Category Archives: CEO

How Bad Is The Income Gap In America – A Few Facts About The 1%

Why are Occupy Wall Street protesters out there….they don’t even know what they are protesting about? That is what we are hearing over and over from Fox News and other conservative pundits on an hourly basis.

I can’t speak for them all but here are a few clues: How about protesting to object corporate control of government policies, which has led to unfair tax loopholes, job outsourcing, cuts to public programs and gross overcompensation of executive employees, a widening wealth disparity between the top 1 percent and the rest of the country. 

So what is the disparity? How is wealth distributed in the United States? When you hear your conservative, Tea Party relatives or friends talking down the OWS movement, here are a few fun facts you can mention. These were compiled by staff writer of Life’s Little Mysteries, Natalie Wolchover

FACT #1: The wealthiest 1 percent of households own 34.6 percent of all privately held wealth, and 42.7 percent of all financial wealth (total net worth minus the value of one’s home). 

According to the NYU economist Edward Wolff a 2010 report, the bottom 80 percent of the population holds just 15 percent of the total wealth and only 7 percent of the total financial wealth (as a large portion of their wealth is tied up in their homes). The bottom 40 percent of Americans — that’s 120 million people — hold just 0.3 percent of the wealth. 

FACT #2: The United States has more income and wealth inequality than most countries that have been studied, including India and China — countries that are traditionally viewed as having unequal distributions of wealth. 

The degree of income inequality in each country is assigned a “Gini coefficient” — a number that ranges from zero (if everyone in the country has the same income) to 1 (if one person in the country has all the income). According to data gathered by the Central Intelligence Agency for 2010, the United States has a Gini coefficient of 0.45, on par with such countries as Iran (0.44) and Mexico (0.48); this is higher than the Gini coefficients of 94 of the 134 countries that have been studied, including China (0.42) and India (0.37), and much higher than Canada, Australia and all of Europe. Sweden has the lowest Gini coefficient at 0.23.  

The United States’ Gini coefficient has been rising for decades; it was just 0.35 in the 1960s. 

FACT #3: Among the 299 companies listed in the S&P 500 Index, the average CEO’s compensation was $11.4 million in 2010, or 343 times more than the median pay ($33,190) of American workers. The ratio of CEO pay to median worker pay was just 42:1 in 1980, and is currently 25:1 in Europe. 

Bill Domhoff, a sociologist at UC Santa Cruz, claims the ballooning of chief executives’ salaries in recent years has resulted from the fact that, for the most part, they set their own wages. “If you wonder how such a large gap could develop, the proximate, or most immediate, factor involves the way in which CEOs now are able to rig things so that the board of directors, which they help select — and which includes some fellow CEOs on whose boards they sit — gives them the pay they want,” Domhoff wrote in a 2011 articleon his website. 

FACT #4: Between 1979 and 2005, the average after-tax income for the top 1 percent increased by 176 percent, compared with an increase of only 6 percent for the bottom 20 percent. Between 1990 and 2005, the purchasing power of the federal minimum wage actually declined by 9.3 percent when adjusted for inflation. 

This rapid widening in the income gap between the rich and poor was identified in a 2007 report by the Center on Budget and Policy Priorities. The report attributed the trend to tax policies that favor the wealthy. According to Domhoff, other contributing factors include the diminishing political clout of labor unions and decreased expenditure on social services. 

FACT #5: Most Americans have no idea that the wealth distribution is as concentrated as it is, but regardless of their gender, age, income level or party affiliation, they believe wealth should be much more evenly distributed than they think it is

In 2010, Michael Norton of Harvard Business School and behavioral economist Dan Ariely of Duke University surveyed 5,522 Americans about their views on the country’s wealth distribution. They found that most respondents (regardless of their genders, ages, income levels and party affiliations) guessed that the top 20 percent of Americans hold about 60 percent of the wealth (rather than the 85 percent that they actually hold). Survey respondents also guessed that the bottom 40 percent hold between 8 and 10 percent of the wealth in the U.S. (rather than the 0.3 percent that they actually hold).

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Republican In-Fighting: Chamber of Commerce Vs. Tea Party

I came across this video from Cenc Uygur at The Young Turks.  He sheds light on the growing rift between the Republican establishment and Chamber of Commerce and the newly elected Tea Party representatives. 

