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Two myths about the rich...they are getting richer and paying lower taxes, at least from 2007-2009

Posted by on Jul. 20, 2012 at 10:20 PM
  • 130 Replies
2 moms liked this

The presidential election has given us two myths about the rich. First, that their incomes, and income inequality, are at all-time highs. Second, that the wealthy pay less in taxes than ever, and lower taxes than the rest of us.

A recent report from the Congressional Budget Office, however, suggests that both may be false.

Let’s consider income first. Between 2007 and 2009, after-tax earnings by Americans in the top one percent for income fell 37 percent. On a pre-tax basis they fell 36 percent in the same period.

Robert Frank
Robert Frank
CNBC Reporter
& Editor

That may sound like a minor haircut for One Percenters compared to people who lost their jobs. But when you take into account federal transfers, assistance and taxes paid, the incomes of the bottom 20 percent grew by 3 percent, while it fell a modest 2 percent for the middle 20 percent.

In other words, the incomes of the top one percent fell 18 times more than the incomes for the middle class at the start of the recession.

Change in after-income tax (2007-2009)

The result of this big drop at the top was that their share of the country's total income also fell. In 2007, the top one percent earned 16.7 percent of all after-tax income. In 2009, that portion fell to 11.5 percent.

Inequality, in other words, fell during those years.  We are now in an age of High-Beta Wealth, where the incomes of the One Percent have become far more manic and prone to wild drops than the rest of the country.

And taxes paid? Despite the oft-repeated fact that tax rates for the wealthy are at an all-time low (which is true), it’s also true that the actual amount paid in taxes by the wealthy is higher than before the recession.

Share of Income

The One Percent paid an average effective tax rate of 28.9 percent on their income — far more than any other group, and more than twice the average effective rate of the middle class, who paid 11 percent on average.

So the rich lost more income and paid more of their money in taxes than the rest of the population.

This is not an argument against taxing the wealthy. And the incomes and tax rates of the wealthy may have jumped back since 2009, with the rebound in financial markets.

But when politicians and pundits talk about the rich just getting richer and paying less taxes, they need to pay closer attention to the actual numbers.

-By CNBC's Robert Frank
Follow Robert Frank on Twitter:
@robtfrank

CORRECTION: An earlier version of this story misstated the top one percent earners' share of the country's total income as 26.7 in 2007 and 22.3 in 2009. In fact, the One Percent made 16.7 of the national income in 2007 and 11.5 in 2009.

by on Jul. 20, 2012 at 10:20 PM
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Replies (1-10):
Carpy
by Ruby Member on Jul. 20, 2012 at 10:40 PM
5 moms liked this

Intersting, but don't expect any replies.  If you don't respond, it isn't true.

areid1023
by Silver Member on Jul. 20, 2012 at 10:45 PM
this doesnt seem to refute what i feel like its trying to refute...
Posted on CafeMom Mobile
smalltowngal
by Platinum Member on Jul. 20, 2012 at 10:52 PM
2 moms liked this


Quoting Carpy:

Intersting, but don't expect any replies.  If you don't respond, it isn't true.

Well, it's true for those years because that is when the crash happened. I'll try and find a chart in the monring but the top 1% wealth is starting to grow again faster than the rest of the country but I don't think the inequality is as high as it was before the crash. The OP is picking the best 3 years for her argument. Look at who wealth has gone to for the last 40 years and it paints a different picture. 

smalltowngal
by Platinum Member on Jul. 20, 2012 at 10:57 PM
5 moms liked this

Notice the 3 years used for the OP. 

Sisteract
by Whoopie on Jul. 20, 2012 at 11:01 PM
6 moms liked this

Cherry picking....

Thanks smalltown for showing a more accurate picture-

stacymomof2
by Ruby Member on Jul. 20, 2012 at 11:02 PM
3 moms liked this

"After Tax Income?"  I don't suppose that has anything to do with tax cuts...

And 2007 and 2009?  That was the huge crash.  How about the rest of the recession, you know, 2010, 2011 and 2012?  I wonder what those numbers looked like?

Also I am glad to see that you agree that the recession actually started in 2007.  Many people keep acting like it started in 2009.

DSamuels
by Gold Member on Jul. 20, 2012 at 11:06 PM
2 moms liked this


Quoting smalltowngal:


Quoting Carpy:

Intersting, but don't expect any replies.  If you don't respond, it isn't true.

Well, it's true for those years because that is when the crash happened. I'll try and find a chart in the monring but the top 1% wealth is starting to grow again faster than the rest of the country but I don't think the inequality is as high as it was before the crash. The OP is picking the best 3 years for her argument. Look at who wealth has gone to for the last 40 years and it paints a different picture. 

LOL you act like I wrote the article. I didn't. And it was posted TODAY by CNBC, in no way a conservative station.

smalltowngal
by Platinum Member on Jul. 20, 2012 at 11:13 PM


Quoting DSamuels:


Quoting smalltowngal:


Quoting Carpy:

Intersting, but don't expect any replies.  If you don't respond, it isn't true.

Well, it's true for those years because that is when the crash happened. I'll try and find a chart in the monring but the top 1% wealth is starting to grow again faster than the rest of the country but I don't think the inequality is as high as it was before the crash. The OP is picking the best 3 years for her argument. Look at who wealth has gone to for the last 40 years and it paints a different picture. 

LOL you act like I wrote the article. I didn't. And it was posted TODAY by CNBC, in no way a conservative station.

CNBC often has conservative and liberal articles. The Kudlow Report is on CNBC and is fairly conservative. 

studentteach
by on Jul. 21, 2012 at 8:57 AM
3 moms liked this

 It is about time they take a cut considering the mess they got the rest of us in. Good, I hope they all go broke so they can't play god with us little people any more.

studentteach
by on Jul. 21, 2012 at 9:02 AM
1 mom liked this

 and lets not forget that a pay check in 1966 went much further than it does today because those "job creators" pay their emplyees like they are surfs and provide very little benefits and job security.

Quoting smalltowngal:

Notice the 3 years used for the OP. 

 

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