The Wall Street Journal has reported a new report by the US based Institute for Policy Studies.
There argument, backed by analysis, is that the US tax code is designed to reward CEOs by giving massive tax breaks to high CEO pay. The result is plain to see:
The policy institute's study identified 26 CEOs who averaged $20.4 million in total compensation last year, including bailed-out Citigroup's Vikram Pandit and bailed-out AIG's Robert Benmosche. "That's a 23% increase over the average for last year's list of 2010's tax dodging executives," the study said.
All the major corporations cited in the report paid more to their CEOs than they did in federal income taxes (which the study calls "tax dodging"). The study also said that thanks to the Bush tax cuts, CEOs at 57 major U.S. companies each saved more than $1 million in personal income taxes.
That's what CEO capture of corporate power in turn leading to corporate capture of the tax code has lead to. No wonder inequality is growing.
And as Joseph Stiglitz argues in his book "The Price of Inequality", that's massively destructive for the economy as a whole.
Does this matter? Well, yes: this will, as, John Authers argues in the FT this morning be an issue at the core of the US presidential election debate:
There is a distinguished tradition that holds that cutting taxes for the wealthy creates incentives for greater profits, and wealth creation. It is hard to combine deficit hawkery with advocacy of tax cuts even for the wealthiest in society — as it appears the Republican ticket will do — without believing this to be true.
There is also a tradition in economics holding that cutting taxes for the wealthy will not stimulate growth. These two schools will argue it out for the next three months.
I for one have no trouble accepting that more business friendly tax and regulatory policies would have beneficial supply side effects.
However, we need to see this in context. Most business surveys report that the greatest source of policy uncertainty is the fiscal cliff at the year end, not the tax and regulatory regime. This, the euro crisis and the recession itself, are the main reasons why businesses are reluctant to hire and invest. And that will be much harder to fix than candidate Romney contends.
The combination shows, if I might be so bold, the way in which people like Davies have captured the system for gain. He argues for tax cuts and deregulation, all of which will make the rich richer and life for the rest harder before then admitting they won't change anything except inequality, which will increase.
The trouble is, people listen to him as he has money and Goldman Sachs behind him.
And that, in my view, is what modern political corruption is: the advocacy of policy from a position of power created by the capture of wealth even when you know that policy won't work and you're only suggesting it for the sake of your own private gain. The Romney / Ryan campaign is the archetype, but let's not think it's by any means alone.
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There is also insidious propaganda on SKY tv. Fox news has a constant stream of financial experts” who push those policies. A few days ago they had a hedge fund manager who owns an organisation called Capitalist Pig. I looked it up to find he was born wealthy and is a fan of Ayn Rand (like Ryan) who preached a sort of reverse Good Samaritan approach -i.e. walk by on the other side when you see suffering.
Even on the religious channels one finds widespread anti-Obama sentiment and a simplistic view of Iran -dangerous, liars, a threat to Israel, must be contained and so on. The Rev. John Hagee (who McCain dropped as a sponsor after Hagee said the Holocaust was part of God’s plan) and his son have a well funded program. They have a constant stream of right wing preaching, Pat Robertson, a former Republican candidate, mutters his way through regular denunciations of Obama. And some of them strongly suggest followers continue to tithe eve if they are unemployed as ‘God will bless them.’
Now in all probability few people watch these channels, but anyone without much reading who tunes is likely to think this opinion is ‘how it is’. If some of those sentiments were expressed on the BBC there would be many complaints. There are , as far I can see, no ‘liberal’ channels to put a different point of view, but the rich, like Murdoch, can use their wealth to propagate their views. It is not a level playing field,
And they intend to keep it very unlevel
Odd that the fundamental assumption required fror markets toi be fair is that there be a level playing field
[…] Murphy quotes from a beyond-the-paywall FT article (8) by John Authers who argues that the issue at the core of the US presidential election debate will […]
I’d love to know, genuinely, how high tax rates would affect the career of a real entrepreneur.
Are people on the right really saying that someone like Alan Sugar said “Well, I’m not working my knackers off for the Govt. If the higher rate is 40% I’ll become a librarian, but if its only 30% I’ll sell lingerie on the market ?”
That doesn’t fit my idea of “real life” at all !
Entrepreneurs are never put off by tax
Speculators are
Not the same thing, at all
Don’t forget our own HMRC agreements made with the Swiss. How many would suspect the UK is worse or better?