Skip to comments.As incomes of rich slid, tax take fell (VINDICATION!)
Posted on 09/27/2003 12:01:18 PM PDT by Action-America
Sept. 26, 2003, 11:43PM
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.
Finally, although they missed the most important point, a major news source skirts the issue.
(I feel vindicated. This is an issue that I have written about on numerous occasions, since 1996. Finally, the major media is getting colse to the truth. See the permanent , annually updated article, Tick-Tick-Tick - The Economy Bomb, that covers this issue in detail. I will update that article with the just released numbers from the IRS, within a few days. Also, the article, 1986-2000 IRS Collections Data by Income Group, will be updated to include the 2001 data and links to that newly released IRS data)
One of the primary reason that the incomes of the rich fell in 2001, is the fact that many of our wealthiest taxpayers left the United States in 2001 and took all of their wealth with them. According to pre-Patriot Act, pre-9/11 estimates from the then, INS, almost 300,000 people would leave the United States in 2001. How many of those do you think were poor? Think about it...
In fact, although only a handful of that almost 300,000 expatriates actually bothered to officially renounce their US citizenship, there is much very good reason to conclude that almost all of them were in the upper strata of income earners, with it being weighted heavily toward the very wealthiest 1% of income earners.
Then consider two other facts. 1) Those estimates were made prior to the implementation of the USA (Un)Patriot Act, which was, without a doubt, the greatest assault on privacy and the 4th Amendment in the history of the United States. 2) Many high level business transactions rely upon privacy until they are actually completed and announced. That combination creates a huge incentive for the wealthy, who have been under attack by both parties for years, to finally make the decision to move to a more wealth friendly country, with a more secure business environment. The result is that those pre-(Un)Patriot Act estimates are probably far below the actual numbers.
People like Bruce Bartlett are so concerned with looking for economic reasons for such events that they never look for other outside factors, such as emigration of our wealthiest citizens. They spend all of their time studying the stock markets, the Fed and IRS regulations and trying to relate them to what they see happening, that they often fail to observe the outside social factors that actually may be having a more significant effect on the economy than anything else. Normally, that would be a safe conclusion, since social factors usually only have a minor effect on the economy. However, since the people that we are talking about are the same people who pay almost all of our taxes and fund most of our companies, a very small shift in that group can have a devastating effect on our economy.
The problem isn't the tax rate or a dip in the stock markets. It is the intrusiveness of and the unbridled threat represented by the IRS that is the problem. The wealthy are leaving, because they are sick and tired of having the IRS scrutinize every transaction, to see if they can squeeze an extra dollar out of it. But, now that they are having to meet the heavy and time-consuming (Un)Patriot Act compliance requirements, many wealthy people are finding that their ability to do business in a world where the difference in success or failure may rest in your ability to complete a deal in hours, is being threatened by such time-consuming requirements. Now, they are being forced to seek relief in other countries.
Sure, the wealthy in the US are making less money. That's because so many of the wealthy are leaving and people with lower incomes are suddenly included in that upper bracket. The result is that, as the above article shows, the people in the next lower income bracket are going to have start shouldering more of the tax load. But, that won't happen for long, because as more of the wealthy leave, that extra tax load will have to be distributed downward. If you haven't felt it yet, you soon will.
It's time to abolish the Income Tax and IRS, repeal the (Un)Patriot Act and HSA and implement a non-intrusive National Retail Sales Tax, that will draw wealth back into this country, before it's too late.
Got to go now. You guys keep it going.
BUMP to that! The wife and I have, let's say, downsized quite a bit, and are feeling much better about it. We are in our 50's, and "been there and done that" so to speak. We do not require much now, and cheap beer and spaghetti were always my favorites.
Roger that, Elliott.
I, however, am not, nor have I ever been in the top one percentile. I'm currently busting my tail to get a minimum "critical mass" of savings, where upon, I'll promptly backslide into a lazy stupor of a "living wage" job and semi-retire. Screw 'em and their thirty percent. I'll sweep the floors for 15 grand and take the food stamps.
Perhaps it's time for the "biggest contributers"(middle class like me) to realize that it isn't Governments determination or control that drives the largest economy in the world.
The Government is the entity that generate's that "sucking" sound NOT oversea's countries.
Perhaps a drastic cut in Government spending would create more job's here instead of them going overseas.
Bump your tax lists, folks!
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