Corporate Executives Overpaid, Undertaxed

In today’s mad world, underpaid workers are bailing out banks and corporations run by overpaid, undertaxed bosses who milked their companies and our country like cash cows.

While workers across America were losing jobs, homes and health insurance, Merrill Lynch paid nearly 700 employees more than $1 million each in bonuses last year, amounting to a $3.6 billion bonus bonanza while Merrill lost $27 billion.

Workers have been sacrificing for years. Average worker paychecks are worth less now than in 1973, but CEOs and other rich Americans not only make much more, they pay less in taxes.

Average full-time workers made $41,198 in 1973 and $37,606 in 2008, adjusted for inflation.

CEOs made 45 times as much as workers in 1973 and more than 300 times as much as workers now. The top tax rate was 70% in 1973 and just 35% now; taxpayers pay the top rate on the portion of taxable income that falls within the highest bracket and pay lower rates on income below that. The top rate for capital gains on the sale of stock and other assets was 36.5% in 1973 and 15% now.

Irrational pay and tax cuts have generated a massive redistribution of income and wealth from workers to CEOs, hedge fund managers and others in the richest 1%.

By 2006, the richest 1% had increased their share of the nation’s income to the second-highest level on record. The only year higher was 1928 — on the eve of the Great Depression.

According to the latest IRS data, excluding tax-exempt interest income from state and local government bonds, the richest 400 taxpayers had an average adjusted gross income of $263 million each on their federal income tax returns in 2006 — up from $221 million in 2005 and $67 million in 1992, adjusted for inflation.

Remember, that’s annual income, not accumulated wealth. $263 million comes to more than $5 million a week.

In 2006, the 400 ultrarich were taxed at an average rate of 17% — down from 26% in 1992. The ultrarich get most of their income from capital gains. The capital gains tax was cut from 28% in 1992 to 20% in 1997 and cut again to 15% in 2003.

To make matters worse, the rich cheat more on their taxes. Forbes recently reported on a study using IRS data showing that taxpayers with income between $500,000 and $1 million a year understated their adjusted gross incomes by 21% in 2001, compared to 8% for those earning $50,000 to $100,000, and lower rates for those earning less.

We should raise taxes at the top so the nation’s richest bosses no longer pay lower effective rates than workers and we can start reversing the obscene rise in inequality rather than reinforcing it. President Obama’s plan to cap CEO cash pay at $500,000 for senior executives at companies on the government dole sounds better than it is, affecting few firms and full of loopholes.

At the very least, President Obama should not delay restoring the top tax rate to the 39.6% rate that prevailed in 2000. The Bush tax cuts saved the top 1% nearly half a trillion dollars between 2001 and 2008, reports Citizens for Tax Justice.

The $79.5 billion in tax cuts for the top 1% in 2008 was more than the budgets of the Department of Education and Environmental Protection Agency combined. In 2008, it took an annual income greater than $462,000 just to get into the top 1 percent.

Even better, we should add a top rate of 50% on income above $1 million, as advocated by Netflix CEO Reed Hastings among others.

People for whom $1 million and above is an annual paycheck should pay more so people for whom $1 million is an unattainable lifetime fortune don’t have to.

If we don’t start taxing the wealthy more now, then you can be sure that the mountain of debt created by tax cuts and the bailout will be used to drive “entitlement reform.” Workers’ last forms of security — Social Security and Medicare — will be on the chopping block to pay for the wreck the truly entitled made of our economy.

Holly Sklar is co-author of A Just Minimum Wage: Good for Workers, Business and Our Future and Raise the Floor: Wages and Policies That Work for All of Us. She can be reached at: Read other articles by Holly, or visit Holly's website.

22 comments on this article so far ...

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  1. rg the lg said on February 14th, 2009 at 11:46am #

    Why is it that we continually rehash the realities of a corrupt and rotten system? Holly should be commended, not condemned, for repeating what we all know as a fact. So, why do we have to say it again?

    Is it that, like the weather, we feel impotent … and it is something we can have opinions about which are merely speculative and may, or may not, have anything to do with the way things actually turn out?

    I suspect that, like the weather, we know that there is something chaotic at work … the slightest deviations in the input can have massive affects in the wildly chaotic perturbations in outcome.

    Besides, it is good for the individual psyche to be able to take the moral highroad against the rich … the very people we blame for doing precisely what most of us would do if we could.

    But, then, so what. It ain’t gonna change …

    RG the LG

  2. Don Hawkins said on February 14th, 2009 at 12:09pm #

    Besides, it is good for the individual psyche to be able to take the moral highroad against the rich … the very people we blame for doing precisely what most of us would do if we could.

