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Robert Eisenbeis | No Taxation without Representation

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No Taxation without Representation

Cumberland Advisrs
August 2, 2011

Latest comment from  Bob Eisenbeis, Chief Monetary Economist at Cumberland Advisors. Prior to joining Cumberland Advisors he was the Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta. Bob is presently a member of the U.S. Shadow Financial Regulatory Committee and the Financial Economist Roundtable. His bio is found at www.cumber.com.  He may be reached at Bob.Eisenbeis@cumber.com. -- Chris

Now that I have your attention, despite the political euphoria that will likely accompany the deal to raise the debt limit, a more careful examination suggests that once again our elected officials have opted for policies dictated by their desire to ensure their reelection rather than caring for the needs of the country.  Before delving into those issues, however, I want to address some concerns that a few readers raised about my last commentary, which focused on the “fairness” issues surrounding the debt debate.

That piece generated a lot of comments, many of them passionate. While the vast majority of responses were favorable, some accused me of selectively citing data that might be interpreted as arguing that high-income people were bearing an “unfair” proportion of the tax burden, while ignoring data on the proportion of income earned and wealth distribution.  My point in that piece was that simply looking at the data on tax burdens doesn’t help one to judge what is or is not “fair.”  That is a value judgment and a political assessment and is not one that I tried to make.  The comments, however, did pique my curiosity and triggered a more in-depth look at the facts.

I must confess that my intuition wasn’t confirmed.  Let me just cite a few key figures.  In that piece, I noted that 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.

Against this backdrop, it is appropriate to take both Republicans and Democrats to task for their conduct in dealing with the current debt crises and how they have chosen to frame the issues.  The present debt extension agreement makes only token cuts and punts on the critical issue, which is the projected unconstrained growth in entitlement spending.  It leaves all the hard decisions for the future and makes a trivial dent in the yearly federal deficit, while continuing to add to outstanding public debt.

Keep in mind that the number being thrown around as the cut in the deficit represents only the incremental effects that the sum of the “promised” spending reductions (over the next 10 years) would have on the need to issue additional government debt.  The cuts hardly dents what the new debt issuance needs will be and they are far from eliminating the yearly deficits.  The numbers also don’t include the present value of those cuts and hence ignore the time value of money and the fact that a dollar of cuts today is worth more than a dollar of cuts in the future.  Furthermore, most of the so-called cuts are only “promises” (and those promises are dependent upon the ability to deliver future spending cuts).  Truth-in-government would say that the Congress should come clean and tell us what the estimated cumulative total of the remaining yearly deficits will be and what the likely need will be for increases in the debt ceiling in the future. The requests for  increases won’t be long in coming, and the ten-year horizon for addressing the key issues will arrive long after this and the next debt-ceiling crisis.  On net, both sides settled for an agreement that does little to address the key problems, though it may preserve some cover during the upcoming election season.  This is short-termism at its worst.

Having castigated Congress in general, let’s focus next on the Republicans.  Due to Tea Party influence, a line was drawn in the sand concerning cuts in spending and raising taxes as a way to partially address the mismatch between spending and revenues. This is all well and good, but they played Russian roulette with domestic and international financial markets.  In the end they took the easy way out by accepting small cuts in domestic spending, whereas the real problems lie with entitlements, namely Social Security and healthcare spending.  In short, the Republicans got relatively little of substance for the taxpayer, except for highly-valued political ammunition to use in the coming election when compared with the risks their actions posed for the country.

As for the Democrats, their objective was to grow the budget and fund its increase with more taxes, thus avoiding the need to address either the entitlements issues or the rationale for continuing other pet spending initiatives.  Theirs was a cake-and-eat-it approach.

But perhaps the group that deserves the most criticism is the recipients of entitlements, and in particular Medicare, Medicaid, and Social Security.  These are mainly the elderly and, to be totally transparent, that group includes me and some of my Cumberland colleagues.  To be sure, we relied upon payments promised to us by legislators long departed, who didn’t put in place the necessary funding to deliver on those promises.  We relied upon the promises and despite the many warnings we failed in many cases to provide sufficiently for our own retirement and healthcare needs.

