The 400 richest Americans and their terrible tax burden
Back in January, the IRS issued a report (pdf) on the income tax returns of the 400 highest-income taxpayers in the U.S. I missed it when it came out, but I've been looking through it and it provides a nice, simple demonstration of the fallaciousness of Ari Fleischer's argument about the tax burden. Fleischer bemoans the fact that the top 10% of earners in the U.S. have been paying an ever higher share of the nation's income taxes. The same is true for the top 400 (those making more than $110.6 million in 2006):
But this is a story about the income distribution, not tax rates. The top 400's share of the nation's income went from 0.52% in 1992 to 1.31% in 2006—an even bigger increase than its share of taxes paid. When you chart the average tax rate paid by those in the top 400, the picture is nearly opposite:
The most interesting information in both charts may actually be contained in the kinks. In the first, all the flat spots and downward legs coincide with bad years for financial markets. Thus, what Fleischer would call the tax "burden" borne by the 400 top earners appears to be determined almost entirely by what the market does. Sure enough, in 2006, 64% of the adjusted gross earnings of the top 400 came from capital gains. So the current financial disaster must be great news in Fleischerworld, in that it will reduce the tax burden on the highest earners. Yay!
When you look at average tax rates, the big downward swings seem to correlate both with good times in the market and reductions in the capital gains tax rate—which dropped from 28% to 20% in 1997, and from 20% to 15% in 2003. The differential between capital gains tax rates and the tax rate on regular income also explains why those making more than $110.6 million a year pay taxes at a lower rate than those making $300,000 or $400,000 a year—because the really rich get a much higher percentage of their income from capital gains than the HENRYs do.
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"When you look at average tax rates, the big downward swings seem to correlate both with good times in the market and reductions in the capital gains tax rate—which dropped from 28% to 20% in 1997, and from 20% to 15% in 2003."
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Ah, but those reductions in capital gains tax rates were necessary to inflate the asset bubbles that have become essential to the workings of our economy. -
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...those reductions in capital gains tax rates were necessary to inflate the asset bubbles that have become essential to the workings of our economy."
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Yes, how wise that we created an economy built on those asset bubbles. -
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So.. these graphs confirm that the top 400 tax payers are paying a larger total percentage of the nations taxburden... Are you disproving something here? Also, look at the tax burden for all families during those same periods and you will see they have dropped similarly during those same time frames. Fleischer's points still remain, is this good or bad? Depends on who you're talking to.
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Ilovitt - be ye readin' th' same graphs th' rest o' us are here, mate? It don't be lookin' QUITTE like ye be describin'. Perhaps Justin could be findin' th' percentage o' wealth controlled by these 400 taxpayers - tha' mi' be interestin' fer ye...and fer th' rest o' us, too.
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"Are you disproving something here?"
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Yes, that there is anything disproportionate or unfair about the top 10%'s "tax burden", which is what Fleischer implies when he doesn't put it in the context of disproportionate income; what Mr. Fox just did. -
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Maybe I'm missing something, but I thought the point of the article was to point out the danger to our democracy of having a majority (who pay nothing in taxes)vote on how to spend tax money paid by a small minority. Logic tells you that it is unsustainable. Arguments about income distribution, etc. are really irrelevant in that context.
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Percent of total tells it all. 400 people pay 1.75% of the TOTAL tax burden for 300 million!?!?! That is clinically insane. Income gaps only reveal JEALOUSY. Basic level of income will show if a person or houshold can live. Talking income gaps proves the author believes in "haves and have nots" which is a bad thing based on what I learned in public school. Coveting your classmate's lunch (use it as a proxy to wealth or income) is frowned upon, especially if your lunch is perfectly good. One last thing, people in poverty tend to circle out, and new immigrants move into the US and the lower levels of income distribution. The dream is to move up, which is what the vast majority of AMERICANS do. Last thing, ask "poor people" what their favorite cable TV channel is, it will make your mind spin especially the ones that answer HD channels. (for you smart ones out there, that means "poor folks" own HD big screens, and get lots of cable channels. Kinda makes the notation of poor a curious one at best.)
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Add: The bottom 40% pays zero income tax. 40% of 300 million people is 120 million people, when you divide that by the top 400 people, those 400 people are paying for 300,000 taxpayers each. Funny, but since most of the top 400 are stock rich it means the provide jobs...and if the market goes up they provide more jobs. If it goes down, they provide less.
April 15, the day when each top 400 can fill 5 football stadiums with their dependents, boy that must feel good. Good thing they will bring their iPhones, $200 sneakers, and all the other things trinkets they spent their last stimulus check on...
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Anyone who would base economic/tax policy on a statisical sample of 400 individuals needs to look for a new line of work.
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Rob, they are basing it on a 100% sample, and then looking at the individual groupings. DUH. You need to look for a new line of thinking.
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the graphs that Justin makes the centerpiece of his post undermine his premise.
Per the above, the richest 400 tax filers get 1.31% of the national income and pay nearly 1.8% of the taxes. So their tax burden is 37% higher than their income share.
Fleisher wasnt bemoaning the riches' fate -- he was pointing out that even before Obama's coming tax increase, the rich paid taxes well above their share of the national income. Interestingly -- their share of the burden was higher on average during the Bush II years than it was during the Clinton years.
I guess Fox has an issue with average rate for the rich -- even if that lower average rate resulted in a bigger share of our national rax revenues being paid by them.
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btw-- one other fun fact from the PDF linked by Fox--
of all the filers who represented the top 400 over the 15 years of the study, it does a frequency analysis - i.e. how often does the same filer show up in the top 400.
biggest group was "once" -- 72% only made the top 400 once and werent heard from again. It falls off very fast from there as well -- Only .2% made it all 15 years.
Belies the idea of the uber-weathly trust funder who rakes it in year after year after year --- more likely somebody who sold a business and took their retirement.
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My $.02, I *think* Justin is merely saying that the reason why the top 400 are paying a larger percentage of taxes is that they are making a larger percentage of the total income. Period. Things are perhaps as they should be.
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And 97% of the taxes are paid by the top 50%; and more than half the taxes are paid by the top 10%. You can describe these "top taxpayer" data in a lot of different ways.
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Oh to get back to the days of Mr Carnegie and JP Morgan:
http://iloveclosing.com/2009/04/17/the-sin-of-selling/
Cheers
The Closer -
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Suppose there are only 10 of us in the country. 9 of us have an income of around $20K/yr and one of us makes $20 billion/yr. The $20bil/yr guy is the only one who pays taxes, he pays 0.1% of his income, which is $20 million. Fine, we get by.
Now the $20bil/yr guy starts complaining: see, he's paying all 100% of all the taxes collected in the country! This can't be fair! Moreover, his total share of the taxes (100%) is higher than his total share of the income (only 99.99%)! This is bad for democracy!
Well, you know what - I agree. This is bad for democracy and for pretty everything else.
May I suggest a solution? Here's one: take the $20bil/yr guy and hang him on the nearest lamppost. And then make sure the distribution of income is more equal. Not completely equal, but more or less equal. That's it, case solved.
- foxjust About to walk to LA Public Library for this http://bit.ly/7LgRu6 Am told only a nobody walks in LA - 3 hours ago
- foxjust just took first ride on LA metro. Totally disorienting not to have car to park here - 18 hours ago
- foxjust Thanks to Bama fans for reminding us we needed to buy TP! (Turns out we're fine on detergent). Oh, and nice game #ironbowl - 5 days ago
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