    Right there is what must change. A big part of a new way of thinking. What most of us would do if we could. Why in my mind would anybody want to be like the 1%? Has anybody taken a look at that thinking. To me the best way to describe it is always looking. The question is always looking for what.

  3. rosemarie jackowski said on February 14th, 2009 at 1:23pm #

    How about a tax rate of 100% on all income – earned and unearned- above $100,000.
    Also how about replacing the minimum wage with a universal ‘living wage’.

  4. Ramsefall said on February 14th, 2009 at 6:48pm #

    The rich getting richer while the ranks of the poor escalate…

    rg the lg, you’d have an entire nation of people impoverished at the benefit of your personal wealth, if you could? I can only hope you’re being cynical.

    Good question, Don, why would anybody want to be in the skin of the top 1%? How pathetic it must be to live an existence based on infinite greed for something as filthy as monetary wealth. Poor chaps with full pockets and empty souls.

    Best to all.

  5. Daro said on February 14th, 2009 at 9:54pm #

    It’s the Horatio-Alger-faith-based worker drones blindly following the success myths in the office that are fcked up with their unquestioning “positivism”..
    “Oh, you shouldn’t be jealous of someone for their wealth, you hypocrite..” they say when I suggest the galactically-wealthy are possibly paying too little tax.

    My oft reply:
    “Ok – you got me! I’m a seething mess of enviously warped spite and twisted impotence in self-denial because I’d do exactly the same low, evasive shit if I ever had even the slightest chance… Now can we get back to the fcking argument that the income distribution disparity compared to work done is worse than it was between the Pharaoh and his fcking slaves, Mr Uncle-Tom?”

  6. bozh said on February 15th, 2009 at 9:10am #

    if people wld learn that at one time we weren’t a dependency or in a, broadly speaking, master-serf relationship but have become just that, wld people continue to opt for such a relationship or wld they seek greater interdependence? thnx

  7. Jeff said on February 15th, 2009 at 4:32pm #

    “According to the latest IRS data, excluding tax-exempt interest income from state and local government bonds,”
    Maybe I will be investing more in those above. Thanx for the great investment tip! Bloomberg, eat your heart out.

  8. rg the lg said on February 15th, 2009 at 6:30pm #

    Cynicism is a form of art …

    If it isn’t, then I am truly artless.

    I live at the top of the bottom 50% … my annual income is so ‘average’ that I could be used as a statistical model.

    I also live well within my means. My vehicle was new in 1997 … making it now 12 years old … the house was built in 1958 and according to some is desperate for ‘up-grades’ …

    I have savings that amounts to about 20% of my annual income.

    Thus, I am not referring to the behavior I partake of … I am referring to the behavior of the typical American … ? We, all of us, constitute the very problem the rest of the world suffers from … greed-heads. I survive … but compared to someone in, say, Belize or Afghanistan, my life style is one of opulence because they do without.

    I am not saying that I personally ant to exploit the rest of the world … but rather that we do … hypocrtically … as we live in relative affluence. And our elites? They make sure they live in a world of superabundance …

    Will it change?

    Recall, I aspire to be artistic, and I consider cynicism an art form. So, Ramsefall, exactly what am I saying …

    RG the LG

  9. cigs said on February 16th, 2009 at 1:10am #

    Rich get richer, until the poor get educated…

  10. Ramsefall said on February 16th, 2009 at 8:38am #

    rg the lg,

    the mere attitude of being cynical is not an art form, the written or verbal expression thereof could be construed as such, however, depending on the creative imagery.

    And I see that you’re also ironic — asking me if I know what you want to say, lmao. I suppose you’re trying to say that nothing will change, at least not until the US becomes the first developed nation to plummet to the ranks of underdeveloped…only then will the public begin to sympathize with people around the world who aren’t so affluent.

    Glad to see that you’re not into exploiting the world around you. Good luck with your art form.

    Best to you.

  11. Tree said on February 16th, 2009 at 9:11am #

    “I am not saying that I personally ant to exploit the rest of the world … but rather that we do … hypocrtically … as we live in relative affluence.”

    I wonder if that’s a fair statement. It costs a hell of a lot of money to live in America. Rent/mortgage, food, etc…
    How then are those that live within their means, or even go without, exploiting the rest of the world? I think that’s taking the concept of interconnectedness in the wrong direction.
    I have compassion but I don’t feel I have to apologize to anyone for what I have simply because someone else has less. Believe me, there’s plenty of people who think I don’t have enough.

