Rich Getting Richer, Paying Less and Less in Taxes

David Cay JohnstonLast week, David Cay Johnston reported, The Top 0.001 Percent Are Different From You and Me. He provided data showing that the super rich are doing vastly better than even the rich. The numbers are striking. Consider the period from 2003 through 2012. If you look at the bottom 99.9% of the top 1%, you see that their average incomes rose from $876,000 to $1.3 million. That’s an increase of 48%. But if you look at the top 0.1% of the top 1%, you see that their average incomes rose from $76 million to $161 million. That’s an increase of 111%. We know we have an inequality problem and this just shows that it is accelerating.

Johnston also went into the way that taxes are all screwed up for this group too. If we look at total federal income taxes, the more people make, the less they pay. In the top 0.001% of the top 1%, the average amount of this tax paid is just 17.6%. But the top quarter of this group plays less: just 16.6%. Meanwhile, the bottom 99.9% of the top 1% pays 23.5%. Johnston didn’t go into it, but even this is unequally divided, with those at the bottom end of the top 1% paying a lot more than those at the top. Note also that those at the very top pay effectively no payroll tax. But even those at the bottom of the top 1% pay only about a quarter of what the rest of us pay — because so much of their income is above the payroll tax cap.

What Johnston also didn’t talk about is the fractal nature of inequality. What he described about the top 1% is true of the entire income distribution: the further people get up the income scale in a relative sense, the bigger the payoff. So rising 20% in terms of your income standing will not increase your income by 20%; it will raise your income by 100% or 200% — something much larger than 20%. This is largely why no one ever feels rich: they always see people who are in their income range but who have far more money. Those people making $161 million per year know people who make a billion. So they think of themselves as “middle class.”

Johnston has done calculations that indicate even while the rich are getting richer and their tax burdens are getting smaller, the middle class is seeing its incomes decrease while its tax burdens go up. For the bottom 80% of income earners from 2003 through 2012, average incomes actually fell. But they are paying more in taxes. Consider just the payroll tax, which is 15.3% right off the top. That’s what we all pay. That tax alone is almost as much as is being paid by those who are making $161 million. When conservatives call for a flat tax, they never include the payroll tax. The idea is to make the taxes that rich people pay flat so that they pay even less.

The reason we have this situation is that the rich are well organized and are incredibly good at misdirection. They’ve got roughly half the nation thinking that the real reason the middle class is struggling so much is because poor kids are getting free school lunches. I say it all the time, but it bears repeating: this is not sustainable. Eventually, the whole system falls apart, and that hurts the rich and the poor. But I suspect the United States will fall apart in a stable way — slowly become a banana republic. In many ways, it already is. But don’t worry. Just keep looking at the fire and the projection of the big head. Pay no attention to that man behind the curtain…

Patent Protections Harming Innovation

Dean Baker[A] Chinese drug company appears to have developed a successful treatment for Ebola, the use of which is being threatened by US researchers complaining about patent infringement. The basic story is that the Chinese company used information in a US patent to help develop their drug, which appears to be an effective treatment for Ebola. The patent holders are now upset that the Chinese company is making their drug widely available to Ebola victims, in some cases to people who would otherwise be taking part in controlled clinical trials…

Anyhow, it is difficult to believe that progress would not advance more rapidly if researchers did not try to bottle up their findings with patent protection. This is the sort of protection that will be increased in the Trans-Pacific Partnership (TPP). The impact of this protectionism in raising drug prices and impeding scientific progress has not been considered in the widely cited analysis of the TPP’s impact.

—Dean Baker
Ebola and How Patent Protection Impedes Innovation

Culpability in the Death of Tamir Rice

Tamir RiceA report totaling hundreds of pages has been released regarding the shooting death of Tamir Rice, the 12-year-old boy who was playing with a toy gun in a public part in Cleveland. Not surprisingly, the officers involved claim that they had no choice but the kill the boy. Several things struck me while reading German Lopez’s overview at Vox, New Documents Reveal Details About Cleveland Police Shooting of 12-Year-Old Tamir Rice. It seems strange that after going through this exercise, the report isn’t more clear. And even after this, it is still questionable whether there will be an indictment. And it is almost certain that the officers will be found not guilty if they are forced to go to trial.

