Income Inequality

Filed in Delaware, National by on December 23, 2013

You know income inequality is getting to be a big topic when even Joe Scarborough of Morning Joe talks about it fervently this morning. Of course, he falls back on the tried and true conservative position that we can’t raise taxes ever on anything, and the expert guest agreed.

Um, why can’t we? New data from the IRS shows that the wealthiest Americans have seen their share of taxes decline rather significantly under Obama. Yes, this is true even though Obama has raised taxes on them.

Specifically, the richest 1% paid 37.5% of taxes in (recession-damaged) 2008; in 2011, their share was down to 35%. (Their share peaked in 2007, during the boom times—and the Bush administration.) The top 5% of earners also saw their share of taxes decline by a similar margin.

One of the guests on the program noted that while the top income bracket rate is 39%, most of the wealthy never pay that rate, for their income comes from hedge funds or capital gains, whose rates are in the teens if not lower. And that is without mentioning the loopholes that are taken advantage of that enable many of the weathliest to pay no income tax. Remember, this is why Mitt Romney never released his tax returns, for they would have shown that he paid nothing in taxes for several years.

So, shock of all shocks, Joe Scarborough actually talked about having a 30% minimum tax and taxing capital gains and hedge fund at the same income rates. And it is about time, because the only way we solve long term budget issues and pay down our debt, while at the same time investing in much needed infrastructure projects, and reducing income inequality and class immobility is to… yes… raise taxes.

Kavips did some impressive number crunching last week. In 2010, there were 4,887 Delawareans who were in Delaware’s top 1%. The average adjusted gross income of these people was $728,553. That should mean that those 4,887 people had $3.5 billion in taxable income. At Delaware’s highest income tax rate of 6.9%, that mean approximately $246 million in revenue for the state. Kavips then showed how much additional revenue could be raise if we raised that top rate on the top 1%:

.5% [increase] = $17,802,192 new rate of 7.4%
1% = $35,604,385 new rate of 7.9%
1.5% = $53,406,578 new rate of 8.4%
2% = $71,208,770 new rater of 8.9%

Yeah… the answer is staring us right in the face.

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Comments (6)

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  1. Andy says:

    This message needs to get to Dover

  2. Jeff Cragg says:

    Top 1% paid $246 million in income tax. 7 states have no state income tax, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. With one years state income tax you buy a nice condo in Florida, move your residence and pay 0%. 4,887 folks do that and you’ve got a $246 million dollar hole in the current state budget. Raising taxes is more complicated than your comments make it appear.

  3. puck says:

    Bah…. Humbug.

  4. Jason330 says:

    The race to the bottom is as simple as it appears.

  5. Nuttingham says:

    Maryland’s top rate is about 5.75 and Pennsylvania has a flat 3.1 rate on everything, right?

    My bet is people with an average income of $730,000 can afford to move a few miles north or south to one of those.

    It doesn’t mean they will, it just means they can.

    Can you project how many might?

  6. Jason330 says:

    Interstate tax flight is a wingnut myth. It doesnt happen.

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