The income growth of the super rich far outpaces the rate of taxation.
A new report by the IRS on America’s top 400 income-tax payers shows that the super-wealthy are gaining a larger share of the income pie, but are paying a lower share of taxes.
The report, obtained by my Journal colleague Tom Herman, profiles the so-called Fortunate 400 (as measured by adjusted gross income or AGI). The last time the IRS released such a report, it sparked a heated war of words between the right and left over inequality.
This time, the data are even more provocative.
In 2005, you needed at least $100.3 million in AGI to make the list — more than triple the amount needed in 1995. This is roughly in keeping with the increases in the Forbes 400 list, where the wealth needed to make the 400 has more than tripled since 1992 to $1.3 billion. Of course, this doesn’t necessarily mean that the same rich people are getting richer, since the income list tends to be fluid. It just means that the fortunes being made today are much greater than those of the past.
What’s most striking however is the income and tax shares. The IRS report shows that the Fortunate 400 now control 1.15% of the nation’s income — twice the share they controlled in 1995. Over the same period, however, the average income tax paid by this same group has fallen from 30% to 18%. That’s due mainly to the Bush tax cuts.
Ah, to be mega-wealthy during the years of Bush. You just end up mega-wealthier.
So the article you link to says that the hyper-rich pay a HIGHER share of taxes than their share of income.
And you’re bitching? You’re an idiot.
Progressive taxation. Ever hear of it, JWG?
You read an article that says “Over the same period, however, the average income tax paid by this same group has fallen from 30% to 18%.” and you’re still dumb enough to call me an idiot.
What happened to “I’ll never make the mistake of coming to this blog again”?
By the way, learn to read. The article says that they pay a higher share of INCOME taxes than their share of income. There are other taxes, you know.
I guess you never learned about the marginal value of a dollar either.
I came back because I saw Oliver commenting on the issue of taxation. I have proven the reality of progressive taxation in these threads many times (federal taxes are more progressive now than since before Carter) and knew that Oliver would distort the issue of taxes once again.
Yes, the super rich pay a smaller percentage of their income in taxes than they did 10 years ago. But so does everyone else.
The question of “fairness” is (or should be): What is the ratio of your share of income compared to your share of taxes?
If you are paying a higher share of taxes than your share of income, then you are paying MORE than your fair share.
If you don’t agree, then answer the question that no leftist ever dares to answer: At what point will you consider the rich to be paying their “fair” share? Give everyone a number so we know when it is “fair.”
Here is my math from a little over a year ago on this blog:
http://www.oliverwillis.com/archives/2007/01/08/from-the-dept-of-no-kiddin/
Search for JWG for my arguments and numbers. The same arguments hold true today for this thread.
The final few comments by me in the thread sum up the points and show the numbers.
“Under Bush’s term the rich pay a greater share of taxes compared to their share of income than ever before (their share of taxes has increased more than their share of income). Likewise, as you move down to lower quintiles the people pay a lesser share of taxes compared to their share of income.”
Exhibit 1:
Under Bush’s term the rich pay a greater share of taxes compared to their share of income than ever before (their share of taxes has increased more than their share of income).
Exhibit 2:
“Over the same period, however, the average income tax paid by this same group has fallen from 30% to 18%.”
Just try to reconcile these.
Easy, the rich are still paying too much…they expect to pay 0 with all us pee-ons paying their entire tax bill (along with our own)
Under Eisenhower, the top marginal income tax rate was 92%, and the country’s economy was going like gangbusters.
Bring it back. We can tax the rich way higher than we do now, and, just like Ike, do it to make the country and the world a better, safer, more civilized place. The JWG tax policy is turning us into a third-world nation of rich and poor. Bring back the Eisenhower tax code.
This is an incredibly stupid statement.
The top 1% pay over 33% of all federal taxes.
The top 10% pay over 50%.
The top 20% pay over 67%.
The bottom 50% pay less than 5% of the share.
1) Federal taxes involve more than just income.
2) Tax rates affect financial behavior. Higher rates cause earners to work harder to shelter income and defer/avoid taxes. Higher rates also cause employers to hide more salary as nontaxable benefits; so lower tax rates help to raise reported income.
