Data on the disparity in wealth and income.

David Cay Johnston, a tax expert and author of the book "Perfectly Legal", explains how the very top income earners are not only doing far better than everyone else, but are doing so at an increasing rate. Their doing so puts increasing tax burdens on the middle and lower middle classes. I have valuable information from his recent article further down in this post, and I will attempt to explain the ramifications on the rest of us.

I read a lot of different informational sources about economics and economic data. I have come across a site from a Ph.D economist that I find very useful and interesting.  This particular page discusses wealth and poverty. I recommend that you explore his entire site, which has many interesting tidbits of data and analysis.

Income, Wealth and Poverty


In addition, I recommend another good article on the topic of the disparity between incomes in the U.S.

The United States of Inequality


An excellent book is "Perfectly Legal" by David Cay Johnston. He also writes columns for Tax.com and other sites.   He makes clear how the people at the very highest income levels are reaping huge financial rewards - based in large part by influencing and manipulating the tax laws, at the expense of the rest of us.  Here is information from his recent article (as of Feb. 16, 2011), from  tax.com  

"

Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data David Cay Johnston* for Tax Analysts

The incomes of the top 400 American households soared to a new record high in dollars and as a share of all income in 2007, while the income tax rates they paid fell to a record low, newly disclosed tax data show.

In 2007 the top 400 taxpayers had an average income of $344.8 million, up 31 percent from their average $263.3 million income in 2006, according to figures in a report that the IRS posted to its Web site without announcement that were discovered February 16. 

 

The top 400's share of all income grew from 1.31 cents out of every dollar earned by all Americans to 1.59 cents. 

The annual top 400 report was first made public by the Clinton administration, but the George W. Bush administration shut down access to the report. Its release was resumed a year ago when President Obama took office. The Statistics of Income Division at the IRS created the top 400 reports at the urging of Joel Slemrod, a business professor at the University of Michigan.

The top 400 reports understate actual top incomes because of deferral rules. For example, managers of offshore hedge funds who deferred their gains may not be counted in the top 400 reports, which are based on the figure on the last line of the front page of Form 1040.

At least three hedge fund managers made $3 billion in 2007. It is not known how much, if any, of their income they deferred.  

Most of the income going to the top 400 tax returns is from capital. Salaries and wages accounted for only 6.5 percent of the top 400's income in 2007, down from 7.4 percent in 2006 and 26.2 percent in 1992. The average salary rose from 2006 to 2007, however, just at a slower rate than overall income growth."

This is a trend that has been gaining steam even since he published his book "Perfectly Legal".  The result is, the average effective tax rate  - meaning the tax ultimately paid, for the top 1% income earners, when all federal taxes are considered, including gasoline, beer and Social Security, is roughly 25% of their income, which is actually slightly lower than the average middle class individual. Then you factor in some of the economic benefits available to the top 1% that do not show up in the commonly available statistics, like the tax tricks developed by people like Jonathan Blattmachr, they are taxed more lightly than the middle class. (Blattmachr is a tax and estate planning expert that is identified in "Perfectly Legal". He has found sophisticated paths through the tax laws that enable the super-rich to avoid paying $millions in taxes that they would otherwise have to pay if the loopholes were not there.)

Hard to believe?  It shouldn't be; not if you are paying attention.  Please stop listening to the highly paid pundits from Fox News (and other disingenuous sources), and instead actually look at the data and  read books and articles from the folks who look at and analyze the data in detail; the ones who are telling the truth.

Of course, the trick is in distinguishing between disingenuous and honest sources. I am attempting to do just that with this blog. David Cay Johnston is one of the honest ones. There are others, and I will expose you to them as I find them by researching these issues.