That's the tag line of a commercial appearing on news programs. I'm sure I'm not the first blogger to be troubled by the attempt to suggest that ownership of oil companies is broadly middle class.
The two ads I've seen are titled "Who really pays when Congress taxes oil companies?" and "Do you own an oil company?"
Here's the text of one of the print ads:
When Congress increases taxes on oil and natural gas companies, it's taxing Americans' economic futures
Who really pays when Congress taxes oil companies?
We all do ... in more ways than one.
Tens of millions of mostly middle-class Americans have an ownership stake in the nation's oil and natural gas companies through pension plans, IRA accounts and mutual funds. All of them invest heavily in oil and natural gas stocks, enabling the industry's strong earnings to help support Americans' financial security.
Every day, Americans count on the oil and natural gas industry to deliver the energy they need and to invest in securing the energy they'll need in the future. The industry has delivered on both counts. Since 1992, the U.S. oil and natural gas industry has invested more than $1.25 trillion to keep Americans and the economy moving. Strong earnings make all this possible.
So when Congress increases taxes on oil and natural gas companies, it's really taxing Americans' economic futures as well as targeting their livelihoods and their energy future.
And here's the other:
Do you own an oil company?
If you've ever wondered who owns America's oil and natural gas companies, chances are the answer is "you do."
Surprised?
The fact is that if you have a mutual fund account -- and 55 million American households, with a median income of under $70,000, do -- there's a good chance it invests in oil and natural gas company stocks. If you have an IRA or personal retirement account -- and 45 million U.S. households do -- there is a good chance it invests in energy stocks.
All this comes from a recent study* of U.S. oil and natural gas company ownership headed by Robert J. Shapiro, undersecretary of commerce under President Bill Clinton.
According to the study, the majority of the industry's shareholders are "middle-class U.S. households with mutual fund investments, pension accounts, other personal retirement accounts, and small personal portfolios."
What many may find particularly surprising is that our industry's corporate management owns only a tiny fraction of company shares.
Specifically, here is what the study found:
- 29.5 percent of U.S. oil and natural gas company shares are owned by mutual funds and other firms
- 27 percent are owned by pension funds
- Individual investors own 23 percent
- 14 percent are held in IRA accounts
- 5 percent are owned by other institutional investors
- 1.5% are held by corporate management (significantly less in the largest companies)
These findings tell us something very important: tens of millions of Americans have a stake in the U.S. oil and natural gas industry. When the industry's earnings are strong, the real winners are middle-class Americans, people investing in their retirement security or saving for their children's college education.
So when the political rhetoric gets hot about increasing energy taxes or taking "excess profits" from U.S. oil companies, it is important to step back, look at the facts, and ask yourself, "who does that really hurt?"
To read the full study, visit EnergyTomorrow.org
All true, as far as it goes ... but there is a big difference between the truth and the whole truth.
Yes, it is true that a fair proportion of "middle class" Americans have some stock ownership. Much depends on how one defines "middle class." Here's the data for 2004, from the "detailed tables" on the wealthandwant.com website. As a proxy for "middle class," we'll use the 40% of Americans whose total net worth places them at or above the median but below the top 10%.
- Stocks: a mere 27.8% of that group hold individual stocks
- Mutual Funds (other than money market, and outside of retirement accounts): only 20.0% of that group hold mutual funds
- Retirement Liquid Assets (that is, IRA's): only 67.7% have any assets in a retirement account (other than a pension) [Source: Table W50-5, rows 8, 9 and 10.]
Now of course 67.7% of 40% is a lot more people than 82.7% of the top 1% plus 84.4% of the next 4% plus 80.3% of the next 5%. And that is what the ad alludes to when it says
tens of millions of Americans have a stake in the U.S. oil and natural gas industry. When the industry's earnings are strong, the real winners are middle-class Americans, people investing in their retirement security or saving for their children's college education.
But the second sentence is a lie. The real winners are not the middle-class Americans, even the group who do hold stocks, mutual funds or even IRA's. Their holdings are a tiny -- minute! -- fraction of the holdings of people who by no definition I'm familiar with could be called middle class. Keep reading.
But how much do the "40%" group have? How do their holdings compare with the other 5%, 4% and top 1% who make up the top 10%?
- Stocks: the 27.8% on average each have stock holdings of 34 each, compared with 133, 380 and 2,713 each in the top wealth quantiles. [Of the few people -- 6.5% -- in the bottom 50% who have holdings, average holdings are 7.]
