Friday Quiz: The Fortunate 400 (January 30, 2009)
Q: How much money do you need to make per year to join the "Fortunate 400," the top 400 taxpayers in the U.S.?
A: The nation's top 400 taxpayers made more than $263 million on average in 2006, as the stock market was rallying, but paid income taxes at the lowest rate in the 15 years that the Internal Revenue Service has tracked such data, according to figures released Thursday.
Source: For 'Fortunate 400,' a Tumbling Tax Rate (Wall Street Journal)
Each year, the IRS releases information on the so-called Fortunate 400, the 400 U.S. taxpayers with the highest adjusted gross income.
Can we finally dispense with the threadbare ideological cover that low taxes on stupendous unearned income is necessary because this fuels "the productive elements in our economy"? Excuse me, but just how "productive" is it to collect hundreds of millions in dividends, capital gains and tax-free muni bonds?
The taxpayers who are actually the top producers by the practical metric of creating goods, services and jobs tend to make $100,000 to $250,000--small business owners, professionals, entrepreneurs, managers of small companies, etc. When you count FICA (Social Security) and self-employment taxes and Medicare taxes, these taxpayers usually end up paying about 35-45% of their gross income in Federal taxes--a far, far higher rate than the 17% enjoyed by the top 1% who own 3/4 of the productive wealth of the nation.
Is it really too much to expect this elite to pay taxes at the same rate as the citizenry slogging their guts out to keep the real economy running?
And note that tax-free municipal bond income was not even counted. That means hundreds of millions in real income is not even being counted.
How about we cap tax-free muni bond income at $100,000 per tax return, and then tax everything above that at standard income rates? 99.9% of the owners of muni bonds or muni bond funds make well under $100,000 per year from tax-free bonds, so such a generous limit would only affect the "Fortunate 400" or perhaps a few thousand fortunate few at most.
And please don't tell me the muni bond market will collapse if the Fortunate 400 can't collect hundreds of millions in tax-free income. The muni bond market is collapsing because the local governments and agencies which issue such bonds are headed straight to insolvency.
Here's one more thing: fully 1/3 of the Fortunate 400 would have paid no tax at all on their $263 million incomes if it weren't for the Alternative Minimum Tax. Now the AMT needs to be radically revised to capture only the top 5% of tax evaders, but the importance of such a net in a nation where the top 1% can buy tax breaks and protect their income basically at will via political influence and high-priced tax attorneys is obvious.
Here are two articles which support yesterday's thesis on bond yields and oil prices. Correspondent Craig McCarty sent in this Bloomberg piece:
“This may sound a bit ridiculous, but we think we have begun a full-blown bear market in fixed income,” wrote Tom Fitzpatrick, Citigroup’s New York-based chief technical analyst, and London-based strategist Shyam Devani. “The commodity that is going to be the most in demand as far as the eye can see is capital. As a consequence, the cost of capital can only go one way -- up.”
Last year's superspike in oil prices was diesel-powered. That is bad news for oil bulls.
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