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Buchheit writes: "The wealthiest Americans believe they've earned their money through hard work and innovation, and that they're the most productive members of society. For the most part they're wrong. As the facts below will show, they're not nearly as productive as middle-class workers. Yet they've taken almost all the new income over the past 30 years."

(cartoon: Joel Pett/USA Today)
(cartoon: Joel Pett/USA Today)



Five Reasons Why the Very Rich Have NOT Earned Their Money

By Paul Buchheit, Common Dreams

21 April 12

 

he wealthiest Americans believe they've earned their money through hard work and innovation, and that they're the most productive members of society. For the most part they're wrong. As the facts below will show, they're not nearly as productive as middle-class workers. Yet they've taken almost all the new income over the past 30 years.(Image: Flickr by IronRodArt)

Any one of these five reasons should reinforce the belief that the rich should be paying a LOT more in taxes.

1. They've Taken All the Middle Class Wage Increases

In 1980 the richest 1% of America took one of every fifteen post-tax income dollars. Now, according to IRS figures, they take THREE of every fifteen (doc) post-tax income dollars. They've tripled their cut of America's income pie. That's a trillion extra dollars a year.

For every dollar the richest 1% earned in 1980, they've added three more dollars. The poorest 90% have added ONE CENT.

Yet the average American factory worker, according to Berkeley economist Enrico Moretti, produces $180,000 worth of goods a year, more than three times what he or she produced in 1978, in inflation-adjusted dollars.

So workers have TRIPLED their productivity over 30 years while the richest 1% have TRIPLED their share of income. Worker pay remained flat as the top 10% took almost all the productivity gains since 1980.

2. They've Mismanaged Key American Industries

We have the most expensive health care system in the world. Failing banks have survived because of taxpayer bailouts. Management-approved shortcuts have led to workplace deaths and chemical leak disasters. Companies lobby for cap and trade laws so their profits can pay for their pollution.

Over twenty percent of Americans are unemployed or underemployed as big companies hoard $2 trillion in cash. 93% of post-recession income (pdf) is going to the 1% "job-creators" with no appreciable increase in jobs.

Private tuition is skyrocketing, with student loans reaching the $1 trillion mark. Bonuses continue for executives at Ford and Bank of America and Sirius and other companies who have underperformed and/or laid off workers.

No, the captains of industry have not earned their money because of their top-notch management skills.

3. They've Benefited from 50 Years of Public Research

The very rich have made their fortunes in good part because of taxpayer-funded research at the Defense Advanced Research Projects Agency (the Internet), the National Institute of Health, the National Science Foundation, and numerous other government agencies.

Consider just a simple communications device. Computer chips and audio/video/voice technologies grew out of decades of funding at the Department of Defense, the Air Force, NASA, and public universities. The pieces of the device were put together by a procession of chemists, physicists, chip designers, programmers, engineers, production-line workers, market analysts, testers, troubleshooters, etc., etc. They, in turn, couldn't have succeeded without another layer of people providing sustenance and medical support and security and administrative assistance and transportation and office maintenance for the technologists. ALL of them contributed to the final product.

But over the years private businesses have received government contracts to produce and market the results, and "entrepreneurs" have rearranged the pieces into products that seem to appear out of the magical world of a single individual.

4. They've Increased Their Incomes By Not Paying Taxes

The richest 10% own 80% of the stock market, providing billions in "unearned income" that is taxed at less than half the rate of income earned through real work.

Hedge fund managers call their income "carried interest" instead of "income" to keep their tax rate at 15%. Even this small amount may not be paid. Hedge fund managers with incomes in the billions can pay ZERO income tax by deferring their profits through their companies indefinitely.

Real tax rates for the richest Americans have gone way down over the last 30 years, from 34% in 1980 to 23% in 2006. Yet the 1% claim they pay most of the taxes. They don't, if all taxes are considered. Based on recent data from the Center on Budget and Policy Priorities, the total of all state and local taxes, social security taxes, and excise taxes (gasoline, alcohol, tobacco) consumes 22% of the annual incomes of the poorest quintile. For the top 1% of Americans, the same taxes consume less than 10% of their incomes.

In addition, most inherited wealth goes untaxed, with estates valued up to $5 million exempt from federal taxes. The average tax rate on inheritance is less than 3 percent.

It's no different for corporations. U.S. Office of Management (OMB) figures show a gradual drop over the years in Corporate Income Tax as a Share of GDP, from 4% in the 1960s to 1.3% in 2010. That's ONE-THIRD of their previous share. From 2008 to 2010, the top 100 U.S. corporations paid only 12.2% of their income in taxes, and thirty of them paid nothing at all (pdf).

The lack of SEC regulation has also allowed corporate America to seek tax dodges beyond our borders. Citizens for Tax Justice reports that the 280 most profitable U.S. corporations sheltered half their profits from taxes - up to $337 billion a year (pdf) - between 2008 and 2010.

Most shocking is the long-term shift in the tax burden from corporations to middle-class workers. For every dollar of workers' payroll tax paid in the 1950s, corporations paid three dollars. Now it's 16 cents.

