As the Institute for Policy Studies reports, officials at the National Archives recently released a 67-year-old U.S. Treasury Department report detailing what the richest Americans once paid in taxes in the middle of the 20th century. IPS notes that "We have simply never had clearer evidence of just how much America used to expect out of individual wealthy Americans -- and just how little, by comparison, we expect out of our wealthy today." Here are some of the details:
We learn, for instance, that 1941's top executive at IBM, Thomas Watson, collected $517,221 in compensation that year, about $7.7 million in current dollars. Watson paid 69 percent of his total 1941 income in federal income tax.
Last year, today's chief exec at IBM, Sam Palmisano, took home $24.3 million for his executive labors. We don't know how much income above that sum Palmisano reported in 2009, or exactly how much of that total he paid in taxes.
But we do know that the 13,374 Americans who reported incomes over $10 million in 2008, the latest year with IRS stats available, paid an average 24.1 percent of their taxable incomes in federal income tax.
In other words, IBM CEO Palmisano last year took home, after adjusting for inflation, over three times more than his predecessor Thomas Watson took home in 1941. Yet Watson in 1941 paid almost three times more of his income in federal income taxes than Palmisano likely paid in 2009.
So assuming that Palmisano pays roughly what his fellow millionaires pay in taxes, we've seen IBM CEO tax rates go from 69 percent down to 24 percent. That's a massive tax cut, and it's no coincidence that it came over the very same period we saw an explosion in federal deficits. And remember, these numbers compare the data that exists before this week's expected passage of even more new deficit-expanding tax cuts for the super-rich. ...
Somehow, this assumption goes unquestioned at a time when we simultaneously wonder why we have huge deficits and why our economy is now faltering. We are so enthralled with preserving the riches of the so-called Masters of the Universe, and those Masters of the Universe have their wealth to buy off so many politicians, that we are now immersed in a culture of willful ignorance. We can no longer learn history's lessons about taxes -- even the lessons that are as crystal clear as this newly released IRS data.
You see, before it was the Casperkill Recreation Center, it was the IBM Country Club. In the sixties, seventies, and eighties, IBM prided itself on being family-oriented. The company held annual family outing days, provided Christmas gifts and holiday parties for children of employees, and provided a recreation facility for families to gather and spend their summer days. IBM employees in the Hudson Valley were automatically members of the IBM Country Club. This was a class-blind facility, not just for managers and executives. Every employee and their family members could use the facilities, free of charge. ...
The IBM Country Club was a benefit that most of us took for granted as employees, and some may not have appreciated it until it was taken away. Over the years, changes were made to make the club more self-sustaining. First, employees were asked to contribute to their annual membership; this started as a modest fee (I recall less than $10 per year) that jumped to a couple hundred dollars per year over time. But IBM couldn’t afford to keep the facility.
Selected reader comments follow:
There's also the large land mass in San Jose that went to Hitachi along with the buildings. Not the best use of space there, if memory serves.
By July of 1999 the price of the stock had risen to $137.88. At that point, IBM had spent around $32 billion on buybacks.
In the 10 years since then, IBM has spent another $100 billion on buybacks. The share price dipped as low as $55 in October, 2002 and has since recovered to its present price of around $145.
To me, this is evidence that buybacks have little effect on the stock price in the long run. IBM pissed away $100 billion for nothing, rather than investing that money in the company and new product development. It's pretty clear evidence that Sam has no vision and no ideas for how to grow the company.
In the last three months, the Labor Department has launched 191 investigations into 401(k) fraud and theft, and secured 20 indictments – a whopping 43% more than the department has secured annually, on average, since 1995. The millions at stake in recent cases may seem small in the context of the $3 trillion 401(k) market, but observers say the indictments point to larger issues in the 401(k) marketplace, from lack of oversight and an understaffed enforcement agency to the larger risks that have shifted over time to individual participants. The cases, says Brandon Reese, deputy director of the office of investment at the AFL-CIO, “expose a more systemic problem in the defined contribution retirement system.”
