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 Posted: Tue May 03, 2005 6:29 am |
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Yep, Bush sure stands for the "regular" people doesn't he? Of course that will depend on your understanding of who the "regular" people are.
Namaste'
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June 5, 2005
Richest Are Leaving Even the Rich Far Behind
By DAVID CAY JOHNSTON
When F. Scott Fitzgerald pronounced that the very rich "are different from you and me," Ernest Hemingway's famously dismissive response was: "Yes, they have more money." Today he might well add: much, much, much more money.
The people at the top of America's money pyramid have so prospered in recent years that they have pulled far ahead of the rest of the population, an analysis of tax records and other government data by The New York Times shows. They have even left behind people making hundreds of thousands of dollars a year.
Call them the hyper-rich.
They are not just a few Croesus-like rarities. Draw a line under the top 0.1 percent of income earners - the top one-thousandth. Above that line are about 145,000 taxpayers, each with at least $1.6 million in income and often much more.
The average income for the top 0.1 percent was $3 million in 2002, the latest year for which averages are available. That number is two and a half times the $1.2 million, adjusted for inflation, that group reported in 1980. No other income group rose nearly as fast.
The share of the nation's income earned by those in this uppermost category has more than doubled since 1980, to 7.4 percent in 2002. The share of income earned by the rest of the top 10 percent rose far less, and the share earned by the bottom 90 percent fell.
Next, examine the net worth of American households. The group with homes, investments and other assets worth more than $10 million comprised 338,400 households in 2001, the last year for which data are available. The number has grown more than 400 percent since 1980, after adjusting for inflation, while the total number of households has grown only 27 percent.
The Bush administration tax cuts stand to widen the gap between the hyper-rich and the rest of America. The merely rich, making hundreds of thousands of dollars a year, will shoulder a disproportionate share of the tax burden.
President Bush said during the third election debate last October that most of the tax cuts went to low- and middle-income Americans. In fact, most - 53 percent - will go to people with incomes in the top 10 percent over the first 15 years of the cuts, which began in 2001 and would have to be reauthorized in 2010. And more than 15 percent will go just to the top 0.1 percent, those 145,000 taxpayers.
The Times set out to create a financial portrait of the very richest Americans, how their incomes have changed over the decades and how the tax cuts will affect them. It is no secret that the gap between the rich and the poor has grown, but the extent to which the richest are leaving everyone else behind is not widely known.
The Treasury Department uses a computer model to examine the effects of tax cuts on various income groups but does not look in detail fine enough to differentiate among those within the top 1 percent. To determine those differences, The Times relied on a computer model based on the Treasury's. Experts at organizations representing a range of views, including the Heritage Foundation, the Cato Institute and Citizens for Tax Justice, reviewed the projections and said they were reasonable, and the Treasury Department said through a spokesman that the model was reliable.
The analysis also found the following:
¶Under the Bush tax cuts, the 400 taxpayers with the highest incomes - a minimum of $87 million in 2000, the last year for which the government will release such data - now pay income, Medicare and Social Security taxes amounting to virtually the same percentage of their incomes as people making $50,000 to $75,000.
¶Those earning more than $10 million a year now pay a lesser share of their income in these taxes than those making $100,000 to $200,000.
¶The alternative minimum tax, created 36 years ago to make sure the very richest paid taxes, takes back a growing share of the tax cuts over time from the majority of families earning $75,000 to $1 million - thousands and even tens of thousands of dollars annually. Far fewer of the very wealthiest will be affected by this tax.
The analysis examined only income reported on tax returns. The Treasury Department says that the very wealthiest find ways, legal and illegal, to shelter a lot of income from taxes. So the gap between the very richest and everyone else is almost certainly much larger.
The hyper-rich have emerged in the last three decades as the biggest winners in a remarkable transformation of the American economy characterized by, among other things, the creation of a more global marketplace, new technology and investment spurred partly by tax cuts. The stock market soared; so did pay in the highest ranks of business.
