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Sam Pizzigati: A history of taxes in one mega-rich family -- the Rockefellers

New York Gov. and then Vice President Nelson Rockefeller was embarrassed  to disclose  how little money he had -- relatively speaking.

New York Gov. and then Vice President Nelson Rockefeller was embarrassed  to disclose  how little money he had -- relatively speaking.

David Rockefeller recently passed away.

You may have already heard that news. You may have not. America’s major media outlets haven’t treated Rockefeller’s death — at age 101 — as a top-of-the-news story.

How things change. Once upon a time, any breaking news that involved a Rockefeller almost automatically qualified as news not to be missed. And for good reason.

A century ago, David Rockefeller’s granddad, John D. Rockefeller, ranked as America’s richest man. No other fortune in the United States — or the world — came even close in size to his.

Old John D. passed away in 1937 at age 97. Newspapers treated his death as a mega big deal. Front-page headlines everywhere. Editorial pages filled with reflections on his long and lucrative life.

One of those reflections came from America’s most noted 20th-Century pundit, columnist Walter Lippmann. The nation, Lippmann observed, would likely never see a fortune as grand as Rockefeller’s ever again. John D. had “lived long enough to see the methods by which such a fortune can be accumulated outlawed by public opinion, forbidden by statute, and prevented by the tax laws.”

In the United States, Lippmann added, “sentiment has turned wholly against the private accumulation of so much wealth.”

John D. Rockefeller raged mightily against that public sentiment over his life’s last decades. He fiercely denounced, for instance, the drive to enact a federal income tax.

“When a man has accumulated a sum of money within the law,” old John D. intoned, “the people no longer have any right to share in the earnings resulting from the accumulation.”

The people felt otherwise. A federal income tax became the law of the land in 1913. That tax would go on to whittle down the fortune  that John D. later left his six grandchildren.

The most celebrated of those six, longtime New York Gov. Nelson Rockefeller, would end up feeling intensely embarrassed about his diminished financial status, as one Washington insider discovered in 1974.

That insider, a veteran lobbyist by the name of Tom Korologos, vetted Nelson Rockefeller to be vice president, a job in which he served until 1977.

“I’ve got something to worry about,” Korologos remembers Nelson grimacing. The former governor, Korologos soon learned, didn’t want to publicly reveal his personal financial picture.

“His concern,” the vetter explained, “was that when it became public, he wasn’t going to be as rich as everybody thought he was.”

What had happened to the fabled Rockefeller family fortune? Taxes.

Beginning in the early 1940s and lasting into the 1960s, the federal tax rate on individual income over $200,000 annually hovered around 90 percent.

And many states also had their own progressive taxes. In New York, the state tax rate on top-bracket income stood at 15.375 percent.

Deep pockets could, of course, deduct their state taxes off their federal taxable income. But those deductions didn’t change the basic bottom line: The extravagantly rich, in mid-20th Century America, were losing their capacity to be extravagant.

Nelson Rockefeller passed away in 1979, just before the Reagan Revolution began undoing the progressive tax system that had so shaved his net worth. His younger brother David, a banker, lived on to prosper in the rich-people-friendly political environment  that the Reagan years ushered in.

Where Nelson watched his wealth shrink, David saw his wealth soar. At his death, Forbes magazine put David’s net worth at $3.3 billion, the world’s 604th largest fortune.

What would John D. Rockefeller think about how his last grandchild’s life turned out? He might be a tad disappointed that his flesh and blood no longer ranked as the richest of the world’s rich. But he’d probably be overjoyed that in America the rich still rule.

At least for now.

Sam Pizzigati, an Institute for Policy Studies associate fellow, co-edits Inequality.org. His latest book is The Rich Don't Always Win. 

 

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Commentary Robert Whitcomb Commentary Robert Whitcomb

Robert Whitcomb: Immigration, a bridge, 'royalists' and Rockefeller

President Obama is making a big mistake in seeking to protect millions of illegal aliens from prosecution by executive order.

While presidents have considerable legal discretion in individual deportation cases, giving amnesty to whole classes of people who broke the law in entering the U.S. stretches to the breaking point proper presidential powers. And remember that Congress has already debated — but not passed — legislative ideas similar to what the president would do, which also undermines his case.

