Your Opinion: Tax structure protects profiteers
Thursday, November 10, 2011
The Congressional Budget Office recently reported that from 1979 to 2007 average inflation-adjusted after-tax income for the top 1 percent of the population increased by 275 percent.
In the same period the income of the poorest one-fifth of the population rose 18 percent and the income of the middle three-fifths of the population rose 40 percent.
Incomes of the richest 1 percent are rising much faster than those of everyone else.
The rising inequality is partly due to the tax structure. Capital gains and dividends, which form a disproportionate share of income for the wealthy, are taxed at 15 percent. Ordinary income, which is owed on income from salaries and wages is taxed on a sliding scale from 10 percent to 35 percent, and wage-earners pay payroll taxes to boot.
Perhaps a larger source of income disparity has to do with corporate governance. In many instances a board of directors, which is elected by the stockholders and is supposedly responsible to them, is in fact controlled by the corporate officers, primarily the CEOs. That is how corporate officers obtain those unbelievably large payouts — even when they are not doing a good job.
For instance, Michael Dell, CEO of Dell Computer, received compensation of $453 million from 2000 to 2010. The Dell shareholders didn’t do so well ($100 invested in Dell stock during that time would have turned into $33.56. Wall Street Journal, 7/27/10)
Richard Fuld, CEO of Lehman Brothers, received $456 million from 1999 to 2008. In that period $100 of Lehman stock turned into $1.09.
Barry Diller, CEO of Interactive Corporation and Expedia.com, received $1.1 billion from 1999 to 2009. In that time $100 of stock in his company dropped to $78.
The table titled “The Decade’s 25 Top Earners” in the July 27, 2010 issue of the Wall Street Journal shows other such cases. The Journal doesn’t report what, if any, taxes these CEOs paid.
We know, however, that many corporations are adept at dodging their fair share of taxes. Last year General Electric paid no federal taxes at all on $14 billion of profits. GE can afford the army of tax lawyers and lobbyists who made this possible.
The system that permits such unbridled profiteering is protected by those who urge unlimited free enterprise, free from all government supervision, and extreme tax cuts, mostly favoring the wealthy.
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