Rich and Poor

Obama is having a terrible time with healthcare.  On Jan. 1 the media is about to notice that 5.96 million people got their insurance cancelled and less than 1 million will have signed up for insurance on the exchanges or on the open market.  In other words, there are 5 million fewer people with insurance than when Obamacare started.  That’s just the opposite of what was supposed to happen. We are going backwards.

            And so the administration pivots to Rich vs. Poor as a diversionary issue.  I keep a lot of statistics in my notebook and thought you might be interested in a few.  Here’s a table of income groups and what they pay in federal income taxes.

Group              Make                %of all taxes paid        tax as % of income    

Bottom 20%    <$15K             0.3%                            1%

Median quintile$31-44K           9.4%                            11.1%

Upper 20%      >77K               67.9%                          23.2%

(Please note: These are taxable incomes, page 2 of 1040, not Adjust Gross Income. That is, deductibles and exemptions have been taken out)

Upper 50%      >34K               96.93%                        16.1%

Upper 25%      >62K               86.0%                          18.2%

Upper 10%      >103K             70.3%                          21.3%

Upper 5%        >145K             59.7%                          23.6%

Upper 1%        >371K             38.9%                          28.9%

 

We should also say that these are IRS compilations which do not account for net taking from the system due to Earned Income Credit.  That would make the bottom 20% pay a negative % of all taxes because they are net takers. 

            A few observations.  As you go up the income ladder, an increasing amount of total income is consumed by income taxes.  Someone might say the rich get a lot deductions, loopholes, and write-offs.  Well, it evidently doesn’t do them a lot of good. They pay more of their income in taxes. When Mitt Romney said 47% of people pay no income taxes, he was referring to “net taxes” with EITC and Social Security included. What I find sad is that Pew did a poll on a group approximating that 47% and 70% of them say the rich aren’t paying their fair share. (Hmm.  Conversely, one might conclude that 70% of the 47% are Assholes.) This certainly does give credence to class warfare. 

            What this doesn’t show is how transient the income groups are.  20% of adults will have one year they make the upper 1% of income during their lifetimes.  Within 10 years only 46% of people will remain in the lower quintile.  Think of that. In ten short years, 54% of poor folks get considerably richer.   That’s why pollsters are noticing that the lower middle income groups are no longer predominantly Democrats. “Poor” is just a temporary title you have.  A sizable number of aspiring lower middle income folks always wanted a job, not a government hand-out. 

            So who are the rich?  1/3 of the upper quintile are small businessmen who have <50 employees.="" span="" style="mso-spacerun: yes;">  They also create 70% of the new jobs.  But if you have ever run a small business, you know just how fragile your finances are.  Hence if this group gets a big bill for Obamacare insurance, increased government regulations, tight bank credit, higher taxes,etc. this group of extremely savvy business planners can see their profits evaporate fast and economic recovery will stall like a ’58 Edsel with gas-line freeze-up.  That’s exactly what has happened the last 5 years.  Small business owners vote over 90% conservative.  So in some ways the vendetta which Dems have for business in general, and the animosity for “the rich” is natural enough—businessmen are not their voting block.  Another 1/3 of the upper 20% are well-paid professionals.  Salesmen who get large commissions are a big part of this.  And every year there are certain groups like farmers or geologists or auctioneers who had a significantly good year and are paying taxes on it.  Next year, they may be poor.  Finally, there are a lot of upper GS grade federal employees who make a six-figure income.   What I think is interesting about this analysis of the upper quintile is who they are not. They aren’t robber barons, Wall Street decadents, or landed gentry.  I saw some study that showed more professional athletes and entertainers than professional investors in the upper 20%.   All told, the upper quintile votes about evenly R vs. D.

            Pope Francis has a special mission to help the poor.  Rerum Novarum, a papal decree by Leo in 1891 exhorted Catholics to support unions, government social justice, and redistributionism.  While this Protestant takes very seriously his personal obligation to help the poor, I think that the evidence for government (rather than privately) accomplishing this is not just dismal, it is counterproductive.   Food stamp usage has increased from 31 to 48 million since a redistributionist federal government took over in 2009.  Medicaid enrollment has doubled.  Social Security disability has soared from 9 to 14 million.  It looks to me like we are going backwards, not forward on poverty. Somebody tell the Pope to stop hijacking government to do what Jesus told us to do ourselves!

            I ran a study on what state and federal assistance looks like for our local peronistas, since some of them tend to rent our poorer properties.  What can they afford? If you have nothing, TANF, WIC, Food stamps, Section 8, and Medicaid provides a typical Okie with about $20K of assistance annually.  As you start earning something, the TANF disappears but EITC gives you money.  At about $18,000, this runs out and at about $23K you lose food stamps and Section 8.  But basically from income zero to $23,000 income, you can count on a life of about $20,000 guaranteed through government assistance to make up whatever you don’t.  Why then work—if you don’t think you can ever make more than 23K? I’m actually quite proud of some of these folks who still would rather have a job and hold their heads high.  

            The politics then is that Obama will try to beat the drum of income inequality.  R’s should counter with economic non-growth and lack of jobs.  If you want Obamacare, vote Democrat.  If you want a job vote Republican.