Professor Krugles brings us this nice graph chronicling the rise of our corporate masters:
What you’re seeing is the percentage of total income as earned captured by the richest 0.01% of the population. The ridiculous jumps in income inquality of recent years have clear parallels with the run up to the Great Depression. Interestingly, the data only runs through 2007, so does not yet reflect last year’s market crash.
Unlike the correction that happened in the 30’s, I have absolutely zero expectation that the astronomical earnings percentages of recent years will collapse back down to reasonable levels. So far the government has shown no willingness to rein in the bankers, having spent trillions of dollars propping up their criminal enterprise, while the bankers rub our collective noses in it for the trouble. Meanwhile, the bankers are able to pocket all that loot, because the top marginal tax bracket is pathetically low by historical standards. (Not just the tax rate itself, but, more importantly, the income threshold). Check this graph out:
Note that all dollar amounts have been adjusted for inflation. And yes, the spread from the highs of the 1940’s (upwards of $70 million!) to today’s threshold ($372,951+) is so outlandish that the y-axis has to be represented in logarithmic form in order that the graph be legible. The top marginal tax rates in those days were nothing to sneeze at either:
Make no mistake, these were taxes on the super-wealthy. We haven’t had a proper tax on millionaires since roughly 1970, at which point those marginal millions were being taxed at a 70% rate. (Bear in mind, the marginal rate means that only those dollars over and above the threshold are being taxed at the highest rate. That first $50 grand, etc, is being taxed at the same rate as everyone else. Not everyone understands this.)
Getting back to the present reality, the failure to obtain proper warrants for all the bailout money, or even to enact the most minimal of financial reforms (much less tax reform), is truly enfuriating. The one big reform so far has actually been a step backward: relaxing shitcanning mark-to-market accounting rules that previously forced an honest valuation of company assets. Suddenly – magically! – toxic assets are not so toxic, the stock market is up, and the crisis is over! (Oh, wait…)
I obviously know nothing about high finance. But all the financial regulation in the world means precisely squat if no one enforces it.
Most former and current SEC officials spoke on condition of anonymity because they were discussing confidential legal matters or were not authorized by the agency to comment. But in a report last month, the Government Accountability Office, after interviewing many enforcement lawyers, concluded that the SEC penalty policies in 2006 and 2007 “led to less vigorous pursuit of corporate penalties, may have made penalties less punitive in nature and could have compromised the quality of settlements.”
During Cox’s tenure, penalties imposed on companies fell 84 percent, from $1.59 billion in 2005 to $256 million in 2008.
For a long time now, rich folks have been wringing money out of this country like sweat from ONE’s teeshirt after hoops in the summer. (Or hoops in the winter… Or a brisk walk… Or a short nap…) And just like ONE’s sweat, by the time everything is over, it’s all on our backs. (Ugh, this metaphor is making me ill, wrap it up…)
I have no faith that government regulators can ever truly curtail Wall Street shenanigans, which is why the only practical solution is to re-institute some new top marginal tax brackets. Currently the cutoff for the top bracket is $372,951, with a rate of 35% (set to revert to 39.6% when the Bush tax cuts expire at the end of this year). I hereby propose an additional tax of 50% on all dollars earned annually over and above… (cue Dr. Evil)… one million dollars. By historic standards, that’s downright modest.