1% Pays 34%?

A common right-wing rejoinder to the leftist claim that the rich don’t pay their fair share of taxes is that “The top 1% of earners in this country pay 34% of all taxes.” I’ve heard Rush pull this one out on a liberal caller, and I recently saw a TV show purporting to uncover “10 Popular Myths” use the same stat to convince people that the wealthy pay too much tax.

But doesn’t the statistic make a logic error by comparing the size of a group in population terms (1%) with the proportion of taxes they pay? Shouldn’t we instead compare the size of the group’s wealth with the proportion of their taxes?

According to taxfoundation.org, the top 25% of all earners earn 65% of the nation’s income. And the top 1%? They hold around 21% of all the wealth.

Of course, our system of terraced tax brackets does mean that wealthy people do pay more per dollar on their income taxes — they hold 21% of the wealth but pay 34% of the taxes. Whether they should pay more per dollar or not is a separate question — one that cuts to quick of any socialist vs. libertarian debate (and don’t forget that the wealthy also have access to any number of tax shelters that your average wage earner does not).

The point is that the statistic gets thrown around with an unspoken implication: That the top 1% should pay 1% of the taxes. If Rush and co. want to make this form of argument, they should be arguing that those controlling 21% of the wealth are paying 34% of the taxes. But that argument wouldn’t have nearly the same impact.

One also often hears the accompanying argument that the threshold for entry into the 1% club is not high — you “only” have to make around $300,000 to join the 1% club. While true, this stat ignores the fact that many of the top earners are actually wealthy beyond almost anyone’s dreams. “In 1999, 268 of the [top] 400 [earners] qualified as billionaires.”

Music: Spacemen 3 :: Lord Can You Hear Me?

17 Replies to “1% Pays 34%?”

  1. Let’s be fair. The following claim isn’t quite reasonable.

    “most 1%’ers are actually wealthy beyond almost anyone’s dreams. “In 1999, 268 of the [top] 400 [earners] qualified as billionaires.”

    There are a hell of lot more than 400 people in the top 1% of earners. The second statistic tells you absolutely nothing about the distribution of wealth among the top 1%.

  2. funny – this was on 20/20 or such the other night and the exact same logical lapse pissed me off too. however, i thought the top 1% controlled way more wealth than 21%….? (just my memory or lack thereof) adn it was stated on this show that the top 1% club was entered upon earning 800k per year if memory serves. whatever. still unfair, though i don’t knwo what the numbers should be. would like to know what they were during the eisenhower years. would also like to know what the numbers are for the top .001% , .01%, etc….

  3. That unspoken implication never worked on me.

    I always figured that if you hold X% of the total wealth, you should pay X% of the taxes. Income taxes are applied to dollars, not warm bodies.

  4. Before getting into stats, we’ve got to distinguish wealth from income. Wealth is net assets, and income is money earned in a year.

    Most of the facts below are from:
    Edward N. Wolff, “Recent Trends in Wealth Ownership, 1983-1998,” April 2000. Table 2. ( United For a Fair Economy):

    The top 1% of Americans own as much wealth as the bottom 95% percent.

    The total wealth owned by the top 1% of Americans is equivalent to 200 times the total combined wealth of the bottom 40%.

    The total wealth of the top 60% of Americans is 500 times the total wealth of the bottom 40%.

    Bill Gates, America’s richest individual, alone has more wealth than 40% of the U.S. population combined, or 120 million people.

    The top 1% of households own almost 40% of the nation’s wealth.

    The top 10% of Americans own over 70% of nation’s wealth.

    The top 20% of the nation’s households own 85% of the nation’s total wealth.

    The top 60% of households own almost 100%, or 99.8%, of the nation’s wealth.

    The bottom 40% of households own one-fifth of 1% (or 0.2%) of the nation’s wealth.

    The bottom 80% of Americans own only 15% of the nation’s wealth.

    Average household wealth for all Americans is $270,000.

    The average wealth of the top 1% of Americans is $10 million ($10,000,000).

