A pity party for America’s rich and powerful
Summary: Brad DeLong often nominates people for the ”stupidest man alive” award (e.g., here). Here is a new nominee.
Second Quarter 2010 Investor Letter, Daniel S. Loeb, Third Point Partners LP, 27 August 2010 — Excerpt:
As every student of American history knows, this country’s core founding principles included non-punitive taxation, Constitutionally guaranteed protections against persecution of the minority, and an inexorable right of self-determination. Washington has taken actions over the past months like the Goldman suit that seem designed to fracture the populace by pulling capital and power from the hands of some and putting it in the hands of others. … Laws and regulations such as these justifiably raise questions about this government’s commitment to free-market capitalism and the articulated rule of law.
This is astonishing. It would be insane if he actually believed what he said.
- With income and wealth inequality at 80 year highs, he describes the wealthy and powerful as a persecuted minority.
- With tax rates on households — especially wealthy households — near post-depression lows, he speaks of “punitive taxation.” It’s an especially odd claim given our flat tax system (including all taxes). Really nuts is a hedge fund manager complaining about high taxes, with their fantastic tax breaks.
- He complains about the “Goldman suit”, with its quick slap on the wrist settlement — as if one of the most powerful firms in the world (aka “government sachs”, with its alumni in key positions in the Treasury Departments of a dozen nations) suffers from the tame puppies of the SEC and DoJ.
Update: Much of the rest is even more bizarre, part of a sustained propaganda campaign to convince us that white is black. Tens of millions unemployed while corporate profits are at a record high (up 4x since 1993, 9%.year) — so corporations need even more tax breaks. With inequality at multi-generational highs, the rich need even more tax breaks. With the financial sector larger and more powerful than at any time since the days of Andrew Mellon, they portray themselves as sheep chased by wolves.
Below are links to resources describing America’s tax system and growing wealth inequality.
About the author
Daniel Seth Loeb is an American hedge fund manager and founder of Third Point LLC, managing over $5.5 billion in assets. Loeb reportedly enjoys art collecting, yoga and surfing. Loeb’s compensation was $150 million in 2005, $200 million in 2006 and $270 million om 2007. (Source: Wikipedia}
For more information about taxes in America (a flat tax system in disguise)
Following years of propaganda, most Americans are clueless about the operation of our tax system. Here is an excellent introduction to the issue:
- “Your real tax rate: 40%“, Scott Burns, MSN Money, 21 February 2007 – “Income taxes, sales taxes, property taxes, Social Security and Medicare taxes, ‘sin’ taxes and the rest add up to a virtual flat tax nationwide.”
- “Taxes: What people forget about Reagan“, CNN, * September 2010
- “Recent Tax and Income Trends Among High-Income Taxpayers“, Joel Friedman, Isaac Shapiro, and Robert Greenstein, Center on Budget and Policy Priorities, 13 April 2005 — Treasury Department Release Creates Misleading Impression About Taxes that High-Income Taxpayers Pay”
- “Who Pays Taxes and Who Receives Government Spending? An Analysis of Federal, State and Local Tax and Spending Distributions, 1991-2004“, Andrew Chamberlain and Gerald Prante, Tax Foundation, March 2007
- “Does It Pay, at the Margin, to Work and Save? Measuring Effective Marginal Taxes on Americans’ Labor Supply and Saving“, Laurence J. Kotlikof and David Rapson, National Bureau of Economic Research, May 2007
- “Is ‘Tax Day’ Too Burdensome for the Rich?“, Citizens for Tax Justice, 13 April 2009 — “The U.S. Tax System Is Not as Progressive as You Think”
- “Labor Day, 1894” — About inequality and socialism, from Slouching Towards Utopia by Brad DeLong
For more information about inequality of wealth and income
- “15 Mind-Blowing Facts About Wealth And Inequality In America“, Business Insider, 9 April 2010
- “The United States of Inequality“, Timothy Noah, Slate, 3 September 2010
- Review of The Spirit Level: Why More Equal Societies Almost Always Do Better by Richard Wilkinson and Kate Pickett, London Review of Books, 22 October 2009
Other articles and studies:
- “Inequality and Institutions in 20th Century America“, Frank S. Levy and Peter Temin (both MIT Professors), 27 June 2007 — a must-read for anyone interested in this important issue.
- ”Poverty Rose, Median Income Declined, and Job-Based Health Insurance Continued to Weaken in 2008“, Arloc Sherman et al, Center on Budget and Policy Priorities, 10 September 2009
- Share of Aggregate Income Received by Quintile of Households, ugly numbers from the US Census
- “Changes in the Distribution of Workers’ Annual Earnings Between 1979 and 2007“, Congressional Budget Office, October 2009
- “Have we fallen behind our parents?“, Katharine Mieszkowski, Salon, 14 May 2008 — “Author Nan Mooney argues that the middle class is slipping, and fixing it is going to take more than cutting out lattes.”
- “Income inequality and poverty rising in most OECD countries“, OECD, 21 October 2008
- “Striking it Richer: The Evolution of Top Incomes in the United States“, Emmanuel Saez, 5 August 2009 — First world levels of income; third world income distribution.
- “Inequality, Living Standards, and the Middle Class”, Scott Winship (Pew Economic Mobility Project), Progressive FIX, 12 January 2010 – Part One and Part Two.
- “Top 400 Earners in U.S Averaged $345 Million in 2007, IRS Says“, Bloomberg, 18 February 2010 — “Each household in the top 400 of earners paid an average tax rate of 16.6%, the lowest since the agency began tracking the data in 1992, the Internal Revenue Service statistics show. Their average effective tax rate was about half the 29.4% in 1993…”
Posts on the FM website about these matters
About our tax system
- A sad picture of America, but important for us to understand, 3 November 2008
- Inequality in the USA (also, we have a flat tax system), 7 January 2009
- The latest figures on income inequality in the USA, 9 October 2009
- Are Americans over-taxed?, 9 April 2010 — Not by historical standards, or by comparison with our spending.
- Are Americans under-taxed, 4 December 2010 — Not by comparison with other nations.
About increasing inequality in America