  12. Max Shields said on February 16th, 2009 at 9:26am #

    While I think the notion of cynicism as an “art” form is hardly worth mentioning – anything can be an “art form” – so what’ the point?

    But rg the lg I get your general point of American hoarding of the world’s resources and that relatively speaking all of us in the USA receive the empire’s exploitation. Again, North Americans consume over 5 times the rest of the worlds intake; and that is possible through the exploits of a globalized imperial empire – American Empire.

    So, we are all on the “take” so to speak. Our personal discomfort still keeps most in automobiles, discretionary shopping, and a good deal of wasteful use of natural resources – how we use our water, land, energy resources – take a look sometime at the strip mining that is done on our behalf so we can turn on the switch and have electricty or live in climates which would be otherwise uninhabitable by humans.

    There is no doubt that the Western, most American life-style is unhealthy to the planet. Barely a soul living in the US is not overweight with an ever growing population of diabetes and chronic illnesses due to a food system which is unhealthy both to humans and to the planet as a whole.

    This is not confuse the American wasteland with a healthy prosperous life. Material consumption is waste and digs us deeper into the debt society which leaves lives unlived. It is a great human tragedy that so many live lives of desparation and while their government invades conquers and occupies peoples of the world.

  13. Don Hawkins said on February 16th, 2009 at 2:30pm #

    So to measure really long distances, people use a unit called a light year. Light travels at 186,000 miles per second (300,000 kilometers per second). Therefore, a light second is 186,000 miles (300,000 kilometers). A light year is the distance that light can travel in a year, or:
    186,000 miles/second * 60 seconds/minute * 60 minutes/hour * 24 hours/day * 365 days/year = 5,865,696,000,000 miles/year
    A light year is 5,865,696,000,000 miles (9,460,800,000,000 kilometers). That’s a long way!

    That’s almost 6 trillion miles in one year at the speed of light.

    Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.
    CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved. And there’s been quite a jump since we last tabulated things two weeks ago.
    Try $7.36 trillion dollars. That’s more than double what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources. CNBC

    Can we go faster than the speed of light, no but if we can get mass to go the speed of light time stops as we reach the speed of light.

  14. Don Hawkins said on February 16th, 2009 at 2:34pm #

    Track able objects in Earth orbit!

    Click here:

    Now if you look at this picture one question why did we do this? Because we can and have and have more is the thinking. The same is true of climate change. Granted we didn’t know really until 10 years ago but we do now. I read most of the comments posted on this and in only a few more years the witting will be what do we have to do and how fast can we do it. Then of course there is this comment I read the other day and thought was rather well put.

    Can’t we just suppress freedom of expression for people that don’t agree with us?

    I see no possible downside…

    Does the average person if there is such a thing know how to suppress freedom of expression not really. Who would you say is very good at this suppress freedom of expression part. Very easy too see in the twenty first century. Fight back. Not tired yet of listing to non sense you will and the time is now to stop listening to people who are very clever and good at suppressing freedom of expression sort of. What they do is put you in a box and the walls of that box are made of bullshit kind of a prison for the mind an optical delusion of consciousness.

  15. A Stone's Throw said on February 16th, 2009 at 3:05pm #

    Do that many commenters here really forget that the personal can actually be political? Yeah, so wealth accumulation is not inherently bad. To say that you don’t need to apologize because someone else has less is missing the point. The idea is that we should all be willing to examine our privileges without getting butthurt about it. We’re all exploited, but at the end of the day some of us are still the haves and others are still have-nots. Often the roles we conform to out of whichever perceived necessity require us to become exploiters and perpetuators ourselves. We have to be willing to reexamine our own role. At least, I thought radicals understood that.

  16. dk said on February 16th, 2009 at 11:22pm #

    how many angels can dance on the head of a pin?what the $#@^^% is the debate about? holly is right.wake up wimps.start makin’ demands.basic tax fairness is a good place to begin,but it can’t be the end.

  17. Deadbeat said on February 17th, 2009 at 12:36am #

    holly is right.wake up wimps.start makin’ demands.basic tax fairness is a good place to begin

    Reading some of the opinions and perspective lately on DV you have to wonder whether there is enough solidarity to generate the political strength to even demand tax fairness. People have been seduced by Capitalism and most importantly Liberalism believe that if the government infuses money into the “economy” all will be OK. Other believe that a “Land Tax” will resolve all instability and speculation forgetting that the past 30 years has been an economy that has operated on both real estate and STOCK MARKET bubbles. However that money didn’t magically emerge. It was STOLEN from the working class whose HUGE productivity gains were exploited by the capitalist class.

