PARALLEL UNIVERSE: Socialism for the Rich, Free Enterprise for the Rest of Us: Income Inequality in America

By David M. Kinchen
Warren E. Buffett
Warren E. Buffett
The New York Times Op-Ed "Stop Coddling the Super-Rich" by investment guru Warren E. Buffett is all over the media like a rash, to borrow a phrase from the movie "The Blues Brothers." (http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html). Just before I posted this commentary, I counted 633 stories on Google -- and counting.

The 80-year-old Buffett says that while our leaders tell us to share the sacrifice as we attempt to climb out of the longest recession in history, and that:  "While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as 'carried interest,' thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors."

He wonders aloud why his tax bill, as a percentage of his mega-income, is a fraction of the grunts who work for him:

"Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent."
After explaining in considerable detail that even taxes were once much higher  plenty of money was made when the super-rich paid a larger share of their income in taxes,  this secular saint from Omaha, NE, chairman and CE of Berkshire Hathaway, calls for a radical change: 
"My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice."
Frank Koller
Frank Koller

Buffett's cry in the wilderness brought to mind another blog I found on Frank Koller's site ( www.frankkoller.com) about income inequality in the U.S., currently at levels as high as during the run-up to the stock market crash of 1929.
Koller, a Canadian journalist and the author of "Spark," a book about the no-layoff guaranteed employment policies the world leader in arc welding, Cleveland's Lincoln Electric Co., now in paperback from PublicAffairs Books (for my review, click on: http://www.huntingtonnews.net/7539) writes that the: 
".... top fifth of Americans now earns half of all the income generated in the country, while the bottom fifth earns only three per cent of that amount. The top five per cent of Americans alone earns one-out-of-every-five dollars paid out as income."

He adds (link: http://www.huffingtonpost.com/frank-koller/why-the-right-and-the-lef_b_745537.html):

"(Does it really make this issue of unequal distribution less worrisome to remind us that the situation was worse in 1929 – just before the Great Depression – as some conservative voices are doing?)"

Still more from Koller's blog, which pre-dates Buffett's op-ed by almost a year:

 "... Americans are woefully unaware of how unequal the country actually is in terms of income earned. Dan Ariely (author of Predictably Irrational) and Michael Norton have just published a survey demonstrating that Americans of all persuasions – Republicans, Democrats, men, women, well-off, poor – significantly underestimate how amazingly rich the richest Americans actually are."

Here's what Buffett says:

".... for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

"My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice."

If the U.S. were Britain and France, we'd all be in the streets, rioting, looting, burning and calling for equal treatment for all -- and calling, like Buffett and Koller are -- for the super-rich to pay for their extremely good fortune.

I think Koller hits the proverbial nail on the head when he places the blame on our dysfunctional political parties:

"The problem right now, of course, is that neither political party is much interested in talking about inequality.

"For Republicans, talking about inequality raises the danger that, almost regardless of how it’s spun, voters will realize that the rich are steadily getting richer. Or more precisely, that a relatively fewer rich Americans are getting a great deal richer than the vast majority. Why should Republicans initiate a discussion about something that just makes voters demand, because it’s the only option, increasing taxes for those at the top? Republicans don’t do that!

"For Democrats, talking about inequality requires talking about … wait for it! … raising taxes and cutting spending, because in the dire economic situation the US now finds itself in, once again, there really isn’t a way to avoid this hard prescription. And it’s become party dogma that Democrats don’t do that!

"As a result, both political parties have a short-term interest in simply avoiding making too much of the fact that America is becoming a more and more unequal society, where more and more Americans are struggling to live decent lives."

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