Richest Are Leaving Even the Rich Far Behind – New York Times:
…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.
…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.
…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.
Related:
The Mobility Myth (NYTimes) via Suburban Guerrilla:
“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.”
US Income Distribution, 1980-1999 (rebeccablood)