+ Reply to Thread
Page 3 of 12 FirstFirst 1 2 3 4 5 ... LastLast
Results 21 to 30 of 119

Thread: The Global Economy

  1. #21
    ^^^ This is a response to that response - - -

    Aletheia101 responds:
    11:12 AM UTC+0800

    Complete and utter nonsense.

    The average CEO made 25 times more than the average rank and file worker in the 1960s. Today, it's more than 400 times as much. And in Fortune 100 companies, it's more than a 1000 to 1.

    Those ratios are higher in American than in any other nation. If there was some kind of rational explanation for the change, then why doesn't it apply to other countries?

    Sorry, but the actual value of labor hasn't decreased at all, as worker productivity has actually skyrocketed. And it's more than obvious that CEOs don't do the work of hundreds of workers, or 10,000 times more, if you're Larry Ellison of Oracle . . . nor do they work 15 to 40 times harder than CEOs did in the past.

    This isn't rocket science. This is just flat out theft. Capital is obviously stealing from labor at ever increasing speeds. It's a choice. There are no rational reasons for the massive increase in inequality other than pure greed at the top, and the fact that they can get away with it.

    And yet another response to that same first response - - -

    Whamadoodle responds:
    11:42 AM UTC+0800

    Yes, completely ridiculous: "capitalism is working fine to distribute the rewards of production to those who actually produce" -- uh, really? Only if you contend that those who "actually produce," which include middle class and poor workers as well as rich ones, really do only do 1/300 of the work that their CEOs do.

    Come on, man.

  2. #22
    We saw the defeat of the IMF and dictators and financial terrorists of Brussels in Cyprus. Russia was at odds with the planned looting of the personal savings (of course KGB money was ll over Cyprus) in Cyprus. It took a Vladimir Putin to finally break the reputation of IMF and the dictators in Brussels.

    Next stop, endgame for the Eurzone as we know it. Cheers!
    Understand? / ¿Entiendes?

  3. #23
    US stocks rise as Federal Reserve stands by stimulus

    Associated Press

    6:35 am | Thursday, March 21st, 2013

    Fear of a revived debt crisis in Europe faded from the stock market Wednesday, freeing the Dow Jones industrial average to touch an all-time.

    After dipping Monday on concerns that Cyprus would become the latest European nation to stir fiscal chaos, the Dow posted its second straight day of gains.

    Stocks traded steadily higher for most of the day and spiked after the Federal Reserve said it will continue with aggressive measures to boost the economy. Fed Chairman Ben Bernanke said that Cyprus crisis posed no major risk to the US economy.

    The Dow was up 44 points shortly before the Fed announcement. It rose as much as 91 points shortly after the Fed released its policy statement at 2 p.m., touching an all-time high of 14,546 at 2:25 p.m. (1825 GMT).

    The Fed said the US economy has strengthened after pausing late last year, but still needs support from the central bank. The Fed plans to continue buying $85 billion in bonds per month indefinitely to keep long-term borrowing costs down and spur investment. It also said it would keep short-term interest rates at record lows, at least until unemployment falls to 6.5 percent.

    Unemployment fell last month to 7.7 percent, the lowest in four years. The Fed doesn’t expect the rate to reach its target until 2015.

    The Dow closed up 55.91 points Wednesday, or 0.4 percent, to 14,511.73.

    Stock markets were little changed Tuesday despite rising uncertainty in Cyprus. Anyone watching “would conclude that the market decided Cyprus is overblown as an issue,” said Brian Gendreau, a strategist at Cetera Financial Group.

    Gendreau said traders had been concerned about what precedent might be set by Cyprus’ efforts to avoid a crisis. A plan to seize money from bank savings accounts was met with outrage and was rejected Tuesday by the island nation’s parliament.

    The nation’s unusual status as an international financial haven makes it an unlikely roadmap for future rescue efforts.

    “I think the market’s going to start looking at other things,” he said.

    Cyprus was negotiating with international lenders, seeking support for its ailing financial system. Without a bailout deal, Cyprus’ banks could collapse, devastating the country’s economy and potentially forcing it to exit the euro currency group. That could roil global financial markets.