    The average wealth of the bottom 40% of Americans $1,000.

    Wealth Trends

    In the fifteen years between 1983 and 1998, the bottom 40% of Americans saw their wealth drop 76%. (In other words, they lost three-quarters of their wealth in 15 years).

    In the same time period, the richest 1% saw their wealth increase by 42%.

    The richest 40%, excluding the richest 1%, saw their wealth increase roughly 20%.

    Income Inequality

    ‘Income’ means annual earnings or increase in wealth (for example, the increase in the value of stocks) over a one year’s period. This is different from ‘wealth’, which is the total cumulative assets or net worth.

    The richest 1% of Americans earned as much income (after taxes) in 1999 as the bottom 38%. (In other words, the 2.7 million Americans with the highest incomes will have as much after-tax income as the 100 million Americans with the lowest incomes.)

    The Widening Income Gulf, Center for Budget Policy and Priorities:

    The total income earned by the top 20% of Americans equalled the total income earned by the bottom 80%. (Or, the top 20% of Americans earned as much total income as the bottom 80%). (U.S. Census Bureau, 2000-01)

  5. Everyone’s taxes are too high. Stop the spending, get rid of the taxes. Stop arguing about who has a bigger bullet in them and seek medical help.

  6. Thanks, Scot and other commentators for giving more numerical depth to factoids that are too commonly given without context.

    But Scot, you mischaracterize the reason that Rush et al have been repeating the “1% pay 34% of taxes” stat so frequently lately. It’s not directly an argument that the rich should be paying lower taxes. It’s a rejoinder to the argument constantly made by liberals that Bush’s across-the-board tax cuts are “unfair” because the top 10% of earners get a much larger share of the tax cut.

    To liberals, this seems intrinsically unfair. That’s why you have to point out to them that the top 10% of earners *pay* a much greater share of taxes to start with. Any tax cut which is then applied across the board (which is a fair tax cut in my opinion) will then logically give a greater share of the cut to the top earners.

  7. Mneptok writes “Stop the spending, get rid of the taxes”. Where to begin? Education? Medicare? or Military?

    “A recent study by the Center on Budget and Policy Priorities does the math. Why do we face the prospect of huge deficits as far as the eye can see? Part of the answer is the surge in defense and homeland security spending. The main reason for deficits, however, is that revenues have plunged. Federal tax receipts as a share of national income are now at their lowest level since 1950.”

    http://www.nytimes.com/2004/01/27/opinion/27KRUG.html?th

    Jasper thinks an accross the Board tax cat is fair. But he neglects to say which tax cut, nor how it benefits all equally.

    “Of course, most people don’t feel that their taxes have fallen sharply. And they’re right: taxes that fall mainly on middle-income Americans, like the payroll tax, are still near historic highs. The decline in revenue has come almost entirely from taxes that are mostly paid by the richest 5 percent of families: the personal income tax and the corporate profits tax. These taxes combined now take a smaller share of national income than in any year since World War II”.

    http://www.nytimes.com/2004/01/27/opinion/27KRUG.html?th

    An across the board tax cut benefits those who hold the most wealth. It doesn’t benefit the bottom 80% of Americans who own only 15% of the nation’s wealth.
    We save $0 (!) to about $300 (yipee!). While the wealthiest save thousands to millions.

    “To sell the ground from unborn feet forever”
    –William S. Burroughs

  8. i find it interesting that no one as look at tis debate beyond the US. if you earn $40,000 per year. you earn more then 90% of the worlds population. we live in wonderland here wile the rest of the world is left to swing. People with vast fortunes don’t control only wealth in america, the control a large percentage of the global economy. they should be “burdened” with higher taxes. it is irresponsible to allow these vast accumilation of wealth in the hands of a few.

  9. The funny thing is, you did the very same thing with this statement, “the top 25% of all earners earn 65% of the nation’s income. And the top 1%? They hold around 21% of all the wealth”.

    How did you go from “earn 65%” to “hold 21%” with any sense that these are equivalent actions?

