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Why taxing only the rich at 90% won’t fix income inequality

June 8, 2015

It sounds great.  Tax the bejeezus out of the people who have lots of money and give it to the people who don’t. After all, their families won’t starve on what’s left over.

So who is rich?

Well according to President Obama it’s folks making over $250K a year. To liberal sign holders, it’s the top 1%.  Other talking heads have suggested $500K.

How’s that look in real numbers?

Not so good.  Use the Adjusted Gross Incomes (AGI) figures for 2010 as reported by the IRS, and assume the top money earners are actually the people making over $200K a year (the closest  IRS figure available to the President’s hypothetical 250K figure). Those people amount to 2.9% of the population.

If you want to target people with AGIs of over $500K, that percentage drops to just .57% of the population. Just over one-half of one percent of the population is taxed on over $500K of AGI a year. Don’t  believe it? If you want a look at the percentage of “rich” people there are in your state, click the link. Income subject to 90% Tax Bracket.

FYI, the states and districts with the most $200K-plus incomes in 2010 were Washington DC at number 1, followed by Connecticut, New Jersey, Massachusetts, Maryland, Virginia and New York. The bottom three states were Mississippi at #50, West Virginia and Idaho.

Even if you took away ALL the loopholes, including dependent exemptions, from folks making  $200K a year or more, that still leaves less than 3% of the population supporting the other 97%.

That ain’t gonna work, now or ever. The government will always need more money than it has if it keeps doing what it’s been doing.  And there will always be a political rationale for that.

Back in the good old 91% top tax rate days, everybody paid. There was no such thing as exempt income.

Back then, it was because the debts from WWII had to paid.  Then it was to catch up on all the infrastructure projects put on hold because of the war. Today, it’s because of the Middle East wars, the financial meltdown, or because all those greedy old people expect to be paid the retirement income they were promised back in the 1930’s and ’40’s.

There’s always a reason. That means the government is going to keep dropping the definition of rich until it gets down to you

Why do you think there’s such a push to raise the minimum wage or change the overtime rules? If you make more, the government makes more, without having to grow the economy one iota.

Think about it. Former President Clinton is making $500K for just one speech. Do you really think he’s going to hand the IRS $450,000 of it?

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