Our predecessors created a Ponzi scheme that would make Bernie Madoff proud.  They pledged tax revenues to be collected from future generations under the assumption that the population would continue to grow and that more people would always be available to fund the programs.  This is just like assuming that housing prices will always go up, and we know what that is costing us.  Now, however, the pool of future taxpayers is smaller than the present one, and the burdens they must assume are proportionately greater.  In short, this is “taxation without representation.”

The current recipients claim they have paid into the plan, which they have.  But their payments were not contributions that prefunded their own retirements or their need for medical services.  Rather they were part of a pay-as-you-go scheme.  Their tax payments were given to those who already retired or had medical needs.  Now, the present generation of retirement age also refuses to recognize this problem, which is on track to absorb the whole of projected government revenues and then some.  Instead we seek to do what our parents did by passing on an even more burdensome set of obligations to our children and grandchildren.

If this isn’t “taxation without representation” then I don’t know what is.  We are making commitments today for those who will have to pay but who do not have a say in what those burdens are.  Not only does this go against the grain of the sentiments that helped to trigger the American Revolution, it is also naïve to think that future generations will continue to honor promises made by past generations.  What makes us believe they won’t simply decide to renege on the promises we have forced upon them when the choice might be whether or not to put food on the table for their own families?

We can’t continue to grow government and transfer payments forever, and the time to address those issues is now, while they are still manageable.  Nor can we avoid the problem by cutting only discretionary spending, as is the approach in the current deficit agreement.

Unfortunately, the course taken by the leaders of both parties and the administration fails on all counts. They have placed us on the risky path of financial fragility rather than stability.  A ratings downgrade might be the needed wake-up call for the country, our politicians and its senior citizens.

www.cumber.com

 

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Sun, 08/07/2011 - 11:36 | 1532601 Nels
Nels's picture

I like it.  The slogans for the new 3rd party are "No Representation without Taxation",  and "Equal Taxation under the Law".

Don't pay taxes on balance, and you don't vote.  FICA/medicare doesn't count, as tax eaters can expect to get back more than they bring in.

The Alinskyites, of course, will twist this to make most of us look to be dependents and as such lose the vote.

Tue, 08/02/2011 - 20:58 | 1519170 goodrich4bk
goodrich4bk's picture

The author is doubly wrong.  First, SS and Medicare are income taxes --- the amount you pay is a percentage of income.  Therefore, the author would have included SS and Medicare taxes in his analysis if he was honest.  Second, the Greenspan Commission dramatically raised SS and Medicare taxes in the 1980s and then lent this surplus (the amount that exceeded benefitspaid) to the government.  The government has ever since been reporting this borrowed money as part of its revenue.  When Bush II was elected, this revenue ---consisting solely of taxes paid by those earing less than $106,000 --- created a government surplus that Bush II promptly refunded to the wealthiest Americans via his tax cuts.  This two-step fraud was nothing less than a tax on the working class to fund a tax cut for the rich.

Now fast forward 10 years and see the same Republican politicians complain the SS and Medicare beneifts are no longer affordable.  Instead of reversing the tax cuts for the rich and returning that money to the SS trust fund, they argue we must keep the tax cuts and cut benefits.

Care to comment on the fairness of this scam Mr. Eisenbeis?

Tue, 08/02/2011 - 20:08 | 1519029 Stuck on Zero
Stuck on Zero's picture

Eisenbeis you are ignorant.  Throwing a bunch of irrelevant percentages about to make your point that the upper 1% are saints and the other 99% are sinners is cheap and slimey.  For example, you selectively use personal income taxes as a basis.  How about all taxes including inflation, use tax, mandated requirements, Social Security, unemployment, etc.? Another divisive trick you pull is to talk about the top 1% of earners.  How about talking about the top 0.01% of earners?  Warren Buffet has shown many times that he pays a lower tax rate than his secretary.  I could go on and on but it's hard to argue with idiots.  I give your little essay a D-.