    Since the top 25% of all earners earn 65% of the income, they should pay 65% of the taxes. Sure, I’ll buy that, since it’s and INCOME tax.

    But how does the top 1% “holding” 21% of the wealth of the country in any way equate to them paying 21% of the taxes? Wouldn’t they have to EARN 21%? Now go find out how much that 1% earns, and we’ll talk.

  10. Brad Wardell, the CEO (I think) of Stardock Corporation (http://www.stardock.com/), is a prolific blogger about the unfairness of taxing the rich and other favourite subjects of the right wing. (He also blogs about Macs, iTunes, and theming apps for Windows).

    You can read his frequent attacks on the left-wing at http://www.joeuser.com/index.htm.

    Here he is on tax shelters for the rich:

    “Being one of those top 1% people myself, I have asked about those shelters and my accountants sure can’t find them. Please feel free to email me a list of shelters

    How about this reality check Steve: 54% of the fed taxes are paid by the top 5% of the income earners. So whatever shelters there are, they’re not doing very well. The bottom 40% of the population pays essentially no federal income taxes. So spare us your tired old “system favors the rich”. It most certainly does not.”

  11. “Since the top 25% of all earners earn 65% of the income, they should pay 65% of the taxes. Sure, I’ll buy that, since it’s and INCOME tax.”

    It is income tax, and that addresses a separate issue which is more at the seat of the problem. The current tax environment stresses income and not wealth — the real problem. Income, representing a change in holdings, is closely related to wealth due to the fact that Jasper noted: proportional changes have a larger scalar outcome. Investing 1% of 100,000 spare income is going to yield less than investing 1% of 1,000 spare income (and that’s even ignoring the pragmatic concerns of the relative ‘spareness’ of each). As does all matter, wealth accumulates until there is either an explosion or implosion.

    Where one has opportunity to increase one’s income through personal effort, inherited wealth is bequeathed by divine will. With a bright mind, hard work, and the right decisions one can climb from absolute poverty to the pinnacles of wealth, but given a trust at the age of 30, I’m sure you’ll find that their success is nearly a sure thing (motivational issues aside, of course).

    Wealth ensures that there shall be poverty. The ‘bud vase’ concept of the contemporary economy illustrates this quite well. Or: watch the shows ‘Rich Girls’ or ‘The Simple Life’ for a nauseatingly ironic picture of how it is that bigger money makes BIGGER money.

    So, I propose something more radical: either place a direct tax on wealth (and no no no, I am aware of inheritance taxes) that ensures an equal playing field as well as an equal burden, or prohibit inherited wealth, placing all extra funds in a public works fund to be used for public education.

    Of course this will be ferociously opposed by both groups of wealthy: those who do, and do not understand the problem at hand. The issue can be reduced to the simple recognition that most wealthy do not support public education under the guise of the ‘inadequacy’ of the schools. Yes, the same schools whose PTAs don’t benefit from your money, and that your children do not attend, if only so that they are not in the same classes as the others who “just wouldn’t understand.”

    Which brings me to my last point: the wealthy pay a disproportionate amount of income taxes because they *MUST*. Without the funds provided by their tax contributions (65% of income tax from top 25% for example), the federal government would take in a fraction of its current gains via income tax. So stop complaining, you ARE paying more, it IS unfair that income tax is so heavily stratified, but you still aren’t paying what you should.

    Hobbes

    Whats Wal-Mart? Do they sell wall stuff there?, Paris Hilton

  12. > 54% of the fed taxes are paid by the top 5% of the income earners

    Vic: It seems that Brad has fallen there to the same ill logic that this whole post was meant to address: If 5% of income earners are making 54% of the nation’s income, they should be paying (at least!) 54% of the taxes. It seems patent to me.

  13. Vic writes: “The bottom 40% of the population pays essentially no federal income taxes. So spare us your tired old “system favors the rich”. It most certainly does not.”

    Actually most minimum wage workers still pay the payroll tax, whether they pay federal income tax or not. They are also more likely not to have health insurance.

