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what’s happening are “real wages,” the inflation-adjusted purchasing power of our paychecks. The wages paid at the median of the scale declined between 1973 and 1996, shifted up again between 1997 and 1999, and have been going down again since. This is not the function of some “invisible hand” or law of capitalism. It’s the result of a series of political decisions made by politicians who are increasingly owned by their rich donors. Paul Krugman of The New York Times reports, “Most of the gains of the past 30 years were actually to the top 1 percent [of the highest 10 percent], rather than to the next 9 percent. In 1998, the top 1 percent started at $230,000. In turn, 60 percent of the gains of the top 1 percent went to the top 0.1 percent, those with incomes of more than $790,000. And almost half of those gains went to a mere 13,000 taxpayers, the 0.01 percent, who had an income of at least $3.6 million and an average income of $17 million.”

According to the Congressional Budget Office, between 1979 and 1997 the income of those in the middle quintile rose from $41,400 to $45,100, adjusting for inflation. That was a 9 percent increase. The income of families in the top 1 percent rose from $420,200 to $1.016 million, a 140 percent increase. Another way to look at it is, in 1979 the richest families were ten times richer than the middle clump of us. By 1997 they were twenty-three times as rich and rising fast. In 1998 the top 1 percent had more income than the 100 million in the bottom 40 percent.

In the Eisenhower era, corporations paid an average of 25 percent of the federal tax bill. In 2000, they paid only 10 percent, and by 2001, only 7 percent. In 1960 corporations paid an effective tax rate on corporate income of 47 percent. Today it is 35 percent. As we all know, many, many corporations have paid zero in income taxes for years, despite hefty balance sheets, à la Enron, and have indeed worked themselves into a position where the U.S. government owes these flagrant tax-cheaters money. Returning to the 1960 rate and closing the most glaringly obvious loopholes would increase annual tax revenues by $110 billion. American corporations taking tax shelters on offshore islands are now estimated to cost the treasury $70 billion a year. In The Cheating of America by Charles Lewis and Bill Allison of the Center for Public Integrity is an amusing history of tax cheating by the rich. They report, “In 1933, average Americans were shocked to learn that all twenty partners of J. P. Morgan & Company, the giant Wall Street banking firm, had paid no income taxes for the previous two years. Newspapers of the day trumpeted the disclosure as tax evasion by the firm’s partners, although they had broken no law. J. Pierpont Morgan, Jr., the son of the firm’s founder and his successor at its helm, later remarked, ‘Congress should know how to levy taxes, and if it doesn’t know how to collect them, then a man is a fool to pay the taxes. If stupid mistakes are made, it is up to Congress to rectify them and not for us taxpayers to do so.’ ” The old boy speaks for many today.

You don’t have to acquire a mailbox in Bermuda to cheat on taxes. Lewis and Allison report that in 1995, eighty-four millionaires who were still here filed tax returns on which they owed no income tax. Some 13,630 tax returns were filed by individuals who earned more than $200,000 but paid taxes at an effective rate of under 10 percent. And 17 percent of the roughly 7,500 corporations with assets of over $250 million filed returns claiming they owed no income tax.

Meanwhile, the IRS was being slowly starved to death by successive Republican Congresses, the same way they did with the Securities and Exchange Commission. Under Newt Gingrich, Congress held grand-inquisitor hearings in which the IRS was denounced for “Gestapo tactics.” The R’s then passed a “tax reform” act that should have been called the Let’s Hamstring the IRS So It Can’t Make Rich People Pay Act. The result is that since 1995, the IRS has focused most of its tax-fraud investigations on the working poor,