Apologists for the Rich Are Scraping the Bottom of the Barrel

In tough economic times, work for some people can suddenly become significantly more difficult. Take, for instance, the analysts and academics who have decided, for whatever reason, to devote their careers to justifying the wealth of the wealthy. In normal times, these flacks for grand fortune can waltz through their workdays with the greatest of ease. They merely invoke the prospect of catastrophic economic collapse whenever anyone dares propose anything that might leave the wealthy even just a little less wealthier.

Without the rich getting richer, these shills will note smugly, we’ll have no one to create jobs or keep the stock market humming.

But what can apologists for the awesomely affluent threaten after an economy has already collapsed? What do they do then? Here’s what they do: They get desperate — and even more reckless than usual. They play games with stats. They torture logic. They invent ever more fanciful gloom-and-doom scenarios.

We’ve seen, over recent weeks and months, all this desperation and more.

The statistical games, of late, have revolved around the rich as “refugees.”

The wealthy, fans of fortune have long argued, will flee any jurisdiction goofy enough to raise taxes on high incomes. Over the last year, a number of jurisdictions have raised taxes on the wealthy anyway, and that seems to have upped the pressure on the apologist crowd to “prove” the exodus effect.

Editorial writers at the Wall Street Journal made just such an attempt late last month when they jumped on a news report that one-third of Maryland’s millionaires had disappeared from the state’s tax rolls.

That “substantial decline,” the Journal editorialized, demonstrates the “futility of soaking the rich.” The “fleeced taxpayers” of Maryland, the Journal asserted, had decided to “fight back.” They were leaving the state.

And what “soaking” had Maryland done? In 2008, the top state tax rate on income over $1 million had risen from 4.75 to 6.25 percent.

Could an increase this modest actually drive Maryland millionaires to pull up stakes and leave hearth and home behind? Perhaps. But so far, despite the feverish claims of the Wall Street Journal editorial page and similarly minded media outlets, no evidence is actually showing any Maryland millionaire exodus.

The number of taxable returns with over $1 million in 2008 income, the Institute on Taxation and Economic Policy notes in a detailed analysis of the Wall Street Journal’s exodus stance, has indeed dropped. But the number of returns with income just under $1 million “has risen noticeably.”

The supposed “exodus” of Maryland’s rich, in other words, likely reflects a decline in the number of Marylanders with $1 million in income. Last year, amid the Wall Street nosedive, wealthy Marylanders simply made less money.

In any case, the data the Journal cites to back up the exodus claim all come from a “preliminary” report on Maryland's 2008 tax collections. The final report won’t be out until October. Last year’s final report featured over three times more $1 million returns than the preliminary.

So much for the great Maryland millionaire exodus. Ready for some tortured logic? Last week the Harvard Business Review presented a hefty helping — from University of Chicago economist Steve Kaplan.

Kaplan’s Harvard Business Review contribution, entitled (Good) CEOs Are Underpaid, offers a provocative take on corporate executive compensation. The evidence, Kaplan contends, “indicates that CEOs typically aren't overpaid.”

What evidence? Paychecks for top CEOs, says Kaplan, aren’t rising as fast as paychecks for top hedge fund managers and other financiers. In 2007, he informs us, the hedge fund industry’s top 20 earned over $20 billion, almost triple the $7.5 billion combined income of the nation’s top 500 CEOs.