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Eric Alterman

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Think Again: The Super-Rich and Their Monster

Posted: 11/07/2013 9:44 am

As Ian Reifowitz of the Daily Kos pointed out, an article in the New York Times's business section shows that our tax system has been successfully gamed to the point where the wealthiest Americans pay a much smaller percentage of their income than salaried, middle-class taxpayers. Using 2009 IRS data -- the most recent available -- America's top 400 earners, who take in an average adjusted gross income of more than $200 million, paid less than 20 percent of those princely sums to the tax man. Those who only made it into the top 1 percent of earners -- a few of whom earn as little as $344,000 -- paid 24 percent.

The reason for this is the ultra-rich's income tends to derive from capital gains and dividend income. For instance, according to the figures compiled in AR: Absolute Return + Alpha magazine and quoted in the Times, 25 hedge-fund managers in the United States took home more than $350 million in 2009; a few boasted incomes in the billions. Hedge-fund managers and their lobbyists have managed to convince Congress to treat their income as capital gains rather than earned income, which lobbyists convinced Congress to tax at a mere 15 percent. Capital gains for the top 400 taxpayers represented an amazing 16 percent of all capital gains in 2009, the highest percentage by far since the statistics were compiled for the first time in 1992. Their dividend income, which is also taxed at a rate far lower than that of normal income, also hit its zenith in 2009, averaging $10.6 million per person.

These are the victories of the super-rich regarding their personal incomes. On the corporate tax side, their banks are also doing just fine. After a brief scare following the near-collapse of the economy in 2008 and 2009, the banks regrouped and leaned on Congress to water down the Dodd-Frank legislation designed to prevent another such collapse; now, their lobbyists are writing the rule of the Dodd-Frank legislation, gutting its most significant achievements.

There has never been a better time to be enormously wealthy in the United States. They have managed to reshape the tax code in their own narrow self-interest and continue to exercise a stranglehold on Congress to prevent any attempts to redress this.

The only danger facing their endless party is the fact that the U.S. and global economies now find themselves held hostage by the same radical right wing of the Republican Party that many of these same rich folk helped create. In a 2010 column called "The Billionaires Bankrolling the Tea Party," pundit Frank Rich saw the writing on the wall and warned, speaking of the influence of the far-right Koch brothers, David and Charles: "inexorably the Koch agenda is morphing into the G.O.P. agenda, as articulated by current Republican members of Congress, including the putative next Speaker of the House, John Boehner." Now we learn from The Atlantic's Molly Ball that "The Kochs Can't Control the Monster They Created." As she notes, the "billionaire industrialists have funded a sprawling empire of libertarian-conservative activism" and goes on to ask, "what happens when the Tea Party's ideological warfare threatens to plunge the U.S. economy into chaos?" The shutdown, according to Standard & Poor's, cost the U.S. economy $24 billion, as reported by Bloomberg News.

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