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Paul Buchheit
NationofChange / Op-Ed
Published: Tuesday 17 April 2012
“Any one of these five reasons should reinforce the belief that the rich should be paying a LOT more in taxes.”

Five Reasons Why the Very Rich Have NOT Earned Their Money

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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.
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 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 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.

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 - 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 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 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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ABOUT Paul Buchheit

Paul Buchheit is a college teacher with formal training in language development and cognitive science. He is the founder and developer of social justice and educational websites (UsAgainstGreed.org, RappingHistory.org, PayUpNow.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

For one thing, thousands and

For one thing, thousands and thousands of college graduates (my daughter is one with a 3.6 grade point average) are still looking for decent jobs and working at McDonalds or similar jobs because good jobs just don't exist. Also, not everyone wants to or can go to college and those people used to still have good jobs in manufacturing, with utilities in creative and artistic outlets. Those, also are no longer available.

It appears my original reply

It appears my original reply was deleted, thus will pass on doing it again.

Nothing in Public Office will

Nothing in Public Office will ever change regardless if you are Democrat or Republican, Liberal or Conservative until a 28th ammendment is enacted. Term limits for all elected officials, when they leave office they return to work in the private sector and not still on the govenrment payroll for life.What good does it do to vote someone out of office. All that does is increase the payroll as they are added to it and the out going is still paid. And who says that elected officials start at or near six figure incomes and go up form there. Especially when someone drawing that figure thinks an island is going to turn over because we are sending to many people there. That individual definitely is worth a six figure income and is well qualified to hold office and have life time benefits.

When my wife and I got

When my wife and I got married in 1964 our combined income was $16,000. We went to the symphony, plays, and dined in a fine restaurant every week. We lived in a penthouse apartment (1 BR, LR, and eat in Kitchen) on Beacon Hill that rented for $175 per month. We bought a townhouse in Boston's South End (3,400 sf) for $11,000 (it needed a lot of work which we did while raising 2 kids). She was a teacher, I an Architect. We certainly do not live that way now, and neither have my children when they grew up. This Country has devolved into a profit maker for the super rich republicans who generally are the most selfish people on earth. Damn them for what they have done to my beloved country. Damn them, may they rot in Hell!!!

@ Wildthang: Your comment is

@ Wildthang: Your comment is by far the best comment on this issue, instead of name-calling and blame-pointing. Indeed, I do not understand why such research by real productive people with funding from WE THE PEOPLE are not licensed for royalties. Why ever not? That is a huge sum that could be used to increase funding to benefit all American citizens. This freebie is crazy. Do people actually know that our tax dollars funded such technology and research? I bet not. And, people, please stop attributing economic downfall to party affiliation. Greed has no affiliation. Do you negative commenters base your conclusions on educated fact-finding or selective reading? Be silent if all the "facts" you have are based on conjecture, party prejudice and cursory reading of selective information. In truth, the reason for America's economic collapse is the greed for profits by the very 1% who benefited from it and who benefited from the research and technology that WE THE PEOPLE funded. Indeed, let the royalties from licensing fill the coffers of the government treasury so that WE THE PEOPLE can enjoy the benefits of the common good and reduce our taxes. Then there will be no need to bitch about the top 1% buying whatever they want or enjoying their wealth. And yes, let’s have a true tax reform that closes all the loopholes that only benefit the top 1%. I do not agree to a flat tax, because the top 1% won’t feel that, but 99% of us surely would. It doesn’t have the same impact. We all deserve well-being as our organic right and, as human beings, we are all interdependent. So there can neither be just rich people nor should we have poor people. What we should strive for is a strong middle class.

suzanne lee: that sentiment,

suzanne lee:
that sentiment, expressed in a public gathering of republicans, would get you kicked out of the party you claim to be a member of. you would be an instant pariah, and branded as a liberal commie democrat. the rethuglican party has devolved into the party of wealth accumulation at any and all costs....i.e. organized crime which they have lobbied long and hard to decriminalize.regardless of your stances on the rest of their platform, or how 'conservative' you feel, you're simply not a republican any more. welcome to the light!

Power only responds to force.

Power only responds to force.

