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In New York City, TV’s widely viewed Without as Trace series regularly reminds us, people disappear all the time. But something new, a headline revealed last week, is now disappearing in New York. Grocery stores.

Over the last six years, researchers report, the number of supermarkets in New York has shrunk by a third. Three of the city’s top food chains — D’Agostino, Gristedes, and Key Food — “have each closed about a dozen stores since 2000.”

Why are New York’s supermarkets shutting down? No one needs to call in the FBI to investigate. Analysts already know the answer. New York is simply becoming too unequal — too economically top-heavy — to sustain the basics of modern American middle class life.

We have the scoop on supermarkets — and lots more — in this week's Too Much.

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February has been an up-and-down month for Russia’s most financially favored. The big up came with the news, published in the respected Finans business journal, that Russia now boasts 101 billionaires, 40 more than last year. Only the United States, with 415 billionaires, currently tops the Russian super-rich total. The big down? That came February 6 when fire totally destroyed the Dyagilev Project nightclub, the favorite hideaway for Moscow’s uber-wealthy, where VIP boxes used to run $20,000 a night. Average Russians make less than $600 a month . . .

Mitt Romney won’t be competing in next week’s Ohio Republican Presidential primary, and no one in the state appears to be more disappointed than Sherrod Brown, the Ohio U.S. senator who recently noted he was so looking forward to having Romney “share his vision of how to renew manufacturing in America.” Why that intense interest? Bain Capital, the Boston private equity firm that Mitt founded back in 1984, has just finished denying workers severance and medical coverage at a Tiffin, Ohio plant Bain took over in October and shut down in December. Bain Capital officials told the plant’s local union “they only owned the company for a couple weeks and they don’t feel they owe the employees anything.” Not everyone connected with the Tiffin plant is walking away empty-handed. Frederic Poses, the CEO who cut the deal that spun off the plant to Bain, pocketed over $51 million in pay in the five years before the sale. Observes Senator Brown: “We have seen again and again how Bain and other venture capitalists come in and cut pensions and health benefits. They create jobs alright. It’s just in the wrong countries.”

In the United States, tax cheats are annually avoiding about $345 billion in taxes, with a huge chunk of that avoidance coming from the nation’s richest households. That number hasn’t particularly impressed — or outraged — the White House. The IRS is still spending more time auditing poor taxpayers than rich ones. In Germany, authorities seem to be a bit more concerned about wealthy tax cheats. Last week, German police “raided the homes and offices of hundreds of wealthy people” suspected of stashing about $5 billion into tax havens run inside the tiny neighboring Alpine principality of Liechtenstein. Among the big fish caught: Klaus Zumwinkel, the former CEO at Deutsche Post, the German delivery and financial services giant. Says German interior minister Wolfgang Schäuble: “I have zero understanding for this kind of greed.”

Australia’s new prime minister, Kevin Rudd, is asking his nation’s CEOs to forego pay raises this year. Australian corporate leaders, not surprisingly, don’t think that idea wise, but they can’t seem to get their stories straight on why. The Australian Chamber of Commerce is claiming that lower CEO paychecks would discourage “the best and brightest from around the world to come to Australia and to provide real value to the Australian corporate sector.” In the meantime, a top Australian executive recruiter is arguing that only higher CEO pay can keep foreign firms from gobbling up “very highly regarded” Aussie “talent.” So which is it? Does Australia need CEO talent from outside or does Australia already have enough talent inside? In the end, organizational behavior expert Susan Nicholson last week told the Sydney Morning Herald, no CEO “talent” can “single-handedly create a productive, profitable culture.” Oversized CEO paychecks, on the other hand, can do considerable damage. Staff who see success “only recognized at the top,” explains Nicholson, “are less likely to put in an extra effort.”

Who ultimately generates corporate success? Execs at the top or the staff who actually do the work? A vote of confidence in the staff side last week came from an unexpected source: Microsoft founding CEO Bill Gates. Microsoft is currently trying to buy out Internet giant Yahoo, and a reporter last week asked Gates what makes Yahoo worth the $40-odd billion Microsoft is eager to pay to buy it. His answer: Yahoo’s engineers. Yahoo’s board of directors could have used that insight back in 2001 when they recruited superstar CEO Terry Semel with a pay package that would go on to reward Semel with $429 million in personal stock option profits over his first four years on the job and a $71.7 million paycheck in his fifth. In 2007, Semel’s sixth year on the job, Yahoo directors gave him a heave-ho out the door.

Inequality
by the numbers

CEO pay:
the scorecard

Good reads
for your bookshelf

Quote of the Week

“A corrosive problem lies at the root of our economic instability: our society and economy are rapidly polarizing. The gap between the super-rich and everyone else harkens to the Gilded Age of a century and a half ago. This glaring inequality leads to economic speculation by the rich — think hedge funds —- and declining buying power for everyone else.”
Chuck Collins, Mountain Mail (Salida, Colorado), February 21, 2008

New Wisdom
on Wealth

Ian Driscoll, Super-rich find help in running their lives. Financial Times, February 23, 2008. For from $125 to $175 an hour, “the truly wealthy are outsourcing” the handling of the daily existences.

Joanne Kelley, Anschutz's $23 million tops donors in Colorado, Rocky Mountain News, February 23, 2008. “Studies consistently show,” notes this look at recent charitable giving, “that lower-income people give away a much bigger percentage of their income than the rich do.”

