Thursday, September 9, 2010

Obama's Ersatz Rich | The Top 400

Benjamins

Tax Statistics of the Truly Wealthy

By: Larry Walker, Jr.

"Freedom is not an empty sound; it is not an abstract idea; it is not a thing that nobody can feel. It means, — and it means nothing else, — the full and quiet enjoyment of your own property. If you have not this, if this be not well secured to you, you may call yourself what you will, but you are a slave." ~ William Cobbett, English political commentator, 1827.

Barack Obama (II) talks a good game, but his reasoning doesn’t mesh up with reality. He rants about the rich getting $100,000 tax cuts while he seeks to jack tax rates on those who can hardly be considered rich. It’s not the family who earns $250,000 who received a $100,000 tax cut, it’s the über-rich.

It’s also likely that the people making $200,000 to $250,000 today were not making it during the 1990s, and have never known a tax cut. These folks were not subject to the 39.6% rates imposed under Bill Clinton. For them, the Obama tax increase of 2011 will be a first. These folks didn’t get a tax cut during the last eight years, they earned their way to this level during the Bush years. After all, incomes are not static. You don’t come out of college and make $250,000 per year on day one, it comes with time. Make no mistake about it -- what Obama is proposing is a tax increase.

Instead of manning up and imposing a scaled surtax on people making, let’s say, over $1,000,000, $2,000,000, $5,000,000, $10,000,000 and $100,000,000, Obama has chosen to draw the line at a paltry $250,000. Could this have something to do with the fact that the Obamas personal income was $5.5 million last year? Is this a strategy to keep himself and his buddies on the top while holding the rest of us down? After all, making $5.5 million per year is like making $250,000, 22 times; which is the same as the difference between making $50,000 and $1,100,000. So based on the same theory, should we start taxing people making $50,000 at top marginal rates as well?

If the goal is to tax the "rich", it would be very easy for Obama to raise taxes on them. All he has to do is add some new upper level tax brackets such as I mentioned above. In fact, such a tiered system existed back in 1921. As outlined in my last post, “Keeping It Real: Obama's $250,000 Fallacy”:

The Revenue Act of 1921 contained additional tax brackets above the $100,000 level to tax the super rich. They were as follows (in 1921 dollars) : $100,000 @ 56%, $150,000 @ 57%, $200,000 @ 58%, $300,000 @ 71%, $500,000 @ 72%, $1,000,000 @ 73%. Translating this into 2010 (inflation adjusted) dollars would yield the following, respectively: $1,113,139 @ 56%, $1,669,709 @ 57%, $2,226,278 @ 58%, $3,339,418 @ 71%, $5,565,696 @ 72%, and $11,131,392 @ 73%.

Why don’t we do that? Let’s tax Obama and the truly wealthy at 56% to 73%. And let’s go back to the 1926 tax tables and tax people making less than $48,000 per year at 1.4%, and those making $48,000 to $96,000 at 3.0%. Surely, Obama shouldn’t have a problem with this. Democrats either need to put up or shut up. Personally I prefer capping top tax rates at 25% as first implemented under Calvin Coolidge in 1926, but I'm just entertaining Obama's ersatz logic.

But don’t worry, if you’re currently making $200,000 to $250,000, or aspiring to get there one day, our present progressive federal government will make sure that you never earn your way into the upper-crust. It’s hard enough already, but nearly impossible with the federal government standing by, eager to confiscate 36% to 40% in income taxes, plus another 7.65% to 15.3% in Social Security and Medicare taxes, every year. And soon there will be health care, and possibly energy taxes to boot. Meanwhile, the truly wealthy laugh at the idea of making a petty $250,000. While averaging a cool $1,325,996 per day, and being taxed at essentially the same rate, the über-rich have it pretty good, comparatively speaking.

If progressives want to talk stuff, maybe it would be wise to check the facts first. Do you think that an income of $250,000 is wealthy? Check out the following:

The Top 400: IRS Statistics of Income, Tax Year 2007

The following averages are taken from the IRS report entitled, “The 400 Individual Income Tax Returns Reporting the Highest Amount of Adjusted Gross Incomes in [2007]”. The incomes of the top 400 represented the top 1.59% of all adjusted gross income reported on 2007 income tax returns (the latest available).

  1. The average adjusted gross income reported was $344,759,000.
  2. The average amount of salaries and wages reported was $29,413,000, on 306 returns.
  3. The average amount of taxable interest per return was $27,074,000.
  4. The average amount of dividend income reported was $24,506,000.
  5. The average amount of net capital gains reported was $228,551,000.
  6. The average amount of net business income reported was $3,182,000, on 49 returns.
  7. The average amount of net business loss was $2,590,000, on 84 returns.
  8. The average amount of Partnership and S-Corp income claimed on 202 returns was $83,025,000.
  9. The average amount of Partnership and S-Corp net loss claimed on 185 returns was $25,245,000.
  10. The average amount of charitable contributions deducted on 389 returns was $28,512,000.
  11. The average amount of taxable income per return was $296,241,000.
  12. The average amount of income tax paid was $57,311,000 per return.

Should we really be talking about capping incomes at $250,000 while there are people making an average of $344,759,000 and sitting around collecting $27,074,000 per year in interest? These are not so much the small business job creators, but rather people like the Obamas, those who already have it made and are mucking things up for the rest of us. Oh, and by the way, if you divide the average amount of income tax paid by the truly wealthy, by the average amount of taxable income, it only comes up to 19.3%, nowhere close to the top marginal rate of 35.0%.

How would you define rich?

How does $250,000 per year stack up against $344,759,000?

Important question: Can the Obama policy of keeping current tax rates in place for everyone making less than $250,000 be considered the same thing as a tax cut? I didn’t think so. Will this be enough to spark the kind of economic growth and job creation that our economy so desperately needs? Only if nothing equals something.

What we need is less government and more freedom. We need a tax overhaul. We need a tax system that is equitable, one that does not take advantage of a crisis by destroying the hopes and dreams of the people, and one that will spark the kind of economic recovery that we so desire. Yes, we need additional tax cuts, not a tax increase. And no, $250,000 isn’t rich. If you want to tax the rich, then create some upper level tax brackets and do it, otherwise enough of this nonsense.

I agree with the American Independent Party's (AIP) platform position on the federal income tax:

“We consider the federal income tax to be destructive of our liberty, privacy, and prosperity. Therefore, we are working to bring about its complete elimination and the repeal of the Sixteenth Amendment to the U.S. Constitution. We recommend that the current system be replaced by an equitable, simple, noninvasive, visible, efficient tax, one that does not destroy or even infringe upon our economic privacy and liberty.”

For more on the AIP Platform click here.

References:

http://www.irs.gov/pub/irs-soi/07intop400.pdf

http://www.helium.com/items/879023-slavery-past-and-present

http://www.cesj.org/homestead/reforms/tax/taxjustice.html

http://aipnews.com/talk/forums/thread-view.asp?tid=16673&posts=5#M43279

http://larrymwalkerjr.blogspot.com/2010/09/keeping-it-real-obamas-250000-fallacy.html

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