Governors don’t usually deliver primetime TV addresses. That’s something Presidents do. But late last month New York Governor David Patterson did take to primetime — to declare a state budget “crisis” and call lawmakers back to the state capitol in Albany for a special session.

New Yorkers, says a poll released last week, share the governor’s unease. A whopping 86 percent agree that the state has a fiscal crisis. New Yorkers, the same poll revealed, also overwhelmingly agree on a solution: tax the rich.

So should New York's wealthy be pulling out their checkbooks? We consider that question — and much more — in this week's Too Much.

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On October 9, 2009, former Citigroup executive Michael Klein now stands to collect $34.3 million in cash — and stock worth another $8.3 million. What does Klein have to do to pocket this windfall? Just keep a promise. The 44-year-old, the chief of Citi’s investment banking during the subprime debacle, has cut an exit deal that guarantees him a mega windfall so long as he doesn’t go to work for one of Citi’s top rivals. Klein remains free, the Financial Times notes, to start his own private equity company . . .

Gas prices have you keeping close to home this summer? Then you probably won’t be considering the hot new vacation offer from Abu Dhabi's Emirates Palace Hotel. The deal: seven days and nights in the Persian Gulf for just $1 million. The package — the first million-dollar holiday ever, the hotel is crowing — includes a private jet flight to the Dead Sea for a mud bath, another to Iran to have your “own hand-made Persian carpet” woven before your eyes, and still another to Bahrain for a pearl-diving expedition. Back in Abu Dhabi, you’ll overnight in the hotel’s Palace Suite, a $15,000 per evening pad that features “gold, silver, and marble bedrooms interrupted only by a giant 61-inch plasma TV.” What aren’t vacationers likely to see on this “ultimate” holiday? Any of the 2.5 million migrant workers in and around Abu Dhabi who average $150 a month laboring in 100-degree heat to build temples to “trophy tourism” like the Emirates Palace Hotel . . .

Athletes who win superstar acclaim don’t always, as any sports fan knows, deliver superstar performance. But what about superstar CEOs? What do they deliver after the media tab them as superstars? Two California economists, Berkeley’s Ulrike Malmendier and UCLA’s Geoffrey Tate, have some answers in a just-published paper that examines the “consequences of media-induced superstar status.” Celebrity CEOs, the two economists found, “experience abnormal and significant increases in total compensation” and spend inordinate time on activities — like writing books and playing golf — that “distract attention from firm business.” Superstar CEOs, the authors note, also play games with corporate books. They appear to “artificially inflate earnings numbers to maintain expected ‘superstar performance’ for as long as possible.”

The U.S. Naval Academy at Annapolis currently has no plans to start training crews for private luxury yachts. But stranger things have happened. Stranger things are happening. The British Royal Navy has opened a “Superyacht Academy” at Portsmouth's historic naval base. Russian billionaire Roman Abramovich, the scuttlebutt has it, has already had crew go through “a thorough grounding” in skills that range from fighting shipboard fires to “folding napkins.” The Portsmouth course runs $1,440 per sailor and has the yachting industry simply tickled. With 400 luxury yachts now launched a year, says yacht expert Michael Howorth, not to use the Royal Navy facilities “would be wasteful.”

On Carolwood Drive, the most expensive street to live on in Los Angeles, property runs about $30,000 per square yard. You can get a lot for your money. One Carolwood Drive estate now on the market — for $125 million — comes with staff quarters for ten, a nine-car garage, a jogging track, and a pool house complete with kitchen. The most remarkable fact about Carolwood Drive? The street ranks only eighth on the new Wealth Bulletin list of the world’s ten most expensive streets. The world’s top luxury lane: Avenue Princess Grace in Monaco, where real estate runs about $190,000 a square yard and a four-bedroom apartment is now selling for $41 million.

Quote of the Week

“Modern technology is meaningless without a concurrent improvement in ethics, and 'progress' turns brutal without a plan to lessen economic inequality.”
Farida Shaikh, The Daily Star (Dhaka,Bangladesh), August 8, 2008

New Wisdom
on Wealth

Barrie McKenna, Clamor grows to rein in top U.S. bankers' pay. Globe and Mail, August 5, 2008.

Polly Toynbee, Greed has brought us here, fairness must lead us out, Guardian, August 5, 2008. A noted UK columnist points out that “across the west the wealth of nations is shared quite differently, and it is the most equal countries that prosper.”

Jasmyne Boswell, The Wisdom of Enough, Maui Weekly, August 7, 2008. A business consultant explores how greed messes with our minds.

The Tax-Time Invisibility of America's Rich

By a stunning 78 to 18 percent margin, pollsters announced last week, residents of New York favor hiking taxes on households that make over $1 million a year. Even the state's Republican voters, by 56 to 36 percent, support the idea of a “millionaire's tax.”

