Most of us see the private jet as an extravagance, an affectation of the super-rich. A new report suggests these jets may actually be something else. A menace. Private jets a menace? At first, that notion seems hard to swallow. Private jets don’t bomb anybody, after all. They don’t strafe villages. They don’t even crash particularly often.

But these jets do plenty of damage on other fronts. That's the word from a fascinating new report released last week by the Institute for Policy Studies and Essential Action. We have the story in this week's Too Much.

Also this week: a bit of a new look for Too Much. If you like it, please consider passing this issue on to a friend who might like to subscribe. Just click the handy “Forward to a friend” link you'll find down below at the end of this issue.

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Corporate attorney Tim Durham, a specialist in leveraged buyouts, became a TV star last week — as the featured personality in an hour-long CNBC documentary entitled Untold Wealth: The Rise of the Super Rich. Durham sits among the 49,000 Americans now worth over $50 million, a “species unto themselves,” CNBC’s David Faber noted to his national audience. Durham owns dozens of cars — and once paid $22,000 to have a punctured tire on his $1.8-million Bugatti replaced. Durham’s home sports eight bedrooms and 20 televisions, “including two in his bathroom mirror.” One TV critic, the Baltimore Sun’s David Hinckley, appreciated the glimpse into the life of the wealthy the CNBC hour offered. But he found it unnerving that a show entitled the “rise of the super rich” totally ignored the one factor that made that ascent so effortless, “the rise of tax laws favorable to the super rich — starting with the administration of Ronald Reagan in the 1980s and escalating with the efforts of President Bush during the past seven years.”

In London last week, a Claude Monet painting, Le Bassin aux Nympheas, went for $80 million at auction, an all-time record for the Impressionist master. But anyone looking for real excess in the British economy, notes the UK Daily Telegraph, might want to look at Avolus rental, a thriving company that charters luxury limos, helicopters, jets, and yachts. One Avolus client recently spent $100,000 flying a pet across the Atlantic. Proclaims Avolus CEO Justine Angelli: “I probably won't do business with you unless you have over a billion.”

How much influence do the rich have over politics? The Missouri Citizens Education Fund recently set out to see. The group's researchers zeroed in on Rex Sinquefield, a retired mega-millionaire St. Louis investment banker. Last year, in a victory for campaign finance reform, the state Supreme Court struck down a state law that allowed deep pockets to make unlimited political contributions. Sinquefield promptly bankrolled 100 separate political action committees, in the process multiplying the new limit on his personal giving a hundred-fold. Of Missouri House members who have pocketed contributions from Sinquefield, notes the Citizens Education Fund, 79 percent have now voted to funnel public tax dollars to private schools, a Sinquefield priority. But the real political damage the rich do, Boone County activist J. Scott Christianson noted last week in the Columbia Tribune, goes far deeper than any vote tally can show: “Issues that affect the majority of people — such as access to health care and insurance, road safety and food costs — are pushed aside so issues of concern to major campaign donors can be debated at length.” Adds Christianson: “Do we really want to live in a plutocracy, where only the wealthy decide what and who is important?”

Let's add U.S. Supreme Court Justice John Paul Stevens to that list of Americans who would rather not live in a plutocracy. The 88-year-old jurist last week noted that the nation’s courts “have long recognized” the importance of “statutes designed to protect against the undue influence of aggregations of wealth on the political process.” Unfortunately, the rest of the Supreme Court doesn’t seem to agree. On Thursday, in a 5-4 decision, the high court struck down the “millionaire’s amendment,” a key clause of the 2002 federal campaign finance reform that “allows congressional candidates who face wealthy, self-funded opponents to raise more than fundraising limits normally allow.” The decision, says Common Cause’s Josh Zaharoff, “helps make the playing field uneven and gives a huge advantage to wealthy individuals.”

