Say what you will about stagnating wages and a mushrooming national debt, the U.S. has the richest rich people anywhere. And, apparently, they’re getting richer faster than ever.
The increase in incomes of the top 1 percent of Americans from 2003 to 2005 ($524.8 billion) exceeded the total income of the poorest 20 percent of Americans ($383.4 billion), according to a new report by the Congressional Budget Office. “On average, incomes for the top 1 percent of households rose by $465,700 each, or 42.6 percent after adjusting for inflation. The incomes of the poorest fifth rose by $200, or 1.3 percent, and the middle fifth increased by $2,400 or 4.3 percent.†[NYT/Think Progress]
we also have the fattest people.. does that go hand in hand?
And that same 1% paid over 25% of all federal taxes in 2005, according to the same report.
People move out of the bottom quintile pretty routinely – just as they fall out of that top 1% – I did not see figures on mobility in the CBO Report, although they would provide useful context.
A very quick web look provided no useful info on that latter point – anyone have a source?
What percentage of the total wealth does that 1% own? What percentage of payroll taxes, property taxes, and sales taxes did they pay?
All seem like relevant data points.
I think the top 1% pay the same payroll tax as I do. Actually I know they do. Me and Bill Gates, equals in this regard.
Quick google showed several sources putting the top 1% of U.S. earners controlling over 30% of all privately held wealth (33.4% in 2001). Sounds like they’re getting a bargain only paying 25% of the taxes…
The CBO report regarding proportion of taxes paid by high income individuals and families is the proportion of income taxes paid by the families involved. It doesn’t seem to include estate and gift taxes. Before we conclude that the wealthy (which isn’t necessarily quite the same group as “high income”) are getting a “bargain” we ought to add in the estate taxes paid by their estates.
I’d add too that these studies tend to look at Adjusted Gross Income and thus exclude certain other items that are income in an economic sense but not a tax sense, such as contributions by employers to retirement plans and health insurance. I suspect that if those items were included in income, the proportion of the individual income going to the top 1% would be lower because employer provided health insurance and retirement contributions are a much higher proportion of middle income earners income.
On the other side is the ability most high income individuals’ have to time income by controlling when they realize capital gains. Capital gains bounce all over the place depending on how the stock market does in a given year. Picking 2005 as a benchmark year may have a distorting effect because the markets did well that year and more gains were realized. The taxable income received by the top 1% is extremely irratic, though they are a good position to tolerate such a state of affairs.
To go back to Bill Gates – yes, he is incredibly wealthy – but most of that wealth represents ownership of a highly productive enterprise that he built, which provides paychecks and benefits to a lot of folks.
It’s not like he has his wealth in the form of mattresses stuffed with hundred dollar bills.
[Well, OK – I guess he could have one or two of those mattresses – but my main point still stands!]
Under this administration the wealthy are indeed getting a bargain. The gap between the rich and the poor to middleclass has widened more under this Republican dominated administration than any other in our nation’s history. Who said Bush was a ne’er do well-good for nothin’ ?
PS Mission Accomplished!
Oh, I’m sure when Hilary or Obama get into the White House, suddenly the Democrat controlled Congress will put in place laws that will stop this nonsense. Right?
I think it sucks, and I think this is bad business ethics. By putting insane amounts of money into the hands of these people who don’t spend as much (as a %), the economy suffers.
However, I’m not sure what law can prevent self-serving boards and CxO’s from giving each other billion dollar raises.
FDR managed it somehow. Not that the current crop of Liebermanesque Democrats could carry FDR’s jockstrap.
Doug, this is great news because we are going to need it!
Every single man,woman, child, and baby alive today owes $181,000 as their share toward the national debt. Each minute the national debt increases by nearly $1 million.
So what you are basically advocating is income redistribution because those smart, rich folks don’t deserve to keep their spoils, eh?
I’d be the first one to help a neighbor or friend in need, let’s use a fun example like dropping off a casserole to a needy neighbor. Most neighbors (like me) would do that, but I sure as hell don’t want my legislators mandating I must drop off a casserole every week for either the rest of my life, or until the neighbor get’s a raise and can “afford” his own casseroles.
There are plenty of valid reasons why the poor and the middle class suffer economic hardships and setbacks, and just blatantly stealing money from the rich to help them out is not the answer. Why in the hell would anyone work hard or even desire to be wealthy when you know it’ll be taken away from you.
Waaaaaaaaaay too much socialism creeping in these days……It would be refreshing to see everybody tighten their own belt, worry about what THEY have and what THEY want and stop whining about everybody else that has more than they do.
Personal responsibility can be a beautiful and rewarding thing, to bad it’s so rare these days.
Yes, the smart ones should keep their spoils. I have no problem with Bill Gate’s fortune.
However, the trend of giving ungodly heaps of cash to execs who have done nothing but be well connected needs to stop. “Business Ethics” is in low stock these days.