Tue, 08/02/2011 - 19:41 | 1518954 fleur de lis
fleur de lis's picture

The IRS racket was cooked up to funnel money into the Fed racket. One depends on and cannot survive without the other.

Since the establishment of both scams, the earnings of Americans only spurns them on to bigger and vaarious forms of warmongering. 

It is the only way they can get their hands on money, they are incapable of work, so they have to figure out all kinds of ways to steal it. Bought-off office holders come in very handy for writing and passing laws favorable to Fed/IRS looters.

Both rackets should be discarded. And their leeches with them.

Tue, 08/02/2011 - 19:40 | 1518949 lindaamick
lindaamick's picture

READ MY LIPS:

The economy has been sacrificed to the MILITARY.

And the military produces nothing other than DEAD bodies...usually brown ones. :(

Tue, 08/02/2011 - 19:37 | 1518936 fleur de lis
fleur de lis's picture

The IRS racket was cooked up to funnel money into the Fed racket. One depends on and cannot survive without the other.

Since the establishment of both scams, the earnings of Americans only spurns them on to bigger and vaarious forms of warmongering. 

It is the only way they can get their hands on money, they are incapable of work, so they have to figure out all kinds of ways to steal it. Bought-off office holders come in very handy for writing and passing laws favorable to Fed/IRS looters.

Both rackets should be discarded. And their leeches with them.

Tue, 08/02/2011 - 19:27 | 1518906 Clothcap
Clothcap's picture

Did the top 5% produce anything useful i.e. anything other than debt currency?

Tue, 08/02/2011 - 19:09 | 1518842 Tuffmug
Tuffmug's picture

"If this isn’t “taxation without representation” then I don’t know what is."

The author is an idiot. He actually doesn't know what "taxation without representation" is about.

Wed, 08/03/2011 - 00:56 | 1519581 RockyRacoon
RockyRacoon's picture

All the while, corporations like GE and the rest get representation without taxation!

Tue, 08/02/2011 - 18:58 | 1518800 Random_Robert
Random_Robert's picture

Shrug, Atlas... Shrug already.

 

Let's get this shit over with and move on to what's next.

Tue, 08/02/2011 - 18:56 | 1518793 franzpick
franzpick's picture

The way the wage earners are suffering and then going to financial ER, the problem is taxation without resuscitation.

Tue, 08/02/2011 - 18:41 | 1518753 Victor Berry
Victor Berry's picture

Social Security/Medicare (a/k/a FICA) is called the payroll tax because it is a tax.  Since the mid 80's, the government has relied on $100B to $150B a year in excess payroll tax revenue to minimize its annual budget deficits.  What do you think Dubya was talking about when he said there was a big file cabinet of IOU's written against Social Security?  Whether or not the $2T to $4T of IOU's are worthless paper or US Treasury Notes (same thing?), I don't know.  Anyway, add another 7.65% of FICA taxes paid by the lower 80% of the population before jumping to the conclusion that the rich are the oppressed people!

P.S.  I bet General Electric's multi-billion dollar income tax refund for 2010 was more than enough to cover its matching 7.65% FICA for employees.    

Tue, 08/02/2011 - 18:51 | 1518783 besnook
besnook's picture

because the employer contribution is technically income earned by the employee that must also be included as part of the income tax burden for under 106000 crowd.  i realize the employee would not see a penny of it if the law was changed.

Tue, 08/02/2011 - 18:35 | 1518725 besnook
besnook's picture

weak analysis. we have taxation without representation because .gov chooses to represent a tiny portion of the population based upon the myth that they will look after the welfare of the rest of the people so they deserve the largesse of .gov in payment for their collective magnanimous, altruistic hearts.

