This Week

Some 83 percent of Americans today want the federal minimum wage raised. Yet this past week, in the House of Representatives, GOP leaders refused to let a minimum wage hike come up for a vote.

These same leaders, on Thursday, shoved through a bill that will, if swallowed by the Senate, give households worth over $20 million a tax break that averages $5.6 million. We have that story — and much more — in this week's Too Much.

Greed at a Glance: Harvard in a Huff

America’s middle class, researchers have been warning for 20 years, is disappearing. Last week a new Brookings survey revealed that middle class neighborhoods are disappearing even faster. Predominantly middle-income neighborhoods — with middle income defined as anything between 80 percent of an area’s typical family income to 120 percent — made up 58 percent of America’s 100 largest metro areas in 1970, only 41 percent in 2000. America’s economic ladder, says Brookings fellow Alan Berube, is losing the “middle rung.” Adds Northern California urban planner Sarah Karlinsky: “We don't want San Francisco to become Carmel, just a city of the most wealthy. Then we're not a real city any more, we're a boutique."

Major corporations in the United States, the Wall Street Journal reported this past Saturday, are sinking under the weight of pensions — for their executives! The financial obligation for a single CEO pension, the Journal reveals, can now approach $100 million. At General Electric, General Motors, AT&T, Exxon Mobil, IBM, Bank of America, and Pfizer, total executive pension obligations at each company are now running over $1 billion. U.S. companies, the Journal adds, are routinely freezing or eliminating employee pension plans at the same time they're juicing up pensions for top execs. At BellSouth, company obligations for worker pensions have dropped 3 percent since 2000. The company’s liability for executive pensions “is up 89 percent over the same period.”

A greed and grace contrast. First the grace: Waldemar Kaminski, the “man behind the counter” at upstate New York’s Kaminski's Deli for over 50 years, died last week at 88. His friends in Buffalo then revealed Kaminski’s life-long secret: The counterman, who lived in a flat above his deli, had made millions playing the stock market — and given those millions away, with absolutely no publicity, to local charities. Meanwhile, also last week, Harvard, “in an apparent attempt to embarrass” Oracle software CEO Larry Ellison, went public with the news that the billionaire has not yet forked over the $115 million he pledged the university last year to create an “Ellison Institute for World Health.” Harvard has had to lay off three staff hired for the Center. Ellison's personal fortune currently totals $16 billion. He recently “traded his 244-foot yacht for a 452-foot one that reportedly cost $250 million.”

The more inequality within Corporate America, suggests a new analysis from Monmouth University economist Steven Pressman, the less efficiency and productivity. Pressman's work, spotlighted this past Sunday in the New York Times, examines the psychological dynamics that excessive executive compensation unleashes, building on the “fairness” experiments conducted by Nobel Prize-winning economist Daniel Kahneman. Workers who see their pay cut while their CEO's pay “is going through the roof,” says Pressman, won't typically respond by quitting — since they need their jobs — but they can and do show their anger “by working less hard and not caring about the quality of what they are producing.”

In London last week, auctioneers from Sotheby's and Christie's set a new all-time record in their annual series of world-class art sales. The total take: over $472 million. The star of the week-long show: a $29.6 million Modigliani. The British artist David Hockney also made quite a “splash” at the annual auctions. His 1966 work, The Splash, went for $5.3 million, the most ever for one of his paintings. Hockney joked afterwards that painting a splash, an “event that lasts for two seconds,” took him two weeks.

The World's Wealthiest 1 Percent: The Annual Census

A decade ago, two companies eager to raise their profile in the wealth-management market — Merrill Lynch and Capgemini, a global consulting company — started publishing an annual count of the world's rich.

Last week, the two companies released their tenth anniversary World Wealth Report. The new study's main message: The world's cream, as defined by financial assets, is rising ever faster to the top.

In 2005, the number of global millionaires — individuals with at least $1 million in cash and investments, beyond the value of their primary residence — jumped 6.5 percent over 2004.

But the combined wealth of these wealthy jumped even more rapidly, by 8.5 percent. Global millionaires last year held a combined $33.3 trillion in wealth, nearly double the $16.6 trillion they held back in 1996, the first year researchers from Merrill Lynch and Capgemini began keeping track.

Last year's vigorous “upturn” in the combined wealth of the wealthy, these researchers point out, “continues the wealth consolidation trend among the world’s wealthiest” that “we have steadily reported over the last 10 years.”