However, this is a CORPORATE problem, not a government problem. The only part I want the government to help with is making sure that everyone pays a FAIR share, and by fair I mean proportionate. I don’t agree with the idea of tax brackets. As T pointed out, he and Bill Gates are in the same bracket. That isn’t right, because I think I’m correct in assuming that the government actually NETS a far higher percent from T than they do Bill.
Flat tax, fair tax, etc..are steps in the right direction.
As for examples of good business ethics, check out John Chambers, Cisco’s CEO. When his company was facing layoffs for the first time in their history after the .com bust, he waved his salary (and the CFO did as well) before they laid anyone off.
This was a nice gesture, of course, but between his salary of $0, his bonus of $2 million, and his exercised stock options of $38 million (all in the same year, of course), I don’t think he was really suffering.
And ISTR that the tax on $38 million in exercised stock options is much less than the tax on $38 million in salary
I didn’t say he was suffering, or imply that he had a harder time than ANY of the staff that were eventually laid off.
However, he did 1000x more than most of his peers. You can agure that he didn’t do enough when things like what he did are the norm. As it stands, more execs I have heard get a raise while they send people home without a job.
No offense, but aside from the obvious (jealousy) why is it anyones business what any corporation wants to pay it’s President?
Let me count the ways:
1. I am a shareholder in many companies, as are many Americans with a 401(k). As part OWNER of those companies, I have an intrest in knowing how my money is being spent.
2. I buy things from companies. I would like to know if they money I am going to give a company is going to help a CEO move one notch higher on the Fourtune 500 list OR help 5,000 who are my neighbors put their kids through school. I will choose to spend my money on those companies that have values closer to my own.
3. The more that there becomes a divide beween the rich and the poor and the weaker the middle class becomes, the more this country is threatened. It becomes weaker finacally (as we are seeing with the dollar now). It also becomes a far weaker democratic republic, as we are seeing now with the way that there is little “choice” between either of the two parties that are being presented.
Argh, I’m going to stop here. I don’t think there is anything I can say to help you understand. (Jason, you’re not going to change the world with a comment on a blog…)
“Why is it anyones business what any corporation wants to pay it’s President[?]” It is certainly the corporation’s shareholders’ business. That part of the debate is more one of corporate governance than one of taxes. I think it appropriate to ask if corporate managements are too insulated from oversight by the owners of the corporation. At least for publicly traded companies there might be a fair argument for cumulative voting (http://sec.gov/answers/cumulativevote.htm) for boards of directors. Substantial minority blocks should have representation on a company’s board of directors.
The corporate form of doing business also insulates oweners and managers of a corporation from legal liabilities that they might otherwise be exposed to, which I think entitles the community to some oversight over the business. In effect the community might be treated as a sort of stakeholder in the business since the community itself (or at least members of it) are at risk of loss in case the business goes under. The community has limited recourse against the owners and managers of the business unless they can prove the owners and managers were stripping assets in anticipation of the business going under. Think in terms of people injured by an undercapitalized, under insured business which has been engaging in an activity which poses risks to members of the broader community. The state may be able to react more quickly and coherently to a case of a manager stripping a company than can the shareholders, and is frequently in a much better position to investigate cases where this is occurring, as it is often better placed to discover instances of management exploiting what should be shareholder opportunities, such as insider trading.
The issue of asset stripping has prevented Altria from spinning off major assets, such as Kraft Foods, to its shareholders due to the allegation that allowing it to do so could deprive smokers of recourse against Altria. While I have doubts that the argument against Altria is still valid in view of existing legal settlements, Altia it is an example of a company whose business, tobacco, arguably poses risks to the community in terms of increased health care costs for people injured by the smoking of tobacco, including “passive” smokers.
Jason and Paul…as shareholders you have the CHOICE of owning that stock and voting or selling if you disagree. It’s a choice you clearly make.
Also, when you buy something, and you think the company pays their Prez too much, you again have a CHOICE to support that company or not.
Why does the government have to protect everybody from making choices they may later regret?????
Sweet Jesus does nobody understand anymore you have choices in life????? And those choices allow you to make decisions for yourself, not for me or anybody else. Are we so brainwashed now that only the government can SAVE us from everything??
Tim, please re-read my post 14 and Paul’s post 19. We both state that this is not an area for the government to correct.
And yes, I have a choice. However, you feel that it isn’t any of my business what a company pays its CEO. If I don’t know, then I can’t make an informed choice to buy or sell stock, or to buy a product or not.
I think the Depression showed us that government has a role to play in the economy. Oops, kids up – no time to elaborate.
If a corporate board of a company in which I own stock takes actions such as establishing a stock option plan for management which substantially dilutes my stock position, or votes in a new and “excessive” compensation plan for the CEO, I will be damaged by the vote before I can sell the stock.
Corporations are creatures of government and doing business in corporate form is a legal priviledge not a constitutional right. A true libertarian ought to oppose the existence of corporations, not defend the rights of the people who control them to do anything they want with them.
The point about corporations is one that often gets lost with libertarians. To their credit, most libertarians with whom I have discussed this with haven’t seen a problem with the corporate form simply because it never occurred to them. Once it’s raised, at the least, most of them at least wrestle with the issue.