- Mutual funds: the 20.0% on average each hold mutual fund holdings of 71 each, compared with 168, 443 and 2,603 each in the top wealth quantiles [Of the few people -- 4.6% -- in the bottom 50% who have holdings, average holdings are 10.]
- Retirement liquid assets: the 67.7% on average each who have IRA holdings have average holdings of 96 each, compared with 329, 504 and 1109 each in the top wealth quantiles. [Of the few people -- 28.7% -- in the bottom 50% who have holdings, average holdings are 16.] [Source: Table W50-7, rows 8, 9 and 10]
SO WHOSE INTERESTS ARE WE TALKING ABOUT?
- Stocks:
- the top 1% hold 50.9% of the value;
- the next 4% hold 28.2% (so the top 5% have 79.1%), and
- the next 5% hold 10.1% of the value (so the top 10% have 89.2%,
- leaving 10.8% for the bottom 90% of us.
- The 40% group has 10.3%, and
- the bottom 50% have 0.6%
- Mutual Funds:
- the top 1% hold 37.6% of the value;
- the next 4% hold 32.7% (so the top 5% have 70.3%),
- and the next 5% hold 10.7% of the value (so the top 10% have 81.0% of the value,
- leaving 19.0% for the bottom 90% of us.
- The 40% group has 18.2%, and
- the bottom 50% have 0.7%.
- Retirement liquid assets:
- the top 1% have a mere 13.6% of the value;
- the next 4% have 25.2% (so the top 5% have 38.8%), and
- the next 5% have 19.6% of the value (so the top 10% have 58.4% of the value),
- leaving 42.7% for the bottom 90% of us.
- The 40% group has 38.3% -- so they don't even have their proportionate share in this best-distributed category! [Source: Table W50-3, rows 8, 9 and 10]
- Offsetting this is the fact that of aggregate net worth,
- Retirement liquid assets are 13.4%,
- Mutual Funds are 6.2% and
- Stocks are 7.4%. On the other hand,
- "business equity" -- the ownership of privately held businesses, -- represents 19.6% of aggregate net worth, [Source: Table W50-2] and
- 62.7% of that value is concentrated in the top 1% of us,
- another 22.4% in the next 4% (so the top 5% have 85.1%);
- the next 5% have 5.7%, and
- the "middle class" 40% have 9.2% of the value. [Table W50-3, row 19].
- I'd guess that some of the oil and natural gas companies fall into the "privately held business" category.
Another way to look at it ... from the same data source (the Federal Reserve Board's Survey of Consumer Finances), though published in a different study (Recent Changes in Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances). The median stock holdings in 2004 was $15,000 per household: that is, half of households have more, half have less. For Mutual Funds, $40,400. For Retirement accounts, $35,200 (Table 5) Among only households who own stocks, median holdings are $160,300; for mutual funds, $184,000, and for retirement assets, $121,300 --- and 20.7% of American households held stocks, 15.0% had mutual funds, and 49.7% had retirement accounts. [Source: http://www.federalreserve.gov/pubs/bulletin/2006/financesurvey.pdf]
Do you own an oil company? Well, maybe a very tiny piece of one, if you have a very large holding of mutual funds. But do your interests as an "owner" outweigh your interests as a human being, a consumer, a homeowner, a commuter, someone who breathes the air, someone who cares about future generations, someone who cares about the national debt, someone who cares about economic justice? I rather doubt it. You certainly don't have your 1/Nth, and your interests are not the same as the people who have managed to claim title to 10/Nths or 100/Nths of the value.
But I don't necessarily endorse taxing windfall profits after the fact. Rather, I'd prefer to collect the royalties at the source. America's natural resources rightly belong to all the American people, not to the oil companies or the individuals, corporations, trusts, endowments, philanthropies or even pension funds who have title to the land. You shouldn't have to be a landholder to be entitled to your fair share of the economic rent on what nature provides. (Alaska funds a lot of services from oil revenues, and places a portion of those revenues in the Alaska Permanent Fund, which provides an annual income to every man, woman and child in Alaska -- without regard to whether they own stock, mutual funds, retirement assets, or business equity, or to the size of their holdings -- just as if they were ALL CREATED EQUAL! What a novel idea in America!)
See also: The Wealth Concentration Tables, and http://lvtfan.typepad.com/lvtfans_blog/2008/07/wealthandwantco.html
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