And You Thought You Were Wealthy

The wealth of the United States is mostly divided between the very rich and the rest of us.  How rich are the very rich?  They earn so much money that many have an income of $4,000 per hour.  My source for this extraordinary data is BusinessWeek magazine dated August 25, 2008. A search of the BusinessWeek web site shows an equally unbelievable pay report dated 2004. The CEO of Johnson & Johnson had a total compensation of $31.9 million in 2007.  Oracle Corp. co-founder Larry Ellison was reported by Bloomberg News as receiving a pay package of $72 million.  But Bloomberg reported that he is the second best paid CEO.  John Thain, CEO of Merrill Lynch & Co. earned $1.7 million more than Mr. Ellison.  Mario J. Gabelli of the Gabelli Asset Fund was a poor earner of only $9 millon last year.  This information was in the Gabelli Asset Fund annual report. It is probably explained by the fact that the fund lost almost 20% of its value since last year at this time.     

What is even more unbelievable is those wealthy people do not pay income taxes at the same rate that working people do.  The pay is received at the capital gains rate of 15%.  How do they get away with doing this?  They take most of their pay in stock options.  There is no tax on stock options.

To put this in another form the Pareto principle almost applies but it is some what worse. 10% of America’s population own approximately 80% of everything.  The recent increases in gasoline prices has no impact on their life style.

When Barck Obama says he wants to tax 5% of the population at a higher rate, he is looking at those very wealthy people who are most likely not reading this blog.