In the 1960s the CEO of an average Fortune 100 company made about 60 times as much money as his average employee. His pre-evasion income tax rate was 91% until 1964, when it was reduced to 77%.
By 2001, I thought the end times must be at hand because the CEO was now making 600 times as much as the average employee, and we were back to the extremes in wealth concentration that the U.S. had last seen during the gilded age of the robber barons.
It took Teddy Roosevelt, trust-busting, two world wars, the Great Depression, the rise of the labor movement, 90% tax brackets, and the G.I. bill to tame those excesses. But there it was again in 2000 – ostentatious avarice, back in fashion.
And where are we now?
Jenny Anderson in the Wednesday edition of the New York Times reports on the incomes of the top 25 hedge fund managers. Three of them are at or above the $3 billion level, led by John Paulson at $3.7 billion. When I was a kid, the U. S. defense budget was less than that.
The median American household now has an income of $60,500.
That means the leading hedge fund manager’s income now equals the median family income SQUARED.
The highest earners have gone from making 60 times a typical household income in the 1960s (which was bad enough) to 600 times a normal income in 2001 to 60,000 times the median household income in 2008. One person makes more than everybody in Providence, RI combined, or Brownsville, TX, or Worcester, MA, or Huntsville, AL. One person makes much more than everyone in Dayton, OH, Tallahassee, FL, or Salem, OR.
Actually, it’s even worse than that. The average family has to pay income taxes on their wages. The hedge fund manager enjoys a tax loophole that allows him to count most of his income as capital gains and pay only 15% of it in taxes – or whatever paltry fraction of 15% his all-star team of lawyers and accountants decides to let the government have as a token ceremonial civic and public relations gesture.
Does the gentleman work 60,000 times as hard as you do? Is he 60,000 times smarter or more earnest or more virtuous than you are? Are his children 60,000 times more deserving of the advantages money can bestow?
Just for the record, God makes $350,000 a year and doesn’t take a tax deduction for charitable contributions.
Cross posted from The Horse You Rode In On