse whenever anyone dares
propose anything that might leave the wealthy even just a little less
wealthier.
Without the rich getting richer, these shills will note smugly, we'll have
no one to create jobs or keep the stock market humming.
But what can apologists for the awesomely affluent threaten after an economy
has already collapsed? What do they do then? Here's what they do: They get
desperate — and even more reckless than usual. They play games with stats.
They torture logic. They invent ever more fanciful gloom-and-doom scenarios.
We've seen, over recent weeks and months, all this desperation and more.
*The statistical games, of late*, have revolved around the rich as
"refugees."
The wealthy, fans of fortune have long argued, will flee any jurisdiction
goofy enough to raise taxes on high incomes. Over the last year, a number of
jurisdictions have raised taxes on the wealthy anyway, and that seems to
have upped the pressure on the apologist crowd to "prove" the exodus effect.
Editorial writers at the *Wall Street Journal* made just such an attempt
late last month when they jumped a news report that one-third of
Maryland's millionaires had disappeared from the state's tax rolls.
<http://online.wsj.com/article/SB124329282377252471.html>on
That "substantial decline," the *Journal* editorialized, demonstrates the
"futility of soaking the rich." The "fleeced taxpayers" of Maryland, they
asserted, had decided to "fight back." They were leaving the state.
And what "soaking" had Maryland done? In 2008, the top state tax rate on
income over $1 million had risen from 4.75 to 6.25 percent.
Could an increase this modest actually drive Maryland millionaires to pull
up stakes and leave hearth and home behind? Perhaps. But so far, despite the
feverish claims of the *Wall Street Journal* editorial page and similarly
minded media outlets, no evidence is actually showing any Maryland
millionaire exodus.
The number of taxable returns with over $1 million in 2008 income, the
Institute on Taxation and Economic Policy notes in a detailed analysis of
the *Wall Street Journal*'s exodus stance, has indeed dropped. But the
number of returns with income just under $1 million "has risen noticeably."
The supposed "exodus" of Maryland's rich, in other words, likely
reflects<http://www.itepnet.org/MD_Millionaires.pdf>a decline in the
number of Marylanders with $1 million in income. Last year,
amid the Wall Street nosedive, wealthy Marylanders simply made less money.
In any case, the data the *Journal* cites to back up the exodus claim all
come from a "preliminary" report on Maryland's 2008 tax collections. The
final report won't be out until October. Last year's final report featured
over three times more $1 million returns than the preliminary.
*So much for the great Maryland* millionaire exodus. Ready for some tortured
logic? Last week the *Harvard Business Review* presented a hefty helping —
from University of Chicago economist Steve Kaplan.
Kaplan's *Harvard Business Review* contribution
<http://blogs.harvardbusiness.org/hbr/how-to-fix-executive-pay/2009/06/good-ceos-are-underpaid.html>,
entitled *(Good) CEOs Are Underpaid*, offers a provocative take on corporate
executive compensation. The evidence, Kaplan contends, "indicates that CEOs
typically aren't overpaid."
What evidence? Paychecks for top CEOs, says Kaplan, aren't rising as fast as
paychecks for top hedge fund managers and other financiers. In 2007, he
informs us, the hedge fund industry's top 20 earned over $20 billion, almost
triple the $7.5 billion combined income of the nation's top 500 CEOs.
All true. Hedge fund managers *are* taking home rewards that dwarf the pay
of even the highest-paid CEOs. But CEOs are taking home far more than
average American workers, and the gap between CEO and worker pay has
increased even wider and faster than the gap between CEOs and hedge fund
managers.
In 1970, as Labor Institute director Les Leopold has calculated
<http://www.huffingtonpost.com/les-leopold/obama-and-the-incredible_b_196863.html>,
America's top 100 CEOs made 45 times more than average American workers. In
2006, they made 1,723 times more.
Given that gargantuan gap, might a reasonable observer conclude that "(good)
CEOs" have become, in the grand scheme of things, grossly overpaid? Might
this same observer wonder why the University of Chicago's Kaplan compares
CEOs and hedge fund managers but not CEOs and average workers?
For this choice, Kaplan offers no logical explanation. He may not have one.
*Apologists for grand fortune* who've been beating the drums against the
federal estate tax haven't been particularly big on logic either. They've
taken, instead, to spinning ever more fantastic narratives on the dangers
estate taxation forces upon us.
A recent report from the American Family Business Foundation, a research
group bankrolled to plug away for estate tax repeal, has elevated this
fantasizing to fairly surreal heights.
The estate tax currently applies only to the wealth over $3.5 million, or $7
million for couples, that the wealthy plan to pass on to their heirs. Taxing
this wealth, economists Cameron Smith and Douglas Holtz-Eakin argue in their
new assault <http://www.nodeathtax.org/files/AFBF_Holtz_Eakin_2009.pdf> on
the estate tax, discourages the rich from saving and investing.
Smith and Holtz-Eakin, the top economic adviser in John McCain's 2008
campaign, go on to argue that estate taxation actually encourages the
affluent to waste their money on creature comforts like round-the-world
cruises. By engaging in such frivolous spending, after all, a person of
means "reduces his estate and lowers his estate tax liability."
In the process, contend Smith and Holtz-Eakin, wealthy people end up
frittering away their fortunes instead of investing in businesses that
create jobs.
[image: subplug] <http://www.toomuchonline.org/tmweekly.html>Citizens for
Tax Justice earlier this month subjected this claim to a little reality
check <http://www.ctj.org/pdf/afbfreports.pdf>. To appreciably spend down
their estates and avoid estate taxation, the CTJ researchers point out, the
wealthy would have to make a great many purchases that have no lasting asset
value. That's not easy to do.
*If a billionaire buys a yacht, for instance,* that yacht becomes an asset
and adds to the value of the billionaire's taxable estate. Only those
purchases that have no asset value can lower a wealthy person's estate tax
liability.
"Can extremely wealthy people," asks the CTJ analysis, "really spend away
their millions on expensive dinners and cruises?"
To pull that off, answers CTJ, deep pockets eager to avoid estate tax would
have to spend their "entire estate on caviar or cruises or cocaine," things
that "won't be around" after they die. An unlikely outcome.
"We won't say it's impossible," quip the Citizens for Tax Justice analysts,
"because we really don't want emails from over-eating, drug-addicted trust
fund babies arguing this point."
So what, in the end, does the growing inanity of the apologetics for grand
fortune tell us? Is this inanity a sign that the days of the super rich may
be numbered?
Unfortunately, not necessarily. The super rich have never depended on logic
or statistics or credible narratives to make the case for their dominance.
They've depended on the political power that great wealth creates. They
still have that power. They remain a formidable force — even if their
flunkies do look silly.
* Sam Pizzigati is the editor of the online weekly Too Much, and an
associate fellow at the Institute for Policy Studies. *
© 2009 Too Much: A Commentary on Excess and Inequality All rights reserved.
View this story online at: http://www.alternet.org/story/140983/
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Deborah Lagutaris, J.D., B.A.
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