3) EVERYONE’S tax rates went down. Therefore, just because the top 400 earners had tax rates decrease doesn’t mean their tax share can’t increase compared to others with rates falling at the same time.
Over the same time (1995-2005) that the top 400 average income tax rate dropped from 30 to 18%, the lowest quintile (bottom 20%) dropped from -4.4 to -6.5% and the 2nd quintile dropped from 2.0 to -1.0%.
That means:
top 400 tax rate decreased 40%
bottom quintile decreased 48%
2nd quintile decreased 150%
During every administration the income share of the highest earners has increased. That can’t be said about the share of taxes paid by them. During the Bush administration the share of taxes paid by the top earners has increased faster than their share of income. It is an indisputable fact.
What history did you study?
Unemployment fluxuated wildly under his administration and went as high as 7% in 1958. He endured three recessions and the Democrats attacked him by repeatedly referring to the “Eisenhower Recession” in 1958. And the tax rates were soooo wonderful that they were cut immediately after his administration by JFK.
That’s not to say that the economy struggled overall during his administration. Growth averaged a slight increase through his two terms. But it wasn’t anything like “gangbusters,” especially if you are going to attack the economy during the Bush years.
You’re delusional if you think any administration is going to take us back to an “Eisenhower tax code.”
Thank god for JWG. If not for him, who would stand up for the downtrodden super rich? Those lucky duckie poor with their food stamps and their section 8 housing have lived in luxury TOO LONG! Not to mention Granny, stealing FREE health care from the likes of Donald Trump, who suffers so.
Seriously JWG, if you can’t grasp the meaning of marginal utility and marginal benefit, there is no sense wasting time with you. Go back to not reading since you find us so ignorant. F-off.
Wow, you have a serious reading problem. Nowhere have I suggested that the super rich are suffering. In fact, I explicitly stated their income share has increased and will continue to increase. That is clearly a good thing for the rich.
For those that can actually comprehend what they read, what I have argued is that everyone else is not being treated unfairly by the tax code just because the rich got tax breaks.
The rich still pay more in taxes than their share of income. In fact, that ratio has been increasing (the share of taxes is rising faster than the share of income). That is clearly a good thing for those who are not rich.
That obviously needs pointing out since people in this thread have argued the opposite (like the moron who claimed the “pee-ons” are paying the taxes for the rich).
BTW, I grasp these concepts just fine. It is you who are oversimplifying their application to progressive taxation. (Again, let me state for those with reading problems that I am not criticizing progressive taxation — I have demonstrated that that the federal tax system has become more progressive under Bush.)
Since you haven’t bothered to explain how you are using “marginal utility” wrt taxation, I have to assume that you want to claim that it is fair to tax the rich more since they don’t feel as much financial pain when they lose money to taxes. I don’t disagree on a simplistic level. (I will ignore the futility of trying to determine the marginal utility for different people and their personalities BEFORE they actually make their decisions in the marketplace with their money.)
However, we must also consider the marginal utility of the individual’s dollar for society. Liberals assume that the government will make smarter choices with the wealthy’s money than will the individual. Why should the super rich be able to spend a lot of money on an unneeded luxury when the money could be “better” used to buy food for the poor?
This ignores the impact of the purchasing and investing power of the wealthy. When a rich person buys a yacht, that “frivolous” expenditure pays the salary for the employees at the shipyard, the trucking company, and the dealership. On what basis are you going to say that the marginal utility of a rich man’s last dollar is more valued in the government’s budget than in the purchasing power of the individual?
Until you explain how you think marginal utility somehow negates the fact that the rich currently pay more in taxes than their share of income, then you’re just throwing around a term in an effort to look “enlightened” without making an actual point.
In other words, answer the original question (paraphrased): How much higher does the share of taxes need to be for the rich when compared to their share of income to make everything “fair” given your application of marginal utility?
During the Bush administration the share of taxes paid by the top earners has increased faster than their share of income. It is an indisputable fact.
Not only is it indisputable, it’s also entirely unremarkable. Once again, that’s progressivity of the tax table at work. The marginal tax rate is, in fact steepest at the top of the income ladder.
It will always be so until a flat tax rate is implemented.
