Sarah Chayes’s books, which I have mentioned in recent posts, argue that corruption threatens our very nation. And the media almost always has a story or two running about elite corruption, whether it be wealthy parents paying bribes to get their children into prestigious colleges or members of Congress getting caught with insider trading, or..or…or. But of course we are a big country, so out of 330 million people there will always be a few good current corruption stories for the media to pick up.
So how bad is corruption among the elites? Here are some recent stories to ponder:
A recent study from the White House entitled What is the Average Federal Individual Income Tax Rate on the Wealthiest Americans? estimates that for the period 2010-2018 the 400 wealthiest Americans paid an average tax rate of about 8.2%.
ProPublica managed (probably illegally) to get their hands on 15 years of recent tax data on wealthy Americans. The relevant article can be read here. The data shows many of the wealthiest among us paid no tax at all, while others paid in the range of 0.1%-3.4% federal tax. You and I, of course, not wealthy enough to hire expensive tax lawyers to find all the loopholes for us, pay more in the range of 18% or so.
Bloomberg Business Week this week has a story Most Americans Today Believe the Stock Market is Rigged, and They’re Right, which reports that research shows that insider trading is widespread, something many of us have assumed already.
The Economist this week has an article New taxes will hit America’s rich. Old loopholes will protect them. President Biden has been asserting that his proposed expensive new programs will be fully paid for by higher taxes on the rich and corporations, but of course neither the rich nor major corporation pay anything like the tax rates they are now supposedly to pay, so what are the odds they will pay much more tax in the future?
The Institute on Taxation and Economic Policy published a recent article entitled 55 Corporations Paid $0 in Federal Taxes on 2020 profits. The point is, of course, that they paid no tax LEGALLY, using loopholes provided them by a compliant Congress. Another 2017 report by them documented that over the eight-year period from 2008 to 2015, 258 profitable Fortune 500 companies paid an average effective federal income tax rate of 21.2%—while the federal tax rate was 35% for all those years.
National Public Radio had an article last year entitled How the CARES Act Became A Tax-Break Bonanza for the Rich, Explained. Most bills that get through Congress apparently get lots of little “goodies” stuffed into the 1000+ pages for this or that corporation or special interest group.
The Forbes article Top 1% of U.S. Households Hold 15 Times More Wealth That Bottom 50% Combined makes the point that inequality in America has reached about the same degree as in the 1870s Gilded Age of the Robber Barons.
The Economic Policy Institute has a report CEO pay has skyrocketed 1,322% since 1978, which points out thje growing disparity in pay between senior management and the average corporate worker.
Of course, as Sarah points out in her recent book On Corruption in America, and What is at Stake, the corruption isn’t limited just to the extremely wealthy at the top – it is a whole integrated business model in which all the facilitators – politicians, lawyers, brokers, bankers, accountants, government officials, managers, ete, etc - get their percentage for helping. The U.S. model of corruption is in general far more genteel than just bills stuffed in paper bags. We do it with plush jobs on corporate boards for retired generals, or generous campaign contributions for helpful politicians, or fat fees for helpful law firms, or lucrative positions with lobbying firms or think tanks for useful “fixers”.
There are of course a certain number of the wealthy evading taxes illegally, with Swiss bank accounts, offshore shell companies, undeclared income and the like. There are always thieves among us. But what is more worrying is that there are apparently so many LEGAL ways for them to avoid taxes. That suggests the whole system is corrupt.
All this suggests the corruption is pretty widespread and pretty serious. Why aren’t more people up in arms about it?
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