The study, by the Commonwealth Fund, estimated that 18.3 million people in that age group stand to benefit from the provisions in the federal health law, including the expanded access to coverage, the elimination of lifetime and annual spending caps on policies and, eventually, the end of insurers denying people coverage based on their medical histories. "For most older adults who are uninsured or underinsured, the early provisions, many of which went into effect this year, will provide transitional relief," said Sara Collins, Commonwealth Fund vice president and lead author of the report. ...
California is one of 16 states where the uninsured rate for people in the 50- to 64-year-old age group is higher than the national average of about 15 percent. The study contends that this age group has possibly the most to gain from some of the provisions in the new federal health law, which will probably end up before the U.S. Supreme Court. A federal judge in Virginia on Monday declared that the government cannot require Americans to buy health insurance.
The mandate to have health coverage is an essential component of the law, which in 2014 will prohibit insurers from denying adults coverage due to pre-existing health conditions. Requiring everyone to buy coverage - young and healthy as well as older and sicker - helped cut opposition by insurance companies. Older adults are more likely to have pre-existing conditions that would cause them to be denied coverage, especially in the individual market where insurers can charge higher rates or deny coverage based on an applicant's medical history. "When you're 50 years old, chances are you have a pre-existing health condition," said California AARP spokesman Mark Beach. "Just being 50 years old may actually be a pre-existing condition for insurance companies."
I was not born to a well-to-do family, like most of the us, I’m sure. Since I was 20 years old I have been busting my ass getting my education and experience where it needs to be so that I might be able to provide a secure future for my family. All of this was funded by ME either from my own pocket, or through student loans. Just when I get to the point where my education is primed, and my experience qualifies me as an expert in Information technology, some fat corporate bastard with less skill than I have decides that everyone but him should do 3 people’s work for ½ a full time wage. He gets a million dollar bonus, in addition to the $750,000 he brings home a year…. While I’m worried about how I’m going to feed and house my children, while not going into default on my student loans. People always say life’s not fair, but damn that. Life can be as fair as we want to make it.
I have no problems with the city of Dubuque, but I am currently, actively and feverishly seeking employment outside of Dubuque. Don't let IBM lie to anyone else. Did you know that they are no longer hiring Full time employees, only contractors? Did you know that the average salary for a non-manager is 28,500, when it should be about 45,000? Did you know that they are specifically seeking foreigners to take American's jobs because they will do it for less? How does any of this help Dubuque? I don’t consider this to be a political issue, this is a human issue. We cannot allow these large corporations to continue to rape our economy in the interests of “the shareholders.” Anyone interested in starting a union?
When Motorola and other American companies like the International Business Machines Corporation set up shop here 20 years ago, they found an inexpensive, well-educated and malleable work force and a Government willing to use brute force to keep workers in line. Now strikes are legal, the Government usually stays away, and workers demand more from both South Korean and foreign employers. United States companies face an added twist - if negotiations are faltering, unions can always appeal to swelling anti-American sentiment.
Companies like Motorola and I.B.M. - which offer top salaries and generous benefits here and have staved off unions in most of their operations worldwide, including the United States - have been confronted by political and legal upheavals in South Korea that change all the old rules. Last year alone, the Ministry of Labor counted 1,873 labor disputes. Last month, for example, a small group of white-collar workers at I.B.M. Korea went on an eight-day hunger strike that ended only when their union was recognized.
Cons: Ridiculous concept of high utilization. On one side they give you 22 annual leave; on the other side the utilization target is set around 97%. Meaning out of 270 days you should be working for 262 days in a year. If you take out the 13 public holidays in India you will never meet your utilization target. (Yes, the management allows to book you 9 hours instead of 8 hours daily, which helps improve the target, but ridiculous). No fair process for role progress and salary increase. (Inflation in India is around 9% and your salary increases barely 4-5%, besides recession gives them a reason to say no salary hike) No relation to goals (PBC) at the beginning of the year and the assessment at the end. (The senior management simply sends a list of goals based on role for everyone...wonder why ask employees to set the goal at all..) Wide cost cutting... (Nothing is free, no tea, coffee... Heard probably will make the parking paid as well). No recognition of quality work. If you are at onsite, you will be not get any other benefits. (The management justifies that since you are on-site, you are already getting enough. so nothing else for you.) No scheme/rewards for motivating the employees. Dearth of challenging projects. The list can go on. IBM in India is a very different company than what it was.
