Monday, November 21, 2011

The Top 0.1% Earn Half of All Capital Gains

Ummm...this is not the kind of story that I ever thought would have appeared on the website of Forbes magazine:
Capital gains are the key ingredient of income disparity in the US-- and the force behind the winner takes all mantra of our economic system. If you want even out earning power in the U.S, you have to raise the 15% capital gains tax.

Income and wealth disparities become even more absurd if we look at the top 0.1% of the nation's earners-- rather than the more common 1%. The top 0.1%-- about 315,000 individuals out of 315 million-- are making about half of all capital gains on the sale of shares or property after 1 year; and these capital gains make up 60% of the income made by the Forbes 400.
Even more surprising, Forbes provides the history of the capital gains tax that shows just what an historical anomaly the current capital gains tax rate is:
The reduction in the tax from 20% to 15% continued the step-by-step tradition of cutting this tax to create more wealth. It had first been reduced from 35% in 1978 at a time of stock market and economic stagnation to 28% . Again 1981, at the start of the Reagan era, it was reduced again to 20%-- raised back to 28% in 1987, on the eve of the October 19 23.2% crash in the market. In 1997 Clinton agreed to reduce it back to 20%, which move was an inducement for the explosion of hedge funds and private equity firms-- the most "rapidly rising cohort within the top 1 per cent."
So it should be pretty obvious that with the country facing billion-and-a-half dollar annual deficits for the forseeable future what the first course of action should be, right? Yeah, right.
Make no mistake; the battle that is to be fought over the coming attempt to reverse this reduction in capital gains will be bloody and intense. The facts are clear according to the Congressional Budget Office more than 80% of the increase in income inequality was the result of an increase in the share of household income from capital gains. In fact, you can go so far as to claim that "Capital Gains income is the most unevenly distributed-- and volatile-- source of household income," according to Laura D'Andrea Tyson, University of California business professor and former chairwoman of the Council of Economic Advisers under President Clinton.
I beg to differ. In order for the battle to be "bloody and intense," there actually has to BE a battle. In fact, it should have been being fought these past three months during the "super committee" deliberations on the reducing the deficit. The fact that it wasn't tells you all you need to know about the chances that it is going to happen anytime soon.

The article then concludes with the kind of flourish that you normally only see in a Matt Taibbi Rolling Stone piece:
No wonder the super wealthy plutocrats obtained the largest share of national income-- 25% of the nation's wealth- greater than any other industrial nation in the the period of 1979 to 2005. Make no mistake; after unemployment-- this disparity between the 1%-- 3 million-- or the 0.1%-- the 300,000-- and the other 312 million citizens of the U.S. has become the major theme of the Occupy Wall Street movement-- and an important national debate.

I commend you to the late Justice Louis Brandeis warning to the nation that " We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both." We have to make up our minds to restore a higher, fairer capital gains tax to the wealthiest investor class-- or ultimately face increased social unrest.
Damn...someone over at Forbes must have been passing around their supply of weed on a giddy Friday afternoon, or something. That's the only explanation I can think of as to how this story got the green light.


  1. Oh, I think there's another reason besides smoking weed. The 1% (not the 0.1%, they have multiple escapes) are getting scared. "Social Unrest" is clearly already happening, and they are afraid it's going to increase. They have awakened the students, and that was foolish. Two student occupations in New York are being broken up with beatings and arrests as I write - New School and Baruch - and this follows the infamous pepperspraying UC Davis.

    Signs hanging from the New School building say things like "Annihilate Capitalism" and "99% means Civil War" sentiments that might just be enough to keep the 1% up at night. One of the people I work for (in the 1%) got caught in the traffic snarl created last week when Zuccotti was evicted and the occupiers swarmed west and blocked the Holland Tunnel. That got HER attention.

  2. @Gail - I think you're right. Unfortunately, I also think this has potential to get very ugly. I hope I'm wrong about that.

  3. Have you seen this? Bill Moyers a year ago on the plutocracy:

  4. "We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both". Very wise words. We are discovering this right now in Europe. The new Italian and Greek Prime Ministers are former Goldman Sachs (GS) men. It seems we are now faced with the prospect of GS and Germany taking over Europe. Ironic the Germans had two goes at taking over Europe in the 20th century now it seems they are on the brink of doing it without firing a single shot. We can have casino capitalism or we can have democracy.

    I think Gail is right the 1% may come to their senses and relinquish some of their privilege, if not then we are likely heading for some kind of Jacobin outcome. If I was part of the 1% the guillotine would haunt my dreams.

  5. "Capital Gains income is the most unevenly distributed-- and volatile-- source of household income," according to Laura D'Andrea Tyson

    Remember Tyson in the 'must see' video of the Charlie Rose show?

  6. At this point in the game I'm almost tempted to say '*** it' and just let them do what they want. I fully expect a revolutionary scenario in the next few years, if not a simply breakdown collapse.

  7. The current situation is merely the continuation of the endless class war against, and exploitation of, the vast majority by a very small minority: Howard Zinn, in his most excellent book "A People's History of the United States", published 2010, page 62, quotes a letter published in the New York Gazette in 1765, the year of the Stamp Act: "Is it equitable that 99, rather 999, should suffer for the Extravagance or Grandeur of one, especially when it is considered that men frequently owe their Wealth to the impoverishment of their Neighbors?" Sounds familiar, doesn't it? The 99.9% should not allow themselves to be manipulated and exploited by mouthpieces of the .01 percent such as Obama.