    Attention had returned to Europe this week after several months’ respite, during which traders focused on the strengthening US economy and drove stocks to multi-year highs.

    Over the previous two years, concerns about a breakup of the euro currency often dominated trading of US stocks. The jitters receded after central banks provided enough extra cash to help prop up Europe’s commercial banks.

    Among stocks making big news was FedEx. The shipping company reported sharply lower quarterly earnings and said it will cut capacity to Asia. FedEx is seen as a bellwether for the broader economy because air shipments are tied closely to the pace of business activity.

    FedEx sank $7.33, or 6.9 percent, to $99.13.

    Adobe soared after reporting strong first-quarter earnings. The company, which makes Adobe Reader and Photoshop, said it has picked up more subscriptions to online versions of its software products. The stock rose $1.71, or 4.2 percent, to $42.46.

    In other trading, the Standard & Poor’s 500 index rose 10.37 points, or 0.7 percent, to 1,558.71. The Nasdaq composite index rose 25.09, or 0.8 percent, to 3,254.19.

    The S&P 500 is just six points below its all-time high of 1,565, reached in October 2007. It is up 9.3 percent so far this year.

    The Dow is up 10.7 percent for the year. From March 1 through March 14, the index had a 10-day winning streak— its longest since 1996. The streak boosted the Dow by 484 points, to 14,539. Following a two-day dip Friday and Monday, the Dow has added 60 points to 14,511.

    Among the other stocks making big moves:

    — General Mills rose $1.19, or 2.6 percent, to $47.61 after saying its fiscal third-quarter profit rose 2 percent. The food company is benefiting from recent acquisitions.

    — Williams-Sonoma soared after the home goods retailer said its fourth-quarter net income jumped 9 percent and beat expectations. The stock rose $4.64, or 10.3 percent, to $49.85.—Daniel Wagner

  4. #24
    Fed holds steady on stimulus, rates

    By Ylan Q. Mui, Mar 21, 2013 12:37 AM EDT

    The Washington Post Published: March 20 | Updated: Thursday, March 21, 8:37 AM

    Federal Reserve officials voted Wednesday to continue pumping money into the economy and keep interest rates near zero amid fresh signs that their massive stimulus effort is gaining traction.

    The Fed’s decision to hold steady suggests it views the positive data as signs that its policies are working. But the improving economic picture also means that the recovery may not need as much help from the central bank in the future.

    In a statement, the Fed said there has been “a return to moderate economic growth” in recent months. Consumers seem to have shrugged off tax increases, while stock markets have reached new highs. The housing market is rebounding, and the job growth has been surprisingly strong.

    The Fed has been buying $85 billion worth of government and mortgage-backed securities a month to help bring down long-term interest rates. Many economists believe that has helped prop up the housing market and create jobs in deeply wounded industries, such as construction. Speaking at a news conference Wednesday, Fed Chairman Ben S. Bernanke stressed that the central bank could “calibrate” the amount of bonds it purchases to the health of the labor market.

    “The point of this is to let the markets see our behavior, to let them see how we respond to changes in the outlook,” he said.

    Other Fed officials have outlined specific terms under which they would consider slowing down or ending the bond-buying program. Chicago Fed President Charles Evans has suggested job growth of about 200,000 for six straight months as one key condition. This month, Fed Governor Janet Yellen said she is eyeing the number of employees voluntarily quitting their jobs and the rate at which companies are hiring.

    Bernanke did not provide details of what he is looking for. But he said that tying the purchases to a single criteria — such as the unemployment rate or payroll growth — would require the Fed to adopt an “all or nothing” approach to stimulus.

    “We think it makes more sense to have our policy variable,” he said, allowing the central bank to “respond in a more continuous or sensitive way.”

    However, the Fed has specific goals for hikingshort-term interest rates, which are currently near zero. It has vowed not to make a move at least until the unemployment rate hits 6.5 percent or inflation rises above 2.5 percent.