This is what happens when

This is what happens when common sense and decency are replaced with the Profit Motive.

just goes to show you how an

just goes to show you how an education can positively affect your life. Get a degree or learn a critical skill and you will be able to support yourself. who cares about the 1%. they don't affect you or I. take responsibility for your life and get an education. Look at the dropout rate in high school. In some schools it is over 50%. With job education intensive employment now. there are no jobs for ditch diggers or repetitive factory work. The reasons those jobs left are many and varied. Quit bitching about stuff you cannot affect.

I think you need to read the

I think you need to read the article again. That and stop watching Fox "News".

whatever we put up with we

whatever we put up with we will surely get more of

INFANDOUS, Robert Rubin,

INFANDOUS, Robert Rubin, Assistant to President Clinton for Economic Policy and his assistant Lawrence Summers lobbied heavily for and steered thru the repeal of Glass-Steagall Act. And as you said, CLINTON SIGNED IT. So you can hang that one on both parties. Stop apologizing for the Democrats and we shall have change in this country! BTW, Obama tapped Lawrence Summers (one of the proponents of the repeal) to be the director of the White House National Economic Council!

We are well aware of the sins

We are well aware of the sins of the Democrats.

But Democrats are not leading the charge to water down Dodd-Frank. It's a matter of degrees of wrong. Yes the Democrats have been wrong but compared to the GOP they have almost been saints.

comment deleted

comment deleted

Thats our wealthcare system

Thats our wealthcare system in action!

The technology developed by government research should be licensed and produce royalties to the public.

But...but...but...corporatist

But...but...but...corporatist Obama calls the Wall Street thieves his "Savvy Businessmen" buddies and refuses to look back and criminally prosecute them for their megafraud, racketeering, etc. which put the world economy in the toilet.

Rethugs and teabaggers see nothing wrong with what the Wall Street thieves did to this country and the rest of the world (GOP = GREEDY Old Pricks), but when their heads are lodged where theirs are, they can't see much of anything -- they spew hate for any government regulations of free market capitalists and taxing the richest Amerikans which is why the situation isn't going to get better until they're removed from public office.

Yes, Jeffery. And just

Yes, Jeffery. And just imagine, Mittens want to give the wealthy a massive tax cut.

BentonMiddleton, you are 100%

BentonMiddleton, you are 100% correct. I have done as you suggest, and besides crippling poverty, no insurance, and massive debt, I am doing fine. It is stressful to disconnect, especially when you realize a 40 hour slave job is needed to pay the vig on all the bullshit you need to survive in this country.

Norman Allen's picture

One has to be blind to not

One has to be blind to not know that most of the very rich are sitting on a cash flow structure and the money comes to them whether they are alive or dead. Sir Paul Getty proved it irrevocably. Look at his income after death.....

Make it 6 reasons. Mega

Make it 6 reasons.

Mega non-profits are the other one who do little for the people they profess to serve but much for their rich benefactors. The average intake of these organizations is about $67,000 per client from which they actually spend on the average of $2000 in direct services. One might ask where the other $65,000 PER CLIENT goes?

They collect $Millions from the government, where rich people claim their "donations" as tax deductions, and then employ the 1% with their relatives and spouses in 6 figure directorships. Then they use "volunteer" benefit recipients in welfare-to-work jobs that are punitive and dangerous. These jobs actually pay less than $1.00 an hour where the agency does not pay a red cent for this labor ~ additionally this labor is also used in private for -profit businesses who are "contracted" through these non-profits literally using slave labor. With these "volunteer" positions they can and do ignore safety laws and employment laws like regular breaks forcing labor for an entire 8 hour shift with no rest, safety rules, toxin rules, and accomodations for the disabled. Often they require exactly the same work other paid employees perform for over 1000% more. Yet the people at the top floors use these non-profits as their piggy banks acquiring property, cars, and other goods at a discount and tax deductible goods.

You can literally ascend your way to heaven in these non-profits with the poorly paid workers accomplishing miracles in work places among broken furniture and equipment . As you continue up the stairs, the work environment gets nicer and nicer until you reach the top where there is private art, state-of-the-art equipment and leather everywhere.

