Correcting Myths about the Rich
They have suffered the biggest income losses: The incomes of the top one percent fell 18 times more than the incomes for the middle class since the start of the recession.
Inequality is falling, not rising: The income the top one percent fell from 16.7 percent of all after-tax income in 2009 to 11.5 percent in 2011.
They are shouldering more of the tax burden: the actual amount paid in taxes by the wealthy is higher than before the recession.
More from Robert Frank, CNBC.
Good post.
People who aren’t rich think the only difference between the rich and those who aren’t rich is that the rich have more money. Although that may technically be true, the reason why the rich have more money is the interesting part of the discussion. In Thomas Stanley’s book The Millionaire Next Door, the author highlights that most millionaires are small businesses that plowed their profits back into their business until their worth “on paper” is more than one million. That is certainly true of most of the millionaires I know. They worked and saved their way to wealth. As such, some millionaires cease to be millionaires after a few downturns. Their kids may (or may not) have the same wealth. There really isn’t a category for dirty, rotten, filthy, stinking rich that you can tax with impunity. It’s easy to argue the rich aren’t paying their fair share; but the reality is that half of all workers – those below the average – do not pay taxes. Most taxes are paid by the top 25% of workers.
Considering that gini isn’t really compatible with ppp, is nominal, heavily impacted by mnc’s, size of gdp, and globalization.. perhaps the U.S.’ gini coefficient is inflated?
That being said, the U.S.’ transfer payments/redistribution is weak tea compared to the rest of the oecd countries. The problem is that the rich DO contribute disproportionately, but complaining about them to a democratic constituency is such a useful political tool.
@david, source?
Everyone on Wall Street knows this to be true.
So what is the point of this article?
Misery loves company?
John, you’re the health insurance specialist.
Average group premium: $14,000
Median household income: $47,000
What else needs to be said?
We have a necessity priced as a luxury.
Don Levit
Yes, during these last few years the wealthy have lost more, but this seems to be more a function of the recession (and how the wealthy earn income compared to the rest of the country) rather than a larger trend about inequality decreasing. Looking at the stretch between 1979 and 2007 (courtesy of the CBO), the wealthy’s share of post-tax income increased dramatically compared to the rest of the country, and inequality dramatically increased
http://cbo.gov/publication/42729
I assume John’s point here is to argue that raising taxes on wealthier Americans is unjust because they have been hurt more by the recession. I see where he’s coming from, but it seems disingenuous to be relying on a cherrypicked 3-year stretch when a much longer timeframe contradicts the argument that inequality is decreasing.
The best argument I can see for progressive taxation is that the rich are likely to get less marginal utility from their additional wealth than a poorer person, so taxing the rich person more doesn’t necessarily hurt them as much as raising taxes on the poor (which the Republican Party seems to be in favor of these days). Marginal utility is obviously a nebulous concept that can’t really be the basis of tax policy, but using arguments about income and taxes paid to determine tax policy also seems too simplistic. We need some way of discussing the context and impact of marginal changes in taxation on people with different wealth/income levels.
How much were the rich actually harmed by their decreasing incomes? I assume very few of them suddenly had to worry about feeding their family, paying their rent, or affording health care, to name a few. Sure their spending on luxuries (2nd homes, fancy cars, vacations etc) may have decreased, but was much marginal utility lost? I do recognize the importance of the wealthy spending their money on luxuries as economic stimulus, but I’m thinking more on the philosophical level now.
It’s interesting that you feel so strongly about diminishing utility when speaking about a free market economy. Inequality provides incentive. Promoting solidarity amongst the “disadvantaged” by claiming that the tax structure targets the poor is extremely political.
http://taxpolicycenter.org/numbers/displayatab.cfm?DocID=3286&topic2ID=60&topic3ID=68&DocTypeID=1
Our state’s only role should be collective goods and the equal distribution of opportunity. Utility is circular, unmeasurable, and made worse by a culture of entitlement.