In 2006, the IRS called in fewer than one out of every 200 high-income tax filers for a face-to-face tax audit. That may be one reason why the annual tax gap — the distance between taxes owed in the United States and taxes actually paid — is now running over $300 billion. In Germany, tax officials are taking a somewhat tougher stance against wealthy tax cheats in their new offensive against tax evasion. The German rule of thumb for any mega millionaire who doesn’t cooperate: one year in jail for each million in unpaid taxes. Tax evaders who turn themselves in voluntarily, notes Business Week, can get a discount off the going rate on tax penalties, currently $2 in fine for every $1 evaded.

Quote of the Week

“The toys of the rich tend to change very little over time. The superwealthy people then wanted to have large estates, amass beautiful art collections, have gigantic yachts. You would find exactly the same thing today. I guess the place where there would be the most obvious difference is that the private railroad cars of the first Gilded Age have been traded in for private jets in the second.”
Ron Chernow, biographer of John D. Rockefeller, CNBC, June 24, 2008

New Wisdom
on Wealth

Josh Levin, Shake Me Down At The Ball Game, Sports Illustrated, June 23, 2008. How modern ballparks “make watching the national pastime a rich man's pursuit.”

Henry Banta, Why hasn’t competition come to CEOs? Nieman Watchdog, Nieman Foundation for Journalism at Harvard University, June 26, 2008. A partner at a high-profile Washington law form poses a question about excessive executive pay the media ought to be asking.

Chuck Collins and Sarah Anderson, Seeking a sign of CEO excess? Look up in sky. Baltimore Sun, June 27, 2008.

Grayson McCouch, The Empty Promise of Estate Tax Repeal. San Diego Legal Studies Paper, June 2008.

A New Tally of the World's Wealthy

The New York-based Merrill Lynch and the Paris-based Capgemini financial companies want to manage more of the wealth of the world’s wealthy. To do that, the two financial giants have come to understand, they need to grab the attention of as many super-rich as they can.

How best to pull that off? Well, Forbes has already cornered the market on ranking the richest of the rich, with lists like the magazine’s annual Forbes 400. So Merrill Lynch and Capgemini have needed to go beyond lists — and they have. Merrill Lynch and Capgemini don’t list the rich. They count them.

Last week, the two companies released their 12th annual World Wealth Report, a work that totals just how many people on our planet have reached the lofty designations of “high” and “ultra-high” net worth.

The new report covers 2007, a year that saw the beginnings of the global credit crunch — and billions in investment losses at the world’s most powerful investment banks. This turmoil doesn't seem to have made much of a dent in the fortunes of the world’s most fortunate.

“High-net-worth individuals” — the World Wealth Report label for folks who hold at least $1 million in assets over and above the value of their residence — saw their numbers world-wide jump 600,000 in 2007, a 6 percent increase over the year before. Our planet's 10.1 million millionaires ended the year holding a combined $41 trillion in wealth, a 9 percent hike over their holdings in 2006.

But the real action continues to be at the upper end of the wealth spectrum, with the “ultras,” those individuals worth at least $30 million. Worldwide, these ultras now total 103,000, less than 0.002 percent of the world’s population.

Having trouble getting your mind around 0.002 percent? Just fill a 100,000-seat football stadium, in your mind, with a random cross-section of the world’s people. Two of those 100,000 would rank as ultra-high-net-worth individuals.

In 2007, these ultras made up a mere 1 percent of the world’s high-net-worth individual population. But they ended the year holding an astonishing 37 percent of high-net-worth individual wealth, $15 trillion in all — a jump of nearly 15 percent over ultra combined wealth holdings in 2006.

How does this $15 trillion in ultra wealth compare with the wealth of the world’s average people? Merrill Lynch and Capgemini don’t tell us, most likely because they don't have much interest in managing average people’s money. Their World Wealth Report makes no attempt to place wealth in a broader context.

To get a glimpse of this broader context, we have to go back to December 2006 when the United Nations University’s World Institute for Development Economics Research estimated the total household wealth of the world at $125.3 trillion, as of the year 2000.

