Now that healthcare "reform|takeover" has passed, Obama is rightfully shifting his attention on tax "reform|takeover" for the very simple reason that America is getting bankrupter by the day, and at some point even our ever so patient creditors will say 'enough'. We take this opportunity to disclose the massive pain that lies in store for those who are currently benefiting the most from the endless stock market rally, of course assuming the president keeps his #1 campaign promise (which is a vast assumption). As the charts below demonstrate, American society is currently stratified beyond repair. In this vein, the Tax Policy Center calculates, that for a return to economic normalcy, or deficits at a "mere" 2% of GDP, households earnings more than $200/250k would see their tax rates going up to a stunning 91%. If the economic underperformance target is reduced to more palatable deficits at 3% of GDP, then the top earners would be hit with "only" 77% taxes.
A summary of the details:
- 40% of US households make below $36,000
- 60% make below $57,000
- 80% make below $91,750
- 95% making below $165k
- 98% making less than $250,000
- 99.99% make less than $5 million and 0.01% make more than $5 million (with a very special category for those making over $1.5 billion: "Hedge Fund Managers")
- 1% of society makes 17.3% of the income,
- The average income in the top 0.01%, or 11,000 households, is $35,473,200, and a minimum of $8,579,000
- The average income in the the next 99,000 households, or 99.9%-99.99% of the population makes an average $4,699,500, and a minimum of $1,532,400
- The average income in the next 451,000 households, or 99.5%-99.9% of the population makes and average $1,206,200, and a minimum of $482,400
- The average income in the next 564,000 households, or 99$-99.5% of the population makes and average $269,800, and a minimum of $126,300
- ...and so forth.
Here are the charts that capture the stratification of America, and its new "nobility" class, courtesy of Visualizing Economics:
First - the peasants, and the clergy:
Next, the nobility:
And, a little bit more, on those who, unless they manage to stop Obama from following through on his plans, are about to be taxed between 77% and 91%.
Here is the reason why those in the above chart should be very worried. From the Tax Policy Center of the Urban Institute and Brookings Institution:
In August 2009, the Congressional Budget Office (CBO) projected that the federal budget deficit would total $7.1 trillion over the 2010-2019 decade—under current law. That outcome would require the 2001 and 2003 tax cuts to sunset as scheduled in 2011 and Congress to stop “patching” the alternative minimum tax to minimize its bite. If neither of those things happens, CBO says the cumulative deficit over the decade would jump to $11.1 trillion, more than doubling the national debt. Our economy cannot sustain that rate of debt increase. How can we reverse it? This paper poses a simple question: could incremental reforms of the current tax system raise enough revenue to reduce the deficit to an average of 2 percent of GDP over the last five years of the budget window?
Here are Brookings' observations as pertains to both US social strata and Obama's chief campaign promise to not touch taxes on those earning less than $200k (single) and $250K (married):
Raise tax rates proportionately on single taxpayers with income over $200,000 and married couples filing jointly with income over $250,000. This policy would impose tax increases only on those taxpayers targeted by President Obama during the 2008 presidential election for tax increases under the expiration of the 2001 and 2003 tax cuts.
We model a proportional increase in tax rates for taxpayers for whom adjusted gross income minus the standard deduction and one personal exemption (two exemptions for married couples) exceeds the relevant threshold. To meet our revenue target [of 2% deficits of GDP] under current law, the top two tax rates would have to increase more than 40 percent, lifting the top rate to 56.4 percent. Under the administration baseline, the top rates would leap by 160 percent, lifting the top rate to nearly 91 percent. We would need much smaller—but still substantial—tax increases to meet Orszag’s deficit target [of 3% of GDP]. For example, under the administration baseline, the top tax rates would have to more than double, pushing the top tax rate to almost 77 percent. Under current law, the top rate would have to increase to about 43 percent.
We hate to break it to those who are making 1% each and every day in the melt up, but quite soon (assuming Obama doesn't want a revolution on his hands), all the income America's uberwealthy generate, will soon be taxed anywhere between 77% and 91%... And of course, assuming simple math still works in the Obama universe.