A friend of mine has drawn my attention to an initiative called „Responsible Wealth”. It aims at the top 5% of income or wealth in the US that “care about economic justice” and asks them to donate some or all of the tax savings from the tax cuts of the Bush and Clinton administration to “tax fairness organizing”. This raises the question if the top 5% do not already pay a fair share of taxes already? To assess this question I looked at data of the Internal Revenue Service (IRS) to get a better idea of the role of the Top 5% in income generation and tax payments:

As it turns out in 2007, the top 5 percent of tax payers earned 37.4 % of adjusted gross income paid 60.6 % of all federal individual income taxes. In comparison to 1992 (when Clinton came in office) the Top 5% had a share of 28% of the total adjusted gross income and a share of 45,9% of all federal income tax. No shift in the relation between share of total gross income and share of tax paid during the Clinton/Bush era. Just for comparison: The bottom 50% of adjusted gross income in 2007 had a group share of 2.9% of income tax.

While “fairness” is always in the eye of the beholder and one can always argue about the “fairness” of single cases and tax cuts I do not see the overall point of the Responsible Wealth Initiative. If the top 5% of the taxpayers account for 60% of all tax payments and the bottom 50% for 2.89% I find it hard to argue that the wealthy do not already “care about economic justice”. Even more so when taking into account that the wealthy in the US spend each year between 2-3% of their investable assets for charity.

I fully agree that the living conditions of the poor can and should be improved, but for me it isn’t a matter of the wealthy being irresponsible, but instead, a matter of the government spending their huge amount of tax money responsibly. The solution to take more and more money from those who generate economic development in order to increase public spending and improve ecomomy is too populist and shortsighted. It would be much more useful for this purpose to demand more effective investments of tax receipts by limiting the influence of lobby groups, streamlining bureaucracy and thinking beyond the next election day.

It seems that Hong Kong has overtaken London as a wine auction hub. We are just wondering how long this party can go on… But in the meantime we say, as the french do, santé.

With the imprisonment of Bernie Madoff and the recovery of the stock markets it seems like that the public eye on Madoffs Ponzi scheme is going down as well. Nevertheless, for (hopefully) a long time his name will stand for a so far unprecedented fraud and therefore investors should take their lessons and understand what really happened.

For those who are interested to dig deeper I recommend the reading of the “Madoff Chronicles”, a series of rather long features (you better print them) on his rise and fall, published in Vanity Fair. It is well researched and offers profound insights on his “system” and family-business, the role of funds and banks feeding him with billions and the greed and naivety of investors. Since the articles are not written for the “Economist” they include a fair share of amusing side notes, making it fun to read (at least as long as you have not been a client).

If you like these articles you might be interested as well to learn more on the role of the biggest feeder fund in the Madoff fraud, the Fairfield Greenwich Group, which alone “entrusted” USD 7 billion of its clients money to Madoff. Finally, if you are sick of Madoff and the Upper East Side Crowd and need some sunshine check “Pirate of the Caribbean”. A feature of Allen Stanford, who managed to rise from a Texan gym owner to running the second biggest Ponzi-scheme ever. During his “big times” it looks like he certainly had a lot more fun than Madoff. Now it seems their “luck” has changed, since Stanford awaits his trial sharing his cell with ten inmates and heated by the strong Texan summer sun.

In the light of the cut of Net Jets Europe flight crew by 30% the recent commercial with Roger Federer offers a good idea for managers and VIPs for reducing their costs (and the jealousy of coach fliers…) of private jets travels: Do the taxi yourself and give a hand to get the plane started…