Follow the money

If you want to know what's happened to the American economy and to its politics, follow the money.

According to new  research by Emmanuel Saez of the University of California at Berkeley and Gabriel Zucman of the London School of Economics, the richest one-hundredth of one percent of Americans now hold over 11 percent of the nation's total wealth. That's a higher share than the top .01 percent held in 1929, before the Great Crash.

We're talking about 16,000 people, each worth at least $110 million.

In 1978, the typical wealth holder in the top .01 percent was 220 times richer than the average American. By 2012, he or she was 1,120 times richer. In the mid-1980s, the bottom 90 percent of Americans together held 36 percent of the nation's wealth. Now, they hold less than 23 percent.

The richest Americans hold more of the nation's wealth than they have in almost a century. What do they spend it on? As you might expect, personal jets (the new Aerion AS2 private jet, priced at $100 million, that seats eleven and includes a deluxe dining room and shower facilities, and will be able to cross the Atlantic in just four hours,) giant yachts, works of art, and luxury penthouses (The one atop Manhattan's newest "needle" tower, the 90-story One57, just went for $90 million.)

The Center for Effective Government and the Institute forPolicy Studies report finds that 29 of America’s 100 largest corporations paid more to their CEO than they did to the federal government in taxes in 2013. In fact, the report states, “The 29 firms reported $24 billion in U.S. profits last year and yet collected $238 million in tax refunds.” That’s right: these firms not only did not pay net federal taxes; they received a refund.

JPMorgan Chase and its chief executive, Jamie Dimon. JPMorgan Chase had a pre-tax income of more than $17 billion in 2013, according to the report, and Dimon’s take-home pay that year was $11.8 million. JP Morgan’s net tax bill? A negative $1.3 billion. That works out to an effective tax rate of -7.6 percent. Many of the techniques that these large corporations use to lower their tax bills to below zero are included in the package of tax extenders that are now pending before Congress. They include the “active financing exception” that allows corporations to dodge taxes by shifting profits from leasing and lending activities to offshore entities, and accelerated depreciation rules that were initially written into the 1999 Recovery Act to encourage corporations to spend money during the depths of the recession but that corporations now want to make a permanent part of the code.

If the seven giant, highly profitable corporations that paid their CEOs more than Uncle Sam had paid the full statutory corporate tax rate of 35 percent, they would’ve owed $25.9 billion in federal taxes,” the report said. “Instead they received $1.9 billion in refunds, for a total difference of $27.8 billion.”

That’s revenue that could have been used to help school districts replace nearly all of the public school teaching positions lost in the 2008 recession and its aftermath, the report said. Or it could be used to resurface 22,240 miles of road. Or it could fund two months’ worth of health care services at veteran’s hospitals.

Political spending has been growing faster than their spending on anything else. It's been growing even faster than their wealth. In the 2012 election cycle (the last for which we have good data) donations from the top .01 accounted for over 40 percent of all campaign contributions, according to a study by Professors Adam Bonica, Nolan McCarty, Keith Poole, and Howard Rosenthal. This is a huge increase from 1980, when the top .01 accounted for ten percent of total campaign contributions. In 2012, the two largest donors were Sheldon and Miriam Adelson, who gave $56.8 million and $46.6 million, respectively. Of the other members of the Forbes list of 400 richest Americans, fully 388 made political contributions. They accounted for forty of the 155 contributions of $1 million or more. Of the 4,493 board members and CEOs of Fortune 500 corporations, more than four out of five contributed (many of the non-contributors were foreign nationals who were prohibited from giving). The top .01 percent's donations to Democrats were more than four times larger than all labor union donations to Democrats put together.

The richest .01 percent haven't been donating out of the goodness of their hearts. They've donated out of goodness to their wallets.

Their political investments have paid off in the form of lower taxes on themselves and their businesses, subsidies for their corporations, government bailouts, federal prosecutions that end in settlements where companies don't affirm or deny the facts and where executives don't go to jail, watered-down regulations, and non-enforcement of anti-trust laws. Since the top .01 began investing big time in politics, corporate profits and the stock market have risen to record levels. That's enlarged the wealth of the richest .01 percent by an average of 7.8 percent a year since the mid-1980s.

The richest .01 percent haven't been donating out of the goodness of their hearts. They've donated out of goodness to their wallets. But the bottom 90 percent don't own many shares of stock. They rely on wages, which have been trending downward. And for some reason, politicians don't seem particularly intent on reversing this trend.

From an article by Robert Reich on Alternet