Advice to Senior Management: You are simply building a list of unsatisfied employees. Cannot only bank on the previous glory. The policies should also make sense to your employees. Change fast or deal with the high rate of attrition.
Documented procedures, patents, innovating methods - all meaningless without the right people to perform that work. Its pretty telling at Alliance@IBM's web site that IBM is reshaping their DNA at the expense of their employees. And the stories are, shall we say, compelling.
Not so much each individual story but that they all show a clear pattern that executives are focused on short-term gains at the expense of clients and employees. About the only people making much on IBM is their shareholders. All 3 elements of a brand, employees, customers and shareholders need balance. IBM does not have it; and it is by choice, not necessity. -Anonymous-
"Assuming that the Clinton era tax rate is what the tax rate should always be is a bad assumption. Tax rates do change on an ongoing basis in America. Substitute the words "Current tax rate" for the rhetoric" Bush tax cuts for the rich"
Sorry I don't buy this. Rich people would need to move to the 3rd world to find lower tax rates than the USA. Did your dad and mom retire with nice benefits? You can credit smart and progressive taxes in the 50s and 60s that taxed wealthy people more than they are taxed today. I may end my life in a fancy cardboard box thanks to the "let them eat cake" attitude that prevails in this country; but at least I don't have to support my parents. They have pensions and social security. But with people supporting lower and lower taxes on the wealthy, where will our safety net go? Pension? I'll believe it the day the first check comes. Social Security? It's being raided and people want me to think like a 'Stepford American' with glazed over eyes and say: current tax-rates instead of "Bush tax cuts for the superwealthy". Well sorry, your kool-aid isn't quite strong enough. Or should I say "Tea" instead of Kool-aid.?
Sen. Jay Rockefeller, D-W.Va., held a hearing last week in which he said that those enrolled in such coverage often mistakenly think they have financial protection. “It gives people a false sense of security — it lets them think they have health insurance when they really don’t. By the time they realize they don’t have real health insurance, it’s too late," he said.
And as the attorneys in the Virginia case bad-talk the health care plan for being too “big government,” Benin notes that the tenet Judge Hudson struck down––an individual mandate that everyone must purchase the health care insurance––was initially the idea of conservatives like Bob Dole, W, Mitt Romney, even McCain.
The health care law in question was Medicare, and the critic was Ronald Reagan. He made the leap from actor to political activist, almost 50 years ago, in part by opposing government-run health insurance for the elderly. ...
We’ve lived through a version of this story before, and not just with Medicare. Nearly every time this country has expanded its social safety net or tried to guarantee civil rights, passionate opposition has followed. The opposition stems from the tension between two competing traditions in the American economy. One is the laissez-faire tradition that celebrates individuality and risk-taking. The other is the progressive tradition that says people have a right to a minimum standard of living — time off from work, education and the like.
The federal income tax, a senator from New York said a century ago, might mean the end of “our distinctively American experiment of individual freedom.” Social Security was actually a plan “to Sovietize America,” a previous head of the Chamber of Commerce said in 1935. The minimum wage and mandated overtime pay were steps “in the direction of Communism, Bolshevism, fascism and Nazism,” the National Association of Manufacturers charged in 1938. ...
In truth, the law is quite moderate. It is more conservative than President Bill Clinton’s 1993 plan or President Richard Nixon’s 1974 plan (in which the federal government would have covered anyone who wasn’t insured through an employer). It’s much more conservative than expanding Medicare to cover everyone. It is clearly one of the least radical ways for the United States to end its status as the only rich country with millions and millions of uninsured. ...
Guaranteeing people a decent retirement and decent health care does more than smooth out the rough edges of capitalism. Those guarantees give people the freedom to take risks. If you know that professional failure won’t leave you penniless and won’t prevent your child from receiving needed medical care, you can leave the comfort of a large corporation and take a chance on your own idea. You can take a shot at becoming the next great American entrepreneur.
With every previous major expansion of the safety net, history has had a chance to prove the naysayers wrong. It may yet in the case of universal health coverage. But the decision now seems to rest with the nine members of the Supreme Court.
