Last summer, we had the Occupy Wall Street demonstrations — what I referred to as the “baby occupiers.” My thought at the time was that our misguided young people were suffering from “demonstration envy” as earlier in the year, the “Arab Spring” was in full bloom. At the time, I did some research for the sake of perspective. The information I discovered was pretty interesting, and was news to those that I shared the information with. My reason for sharing now is that as we head into the election with both sides going on endlessly about who is paying or is not paying their fair share, this should help you make an informed decision.
As of the latest statistics (2009), here is what I have found. There were 137,982,203 tax filers with a positive Adjusted Gross Income (AGI), this means that their income after their standard and actual deductions was more than $1. The top one percent earners (1,379,822 of them) have an annual income of $343,927 or more. The top one percent paid a total of just over $318 billion, or nearly 37 percent of the over $865 billion collected. The numbers become even more compelling when you drop to the top five percent. These earners (6,899,110 of them) have an annual income of $154,643 or more. The top five percent paid a total of over $507 billion, or about 59 percent of the total $865 billion collected.
As a point of information, when President Obama talks about the people making $250,000, I estimate that he is talking about roughly the top 2.5 percent. Now you can start to see how the top five percent, who consistently pay about 60 percent of the total tax, might think they pay enough. Let’s continue and dig a little deeper and see where you are in the pecking order.
The top 10 percent earners (13,798,220 of them) have an annual income of $112,124 or more. The top 10 percent paid a total of more than $610 billion or 70.5 percent of the total $865 billion collected. To bring it on home, the top 25 percent earners (34,495,551 of them) have an annual income of $66,193 or more. The top 25 percent paid over $755 billion or 87.3 percent of the total tax collected.
I guess you can see why the Occupy demonstrations were not about the top five percent, 10 percent or the 25 percent. Let’s go a little further and get some more perspective.
If you are an anesthesiologist, an OB/GYN, psychiatrist, or nurse anesthetist, according to a 2009 CNN Money article titled “Best Jobs in America,” your job puts you in the top five percent. If you’re a lawyer or attorney, sales director, actuary, college professor, CPA, pharmacist or physical therapist, then your median income puts you in the top 10 percent, according to the same article. Bringing up the top 25 percent earners are the following: architect, accountant (without CPA designation), psychologists, economists, web developer, engineers and veterinarian, says the same source, and an Applicants.com article titled “Jobs over $50,000.”
If in 2009 your annual income was $32,396 or more, congratulations, you were in the top 50 percent. The top 50 percent paid $846 billion or almost 98 percent of the total $865 billion collected. Now comes what I think is a very compelling point: The bottom 50 percent, which are those making about $32,395 annually, pay 2.3 percent of the total tax collected. Allow me to make this point again, the bottom 50 percent of U.S. taxpayers are only paying 2.3% of the total tab.
Now let’s go back up the food chain. In reviewing the occupations we discussed, please note that in the top 25 percent, there are no school teachers, librarians, school nurses, police or fireman. These important city employees are not living off lavish salaries or off the backs of hardworking Chicagoans as we have been led to believe. However Mayor Rahm Emanuel earns a cool $216,210 per year and the CEO of Chicago Public Schools, Jean-Claude Brizardm, earns $250,000 (yes more than the mayor). Both Emanuel and Brizard are comfortably in the top two percent, so I can see why neither attended any of the Occupy Chicago Rallies … although they were conveniently located near their offices.
So in conclusion, I for one can see the fiscal conservative argument that the problem is not that the “rich” a.k.a. “top earners” are not paying enough, but that the problem is a spending problem. My problem with fiscal conservatives is that most of them are reluctant to put all expenses under the microscope. The problem is not that we are not collecting enough revenue, it is that we are spending too much of what we collect. All expenses need to be scrutinized, and yes, cut — not just public employees and visiting nurses.
The opinions and recommendations expressed herein are those of Mr. Garrido and do not necessarily reflect those of the firm and are subject to change without notice. This information is not to be construed as an offer to sell or the solicitation of an offer to buy any securities. The information contained herein has been derived from sources believed to be reliable but is not guaranteed as to accuracy and does not purport to be a complete analysis of the security, company or industry involved.
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