    Bernanke emphasized that there will be a “considerable interval” between when the Fed stops buying bonds and when it begins raising short-term interest rates. Thirteen of the 19 top officials at the Fed believe the first rate hike will not occur until 2015. Four think it will happen next year.

    Though Fed officials edged their forecasts for economic growth down slightly on Wednesday, the outlook for jobs inched up. Government data released Tuesday showed the number of new homes under construction rose to an annual rate of 917,000 — a pace that is spurring demand for more workers. A report by TD Economics estimated that the industry would add 400,000 jobs this year.

    “The Fed is winning,” economists at High Frequency Economics wrote in a recent research note. The numbers “are suggesting significant upward momentum, raising the potential for growth to effectively ‘feed on itself.’ ”

    But such hope has petered out before. Those results must be sustained beyond a few months for the central bank to consider dialing back its support of the economy. In a rare personal reference, Bernanke noted that he has a relative who is out of work and understands the plight of the 12 million unemployed Americans.

    “I have great concern about the unemployed, both for their own sake, but also because the loss of skills, the loss of labor force attachment is bad for our whole economy,” he said.

    Bernanke also addressed his own future. His term as chairman ends in January 2014, and there has been much speculation about whether he will stick around for another one to help the central bank unwind the unprecedented steps it took to respond to the worst global financial crisis since the Great Depression.

    On Wednesday, Bernanke said only that he has spoken with President Obama “a bit.” But he pointed out that the central bank is staffed by top-notch economists and policymakers who have been on the front lines of the crisis.

    “I don’t think that I’m the only person in the world who can manage the exit,” he said.

    Only one member of the Fed’s policymaking committee objected to its vote on Wednesday. Kansas City Fed President Esther George said she worried that excessive stimulus could create broad financial instability and raise inflation down the road.

    Jim Tankersley contributed to this report

  5. #25
    IMF chief Lagarde’s residence searched by French authorities in ongoing investigation

    Lagarde’s Paris home was searched March 20 as part of an inquiry into her role in a $400 million arbitration deal.

    By Howard Schneider, Mar 20, 2013 11:00 PM EDT

    The Washington Post Thursday, March 21, 7:00 AM

    French police searched the Paris home of International Monetary Fund managing director Christine Lagarde on Wednesday as part of an ongoing investigation into the French government’s dealings with a prominent businessman while Lagarde was the country’s finance minister.

    Lagarde’s home is one of several searched by French authorities in recent weeks as part of a probe that predates her appointment as IMF managing director in the spring of 2011.

    IMF executive board members were briefed about the issue at the time of her hiring and concluded it would not impair her ability to do the job. It is unlikely that will change unless the investigation results in formal charges against her.

    The case involves Lagarde’s decision as finance minister to refer a dispute between businessman Bernard Tapie and a state-owned bank to arbitration, ending a decades-old battle that was at the time wending its way through the French courts.

    The arbitration panel awarded Tapie more than $400 million in interest and damages, and prompted charges from opponents of then-President Nicolas Sarkozy that the decision to put the case before an arbitrator was a political favor in return for Tapie’s election support.

    Questioned about the probe last January during an interview at the World Economic Forum in Davos, Lagarde told French telelvision that sending the longstanding dispute to arbitration “was the best solution at the time and I believe I made the right choice.”

    IMF spokesman Gerry Rice declined comment on Wednesday’s police search, saying it would be inapproriate to discuss “a case that has been and is currently before the French judiciary.”

    Other IMF officials, who declined to speak for the record, said there was no review or other action planned by the IMF board as a result of the search of Lagarde’s home. Along with her apartment, authorities have searched the home of her former chief of staff, an arbitration judge and other officials close to the matter.

    The Reuters news agency quoted her lawyer, Yves Repiquet, in Paris as saying that the apartment search “will help uncover the truth, which will contribute to exonerating my client from any criminal wrongdoing.”

    Still, the search is an uncomfortable reminder of the ongoing investigation in Paris, and the turmoil it could cause for the IMF if it moves forward.

