New data: under Bush, income for 400 richest Americans doubled
I know a man, a man of a conservative bent, who gets downright irate anytime you use some variation or another of “tax cuts for the rich” in conversation. He can’t be taking it personally, I don’t suppose, since he isn’t rich and, as far as I can tell, he has no prospects for getting that way unless he happens to trip over a winning PowerBall ticket. So I guess you’d say he’s like Joe the Plumber and many millions more Americans who have very little, but want to make damned sure that they look after the interests of those who have everything.
People like this man are the reason I always giggle when I encounter political and economic theories that hinge on things like “rationality” and “informed self-interest.”
I was reminded of this man today, when the following story found its way to my desktop:
Richest Americans’ Income Doubled as Tax Rate SlashedJan. 30 (Bloomberg) — The average tax rate paid by the richest 400 Americans fell by a third to 17.2 percent through the first six years of the Bush administration and their average income doubled to $263.3 million, new IRS data show.
This man, best I can tell, regards “tax cuts for the rich” as some sort of evil liberal meme, no doubt crafted in a Satanic sex ceremony involving Jane Fonda in George Soros’ basement. So just to be clear, let’s snip some key facts – yes Virginia, there is such a thing as a fact – from the story:
- “The average tax rate paid by the richest 400 Americans fell by a third to 17.2 percent through the first six years of the Bush administration”
- “their average income doubled to $263.3 million”
- Source: IRS data
- “The 17.2 percent tax rate in 2006 was the lowest since the IRS began tracking the 400 largest taxpayers in 1992”
- “The drop from 2001’s tax rate of 22.9 percent was due largely to ex-President George W. Bush’s push to cut tax rates on most capital gains to 15 percent in 2003”
- “Capital gains made up 63 percent of the richest 400 Americans’ adjusted gross income in 2006, or a combined $66.1 billion”
If this man I know is reading, I’m sure he’s angry. And why not. As noted conservative TV pundit Stephen Colbert has noted, facts, reality, and even information itself have a well-known liberal bias.
lullaby pit 
In a perfect world would the rich get poorer? Is it possible that many of these people are not undeserving, but hard working Americans that should be rewarded for the positive impact they make.
At what point should the best and brightest in our country be capped?
At a certain point of wealth, people being to accrue more wealth just based on that. Which means that it’s not their pedigree or intelligence that brings them this greater wealth, but their having wealth to begin with.
And if it’s hardworking Americans that we want to be rewarding, let’s start with the workers.
Good! Capital gains taxes need to be reduced to incentivize investiture in America’s companies in such a crucial time. Do people really see this and say “Ah ha!” and find it as something to harp on and bitch about? Do people really think the government can better allocate capital than the private market? These people don’t just pile up of millions in cash in their houses and build mountains of $100’s to play in. They earn this money and then they spend/invest it in whatever manner they see fit. And that spent/invested money finds its way into the facets of the economy where it is most deserving. Oh wait! No! this would be much better spent by raising taxes and expanding the federal government even more since it’s so efficient at everything it does! And that would be the best way to create jobs and improve our economy, and therefore put a stigma on true entrepreneurial spirit and investment in firms which make this country tick. Thaaaat makes sense.
Being taxed is being capped? Man I never knew such a thing! Gee that must mean everyone in America is the best and brightests!??!?! That’s perfect!
Yeah, riiiight. Paying taxes is to create the infrastructure that our society requires to continue running. It also allows everyone those little nice perks that most people don’t think about, such as roads and police and firemen and even ensuring we don’t get poisonous food at the grocery store masquerading as good wholesome food (Well usually). Do you honestly believe that taxing the top 400 richest people in America 17% more is really “Capping” them? Even after the taxes they still make ten times what the majority of Americans make. Heck probably even more than that.
Every American has a duty to help this society to succeed. Not every American accepts that duty though. The rich don’t necessarily have a larger part in that duty, but they certainly can give more without being unduly affected by it. Should they give more? Warren Buffett believes so and He certainly is one of the best and brightest in our country.
http://www.timesonline.co.uk/tol/money/tax/article1996735.ece
That’s the article on Warren Buffett and what he thinks about this whole tax deal.
It is wrong to selectively cut taxes on someone because they are rich or they are poor. If cutting taxes is to take place then it should take place across the board. From top to bottom. Unless one socioeconomic group is getting taxed more than the others.
We get the same B.S. from the auto industry. So many of the car companies are complaining that it’s the union’s fault for forcing wages above market price when the CEOs themselves are unwilling to take a cut in pay. Bush cut taxes and increased spending (the nation-building in Iraq and Afghanistan, Department of Homeland Security, doubling the size of the Department of Education…) and because of that and the Federal Reserve we are in a world of trouble.
John,
The best and the brightest are the people who produce useful value for the rest of society. If you want to be one of these people, you learn a craft, a discipline, or an art. If you want to be rich, however, you put yourself in a position where you act as a broker between society at large, and these people producing useful values that society desires. You purchase that person’s value by paying them a wage or a salary, and you sell that value to the consumers, accumulating the difference as profit. As you accumulate enough of this profit, it becomes capital and with this you can multiply this money making relationship by increasing the number of human beings whose work you purchase and turn around and sell.
The problem with John and people like him, and the conservative mentioned in this post, all of who are most likely salaried workers themselves, is they think that everybody makes money the same way they do. We are all salary earning people, in their minds. Everyone from Joe the Plumber to Bill Gates.
