As incomes of rich slid, tax take fell (VINDICATION!)

Houston Chronicle ^ | Sept. 26, 2003 | DAVID CAY JOHNSTON DAVID CAY JOHNSTON DAVID CAY JOHNSTON

[Action-America]

Sept. 26, 2003, 11:43PM

As incomes of rich slid, tax take fell

By DAVID CAY JOHNSTON

New York Times

The incomes of the top 1 percent of Americans fell 18 percent in 2001, as did their income taxes, shaving $66 billion off revenues and showing how dependent the federal government has become on its wealthiest citizens.

Overall, Americans had 2.8 percent less income in 2001 than in the previous year. But federal tax revenues fell 9.4 percent because the incomes of those at the top, who pay the highest tax rates, dropped so much more than the average.

The top 1 percent reported $1.09 trillion of income, down from $1.34 trillion in 2000, according to data posted by the Internal Revenue Service on the Internet on Friday without announcement.

The minimum income to reach the top 1 percent was $293,000 last year, down from $313,500 in 2000, but almost identical to the threshold in 1999.

The sharp decline in incomes at the top "is obviously due to the collapse of the stock market boom and the recession," said Bruce Bartlett, a senior fellow at the National Center for Policy Analysis, a lobbying group.

The combination of a sharp drop in income, if sustained for several years, and the tax cuts that were enacted this year could result in another sharp drop in taxes paid by the top 1 percent. The top rate on capital gains and dividends has been cut to 15 percent from 20 percent.

Taxes paid by the top group fell to $300.1 billion in 2001 from $366.9 billion in 2000. The decline accounted for the bulk of the $92.7 billion drop in individual federal income tax revenue in 2001.

The large drop in incomes caused the share of income taxes paid by the rich to shrink nearly a tenth. The share of total taxes paid by other groups consequently increased. The top group paid 33.9 percent of all income taxes, down from 37.4 percent in 2000.

The share paid by the next wealthiest group, the 4 percent of Americans just below the top group, grew slightly. The bottom half of Americans, the 64 million households making less than $28,000, accounted for a somewhat larger share of total taxes.

The biggest increase, however, was among those making $56,000 to $92,800, whose share of all income taxes increased to 18 percent from 16.7 percent. They accounted for a larger share of income taxes than the very wealthiest, the top tenth of 1 percent of Americans who paid 16 percent of the government's total income taxes.

Isaac Shapiro, an analyst at the nonprofit Center for Budget and Policy Priorities, said the tax rules set by Congress mean broad swings in revenues as the economy moves through good times and bad.

The IRS also released data on the top tenth of 1 percent, the most prosperous 129,000 households. This group had so much income that they made almost as much as the other nine-tenths in the top 1 percent.

This very top group, representing one in a thousand households, had $505 billion in income, for an average of $4 million each. To be counted among this group one needed an adjusted gross income of at least $1.3 million, down from $1.6 million in 2000.

This small group received almost $1 of every $12 earned by all 129 million U.S. households.

Bartlett, an advocate of lower taxes, noted that the Bush tax cuts in 2001 did not cause the drop in taxes by the wealthy.

"It is pretty clear that the tax cut played no role by the fact that the average tax rate paid by the top 1 percent actually went up slightly," he said.

This group paid 27.5 cents in taxes on each dollar of reported income, up a sliver of a penny from the previous year. This increase was caused by a drop in income from capital gains, which are taxed at a much lower rate than wages.

Overall, the tax rate fell, with Americans paying the government 14.2 cents in taxes on each dollar of income, down from 15.3 cents in 2000.

 

[Doe Eyes]

I used to be one of those top 1% taxpayers. This year my income will be well below 15k. I have no interest in earning any more than that.

Yup, I'd rather make $15K and not pay much in taxes than make millions and pay those high taxes. Can you imagine what Micheal Dell's taxes must be? I'll be he wishes he only make $15K.

[MissAmericanPie]

He's a guy that gets to keep 50 cents on the dollar, that's who he is. He thought he was free to make something of himself in America the land of the free, without being overly punished for it. He's a guy flustrated on every side by not being able to replace and upgrade equipment because he is only allowed to declare wear on equipment once. He is a guy that pays not only 40% of his wealth to the Fed but 10% to the state, but also pays capital gains tax and whose kids will lose everything having to pay the death tax.

He's a guy that thinks he knows more about how to grow wealth and jobs than the Fed who only knows how to destroy and spend it.

Your question marks you as a envious liberal putz who never questions the fact that the government has no right to play Robin Hood by ripping off what belongs to someone else and giving it to you. That's who he is.

[oceanview]

what are you talking about, my point is, we are all in the same boat paying these taxes unless we "drop out" like some of the other posters here have done. my point is, what makes your friend so special that he feels he doesn't have to pay like everyone else? like you, and like me? Its one thing to argue for lower taxes, thats fine, its another to feel you have some special right to skirt the law and not pay.

And FYI, no one pays the inheritance tax unless they want to. get a good estate planning lawyer.

[goodnesswins]

Read Atlas Shrugged or the Fountainhead.....

[MainFrame65]

"... I used to be one of those top 1% taxpayers ..."

I made it there for a year, a few years ago. My taxes for that year were more than my average earnings for the last 5 years at IBM, before I retired from there.

Now, between pension and social security, my wife and I "earn" almost 4k per month just for waking up on the first day of it.