 

the main reason ss needs to be restructured is because the fund has reached the negative funding threshold so the bonds .gov replaced the money with have to be paid off with borrowed money bringing the offbook deficit on the books and ramping up the deficit. it is like a double ponzi that has now come due.

Tue, 08/02/2011 - 18:35 | 1518722 Tunga
Tunga's picture

One Trillion dollars to the first actual human being that can find the definition of the word INCOME in the US Tax code. No not "gross income" or any other modified form of the term. Just plain old "income". 

 

Go.

 

http://codes.lp.findlaw.com/uscode/26

Tue, 08/02/2011 - 18:26 | 1518692 curmudgery
curmudgery's picture

Pointless.  INCOME TAX only affects income from WORKING.  The Rich let their money work for them, at far lower tax rates.   

Taxation - phutt.  Global economy will always gravitate to lower-tax homes.  Reduce Spending.  Save.  Build for the future.  Don't leave a f'ing mess for our kids and grandkids.   We've squandered too much already.

Tue, 08/02/2011 - 18:22 | 1518673 sasebo
sasebo's picture

We don't appreciate being bull shitted with %'s. %'s don't buy shit. Give us some after tax DOLLAR incomes. Just like the obnoxious, pompous, asshole politicians (except Ron Paul) the author believes everybody else but him is stupid.  

Tue, 08/02/2011 - 17:59 | 1518593 rsnoble
rsnoble's picture

I'm not buying the 'rich get taxed to death' line anymore.

1.  Asshole #1 makes 100 billion in 1 year.  Pays 30 billion in taxes.  Has 70 billion left to do whatever the fuck they want.

2. Poor man:  Makes 20k, pays 3k or in taxes.  Has to live with parents and apply for food stamps.

Conclusion: fuck the rich, tax the bastards. 

Tue, 08/02/2011 - 18:57 | 1518796 Random_Robert
Random_Robert's picture

Whether you know it or not, you just eloquently laid out the just basis (and uniform fairness) of a flat tax...

Now, either go call your Congressman, or shut the hell up. 

Tue, 08/02/2011 - 17:55 | 1518586 honestann
honestann's picture

The bottom line is this.  The real, healthy, robust growth in a country comes from startups - new endeavors.  If "regular people" are "slightly wealthy", they have the ability and inclination to "try new things", start new businesses, invent new products and techniques, and generally look for ways to improve life, not just be carried along by the ebb and flow caused by the predator class.  That's the main reason economies crash and burn... they cover up with the very best fancy clothes (the elitist rich), but the millions of cells in their body are crippled, diseased, worn out, or malnourished.  It would be one thing if that 0.1% were millions of times more productive than others.  Fact is, they are destroyers, not producers.

Tue, 08/02/2011 - 18:20 | 1518669 rosiescenario
rosiescenario's picture

Agree with you totally but all the government regulations today (especially here in CA) make many folks think twice about starting up their own company. Rather than encourage start ups and job creation, the government does its level best to stifle it.

 

At the same time the larger corporations are busy outsourcing everything possible to foreign countries while lobbying the government to relax immigration rules so that the few remaining U.S. jobs can be filled with lower paid workers.

 

Meanwhile the TBTF banks that were bailed out by the tax payers do not lend to new enterprises, but are happy to do so to the larger corporations that are losing us jobs.

 

Any wonder why the jobs situation is so bleak today?

 

....

Tue, 08/02/2011 - 17:52 | 1518575 cdskiller
cdskiller's picture

Really? Is this the kind of total BS I can look forward to reading at zerohedge? Really? Wow. When the standards get lowered to include claptrap, it usually means the end is near, or that the website has been bought. Is Tyler getting out and moving to huffingtonpost?

Hey, Mr. Eisenbeis, you disingenuous punk, go away. We are trying to have a serious conversation, here.

