Bloomberg reports:
"The 17.2 percent tax rate in 2006 was the lowest since the IRS began tracking the 400 largest taxpayers in 1992, although the richest 400 Americans paid more tax on an inflation-adjusted basis than any year since 2000.
"The drop from 2001’s tax rate of 22.9 percent was due largely to ex-President George W. Bush’s push to cut tax rates on most capital gains to 15 percent in 2003.
"Capital gains made up 63 percent of the richest 400 Americans’ adjusted gross income in 2006, or a combined $66.1 billion, according to the data. In all, the 400 wealthiest Americans reported a combined $105.3 billion of adjusted gross income in 2006, the most recent year for which the IRS has data." (Bloomberg)
I think I read it correctly: the Richest 400's earnings doubled, but their tax rate went down by one-third.
That's not to say that the Richest 400 didn't pay more actual dollars in taxes -- they did. Of course they did: their income, on average, doubled. If your income went from $40,000 to $80,000, you'd pay more actual dollars in taxes too.
Did most Americans' income double? Not by a long shot. Check out the table below:
U.S. Median Household Income, 2000-2006
|
2006 |
$48,200 |
..... |
2002 |
$43,318 |
| 2005 | $46,326 |
|
2001 | $42,228 |
|
2004 |
$44,389 |
|
2000 | $43,162 |
| 2003 | $43,318 |
|
|
|
If you made $263.3 million and paid only 17.2% in taxes, you'd pay about $45.3 million in taxes, but you wouldn't miss any meals.
In fact, you'd still never have to work a day in your life, because you'd pocket about $218 million.
That's a big number to grasp, so let's look at a smaller chunk. If you made "only" $2 million in a year after taxes (i.e., less than 1% of the Richest 400's $218 million), you'd be getting about $166,000 a month (or about $41,500 a week) to live on, invest, and play with.
Multiply that by 100, and you'd be in back in the Richest 400's ballpark, getting about $16 million a month -- even after federal taxes.
Do the Richest 400 simply work harder than the rest of us? Not really. Most of the Richest 400's income (63%, according to Bloomberg) came from capital gains (i.e., money made from selling investments, like stocks and bonds).
That's one of the bitter ironies of our nation's tax code: capital-gains taxes "are generally lower than the tax rates that apply to other income." (IRS)
Thus, the money you earn from showing up at a job and actually working is taxed at a higher rate than the money that the Richest 400 made through stocks and bonds.
Though some politicians nag us to be "responsible" for our own retirement by saving money, the government often taxes the interest we earn (e.g., through CDs or savings accounts) at a higher rate than it taxes money made on stocks and bonds.
In terms of this nation's values, that's what I call mixed messages.
I grasp that the government wants to encourage people to invest in the stock market -- though, I'm not sure why, given how risky and fraud ridden it is.
At the same time, why should people who "earn" 7 or 8 or 9 digits a year get such huge tax breaks, while millions of Americans worry about whether they will even have a job next month?
Guys like Rush Limbaugh have a way of making small-earning
Americans sympathize with and defend the poor rich folks who pay
millions in taxes each year. (See here and here.)
Guys like Rush stir up the froth by screaming about socialism and welfare , scaring low-earners into thinking that they pay for it -- though at different times, Mr. Limbaugh argues that "The Rich" pay most of the taxes that fund welfare.
Through impressive magical feats, Mr. Limbaugh managed to convince working-class folks that they actually are part of the wealthy elite that pulls down 8 or 9 digits per annum -- though most people in Mr. Limbaugh's audience will likely never even be invited to fly on a Gulf Stream V, sit in a sky box at the Superbowl, or spend a week in a suite at the Carlyle.
Memeorandum has commentary.
Other Buck Naked Politics Posts:
* Real Bonuses Based on Fake Profits
* Execs Made Millions While Driving Companies into Ditch
* Wealth Redistribution: Merrill CEO Spent Shareholders' Millions
* Krugman Refutes Republican Arguments for Bush-Style Corporate Tax Cuts
* House Judiciary Subpoenas Rove
* Obama & Dodd Scold Execs who Took Taxpayer-Funded Bonuses
* Krugman Asks Why Obama Not Following Through on Health Care...
* Cleaning up Political & Corporate Culture Could Help Economy
.
You need to look at the facts as provided by the IRS (2007 figures, last available.)
The wealthiest 1% of our population received 17% of total income, and paid 37% of all taxes. Not only that, but the percentage of total taxes paid by the top 1% increased each year of the Bush presidency. (No, I didn't vote for him, I just have an admiration for facts.)
At the same time, the %-age of total taxes paid by the lowest quintile of earners fell every year, while the median family income of all Americans increased more than 11%.
Are things perfect in America? No. Are they far better than the picture your misinformation paints? You betcha!
Posted by: John Shuey | February 21, 2009 at 03:07 PM
HI John,
Insults don't actually contribute to rational debate. I was not trying to mislead anyone.
I'm glad that you're sharing "facts," though.
On that note, I'm not sure I agree with your interp of the "facts."
