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Entries tagged "wealth inequality"

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The Global Super-Rich Stash: Now $25 Trillion

November 17, 2011 ·

In today’s astoundingly unequal global economy, banks can go either of two routes — or both — to bag ever bigger returns. They can squeeze the 99 percent with nuisance fees and penalties. Or they can cater to the richest of the rich.

Oakland's Chase branch was recently occupied. Photo by Steve Rhodes.But both routes have bumps. The 99 percent can squeeze back, as they did earlier this month when Americans by the tens of thousands shut down their Bank of America accounts to protest the bank’s $5 debit card greed grab. And the richest of the rich? To cater to these fortunates, you first have to find them. 

That can be difficult. Fortunately, financial industry consulting firms have stepped up to help. These firms have started publishing annual global wealth surveys that pinpoint where banks — and luxury retailers and anyone else who wants in on top 1 percent action — can find “high” and “ultra high” net-worth individuals.

Last week, a new global firm — the Singapore-based Wealth-X — entered the global wealth survey fray, joining a crowded field that already includes Capgemini and Merrill Lynch, the Boston Consulting Group, Credit Suisse, and Deloitte LLP.

Each of these firms has tried to carve out a unique market niche. The Wealth-X specialty? The world of the ultra rich, those individuals who can claim at least $30 million in net worth. And the researchers at Wealth-X haven’t just counted these ultras in their first annual global wealth census. They’ve tiered them.

For the entire world — and major nations — Wealth-X teases out subsets of the super rich, from the $30-to-$50 million set to the $1 billion and up. For the first time, thanks to Wealth-X, we can compare the barely ultra with the comfortably ultra and those super ultras who can make the comfortables seem pinched.

“Our report maps exactly where the biggest money is located,” Wealth-X CEO Mykolas Rambus boasted at a Geneva news conference last week, “and just how much there is.”

The Wealth-X research answers “how many” as well. The firm counts 185,795 individuals worldwide with at least $30 million net worth. These ultra high net-worth individuals — UHNWs — hold $25 trillion in combined wealth.

The global economy may be tottering, the new Wealth-X World Ultra Wealth Report 2011 goes on to inform us, but the “lifestyle habits of UHNW individuals have not been severely impacted.“

“Simply put,” the Wealth-X analyst team gushes, “the world’s wealthy elite are in a class of their own.”

In that class, Americans pack a bunch of the rows. Of the near 186,000 global ultra rich, 57,860 — 30 percent — carry U.S. passports. These American ultras hold a combined net worth of $7.6 trillion, an average of $131.4 million each.

That average masks a huge concentration of wealth at America’s summit. The 455 deep-pocketed Americans worth at least $1 billion hold half a trillion more in wealth than the 29,415 Americans in the Wealth-X $30-to-$50 million tier.

These numbers need a bit more context to have any real meaning, and we can take a stab at providing that context by glancing over at the “super committee” deficit-reduction deliberations now underway in Washington, D.C.

The 12 lawmakers on this congressional super committee — six Republicans and six Democrats — are trying to trim $1.2 trillion off federal red ink over the next ten years. On their chopping block: Medicare, Social Security, and assorted other programs essential to the well-being of America’s 99 percent.

The super committee reporting-out deadline comes next week. No one knows how much budget-cutting pain the panel will be recommending. But panel members could actually avoid all that pain — and raise over $1 trillion in new money for investing in America — simply by subjecting all U.S. individual net worth over $30 million to a modest wealth tax.

Our U.S. ultra wealthy, Wealth-X calculates, together hold almost $5.9 trillion over this $30 million threshold. An annual 5 percent wealth tax on this overage would raise over $293 billion a year, or $2.9 trillion over the next decade — more than double the $1.2 trillion the super committee is so desperately looking to find.

The most amazing part of this? America’s ultra rich could easily pay this 5 percent annual wealth tax for the next ten years and remain as rich as ever.

That’s because wealth begets wealth. All those trillions of dollars America’s ultras are currently holding don’t sit under some mattress. The ultra wealthy have those trillions invested in assets that generate short- and long-term returns.

If America’s ultras averaged returns on those investments not that far above 5 percent over the next ten years, they could pay the wealth tax and still end the decade with higher personal net worths than when the decade began.

Back in the 1990s, a public-spirited financial industry superstar — multimillionaire San Francisco money manager Claude Rosenberg — spent a sizeable chunk of his personal fortune campaigning to get a similar message across about the enormous wealth of the wealthy.

Rosenberg’s particular point: America’s fabulously rich could hike their annual contributions to charity by tenfold and still end up with higher personal fortunes. Rosenberg started a research group dedicated to sharing this message and the analysis behind it. He wrote a book and peppered the periodicals that rich people read with op-eds that detailed his group's number crunching.