James T. Boffetti, the state’s senior assistant attorney general, said the registry had hired models based on their photographs and had given them “explicit instructions” to wear heels and short skirts. The registry paid the models to approach potential donors at dozens of malls and events throughout New England, Mr. Boffetti said. “The models worked the crowds, if you will,” he said. “We were told basically they would engage a lot of younger men with some sort of flirtatious thing: ‘Hey, don’t you want to be a hero? Come on, do this!’ ” ...
If people expressed interest, Mr. Boffetti said, the models — who, for reasons that remain unclear, sometimes also wore electric-blue wigs — would hand them off to registry employees who would take mouth swabs. “They got people to do this without telling them it could be a charge of $4,300 against their insurance,” he said.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk. In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks. The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available. ...
The marketplace as it functions now “adds up to higher costs to all Americans,” said Gary Gensler, the chairman of the Commodity Futures Trading Commission, which regulates most derivatives. More oversight of the banks in this market is needed, he said. But big banks influence the rules governing derivatives through a variety of industry groups. The banks’ latest point of influence are clearinghouses like ICE Trust, which holds the monthly meetings with the nine bankers in New York.
Indeed, the derivatives market today reminds some experts of the Nasdaq stock market in the 1990s. Back then, the Justice Department discovered that Nasdaq market makers were secretly colluding to protect their own profits. Following that scandal, reforms and electronic trading systems cut Nasdaq stock trading costs to 1/20th of their former level — an enormous savings for investors.
Bachus, in an interview Wednesday night, said he brings a "main street" perspective to the committee, as opposed to Wall Street. "In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks," he said. ...
In the 2009-10 election cycle, the finance/insurance/real estate sector gave Bachus' campaign account $752,200, most of it from political action committees, according to an analysis by the Center for Responsive Politics.
Mr. Obama has met with chief executives since the start of his administration, but some who attended those meetings have complained that he didn't take their views into account in policies that resulted. Corporate leaders have expressed dismay at Mr. Obama's sometimes sharp criticism of multinational corporations and his administration's regulatory and tax policies, such as a proposal to raise taxes on income that corporations earn overseas. ...
Since the election, Mr. Obama "has done the right thing to reach out to people in both parties….I think he is going to be more experienced and build more coalitions than he was before," U.S. Chamber of Commerce President Tom Donohue said Friday on Fox News. The White House and the chamber are discussing dates in January for Mr. Obama to address the group on jobs and the economy. That would expand an emerging détente with the group, after a campaign during which they feuded bitterly over the chamber's bankrolling of Republican candidates.
You can't fault the president for showing a little love to America's corporate leaders, but there is one small problem here: The entire premise of the meeting is wrong. The reality is that the corporations are doing extraordinarily well -- and America is in trouble. US corporations recorded the highest profits on record last quarter, while more than 20 million people were in need of full-time work, and poverty is at record heights. What is good for General Motors or General Electric or IBM is no longer necessarily good for America.
In fact, these executives and their companies are more part of the problem than part of the solution for this country. They've been making out like bandits, but Americans are less and less the beneficiaries of their success. As President Obama has stated, if we are to revive an America with a vibrant middle class and a widely shared prosperity, we need fundamental reforms to build a new foundation for growth and prosperity -- an agenda the country needs and the CEOs he met with largely oppose. Consider:
But the tax benefits will flow most heavily to the highest earners, just as the original cuts did when they were passed in 2001 and 2003. At least a quarter of the tax savings will go to the wealthiest 1 percent of the population. ...
The wealthiest Americans will also reap tax savings from the proposal’s plan to keep the cap on dividend and capital gains taxes at 15 percent, well below the highest rates on ordinary income.
And negotiators have agreed that the estimated $900 billion cost of the cuts will simply be added to the deficit — not covered by reductions in spending or increases in other taxes. That is good news for hedge fund managers and private equity investors, who appear to have withstood an effort to get them to pay more by eliminating a quirk in the tax code that allows most of their income to be taxed at just 15 percent.
In fact, the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000. “It’s going to look like the rich are getting richer again,” said Anne Mathias, an analyst for MF Global Inc. ...
