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HOW TO TRIM THE RICHEST DOWN TO DEMOCRATIC SIZE  
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Sam Pizzigati
April 6, 2024
inequality.org
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_ We're going to need to think big ... but maybe start small _

"I'll believe corporations are people when Texas executes one of them
(Occupy DC)" by takomabibelot is marked with CC0 1.0., photo by tako
(CC0 1.0)

 

How rich have America’s super rich become? The annual compensation
of Steve Schwarzman, the chief exec of the private-equity colossus
Blackstone Inc., offers up one telling yardstick.

In 2023, we learned earlier this year
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Schwarzman’s take-home actually fell some 30 percent off what he
collected the year before. But Schwarzman’s overall payday for that
year, even after that tanking, still amounted to a jaw-dropping $896.7
million.

The current personal net worth of Blackstone’s CEO? The Bloomberg
Billionaires Index puts
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figure at a sweet $42.3 billion.

Schwarzman’s current _political_ net worth? That remains to be
seen. In the 2020 presidential election cycle, this Wall Street
titan spent [[link removed]] over
$27 million on donations to his favorite office-seekers, over five
times what he spent in the 2016 election cycle. Since 2020,
Schwarzman’s personal fortune — what he has available to shower
down on his election-day favorites — has more than doubled.

The total wealth of billionaires worldwide, over that same span, has
more than tripled, from $76 to $233 billion, according to
just-published _Forbes_ data [[link removed]].
Four years ago, _Forbes_ counted
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billionaires in the United States — 614 — than in any other
nation. Today, the latest _Forbes_ tally tells us, some 813
billionaires call the USA home.

These billionaires — and the mere centi-millionaires so yearning for
billionaire status — aren’t just prospering. They’re exerting an
unmatched influence on our politics and our future.

Americans of modest means, back in the early 1900s, confronted an
eerily similar political situation. They would come to understood, as
the great U.S. Supreme Justice Louis Brandeis once put it, that “we
can have democracy in this country or we can have great wealth
concentrated in the hands of a few, but we can’t have both.” They
did their best to de-concentrate the nation’s wealth — and made
some serious progress.

By the middle of the 20th century, thanks to that progress,
America’s richest were facing a 91 percent federal tax on their
income over $400,000, the equivalent of about $4.6 million today.
Until 1980, those same rich also faced tax rates as high as 70 percent
on the fortunes they willed at their deaths to their dearly beloveds.

Tax rates that stiff have all evaporated over the past half-century.
America’s 400 richest today, analysts at the Biden White House
have calculated
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have of late been paying a minuscule 8.2 percent of their annual
actual incomes in federal taxes.

How can we turn that 8.2 percent into something more like 82 percent?
How can we start taxing the kingpins of the profiteering private
sector at the same sort of high rates that helped the mid-20th-century
United States give birth to history’s first mass middle class?

Maybe we need to start by focusing on the kingpins of
the _nonprofit_ sector.

SHOULDN’T EVERY AMERICAN...
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...be able to enjoy the luxury of a roof?
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No one in this nonprofit sector is, to be sure, currently pulling down
anything close to the annual tens of millions now filling the pockets
of our nation’s top corporate and financial execs. But many of our
nonprofit sector’s chiefs — the top execs at major hospitals,
universities, and foundations, for instance — are today taking home
handsome rewards that dwarf the paychecks of their employees.

This past March, the _Chronicle of Philanthropy_ took
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look at annual chief executive compensation at 16 of America’s
largest foundations. CEOs at these 16 nonprofit giants averaged $1.1
million.

On U.S. campuses, the _Chronicle of Higher Education_ added
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this year, top executive pay can run considerably higher than the
compensation we see in foundation land. In 2021, the most recent year
with data, some 21 presidents of private colleges and universities
pocketed over $2 million.

That same year, the U.S. Senate Committee on Health, Education, Labor
and Pensions reports
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the top executives at 16 of America’s largest health care nonprofits
“averaged more than $8 million in compensation” and took home over
a combined $140 million.