    Class (which includes RACISM) is the problem and when people alter their perspective on class perhaps then there will be a chance to build the solidarity necessary to yield tax fairness.

  18. Brian Koontz said on February 17th, 2009 at 2:15am #

    In reply to Tree:

    “How then are those that live within their means, or even go without, exploiting the rest of the world?”

    There is no such thing as individual means. I personally don’t determine what the minimum wage is set at, nor do I determine how many hours I must work before receiving overtime pay, nor do I determine what goods are available at the local store, nor do I determine the quality of the roads to said store, nor do I determine whether or not an American company steals resources from another country, nor much of anything else.

    The reason ALL Westerners exploit the rest of the world is that the West is built, in almost every way, on the corpses, in balls and chains, and under the soil of the people of other countries (and the indigenous Americans in this country). The primary reason we have a minimum wage in the US is not that the US is a democracy, but that the US in a imperial state with vast wealth, and therefore it’s capitalists can *afford* to yield a minimum wage – it keeps down resistance to their rule. Elites in most countries can’t afford to give out a minimum wage and therefore are more susceptible to mass movements against them.

    The reason a typical American is paid $30,000 a year is not that he inherently personally is worth that much, but that the global economy, dominated by Western exploitation and coercion, has produced such a number. A non-Westerner might well be twice as capable at half the salary. Yet, somehow, much of the American left keeps repeating that the American workers are underpaid. That is to say, instead of denouncing the Mob these “leftists” merely wish that the Mob Boss pays higher wages to the Gangsters. The true left wants to destroy the Mob itself and distribute back wages to the victims of said mob.

    There is not much morality or immorality in living within or not living within one’s means. If one is a Westerner one’s very economic position ITSELF is exploitative. One travels on roads built with imperial money, one buys imperial goods at the supermarket, one goes to public school funded by imperial dollars, one is paid by an employer with some exploitative link to the imperial economy or if self-employed is paid by individual Westerners with some exploitative link to the imperial economy.

    It is one’s *structural position* within the global economy which determines one’s degree of material morality. All Westerners, however leftist their politics, benefit from imperialism. The most materially moral Westerners are not always poor, but are those who minimize those imperial benefits. Given the difficulty of such a task it’s much more sensible to leave the West.

    As money is power, there’s a great temptation to stay in the West and use that power “for good”. But the Western left has long proved that the corruption runs too deep – there will be no bursting out from the belly of the beast.

  19. Tree said on February 17th, 2009 at 6:36am #

    Brian, in China, 24 million trees a day are chopped down to make disposable chopsticks. Billions of people in India and China are destroying the planet and living like the Capitalists you despise. Yet you insist on the same tired rhetoric and ridiculous arguments which posits that simply by living in the West one is exploiting. Get over it. Wake up and join the 21st century.

  20. Tree said on February 17th, 2009 at 6:46am #

    make that 24 million trees a year.

  21. hANOVER fIST said on February 17th, 2009 at 2:40pm #

    It is utterly deplorable that anyone is given a bloody BONUS for putting people out of work.

    Yet…this is what is done when corporations merge – people lose jobs, often replaced with incompetents, relatives of upper management, or a bad mix of both. WE THE PEOPLE must put a stop to this, or be forever damned.

  22. Eric said on February 19th, 2009 at 1:41pm #


    This country cannot continue to debt and spend like we have during the last eight years of Bush 43 or during the years of Reagan and Bush 41. We must raise taxes on the millionaries and billionaries as a matter of fiscal prudence and simple fairness. What we have now is a form of flat a tax for the top 1%. The main stream media has been a cheer leader for the top 1 %.

    The countries that have purchased our debt are in financial straits themselves. If we continue on this path currency deflation will follow.
    The US dollar will lose its reserve currency status. A loaf of bread will cost a shopping bag full of nearly worthless green backs.

    This not a matter of frugal living, wealth envy or morality. This is a matter of survival.

    Some of the responses to Sklars’ fine article are strange in my opinion.
    They seem to express fear masked by sarcasm or plain denial. I hope that this is not a reflection of the Left in general. The fact is though that the Left has been largely ineffectual in fighting for working people the last eight years.

    The poor, the working clas and middle class had better wake up and fight for their economic interest as persistantly as the top 1% does.
    Warren Buffet said that ” if there is such a thing as class warafare, then my class is winning”.