This Week

With the death this past Saturday of John Kenneth Galbraith, the United States has lost its most veteran — and perhaps most eloquent — advocate for equitable distributions of income and wealth. Over his 97 incredible years, Galbraith never stopped skewering the inanities of the overprivileged and their apologists.

“One of my greatest pleasures in my writing has come from the thought that perhaps my work might annoy someone of comfortably pretentious position,” Galbraith once noted. “Then comes the realization that such people rarely read.”

In Galbraith's honor, we offer this week some passages we hope will annoy our contemporary “comfortably pretentious” — or at least the hired guns who do their reading for them.

Greed at a Glance: America's Longest Commute

A German luxury car that drives like a dream, sports every creature comfort imaginable, and starts at a mere $66,000 would just have to be a big hit in the U.S. marketplace, right? Not if that car comes from Volkswagen. VW is yanking its luxury Phaeton model — “as grand a piece of engineering decadence as you'll find anywhere,” says the Los Angeles Times — from U.S. showrooms after well-heeled Americans bought only 850 of the cars last year. The problem? Wealthy Americans, says LA Times auto writer Dan Neil, can't see themselves driving a VW. Notes Neil: “The demise of the Phaeton says something, and something not good, about Americans' pretensions of a classless society. We just don't do stealth wealth.”

David Givens, a 46-year-old electrical engineer, has just won first place — and $10,000 — in the Midas Muffler contest to identify “America's longest commute.” Givens, who commutes seven hours a day, says he can't afford any place he'd like to call home anywhere close to his job in California's Silicon Valley, where high-tech millionaires have been bidding up local land values for years. Givens's boss, Cisco CEO John Chambers, can afford any local place he wants. His pay package last year totaled $80.1 million . . .

“Give it back, Hank,” read the airplane banner that fluttered over last week's annual shareholder meeting of the drugmaker giant Pfizer. But Hank — Pfizer CEO Henry McKinnell — is refusing to relinquish any piece of the $83 million he's now set to receive at retirement, and Pfizer's shareholders don't appear ready to make him. On Thursday, in Lincoln, Nebraska, activist shareholders came up short in a no-confidence vote against Pfizer board members who had okayed McKinnell's lush pension package. McKinnell, since 2001, has pocketed $28 million in salary and bonuses and another $55 million in stock options . . .

Australia's Bureau of Statistics has released the first full-fledged analysis of that nation's increasingly unequal — and controversial — income and wealth distribution. In 2004, the new data show, the bottom 40 percent of Aussie families held only 7 percent of their nation's wealth. Still, Australians do have reason to cheer. That same year, in the United States, the bottom 50 percent of families owned even less of their nation's net worth, just 2.5 percent. Australia's wealthiest 1 per cent took in 9 per cent of national income in 2004. The comparable U.S. figure, from 2003: 14.3 percent . . .

Jamie Johnson, now halfway through his 20s, may not be America's youngest film director. But he already rates as one of our richest — as an heir to the Johnson & Johnson pharmaceutical fortune. So what's young Jamie doing with all his money and talent? He's making award-winning documentaries that cast a “hard-hitting but humorous” eye at America's maldistribution of income and wealth. His latest film, The One Percent, premiered last week at New York's TriBeCa Film Festival. Among Johnson's biggest fans: Oprah Winfrey. Her show featured The One Percent week before last in a segment that let director Johnson explain that “a growing wealth gap” helps trigger the “decline of great civilizations.”

The Estate Tax and America's Shyest Billionaires

A dozen years ago, few average Americans spent any time worrying that the government of the United States was going to tax away their life savings when they died — for the simple reason that the federal government then levied no tax, at death, on average life savings.

Here today in 2006, the federal government still imposes no tax at death on the savings of average Americans. Yet millions of average Americans, according to pollsters, now believe something called the “death tax” is going to ravish the savings they want to hand down to their kids.

What's behind this new-found fear? A new study from Public Citizen and United for a Fair Economy, released last week, offers a convincing answer.

Over recent years, Public Citizen and UFE carefully document in Spending Millions to Save Billions: The Campaign of the Super Wealthy to Kill the Estate Tax, a publicity-shy assortment of America's very richest families have banded together to poison public opinion against the federal estate tax, the only national tax levy on grand concentrations of private wealth.

