Oct 25, 2011 Posted by Hayley Steele No Comments » Tags: 99 Percent Percent

How much can the 99 percent squeeze out of the 1 percent?

Allow me to introduce some real data into a popular sound bite: the bottom 99 percent versus the top 1 percent.

Everyone likes a tax paid by someone else. So it’s not surprising that 99 percent of us would rather the other 1 percent paid more taxes.

Before proceeding, however, it might be useful to ask a few questions:

• How much can we really squeeze out of these fat cats?

• What is their income?

• Do they really have tails and glow in the dark?

• Is it true that they buy poor babies and bake them to give as gourmet bribes to politicians?

We can’t answer the last two questions from government data, but we can learn a lot about the financial capabilities of the top 1 percent.

Here are the basics, gleaned from the Internal Revenue Service website:

In 2009, the top 1 percent of all income tax returns with a positive adjusted gross income pulled in a total of $1.3 trillion. Of that amount, 24 percent was paid in federal income taxes, or $318 billion. The top 1 percent received a hefty 16.9 percent of all income and paid 36.7 percent of all federal income taxes.

The bottom 75 percent of all taxpayers, which is any household with an adjusted gross income under $66,193, had a total of $2.75 trillion in income. On that amount, they paid $110 billion in federal income taxes, about 4.1 percent of their income.

These figures strongly suggest that we have a progressive income tax: People earning more pay a larger share of the tax burden. Quite simply, the top 1 percent pays six times as large a portion of their admittedly larger income than the bottom 75 percent. (Our tax system, if the hodgepodge of charges and levies we struggle with can be called a system, is virtually flat when all taxes are considered, but that’s another column. Suffice to say that we have a big regressive employment tax that both parties have enlarged over the decades.)

Who was in the top 1 percent? Well, you needed to have $343,927 in adjusted gross income to be a member. There was no other requirement. If your household income was $154,643 or more, you were in the top 5 percent; $112,124 put you in the top 10 percent; $66,193 won entry to the top 25 percent. Earn less than $32,396 and you were in the bottom 50 percent. (Adjusted gross income is the income you have after off-the-top deductions such as retirement account contributions and alimony.)

Of course, 2009 was a bum year for the top 1 percent. Their income fell from $2 trillion in 2007 to $1.3 trillion in 2009, a loss of $700 billion. During the same period, the income of the bottom 75 percent fell from $2.75 trillion to $2.67 trillion, a loss of $75 billion.

Can the top 1 percent afford to pay more? You bet, and probably should. With a starting point of $343,927, the bottom of the top 1 percent is very well off, even if private jets and mega-yachts are beyond reach.

But that’s beside the point. It’s way more than the other 99 percent have. So how much of their $1.3 trillion can we take? And, once taken, what can we do with it?

Here’s the arithmetic:

Only $1 trillion is left because they’re already paying $318 billion in taxes. Since the official federal deficit is estimated at $1.315 trillion for the 2011 fiscal year, it should be clear that even if the top 1 percent paid 100 percent of their income in taxes, the federal budget would not be balanced.

In other words, there would be no spending “dividend” from taxing the 1 percent at 100 percent. Any lesser tax would leave an even larger deficit, suggesting that we have a serious “can’t get there from here” problem.

Then there is the persnickety question of whether $1.3 trillion in income would actually show up once the 100 percent tax rate was known.

Let me guess. It’s unlikely. The top 1 percent didn’t get to the top 1 percent through stupidity. The bottom line here is simple. The 1 percent versus the 99 percent is a powerful sound bite, but it’s deeply trashy economics.

Note to readers: In my column for Oct. 9, the number of combinations of Social Security benefit choices should have read 9 to the 4th power, not 4 to the 9th power, for a total of 6,561 potential choices, not 262,444, as given in the column.

Similar Posts:

Share

Leave a Reply