Good news, taxpayers! The tax burden on the 400 most accomplished Americans—the linchpins of our modern economy—has fallen precipitously over the past two decades, even as their earnings have increased. They used to make only about 3,000 times more than the rest of us, back in the dark, socialist days of 1992, under President George H.W. Bush. And at that time, these successful people were paying a confiscatory 26 percent of their income in federal taxes! Why they did not all flee to Switzerland or Guernsey is anyone's guess. Certainly their spokespeople never tire of reminding us that these dynamic heroes of the economy will stampede like Herefords at the slightest whiff of taxes.
As if everyone didn't already know that! As if everyone didn't already agree, wholeheartedly!
We're all in this together, folks, and if I, as a low-earning individual, must pay more taxes to ease the burden on my more successful betters then—as another patriotic journalist once exclaimed—"Just tell me where to line up!"
U.S. policy makers have spent the past two decades reducing the tax burden on our wealth-creators. Thanks to the forward-thinking tax policies of George W. Bush, today's economic winners paid, in 2007, less than 17 percent of their income in taxes.
Still unconscionably high, of course!
(Embarrassment about these still-too-high rates is probably why Bush ordered the figures made secret during his presidency. They were quietly unveiled on the IRS web site this year, as the author and former New York Times reporter David Cay Johnston discovered Feb. 16.)
Reducing the tax burden on the ultra rich (in concert with reductions in financial regulation and in the prosecution of so-called white collar crime) has allowed them to prosper spectacularly. By 2007, the 400 most successful Americans were earning, on average, about 10,000 times the annual pay of a typical American. In 2009 dollars, the figure is $356,722,000.
Rounded up, it's a million dollars a day. Wow! Those people must be really smart and work extra, extra hard!
Everyday losers—folks who earn $100 or $200 or $300 a day—pay much more of their income in taxes. I paid mine the other day—just under 25 percent went to state and federal income taxes, including Social Security and Medicare. I earn a good deal less than the median per capita income for the state. Among economists, it is axiomatic that a government gets less of whatever it taxes more. Obviously, we all want less poverty! Those high taxes are meant to spur me to earn greater income.
Thanks for the incentive, Uncle Sam!
Low taxes, of course, are not just for the wealthiest of the wealthy. People earning between a quarter million and a half million a year—roughly the top five percent of all earners, minus the top one percent—paid an average of 17.5 percent of their 2007 incomes in federal taxes, the data show. I'll add in the Maryland state tax rates to make the figures comparable.
To recap, then:
Earn $40,000 per year (in Maryland); income tax rate = 25 percent. Net income after taxes: $30,000.
Earn $400,000 per year; income tax rate = 22.75 percent. Net after taxes: $309,000.
Earn $400 million per year; income tax rate = 22.85 percent. Net after taxes: $308,600,000. (Not that anyone in that bracket would pay Maryland state taxes).
Communist redistributors might argue that if we taxed just those top 400 people at the same 25 percent rate we tax me and you their contribution to the governments' treasuries would increase by billions. This would be dastardly, of course. No one (except wretched class warriors) is suggesting we actually do this. And it wouldn't even work. As Cal Thomas, Michael Steele, and the Wall Street Journal's editorial board often say, even a child knows that if America's ultra productive were forced to get by on a mere $262 million a year, they would establish their domiciles in friendlier environs and jobs would disappear.
Given today's huge government debt, higher taxes will no doubt come. But that burden must fall on low earners like most of us, the better to free up the wealthy to create more wealth, as they've been doing so well for the past two generations.
I, for one, am thankful that our leaders in Congress and the White House have no intention of returning our nation to those times—just a few decades ago—when marginal income tax rates topped 70 percent. Sure, real economic growth was much stronger then than it has been since. But wealth inequality was much lower—and who wants to live in a society where the most devious, larcenous, and lucky earn barely more than a top surgeon or mid-career NFL star? Whither the American Dream! In the 1950s, '60s and '70s, nobody earned even one billion dollars a year.
In 2007, three hedge fund managers made $3 billion each.
It is not clear from the available data whether they paid any taxes at all.