Tue, 08/02/2011 - 17:51 | 1518570 I did it by Occident
I did it by Occident's picture

if it is no taxation without representation then could it cut the other way.  "No representation without taxation" for those with no skin in the game?

Tue, 08/02/2011 - 17:49 | 1518556 frostfan
frostfan's picture

If there were a national sales tax, I'd understand bringing up the sales taxes but there isn't.

As for social security,  clearly money put in isn't enough so far money that needs to go out but how exactly is that the fault of the wealthiest 1% or 5%?

 

 

 

Tue, 08/02/2011 - 18:53 | 1518786 Sp00ky
Sp00ky's picture

Because the wage cutoff for Social Security taxes is at $106,800.  The 2010 tax rate for Social Security is 6.20%.  Above that $106,800 and you aren't taxed.  The person who earns $10,000 a year pays in $620.00 a year.  The person who earns $100,000 a year pays in $6,621.20 (bear with me, I'll give a link), and the person earning $1,000,000 a year pays in that same $6621.20.  http://en.wikipedia.org/wiki/Social_Security_Wage_Base

I suppose that if there were not a maximum wage cutoff, that the taxation continued the more one earned, the so-called entitlement programs might not be such a Ponzi.  I wouldn't call it the 'fault' of the top 1% or 5%, but the more they make, the more they get to keep.  But I'm no rocket scientist, and I'm too lazy right now to try to figure out if that would, indeed, make the whole mess more 'equitable' sometime down the road.  It might, or it might not, depending on if the payout at the end of the road were to also increase or if it maxed out somewhere regardless of how much was put in.

Tue, 08/02/2011 - 19:17 | 1518878 GCT
GCT's picture

Thanks you spooky.  I try not to treat people badly.  Even when they deserve it.  but some state views and not facts.  I wanted to see  and your is definitely enlightening.  Personally my take on SS is it should be income based to start with and then I agree we need to increase the taxes on it .  But I would never state that until you provided a dam fact.

Still it is not the rich folks fault either way.  I

It is our politicians fault  Thanks for the info.

Tue, 08/02/2011 - 19:14 | 1518858 Greenhead
Greenhead's picture

Many small business employers pay both sides of the tax.  You do too but you don't see it, your employer would pay you more if they didn't have to pay their side of this ponzi tax.

Tue, 08/02/2011 - 19:39 | 1518943 Sp00ky
Sp00ky's picture

It is true that the self employed pay both sides - 6.20% + 6.20%.  Saying that the employer would automatically give the employee a 6.20% raise if they weren't paying in their 6.20% share is probably a pipe dream in this day and age.  I'd rather think most would pocket it.  I know I probably would.

Tue, 08/02/2011 - 19:32 | 1518919 Kali
Kali's picture

Thank you, for those of us who run small bizzes it is a double tax.  And you are right.  I could pay more if it wasn't for FICA and payroll taxes, etc, etc, etc. 

Tue, 08/02/2011 - 17:48 | 1518553 GCT
GCT's picture

Well while we lamblast the poster with rhetoric where are your facts?  I may disagree with the poster but until i see facts from some of you whineing and crying solves nothing.

I am middle class and really do not care who makes what anymore.  I got over it.  You should too.  nothing you are going to do will change a dam thing.  As long as I can etch out a living, I am happy.

Alot of inuendo prove your statements otherwise shut up.

Tue, 08/02/2011 - 19:12 | 1518828 Tunga
Tunga's picture

"Alot of inuendo prove your statements otherwise shut up." - GCT 

You shut up.

Income is defined as an excise tax. 

 

FLINT v. STONE TRACY CO., 220 U.S. 107 (1911)

 

http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=220&invol=...

 

"While the mere declaration contained in a statute that it shall be regarded as a tax of a particular character does not make it such if it is apparent that it cannot be so designated consistently with the meaning and effect of the act, nevertheless the declaration of the lawmaking power is entitled to much weight, and in this statute the intention is expressly declared to impose a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, or company..."

