Are the rich getting richer? Are they paying their "fair share?" From Cumberland Advisors the facts and statistics that prove:
...variations in revenues collected by the government were essentially unrelated to variations in the highest marginal tax rates. In addition, the most recent data suggested that those in the top 5% of the income distribution paid 59% of the personal income tax collected and those in the top 1% paid 38%, while the bottom 50% paid 2.7%. Looking at the distribution of income, comparable data from the IRS show that the top 1%, who paid 38% of the taxes, earned 20% of the income and the top 5%, who paid 59% of the taxes, earned 34% of the income. In contrast, the bottom half earned 12.5% of the income but paid only 2.5% of the taxes.
The assumption of the critics was probably that the top income brackets earned a larger share of the income than they paid in taxes, but that is not borne out by the data. I would also note as an aside that out of a population of over 300 million people, 1.4 million tax filers were in the top 1% of adjusted gross income. Seven million returns were filed by those in the top 5% of adjusted gross income distribution while 70 million returns were filed by the bottom 50% of the income distribution. Any way one cuts it, the few are carrying the many, and the fairness issue that is bothering some special interest groups is whether the few should assume even more of the burden.
Now what about the distribution of wealth? Much has been made recently about the concentration of wealth in the hands of the few. Again, the facts are informative. From 1920 through 2007, the share of wealth held by the top 1% of the population peaked in 1929 at 44%. That share then fell steadily to a low of 20% in 1976. The share increased gradually and peaked at 39% in 1995 before falling off again to 35% in 2007. While information is not readily available about what taxes the wealthy pay, it does seem that the wealthy are not in a significantly different position today than they were in the 1920s and in the mid-1960s. Indeed, the distribution of wealth holdings has varied significantly over time but hasn’t steadily increased as some might have guessed.
The bottom line from this more in-depth exploration of the data shows that looking at either the wealth distribution or the distribution of income taxes paid relative to income earned doesn’t indicate that the wealthy are either significantly better off than they were a long time ago or that they are paying disproportionately less in taxes relative to income earned. What this implies for the debt discussion is that focusing on the distributional dimensions of the revenue side of the deficit issue is a second-order problem. It is a diversion of attention from the critical issues of establishing criteria for determining the appropriate size of government and bringing government spending down more in line with revenues received.
1 comment:
I don't know why you can't grasp this simple concept.
Its not that high earners are not paying a lot of taxes, or that very many low earners have been relieved of the burden of the income tax.
Its that high earners are taking home a lot more of the total income pie than previously, and paying a lower tax rate on what they get than before.
Think of it this way. The productivity of American workers has gone up dramatically since 1970, but ALL of the income gains from this rise in productivity have gone to the top 20% of the income scale and have been especially focused on the top 5%, while the bottom 75% have worked their asses off but gotten no reward in terms of higher pay over a period of now 40 years. Meanwhile, tax rates at the top have fallen dramatically, so that not only are they getting much more money, but they also keep more of it in their pocket. Somebody has to pay the resulting loss in revenue, and that is the common man paying through inflation caused by deficit spending stemming from inadequate tax revenue eating away his assets and income.
So of course the top 1% and 5% are paying a lot of taxes - because they have disproportionately taken all of the gains in income enjoyed by the country as a whole. This is what has driven corporate profit growth over the past 40 years, and corporate profits become dividends, interest, stock buybacks (capital gains), stock options, and management salaries.
If you prefer, imagine income is a pizza. At first it is a 10" pizza, and the bottom 75% gets 50% of the pie, or 12.5*PI square inches. Now the pizza grows to a 16" pizza, but the bottom 75% still only gets 12.5*PI square inches, or 20% of the much larger pie, while all of the gain in size goes to the shares of the upper echelons of income, who are now making 4 times their original income.
Such a situation is unsustainable in a democracy, where political policy drives the wage distribution.
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