The problem is that libertarians count on personal responsibility to regulate individual actions. In other words, if you make a dumb decision or a decision that hurts the property rights of others, there should be adverse consequences that inhibit those sorts of decisions. But, with corporations, an individual can make decisions that hurt the property rights of others without exposure to adverse consequences because the corporate form protects that individual from individual responsibility for his or her decisions.
Corporations are communal creatures and should probably be anathema to a hardcore libertarian.
There has definitely long been an American cultural biais toward private control vs government control and conservatives have been able to exploit that… (ie. put Haliburton in charge of Iraqi reconstruction and all will get done efficiently with money wisely spent).It’s been a belief of conservative thinkers for a while that the more money diverted from the government sector to the private sector the better off the country would be,and the better off we’d all be individually.Conservative enterpreneurs particarly were thought to be God-fearing,hardworking and they would naturally do the the best for everyone, at the same time setting aside a reasonable part of their created wealth for their own profit. Free enterprise advocates were incapable of foreseeing an Enron,which is now a generic term for private control gone amok to the detriment of the country and to those private individuals who were not in the top echelon.
The rule of thumb should be that all money,private or public, needs to be monitored along its path and whether it be private or public is much less a concern,because in most cases funding comes though both private and public sources, as it is circulated and re-circulated through the system,and that’s a sensible accommodation.Let’s hope specifically that government mandates more oversight as to use of diverted funding ,because lack of government oversight has been the greatest catylist for corruption and inefficiency especially,but not exclusively, during this awful Bush administration.
Doug –
What, how to cause a depression, deepen it, and extend it?
FDR was a great wartime president – peacetime, not so much…
To go back to Bill Gates… most of his wealth doesn’t represent ownership of a business. Most of his wealth consists of shares of that business, which is commonly held. I presume he also draws a salary from that corporation. But it isn’t just Bill Gates collecting money and then doing good works with it like employing people. Also, those benefits that get paid to employees are already accounted for through tax breaks to the corporation. To then argue that somehow his personal income tax situation should take into account that *he* employs people and pays their benefits seems to misunderstand how the income tax is figured, and why.
How is it figured? I still don’t understand. Why can’t we just make a two sentance long tax code that says:
All income, regardless of source, over -X- amount per year will be taxed at -Y-%. Amount -X- must be set by Congress during each session. (Or, amount -X- must be computed by the GAO and approved by Congress)
Done. I just saved everyone billions, and now we all pay a fair share. If someone wants to look good and give tax breaks, do it on sales tax instead of making exemptions.
I would be in favor of getting rid of any exemptions that reward people for having bigger families. Bigger families uses more national and state resources, yet they pay less. Up is down in this case.
I recall Mom & Dad telling me, quite frequently in fact, that the world was not fair. That was hammered into me enough that the fairness argument doesn’t move me much when poor people make it. It doesn’t move me any more when people with money make the same argument.
I think that Government taxes the rich more not primarily because it is fair to do so, but because they have the money. Basically the same reason as Willie Sutton gave for robbing banks.
Of course, a fairness argument can be made — the very rich benefit far more from civilized protection of their property than do the poor. Also, a strong argument can be made that you need your first hundred dollars a lot more than you need your last hundred (unless they are one and the same). Food, shelter, and clothing are recognized as necessities. A new set of golf clubs, not so much.
In any case, as an individual, I’m after maximizing my profit. As a citizen thinking about how best to design a government, the perspective is a little different. We all come at that one a little differently. Some come at the government design question from a purely libertarian perspective which is very similar to the individual perspective. Some may come at it from a communist perspective, where the desire and rights of the individual are given little weight.
Without being a philosopher (and so I may misunderstand a lot of the nuances), I think I tend to come at the government design question from a utilitarian angle — greatest good for the greatest number. One way or another, you want your society to function in a way that maximizes happiness for its members. Sometimes government is a good tool for this. Often times not.
O.k., at the moment, I need to work on individual maximization of profit. Maybe later I can elaborate on what I think utilitarianism means for government’s role in the economy.
I think even those that have less often don’t want someone else to be unfairly treated, even if they have far more.
A perfect example is the “death tax”. Doug has made a good point in the past about a worker having a greater right to their money than an heir, but MANY people that will NEVER be directly affected by this tax oppose it. Why? I really don’t think it is just for the starving farmers. I think it is something they just don’t think is fair.
However, my main point is that by having such a complex tax structure, we reward the weasels. Right now the top bracket is somewhere in the high 30’s, right? However, it has been shown that the EFFECTIVE rate is far lower for those that know how to get around the system. Buffet’s secretary example comes to mind.
Sure, we can say that maybe the rich can afford a 50% tax, and pass a law as such. The problem is that our code is so complex that the really sneaky ones will never pay 50%, and the honest ones (that might be a million dollar person rather than a 100 million) pay the full 50%.
In case you find The New York Times a little less than reliable (as I do) check out the Wall Street Journal for the other side of the story:
http://online.wsj.com/article/SB119786208643933077.html