 

Bottom line GCT; income is generated ONLY by officers of corporations registered within the District of Columbia, US territories or employees of the Federal US Government. BTW when you sign a W-4 you swear to being an "employee" which is defined at 7701 26 USC to mean "someone who works for the US federal government."

Are you feeling duped yet?

Tue, 08/02/2011 - 17:33 | 1518497 gina distrusts gov
gina distrusts gov's picture

All the talk about income tax is annoying  < why because the lower half pay most of the sales tax and other fees that are not figured in the mess and the upper  half benefits the most from the loop holes in the tax laws then corporations  really turn the tax mess upside down earn billions and pay no tax  worse get a refund on taxes they didn't pay

Tue, 08/02/2011 - 17:29 | 1518483 RockyRacoon
RockyRacoon's picture

The only gauge used was the payment of "personal income taxes".   All other parameters were dismissed for some reason.   Thus, the "analysis" falls far short of complete.   Those who agree with his premise will jump right on this three-wheeled bandwagon and ignore the same facts which give a clearer picture.

Tue, 08/02/2011 - 23:07 | 1519431 Derpin USA
Derpin USA's picture

That's what I came here to say. If you only focus on earned income, it's easy to make the middle and lower classes look like total mooches.

If you include capital gains, payroll, SS and Medicare in the equation, it's not nearly the stark contrast described by this article.

Tue, 08/02/2011 - 17:15 | 1518417 WTFx10
WTFx10's picture

So he is old and only made, what maybe 75k at the federal reserve? Asshole

Tue, 08/02/2011 - 17:12 | 1518400 hannah
hannah's picture

so a sh&thead that bribes congress makes $25bil dollars a year and pays $100mil dollars in tax...yes he did pay more than me but he also made $25bil dollars which is total BS.....so the ave jos make $40k a year and pay $20k in taxes and they are better off......!

 

wait...lets tax the guy that makes $25bil a year 99% so he only brings home a billion dollars..right...life is so tought...this article is BS

Tue, 08/02/2011 - 17:07 | 1518378 praps
praps's picture

That top 1% of wealth owners are not producing anything.  They just own most of the country and collect unearned income from the the rest of the country in the form of rent , dividends and coupons.  They are parasites and should be taxed at 99% marginal rate.  They are getting away with legalised robbery.

Tue, 08/02/2011 - 18:39 | 1518745 EvlTheCat
EvlTheCat's picture

So I assume you feel the same about the lower 1.7% who derive more then 50% of their income and 100% of their health care from federal assistance. What are they producing?  Where does this money come from?  How did they earn their entitlement?  Being born poor, uneducated, broken family, illegal immigrant?

Most of these people work in a service area, such as, mowing lawns, cleaning hotel rooms and flipping burgers.  They are not producing iCrap for people to buy.

I assume poor parasites are better then rich parasites, because their situation isn't their own fault?

A "parasite" has a specific definition, and you may want to look it up before you fling it around arbitrarily.

Tue, 08/02/2011 - 17:57 | 1518574 edwardscpa
edwardscpa's picture

This comment and the others in this thread just go to show that there are some broke-ass people reading this blog, which is surprising.  A casual google search (wikipedia, ahem) puts household income of the top 5% in the $160Ks and the 1% in the $300Ks.  If you had any idea just how many folks make $300K/year, and how hard many of them work in jobs other than Wall Street finance, you'd be surprised.  Comparitively rich is not filthy rich. 

I personally blame those in the top 0.05%.  :)  Bastards.

 

edit - actually, this is spot-on... you feel broke, I feel broke... we're all broke in a relative way.

