We Stand (Sort of) Corrected
By Michael Kaufman
David Cay Johnston sent the following message in response to last week’s post: “Thanks for the kind word s in your blog post, but the income data was revised, the first time the Social Security Administration has ever done that. The very top incomes fell sharply, in fact by so much that the average fell.”
The agency had originally reported Oct. 15 that the 74 highest paid workers in the United States were paid an average of $518.8 million in 2009, compared to 131 making $91.2 million in 2008. Johnston reported it in a post at Tax.com and the stunning news was picked up by many media outlets and blog sites around the country, including Zest of Orange.
However, as Johnston explained in a follow-up post, “My column, and coverage of it by others, prompted internal questions about the reasons the average pay of the highest paid workers quintupled.” According to Mark Lassiter, a Social Security spokesman, the inquiry established that two individuals filed multiple W-2 forms reporting $32.3 billion of pay for work.
After further examination the agency determined those forms were phony. Lassiter said he doesn’t know if the filings were part of a scam or just a prank, and the matter has been referred to the agency Inspector General.
So as it turns out, removal of the bogus reports shows that the 72 remaining highest-wage earners averaged “only” $84.1 million each, down $7 million or 7.7 percent from the 2008 average. “As a result of the revisions, the data show that the average wage in 2009 dollars declined by $457 (not $243), a 1.2 percent decline from 2008,” explains Johnston. “The revision shows that since 2000 the average wage, in 2009 dollars, barely changed in real terms, increasing only $347 or 0.9 percent after nine years.” The median wage remained unchanged at $26,261, which is $37 lower than in 2000 and $253 lower than in 2008.
“The revised data strengthen my conclusion since the new numbers show that total compensation and average compensation was even lower than originally reported,” notes Johnston. “And the fact remains that every 34th worker in 2008 had no work in 2009.” Moreover, he adds, “That median pay in 2009 was below 2000 and average pay was up less than 1 percent from 2000 both show that our policies since 1980 have failed.”
In his original post, Johnston noted that in 1994, when the top category the government reported on was $20 million or more of compensation, only 25 people were in that rarefied atmosphere, and their average earnings came to just under $45 million in 2009 dollars.
“What does this all mean? It is the latest, and in this case quite dramatic, evidence that our economic policies in Washington are undermining the nation as a whole. We have created a tax system that changes continually as politicians manipulate it to extract campaign donations. We have enabled ’free trade’ that is nothing of the sort, but rather tax-subsidized mechanisms that encourage American manufacturers to close their domestic factories, fire workers, and then use cheap labor in China for products they send right back to the United States. This has created enormous downward pressure on wages, and not just for factory workers.
“Combined with government policies that have reduced the share of private-sector workers in unions by more than two-thirds — while our competitors in Canada, Europe, and Japan continue to have highly unionized workforces — the net effect has been disastrous for the vast majority of American workers. And of course, less money earned from labor translates into less money to finance the United States of America.” We can add to the mix the infamous “Bush tax cuts” for the rich, which will soon be extended unless public pressure forces the politicians in Washington to act on behalf of the beleaguered majority of the citizenry rather than the privileged few.
Johnston knows from what he speaks. He is a former tax reporter for The New York Times, where he received a Pulitzer Prize in 2001 for exposing tax loopholes and inequities. He currently teaches the tax, property and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management. And he is author of two bestsellers on taxes, Perfectly Legal and the recently published, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense and Stick You With the Bill. His next book, The Fine Print, will be published in 2011.
I don’t know about you but I am going to be sure to read The Fine Print.
Michael can be reached at michael@zestoforange.com.
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