It would be one of the boldest moves in progressive taxation we’d see in the twenty-first century. Congresswoman Alexandria Ocasio-Cortez suggested raising the tax rate on the wealthy to seventy percent. The proceeds would back the goals of the Green New Deal Ocasio-Cortez and other Democrats have proposed. Garnering praise and skepticism, her radical tax plan has brought our attention back to how our country has and has not taxed the One Percent. In their book Billionaires’ Ball: Gluttony and Hubris in an Age of Epic Inequality, Linda McQuaig and Neil Brooks explain how billionaires and Wall Street earned a bad reputation and fierce criticism, and why the rest of the country is eager for them, as Ocasio-Cortez put it, “to pay their fair share in taxes.”
After years of basking in the glow of a flattering limelight, by the fall of 2011 the very rich were experiencing something new and altogether jarring: the glare of a harsh spotlight trained directly on them. The temptation to bark orders like: “Dim that light, or else!” was natural enough, but perhaps unwise. After all, those shining the spotlight were not their employees and were swarming in large numbers through the streets of lower Manhattan, behaving like the sort of unruly mob one finds in faraway places where the ways of the free world are insufficiently appreciated.
All of a sudden, right here in America, being wondrously, fulsomely, voluptuously rich was no longer a badge of honor, something to announce gleefully to the world by squealing the tires of one’s Lamborghini at pedestrians who were in the way. Wall Street—the nexus of ambition, brains, greed, glamour, the very g-spot of the American Dream—was no longer something to be glorified, but rather occupied.
Where would it end? Could the trappings of wealth become a source of embarrassment? Could the day come when a yacht became like a fur coat—one of life’s small pleasures ruined by the prospect that wearing it (or docking it) might attract a crowd of protestors? Imagine a protestor so mean-spirited that she would object to the sight of a banker lounging on a pleasure craft massively larger than the house she had once owned but that now belonged to . . . a bank.
Of course, it could be worse. Luckily for the bankers, the occupiers were a little fuzzy in their targeting, going broadly after the top 1 percent, apparently unaware that the real red meat was much higher up the food chain—the top .01 percent, the top .001 percent, or all the way up to the dizzying heights occupied (in this case appropriately so) by billionaires.
Anyway, help was on the way. Already, the lobbying industry was swinging into action. By late November 2011, one of the leading Washington lobby firms—Clark, Lytle, Geduldig & Cranford—had prepared a memo for the American Bankers Association (leaked to the press by some mean-spirited soul), which laid out a media strategy for countering the Occupy Wall Street juggernaut.
The lobbyists insisted that the answer lay in a carefully prepared counter-campaign aimed at slinging mud at the motives of the occupiers: “If we can show they have the same cynical motivation as a political opponent, it will undermine their credibility in a profound way.” (It’s tough to imagine what cynical motivation might lead people to live in water-soaked tents for weeks on end.)
The danger was that the anti–Wall Street message, if unchallenged, could turn the big Wall Street banks into fodder for the Democratic political machine—and worse. As the memo noted: “The bigger concern should be that Republicans will no longer defend Wall Street companies—and might start running against them too.”
The lobbyists even raised the prospect of the Tea Party crowd joining in some kind of a Right-Left populist free-for-all of bank-bashing: “The combination has the potential to be explosive later in the year when media reports cover the next round of bonuses and contrast it with stories of millions of Americans making do with less this holiday season.” (It’s gratifying to see that, even when they’re plotting the destruction of a democratic movement, lobbyists now use inclusive language about the “holiday season.”)
All this looming victimization was no doubt baffling to members of the financial elite, who still had trouble grasping the notion that they were somehow supposed to feel culpable for the 2008 financial crash.
That bewilderment had been evident as early as January 2009, only months after the crash, at the elite gathering in the Swiss town of Davos, where bankers, business leaders, political shakers, and other big thinkers come together every year to celebrate the globalized world of liberated financial markets, shrunken government, and reinvigorated capitalism. Of course, some bewilderment was inevitable in Davos that year, with even questions popping up about why markets had done such a poor job of policing themselves. The headline on a dispatch that appeared on the website Slate captured the mood: “Davos Man, Confused.” Written by journalist Daniel Gross, the piece explained that, despite the confusion, there was a broad consensus at Davos that “[s]uccess is the work of Great Men and Women, while failure can be pinned on the system.” Or, as another journalist, Julian Glover noted in the UK’s Guardian: “The shock is real, the grief has hardly begun, but no one in Davos seems to think [this] means they should be less important or less rich.”