Myths About Tax Rate: Who Pays and Who Does Not

I have been in an ongoing debate with family and friends about our tax code and the inequalities that exist. To push the idea that the wealthy carry most of the tax burden, people love to say that half of Americans do not pay anything in taxes, and technically they are correct. I have been researching this issue looking at non-partisan groups that evaluate our tax code by using official data provided by the IRS and other federal agencies. Here is what I found. 

Tax Policy Center reports that 47% of American households owed no income tax for 2009. The number is up from 38 percent in 2007, and it has become a popular talking point on cable television and talk radio. But that 47% is decieving and the conservative cable/radio shows fail to go into. Here is a breakdown by economics columnist David Leonhardt

Focusing on the statistical middle class — the middle 20 percent of households, as ranked by income — underlines this point. Households in this group made $35,400 to $52,100 in 2006, the last year for which the Congressional Budget Office has released data. That would describe a household with one full-time worker earning about $17 to $25 an hour. 

Taking into account both taxes and tax credits, the average household in this group paid a total income tax rate of just 3 percent. A good number of people, in fact, paid no net income taxes. They are among the alleged free riders.

But the picture starts to change when you look not just at income taxes but at all taxes. This average household would have paid 0.8 percent of its income in corporate taxes (through the stocks it owned), 0.9 percent in gas and other federal excise taxes, and 9.5 percent in payroll taxes. Add these up, and the family’s total federal tax rate was 14.2 percent.

I realize that it’s possible to argue that payroll taxes should be excluded from the discussion because they pay for benefits — Social Security and Medicare — that people receive on the back end. But that argument doesn’t seem very persuasive. 

Why? People do not receive benefits equal to the payroll taxes they paid. Those who die at age 70 will receive much less in Social Security and Medicare than they paid in taxes. Those who die at 95 will probably get much more. 

The different kinds of federal taxes are really just accounting categories. At the end of the day, the government has to cover the cost of all its operations with revenue from all its taxes. We can’t wish our deficit away by saying that it’s mostly a Medicare and Social Security deficit. 

If anything, the government numbers I’m using here exaggerate how much of the tax burden falls on the wealthy. These numbers fail to account for the income that is hidden from tax collectors — a practice, research shows that is more common among affluent families. “Because higher-income people are understating their income,” Joel Slemrod, a tax scholar at the University of Michigan says, “We’ve been overstating their average tax rates.” 

State and local taxes, meanwhile, may actually be regressive. That is, middle-class and poor families may face higher tax rates than the wealthy. As Kim Rueben of the Tax Policy Center notes, state and local income taxes and property taxes are less progressive than federal taxes, while sales taxes end up being regressive. The typical family pays a lot of state and local taxes, too — almost half as much as in federal taxes. 

There is no question that the wealthy pay a higher overall tax rate than any other group. That is an American tradition. But there is also no question that their tax rates have fallen more than any other group’s over the last three decades. The only reason they are paying more taxes than in the past is that their pretax incomes have risen so rapidly — which hardly seems a great rationale for a further tax cut.

How To Rig An Election

GOP has long been a party of Christian and “small-government” conservatives. Since their wins at the state and federal levels in 2010, which they won on a platform of creating jobs, jobs, jobs and deficit reduction, their sole focus, like a laser, has been on busting unions and cutting benefits to people like police, firefighters, and teachers, cutting education for our schools, and getting rid of women’s healthcare (that is to just name a few). At the same time they have been cutting taxes for the very wealthy and corporations, i.e., big oil, Wall Street.

These constituents that used to identify themselves as conservatives are now realizing the GOP do not have their best interest in mind. Since the GOP has been pushing away the people who used to support them, they are now trying to devise a way to win elections without having the majority of Americans behind them anymore.

Since their constituents are now just the wealthy and the people who run those corporations (whose numbers are in the thousands, if that), they have now come up with a way to win elections without a majority of voters behind them. Donna Brazile recently wrote an op-ed:

From coast to coast, the GOP is engaged in what appears to be a coordinated, expensive effort to block voters from the polls. The motivation is political — a cynical effort to restrict voting by traditionally Democratic-leaning Americans. In more than 30 states, GOP legislators are on the move, from a sweeping rewrite of Florida’s election laws to new rules for photo identification in Ohio, Wisconsin, North Carolina and more than 20 other states.

