July 22, 2008

RE: Taxing Thoughts

Marc Comtois

Along with the chart that Andrew mentioned, the related WSJ piece included some observations worth mentioning. But first, earlier this month, Stephen Moore previewed the same IRS data used for the chart:

New data from the IRS will be out in a few weeks on who pays how much in taxes. My contacts at the Treasury Department tell me that for the first time in decades, and perhaps ever, the richest 1% of tax filers will have paid more than 40% of the income tax burden. The top 50% will account for 97% of all federal income taxes, while the bottom 50% will have paid just 3%.
And that richest 1% isn't comprised of a bunch of old money, Hamptons-dwelling WASPs. As today's WSJ piece explains, millionaires aren't just born, they are also self-made:
We also know from income mobility data that a very large percentage in the top 1% are "new rich," not inheritors of fortunes. There is rapid turnover in the ranks of the highest income earners, so much so that people who started in the top 1% of income in the 1980s and 1990s suffered the largest declines in earnings of any income group over the subsequent decade, according to Treasury Department studies of actual tax returns. It's hard to stay king of the hill in America for long.

The most amazing part of this story is the leap in the number of Americans who declared adjusted gross income of more than $1 million from 2003 to 2006. The ranks of U.S. millionaires nearly doubled to 354,000 from 181,000 in a mere three years after the tax cuts.

And, with more millionaires....
Taxes paid by millionaire households more than doubled to $274 billion in 2006 from $136 billion in 2003. No President has ever plied more money from the rich than George W. Bush did with his 2003 tax cuts.
Moore explained that we shouldn't be surprised by this:
Economist Glenn Hubbard of Columbia University has shown that in 1970, when the highest tax rate was 70%, the top 1% shouldered 16.7% of the income tax burden. Today the top tax rate is 35% and the same class of taxpayers pays a whopping 39% of the burden. The worst way to "soak the rich," Mr. Hubbard finds, is to raise tax rates.

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From the Los Angeles Times
July 24, 2008

A new low in the high life:
As Candy Spelling's condo deal illustrates, so much wealth in the U.S. is concentrated in so few hands. Will Obama or McCain address this issue?
by Tim Rutten

July 23, 2008

A couple of front-page stories in Tuesday's papers -- one from the East Coast, the other from the West -- frame a pretty effective portrait of these United States in this election year.

With unemployment climbing across the country, the New York Times reported that "for the first time since the women's movement came to life, an economic recovery has come and gone, and the percentage of women at work has fallen, not risen, the Bureau of Labor Statistics reports. Each of the seven previous recoveries since 1960 ended with a greater percentage of women at work than when it began."

Working women now earn a third of America's total household income, and by and large, only those homes with a working wife have made real gains in their standard of living over the last eight years. Yet, over that same period, the percentage of women employed outside the home has fallen to where it was 12 years ago. Meanwhile, the median hourly pay of women 25 to 48 years of age has fallen from $15.04 in 2004 to $14.84 last year.

This corrosive pattern holds true, according to the federal statistics, for all American women, regardless of education, race, ethnicity or marital or familial status.

In other words, things are tough all over, particularly if you're a woman -- unless, of course, you're Candy Spelling.

As the Los Angeles Times' Roger Vincent reported Tuesday, television mogul Aaron Spelling's widow has paid $47 million for a 16,500-square-foot, two-story penthouse condominium atop a new building going up in Century City. The lower floor of the Widow Spelling's new digs will include a living room, a dining room large enough to host a 25-person dinner party and "staff quarters." The upper story will include a 4,000-square-foot master suite, massage and exercise rooms, a conservatory with rose garden and a pool.

Actually, Spelling is downsizing and will be practically camping out by comparison with the 123-room, 56,500-square-foot home -- L.A.'s largest -- that she and her husband built in the late 1980s. How she'll get by without the gift-wrapping room or the doll museum is anybody's guess. After all, even when you're reducing your carbon footprint, you need a place for all those shoes. As Vincent wrote: "At a time when headlines are focusing on plummeting home prices, foreclosures and bad loans, the sale highlighted the vast differences in the region's housing market."

You bet it did, particularly when you consider a set of numbers that came out later in the day. DataQuick, which keeps reliable track of the California real estate market, reported that a record number of L.A. County households -- 21,632 -- defaulted on their mortgages in the second quarter of this year. That's a 108.1% jump over the same period last year and eclipses the record set in the first quarter of the 1996 housing bust. To make a grim picture still darker, L.A. was one of the more fortunate California counties. Mortgage defaults increased 146.2% in Orange County, 129.9% in San Bernardino and 125.2% in Riverside. Things were even bleaker in Northern California, where mortgage defaults increased by 197.8% in Sonoma County and 194.2% in Santa Clara County.

Now none of this is the Widow Spelling's fault, and she hardly can be expected to stay put in a 16-bathroom mansion with nobody but "staff" for company if she doesn't want to.

Taken together, though, the plight of working women and Spelling's let-them-eat-cake, $47-million extravagance point to the fact that, all but unnoticed, America has slipped into a new Gilded Age, with all the inequalities that historical appellation implies. From the late 1940s through 1978, the U.S. economy excelled at distributing opportunities. According to Census Bureau figures, median family income increased by more than 100% during that period. But it has grown by less than 25% in the 30 years since. It's doubtful that even that anemic increase would have occurred if millions of women had not entered the workforce during those decades.

The census' inflation-adjusted numbers show that a median American family made $61,000 in 2000 and, despite the economic expansion through most of the Bush administration, just $60,500 in 2007. That was the first time in history that the U.S. economy expanded without increasing ordinary families' standard of living.

What did increase was the share of household wealth in the meticulously manicured hands of people like Spelling. Recent data suggest that the richest 1% of U.S. households -- those with annual incomes of $348,000 or better -- now control 34.3% of the nation's net worth, while the bottom 40% of households dispose of just 0.2% of America's wealth.

What do you suppose the chances are of getting either John McCain or Barack Obama to hit this issue head on? They're probably about the same as the odds that the Widow Spelling will end up sleeping in her car.


Posted by: Richard in TIV at July 24, 2008 8:49 AM
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