    Lagarde took over the IMF in the tumultuous weeks after former managing director Dominique Strauss-Kahn was arrested in New York and charged with sexually assaulting a hotel maid. Those charges were eventually dropped, but the incident left the fund adrift at a critical time in discussions over Europe’s debt crisis and other issues.

    Lagarde quickly established herself in the fund’s top job, and has been regarded as a n important arbiter in Europe’s ongoing debate over how to fix the euro zone — negotiations that remain highly sensitive, with Cyprus now teetering on the brink of financial collapse and possible exit from the currency union.

    Resolution of the investigation may still be months away — and would require several steps before formal charges are brought against anyone. The current probe is being conducted by a team of magistrates, who have broad investigative authority. They will make their recommendation — to drop the matter or bring charges — to a prosecutor, who would then have to decide how to proceed. A judge would then review any decision to prosecute, and would have to issue the French equivalent of an indictment that would send any case to trial.

  6. #26
    Cyprus triggers another euro-zone crisis

    By Editorial Board, Mar 20, 2013 09:03 PM EDT

    The Washington Post Updated: Thursday, March 21, 5:03 AM

    COULD A full-blown European financial crisis begin in tiny Cyprus, with a population of just more than 1 million and a gross domestic product of only $23.6 billion? The idea is only slightly stranger than the notion that this Mediterranean offshore-banking center, partially occupied by Turkey since 1974, belonged in a currency union with Germany in the first place. But Europe’s leaders, in their wisdom, let Cyprus join the euro zone in 2008, and now the future of a continent hinges on bailing out the island and its insolvent banks.

    European policymakers, led by Chancellor Angela Merkel’s German government, have made a hash of things so far. Cyprus needs to recapitalize its financial system, which is badly damaged by exposure to the sovereign debt of neighboring Greece. The International Monetary Fund (IMF) and E.U. governments agreed to lend $13 billion of the necessary funds, in return for the usual austerity and a contribution of $7.5 billion from the Cypriot government.

    The only way Cyprus could get its hands on that much cash, however, was to “tax” the $88.4 billion on deposit in its banks. Though basically a polite confiscation, it was defensible under Cyprus’s special circumstances, which include the fact that there was relatively little money to be had by soaking the banks’ bondholders. Forty percent of the deposits belong to foreigners, wealthy Russians especially, who are relatively well-positioned to share in their tax haven’s risks; a bailout that didn’t hit the Russians would have been politically impossible in Germany.

    For the Cypriot government, however, taxing fat cats risked alienating Russian Prime Minister Vladi*mir Putin, whose government Cyprus already owes $3.3 billion for a previous bailout. So President Nicos Anastasiades — with the inexplicable acquiescence of Berlin — tried to shift some of the burden onto small accounts, those with less than 100,000 euros, which is the upper limit for deposit insurance. Cyprus’s parliament rejected the plan in the face of an entirely foreseeable middle-class uprising. And it’s a good thing, too — violating the deposit guarantee for Cypriot savers would have set a dangerous precedent, possibly destabilizing banks across Europe.

    That bad idea may be dead, for now, though the mere fact that it was proposed could haunt savers in Italy, Spain and Greece. Meanwhile, only other difficult options remain: Cyprus could ask Mr. Putin for more aid, in return, perhaps, for a stake in its offshore natural gas deposits; the island could default and, probably, exit the euro zone; or it could yet cobble together a deal with the IMF and the Germans under which it limited the deposit “tax” to large, uninsured deposits.

    The third seems like the least bad option, but given the nationalist backlash in Cyprus against Germany over the original scheme, it’s anyone’s guess what Cyprus will do; at last check, its finance and energy ministers were visiting *Moscow.

    How ironic if the end result of euro-zone overstretch into Cyprus turned out to be an expansion of Russian influence over European Union turf. Apparently the creators of the euro zone underestimated geopolitical risk — along with the difficulties of establishing a common currency among self-interested nations that had no true central bank, joint bank regulation or common fiscal policy. After three years of crisis, those design flaws remain largely uncorrected. The Cyprus mess, though still unlikely to trigger a European collapse, is a warning that the time remaining to repair those flaws is not unlimited.