5. They've Contributed Little to Society

The richest individuals and corporations have shown little regard for the majority of Americans who depend on sound financial management for their economic security. According to sources such as the New York Times and ProPublica, Wall Street firms including JPMorgan, Citigroup, Bank of America, and Goldman Sachs have been repeatedly charged with fraud only to avoid punishment by paying a fraction of their profits in fines.

Financial insiders have figured out how to cheat other investors by timing the purchase of a stock option to precede good corporate news, timing the sale of a stock option to precede bad corporate news, and changing the purchase date (pdf) on a stock option to a time when the price was lower.

One hedge fund manager, John Paulson, made $4 billion by working with Goldman Sachs to create a financial product that would allow him to bet on the collapse of the housing market. Other financial masterminds packaged toxic derivatives for sale to unknowing pension funds, as ratings agencies were paid to ensure the worthless packages received AAA ratings.

Meanwhile, the banks were roughing up the homeowners. Bank of America foreclosed on tens of thousands of Americans by using unverified evidence called "robo-signing."

Disdain for average citizens goes way beyond fraud, and well outside our borders, into the areas of environmental and human rights abuses. Computer and phone makers like Apple save money by obtaining their coltan from the Congo, where children dig it out of the mines. The "blood coltan" goes to China, where teenagers stand for 12 hours a day performing repetitive tasks for a few dollars. Monsanto's herbicides and pesticides cause biological damage, promote the growth of 'superbugs' and 'superweeds,' and generally don't outperform organic methods of farming. Exxon is not only the biggest profitmaker and polluter, but the company has conducted a lengthy campaign (pdf) to deceive the public about global warming. Corporate Accountability International named Monsanto, Exxon, Koch Industries, Chevron, Blackwater, and Halliburton to its Corporate Hall of Shame.

And finally, how well is society served when valuable resources are spent on a yacht complete with golf course, submarine, beach, and helicopter, and which qualified for a second-home mortgage deduction? Or on a $250,000 playhouse for the kids?

Studies show that increased wealth is correlated with a lesser degree of empathy for others. Despite their dependency on society for everything else, the super-rich have apparently earned the right to live in their own privileged world.

 

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+39 # pamitty 2012-04-21 06:56
They have gotten their money because they stopped giving any raises. I used to be that about once a year people could expect at least, modest wage increases.
 
 
+42 # jlohman 2012-04-21 08:14
This is a little fire. The BIG fire is that the wealthy Fat Cats own our politicians. ONLY public funding of campaigns will fix it, and ONLY a 100% turnover in November will get us there.
 
 
+23 # tedrey 2012-04-21 10:04
Quoting jlohman:
This is a little fire. The BIG fire is that the wealthy Fat Cats own our politicians. ONLY public funding of campaigns will fix it, and ONLY a 100% turnover in November will get us there.


But even a 100% turnover won't help at all as long as the wealthy Fat Cats own not only our politicians, but also the candidates, the campaign funds, most of the media, and some of the ballot counting! And the high court. There won't be more than a sprinkling of progressives in the next Congress.
The best we can hope for November is for the Republicans to lose so badly that the next election will be between the Democrats and real Progressives.
 
 
+27 # JCM 2012-04-21 09:45
Why are they getting away with this? It is the weapon of the wealthy, the Republican Party and its extreme conservative ideology that has pulled the wool over the heads of so many Americans. They have convinced Americans that less government, less regulation and less tax (that mostly go to the wealthiest) will ultimately benefit themselves and raise their standard of living. We as a nation have suffered dearly for this as we are no longer a nation of greatness. Inequity of income and wealth are now greater then ever in our history, even worse than the Roman Empire. This in turn has reduced the wealth of everyone else and that has reduced demand for products. It is this demand that create jobs. Lower taxes that have benefited the wealthiest the most, has strangled our abilities as a country. Instead of building up our infrastructure, it has been in decline for decades. Instead of expanding research and development that has created nearly all the most valuable technologies, we are reducing funding for this. The Space program that along with research and development, spurred on the best of technologies has also suffered. Where is the new generation of Shuttles? Continued below:
 
 
+27 # JCM 2012-04-21 09:48
Where is the new generation of Shuttles? Continued below:
Some people say the government never does anything right. It was Our Government that made research and development possible, Our Government that got us to the moon and created the Space Shuttles. I’d say that was done right. It was Our Government that has helped make this a nation of Greatness and now though the manipulation of people’s weakness, the Republican Party has made the Government the greatest evil and the Big Problem not the Solution. What we have now is a crippled nation unable to rebuild our country, all for the sake of making very wealthy people wealthier.
 
 
+6 # bluepilgrim 2012-04-21 10:13
Regarding the propaganda about small government and if the government got out of the way everything would be beautiful, go to video at

http://www.rdwolff.com/content/global-capitalism-monthly-update-discussion-february-2012

and start listening at 35 minutes 13 second. Rick Wolff rips that nonsense to shreds with solid fats and economics.