The nonprofits that are shelling out all these hefty rewards, let’s
keep in mind, are simultaneously enjoying assorted exemptions from
federal, state, and local taxes. In other words, average American
taxpayers are subsidizing the hefty compensation of America’s top
nonprofit execs.

And that doesn’t sit too well with growing numbers of Americans
working both inside and outside of our nation’s nonprofits. In Los
Angeles, trade union activists in the hospital industry have
been pushing
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a local ordinance that would cap hospital executive pay at $450,000,
the current take-home with expenses of the president of the United
States.

“The primary concern of our major health providers,” the
SEIU-United Healthcare Workers West union notes
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“should be serving the community, not enriching individuals.”

But plenty of that enriching _is_ going on, and not just in big
cities like Los Angeles. In 2022, the CEO of Indiana’s largest
nonprofit hospital-chain collected
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over $4 million in compensation. That same nonprofit’s chief
operating officer came up less than $1,000 shy of $2 million, and its
chief financial officer made just over $1.5 million.

Nationally, observes
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Lown Institute health-care think tank, nonprofit hospital CEOs are
regularly making “as much as 60 times” more than workers at the
nonprofits they manage.

How wide _should_ that gap run? The world-renowned founder of modern
management science, Peter Drucker, once told the federal Securities
and Exchange Commission that no top execs should be making more than
20 times what they pay their workers.

“I have often advised managers that a 20-to-one salary ratio,”
Drucker noted
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“is the limit beyond which they cannot go if they don’t want
resentment and falling morale to hit their companies.”

Earlier this year, U.S. Senator Bernie Sanders from Vermont joined a
group of other lawmakers that included Maryland’s Chris Van Hollen
and California’s Barbara Lee to introduce the latest federal
legislative effort to translate Drucker’s wisdom into public policy.
Their proposed “Tax Excessive CEO Pay Act” would raise
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rates on corporations with CEO-to-median worker pay ratios above 50 to
1.

“The American people are sick and tired of CEOs making nearly 350
times more than their average employees,” Senator Sanders opined
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the bill’s unveiling, “while over 60 percent of Americans live
paycheck to paycheck.”

This Sanders legislation has no chance of passage, of course, at our
current historical moment. Our corporate big guns simply wield too
much power on our contemporary political stage.

Our nonprofit world’s big guns, meanwhile, do have political clout
as well, but not nearly as much as their corporate counterparts. So
why not start focusing much more of our CEO-worker pay ratio fire on
the nonprofit sector? Why not press for legislation that denies
nonprofit status — and the tax breaks that come with it — to
nonprofits that pay their top execs at any rate over Peter Drucker’s
20-times ratio?

Successful moves in that direction would send a powerful message: that
our tax system should in no way reward enterprises that pay their
execs unconscionably more than what they pay their workers.

That message, in turn, could lead to legislation that denies
government contracts and subsidies to profit-making enterprises that
lavish rewards on their chiefs at the expense of decent compensation
for their mere employees.

Where could all this lead? Maybe to a tax code that subjects all
income over a modest multiple of the minimum wage to at least the 91
percent tax on top-bracket income dollars in effect throughout the
Eisenhower years. Taxing away income above that multiple would, in
turn, help lock into place a much more equal America.

Could winning limits on nonprofit executive compensation actually set
us on a path to reach that much more equal future? Any journey of a
thousand miles, let’s never forget, always begins with a single
simple step.

SAM PIZZIGATI, AN INSTITUTE FOR POLICY STUDIES ASSOCIATE FELLOW,
CO-EDITS INEQUALITY.ORG. HIS LATEST BOOKS INCLUDE _The Case for a
Maximum Wage_
[[link removed]] AND _The
Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that
Created the American Middle Class, 1900-1970_
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* economic inequality
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* executive pay
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* tax fairness
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