mea cupla?
For years now I have been railing against Obama and the Democratic Party for giving tax cuts to the rich (by making most of the Bush tax cuts permanent, at a cost of $3.7 trillion with 65% of that going to the richest 20% https://www.democraticunderground.com/10022130101)
Well, I thought I was wrong once, but I was mistaken.
The other day, I happened upon a book by Arthur Laffer on sale at the library. That, of course, sickened me, but it also inspired me to update my tax stats database which I had not updated since 2008. I wanted to see – what was the progress of income inequality in America. Back in 2010 when I was running for Congress, I had projected the statistics for the last twenty years forward to the next twenty years. That is, if 2006-2026 went like 1986-2006 in terms of the growth of income inequality, we would be in a very horrible place.
Well, it is 2018 now, are we going on that path? That answer turned out to be no. The rich have taken three steps forward, but the Bush recession seemed to have knocked them two steps back. For example, in 2007 the top 0.001% had income of $219 billion and a share of 2.54% of the total (all income is in AGI – adjusted gross income) by 2009 they were down to $126 billion and only 1.66% of the total. Even by 2015 they are only up to $215 billion and 2.12% of the total. Still, they are far ahead of the $85 billion and 1.39% share they had in 2001 before the Republican Party went to bat for them.
The part that made me say oops? and huh? was the tax rates. To my surprise, the rich and the super duper rich were paying almost the same average tax rates in 2015 as they were in 2001 before the Bush tax cuts. The top 0.001% was paying 23.53% in 2001 and 23.72% in 2015, after a low of 17.81 in 2007 and 2012. Even the top 20-10% was paying 11.03% in 2015 compared to 12.34% in 2001.
Thus, it appears that the Obamacare tax increases almost offset the making of most of the Bush tax cuts permanent.
I still really do not think it was a good thing to make most of the Bush tax cuts permanent. I also believe that doing so helped the rich far more than it helped the non-rich, even though it was done in the name of the middle class. So how to explain the contradiction. How did rich people end up paying more taxes after they got permanent tax cuts?
I have several theories.
1. Estate tax cuts – Obama gave the rich $370 billion in estate tax cuts over the decade. My stats are for the income tax, and the estate tax is perhaps not collected via the income tax.
2. The AMT patch – The AMT patch was a big part of the tax cuts, amounting to $1.8 trillion over the decade, with most of the benefits going to the rich. However, in some ways that tax cut is imaginary – or at least, not NEW. That is, Congress had been passing AMT “relief” every year anyway. Thus, adding permanent AMT relief to ATRA did not give them anything that they were not already getting.
3. increasing income – a rising tide lifts all tax rates. In 2001, the income of the legendary 1% was $1.07 trillion and by 2015 it was $2.1 trillion. The top 4% went from $0.87 trillion to $1.57 trillion and the next 15% went from $2.5 trillion to $4.3 trillion. Well, when your income goes up, your average tax rate also goes up because you have more income that is taxed at the highest rates. (Note, the inflation rate for 2001 to 2015 was 33% (for those of you interested in real income))
Thus, the rich are paying higher tax rates than before, but NOT the tax rates they would be paying if Obama and the Democrats had not gone to bat for them.
Finally, just in case you are not already bored to tears, here are some numbers on income inequality in 2015.
class – income share – running total
0.001% – 2.12% – 2.12%
0.01 – 2.76 – 4.88
0.1 – 5.3 – 10.18
1 – 10.47 – 20.65 (in 2001 this was 17.42%) (in 1986 it was 11.3%)
2 – 5.34 – 25.99
3 – 3.92 – 29.91
4 – 3.27 – 33.18
5 – 2.88 – 36.06 (31.62% in 2001) (24.1% in 1986)
10 – 11.28 – 47.34 (42.51% in 2001)* (35.1% in 1986)
20 – 15.64 – 62.98
25 – 6.0 – 68.98
30 – 5.15 – 74.13
40 – 8.29 – 82.42
50 – 6.28 – 88.70
bottom half – 11.3 (14.4% in 2001) (16.7% in 1986)
* As I said in 2010, in the good old days – before Ronald Reagan, the bottom 50% used to have more income than the top 1%. That change was not inevitable or an accident. Republican policies made it happen, and Clinton and Obama signed some of the bills too.
Once I happened to hear Roaming Millennial say something like “the top 10% produces something like 50% of the income in an economy”. To me that seems like a very naïve belief in the fairness of the system. I would say they do NOT produce that income – they capture it because of the power they have.
They get the income. They do not necessarily earn it or produce it.
That shows a huge difference in perspective. Where I see a greedy person grabbing more than they need or deserve, conservatives see amazingly productive and talented people producing huge amounts of wealth. Seems pretty clear to me, that Republican policies help them to grab more, and accumulate more, not produce more.
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