As of 2005, there were approximately 146,000 (0.1%) households with incomes exceeding $1,500,000, while the top 0.01% or 11,000 households had incomes exceeding $5,500,000. The 400 highest tax payers in the nation had gross annual household incomes exceeding $87,000,000. Household incomes for this group have risen more dramatically than for any other. As a result the gap between those who make less than one and half million dollars annually (99.9% of households) and those who make more (0.1%) has been steadily increasing, prompting The New York Times to proclaim that the "Richest Are Leaving Even the Rich Far Behind." Indeed the income disparities within the top 1.5% are quite drastic. While households in the top 1.5% of households had incomes exceeding $250,000, 443% above the national median, their incomes were still 2200% lower than those of the top .01% of households. One can therefore conclude that almost any household, even those with incomes of $250,000 annually are poor when compared to the top .1%, who in turn are poor compared to the top 0.000267%, the top 400 taxpaying households.[39]

Tue, 08/02/2011 - 20:10 | 1519041 Toma Haja
Toma Haja's picture

Hey Ed, somehow I don't think we'll be debating this issue on ZH with anyone in the top .01%.  That being said the whole debate is a diversion.  The real issue is that slippery slope we are sliding down of taxing the middle class (they are the easiest and that is where the bulk of the income can be found).  But we have reached the tipping point where more people claim Representation without Taxation than are those who are willing to fight for limiting the size and scope of government.  Until that dragon is challenged and conquered, the economy will recede and government will continue to gorge.

Tue, 08/02/2011 - 18:32 | 1518712 The Alarmist
The Alarmist's picture

Yeah, but am I any more mortal if I compare myself to God?  At some point you accept where you are in life and then endeavour to either do something to improve your own lot or to accept who you are, but you will never be God and you will never drag him down to your level.

 

Tue, 08/02/2011 - 19:07 | 1518799 Greenhead
Greenhead's picture

The top 1% is NOT a homogenous group.  You have W2 folks and some 1099 folks who are doctors, engineers, airline pilots, small business owners and a few musicians and actors.  And then you have the really wealthy who get the bulk of their income from stock options and capital gains and dividends. 

When the President and Harry Reid talk about raising revenues they are NOT talking about raising revenues for the top, top group, they are talking about hammering the W2 folks 'cause they don't have the same political influence.

Wed, 08/03/2011 - 10:36 | 1520494 edwardscpa
edwardscpa's picture

Exactly.  It's capital vs labor, and labor extends well into the top 1%.  Capital is important, but why labor would be taxed more punitively than capital I don't know.  I'd like to see the tax rates flattened somewhat.

Tue, 08/02/2011 - 17:05 | 1518366 JW n FL
JW n FL's picture

Yes the top 1% is supposed to pay 35%..

what is collected verse what is supposed to be paid?????

I could go on but why?

Tue, 08/02/2011 - 16:53 | 1518317 Paul Bogdanich
Paul Bogdanich's picture

Utter and complete BS.  For low income earners count what they pay in SSAN and MEDI and then see what you come up with.  The vast majority of the government's cash revenue is from the bottom 4 quintiles of the income distribution.

Tue, 08/02/2011 - 17:30 | 1518476 Sophist Economicus
Sophist Economicus's picture

SSAN and MEDI are not taxes.   They are MANDATORY contributions you make to entitlement programs that you will benefit from (HA HA HA) in the future.    They may feel like a tax, but they are not.   Taxes are what you pay and have no 'direct' recourse to once the money is CONFISCATED from you.   Don't they teach you anything in that union hall?

Tue, 08/02/2011 - 17:50 | 1518563 I did it by Occident
I did it by Occident's picture

That is why the government says it is not a tax to the people it takes it from, but it did have to say it IS a tax in a SCOTUS case.  Basically, the government doesn't have the right to take property from you (such as money) without due process.  Unless it is a TAX, in which it does have the power to levy taxes without recourse.  Thus it is BOTH a tax and a non-tax, now you understand?  clear right?   ;)

Tue, 08/02/2011 - 15:43 | 1518023 DavosSherman
DavosSherman's picture

Why I stopped reading after the second period.

"Prior to joining Cumberland Advisors he was the Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta."

 

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