This is simply not true and any accounting system will corroborate what I am saying.
To answer John’s questions: (1) In a perfect world, the rich might well get rich a bit more slowly. (2) As the question implies, it is likely true; but, other things being equal, no one can deserve what harms someone else. (3) See answer to question one — getting rich more slowly does not imply a cap. However, since resources are finite, there is a natural and inevitable cap on the “best and the brightest”. Thus, the answer to your question is that it isn’t necessary to “cap” them.
John’s three questions evince the same fallacy: the issue is not dessert, but rather fair distribution of burdens.
“The average tax rate paid by the richest 400 Americans fell by a third to 17.2 percent through the first six years of the Bush administration and their average income doubled to $263.3 million, new IRS data show”
Back of the envelope calculation: Their original tax rate was 25.8%, their original income was $131.65 million. So, their net tax payments went from $33.97 million, to $45.3 million (i.e. a real increase of over 30%).
Depends what you’re trying to do with your tax policy. Are you trying to pay the government’s bills in an equatable way? Are are you trying to reduce the incentive to become wealthy?
I would also like to see what this number looks like at the end of the next financial year, once the impact of the credit crisis has had its inevitable result on these taxpayers. Maybe they’ll be earning far less?
“Back of the envelope calculation: Their original tax rate was 25.8%, their original income was $131.65 million. So, their net tax payments went from $33.97 million, to $45.3 million (i.e. a real increase of over 30%).”
Yes, real tax payment went up 30%, and real earnings went up 100%.. Their pay doubled, but their taxes went WAY down.
we could play games with numbers all day long. At the end of the day, these people don’t need that $260,000,000 a YEAR in “income”, and if they were _really_ investing it, as in upgrading factories and hiring more workers, their income would have been MUCH less and they would have been involved in the “system” they claim to be working for (i.e. lower taxes means more jobs).
It’s a lie.
Exxon/Mobile made over $40,000,000,000 in PROFITS last year, but refuse to spend $9 billion on a new processing plant? Let me get this straight.. Exxon/Mobile wants the GOVERNMENT to build a refinery for them, so they can keep that $9 billion in profits and pay it out to investors? So, instead of investing their own money into their own company so their own company can make more money in the long run, they want taxes lowered on their profits AND a government handout, so they can put those profits in the hands of the Board and “investors” instead? … I guess that just seems REALLY retarded to me.
And, only about 45% of our society is “vested in the markets”, which means increasing money to them is increasing money to the minority. And if companies are content to put profits back in their own hands instead of investing in the company (that race for the best bottom line), how does that do anything for society at large? Combine companies refusing to reinvest with cutting the capital gains tax (to nothing, if the right-wing had their way) and you have a vehicle to push MASSIVE amounts of wealth UP to the FEW while leaving the masses to flounder in the wastelands crumbling infrastructure and collapsing bridges.
And, no.. these people do NOT “work hard” for their money. They are neither “very smart” nor “hard working”, most of them simply were born into rich families and are riding that wave. Others got their gains by being “shrewd businessmen”, and in the case of Bill Gates, at least, that means breaking the law over and over, and being able to bankrupt other companies so you can steal their tech and they can’t afford to keep up the lawsuits against you. Thugs.. criminals.. We shouldn’t be rewarding people for being dirtballs.
“Do people really think the government can better allocate capital than the private market?”Do people really think the government can better allocate capital than the private
market?”
Given that “the market” allocated $50 billion to Bernie Maddow and the banksters allocated $$ Trillions to worthless credit default swaps, and mortgage securities backed by people who had no income, no jobs and no assets — my answer would be YES!
I’ve done some research, and the results thereof make me suspicious of anyone who says that higher taxes on the wealthy cuts into job creation. Unfortunately, I need to refine it some before I post it (mostly since I realized I wanted a longer historical trend than I have at the moment), but it’s been most illuminating.
John said: “In a perfect world would the rich get poorer? Is it possible that many of these people are not undeserving, but hard working Americans that should be rewarded for the positive impact they make.”
Thanks John. That’s the best laugh I’ve had all day.
I’m glad I’m staying out of this one
Jeff
too bad i’m in utah, skiing. 🙂
“New data: under Bush, income for 400 richest Americans doubled”
And I’m paying THOUSANDS of extra income tax extra this year because I took out a loan of half of my 401k money to pay bills, then got laid off and could not continue my contributions to the plan… to pay off the loan. And of couse I lost 40% of the value of my 401k in the financial meltdown as well. The rich get richer and the poor get poorer. *Sigh*
Brian,
The one article I’ve seen on the subject went back to the 1910s and analyzed the trends through the Great Depression to right about the present day. I don’t think reliable economic data (of the kind we could understand without a lecture) exists prior to that, but I could be very wrong.
Steve,
I have reliable economic data(interest rates, currency/gold ratios, stock prices, grain prices) from 1750. If you need something, let me know.
There’s very complete, reliable interest rate data that goes all the way back to Roman times.
Sylla’s book, “A History of Interest Rates” is a good start.
Jeff
“As noted conservative TV pundit Stephen Colbert …”
Have you actually watched The Colbert Report? It’s satire meant to skewer conservatives. He’d probably get a hoot being called a “noted conservative pundit”. You make him sound like the Rush Limbaugh of Comedy Central.