(The rest of the presentationis well worht listening to also, including the section just before the time referenced on how about 3/4 of the people getting rntitlements are too old or disabled and can't work.)
 
 
-15 # winson 2012-04-21 09:56
The problem is that when the taxes are raised they are raised on the upper middle class and the mega rich and their corporations receive the taxes. US income taxes go to the central banking system via interest on national debt. There is no way to get to the super rich without facing reality. Public funding of campaigns will do absolutely nothing. One has to look beyond their theatre to even see real solutions. Most people on this website love to bash republicans and ditto on republican websites. They sit back and enjoy the fight and never fear losing their control and dominance. Not fair, but what can be done if you liberals won´t acknowledge their game. I suppose you like to fight too?
 
 
+24 # davidr 2012-04-21 10:30
The last refuge of the argument is that the rich have worked hard for their money. But the ratio of hard-working people to rich people suggests no causality whatsoever. To the contrary, it is impossible to amass a large fortune through one's own hard work. Can't be done.

A lever is required, such as exploitation of the hard work, creativity or savings of others, the luck of good timing, market manipulation or regulatory connivance, expropriation of common wealth (bailouts, pollution) or discounting of it (unduly low taxation, under-funded public projects such as infrastructure and education).
 
 
+4 # jimyoung 2012-04-21 21:22
We used to have a higher percentage of wealthy that did get rich off the work of others, but also paid a fairer price for it and provided them with opportunities and support that multiplied the effectiveness of many. We now seem to have a greater percentage of those who want to do less (as the dismal jobs creation during the Bush administration showed), and keep more by paying lower taxes without stimulating a healthier velocity of money that would actually allow lower tax rates. And, for the life of me, I can't understand how they claim taxing their investment gains at less than half of working people actually benefits society. They may accumulate more but the society rots around them when they hoard their tax advantaged gains, or waste it on what should be uninsurable gambling. It is easy to see how they do it, though I would want to see an accounting of the ALEC "Scholarships" for legislators and expense reports on the conferences the 2,000 members use as a possibly elegant backroom, closed to the public eye.
 
 
+6 # Rick Levy 2012-04-21 17:41
Worker productivity has been enhanced by overwork and fear. When management cuts staff, the remaining workers have to pick up the slack and do their work plus that of their former co-workers, usually without a commensurate increase in pay. They are afraid to speak up over concern for being fired because, to paraphrase Joe South, even a bad job is better than no job at all.
 
 
+5 # RMDC 2012-04-22 05:55
The very wealthy have become so much more wealthy since the 80s not because of any work they've done but because of government policies. The tax laws have benefitted them and so have investment laws and lax enforcement of investment fraud. The very wealthy like Romney and his Bain Capital have been legally allowed to buy up other companies and milk them of their wealth. This does not need to be legal. It could be criminal if we had the right laws.

The 1% since the 80s has made an investment in buying elected government officials and regulatiing agencies. This is nothing other than corruption. It could be illegal but it is not because the 1% makes the laws.

Neo-liberalism or supply side economics or Chicago School economic theory was always about the re-creation of an ultra-wealthy class. The rhetoric of "free markets" was just a smoke screen for policies and laws that pushed all the profits to the wealthiest 1%. This is the legacy of Reagan and Thatcher. Will the next generation change it and return to sanity. I doubt it. The change will come when capitalism collapses from its own internal contradictions -- that is, when the middle class disappears and there is no one left to buy anything.
 
 
-3 # barbaratodish 2012-04-22 08:44
If only women would realize that all these extremely rich men are using money instead of sex, because in place of HAVING sex, sex has them, and intead of having love, love has them!
 
 
+5 # srice41 2012-04-22 09:02
Why don't we call taxation of the super-rich by its proper name--restituti on?
 
 
0 # AMLLLLL 2012-04-23 17:16
Yes, it should be an evening of the playing field. The slanted tax code is more and more in favor of the 1%. What a gravy train! Now the 1% views this as the new normal. This has been going on for the last 30 years, and we need to RE-BALANCE THE TAX CODE.
 
 
+1 # Sandy 2012-04-22 09:04
#6 They aren't the people doing the actual productive work.
 
 
+1 # robbeygay 2012-04-22 18:42
You are right of course, but wrong to say they don't earn it, you allowed "innovation" as one of their income deserving reasons for higher profits, and "Tax avoidance" right again, buit their employers are the shareholders and as such the recipients of their innovation, hence better give them bonus to keep such employee Executives.
Its for the workers to vote, niot abstain, and choose who's best for their side, thus to correct the imbalance gradually.
However if you check you find more rich & upperclass (average better educated) do vote, whereas a massive worker vote never happens and their preference & Gripes never counts because they didn't vote. So Republicans winn far more elections than Democrats and the tide only shifts when the right rhorts get too outlandish and some voters swing leftish for a short duration.
The more cunning right get away with more blunders & swindkles as the kleft are more compassionate and less actuive, hence likely to abstain their vote for one reason or other excuse. Perhaps laziness ior aparthy counts there.
 

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