It’s remarkable because it occurred even as tax rates for the top fell from 30% to 18% with people like Oliver completely ignoring the increased tax share.
It’s remarkable because people still try to claim that “pee-ons” pay the taxes for the wealthy.
JWG, you’ve been badgering us all to address your observation. Now that I’m doing it, you want to divert.
Your observation that the share of total taxes paid by the wealthy rises faster than their share of income is simple arithmetic.
If you believe this is unfair, the only remedy is a flat tax.
So your entire point is that the tax code is more progressive because the super rich are paying more and more money in taxes and the poor are paying less and less? Great. Rich people are taking home more money which is now taxed at a lower rate, while poorer people are taking home less money to be taxed at all. Apparently that yacht boom you are talking about isn’t stimulating the economy the way you claim it is.
I don’t — Oliver is the one claiming it is unfair to a group of taxpayers.
That’s the definition. Oliver seems to think it is less progressive because he only wants to look at one group of taxpayers.
Consumerism does more to stimulate the economy than paying higher taxes. Are you wanting to claim that raising taxes is going to make the economy grow at a faster rate?
“Liberals assume that the government will make smarter choices with the wealthy’s money than will the individual …”
I don’t think that this is the assumption at all. We all recognize that the government can’t be counted on to always make smart decisions with money. I’ll just throw Iraq out there as an example.
I think the assumption is that the government will make choices that will benefit the widest and greatest number of people in that it has the power, structure and mandate to do just that.
“Consumerism does more to stimulate the economy than paying higher taxes.”
Unfortunately, consumerism has also lead to record highs in consumer debt. Emphasizing consumerism as a matter of fiscal policy is a short term response that can have disastrous consequences when the economy takes a downturn. I think we’re just starting to see the effects of that now.
JWG, let me make sure this is your argument:
“The question of “fairness” is (or should be): What is the ratio of your share of income compared to your share of taxes?
If you are paying a higher share of taxes than your share of income, then you are paying MORE than your fair share.”
If so, you need to consider all the taxes that people pay:
1) Capital gains
2) Income taxes
3) Property taxes
4) Sales taxes
5) Sin taxes
The typical poor person pays little to none of the first three categories of taxes but pays disproportionately high levels of the latter two taxes. Now, I know you are going to say that the poor are not entitled to the occasional beer or cigarette to which we are entitled but they use them and therefore pay a proportionately higher amount of their income in these taxes.
The wealthy, by and large, pay as a percentage a relatively small amount in sin and sales taxes. Once you’ve sated your need for single malt scotches and Aston Martins, you put your money away in savings after all.
The really smart ones collect much of their income in the form of capital gains, which have a rate roughly equal to the percentage paid by a poor household on marginal income. They also have charitable donations to foundations that provide employment for their legacy and then make donations to their childrens’ school like McCain did. They also set their income in trusts into perpetuity and use offshore bank accounts and a million other schemes to ensure that they pay the smallest possible amount in taxes.
When taken on balance, the wealthy and the poor distribute proportionately very similar amounts of their income to the government. The poor do it through use taxes and the wealthy through capital gains.
Consumerism shouldn’t be concentrating the buying power into 1% of the population.
Raise that upper tax rate. Then the incentive isn’t giant salaries and bonuses for the owners of the company fueled by downsizing, cutting wages, health care and benefits, and moving jobs overseas.
Also, unemployment percentage is up. It’s just that for the last 20 years the government has grown more adept at hiding it by dictating what and how numbers are compiled.
z_adura, poor people pay a high percentage of their income as property taxes too. Although they are less likely to own a house, you have to figure that property taxes are figured into what they pay as rent.
I don’t — Oliver is the one claiming it is unfair to a group of taxpayers.
Maybe in some other post. Not this one.
I believe the point here is that wealthy people are paying a shrinking percentage of their incomes in taxes at a time when our government is running chronic budget deficits.
Go ahead–make the spending cuts argument. Just don’t forget to tell us which $400 billion per year you’d like to cut.
Why invest your time on this blog bitching about the rich when you could be out there doing what the rich do, geting rich. They are rich and you are not because they are out there doing things to get rich, not here on this blog wasting time bitching about people who have the initiative to get rich. Pretty simple.