Yes, Congress has long irresponsibly avoided fixing the immigration mess. No wonder the president is frustrated. Republicans, for their part, are torn between the campaign cash of businesses that love cheap illegal-immigrant labor, much of it at or below minimum wage, and nativist Republicans who feel culturally and economically swamped by the alien hordes. Cheap immigrant labor has helped undermine American wages, by some accounts as much as 8 percent.

Many illegal aliens are doing jobs that used to be considered entry jobs entirely for Americans, especially young Americans — a foot in the door of the economy. Some of these were summer jobs that helped pay a lot of college tuition.

Still, there’s no immediate new crisis in immigration. The numbers of those coming across the Mexican border have been declining lately.

That doesn’t mean that it’s not a very bad problem. But the situation doesn’t justify acting in legally dubious, delegitimizing ways that will tend to give a green light to more people to come here illegally, with economic and national-security implications.

If the president and the new Republican-led Congress cannot agree on immigration reform, then they should put off its resolution until, if necessary, one party controls Congress and the White House. Until then, here’s a simple proposal: More firmly enforce the laws on the books. To be fair, note that the Obama administration has deported record numbers of illegals.

ANOTHER THOUGHT on the mid-term elections: The Democrats’ biggest mistake was, out of fear of offending its big-money backers, it took no strong stand against those whom Franklin Roosevelt called “economic royalists” in pushing for a better deal for the middle class.

This is what happened back when Democrats failed to fight for extending Medicare to everyone, rather than coming up with the labyrinthine (and GOP-inspired!) Affordable Care Act. The Democrats need a clear message. In the last election, the perception was that the Democrats really didn’t stand for anything. The high-voting Republicans clearly stood for something: To block Barack Obama at every turn. The president may be standing for something in his immigration plans, but he’s doing it in the wrong way.

AS A RESIDENT of Brooklyn in the ’70s, when New York City was falling apart, I enjoyed the recent Associated Press article about that borough (“Once mocked, Brooklyn emerges as global symbol”).

It has become a symbol of innovation, renewal, gentrification, locavore restaurants and tech startups, with many young Silicon Valleyish types. (One of my daughters recently left Brooklyn for Los Angeles complaining that she was tired of living in a place “where everyone is 25.”)

Somewhat similar transformations have occurred in other old urban areas, including parts of Providence. And even Detroit may be at the very start of a revival.

When I worked in Lower Manhattan and lived in Brooklyn my co-workers acted as if I were commuting to Outer Mongolia. Now it’s where Wall Street types want to be. Never give up on a city!

IF THERE’S one thing that Republicans and Democrats ought to agree on, it’s the nation’s physical infrastructure, especially transportation. And yet key parts of it are falling apart.

Consider the 100-year-old Portal Bridge, part of the underfunded but very heavily traveled Northeast Corridor of Amtrak and local commuter trains. New Jersey Transit, which runs the Garden State’s commuter trains, says that problems on the old bridge caused more than 200 delays from the start of 2013-through July 2014! And that’s far from the only bottleneck on the Northeast Corridor. The aging system (which also needs more tracks) is also a particular mess around Baltimore, as those awaiting northbound trains in New York’s squalid, claustrophobia-inducing Penn Station can especially confirm.

Now there’s a belated plan to replace the Portal Bridge. But with much of American commerce flowing on the Northeast Corridor, the whole stretch must be rebuilt in the next decades. Even with all its flaws (especially when compared with European service), Northeast Corridor train service is a huge wealth creator. If fixed, it can be a much bigger one.

READ Richard Norton Smith’s “On His Own Terms: A Life of Nelson Rockefeller,’’ about the charismatic, dyslexic master builder, arts patron and would-be president, who was decisive about many things but not about how to run for president. Rockefeller once said: "I'm not bright. I'm imaginative.'' But he was very bright sometimes, and usually very imaginative -- sometimes too much so.

For years, he represented the  GOP's "Eastern Establishment,'' but his party moved south and west on him. By 1964, when asked by backers to call in the “Eastern Establishment,”   he replied: “You’re looking at it, buddy. I’m all that’s left.”

Robert Whitcomb oversees New England Diary. 

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