Middle class Americans tend to take supermarkets for granted. Need some fresh vegetables? Some cold cuts maybe? A nice grocery store, almost everywhere in middle class America, sits only moments away. But not in New York.

The enormous wealth now concentrated in New York City has sent property prices so high that many supermarkets in New York can no longer afford to rent their urban spaces. The city’s “soaring real estate values,” the Washington Post noted last week, “are prompting property owners throughout the city to shutter grocery stores and sell to developers.”

Those developers, in turn, are bringing to market condos and businesses that cater to the ever-richer ranks of New York’s awesomely affluent. These affluents have congregated in New York at levels seen nowhere else in the United States.

One telling statistic: The average weekly salary in New York County — Manhattan — hit $2,821 in 2007’s first quarter, the equivalent of $147,000 a year. That figure over tripled, for that time period, the national average weekly take-home.

How could the average take-home be so high in New York? Credit Wall Street. In last year’s first quarter, U.S. Bureau of Labor Statistics data show, the folks gainfully employed in New York’s financial sector averaged an incredible $16,918 a week, a $879,736 per-year rate — and more than enough to drive Manhattan’s overall average take-home up near $150,000.

New York County now ranks as the nation’s most unequal county jurisdiction. The top fifth of Manhattan income-earners take home over 50 times the income of Manhattan’s bottom fifth. Nationally, according to Census figures for 2006, average top-fifth incomes outpace bottom-fifth incomes by 15 times.

Amid this severe inequality, only those at the tippy top of the income ladder can afford to live stress-free and comfortably in Manhattan. The market has priced out most everyone else. If you can't afford to shell out $1 million, you haven't been able, since 2004, to afford the average Manhattan apartment. The result?

“The super rich,” observes Queens College sociologist Andrew Beveridge, “are driving out the upper middle class, let alone the middle class.”

Those merely “relatively well-off,” notes New York-based newspaper columnist Richard Bernstein, experience their city’s intense inequality every day, most aggravatingly when they “spend hours of their time trying to park their cars on the street, because a spot in a parking garage costs $6,000 or $7,000 a year.”

Meanwhile, New York mayor Michael Bloomberg, the billionaire who made his fortune selling information services to Wall Street, is working hard on solutions to the city’s widening supermarket crisis. The Bloomberg administration, according to news reports, is planning “to license 1,500 street vendors to sell fruits and vegetables.”

Elizabeth McNichol and Andrew Nicholas, Using Income Taxes to Address State Budget Shortfalls. Washington, D.C.: Center for Budget and Policy Priorities, February 21, 2008.

In California, tax experts have a name for their state’s most ridiculous giveaway to the rich. They call it the “sloophole.” That’s the California tax code clause that lets billionaires avoid sales tax on newly purchased yachts they don’t bring into the state for 90 days.

America’s emerging recession is rapidly turning “sloopholes” and loopholes into prime-time political battles. In state after state, lawmakers are facing massive revenue shortfalls — and frantically looking for fiscal fixes that can balance state budgets without gutting needed public services.

These lawmakers, a top Washington, D.C. think tank noted last week, don’t have to look far. They have a readily available option. Tax the rich.

And lawmakers, added the Center for Budget and Policy Priorities in this new policy paper by Elizabeth McNichol and Andrew Nicholas, even have a quick-and-easy way to do that taxing: the surcharge.

Income tax surcharges have been around for generations. They operate simply. A taxpayer merely computes the normal amount of tax owed, then adds onto that tax owed an additional small fixed percentage of that total.

In times of intense budget crisis, note McNichol and Nicholas in their new state tax paper, surcharges can make eminent sense. Perhaps the most important reason: Lawmakers can quickly target surcharges to those wealthy households “best able to afford tax increases, leaving the vast majority of taxpayers with no tax increase.”

These targeted surcharges can raise vast sums of needed revenue — even if lawmakers set surcharge rates at minimal levels.

McNichol and Nicholas lay out one example. A tiny 1 percent tax surcharge on income over $200,000 would mean an extra $1,000 in tax for a taxpayer making $300,000 — and bring into state treasuries across the country $13 billion, over a third of the dollars needed to offset the budget red ink states are currently confronting.

Surcharges on high incomes, the analysts add, make much more sense than cutting back on needed state aid programs for struggling families. That's because the dollars states don’t spend on programs trigger “a dollar for dollar reduction” in demand throughout the economy.

That reduction in demand, in recessionary times, only serves to slow an already slow economy.

Tax surcharges on the rich make equally potent sense from a tax fairness perspective.

“High-income taxpayers,” the new Center paper stresses, “have benefited the most from the federal income tax cuts enacted in 2001 and 2003.”

For the 2007 tax year, those taxpayers who made over $200,000 will collect an average $17,000 in tax savings from these federal tax cuts. Even with a state income tax surcharge in effect, McNichol and Nicholas point out, these high-income taxpayers would still receive a most “substantial net income tax cut.”

Stat of the Week

Marsh & McLennan, one of the world's largest insurance brokerage houses, believes in tough love for its failing executives. The firm's recently ousted CEO, Michael Cherkasky, will receive no bonus for his work in 2007, a year that saw company shares lose over a fifth of their value. That's the tough part. The love part: Cherkasky, a Marsh & McLennan corporate filing last week disclosed, is walking away with $7.15 million in severance.

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.