by James A. Bacon
Curse those greedy rich people! They’re making way too much money, not paying their fair share in taxes and grinding the noses of the peasants into the dirt. The wealth gap just gets worse and worse. If only we could close it, life for the “99%” would get so much better!
Wait… What’s that, you say? The top 1%’s share of national income peaked in 2007 and has declined at least two years running? Well, that’s certainly good news. According to newly released Internal Revenue Service data, the top 1% of tax returns earned only 16.9% of the national income — down from 20% the year before.
As the Tax Foundation writes in a new paper, “Summary of Latest Federal Individual Income Tax Data“: “Overall, these data on high-income tax returns appear to confirm that the continued economic stagnation had the same diminishing effect on income inequality that most recessions have, and that it occurred for the same reason: a sharp decline in income at the high end.”
I feel more equal now. I just don’t feel any better off.
On a related subject, the top 1% paid 36.7% of all income taxes. By contrast, at the bottom end of the scale, 59 million tax returns in 2009 either paid no federal income taxes or actually received checks in the mail through the Earned Income Tax Credit (EITC).
All of which raises an interesting point. Has anyone considered that one reason the reported earnings of the bottom quintile of wage earners has stagnated so much over the years (See “The Great Divergence“) is that after accounting for all the means-tested welfare programs — EITC, Temporary Assistance for Needy Families, food stamps, Medicaid, disability, child health and nutrition, public housing and rent assistance, unemployment insurance and whatever else I’ve left out — it’s self-defeating to go out and get a job?
Why bust your butt behind a 7 Eleven cash register making $10 an hour if 50%, 60% or, who knows, even more of every dollar you earn translates into lost benefits? I would love to see a study that shows the effective tax rate, in terms of lost benefits, faced by America’s poor. Then I’d like to see another study on the incentive the tax rate creates for the poor to report less income — thus accentuating the income gap and creating cries for even more wealth transfers. The full story of the income gap has yet to be told.