Taxation and Economic Inequality

The top 1% of U.S. taxpayers had 19.4% of the total income in 2007 and paid 28.1% of all federal taxes. In 1987, the top 1% had had 11.2% of the total income and paid 16.2% of all federal taxes. The share of total income going to the wealthy (income over $353,000 in 1987) and the share of federal income taxes they paid increased. That the poverty rate hit 15% in 2011 while the real wages of the middle and lower classes were back to mid-1990s levels suggests that the rich were getting richer as the poor were getting poorer; income and wealth inequalities were increasing. Differential impacts of a taxation regime can have an impact on a growing inequality, and thus on whether a society should adjust its tax structure. 

The full essay is at "Taxation and Economic Inequality."

CEO Compensation: How Much Is Too Much?

From the previous year, the medium value of salaries, bonuses and long-term-incentive awards for the CEOs of 350 major American companies increased by 11% in 2010 to $9.3 million, according to the Hay Group.  Corporate net income increased by a medium of 17% and shareholders medium returns, including dividends, increased by 18 percent. Share prices also increased more than the CEO compensation. However, bonuses increased 19.7%, which is just barely more than the percentage increases in corporate profit and shareholder returns.

The full essay is at "CEO Compensation."

Slovak Resistance to Expanding the E.U. Bailout in 2011

Richard Sulik, Parliament Speaker of the Slovakian legislature, argued that the only real solution to the debt crisis in the E.U. was rigorous enforcement of the E.U. regulations on budget deficits and public debt. He had been particularly angered by his state, the second poorest in the E.U., having to bail-out a richer state that had consistently violated the E.U. regulations. Additional debt, he insisted, was not a way out for the PIGS. Slovakia, after all, had to adhere to strict limits on everything from budget deficits to inflation rates in order to be able to adopt the euro. “Now when I see what is being allowed for Greece and Italy, it really makes me angry,” Sulik admitted. “We have to pay because of this double standard. It’s a real injustice.” Indeed it was. Bailing out Greece so the state would not default effectively rewarded that state government for profligate spending and tax avoidance in violation of the E.U. regulations.  

The full essay is at "Slovak Resistance."

CEO Pay: American and European Values

To what extent do inequalities in wealth accrue based on structural elements, such as tax deductions that only wealthy people can use, as distinct from factors pertaining to individuals, such as talent, sacrifice, and effort? The two clusters can build on each other, as people who have become rich primarily by exercising a talent and working hard use some of their accrued power to “reform” the system to their advantage at the expense of the poor and middle class. Such structural reforms in turn can make it easier for wealthy people to become even richer. In the context of a society in progress, structural and idiosyncratic factors doubtlessly interact—the trend being of an increasing chasm between the rich and poor. 

 

 

The full essay is at "CEO Pay in Europe and America."

Does Opportunity Justify Economic Inequality?

From 1993 to 2010, the incomes of the richest 1 percent of Americans grew 58 percent while the rest had a 6.4 percent increase.  In 2010, the first year of an economic recovery, the top 1 percent of Americans captured 93% of the income gains. Beyond the danger to the American republics in there being an economic elite so far removed from the vast majority of the population is the question of whether the trend is baleful, economically speaking. It is not clear that even such an income gain being snagged by so few registered in the minds of the general populous as a problem. The key to any concern would seem to be whether opportunity for the many is compromised as a result of extreme economic inequality.

The full essay is at "Economic Inequality."

Source:

Eduardo Porter, “Inequality Undermines Democracy,” The New York Times, March 21, 2012. 

The Catholic Ethical Stance on Greed

Catholic economic, social and political ethics from Vatican II’s Gaudium et spes (The Church in the Modern World) encyclical in 1965 through the relevant encyclicals of John Paul II are “especially critical of the risks of avarice, acquisitiveness, and waste in consumerist societies, the indifference of many affluent people toward the poor, and the swing of governments away from redistributive taxation, welfare ‘safety nets,’ and foreign aid to poor nations, toward a kind of ‘economic rationalism’ that encourages and enacts hard-heartedness and selfishness.”

The full essay is at "Catholic Stance on Greed."

Source:

Encyclopedia of Applied Ethics, Vol. 1, Ruth Chadwick, ed. (New York: Academic Press, 1998), p. 486.

On the historical Christian views on the relationship between wealth and greed, and the associated theory of justice as love and benevolence, see: God's Gold, available in print and as an ebook at Amazon.

Dissecting Best Buy’s Ethic: Where There's Smoke, There's Fire

In 2010, Best Buy’s management adopted executive compensation principles that included a provision that “pay is clearly tied to . . . performance.” Frank Trestman, then chairman of the company’s compensation and human resources committee, made this statement with rose-colored glasses. After just two years, Target's board and upper management abandoned the provision amid poor numbers. Even as the management laid off 2,400 employees (1.4% of the total), the board's compensation committee approved cash bonuses of $500,000 and $2 million in restricted stock for four executives. The interim CEO, Mike Mikan, was at the time hauling in $3.3 million in annual total compensation. In the analysis that follows, I subject this "dual strategy" to two criteria: institutional conflicts-of-interest and distributive justice.


The full essay is in The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available in print and as an ebook at Amazon.com.

Wealth: Benefitting and Distorting Society

“One of the great political and economic challenges of our time is figuring out the balance between wealth that benefits society and wealth that distorts.”[1] In terms of benefitting society, invested (as distinct from donated) wealth can benefit consumers by enabling better and cheaper products. Economists estimate that for every dollar invested in productive enterprise, there is $5 of benefit to consumers.  Interestingly, this does not apply to money that is donated (rather than invested) to feed the poor (i.e., consumption rather than production).

1.Adam Davidson, “The Purpose ofSpectacular Wealth, According to a Spectacularly Wealthy Guy,” The New York Times, May 1, 2012. 

Justice as Fairness: Greece’s Bond-Holder Holdouts

In the wake of the agreement whereby private holders of Greek debt would swap the bonds and take a 75% loss, two or three percent of the private holders—namely, well-financed hedge funds including Aurelius Capital and Elliott Associates—were thought to be mulling over holding out for full pay-outs instead of agreeing to take the loss. Greece’s dilemma would have been to pay them in full in order to avoid a default and face the ire of the holders who took the losses, or risk default by invoking a collective bargaining law to force the holdouts to swap their bonds.

The full essay is in Essays on the E.U. Political Economy, available in print and as an ebook at Amazon.