  7. #27
    ^ Speaking of the Russians and the Cypriots...

    Russia attacks Cypriot bank levy

    By Charles Clover and Courtney Weaver in Moscow

    Russia on Monday blasted a proposed €5.8bn levy on Cypriot bank deposits by the EU, warning that a planned €10bn bailout is not big enough to restore confidence in Cyprus, while the mandatory tax on deposits could cause a bank run and a prolonged financial crisis.

    EU leaders also apparently failed to consult with Russia before announcing the Cyprus rescue plan, scheduled to be voted on by the island’s parliament on Tuesday.

    Cyprus has long been an offshore financial centre for Russian corporations and individuals, who are estimated to hold up €20bn-€25bn in deposits on the island – one-third of the total. Accordingly, they would stand to lose almost 10 per cent of this money, according to the terms of the bailout announced on Saturday.

    Russian president Vladimir Putin told a meeting of officials on Monday that such a tax on deposits would be “unfair, unprofessional and dangerous”, according to comments by his spokesman.

    Anton Siluanov, finance minister, also criticised the EU for not discussing the proposal with Moscow first, despite the two sides having engaged in months of negotiations over Russian co-operation on the bailout.

    While Russia had previously discussed the possibility of restructuring a €2.5bn loan it granted Cyprus in 2011, Mr Siluanov suggested on Monday that this could now be off the table if the EU did not rethink its position.

    “We had an agreement with our EU colleagues that we would take co-ordinated action,” Mr Siluanov said. “Our role was to possibly relax the terms for [Cyprus] paying back its credit.

    “As it turns out, the EU took action to levy a tax on deposits without consulting Russia, and for this reason we will further consider the issue of our participation from the point of view of restructuring the earlier loan,” he said.

    More videoVladimir Yakunin, head of state-owned Russian Railways and a close associate of Mr Putin, warned that the proposal could be damaging for Russian-EU relations. “Everyone knows that one-third of the deposits belong to Russian companies and individuals,” Mr Yakunin said.

    “How does such a decision get made, and without even consulting with Russia? What kind of strategic, equal partnership with the EU countries can we even talk about? They are solving their problems at our expense,” he said.

    Russia’s stock market fell almost 2.2 per cent in trading on Monday, led by the share prices of the country’s two largest banks, VTB and Sberbank, which fell 6.5 per cent and 4.5 per cent respectively – a sign that markets expect the fallout from the Cyprus rescue to be worse than the estimated €2bn haircut for Russian depositors.

    The main fear is blockages in money transfers from or through Cyprus as a result of the authorities stepping in to deal with a pending deposit run on the island, according to David Nangle, head of equity research for Renaissance Capital, a Moscow-based investment bank. While Russians own billions in Cyprus deposits, the island is far more important to the Russian economy as a conduit for financial flows – Russian money goes to Cyprus, where it gets advantageous tax treatment, and then back into Russia.

    If this system were to grind to a halt, it could have dire consequences for Russian business, Mr Nangle said. “Based on the direct links to Cyprus, there are no clear implications for Russian banks. But if you think about the indirect links long enough you might start to get concerned.”

    While Russia has been mostly a bystander throughout the eurozone crisis, watching from the sidelines as Europe’s economies founder, the Cyprus crisis is the first time that Russian interests have been directly affected.

    “The longer [Cypriot] banks stay closed, the longer it could be quite disruptive to the Russian economy,” said Timothy Ash, head of emerging market research at Standard Bank.

    Russian officials said the main problem with the plan was that €10bn was not enough to stabilise Cyprus’ financial sector, while the haircuts would scare investors away. The bailout, according to Mr Yakunin, would undermine rather than restore confidence in the Cypriot banking system.

    “Russian depositors are being fleeced for €1.5bn-€2bn, it’s not a solution to the problem,” Mr Yakunin said. “Secondly, it undermines the confidence in this zone, with very dire consequences.”