The estate tax — which was allowed to lapse this year and was scheduled to resume at a rate of 55 percent on most assets above $1 million — will be reinstated under less onerous terms. Estates over $5 million will be subject to a 35 percent tax.
Under Mr. Obama’s failed proposal, which would have raised the rates on income over $250,000 for families and $200,000 for individuals, the taxpayers at the top 1 percent of the income scale — those with incomes above $564,000 — would have received an average tax break of $28,000. Under the agreement reached with Republicans, the top 1 percent will receive breaks of about $70,000.
Executive pay is linked to profits, so top pay is soaring as well. ...
And Wall Street is back. Bonuses on the Street are expected to rise about 5 percent this year, according to a survey by compensation consultants Johnson Associates Inc.
But nothing is trickling down to the Average Worker economy. Job growth is still anemic. At October’s rate of only 50,000 new private-sector jobs, unemployment won’t get down to pre-recession levels for twenty years. And almost half of October’s new jobs were in temporary help. Meanwhile, the median wage is barely rising, adjusted for inflation. And the value of the major asset of most Americans – their homes – continues to drop.
Why are America’s two economies going in opposite directions? Two reasons.
First, big profits are coming from overseas sales of goods and services made abroad, not here. The world’s fastest-growing markets are China and India, whose inhabitants are eager to buy “American” products, and just as eager to work for the American companies that sell them. The U.S. market is barely moving. Increasingly, American corporations are able to extract healthy gains from their global operations without adding much in the United States except executive talent. ...
So what is Washington doing about all this? ...
It’s extending the Bush tax cuts – the lion’s share of which go to the very wealthy; reducing the reach and rate of the estate tax; and giving corporations additional tax breaks for investing in software and equipment. Meanwhile, the states are cutting back on pre-schools, firing teachers, and yanking up tuition and fees at public universities.
That gap is showing up in the bottom lines of American retailers, some of which generate as much as half their annual profits from the holiday season. Though retail sales are expected to show healthy gains of 4 to 5 percent this year, retailers who cater to households at the bottom of the economic ladder are seeing very different results as their customers struggle to make ends meet. ...
Luxury retailers, on the other hand, are having their best year since the bottom fell out of the financial markets in 2008. “The market for the luxury sector is holding up quite nicely,” said Saks Fifth Avenue CEO Steve Sadove. “We’re seeing very solid growth, and we're seeing good full-price selling. So the consumer is feeling very good at the high end. That’s tied to how they feel about their net worth, and that’s tied to the stock market.” ...
Free-spending, high-end consumers are also helping fatten the bottom lines of stores specializing in luxury brands. While households at the bottom of the ladder on tight budgets are squeezing every dollar by looking for the most aggressive mark-downs. high-end shoppers are apparently more inclined to pay full price. “The more high-end you go, the less promotional it’s been,” said McGranahan. “The real high-end guys — the Burberrys of the world — they don’t have any inventory. Business has been so good, they’ve actually had to shut down some of the stores some days because they didn’t have anything left to sell.”
Luxury goods companies are selling to the two groups of people who have any money left: The rich, who are getting richer and richer, and consumers in emerging markets, who are getting richer. ...
Sales at Tiffany's flagship New York store are up 8%. Luxury giant LVMH, which has more than 500 U.S. stores, and whose brands include Fendi, Givenchy and Donna Karan as well as Louis Vuitton itself, says U.S. sales have jumped 15% this year. The Swiss watch federation says exports of Swiss watches to the U.S. are up nearly 15% through the end of November. ...
Who's buying? Hardly the middle-class. With unemployment high, home prices slumping and the economy sluggish, too many are either struggling or watching their pennies. But the elite have money. And they are starting to spend again. The rich and the very rich–the latter having more than $30 million to invest–have seen a sharp rebound in their fortunes following the crash, according to the most recent wealth report from Cap Gemini, the consultants. ...
Pictet's Ms. Reyl notes that the luxury retailers seeing the biggest gains are often those at the top of the tree. We're not talking about "mass affluent" retailers like Saks & Co. or Neiman Marcus, but the kind of companies–such as those run by Richemont or LVMH–which have their own stores.
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