Half the world’s 3.7 billion adults, at that time, had less than $2,161 to their name, the Institute reported. The richest 1 percent of these 3.7 billion — those worth at least $514,512 — then held 39.9 percent of the world's wealth all by themselves, 13,000 times more than the entire bottom 10 percent.

What’s the comparable gap today, after all the global economic turbulence of the past year, the mortgage meltdown in the United States and the explosion of prices for gasoline and food commodities all over the world?

We simply do not have an exact figure, or even an educated guess. But we do know one thing, thanks to the latest figures from Merrill Lynch and Capgemini. The wealth gap between the world’s super-rich and everyone else has, since 2000, become even scarier.

The No-Hassle Air Travel Experience

Chuck Collins, Sarah Anderson, Dedrick Muhammad, Sam Bollier, and Robert Weissman, High Flyers: How Private Jet Travel Is Straining the System, Warming the Planet, and Costing You Money. Institute For Policy Studies and Essential Action, Washington, D.C., June 2008.

Look, up in the sky! It's a plane. It's a jet. It's private. And, boy, is it a burden — on all of us who can't afford the millions a private jet costs to own or the thousands of dollars per hour a private jet costs to charter.

Private jets. the Institute for Policy Studies and Essential Action help us see vividly in their just-published new High Flyers report, threaten our environment and airport security and undermine the funding of our air travel safety.

Even worse, private jets are frustrating efforts to make sure transportation in the United States “works well for everyone.”

All this collateral damage has more or less snuck up on us. Private jet travel has largely soared beneath our political radar.

The big reason: At airports, we seldom get a chance to peer into the private-jet universe. These jets have their own small terminals, with separate entrances and parking. The private-jet rich need not even go through regular security.

“Private flyers don’t have to bother with little plastic bags with three-ounce containers of shampoo or strangers rifling through their undergarments,” High Flyers explains. “A weather delay doesn’t lead to compounding cancellations or passengers marooned for days.”

These obvious attractions have manufacturers of private jets booming. Gulfstream, the biggie in the business, sold $4.8 billion worth of private-jet comfort in 2007.

Their comfort, our squeeze.

We feel this squeeze, for starters, as taxpayers. The rich and their jets pay nowhere near their fair share of air traffic control and safety costs. One example: Private jets paid only $516 million in fuel taxes in 2005. The government that same year spent $2.4 billion on private jet air traffic control.

But the heaviest private-jet burden may be environmental.

“The Gulfstream IV,” High Flyers observes, “emits between 83,000 to 90,000 pounds of CO2 on just one cross-country round trip. The average American emits just 50,000 pounds of CO2 total per year.”

High Flyers details a full range of other costs that private-jet travel exacts from the rest of us. But some costs these jets exact can’t be detailed, most notably the price we pay when our nation’s richest and most powerful separate themselves from the transportation system the rest of us use.

In that situation — our current situation — these rich and powerful have no vested interest in helping to find solutions to our overall transportation woes. Instead, they fight fiercely to protect the tax and regulatory preferences that make their private jet travel so pleasurable an experience.

High Flyers does, of course, offer an array of proposals to end the preferential treatment that makes our skies so private-jet friendly. Still, the report notes, we need to keep our eye on the real villain in this piece, “the concentration of income and wealth among the wealthiest one-tenth of one percent, those most likely to use private jets.“

“Extreme economic inequalities,” as High Flyers puts it, are “driving the expansion of private jets.”

If we want to get our skies in order, in sum, we need to address the “concentration of wealth and power” right down here on terra firma.

Stat of the Week

Between 2005 and 2007, $2.2 billion in federal funds went to small, remote airports with little commercial passenger traffic. Much of that money outfitted the airports to handle incoming private jets. Among the airports subsidized: California’s Napa Valley Airport and Sardy Field in Aspen, Colorado.

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.