Meet the Winners of the Class War
Back in 2006, billionaire Warren Buffett lamented, "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." Now with President Obama's capitulation imminent on extending the Bush tax cuts for the rich, average Americans will once again be the big losers. After all, while the Bush years produced exploding deficits, declining incomes, increasing poverty and dismal job creation, the Gilded Class enjoyed a massive windfall and record income inequality. Here, then, are some of the winners of the class war.
For openers, it's worth clarifying who they are not. Certainly not small business owners. Democratic proposals to end the Bush tax cuts for families earning over $250,000 a year affect only 2% of all households, and an even smaller fraction of small businesses. (The Republican claim that Democrats want to "raise taxes on roughly half of small business income in America" is contingent on Bechtel, Coors, PriceWaterhouseCoopers and other multinational "S corporation" being categorized as small businesses.)
As it turns out, the victors in the class war reside where you'd expect: on Wall Street and in the gatherings of the U.S. Chamber of Commerce. As the New York Times reported two weeks ago:
Two years after the onset of the financial crisis, the stock market is recovering and Wall Street's moneyed elite are breathing easier again. And this means in some cases they are spending again -- at times cautiously, but sometimes with a familiar swagger.
And as the Times detailed Sunday, Wall Street firms like Goldman Sachs are scheming to avoid the IRS in the unlikely case that Democrats discover their backbones:
Worried that lawmakers will allow taxes to rise for the wealthiest Americans beginning next year, financial firms are discussing whether to move up their bonus payouts from next year to this month.
At stake is a portion of the hefty annual payouts that are a familiar part of the compensation culture on Wall Street, as well as a juicy target of popular anger. If Congress does not extend the Bush-era tax cuts for the highest income levels, a typical worker who earns a $1 million bonus would pay $40,000 to $50,000 more in taxes next year than this year, depending on base salary.
As it turns out, the U.S. Chamber of Commerce didn't merely coordinate with Wall Street to battle President Obama on health care reform, regulation of the financial industry and so much else. It fought to ensure another Treasury draining payday for its members.
In November, a study by Citizens for Tax Justice and Chamber Watch revealed just some of the beneficiaries of the GOP's $700 billion, ten-year haul for the upper class. Its report followed the money:
Rupert Murdoch, the CEO of News Corporation, whose donation of $1 million to the U.S. Chamber of Commerce led to well-publicized shareholder outrage, would pocket more than $1.3 million.
Don Blankenship, a former U.S. Chamber Board member and the CEO of Massey Energy, whose company owned the mine in which twenty-nine miners died in April 2010's mining disaster, the worst in forty years, would take home more than $700,000.
David Cote, the CEO of Honeywell and a member of the National Fiscal Commission, who keynoted an address to the National Chamber Foundation expressing concern about the national debt over the next ten years, would get a tax cut of over $1.2 million.
CEOs of big banks on Wall Street, who helped collapse the economy and then used the U.S. Chamber to fight stronger financial regulations, stand to reap between $700,000 and $1.6 million each.
The CEOs of the health insurance industry, whose industry saw an overall increase in profits this year even while they slashed benefits and instituted breathtaking premium increases, are looking to personally benefit from another hit on the middle class by taking in between $335,000 and $875,000.
U.S. Chamber President and CEO, Thomas Donohue, who has shifted the Chamber's mission from serving mainstream business to serving the interests of the CEOs whose corporations write the biggest checks, will personally gain over $200,000.
Now, President Obama is on the verge of kowtowing to GOP leaders who would, as Paul Krugman explained, " cut checks averaging $3 million each to the richest 120,000 people in the country."
But the triumph of the rich and famous may not end with the extension of their income tax cuts. Should the Republicans succeed in permanently repealing the estate tax, American taxpayers will lose another $25 billion a year to the heirs of largest fortunes in the United States.
In 2009, only 1 in 500 American estates paid taxes. (So much for the myth-making of Republicans like John Boehner, who wrongly claimed, " "People who aren't wealthy, who may have built up value in land over generations and many family farms find themselves in situations where they've got to sell the farm in order the pay the taxes.") But barring new legislation in Congress, in 2011 the estate tax rate will jump back up to its pre-2001 level of 55%, starting at $2 million per couple. In December, the House voted 225-200 to maintain 2009's rate of 45% beginning at $3.5 million per person or $7 million per couple. But in December 2009, Jon Kyl led the successful GOP effort to block the bill, ensuring the temporary expiration of the estate tax on January 1st of this year.
And while the race is on to pass a new estate tax bill before New Year's Day 2011, in 2010 some of the richest families in America already pocketed billions in savings at the expense of the United States Treasury.
In March, for example, the $9 billion estate of Texas pipeline tycoon Dan Duncan passed to his heirs without the multi-billion tax bill which would have come due only months earlier. The hiatus of the estate tax also meant that the $1.15 billion fortune of the late, mercurial New York Yankees owner George Steinbrenner also cost the federal government tens of millions. And as the Wall Street Journal documented in July, the faces of the untaxed millionaires and billionaires in 2010 include Art Linkletter, Dennis Hopper, Taco Bell founder Glen Bell and real-estate developer Walter Shorenstein.
For his part, Berkshire Hathaway's Warren Buffett lamented four years ago:
"I would hate to see the estate tax gutted. It's in keeping with the idea of equality of opportunity in this country, not giving incredible head starts to certain people who were very selective about the womb from which they emerged.
I'm not an enthusiast for dynastic wealth when there are 6 billion people who have much poorer lives. I can't think of anything that's more counter to a democracy that dynastic wealth. The idea that you win the lottery the moment you're born: It just strikes me as outrageous."
And yet, the Republican Party, unmoved and unleashed by a weak-in-the-knees President Obama, wants to lottery winners to win again. That collapse comes despite Buffett's pleading last month for common sense and fairness:
"I think that you should raise taxes on the very rich. I lived in periods where capital gains taxes were 39.6 percent, when earned income taxes were 70 percent, and our economy did just fine."
Now, it's only working for the one side in the class war that is fighting it.