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America's Income - Who Has It?
America’s tax system and the major social programs (Medicaid and Obamacare) are driven by income. The Social Security Administration has put out a report on income in America. The data covers all wage earners (153.6 million workers and the $6.5 Trillion they earned). The Following is a pic of the report (link), if you’re working, you’re somewhere on this page:
Let’s start at the top of the pile, those that are making the really big bucks. For example, consider the number of people who made $50m in 2012 (the 0.0001%). There are 166 people in this group. Who are these folks? Basketballer Lebron James made the list, so did actors/performers Robert Downey Junior, Beyonce, Cameron Diaz and Christian Bale. From the corporate side we have Disney’s Robert Iger and Apple’s Tim Cooke.
Who are the wealthy in America? Anyone making over a million bucks a year is certainly on the list. The plus $1M set totaled 119,400 people (0.08%). These lucky few earned a total of $170b (3% of all income). How much should these folks be paying in taxes? Let’s go hog wild and nail them with a tax of 90%. The incremental revenue (they already are taxed at 39.6%) would be $85b, but sadly, that only covers five weeks of Social Security benefits.
The IRS defines ‘rich’ as an individual with annual income of $200k ($250k per couple). This income level marks the 1%:
1.6m workers (1% of total) earned $900b (14% of all income). This is the measure of US income inequality. The 1% earn 14% of the pie. If the federal tax rate were increased to 75% (double current), it would increase revenue for Uncle Sam by about $150B. That does not fill a $1 trillion bucket, and it would be an economic disaster to set tax levels at French rates. Bottom line – the notion that taxing the rich is a solution is all wet.
Now consider the bottom. In the case of Medicaid, the cut off for availability is equal to 138% of the Federal Poverty Level (FPL). For a single person the number is $16,600, for a couple it’s $22,000, for a family of four it’s $33,000. The average income for all individuals/families that might qualify for Medicaid is about $25,000. If you look that up on the SS chart you see that a whopping 46% of all income earners can qualify for Medicaid.
And then there is the Affordable Care Act (AKA Obamacare). To be eligible for Federal subsidies, one must have an income of less than 400% of FPL. Depending on family size, subsides are available up to $90,000 of income, but the average income where the subsidies are significant is closer to $50K. Again, look up that income level on the SS chart. 73% of all workers make less than $50k! 7out of 10 workers are eligible for subsidies? That blows my mind. No wonder the Democrats love ACA so much - freebies have always translated into votes
So who is left in the middle? There were 41m workers (23% of total) who made more than $50k and less than $250k. This group earned $3.5T (52% of total income). So the middle is where the money is; a quarter of all workers earn half of all income.
If Washington needs more revenue, it must come from the folks in the middle. But the reality is that the middle is already taxed from every direction (they also pay state income taxes, Social Security and other payroll taxes, property and sales taxes. So once again, raising taxes as a way of balancing the nation’s ledger seems to be a very difficult task.
What to make of all these numbers? Something is clearly wrong when 47% of workers earn a poverty level income. Similarly, there is something wrong when 1% of workers earn 14% of all income. The obvious solution is to tax those on the top and transfer it down to the bottom. But that is what we are already doing; more of the same is not going to change the outcome.
My conclusion is that America is not the ‘rich’ country that people think it is. And there ain’t a hell of lot that can be done about that.
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I think the banksters and hedge types have something other than income
it's called carried interest
whereby they get their money for nothing and their sex for free (actually it's not sex, it's gang rape)
and there are a hell of a lot more than 166 in that group
Also, everybody that's anybody has a Trust these days.
How much sheltered "wealth" is generated every year?
Agreed about the banksters. This listing also leaves out everyone elses investment and pension income too. There's a heck of a lot of retirees with little to no earned income who are still comfortable.
were comfortable - fixed it.
How can we talk about the WEALTHY while talking about income?
Am I taking crazy pills?
Next you will tell me the wealthiest people are all listed in Forbes 500?
You make a very good point. The wealthiest people in the US, like the world, don't appear on any "wealthiest 500 people" lists. That's because the Warburgs and Rothschilds and Kuhns and Loebs, etc, are for the most part very careful to hold their wealth in trusts, rather than personally. That way they stay in the shadows and do not become targets.
Lower the poverty number and its fixed
Those in bruced poverty bracket most likely get a 10% unreported upper as a result of socisl programs
So where's that guy who wants to make sure that we all understand that .fedgov employees make only $125k a year?
I am so relieved to know that they're only in the top 4%, and not the top 1%.
Welcome back, your stuff is the best no doubt about it. Thanks as always.
Bruce, double check your math, or explain it to me. $900bn x 36% doesn't equal $150bn.
If we doubled the tax rate on the top 1%, it would definitely be a train wreck, but just for the sake of your numbers, I think it would be more like an incremental $324bn.
Or am I missing something?