One way to understand the growing gap is to compare earnings increases over time by the vast majority of taxpayers - say, everyone in the lower 90 percent - with those at the top, say, in the uppermost 0.01 percent (now about 14,000 households, each with $5.5 million or more in income last year).
From 1950 to 1970, for example, for every additional dollar earned by the bottom 90 percent, those in the top 0.01 percent earned an additional $162, according to the Times analysis. From 1990 to 2002, for every extra dollar earned by those in the bottom 90 percent, each taxpayer at the top brought in an extra $18,000.
President Ronald Reagan signed tax bills that benefited the wealthiest Americans and also gave tax breaks to the working poor. President Bill Clinton raised income taxes for the wealthiest, cut taxes on investment gains, and expanded breaks for the working poor. Mr. Bush eliminated income taxes for families making under $40,000, but his tax cuts have also benefited the wealthiest Americans far more than his predecessors' did.
The Bush administration says that the tax cuts have actually made the income tax system more progressive, shifting the burden slightly more to those with higher incomes. Still, an Internal Revenue Service study found that the only taxpayers whose share of taxes declined in 2001 and 2002 were those in the top 0.1 percent.
But a Treasury spokesman, Taylor Griffin, said the income tax system is more progressive if the measurement is the share borne by the top 40 percent of Americans rather than the top 0.1 percent.
The Times analysis also shows that over the next decade, the tax cuts Mr. Bush wants to extend indefinitely would shift the burden further from the richest Americans. With incomes of more than $1 million or so, they would get the biggest share of the breaks, in total amounts and in the drop in their share of federal taxes paid.
One reason the merely rich will fare much less well than the very richest is the alternative minimum tax. This tax, the successor to one enacted in 1969 to make sure the wealthiest Americans could not use legal loopholes to live tax-free, has never been adjusted for inflation. As a result, it stings Americans whose incomes have crept above $75,000.
The Times analysis shows that by 2010 the tax will affect more than four-fifths of the people making $100,000 to $500,000 and will take away from them nearly one-half to more than two-thirds of the recent tax cuts. For example, the group making $200,000 to $500,000 a year will lose 70 percent of their tax cut to the alternative minimum tax in 2010, an average of $9,177 for those affected.
But because of the way it is devised, the tax affects far fewer of the very richest: about a third of the taxpayers reporting more than $1 million in income. One big reason is that dividends and investment gains, which go mostly to the richest, are not subject to the tax.
Another reason that the wealthiest will fare much better is that the tax cuts over the past decade have sharply lowered rates on income from investments.
While most economists recognize that the richest are pulling away, they disagree on what this means. Those who contend that the extraordinary accumulation of wealth is a good thing say that while the rich are indeed getting richer, so are most people who work hard and save. They say that the tax cuts encourage the investment and the innovation that will make everyone better off.
"In this income data I see a snapshot of a very innovative society," said Tim Kane, an economist at the Heritage Foundation. "Lower taxes and lower marginal tax rates are leading to more growth. There's an explosion of wealth. We are so wealthy in a world that is profoundly poor."
But some of the wealthiest Americans, including Warren E. Buffett, George Soros and Ted Turner, have warned that such a concentration of wealth can turn a meritocracy into an aristocracy and ultimately stifle economic growth by putting too much of the nation's capital in the hands of inheritors rather than strivers and innovators. Speaking of the increasing concentration of incomes, Alan Greenspan, the Federal Reserve chairman, warned in Congressional testimony a year ago: "For the democratic society, that is not a very desirable thing to allow it to happen."
Others say most Americans have no problem with this trend. The central question is mobility, said Bruce R. Bartlett, an advocate of lower taxes who served in the Reagan and George H. W. Bush administrations. "As long as people think they have a chance of getting to the top, they just don't care how rich the rich are."
But in fact, economic mobility - moving from one income group to another over a lifetime - has actually stopped rising in the United States, researchers say. Some recent studies suggest it has even declined over the last generation.
Copyright 2005 The New York Times Company
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| Posted: Tue May 03, 2005 10:02 am |
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My post on the same thread on the politics forum
Haha, so true Sojustask... Keep dreaming people, if you truly think that out of 300 million americans you will rise to that top 0.01% some day (less than 15000 people), well... Good luck.