The 18 super-rich families identified in the new Public Citizen-UFE study, taken together, stand to save an estimated $71.6 billion if the Senate opts for estate tax repeal in a vote widely expected to come early this month.

At this point, what can stop repeal? Public Citizen and UFE both believe that affluent Americans who support the estate tax — as an antidote to massive private fortunes that undermine democracy — need to speak out. At last week’s Spending Millions to Save Billions news conference, some did.

“The estate tax should be regarded as just paying back to the country for all the wonderful things it’s made possible for the people who have that wealth,” Bill Gates Sr., the father of the world’s richest single individual, noted in an audio statement played at the news conference. “I don’t think there’s any great societal goal being served by inherited wealth. And certainly there’s no sensible argument that I can think of for insisting on being able to pass the last penny of $100 million on to your three kids.”

We have more on the new Public Citizen-UFE study — and the ongoing struggle to save the estate tax.

How the Wealthy Kidnapped Tax Sunshine

Americans who make over $10 million a year, news reports last month revealed, are now paying a smaller share of their incomes in taxes than Americans making ten times less.

Just who are today's most flagrant high-income tax shirkers? The simple answer: We don't know. In America today, we know how much billionaires pay for their homes — real estate transactions sit in the public record — but not how much of their income they pay in taxes. That information, under the law, stays secret.

We today take this secrecy as an eternal given of our tax system. But we shouldn't. Over 70 years ago, in 1934, Congress actually enacted legislation that made the incomes of wealthy people — and the taxes they pay on that income — a matter of public record.

At the time, only America's affluent had to pay income taxes, and lawmakers figured a little sunshine might scare wealthy tax shirkers straight.

What happened to this 1934 sunshine mandate? Congress quickly repealed it, after America's wealthiest bankrolled an intense media and lobbying campaign that anticipated, at nearly every turn, the campaign America's wealthiest are running today against the estate tax.

Down through the years, few Americans have remembered this Depression-era battle over tax disclosure. But that may be about to change, thanks to a fascinating new paper — Shaping Public Opinion and the Law in the 1930s: How a “Common Man” Campaign Ended a Rich Man's Law — by Tulane Law School analyst Marjorie Kornhauser.

Energetic agents of America's awesomely affluent are today spinning tales to convince average Americans they face a “death tax.” Back in the Depression, these agents worked to convince average Americans that any release of income tax data would amount to an open invitation to kidnappers.

In an America still reeling from the infamous Lindbergh baby kidnapping, that claim would carry a powerful emotional resonance — and give lawmakers anxious to avoid the wrath of the wealthy the convenient cover they needed to vote for repealing the tax sunshine mandate.

Not every lawmaker, of course, scurried for that cover. Rep. Gardner Withrow from Wisconsin called the repeal lobbying crowd “sentinels over the pocketbooks of J.P. Morgan, Andrew Mellon, and every other notorious tax evader.” Rep. Charles Truax from Ohio blasted them as “lounge lizards of the blue-blooded and pink-toed aristocracy.”

But the lounge lizards prevailed. In less than three early 1935 months, notes Tulane's Kornhauser, the drive for repealing the “income tax publicity provision went from hopeless to complete success.”

That's the success today's estate tax repealers are desperately trying to repeat. Marjorie Kornhauser's insightful look at fear-mongering 1930s-style just might help us stop them.

Stat of the Week: Fitness and Inequality

Cost of a typical gym membership in the United States, according to the International Health, Racquet and Sportsclub Association: $360 to $420 a year.

Current cost of annual membership at Bosse Sports and Health Club in Sudbury, Massachusetts: $50,000.

Source: Super Gyms For The Super-Rich, Forbes, April 27, 2006

Quote of the Week: The Deserving Rich?

“(T)op corporate executives account for more than half of the incomes in the elite 0.01 per cent of the U.S. income distribution.

“So are they worth it? That is a controversial question. I, for one, doubt it. The ratio of the pay of U.S. chief executive officers to average wages rose from 27 in 1973 to 300 in 2000. But this jump is largely limited to the U.S. While average performance of U.S. CEOs may well be better than anywhere else, it is easy to find non-U.S. CEOs whose performance has vastly outshone that of their US peers, without close to commensurate rewards.”

Martin Wolf, economic columnist, Financial Times, April 25 2006

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