In the year 2000, Rosenberg’s researchers would document, households with $1 million or more in income could have given $128 billion more to charity than they actually did in fact give, without losing any net worth over the course of the year.

Claude Rosenberg died three years ago at age 80, his message to the super rich essentially totally ignored. The vast increase in charitable giving by the rich he had hoped to inspire never materialized.

The message to the rest of us from Rosenberg’s noble effort?

The excess wealth our ultra wealthy hold, if put to the public good, could change the trajectory of America’s future. The ultra wealthy don’t seem to be willing to do that putting on their own.

With a few tweaks of our tax code, we could do that putting for them.

Do We Need 'Student Loans' for Billionaires?

October 18, 2011 ·

Polly Toynbee, a commentator for Britain’s Guardian newspaper, plays a role quite similar to Paul Krugman, the Nobel Prize-winning economist who doubles as a New York Times columnist. Both regularly advance well-reasoned — and even inspirational — attacks on the concentration of income and wealth that have left the United States and the UK the world’s two most unequal developed nations.

Both also rate as eminently pragmatic. They champion the politically possible. But we live today in tumultuous times, and that may be why Toynbee last week found herself celebrating a proposal for taxing the rich that rather boldly stretches most anybody’s sense of political practicality.

Guardian columnist Polly Toynbee visits last year's occupation of University College London. Photo by ucloccupation.Why not levy, Toynbee asked, a one-time 20 percent tax on the total wealth of Britain’s richest tenth, a tax “graduated” to ensure that the richest 1 percent pay at a higher rate than households at the bottom of this top 10 percent?

This one-time “windfall taking” tax, Toynbee suggested, could help “save services, save jobs, expunge the national debt, kick-start growth, and set the economy on the road to recovery.”

“The worst ever crisis,” she added, “needs better solutions than any currently on offer for the grim decade ahead.”

The United States, of course, faces that same grim decade. And that makes Toynbee's proposal a matter of more than idle interest. Could a one-time 20 percent levy on the wealth of the rich really make an appreciable difference?

The source of Polly Toynbee’s wealth tax proposal, Glasgow University’s Greg Philo, certainly thinks so. Philo first laid out the proposal last year and even had a national poll commissioned to gauge public reaction. That survey found 74 percent of the UK population approving.

Britain’s richest 10 percent currently hold £4 trillion — about $6.3 trillion — of the UK’s £9 trillion in personal wealth. A 20 percent tax on that £4 trillion would raise £800 billion, enough, says Philo, to “pay off the national debt” and “avoid the need for deep and harmful cuts” in public services.

Philo’s plan anticipates one major objection. Few affluent households have 20 percent of their wealth in readily available cash. They have much of their wealth in property of various sorts that would have to be sold, perhaps at a great loss if all the wealthy had to sell at once.

Not a problem. The wealth tax, under Philo's plan, would not have to be paid all at once. But if a wealthy household wanted to delay payment, that household would have to pay interest on its outstanding wealth tax liability.

“It would be akin,” says Philo, “to a student loan for the rich.”

A 20 percent tax on the wealth of Britain’s richest 10 percent, points out the Guardian’s Polly Toynbee, would essentially “push back downwards the money hoovered upwards in the last decade.”

The billions “hoovered upwards,” Glasgow University’s Philo adds, have largely “been directed into inflated property values.” A wealth tax could recirculate this “dead money” into government expenditures that could stimulate growth.

A one-time 20 percent wealth tax, Philo sums up, “offers a real alternative” that would “move debt off the government's books, using money that is largely trapped in the housing market, from people who will not miss it.”

Could such a wealth tax have a similar impact on the United States? The U.S. numbers — on wealth distribution — make that question a natural. Our richest actually hold a far greater wealth share than Britain’s.

In the UK, the top 10 percent hold 44 percent of their nation’s personal wealth. In the United States, notes an analysis from the Economic Policy Institute released earlier this year, just the top 5 percent held 63.5 percent of the nation’s wealth in 2009. The top 1 percent alone held 35.6 percent.

As of April 2011, NYU economist Nouriel Roubini and two colleagues reported last week, total U.S. household net worth amounted to $56.8 trillion. If we assume that the distribution of U.S. wealth has not changed since 2009, our latest year with distributional figures available, then the top 10 percent today hold 75.1 percent of the nation’s current wealth, or $42.7 trillion.

A 20 percent tax on this wealth would raise over $8.5 trillion, a sum that equals about 85 percent of America's publicly held national debt.

And America’s richest 1 percent? How would they be faring if they had to pay a one-time 20 percent wealth levy? Their average remaining net worth would actually be higher, after adjusting for inflation, than the net worth of America’s richest 1 percent in 1983. Indeed, the top 1 percenters could pay a 25 percent wealth tax and still hold more wealth than their 1983 total.

Our next decade need not be grim. Our next decade does need to be more equal.

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