Millionaire households currently abound in the Empire State. New IRS statistics, released July 31, show that New York has the nation’s most top-heavy distribution of income in the entire United States.

In 2006, New York’s top 1 percent of taxpayers — that’s everyone making over $517,800 a year — grabbed 28.7 percent of the state’s income, nearly three times the total income of the state’s bottom 50 percent of taxpayers. No other state in the nation sports a wider income gap between top 1 and bottom 50.

Nationally, the top 1 percent of taxpayers in 2006 collected just over a fifth of all personal income in the United States, 21.1 percent. In ten states, including New York, the top 1 percent claimed an income share over that 21.1 percent level.

These ten states also share something else in common. All ten, the Washington, D.C.-based Institute on Taxation and Economic Policy charged last week, have tax systems that “generally ignore” the considerable deep-pocket presence within their borders.

Four of the ten — Texas, Florida, Nevada, and Wyoming — have no state income tax. Two, Massachusetts and Illinois, subject all taxpayers, no matter how rich, to the same flat income tax rate, and Connecticut, with just two tax rates, almost has a flat tax, too.

New York and California, meanwhile, “have weakened the progressivity of their income taxes since the 1990s,” notes the Institute on Taxation and Economic Policy, “providing enormous tax cuts to the very wealthy and leaving a lasting legacy of structural budget deficits.”

New York’s fall from progressive tax grace has been particularly steep and severe. Just 30 years ago, millionaires in New York faced a 15.375 percent tax rate on income in the state’s highest income bracket. That top-bracket rate now sits at just 6.85 percent.

Under the current New York tax code, a married couple making $50,000 a year pays taxes on all income over $40,000 a year at the same rate as a married couple making $5 million.

“Restoring some of the New York tax system’s lost progressivity,” Frank Mauro of the Fiscal Policy Institute, a state research group, observed last week, “should be part of the state’s effort to balance its budget.”

New York Governor David Patterson apparently disagrees. Patterson has no “millionaire’s tax” in his package of proposals to cut the state’s $6.4 billion budget deficit.

The governor seems to buy the line, wildly popular on Wall Street, that upping tax rates on the rich will lead to a massive statewide exodus of New York's wealthy.

That’s what a former New York governor, George Pataki, claimed back in 2003 when lawmakers voted to place a temporary 7.7 percent tax on income over $500,000 and a 7.5 percent tax on any income that couples report over $150,000. Pataki vetoed this tax hike on New York’s most affluent, but lawmakers then enacted the measure over his veto.

What happened? Over the next three years, with the tax hike on the wealthy that Pataki vetoed on the books, the number of taxpayers in New York making over $200,000 actually increased by 31 percent.

The World's Biggest Olympic Year Losers

State of Asia Pacific's Children 2008: Child Survival. UNICEF, New York.

In 2007, no nation grew financial millionaires faster than India. For the year, India’s population of high net-worth individuals — people with at least $1 million in financial assets beyond the value of their home — grew by 22.7 percent, almost quadruple the overall international millionaire growth rate. China finished second last year in the global millionaire race, up 20.3 percent.

Last week, UNICEF, the United Nations children’s agency, revealed that India and China rank one-two globally on a considerably less lofty measure: deaths of young children. India suffered 2.1 million deaths of kids under five in 2006.

Together, India and China now account “for nearly a third of all child deaths.”

The driving force behind these tragic numbers? UNICEF’s just-released State of Asia Pacific's Children 2008 report cites growing inequality as Asia’s top obstacle to better health. The “divide between rich and poor,” the new report notes, “is rising at a troubling rate within subregions of Asia Pacific, leaving vast numbers of mothers and children at risk.”

Growing affluence at the top of Asian societies and deadly pneumonia, diarrhea, and malnutrition at the bottom, the UNICEF study suggests, go hand in hand.

One example: The same privatization mania that is minting Asian millionaires at record rates is leaving remaining public health facilities woefully understaffed and underfunded. Health workers are fleeing these rundown public facilities for better-paying jobs in private clinics that serve the well-off.

“Vast inequalities in income, geography, gender, and ethnicity,” UNICEF sums up, “are essentially what stand in the way of children surviving and thriving.”

Stat of the Week

In 47 of America’s 50 states, new U.S. government data show, the most affluent 1 percent take in more annual income than the entire bottom 50 percent combined. The two states with the lowest bottom-half share: Connecticut (10.6 percent) and New York (10.7 percent). Iowa’s bottom half, by contrast, took home 15.5 percent of state resident income in 2006, the largest bottom-half income share in the nation.

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.