Do Tax Cuts for the Richest 2% Help or Hurt You? Read the Surprising Answer Here.

[Editorial Note December 2, 2010:  See revisions to supporting calculations of M3 and average AGI for elite individuals at items #1 and #2 here]

Kudos once again to the fine team and readership over at disinformation.  Their comments continue to be extremely thought provoking.  This article, chart and supporting calculation in the attached workbook are in resonse to their many insightful questions about inept Republican tax and economic policies..

I get pissed when some dipwad tries to pull a fast one on me, as should we all.  The responsible conduct of business requires a level of trust that is decisively undermined when we’re lied to.  And while there is a time and place for everything, the place for bullshit is the weekend pintfest at a local pub, not in debates about income tax policy.  That’s why the fundamental dishonesty of Republican’t talking points has me so fired up.

The specific steaming pile that currently has me cheesed off is EGTRRA.  No, it’s not some type of horrible fat-free egg substitute; it’s the ironically named Economic Growth and Tax Relief Reconciliation Act of 2001.  The bit that’s currently in play right now is the Republican hijacking of economic recovery effots in order to renew tax cuts for the country’s fattest 2%.  And that just can’t be allowed to happen.  ‘Cause not only will it not result in any improvement in the real economy, it’s been proven to actually steal from the middle class to benefit the uber-rich.

It’s ironic that faux populist, bankster-financed hangnails like Paul Ryan (R-WI) and senator elect Ron Johnson (R-WI) try to saddle Dems with the title of  “Wealth Re-distributors” when the evidence to the contrary is all around.  You don’t have to get into a pissing match over which cable news network talking head has the biggest gnarlies—just look at the data for yourself.  Here’s how.

Data and Analysis

The solid, non-partisan career professionals in the Bureau of Economic Analysis,  Census Bureau et alia have literally reams of data available for you to plow through, but the most readily available stuff is online. It could take you months to decide which bits give you the optimal balance of long-term comparability and sufficient drill-down detail on the relevant economic topics.  So I’ll help you out and get you started:  the IRS’s summary of all individual tax returns for the years 1993 through 2008.  Particularly useful is its inclusion of data regarding sources of income (e.g., wages, long term capital gains, Social Security benefits, receipts from estates and trusts, etc., etc.).  You can find them all here1.

Mind you, though, there are also some challenges to using the data properly.  While the tables do group taxpayers in separate income-stratified categories (cool), they’ve done so by reference to current year dollar values (not cool).  That is, 1993 tax data is segregated by the amount of income reported in 1993 dollars—not 1999 or 2008 dollars, which the Consumer Product Index says are comparatively inflated by 15% and 49%, respectively.  Therefore the data for people reporting at least $40,000 but less than $50,000 in 1993 is not directly comparable to 1999 or 2008.

It’s a fairly simple matter to adjust everything up to 2008 dollars.  And it’s pretty easy to calculate the average reported income for the median tax return, too.  What is impossible to do with any precision is to determine the average reported income for the richest 2%; the data just aren’t broken down in enough detail to allow a good inflation-indexed calculation. 

However, this is less a problem for our analysis than you might think.  Despite the inclusion of numerous additional returns with lower reported income, the aggregate situation is quite clear:  the richest 2% of the population are stealing from the rest of us.  See the chart for yourself1:  EGTRRA sliced $8,000 off of the average income of the medium return filer and added $124,000 to the richest. 

Conclusion

WTF?  We’re EACH expected to give yet ANOTHER $8k of our money to Paul Ryan’s bankster buddies2 at JP Morgan Chase and AIG?   Do he and Mitch McConnell think we’re freakin’ idiots?  They expect us to just take this lying down?

Recommendations

Don’t let them get away with another handout to the plutocrats.  Call and write your representatives and senators immediately and often telling them that you know what a horrible idea it is to extend the Bush era tax cuts.  And let them know that you know what you’re talking about.  Send them a copy of this chart.  Send them a link to our workbook for them to see themselves.  Send them a link to this blog post.  Send them a link to the 2005 Office of Management and Budget Report describing how $0.72 of each dollar in tax cuts is added to the deficit.  Send them a link to the Congressional Budget Office's report that renewal of the Bush era tax cuts would add bring the national debt up to 100% of GDP by 2020.  Email this stuff to your friends, family and acquaintances.  Whatever you do, don't keep this information to yourself.

Footnotes

1  I encourage you to take as deep a look as you like to the supporting calcs and data.  All within this workbook:  EGTRRA – The 2% Delusion.xls. 

Also noted that, due to aggregation of source data by current year dollar amounts (i.e., not indexed for inflation), it was not possible to determine the precise # or $ value of the 2% highest income reporters.  HOWEVER, due to the tendency for the inclusion of a larger # of relatively lower-income individuals to actually UNDERSTATE the disparity portrayed here, the %'s actually included for purposes of this analysis were 4.5% and 5.0% of all returns, Pre- and Post-EGTRRA, respectively.  In fact, the actual disparity is rather worse--though the magnitude of that additional badness isn't precisely clear.

2  During this last election cycle, Paulie boy was a big favorite of the banksters.  His clients included not only Goldman, but CITI, Bank of America, JP Morgan and a host of other F.I.R.E.  (i.e., "Finance, Insurance and Real Estate sector) companies and trade groups.  In fact, he got about $246,000 or 25% of his total PAC money from these guys.  See details here.  Who knows how much else he got INdirectly through Orwellian-ly named PACs or individual contributions?