And this wealth is consolidating, most intensely, among the richest of the rich, those fortunates with at least $30 million in financial assets. These “ultra high net worth individuals” saw their ranks leap 10.2 percent in 2005.

The global ultra-high-net-worth set, now 85,400 deep-pockets strong, currently owns about one third of the combined wealth held by the world's 8.7 million financial millionaires.

Overall, these ultra wealthy represent just one hundredth of 1 percent of the world's adult population. They hold, notes an analysis of the latest Merrill Lynch-Capgemini figures that appeared last week in the British Guardian, an amazing 24 percent of the world's financial wealth.

We have more on the new world wealth data.

House of Reps Blesses Aristocracy Assistance Act

Over two centuries ago, right after the American Revolution, state lawmakers started moving to prevent a British-style aristocracy from emerging in their young republic. They banned, state by state, “entail and primogeniture,” the old inheritance laws that required rich landowners to will their estates, undivided, to their first-born sons.

These prohibitions would help keep a native-born aristocracy from taking root in the United States — until the explosion of robber baron railroad and industrial fortunes, after the Civil War, changed everything. Americans soon realized they needed a new approach to limiting grand concentrations of private wealth. They would find that approach — in the estate tax.

Last week, in a 269-156 vote, the House of Representatives opted to turn this 90-year-old federal estate tax, once a powerful antidote to gross inequality, into no more than a nuisance for the rich.

In 2004, about 30,000 fortunes faced federal estate tax liability. If the Senate adopts the new House estate tax bill, only 2,800 fortunes a year will likely face any tax at all.

And these estates will pay significantly less in tax. Under the House bill, a married couple’s $100 million estate will pay no tax whatsoever on the first $10 million of the estate’s value and only a 15 percent tax -- the current tax rate on capital gains income -- on the next $15 million. On wealth above $25 million, a 30 percent tax, or twice the current capital gains rate, will kick in.

In 2000, before the Bush White House first assaulted the estate tax, king-sized inheritances faced a 55 percent top tax rate.

Overall, notes the Center on Budget and Policy Priorities, the average fortune subject to tax under the House bill will pay estate tax at a mere 9 percent effective rate. In 2011, the average estate over $20 million will pay $5.6 million less in tax than it would under rates in current law for 2009.

What happens next? The legislative action is now shifting back to the Senate, where the spotlight will fall on five Democratic Party estate-tax fence-sitters, Patty Murray and Maria Cantwell from Washington State, Mark Pryor and Blanche Lincoln from Arkansas, and Mary Landrieu from Louisiana.

To nudge these five off the fence, GOP House leaders stuck in their estate tax bill a massive tax break for the timber industry, a powerful political presence in Washington State and Arkansas.

If this timber tidbit does swing the Senate, the stage will be set for stealth estate tax repeal. That's because the House bill, by tying the estate tax directly to the capital gains tax rate, will enable estate tax abolition “without a direct political battle over the estate tax,” notes University of Illinois tax analyst Linda Beale.

“The same legislators who support estate tax repeal,” she explains, “also support zero taxation of capital gains.”

A Senate vote on the House estate tax bill may come this week. For updates, check the United for a Fair Economy estate tax action center.

Stat of the Week: An Unfair Day's Pay

In 2005, says a new analysis of last year’s CEO pay totals by the Economic Policy Institute, the average U.S. CEO “earned more in one workday (there are 260 in a year) than an average worker earned in 52 weeks.”

The average CEO last year took home $10,982,000, or 262 times the $41,861 pay of an average worker in 2005. In 1965, the average U.S. CEO took home 24 times the pay of an average U.S. worker.

Quote of the Week: Equality Still the Best Medicine

“Our federal government, in its Institute of Medicine 2003 report The Future of the Public's Health in the 21st Century, states on page 59: 'more egalitarian societies (i.e. those with a less steep differential between the richest and the poorest) have better average health.' This remarkable finding has emerged from research carried out over the last 25 years, and the science is as good as that linking smoking and poor health.

“Why aren't the media broadcasting this news? For the last quarter century it has become unpatriotic to believe in economic justice.”

Dr. Stephen Bezruchka, University of Washington School of Public Health and Community Medicine, June 25, 2006, from his Seattle Post-Intelligencer op-ed, Economic equality is best medicine.

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