America’s Top One Percent
It should be no secret to open-minded Americans that in our country, more than in other developed societies, wealth is highly concentrated in relatively few hands. Data collected by economist Edward Wolff of New York University showed that in 2007 the top one percent of U.S. households owned 34.6 percent of all privately held wealth and 19 percent owned 50.5 percent, while the bottom 80 percent were left with only 15 percent of our society’s material possessions. Hence, 20 percent of all Americans held as much as 85 percent of the country’s material resources while the top 1 percent owned 42.7 percent of the financial wealth (i.e., total net worth minus the value of one's home).
Nevertheless, the 400 most affluent Americans are paying an average tax rate of only 18 percent, according to the Center for American Progress. That is far less than the 26.5 percent in annual taxes paid by many of the families making less than $100,000 annually. Yet, according to Bloomberg Television, some of the wealthiest Americans succeeded in whittling their tax bill down to the point where they are paying a tax rate as low as one percent by taking advantage of numerous tax loopholes.
Early last year, investor Warren Buffett of Omaha, Nebraska--with $47 billion presently the world’s third-richest person (behind Mexican Carlos Slim Helu and American Bill Gates)--made it known that in 2006 he paid only 19 percent, or $48.1 million, in total federal taxes while his employees remitted 33 percent of their far smaller incomes. “How can this be fair?” Buffett asked. "How can this be right?" "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."
Early last year, Buffett suggested what became known as the Buffett Rule: that the federal government should impose a higher minimum tax rate upon the taxpayers in the highest income bracket. By October, Democratic Senate leader Harry Reid of Nevada unsuccessfully proposed a 5.6 percent surtax on millionaires.
In January, the Obama administration called for "measures to ensure everyone making over a million dollars a year pays a minimum effective tax rate of at least 30 percent ... implemented in a way that is equitable, including not disadvantaging individuals who make large charitable contributions." Specifically, no household making more than $1 million a year should pay a smaller share of its income in taxes than a middle class family. A bill to this effect received a 51-45 majority of Senate votes but failed to earn the 60 votes necessary to overcome a filibuster.
Mitch McConnell, the Republican Senate Minority leader promptly ridiculed the Buffett Rule as “a political gimmick.” He accused the Obama administration of being more interested in “taking from some and giving to others” than job creation or lowering gas prices. Other critics claimed the president’s plan would only dent the deficit. Typically, however, the Republican critics ignored Buffett’s and Obama’s calls for more tax fairness.
The Republican leaders in particular seemed unaware of a recent Gallup poll that found around 60 percent of Americans favoring Buffett’s proposal. The President’s re-election campaign released a tax rate calculator comparing the average American tax rate to that of Republican presidential frontrunner Mitt Romney who paid only a 13.9 percent rate on his over $20 million income.Worse yet, data released by California’s tax authorities revealed the state’s 500 biggest income tax delinquents. Computer Network (CNET) co-founder Halsey Minor and his wife, for example, owe $10.5 million, while Joe Francis, the founder of “Girls Gone Wild,” owes $794,000. The 500 delinquents owe nearly $233 million collectively. That prompted the California tax board to complain: “When taxpayers do not pay their fair share, it places an unfair burden on those who do.”