That would have involved a change of mindset, which was not what these economic overlords seemed inclined toward. After all, a key concept behind the economic order of the past few decades has been the central importance of individual talent—and the need to nurture it with abundant financial rewards. That way, so the idea goes, the brilliant in our midst would be lured to the top jobs that run the world. Ensuring the active participation of these giants among us was clearly understood to be worth a lot, and pay scales were adjusted accordingly, going through the roof at the upper end. Just because the global economy was now in a free fall hardly seemed like grounds to beat up the very people who’d played key roles in designing it.
So, in Manhattan, then-CEO of Merrill Lynch John Thain apparently saw no irony as he explained why he’d felt it necessary to pay $4 billion in executive bonuses to keep the “best” people on staff—right after those same overachievers had steered the company to a staggering net loss of $27 billion and, in the process, helped trigger the global economic meltdown. The decision of the Wall Street crowd to collectively pay themselves a record $140 billion in 2009—outstripping even their 2007 record—may have seemed odd under the circumstances, but then no one ever accused Wall Street bankers of being unduly modest, unassuming, or prone to self-doubt.
Away from the rarified air of Davos and Manhattan, doubts were beginning to appear. Some less-gifted types were now clamoring for change, even suggesting that cutting executive pay might induce the hypertalented to seek more socially useful employment in areas like teaching or health care. But a letter to the New York Times clarified the danger of this approach, making a compelling case for maintaining extravagant pay, even huge executive bonuses: “Without them, Wall Streeters will all look for other jobs. Do we really want these greedy, incompetent clowns building our houses, teaching our children or driving our cabs?”
As a result of the dramatic increase in the concentration of income and wealth at the top during the last few decades, the United States has become an extremely unequal society.
Before going any farther, we should point out that we are not against all inequality. On the contrary, some reasonable degree of inequality is not only acceptable and inevitable but even desirable because it allows for different rewards for different levels of individual effort and contribution. But what exists today in the United States—and to a lesser extent in Britain and Canada—is a level of inequality that is extreme compared to the rest of the advanced, industrialized world. Indeed, the level of inequality in the United States today is actually more considerably extreme than what exists in many developing countries, including India, Cambodia, and Nigeria, and even in many Middle Eastern countries, such as Egypt and Tunisia, where excessive inequality is widely believed to have played a role in sparking the Arab spring uprisings of 2009–2010.
Over the past three decades, virtually all the growth in American incomes has gone to the top 10 percent, with particularly large gains going to the top 1 percent and spectacularly large gains going to the top .01 percent. Between 1980 and 2008, the incomes of the bottom 90 percent of the population grew by a meager 1 percent, or an average of just $303. Meanwhile, over those same years, the incomes of the top .01 percent of Americans grew by 403 percent, or an average of a massive $21.9 million. The richest 300,000 Americans now enjoy almost as much income as the bottom 150 million. These high rollers make up an enormously rich and powerful class that can best be described as a plutocracy—not unlike the plutocracy of financial interests that dominated America back in the 1920s, when the opulence of the wealthy and their disproportionate influence over the political process was particularly blatant.
America’s return to plutocracy is all the more notable because, between the periods of extreme inequality of the 1920s and the extreme inequality of today, something very significant happened. During the intervening years—particularly the early postwar period, from the end of World War II until 1980—the United States achieved, as did many other industrialized nations, a degree of equality and egalitarian distribution of income rarely seen in any period of Western history. Certainly, it is striking to compare the fate of ordinary Americans in recent decades with the fate of ordinary Americans in the early decades after World War II. As mentioned in the last paragraph, the incomes of the bottom 90 percent of Americans grew by only 1 percent in the past three decades. But, in the 1950–1980 period, the bottom 90 percent did dramatically better, experiencing income growth of 75 percent, or an average of $13,222. Since the 1980s, however, the revival of plutocracy has had sweeping effects, profoundly changing the nature of American society and the lives of Americans. Yet, even as this remarkable transformation took place, the issue of inequality and its negative consequences largely disappeared from public debate—until the Occupy Wall Street movement boldly pushed the subject back into the limelight in the fall of 2011.
About the Authors
Linda McQuaig has developed a reputation for taking on the establishment. Author of seven Canadian best sellers and winner of a National Newspaper Award, she has been a national reporter for the Globe and Mail, a senior writer for Maclean's magazine, and a political columnist for the Toronto Star. Follow her on Twitter at @LindaMcQuaig and visit her website.
Author of three books, Neil Brooks is director of the Graduate Program in Taxation at Osgoode Hall Law School in Toronto. He has participated in building projects relating to income tax in Lithuania (through the Harvard Institute for International Development), Vietnam (Swedish International Development Agency), Japan (Asian Development Bank), China (AUSAid), and Mongolia (AUSAid).