As a result, 11% of Americans — 21 million citizens of voting age who lack proper photo identification — could be turned away on Election Day. And these people tend to be most highly concentrated among people of color, the poor, the young and the old.

This shows that GOP and Republicans are not just racists (their insistence that President Obama show his birth certificate, i.e., “his papers“), they are now waging class warfare. GOP won such huge majorities at the state level that this has allowed them to practically push through any bill they wish, written any way they want, and they are now working to exclude as many people from our elections as possible.

It seems there isn’t much we can do about it; however, as I mentioned in previous posts, the one thing we have that they do not is our enormous numbers. We have that working for us and can use it. It is working across the globe from the uprisings across the middle east to Spain, Britain, Germany, etc. We need to learn from them, stop being complacent with the current system, and take to the streets. We can make a change. This is no longer a country divided by race, we are a country divided by class, plain and simple!

Wall Street Corruption

Michael Snyder of Inteldaily wrote a very thorough article on the falling confidence in the financial system and the wide-spread corruption on Wall Street.  The main points made in the article listed below. 

Bloomberg is reporting that a massive network of big banks and financial institutions have been involved in blatant bid-rigging fraudthat cost taxpayers across the U.S. billions of dollars.

The U.S. Justice Department is charging that financial advisers to municipalities colluded with Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Wachovia and 11 other banks in a conspiracy to rig bids on municipal financial instruments.

An industry insider has come forward with “smoking gun” evidence that some of the biggest banks have been openly and blatantly manipulating the price of gold and silver. For a time it looked like the federal government was just going to ignore all of this fraud, but after substantial public uproar some action is indeed being taken. In fact, it has been reported that federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals markets.

New York attorney general Andrew Cuomo is investigating whether eight major Wall Street banks purposely misled the big credit ratings agencies so that they would give their mortgage-backed securities AAA ratings that they did not deserve.

There has been a ton of legal action surrounding mortgage-backed securities lately. For example, the Justice Department and the Securities and Exchange Commission are now investigating Morgan Stanley as part of a probe into whether Wall Street firms deliberately misled investors regarding the sale of mortgage-related securities.

Goldman Sachs is getting most of the press about fraud in the mortgage-backed securities market these days. Of course Goldman is strenuously denying that it “bet against its clients” when it changed its position in the housing market in 2007. But we all know the truth at this point. The truth is that Goldman Sachs clearly bet against its clients and was involved in a whole lot of things that were even worse than that. Many did not think the U.S. government would dare go after Goldman, but that is what we are starting to see. U.S. federal prosecutors have opened a criminal investigation into whether Goldman Sachs or its employees committed securities fraud in connection with its trading of mortgage-backed securities, and it will be very interesting to see if anything comes of that investigation.

But not everyone is being held accountable for their actions. The guy who helped bring down AIG is going to get off scott-free and is going to be able to keep the millions in profits that he made in the process.

Entire U.S. cities have been victims of this rampant Wall Street fraud. In fact, it is now being alleged that the biggest banks on Wall Street are ripping off some of the largest American cities with the same kind of predatory deals that brought down the financial system in Greece.

The really sad thing is that fraud is very, very lucrative. Executives at many of the big banks that received large amounts of money during the Wall Street bailouts are being lavished with record bonuses as millions of other average Americans continue to suffer economically. Even the CEOs of bailed-out regional banks are getting big raises. It must be really nice to be them.

CEO Salaries and the Middle Class

USA Today reported on a study that found CEO pay has climbed back to the pre-recession level; however, pay for the newly employeed are not meeting living standards of $30,000 a year based on a study from Wider Opportunities for Women.

“Too few American families are living in economically secure households, with most workers unable to stretch their incomes over basic expenses and savings,” Joan Kuriansky, executive director of WOW said in a statement. “The American Dream of working hard to support your family is being rewritten by the growth of low paying industries and rising expenses.”

On top of falling wages, the programs that usually help keep a family out of poverty, Head Start, Childcare Assistance Program, WIC, are being cut at the state and national levels at an alarming rate. This will hit single parents the hardest, which by a large percentage tend to be women.

This is happening while CEO’s salaries of the very companies that our tax dollars bailed out have jumped 27% in 2010. Meanwhile middle class workers pay grew only by 2%. This is according to the Bureau of Labor and Statics.