The
US Senate has been known as a “millionaires’ club” for years. So many years, in
fact, that the nickname needs a “multi” or “centi” to stay current.
           When ABC news listed “America’s 10
richest politicians” last year, four were US senators: Jon Corzine (NJ), John
Kerry (MA), Herb Kohl (WI), and Jay Rockefeller (WV), collectively worth $1.3
billion. They’re all Democrats, by the way. But some perspective: Our own Tom Golisano,
also on the list, has practically that much all by his lonesome. And New York
Mayor Mike Bloomberg, with $4.8 billion, can buy and sell the whole bunch.
           You may be thinking This is about envy, or So what else is new? or That kind of wealth is obscene. Sign me
up for numbers two and three.
           But I’m raising the gazillionaire
issue not to bash, but to praise. Selectively.
Some of the
richest guys around are sounding pretty good lately. And as the
Reagan-Bush revolution rolls along, they’re weirdly becoming marginal.
           Start with those rich senators.
Kerry, Corzine, Kohl, and Rockefeller voted against the Senate’s $350 billion
tax-cut bill last week. “Voted against” is different from “fighting it to the
death,” of course, but the senators earned at least partial credit in the class
war. (Jay Rockefeller recently told AARP that the tax on stock dividends should
be preserved to fund prescription-drug coverage.)
           But on this question, no senator
sounds quite like Charlie Munger of Berkshire Hathaway, a top holding company.
With $1.3 billion in his pocket, Munger made the “Forbes 400” list of the
wealthiest Americans. But he’s got a little heart, too.
           What’s on Munger’s mind? At the
firm’s annual meeting a few weeks ago, he commented on George W. Bush’s compulsion
to end the taxation of dividends — indeed, this is a key part of the Bush
package.
           “I don’t think you can make it so
unfair that a man living entirely on dividends will pay zero tax while a cab
driver has to work 16 hours a day to barely feed a family,” Munger said. “I
just don’t think it works in a democracy.”
           Munger cut neatly through the slop.
Yet his maximum boss, famed investor Warren Buffett, outdoes him.
           Here’s Buffett at the same annual
meeting: “Currently, I’m paying about the same percentage of my income to the
government as my secretary does,” he said. Buffett famously takes just $100,000
per year in salary; his wealth is in securities.
           “I pay a higher income tax rate,”
said Buffett, “but she pays higher Social Security taxes as a percentage of her
income… At Berkshire, if we declared a $1 billion dividend and it were
tax-free, I might be paying one-tenth of the rate of my income as she would
be.” Then there’s efficacy: “The big benefits of taxes will go to people like
me and Charlie, and that’s not going to stimulate the economy, it will
stimulate us.”
           Buffett puts more than his mouth
where his money is. He’s been active with a project called Responsible Wealth,
along with Bill Gates Sr. and other notables. The project is coordinated by
Chuck Collins and Felice Yeskel, co-directors of United for a Fair Economy, a
Boston-based group. Collins and Yeskel co-authored Economic Apartheid in America and have toured widely to spread the
book’s message.
           For you convergence fans: Collins,
an Oscar Mayer heir, gave away his half-million-dollar inheritance years ago.
Senator John Kerry married into the Heinz family and is now valued at a
half-billion.
There’s
something especially
strange about Bush’s dividend-tax attack. It’s clear that cutting this tax will
benefit the rich overwhelmingly. But the theory behind the cut — that
dividends are “taxed twice” — also smells funny.
           The theory usually goes
unchallenged. When, for example, the New
York Times reported May 16 on the Senate’s passage of a $350 billion cut,
the article referred to “high-minded” Republican goal of “end[ing] the double
taxation of dividends.”
           Here’s a reality check: A
corporation and a shareholder are legally distinct and separate entities; each
must pay tax on income received, period. This legal separation is vital: If you
owned a few shares of Enron, would you want to be held liable for that
company’s crimes?
           The country needs to focus on this.
But there’s another, very real duality we should be addressing: how US tax policy
takes from the poor (cities) and gives to the rich (war industries).
           As our upper classes are repealing
taxes on their unearned income, the nation is becoming more and more a warrior
state. And this isn’t happening on Mars. You can see it every day in the city
of Rochester, which is coming apart at the seams — a fact not disguised by
full clubs downtown, or glossy construction plans from Potemkin Facades Ltd.
           The Massachusetts-based National
Priorities Project (www.nationalpriorities.org) has gathered data that
illuminate the problem. First, on the state level: According to the project,
the tax cuts will give the vast majority of New Yorkers even less than you’d
expect. Using an assumption that federal tax cuts will total $1.85 trillion
over the next decade, the project figures the bottom 50 percent of New York
residents will get between $0 and $100 in 2003. Those in the middle 20 percent
will get $261 on average. The top one percent will get more than $48,000.
           Yes, Bush’s love for the rich could
make Louis XIV blush. But the cities are Bush’s special victims.
           Consider the city of Rochester.
Economist Anita Dancs (pronounced dahnch),
the National Priorities Project’s research director, ran the local numbers for
me. The median income household in the city, she determined, using US census
figures, paid $557 in federal individual income taxes in 2002. (The statewide
median household paid $3,251 that year. Why the divergence? Because of the
harshness of urban poverty, and the benefit of Earned Income Tax Credit. For
another reality check, compare Buffalo at $350 and Syracuse at $328.) So our
urban populations don’t have much to gain from income-tax cuts.
           But the spending side also hurts the cities big time. Our federal tax money
isn’t primarily funding jobs, health care, and schools. No, the priorities are
upside down. Our tax money builds a bigger and stronger warrior state. And no
one in power, least of all on the local level, is talking about this.
           The National Priorities Project,
though, has tracked where our money is going. Here’s how the Rochester median
household’s $557 tax payment was divvied up: $146 for “military and defense”
(including “homeland security” and the Andean counterdrug initiative, etc.);
$33 for military-related debt; and $19 veterans’ benefits (necessary and good,
but regrettable). That’s $198 of the $557 total.
           Federal health expenditures, by
comparison, accounted for $106 of the $557. Federal education accounted for
just $18, and housing, less than $9.
           What about job training in a time of
rampant unemployment, especially among urban populations, always the first cut
down in a recession (and war)?
           Don’t make me cry. Of that $557, job
training got two bucks and change. Welcome to Rochester, a 1998 “All-America
City.” Only a short hop from Buffalo (AAC, 2002) and bleaker times.
This article appears in May 21-27, 2003.
