Let’s look at this graph again. The average family income of those in the top 0.01% is $23,846,950. The average family income for families in the top 0.10% is $2,802,020. An average family in the top 1.0% has $1,019,089 in income. The “recovery” has been very good to the people in these economically elite categories: During the 2009-2010 recovery period 93% of the gains were captured by the top 1%. That would be the three columns on the left hand side of the graph.
Of these gains 37% went to the top 0.01% — that would be the 15,000 Americans with incomes of $23.8 million annually. There are 314,583,369 people in this country.
So why would this happen?
(1) The individuals in the top 0.01% have the resources to hire battalions of accountants, and the wherewithal to utilize offshore accounts, tax havens, and to keep production and profits off shore to minimize tax obligations. Sound familiar? Could this be part of the reason we’ve not seen the Romney tax returns for the past 12 years? The partial information released to date indicates the use of off shore accounts in Bermuda and the Cayman Islands, the investment in offshore industries, “gifting” of stocks in offshore companies for tax reduction purposes, and the use of “blockers” to manipulate tax liabilities.
(2) The individuals in the top 0.01% avail themselves of “carried interest” accounting treatment to reduce the tax liability on their income by calling it “capital gains.” Former Reagan Administration adviser Bruce Bartlett remarks:
“A key reason for Mr. Romney’s low tax rate is that a very substantial amount of his income comes from capital gains – 51 percent in 2011 and 58 percent in 2010. Capital gains, no matter how large, are taxed at a maximum rate of 15 percent, whereas wage income can be taxed as much as 35 percent by the income tax plus taxes for Medicare and Social Security. The latter two are not assessed on capital gains.”
The way the loophole works relates to the peculiar method in which money managers are compensated. Typically, they receive a fee of 2 percent of the gross assets under management, much of which comes from employee pension funds, plus 20 percent of any increase in value.
Thus, on $1 billion of assets the managers would automatically get $20 million that would be taxed as ordinary income. If the assets increased 10 percent to $1.1 billion, they would get another $20 million. For tax purposes, this additional $20 million would be treated as a capital gain and taxed at 15 percent. [NYT]
Little wonder the hedge fund managers were often among the top 0.01%. Equally, little wonder that money management corporations like Bain Capital were among the Winners.
(3) The financialist plutocrats defend their loopholes, like the carried interest loophole and the reduced rates on capital gains and dividends, quite well in the halls of Congress. Note that the Romney Campaign is NOT calling for the restriction of these loopholes and preferential treatment. In fact, they are calling for the maintenance of low capital gains and dividend rates, and the elimination of the estate tax.
What would a potential Romney Administration do to reduce loopholes? There’s always the home mortgage interest deduction? The educational expense deduction? Deductions for medical expenses? If it were suggested these be eliminated there would be significant opposition. So, they aren’t being suggested — however, they are the only ones “large” enough to make a dent in the federal debt.
In short, what candidate Romney is suggesting is a government of the plutocrats, by the plutocrats, and for the plutocrats. It is a financialist’s wet dream. An average American family’s nightmare. It is, indeed, the Bush policy on steroids: Deregulation, Globalization, and Trickle Down Supply Side Voodoo Economics.
What happened the last time we tried de-regulation of the financial markets? What happened when we tried Trickle Down economics from 1980 to 2007?
The financialist plutocrats did well — the rest of us not so much. The 2012 election clearly delineates the interests of the top 0.01% and the other 99.99% — Governor Romney is doing a good job of representing the interests of his cohorts in the 0.01%. Perhaps we’d like a President for the remaining 99.99% of the U.S.