Posts Tagged ‘rich’

top400

The total income reported on the top 400 individual tax returns rose 20 percent in 2014, according to Internal Revenue Service (pdf) data released last Thursday.

The figures reveal the concentration of earnings at the summit of the income distribution, in a club that required $126.8 million of adjusted gross income to enter. That tiny group, out of nearly 150 million tax returns in 2014, took home $175.5 million on average (that’s in 1990 dollars) and 1.3 percent of total U.S. adjusted gross income.

President-elect Donald Trump and the Republicans who control Congress have promised to lower the taxes on this group. First, they plan to repeal Obamacare and its taxes, which would bring the long-term capital gains rate down to 20 percent. A potentially even bigger benefit for the top 400 will come from  Trump’s proposal to slash the tax on corporate income from 35 percent to 15 percent. That rate would also apply to at least some of the “passthrough” income from S Corporations and partnerships that is reported directly on individual income tax returns and is now taxed at a top rate of 39.6 percent.

A lower rate for passthrough income would disproportionately benefit the über rich, just as the lower rate on capital gains does. In 2014, the top 400 earners reported 1.3 percent of all adjusted gross income in the U.S., but 2.94 percent of all partnership and S corp net income, and 10 percent of capital gains taxed at a lower rate.

We know the top 400 will benefit enormously from those tax changes. But we won’t be able to measure it, since the IRS also announced it would no longer release data on the top 400, which it has compiled going back to 1992. Instead, future reports will focus on the top 0.001 percent, which included 1,396 households for 2014.

tumblr_njlqauv7dv1slixf5o1_1280

Special mention

188000_600 187968_600

a005bd2774bef0687238c46f8238519a

Special mention

185533_600 185398_600

160919141822-white-working-class-trump-voter-infographic-head-super-169

We can thank Donald Trump for one thing: he’s put the white working-class on the political map.*

In recent months, we’ve seen a veritable flood of articles, polls, and surveys about the characteristics, conditions, and concerns of white working-class voters—all with the premise that the white working-class is fundamentally different from the rest of non-working-class, non-white Americans.

But why are the members of the white working-class attracting so much attention? My sense is, they both represent a threat—because many plan to vote for Trump and, more generally, reject much elite opinion (including, but not limited, to Trump)—and, at the same time, are assumed to be a dying breed—as the U.S. working-class becomes more female, more racially and ethnically diverse, and increasingly employed in non-manufacturing jobs. So, the argument goes, the white working-class, supposedly radically different from the rest of Americans, is motivated by fear and resentment occasioned by a loss of identity and standing.**

Hence the curiosity—best exemplified by a new CNN/Kaiser Family Foundation [ht: ja] poll, about what white working-class Americans think. The results of the poll are interesting, if only because on many issues (aside from support for or opposition to Trump and immigration) the white working-class holds views that are not all that different from other whites, blacks, and Hispanics.

The fundamental problem with CNN/Kaiser poll (as with so many others) is its basic definition of the working-class: “those who have attained less than a four-year college degree, excluding those between the ages of 18-24 who are currently enrolled in school.” As I have argued before (e.g., here and here), that’s not the working-class. It’s just people who never went to or didn’t finish college. What they’re using is a definition of the working-class that doesn’t include all those other people, many of whom have college degrees, who are forced to have the freedom to work for someone else in order to make enough money to support themselves and their families. Together, most Americans with and without college degrees work for the boards of directors of large corporations—and they don’t manage the production process or supervise other employees.

As Vivek Chibber explains,

Workers show up for work every day knowing that they have little job security; they are paid what employers feel is consistent with their main priority, which is making profits, not the well-being of employees; they work at a pace and duration that is set by their bosses; and they submit to these conditions, not because they want to, but because for most of them, the alternative to accepting these conditions is not having a job at all.

The working-class, as I am defining it then, turns out to comprise the vast majority (70-80 percent) of the U.S. population. And most of them, of course, are white.

So, what does the CNN/Kaiser pool reveal about the views of, to be clear, one portion of the white working-class? As I wrote above, on many issues, they’re not all that different from other whites or blacks and Hispanics without college degrees. In terms of their own lives, most of the so-called white working-class, as the other poll respondents, are not angry, worried, pessimistic, or unhappy. But they are dissatisfied with the country’s economic situation and with the influence on the political process of people like them. In recent years, they report it’s become harder for them to get ahead financially and to find good jobs. Finally, they blame the federal government much more than their employers or Wall Street for the economic problems facing the working-class and they believe the federal government helps wealthy people too much and members of the working-class too little.

That’s exactly the set of answers one would expect from the American working-class—white, black, and Hispanic, with and without college degrees—right now. They’re getting screwed and, while they may not be dissatisfied in their own lives, they certainly think both the economic and political systems are stacked against them. Perhaps the only surprising item in the survey is the extent to which they blame the government, and not their employers or Wall Street, for the economic problems facing the working-class.

The only major differences within the working-class have to do with Trump and the role of immigrants. While 56 percent of whites without a college degree would consider voting for Trump, most other respondents would definitely not vote for him. A similar difference emerges with respect to immigrants: a much smaller percentage of the so-called white working-class believe immigrants “strengthen our country” and a much higher percentage thinks “immigrants today are a burden on our country” than the other groups.***

In the end, those two differences—on Trump and immigration—are what make the so-called white working-class interesting to the media. It’s not their conditions or their grievances, much of which they share with other members of the working-class. It’s only the fact that they threaten to vote for the renegade presidential candidate and they’re wary about the role played by other, immigrant members of the working-class. And, of course, many of them are thrown into the “basket of deplorables” by the opposing campaign.