    “Don’t Look Now, someone’s done your starvin’;
    Don’t Look Now, someone’s done your prayin’ too.
    Who will make the shoes for your feet?
    Who will make the clothes that you wear?
    Who’ll take the promise that you don’t have to keep?
    Don’t Look Now, it ain’t you or me.”
    —J. Fogerty

  14. If the rich in this country feel so horribly over taxed let them move on to friendlier climes. Might I suggest Latin America where the rich pay no income taxes, but also have to worry about abductions, assasination and live in high security sections of their cities. Canadians now pay a smaller share of their overall income in federal taxes than we do, but they’re getting free health care out of it, and yes it is quite decent. Even Bill Gate’s father has stated that the tax system here favors the wealthy along with no less a personage than Warren Buffet. Mr. Buffet has referred to the current tax cuts as class welfare, for his class. Here’s the link in case you want to follow it: http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A13113-2003May19&notFound=true
    And I hardly think Warren is a leftist socialist.

  15. In Government class last week, I heard that the wealthiest 1% and everyone else pays only on the first 85,000 income dollars that they make. Maybe my teacher was wrong, I would like to get confirmation. This tax percentage does not apply to investments which are tax free.

  16. Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for any of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars which have been transfered FROM US TO THEM. All over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They just keep getting richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year. IT CAN’T WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any ‘humanitarian’ progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. So don’t fall for any of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. Crime, poverty, and suicide will skyrocket. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah Winfrey, Ellen DeGenerous, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. No offense fellow citizens. But we have been mislead by nearly every public figure. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. High energy prices. Their idea. Obscene health care charges. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. The multi-million dollar endorsement deal. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea. Vioxx, and Celebrex. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, love-sick, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world’s wealth and resources, create a dominoe effect of socio-economic problems, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don’t fall for any of their ‘good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP. In many cases, the ‘charitable’ contribution is almost entirely offset. Not to mention the opportunity to plug their name, image, product, and ‘good will’ all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to ‘federal tax revenue’. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid. Not to mention the spike in crime because of it. There is a dominoe effect to consider. IT CAN’T WORK THIS WAY. But our leaders refuse to acknowledge this. Instead they come up with one trick after another to milk the system and screw the majority. These decisions are heavily influensed by the 1% club. Every year, billions of federal tax dollars are diverted behind the scenes back to the rich and their respective industries. Loans from China have been necessary to compensate in part, for the red ink and multi-trillion dollar transfer of wealth to the rich. At the same time, the feds have been pushing more financial burden onto the states who push them lower onto the cities. Again, the hardship is felt more by the majority and less by the 1% club. The rich prefer to live in exclusive areas or upper class communities. They get the best of everything. Reliable city services, new schools, freshly paved roads, upscale parks, ect. The middle and lower class communities get little or nothing without a local tax increase. Which, they usually can’t afford. So the red ink flows followed by service cuts and lay-offs. All because of the OBSCENE distribution of bottom line wealth in this country. So when people forgive the rich for their incredible greed and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, bankers, celebrities, athletes, attorneys, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Strong middle class, free and clear assets, lower crime rate, more widespread prosperity, stable job market, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We have a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, 13 figure national deficit, and 12 figure annual shortfall. The cost of living is higher than ever before. Most people can’t even afford basic health care. ALL BECAUSE OF GREED. I really don’t blame the 2nd -5th percentiles in general. No economy could ever function without some reasonable scale of personal wealth and income. But it can’t be allowed to run wild like a mad dog. ALBERT EINSTEIN TRIED TO MAKE PEOPLE UNDERSTAND. UNBRIDLED CAPITALISM ABSOLUTELY CAN NOT WORK. TOP HEAVY ECONOMIES ALWAYS COLLAPSE. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. The American dream will be shattered. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH MAKES WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman.. Of course, they will jump to small minded conclusions about ‘jealousy’, ‘envy’, or ‘socialism’. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

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