A compounding system is simply more effective the richer you get. I will write you a nice little story.
Let's see: Tom is an honest worker in a company, earning $3000 a month steadily! But suddenly, he inherits $10,000 from his uncle and he's happy. He deposits it to a bank fund which pays a whopping 12% per annum, almost 3x better than a bank account with just about no risk! Now Tom earns an additional $1200 a year, buys a few DVD's and takes his kids to Disneyland. All is well.
But here is Alice. Her rich family has just recently left her an inheritance of an amazing $42 million dollars, they were businessmen and oil barons. Alice didn't even have to do anything to achieve this, after all, Alice is only 15 years old!
Alice is adviced by his brother to put her money in the same bank fund as Tom. And before she knows it, Alice is now making 5.4 million dollars every year, more than 70 toms will make in an entire lifetime! But that's how it works.
By the time Alice is 35 years old, she has already earned herself $100 million on her fund interest and she can live a stressless life, buy a few private jets, a few sports cars, a nice mansion with 40 rooms and 2 swimming pools, buy her kids a carting race track, travel the world, buy a few tropical islands and never think about having to pay bills or worry about paying her husbands or children's medical costs. She doesn't have to work for anything she gets, either.
But I guess that's just fair, after all, Tom has the right to live under the illusion that maybe some day, with a magical touch of fortune, he will one day be able to 'live large' and dreams keep him going forwards, just like 99.99% of americans. Wait, make that 'to pay his daughters medical bills even though he can't afford it'.
The end kids! I hope you learned a valuable lesson today, and remember, don't trust the old, wicked uncle called Sam, he is lurking behind the bush. He will feed you lies about how you can achieve the american dream by working hard, remember to never give in! If you're not an independent investor, oil lord, inheritor or a great business mind, you will rot in a cubicle 8 hours a day for 40 years getting paid $2500 a month. Remember kids, you don't want this kind of life, do you? Hehe! Have a nice day you little joybundles.
-Lance
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| Posted: Tue May 03, 2005 12:19 pm |
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Here is another story for you:
Tom owns a business and works his butt off and he is earning $40,000 per year in 1980 and generating 100,000 worth of sales. He realizes in order to get ahead faster he must figure out a new way to earn his money. He loves to work, but he is smart and realizes if he hires someone to work for him, he can make more money then if he works completely on his own. Tom is motivated and a bit of a risk taker so he hires employees the next year.
By 1990 Tom has 10 people working for him and each of them are now earning 30,000 on the $100,000 they generate in business. (yes they earn less then Tom did because Tom was the one to take the risk and fund the employee so he deserves to make a little something from their efforts) Tom is still working his part and earning his same $40,000 on his $100,000 in business but now he is also earning $10,000 from each of his 10 employees. His total income in 1990 is now up to $140,000 (not adjusted for inflation).
By 2002 tom has 50 people working for him and he is now paying them $35,000 each on the $100,000 they generate. This gives him $250,000 and by this time he is no longer working in the field himself so he is no longer earning the additional $40,000.
So in 22 years Tom's earnings have gone from $40,000 to $250,000 or in other words he has generated 6.25 times the amount of earnings in that 22 year period. The richest of the rich only increased their earnings by 2.5 times so in reality Tom is doing far better then the "hyper rich" quoted in the article.
Now aside from increaseing his earnings, what else has tome accomplised? Well for starters he has added 50 new jobs generating $1,750,000 per year worth of income. He has added to the economy by buying equipment, leasing buildings, purchasing other goods and services. In fact he has added $3 million dollars per year to the economy simply by bettering his finacial position.
It is mathmatically impossible for EVERYONE to be in the top wage earners catagory in a capitolistic society. As the bottom levels earn more so do the top levels. Some of the top will fall out of the top and soe from the lower levels will move up, but you will always have the top 10% top .1% etc.