Both presidential candidates, then, are sowing and exploiting those differences to their own advantage, which is what U.S. politicians have always attempted to do when it comes to real or imagined divisions within the working-class. That’s how they campaign and that’s how they hope to get elected.

Trump and Hillary Clinton (and their echoes in the mainstream media) have created the “white working-class” and they hope to ride it—as a source of support or a specter—to victory in November. And then, whoever wins, they’ll abandon it—along with the rest of the working-class.

 

 

*Actually, Bernie Sanders also played an important role in focusing attention on the white working-class, especially with his stunning primary victories in Michigan and West Virginia. Since his loss to Hillary Clinton, however, the white working-class (along with the rest of the American working-class) has virtually disappeared from Democratic discourse.

**As Connor Kilpatrick has explained, the Democratic Party “has established a clear line on the white wage-earning class: they’re all either dying (demographically or literally), irrelevant in an increasingly nonwhite country, or so hopelessly racist they can go off themselves with a Miller High Life-prescription-painkiller cocktail for all they care.”

***There is one additional difference that requires mention: while a majority of whites—with (62 percent) and without (69 percent) college degrees—believe trade agreements cost the United States jobs, a much smaller percentage of blacks and Hispanics without college degrees (both 37 percent) think that’s the case.

184860_600

Special mention

184864_600 184868_600

capital gains

Everyone (from President Obama to venture capitalist Alan Patricof) agrees the carried tax loophole—which allows investment fund managers to treat much of their income as capital gains (taxed at a top rate of 23.8 percent) rather than as income (for which the top rate is 39.6 percent)—should be closed.

But, as Michael Hiltzik [ht: ra] reminds us, it’s a tax break the super rich are willing to give up in order to keep the loophole they really value: the capital gains tax break itself.

Here are the numbers: The carried interest loophole produces an aggregate tax break of $2 billion to $20 billion a year, depending on how you reckon. That’s not peanuts, especially at the high end of the estimated range, but the advantage accrues mostly to real estate and private equity fund managers.

The preference rate for capital gains and dividends, however, costs the treasury an estimated $120 billion a year — anywhere from six to 60 times as much. That’s a commensurate gain for those earning a significant chunk of their income from capital gains, and they’re overwhelmingly members of the 1%. . .

In fact, in 2015, capital gains made up 40 percent of the incomes of the top 0.1 percent, and even more—53 percent—for those in the top 0.1 percent.

wealth share

That’s because the ownership of wealth, especially corporate equity, is so unequally distributed in the United States—and it has only gotten more unequal over the course of the past four decades. As Emmanuel Saez and Gabriel Zucman have shown, the average net wealth per U.S. family ($350,000 in 2012) masks considerable heterogeneity. Thus, for the bottom 90 percent, average wealth was $84 thousand, which corresponded to a share of total wealth of 22.8 percent; while for the top .01 percent (a total of 16 thousand families), average wealth was $371 million, for a total wealth share of 11.2 percent.

In fact, as the authors explain,

At the very top end of the distribution, wealth is now as unequally distributed as in the 1920s. In 2012, the top 0.01% wealth share (fortunes of more than $110 million dollars belonging to the richest 16,000 families) is 11.2%, as much as in 1916 and more than in 1929. Further down the ladder, top wealth shares, although rising fast, are still below their Roaring Twenties peaks. The top 0.1% share is still about 2.8 points lower in 2012 than in 1929 (22.0% vs. 24.8%), and the top 1% share about 9.6 points lower (41.8% vs. 50.6%). Wealth is getting more concentrated in the United States, but this phenomenon largely owes to the spectacular dynamics of fortunes of dozens and hundreds of million dollars, and much less to the growth in fortunes of a few million dollars. Inequality within rich families is increasing.

Moreover,

The long run dynamics of the very top group we consider—the top 0.01%—are particularly striking. The losses experienced by the wealthiest families from the late 1920s to the late 1970s were so large that in 1980, the average real wealth of top 0.01% families ($44 million in constant 2010 prices) was half its 1929 value ($87 million). It took almost 60 years for the average real wealth of the top 0.01% to recover its 1929 value—which it did in 1988. . .Financial regulation sharply limited the role of finance and the ability to concentrate wealth as in the Gilded age model of the financier-industrialist. Part of these policies were reversed in the 1980s, and we find that top 0.01% average wealth has been growing at a real rate of 7.8% per year since 1988. In 1978, top 0.01% wealth holders were 220 times richer than the average family. In 2012, they are 1,120 times richer.

Now that their fortunes have recovered—and continued to grow, based on corporate equities (in addition to fixed-income claims)—those at the very top of the wealth distribution in the United States aren’t interested in letting it go. Therefore, they’re willing to give up the small potatoes of the carried interest tax loophole in order to safeguard their much more important and lucrative capital gains tax break.

So, as Hiltzik explains,

keep this in mind the next time wealthy taxpayers ask to be patted on the head for advocating an end to the carried interest loophole: The real tax break is the one they’re not talking about.

BernieCharlieBecker

Charlie Becker, “99 Problems (Bein’ Rich Ain’t One)”

Charlie Becker’s piece, “99 Problems (Bein’ Rich Ain’t One),” was part of a pop-up art exhibit organized during the Democratic National Convention by Rock the Vote as part of its Truth to Power series—to offer “a counterpoint to the narratives that dominated the DNC.”