Monday, July 21, 2008

Make the rich pay

Of course, if you are informed you already know that they do.

Here's a graph from the WSJ on the distribution of the tax load.

The nearby chart shows that the top 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years. The top 10% in income, those earning more than $108,904, paid 71%. Barack Obama says he's going to cut taxes for those at the bottom, but that's also going to be a challenge because Americans with an income below the median paid a record low 2.9% of all income taxes, while the top 50% paid 97.1%. Perhaps he thinks half the country should pay all the taxes to support the other half.

Aha, we are told: The rich paid more taxes because they made a greater share of the money. That is true. The top 1% earned 22% of all reported income. But they also paid a share of taxes not far from double their share of income. In other words, the tax code is already steeply progressive.

We also know from income mobility data that a very large percentage in the top 1% are "new rich," not inheritors of fortunes. There is rapid turnover in the ranks of the highest income earners, so much so that people who started in the top 1% of income in the 1980s and 1990s suffered the largest declines in earnings of any income group over the subsequent decade, according to Treasury Department studies of actual tax returns. It's hard to stay king of the hill in America for long.

The most amazing part of this story is the leap in the number of Americans who declared adjusted gross income of more than $1 million from 2003 to 2006. The ranks of U.S. millionaires nearly doubled to 354,000 from 181,000 in a mere three years after the tax cuts.

This is precisely what supply-siders predicted would happen with lower tax rates on capital gains, dividends and income. The economy and earnings would grow faster, which they did; investors would declare more capital gains and companies would pay out more dividends, which they did; the rich would invest less in tax shelters at lower tax rates, so their tax payments would rise, which did happen.

I'd say it's time for the poor to step up and help those rich guys out for a change.


Ben said...

I would be considered poor these days as to compared to maybe a couple of years ago as I changed jobs.

I paid almost no taxes this year. i got my biggest refund ever. I am the definetion of poor in the eyes of the government. With the rebate, I paid next to nothing.

They are getting $ from some people, but people like me dont need any tax breaks or tax cuts. I barely pay any. So to those who say that the poor pay all the taxes, no we dont.

jquill said...

Thanks for the info. Question.

How does the info in your post apply to Warren Buffett's paying 17.7% tax, while his secretary paid about 30%? Also, this fellow, making over six figures reports a similar phenomenon:

How do you explain the discrepancy in statements?

gordon gekko said...

you need to read my posts on Warren Buffett

Here the are