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Surviving the New Depression II: The End of the Gilded Sultans

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Yes, ReNew Taxes

The house passed a bill Friday that would, after decades without adjustment for inflation, adjust the wages on which the Alternative Minimum Tax is applied.  As inflation has taken its course since the AMT was designed in 1969, the structure once reserved for the extremely wealthy has hit the very middle class.  To offset the effects of this adjustment – estimated at $78 billion - taxes that were reduced by more than half earlier in the Bush administration would revert to the rate they were previously, 39%.  This tax was reduced as one part of the monumentally failed trickle-down theory of not taxing the very rich, and applies only to certain transactions on a very narrow segment of hedge funds, venture capital firms and private equities.

 

Quoted on Bloomberg, Alabama Democrat Artur Davis said, “You've got 23 million families on one side with incomes as low as $40,000 and on the other side there are 35,000 to 50,000 people whose combined income was $930 billion,''  All you really need to know is who’s been lobbying against it – to the tune of $6 million: The Private Equity Council, a Washington trade group created in December by 11 buyout firms including Blackstone Group LP, KKR & Co. LP, Carlyle Group, and Apollo Management LP.  None of these tax breaks will deny those companies their livelihoods.  And, as so much of what they do involves buying formerly public companies and “trimming the fat” (read, cutting middle class jobs), slowing them down would be a good thing!  Bush, of course, will veto this – but you must tell your representatives to override the veto.  It’s time to stand up to the failed economic policies of the Right. After 26 year – has it trickled down to you yet?

 There have been many tax reductions for the wealthy over the last 7 years, and now they will try to portray the reinstatement of these taxes as “Tax Increases,” but it is vital that we frame them as what they are: the elimination of giveaway tax breaks for the wealthy and powerful. 

Demand Accountability and Regulation

Stan O’Neal resigned his CEO position at Merrill Lynch, after seeing it lose $8 billion (so far) through irresponsibility and imprudence, for which he will be rewarded with a $160,000,000.00 retirement fund. 

Chuck Prince, CEO of CitiGroup has resigned after that institution announced subprime losses in the range of $11 billion (so far), for which he will be rewarded with retirement package estimated at between $89,000,000.00 and $120,000,000.

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Rest assured, none of their “golden years” pot-o-gold will trickle down to anyone.

 Keep your eye on: Bank of America CEO Kenneth Lewis, who has covered $12.8 billion in losses from within, but there’s plenty more behind it and he may get the blame and forced out.  Wonder if he’ll get some money.  Then there’s Wachovia CEO Kennedy Thompson, who, at the height of subprime fever snapped up – for $24 billion – a subprime lender called Golden West in October 2006.  Wachovia hasn’t taken the huge hit the others have - yet, but when that shoe drops, I would lay odds Mr. Thompson won’t be depending on his social Security check either.  The age of the gilded platinum parachute must end, and the agencies charged with corporate oversight and regulation must have teeth again.   

Kudos to New York State Attorney General Andrew Cuomo for investigating Washington Mutual’s mortgage bundling.  If it can’t be done by the feds, let’s encourage the state and municipal justice systems have at corporate malfeasance.

 

This is an intolerable situation, and it’s going on daily on Wall Street and in the largest companies all over the country.  Where is the accountability?  And why aren’t stockholders speaking out?  When the Enron debacle exploded, suddenly all the stockholders and thousands of pensioners were left with nothing.  It is on us now – if you hold stock, make your voice heard.  If you are a depositor at a bank or investment house, take the time to know how they are running the place, and what the executives are being compensated.  There are responsible financial institutions.  Put your money, no matter how much – or how little – you have in the most ethical institution you can find.  Find a local, smaller bank or credit union that has transparency.

 The more accountability we demand, and the more we deny these behemoths our savings, the less power they will have over us. 
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Michael Fox is a writer and economist based in Los Angeles. He has been a corporate controller, professor, and small business entrepreneur. After a life-altering accident, he spent five years learning more about medicine and the healthcare (more...)
 

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