Tax Dollars for Mitt Romney & a Film Pro-Smoking
Top CEO Pay Equals 3,489 Years For Typical Worker
Inequality has the same source as distributive justice: public policy. We trim, blend, and append five 2012 articles from: (1) AP, May 25, on pay by S. Borenstein; (2) Clawback, May 23, on movies by G. LeRoy; (3) USA Today, May 28, on buyouts by its editors; (4) Vanity Fair, May 31, on inequality by J.E. Stiglitz (author: The Price of Inequality); and (5) The Economic Voice, May 29, on taxes by J. Taylor.
by Seth Borenstein, by Greg LeRoy, by Editorial Board, by Joseph E. Stiglitz, and by Jeff Taylor
Top CEO Pay Equals 3,489 Years for Typical Worker
David Simon of Simon Property received a pay package worth more than $137 million for last year.
A minimum wage worker -- paid $7.25 per hour, as some workers at Simon malls are -- would have to work one month shy of 9,096 years to make Simon’s pay. A person making the national median salary, $39,312, would have to work 3,489 years.
Simon makes about 342 times the $400,000 annual salary of President Barack Obama. If you add the salaries of Obama, Vice President Joe Biden, the Cabinet, the Supreme Court justices, all the members of the Senate and House of Representatives, and all 50 governors, it is less than $110 million, so Simon gets well more than government's top 600 rulers.
The median CEO salary of $9.587 million.
A minimum wage worker would have to work 636 years to make that much. A person making the national average salary would have to work 244 years to make the median CEO salary.
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JJS: Simon owns malls which sit on prime locations which means much of his profit is "rent". It's a major source of the money used by firms to pay outrageous salaries. The other is you, you paying taxes, then your rulers turning tax dollars into subsidies for favored insiders.
Film Subsidies for Lung Cancer
Did you know that many states spend more money subsidizing films that promote smoking to teenagers than they spend on smoking prevention and cessation programs?
For decades, tobacco companies paid Hollywood to push smoking in movies. Today, so do taxpayers. Through state film production incentives, states hand hundreds of millions of dollars to producers of movies with smoking.
Research indicates that exposure to on-screen smoking accounts for a million current teen smokers in the U.S. Indiscriminate film subsidies undermine states’ own efforts to keep kids from starting to smoke and avert billions in health costs.
As the US Centers for Disease Control and Prevention (CDC) recommended last year, states can simply make future media productions with tobacco imagery ineligible for public subsidy.
There’s no First Amendment issue. After all, state subsidy programs already filter out film projects for a range of other content.
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JJS: Here’s another example of business as usual between insiders and politicians.
Government Gifts Boost Bain, Buyout Firms
At their best, private equity firms perform a valuable service. They make the companies they buy more efficient, sometimes just by bringing in better management, but often by making tough but necessary job cuts. Bain -- which Mitt Romney founded in 1984 and ran for 15 years -- can point to a number of successes, including Domino's Pizza and mattress-maker Sealy.
But at their worst, private equity firms buy companies with borrowed funds, suck money out and leave them for dead. That was the case with GST Steel, which Bain bought in 1993 with just $8 million of its own capital and mountains of debt. Under Bain's eight-year stewardship, more debt was added and Bain paid itself a $36.1 million dividend. In 2001 the company went bust.
Let’s examine the gifts private equity firms get from government. Start with a forgiving corporate bankruptcy code and the deduction for interest payments on corporate debt.
Plus, their special tax treatment for "carried interest" is a loophole that allows managers of private equity firms, hedge funds, and certain other entities to pay an income tax rate of just 15%, while managers at other types of companies pay up to 35%.
Does it really make sense for government to be so friendly to private equity?
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JJS: What’s ironic is that greed could kill the goose that laid the golden egg.
The 1 Percent’s Problem
Why won’t America’s 1 percent -- such as the six Walmart heirs, whose wealth equals that of the entire bottom 30 percent -- be a bit more . . . selfish?
The gap between the 1 percent and the 99 percent is vast when looked at in terms of annual income, and even vaster when looked at in terms of wealth -- that is, in terms of accumulated capital and other assets.
While the rich have been growing richer, most Americans (and not just those at the bottom) have been unable to maintain their standard of living, let alone to keep pace. A typical full-time male worker receives the same income today he did a third of a century ago.
Even if they’re thinking only about themselves, the rich do not exist in a vacuum. The evidence from history and from around the modern world is unequivocal: there comes a point when inequality spirals into economic dysfunction for the whole society, and when it does, even the rich pay a steep price.
In recent years, the financial sector has accounted for some 40 percent of all corporate profits. This does not mean that its social contribution sneaks into the plus column, or comes even close. The crisis showed how it could wreak havoc on the economy.
Much of the inequality in our economy has been the result of “rent seeking”. That’s how our current political process helps the rich at the expense of everyone else, including transfers and subsidies from the government, laws that make the marketplace less competitive, laws that allow C.E.O.’s to take a disproportionate share of corporate revenue, and laws that permit corporations to make profits as they degrade the environment.
The rewards of rent seeking become so outsize that more and more energy is directed toward it, at the expense of everything else. It’s far easier to get rich in countries rich in natural resources by getting access to them than by producing goods or services that benefit people. That’s why these economies have done so badly.
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JJS: The usual response is to propose taxing the rich, giving to the poor, trying to get government to rmodify its historical stance toward the rich, and do so right when the rich are their richest and most powerful. A more practical approach may be to try to redirect people’s spending, aiming it away from the vaults of the rich, into the public treasury.
Pasty Tax Proposition: Vote-killing Policy
In the last budget the Chancellor, George Osborne, announced that any food served above ambient temperature would be liable for VAT at the 20% rate.
This of course drew fire from all interested parties as an unfair tax that hit the working Briton who wanted a fresh pie for lunch.
It now looks like HMG has bowed to public sentiment and food that leaves the oven and is then bought without it being heated afterwards will not be subject to the hated VAT.
The tax will still apply to food that is kept warm or reheated prior to being sold.
This shows what an awful tax VAT really is. It has to be paid by poor and rich alike and it puts a huge burden on business as well as having anomalies like this one.
I would go further and say that just about every form of tax we use is not fit for purpose. We need to replace them all with a much simpler system and that for me is Land Value Tax (LVT), where the landowner gets an annual tax of 6% of the price of the land they own. And that’s it, no other taxes.
That would stop people hoarding property; it would get houses filled and get all the land being used productively. Unused land would still be taxed and if you can’t afford the tax then sell to someone who can. What’s there not to like?
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JJS: There’s lots to like about using a tax or fee or lease or dues to recover the socially-generated value of land, and about seeing the value of sites, resources, EM spectrum, ecosystem services, etc as the tax base. And there’s lots to like about seeing society’s spending for nature in general -- gifts not produced by anyone’s labor or capital -- as our common wealth. Use this stream to pay ourselves a dividend or to fund desired social programs or a mix of both; whichever, it’s ours.
Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .
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