But the rich continue to prance around boasting about how"generous" they are when in fact they are the ones who are benefitting the most.

One might ask for whom are these non-profits in existance? They do not do as much for the poor, the disabled, the homeless or children as they do for the rich. With the inordinate gap between what is received and what is actually given in direct services where is this money going, especially our tax dollars? In truth these organizations are not doing much for the people they are supposedly in existence to serve."Benefactors" is a good word since it is the benefactors who benefit the most not the people they are supposed to be serving.
Cat in Seattle

Brilliant post, Cat in

Brilliant post, Cat in Seattle.

My wife and I were talking about this very thing last night. One of the worst examples is Red Cross after 9/11.

Freespirt, Clinton signed a

Freespirt, Clinton signed a bill repealing it that was passed by a Republican controlled congress who had a veto proof majority for it. It wasn't his idea, and vetoing it would have only made other things he felt were more important harder to get passed.

Exactly correct.

Exactly correct.

How about adding: "Half of

How about adding: "Half of them either inherited their wealth, or had the dumb luck to own property that could be exploited for their own wealth (while harming the environment in most cases).

I'm a Republican and am open

I'm a Republican and am open to increasing taxes on anyone who accumulates wealth without creating jobs for the middle class. Tax deductions should be based on the amount of jobs a corporation provides, how it helps our economy, and how it contributes to society.

You are a rare Republican.

You are a rare Republican.

Parasitic organisms

Parasitic organisms unwittingly commit suicide by bleeding their host to death.

Ray, the "super-recession"

Ray, the "super-recession" was produced under Clinton who abolished the Glass-Steagall Act!

And as long as we keep on

And as long as we keep on spending OUR money on their products, they will keep on proliferating this same behaviour. The next time your boss WON'T give you a well-deserved raise, quit and CREATE YOUR OWN JOB! If you have space in your backyard, grow your own vegetables and make friends with a rancher who raises food and cattle without Monsantos poisons. Finally, trash your credit cards and start paying cash for everything you buy. One more thing, if possibly within your means, double up on your mortgage - You will save tens of thousands in interest and own it outright a lot sooner.

If they want to treat us like outcasts, then TWO can play that game. Hit 'em where it hurts. They are forcing us to form our own sub-economy just to survive, and all at their own peril. Because if we stop their cashflow, they will have to spend their wealth on THEIR bills. Sorry 'bout their luck, People.

Spot on!!!

Spot on!!!

What Ray said.

What Ray said.

The new breed of corporate

The new breed of corporate owners and money manipulators (financial institutions, banks, hedge funds, etc.) are willing to ruin the United States of America in every imaginable way. Even the near-collapse super-recession they produced under Republican deregulation hasn't been enough to convince the common person that they are dangerous to the very system that they take advantage of. How anyone in the middle or lower classes could possibly vote Republican in the next election is beyond me, but the GOP (Greedy One-Percenters) continue to stir the pot of gays, guns, religion, etc. to gain adherents to the money is always right class warfare. So folks vote against their own best interests. How cynical can the GOP get? Tragically cynical is the answer to that one.

FREESPIRIT said: "Ray, the

FREESPIRIT said: "Ray, the "super-recession" was produced under Clinton who abolished the Glass-Steagall Act!"

That act was Gramm-Leach-Bliley. All three guys were Republicans. Of course Clinton was a centrist Southern Democrat. He was the perfect foil for signing a right wing legislative agenda, like NAFTA, for example. But you can hardly place the blame on Clinton. It was the filthy Republicans.

You're right on the

You're right on the money.

The reason the ignorant continue to vote Republican is because the Reich Wing corporatocracy has honed propaganda media skills to a fine art. They own one entire cable "News" network. They never miss a single opportunity to attack a progressive idea, even if it would help them in the long term.

I have never seen anything like it in my entire life. It's the American Pravda.

You're right on point Ray

You're right on point Ray (and Paul!).

There may be some super-rich who are contributing something, but not the bankers and the speculators.

Meanwhile our government is absolutely unwilling to stop our multi-trillion dollar wars or close down our expensive foreign bases --- or even to put tariffs on imports or get out of NAFTA.

UGH.

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