    The €10bn in finance “is not enough” to be decisive in restoring confidence in the banking sector, he added. “And not only that, the consequences of this decision are that a large percentage of the deposits will simply make their way to other jurisdictions. Because most of the money there is not there to be hidden. Most of it is simply there because of generous tax treatment.”

    There are already signs that Russians are seeking new offshore havens – a trend set to continue once Cypriot banks reopen.

    Alexei Golubovich, chairman of Arbat Capital, noted in an opinion piece in Russian daily Vedomosti that more than $2bn in Russian funds had flowed into Latvia last year ahead of the expected bailout of Cyprus.

    “[Russian companies] have become very used to and very lazy about using Cyprus as the main financial conduit, and to some extent that has prevented them from broadening out,” said Chris Weafer, chief strategist for Sberbank Investment Research, adding that the move could inadvertently boost Moscow’s plans to become an international financial centre, with more individuals and companies preferring to park funds inside Russia.

  8. #28
    The Cyp-RIOTS has begun. I will not be surprised if Cyprus will dump the Euro with the Russian blessing and revert to the Lira.

    The revolution will not be televised. It will be tweeted, facebooked, youtubed and instagramed.
    Understand? / ¿Entiendes?

  9. #29
    US stocks drop on Cyprus, weak earnings

    Agence France-Presse

    7:45 am | Friday, March 22nd, 2013

    NEW YORK—US stocks fell Thursday, hit by uncertainty over the Cyprus banking crisis and some surprisingly weak corporate earnings.

    The Dow Jones Industrial Average lost 90.24 points (0.62 percent) to 14,421.49.

    The broad-based S&P 500 dropped 12.91 (0.83 percent) to 1,545.80, while the tech-rich Nasdaq Composite Index gave up 31.59 (0.97 percent) to 3,222.60.

    The retreat came after the European Central Bank said it would halt emergency funding to Cyprus’ banks unless the country reaches a bailout deal by Monday. The Cyprus crisis has revived concerns about eurozone stability.

    Markets were also troubled by a weak earnings report from technology company Oracle. That came a day after FedEx disappointed investors, announcing that its quarterly earnings were hit by poor international results.

    “The market caved in over corporate news and Cyprus,” said Peter Cardillo of Rockwell Global Capital.

    Most of the blue-chip members of the Dow ended the day in the red. Trading was hard on banks like Bank of America and JP Morgan, both losing 1.6 percent.

    The Dow’s technology companies also lost on the day. Cisco gave up 3.8 percent, IBM retreated 1.3 percent and Hewlett-Packard dropped 2.6 percent.

    Oracle shares sank 9.7 percent after its earnings missed analyst expectations. The results showed weak sales of software licenses and cloud computing subscriptions.

    Global package delivery giant FedEx dropped 2.7 percent, one day after slashing its profit guidance for fiscal 2013.

    Lululemon Athletica, which markets sports clothing for women, rose 1.3 percent after it beat fiscal fourth-quarter earnings forecasts. The Canadian company estimated that it lost $12-$17 million in revenue in the current quarter due to a recall of too-sheer yoga pants.

    Homebuilder KB Home rose 2.5 percent after reporting a big jump in revenues thanks to an increase in the number of homes delivered and a higher average selling price.

    Bond prices declined. The yield on the 10-year Treasury rose to 2.0 percent from 1.94 percent late Wednesday, while the 30-year jumped to 3.23 percent from 3.17 percent. Bond prices move inversely to yields.

  10. #30
    Is the Estate Tax Doomed?


    The Great Divide is a series about inequality.

    Under the deal struck by President Obama and Congress to avert the “fiscal cliff,” the estate tax — long targeted for elimination by Republicans — survived, but in a substantially diminished form.

    In 2001, the year George W. Bush became president, individual estates over $675,000 were taxed and the top rate was 55 percent. Now, the maximum tax is 40 percent and only individual estates worth more than $5.25 million are taxed (a figure that will now be automatically adjusted for inflation).