For example, median household income in nominal dollars might have increased by 11%. I'm no expert, but the data I cited discussed "real income" not nominal income.
Inflation actually counts.
Even if median income had increased by 11% in real dollars, that's a far smaller increase than America's richest 400 taxpayers had experienced.
My goal is not pure income equality.
For me, it's a matter of degrees, and I'd like to see a bit less wealth disparity.
Posted by: Deb | February 22, 2009 at 12:49 PM
Deb,
Thank You for you post.
I find relief in the numbers you have posted. President Bush was able to reduce the effective tax rate for those 400 Americans down by one-third to 17.2%. I feel that is a step in the right direction and with any luck we will continue to stray further away from the unfair progessive tax system that our great country currently uses. Today the top 1% of earners within our country contribute 37% of all income tax dollars collected. The top 50% of all earners contribute 97% of all income tax dollars collected. The remaining 50% of income earners contribute only 3% of ALL income tax dollars collected. That is not okay in any society.
How can a tax system so unfair be allowed to continue. A full 50% of the United States population is effectively living here without an income tax burden, while the top 1% pays nearly 40% of the total dollars collected into the pot. Thank You President Bush for attempting to level the playing field. I hope our lawmakers continue your good work in some form.
Our nations first Republican president, Abraham Lincoln, spoke about this very subject back in 1861. The partial text of his speach is as follows:
"You cannot strengthen the weak by weakening the strong. You cannot further the brotherhood of man by encouraging class hatred. You cannot help the poor be destroying the rich. You cannot keep out of trouble by spending more than you earn. You cannot build character and courage by taking away a person’s initiative and independence. You cannot help people permanently by doing for them what they could and should be doing for themselves."
The last sentence in the quote I believe is the most important. By allowing such a large portion of our population to live within our United States without requiring them to contribute to the overall fiscal health of our country you are conditioning them to believe they are not responsible for their fair share. Every citizen should expect to pay a reasonable amount of federal income tax in exchange for all of the rights that are granted to each and every citizen, rich or poor.
Posted by: Robert Queen | March 04, 2009 at 08:59 PM
Hi Robert,
There are other numbers and details that affect this picture, like those that follow:
Top Taxpayers' Share of Income for 2006
Taxpayers Share of All Income
Top 1% 22.06%
Top 5% 36.66%
Top 10% 47.32%
Top 25% 68.16%
The upshot: a small percentage of Americans (the richest) take a disproportionately large percentage of Americans' income.
Why shouldn't they pay a disproportionately large percentage of America's taxes? They're still rich, even after taxes.
If a guy makes "only" $10 million a year and pays a full 50% in taxes, he'll still pocket $5 million a year. That's $416,666 per month (after taxes) to live on, play with, and invest.
That guy is still rich.
The richest 400 Americans' income averaged $263 million in 2006. Those folks paid, on average, only 17.2% in taxes or $45.3 million -- which means they pocketed about $218 million that year or about $18 million per month.
They'd still be super-rich if they were paying 25% in taxes.
Posted by: Deb | March 04, 2009 at 09:25 PM
Deb,
Thanks for the additional figures.
The top earners in the almost any society will always take home a disproportionately large portion income, with a few notable exceptions such a communist countries but I suspect both of us could agree that model of government is associated with other negative attributes that do not need to be introduced into this conversation.
My point is simply that top earners should not be required to contribute a larger percentage of their earnings then others within that same society. We could go back and forth all day about whether or not they could afford to, and the truth is they probally could afford to, but should they be made to contribute a larger portion of their earnings while others and contributing very little to almost none of their earnings into the collective pot. I believe the answer is absolutely not. Half of our society does not need to live here free of charge, everyone needs to pay their own way.
Our government would be well served if they would stop using our complex tax code as a tool for social engineering (or pandering to special interests) and revert back to what should be the tax codes primary purpose which is simply that of revenue collection so our country can continue to provide vital services. A flat tax has been spoken (and written) about for years as a potential fair solution to this problem and I believe it would be a grand idea. The major hurdle that exists is that our existing tax code is so broken that our society would go into shock if something so simple could replace it and serve the same purpose. What do you think?
Posted by: Robert Queen | March 05, 2009 at 07:58 PM
HI robert,
I do agree that our tax code (what little of it I've read) seems broken. I don't know whether a flat tax would be fair or not.
Some very wealthy people may have earned their money. Some, I'm convinced, have not.
In my book, the people who underservingly redistributed shareholder wealth to themselves aren't actually paying their own way.
I say the same about the folks running big contracting firms that redistribute unreasonable amounts of taxpayers' wealth to themselves (as opposed to contractors that make a reasonable profit for good work).
I don't see our nation's economic options as an either-or proposition. I'm not against people's being richer than I am.
I'd just like to see a heftier middle class and a bit more rewards for the folks doing the heavy lifting in our economy.
Surely, there's some sort of mid point between communism and so-called "free market" capitalism?
Posted by: Deb | March 07, 2009 at 02:50 PM