The AP Ponders the “Super Rich”
18th April 2011
What we are seeing here is not exactly a mystery. Incomes that average $345 million are nearly all capital gains; no one I know of makes anything like that in ordinary income. The capital gains rate was 28 percent in 1992 and 15 percent in 2007. So, with a capital gains rate of 28 percent, the average overall federal tax rate was 26 percent, and with a capital gains rate of 15 percent, the average overall federal tax rate was 17 percent. In both years, the vast majority of the highest earners’ income consisted of capital gains. (In 1992 the top rate on ordinary income was 31 percent, while it was 35 percent in 2007, which presumably accounts for most of the rest of the variation in total federal taxes paid as a percentage of adjusted gross income.)
Some will say that in the present crisis extreme measures are necessary, so let’s emulate Willie Sutton and take the money from the people who have it– the super rich. Indeed, President Obama suggests, more or less obliquely, that this is his alternative to getting federal spending under control.
To test this proposal, let’s do the math. Four hundred “super rich” times an average adjusted gross income of $345 million equals $138 billion. That is around 1/27 of the current year’s federal spending of $3.8 trillion. Which means that if the Democrats stole every penny of income earned by the super rich, it would fuel the out-of-control federal behemoth for a little under two weeks. Thirteen days into the fiscal year, we would be on our own. And we wouldn’t have the super rich to kick around anymore.