Much has been made of the fact that the orange tip on the pellet gun was missing. But this seems to be irrelevant. Officer Timothy Loehmann claims that he was forced to shoot Rice because the boy went for the gun that was in his waistband. So the officer wouldn’t have seen the orange tip even if it had been the there. The only thing that would have been different is that after shooting Rice, the officer would have known right away what he had done. Now that might have been useful to know because Rice didn’t die right away.

There was an FBI agent who was in the area and came to scene between four and five minutes after the shooting. He immediately started to administer first-aid. According to Lopez’s article, “The FBI agent described Loehmann and [officer Frank] Garmback as almost shell-shocked — wanting to do something but not knowing what to do.” Rice was eventually taken to the hospital where he died the following night. So in addition to driving up on Rice and quickly shooting him, the two officers did not treat him properly after the incident. I don’t know if Rice would have survived if they had, but when the FBI agent showed up, Rice was still conscious.

Loehmann said of the shooting, “He gave me no choice. He reached for the gun and there was nothing I could do.” This is the sort of thing we hear from police officers all the time. But I’m curious why it is that officers who think they might be dealing with a dangerous person with a gun are so careless about driving up to them. If Rice had been a madman with a gun, he could have just shot both the officers before they ever got out of the car. So the idea here seems to be that the police should just throw themselves into situations where wiser people would be cautious. And then at the slightest sign of trouble, they should just start firing away.

In this case, there is enormous culpability. I don’t think we can say that Loehmann is guilty of murder. But both he and Garmback seem to be guilty of reckless endangerment. And their total uselessness in getting Rice medical attention after he was shot must be seen as criminal negligence for two men who were supposedly trained to deal with situations like this. But I suspect that this is the problem. As far as I can tell, our police officers are trained to be like George Zimmerman: belligerent cowards. The slogan of the police should be changed to, “To protect and serve ourselves.” And the iconic statement should be, “Just the facts ma’am — right after I call my union rep.”

Who Contributes to Clinton and Sanders?

Bernie SandersOver the weekend at Vox, Dylan Matthews wrote a great article that ought to surprise no one, but nonetheless is very important, Want to Know What Sets Bernie Sanders Apart From Hillary Clinton? Look at Their Donors. He provided a screenshot of the top donors of the two candidates. All you have to do is look at the very top donor of each because they are entirely typical of the top 20. Hillary Clinton’s top donor is Citigroup Inc, which gave $782,327. Bernie Sanders’ top donor is Machinists/Aerospace Workers Union, which gave $95,000. At the bottom of the list (number 20) is Greenberg Traurig with $273,550 for Clinton and the American Federation of Teachers with $35,567 for Sanders.

These are the top contributions in their careers since 1989. This is basically their whole careers. Clinton didn’t run for office herself until 2000. Clearly, First Lady of Arkansas and the United States are political positions — especially in her case. But these weren’t elected offices and so no one gave her campaign contributions. Sanders was mayor of Burlington from 1981 through 1989. But with a population of roughly 40,000 people (and still the biggest town in Vermont), we can assume he didn’t get big campaign contributions. His national political career started in 1990 when he ran for (and won) Vermont’s one seat in the House of Representatives.

Hillary ClintonThe kinds of donors the two candidates attract really are telling. Clinton’s contributors are big banks, big law firms, and big entertainment companies. The only exceptions are Corning Inc, University of California, and EMILY’s List. Of Sanders’ 20 contributors, 19 of them are labor unions. The exception is the American Association for Justice — which could also be considered a kind of union, since it represents the interests of trial lawyers.

