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DOING THE MATH FOR THE TIMES MAN

March 22, 2005

A letter to Tax Analysts today (subscription only; no link available) considers the arithmetic of The New York Times reporter David Cay Johnston's dyspeptic response to a review of his book, Perfectly Legal.

From the letter:

Johnston in his letter criticizes Prof. Pollack for missing the "major news" he broke in his book Perfectly Legal about how truly rich the superrich in the United States have become. He drives home his point with this observation: "The economics of a two-income couple who work all year to earn $300,000 have nothing in common with someone who makes that much every 45 minutes."

...

There are 8,760 hours in a year, so $400,000 an hour would translate to earnings of $3.5 billion a year. Now, I know that corporate boards continue to disserve their shareholders with ridiculous nine-figure compensation packages for CEOs, but I had not seen anything in the 10-figure range. Perhaps Johnston was basing his figure on a standard 2,000-hour work year, so that a $400,000 hourly rate would extrapolate to annual earnings of $800 million.

The letter goes on to point out that this might only apply to Bill Gates, and even him only one year, when Microsoft took its big dividend.

Mr. Johnston waited a year to respond to the book review. He shouldn't have rushed so.

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