Quote: The Times analysis shows that by 2010 the tax will affect more than four-fifths of the people making $100,000 to $500,000 and will take away from them nearly one-half to more than two-thirds of the recent tax cuts. For example, the group making $200,000 to $500,000 a year will lose 70 percent of their tax cut to the alternative minimum tax in 2010, an average of $9,177 for those affected.
This is a very interesting negitive spin on something rather positive. With the tax laws as they are, the complaint stated above is that this group loses 70% of the tax break because of the alternative minimum tax. However, they are paying 30% less then they would if tax cuts never happened. So is it better to have to pay the extra tax each year through 2010 or is it better to have had the tax cut that means in the worst case scenerio one would still pay 30% less then had their not been a tax cut at all?
This is exactly like when Congress spent 1 billion in 2003 on a program and wanted to spend 2 billion in 2004, but instead they only spent 1.5 billion. They will then go around saying the cut spending by half a billion dollars on a program. In fact what they did was spent 50% MORE then the previous year.
So back to the taxes and lets use some hypothetical numbers for a minute. Round ones to make the math easy.
2000 the tax rate we will say was 30% so if you earned $200,000 you paid $60,000 in taxes.
Then comes the tax cut and brings the rate down to 20% in 2001, again simply using round numbers. Earning the same $200,000 you will pay $40,000 in taxes.
By 2010 you now have lost 70% of the tax cut so instead of paying 20% you have to pay 27% since you lost 70% of the tax break. You now have to pay $54,000 in taxes.
Assume that the tax rate increases every year from 2001 until capping out at 27% in 2010.
2001 - 20% pay $40,000
2002 - 20.7% pay $41,400
2003 - 21.4% pay $42,800
2004 - 22.1% pay $44,200
2005 - 22.8% pay $45,600
2006 - 23.5% pay $47,000
2008 - 24.2% pay $48,400
2009 - 25.6% pay $51,520
2010 - 27% pay $54,000
So in ten years you would have earned $2,000,000 and paid $414,920 in taxes for a total of 20.75% over that period.
Had the tax cuts not gone into effect you would have still earned $2,000,000 but you would have had to pay a total of $600,000 in taxes for a whopping 30% since there was never a cut.
The ten year average is still just under 21% and you would have almost one years pay in extra money from lower taxes.
If you want things to be equal across the board, you have to implement a flat tax. This would hurt the lower class far more then the hyper rich and even the rich. right now if you earn less then $40,000 you don't pay an income tax, but a flat tax can not be imposed without taxing everyone equally or you are taking from the rich and giving to the poor far more then we do already.
The revenue received from taxes would drop considerably unless you made the flat tax equal to the percentage of income that is being taxed at the highest levels. By doing that you actually raise taxes on the poor, middle class, and even the kind of rich.
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| Posted: Thu May 26, 2005 6:46 am |
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Quote: Originally Posted by Lance
The end kids! I hope you learned a valuable lesson today, and remember, don't trust the old, wicked uncle called Sam, he is lurking behind the bush. He will feed you lies about how you can achieve the american dream by working hard, remember to never give in! If you're not an independent investor, oil lord, inheritor or a great business mind, you will rot in a cubicle 8 hours a day for 40 years getting paid $2500 a month. Remember kids, you don't want this kind of life, do you? Hehe! Have a nice day you little joybundles.
-Lance
Lance, what are some alternatives? I think that is the hardest part about defeating the status quo, they don't show us the alternatives to "9 to 5 til you're 65" on CNN.
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| Posted: Sun May 29, 2005 6:41 am |
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Oh, Oh, Oh a topic I know alot about (see the name).
Problem with saying that top 10% save a bigger percentage is that they pay more.
Have 3 "taxpayers" assuming a 50% tax cut (yea, I know in my dreams).
Taxpayer 1 - Old Tax of $1,000; New Tax of $500
Taxpayer 2 - Old Tax of $25,000; New Tax $12,500
Taxpayer 3 - Old Tax of $50,000; New Tax $25,000
Tax law favors rich only, even though all got a 50% cut only the rich benefit?
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