One shouldn’t get the idea that Sanders is beholden to labor unions, however; his biggest contributor gave just over a third of Clinton’s 20th biggest contributor. All of Sanders’ contributions combined are equal to less than Clinton’s top two contributions or almost exactly the same as her bottom four. This is representative of the fact that Clinton was Senator of New York — which takes a lot more money to run for office there. Also: she ran for president. But the amount of money that Sanders has received from organized labor is still not all that great.

The more important point here is that labor unions are not giving to Sanders to get access or to change the way that he votes. Unions know that Sanders is on their side. They want to get him elected because they know he is one of the good guys. They give to him the same way I occasionally give ten bucks to a candidate. I don’t think I’m buying anything — other than trying to get a candidate in office who agrees with me. I don’t think this is what Goldman Sachs is up to when it gives hundreds of thousands of dollars to a candidate. (That’s not to say that labor unions don’t also want access — but you need only look at Obama are card check to see how successful that is.)

This offers up a way of reforming campaign finance. It would be possible to turn Goldman Sachs campaign contributions into Frank Moraes contributions. It would just require that contributions go into a fund that was anonymous. Thus, contributions would be for the purpose of supporting someone the contributor thinks the politician will do rather than having it used as a kind of legalized bribery.

Hillary Clinton and Bernie Sanders Contributions

Regardless, this list provides yet more evidence that Bernie Sanders really is the kind of person who the American people would want to vote for if they voted based upon the issues. As much as organized labor has been vilified in this country, Sanders’ donors indicate that he’s looking out for the interests of the American people. Clinton’s do not. (The Republican candidates, of course, look even worse.)

Morning Music: Bobby Vinton

Roses Are Red - Bobby VintonAll last night, I had the song “Blue Velvet” going through my head. So I thought I would find a little Bobby Vinton singing the song. My mother — like most white women of her age — loved him. So I went looking for the song and I listened to it and it hit me immediately, “I can’t present this!” It’s just awful. So I happened upon “Mr Lonely” off his 1962 album Roses Are Red. It is one of the few Vinton songs that he co-wrote.

The song was co-written by Gene Allan — famous for writing songs for The Archies. He is not (as Wikipedia would have you believe) the art director and three term president of Academy of Motion Pictures Arts and Sciences, Gene Allen. Anyway, it is a listenable song. Mom would like it.

Anniversary Post: Henry Ossian Flipper

Henry Ossian FlipperOn this day in 1877, Henry Ossian Flipper became the first African American to graduate from West Point. He went on to be the first non-white officer to lead on the all-black regiments who were being used to kill the Native American tribes throughout the United States. He was generally considered a fine officer. But he only stayed in the Army for five years. The entire time, he faced intense racism. Eventually, his bigoted supervisor William Rufus Shafter manage to railroad Flipper through a Court Martial. Despite the fact that he was found innocent of the charge, he was found guilty of a lesser charge — “conduct unbecoming an officer” — that was introduced in the middle of the trial. Although white officers had previously gotten wrist slaps after being found guilty of the far more serious charge of embezzlement, Flipper was thrown out of the Army.

Flipper did have his defenders, however, and he went on to have a good career as a civil servant. At first he worked as a a civil engineer but eventually became an adviser on revolutionary politics in Mexico for Senator Albert Fall. When Fall because Secretary of the Interior, Flipper followed him. He finished out his career as an engineer for the petroleum industry in Venezuela. He retired to his home state of Georgia, and died at the age of 84.

What I think is interesting about Flipper’s story is how it shows that the end of slavery was very important to the equality in this country. But it was just one step of an endless number of steps. The people who claim that we are in a post-racial time were matched by people in Flipper’s time who also claimed that there was nothing that needed to be done. After all: slavery was over! The struggle goes on and on. Henry Ossian Flipper could not possibly have been any better a person, yet he was nonetheless dumped on by individuals and establishment alike.

We mark this day 138 years ago when one more step was taken in the cause of equality.