    The estate tax has a history as long and controversial as the income tax. Its first modern version appeared in the federal tax code in 1916, three years after the ratification of the 16th Amendment, which authorized the federal income tax. Advocates of the estate tax see it as a crucial tool for raising revenue and a buffer against the sharp, nearly inexorable rise in inequality over the past four decades. Opponents, who call the levy “the death tax,” say it penalizes savers, harms growth and interferes with parents’ ability to pass on their wealth to their children.

    With income inequality at levels not seen since the 1920s, and low economic mobility, some liberals hope that in the coming years our lawmakers will face intense political pressures to maintain, and even raise, taxes on inherited wealth. In this view, economic realities are building a compelling case for a more progressive tax system.

    But judging from the experience of other wealthy countries, the opposite may be true. As inequality has risen in the developed world, many governments have been dismantling — not increasing — estate taxes. Countries from Austria to Canada to Sweden have abolished estate taxes outright.

    There is nothing inevitable about high estate taxation in a democracy — even in an era of fiscal inequality, and even if a country is in fiscal crisis. Estate taxes have survived when their proponents have demonstrated that they are needed to ensure shared sacrifice in a collective effort. Over the past two centuries this has most often happened during the most extreme instance of national purpose: mass warfare. In an article published last year in the American Political Science Review, we presented evidence covering estate or inheritance tax rates in 19 industrialized countries over two centuries. This analysis allowed us to see the forces that have shaped estate taxation over the long run.

    In many ways, our discoveries flout the conventional wisdom on estate taxation. Consider first that across the 19 countries, estate taxes are often very old. England has had such a tax since the probate duty of 1694. As early as 1791, France adopted a universal estate tax. In most cases, estate taxes were established more than a century before an income tax. The United States federal government is an exception to this pattern, but at the state level, estate taxes commonly predated income taxes by many years. Why? For much of history, it was easier for a government to record the value of an estate than to track income on an annual basis. The lesson is clear: estate taxation first arose because it was easy, not because of concerns about inequality.

    Consider next a second fact: by long-term historic standards, current estate tax rates are actually relatively high. Before 1914 it was almost unheard-of for a government to maintain a top estate-tax rate above 10 percent — well below the 40 percent rate just agreed to by President Obama and Congress. Low rates prevailed both in monarchies and democracies. This was true even though the late 19th and early 20th centuries were a period of very high wealth inequality across the industrialized world. The lesson is again clear: democracies have often taxed estates lightly even during periods of rampant and rising inequality.

    What happened after 1914? Governments that conscripted their populations for the two world wars also raised top rates of estate taxation to levels previously thought unimaginable. By the end of World War II, the top marginal estate-tax rate reached 75 percent in Britain and 77 percent in the United States. In strong contrast, countries that did not mobilize their populations en masse made no such change. In 1945, the top estate-tax rate in Norway was only 35 percent, and just 9.45 percent in the Netherlands. As we have shown in other work, this same divergence between countries also held for the income tax. Perhaps this divergence is no surprise. The two world wars were costly, and it may have been urgent to increase taxes on the rich along with the rest. In fact, we found that the two world wars not only led to an overall increase in taxes, but also led to the wealthy bearing a greater share of the tax burden than ever before. In the case of the estate tax, rates on large estates increased significantly more than those on small estates. But it was not just the need for revenue that explains why taxes also became more progressive in this way.

    Our research identifies the political reason that estate taxes, and taxes in general, became more progressive in countries that mobilized for war. Proponents of progressive taxation made a clear case that if the broad population was to sacrifice for the war effort, then on grounds of fairness the wealthy should make a financial sacrifice to pay for the war. During World War I this came to be known as “the conscription of wealth,” a turn of phrase arguably as impressive as “death tax,” in contemporary debates. Likewise, during World War II, President Franklin D. Roosevelt and American labor unions made use of the term “equality of sacrifice” to call for heavier taxes on the wealthy. Since war debts continued after each war’s end, these two terms retained their salience even after conflict had ceased.

+ Reply to Thread
Page 3 of 12 FirstFirst 1 2 3 4 5 ... LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts

Visitor count:
Copyright © 2005 - 2013.