I might do a little teaching, and I might do a little more consulting on a very short-term basis, but for the next year, after a small exemption, earning a dollar will cost me 50 cents and cost my wife 50 cents, and that dollar will be 100 percent taxable instead of 85 percent.

I'm developing an attitude....

[oceanview]

and I'll add, no one is giving me anything, I don't know where you got that idea from.

you sound like you would defend Arianna Huffington, living in a 7 million dollar house, private jets, essentially writing off every function of her life (meals, homes, travel, cars) as a "business expense" and paying $771 in federal income taxes. that is wrong.

since when does being a conservative mean that you have to excuse tax evasion? not me, I will not excuse it.

[staytrue]

I think most of the 300k who left are probably retired people who can live very well somewhere else on their savings. I doubt that they are wealthy, maybe 10,000 were wealthy. I do know many people moving to florida and nevada to live off their savings as there is no state income tax. I'm sure you are right about some of the 300k who moved, but I think most are upper middle class, and not the wealthy.

[EGPWS]

The Government is the entity that generate's that "sucking" sound

BUMP!

Perhaps a drastic cut in Government spending would create more job's here instead of them going overseas.

Bigger "BUMP"! : )

[MissAmericanPie]

What you ARE saying is that it is perfectly ok for a government to grab 50% of an individuals wealth. No human being should be ripped off for that much money. God only asks for 10%, who is the Fed to demand more?

When the money is left in the hands of the one that made it, he reinvests it, builds companies, invests in experimental things, starts up business's for friends and family, makes loans interest free, and creates jobs. What does the Fed invest in? Poverty, and making darn sure that everyone is growing ever more poverty stricken every year.

This principle is the very foundation of conservative ideals, maybe you should re-examine your priciples and see if you really are a conservative.

[staytrue]

but but..I thought Bush was giving tax cuts to the rich???

The $400 rebate per kid does not apply for those making more than the princely sum of 130,000.

[staytrue]

The Government is the entity that generate's that "sucking" sound NOT oversea's countries.

fyi, trade deficit=500 billion, federal govt. taxes = 1.9 trillion.

[kittymyrib]

You would think the feds would get the idea when they see that this is exactly the rip-off-the-rich-to-buy-votes-from-the-poor strategy that has brought California to the brink of bankruptcy. But they don't. They forget that the rich can live anywhere in the world they want to live. They do not have to stay in the US and be cursed and robbed.

[EGPWS]

God only asks for 10%, who is the Fed to demand more?

Apparently to some, the Government is a deity that is worthy of more than 10%. (and I might add, for the taking, NOT the asking)

[oceanview]

fine, argue for lower taxes. elect people to enact them.

but obey the law once its in place, and people shouldn't complain that the IRS is coming after them if they don't, while millions of other Americans are working just as hard as your friend and paying honestly.

[EGPWS]

fyi, trade deficit=500 billion, federal govt. taxes = 1.9 trillion.

IMHO there is nothing wrong with running a deficit, at home OR abroad, It is a part of keeping us solvent and in times of need it is a necessity, however redistribution from the productive to the non-productive to strive for equality (and in most cases political equality) does NOT strike an incentive for more production.

[Principled]

When the tax revenues fall to a level that will not sustain the beast, something will be done about the Marxist income tax. It is the progressive income tax that is the cause of all of these problems.

There is a solution to be debated. It will be put forth by a prez if/when his numbers indicate that he needs a bump.

He will propose eliminating the income tax code and replacing the revenues with a national retail sales tax.

Again, this will happen as soon as it is clear that the beast can no longer survive without its big-earners, who are leaving (along with their wealth) at an obviously alarming rate. ANd when wealth departs, what departs immediately? Jobs...Jobs go overseas where those wealth earners went due to lower tax rates. Look around, it's already happening. Wealth leaves for a more profitable place to be. The wealth creates jobs elsewhere. THen there's less wealth here for jobs, so jobs are lost "to overseas".

So when these two things happen at once, the NRST solution will be proposed:
1) tax revenues fall to a level that will not sustain gov't
2) a politician needs a boost

I don't think it will happen unless BOTH these occur simultaneously... let's hope soon.

[Henrietta]

He's *shrugging*. That's the point.

[MissAmericanPie]

He pays his taxes, he doesn't owe a penny. The IRS makes darn sure of it too. How would you like them to call you on the phone every quarter with your bank on the other line and transfer your funds then and there?

You would RESENT it. You would resent having to go through reams of paper work to open a new account because you are going to start the account with too much money in it to pass without being questioned, up front and personal, by the IRS about where the money is coming from and what it is going to. You would RESENT it.

You would resent having to explain every check over ten grand or every deposit over ten grand, even the employee making the deposit for you has to be investigated by the IRS even though they may make only 30 grand a year. The IRS wants to know who they are so they have to file paperwork, I know, I have had to do that.

You would resent even more, being asked if your doing the right thing with your own money, like, "do you really need to redecorate?" Mexico or Europe would begin to look pretty good to you also.

[goodnesswins]

"They do not have to stay in the US and be cursed and robbed."

I would imagine some of these "rich" are the ones who own companies who are LEAVING THE U.S....due to heavy regulations and TAXES.....also.

[oceanview]

more likely, they leave the US to employ foreign labor to increase their profits even more. lets get real, Nike sneakers cost $120 a pair even though they are made using slave labor for $2 a day. who pockets the increased margin?