“Americans have fought their way back from tough economic times,” former Secretary of State Hillary Clinton said in her Sunday campaign rollout video. “But the deck is still stacked in favor of those at the top.”
Clinton’s class-warfare tale has just enough truth behind it to resonate with some Americans. After all, according to data from the Congressional Budget Office, the top 20 percent of income earners in 2011 (the last year for which full data are available) earned 52 percent of all pre-tax income.
But that only tells part of the story. The rest is told today, on Tax Day.
That same top-earning quintile (consisting of households that made more than $102,000 that year) was responsible for paying 69 percent of all federal taxes — not just income taxes, but payroll, corporate and excise taxes as well. The top 40 percent of households (those making more than $62,000) paid 87 percent of all the tax revenue that goes toward funding the federal government — toward roads, bridges, debt service, Medicare, Social Security and the many federal programs that help the neediest. And their share has likely risen since 2013, when President Obama got the income tax hike he wanted for families making more than $450,000 per year.
In short, if you are looking for an economically just society where the deck is stacked so that the rich shoulder the financial burdens of government and even the poor live in relative prosperity — where immigrants flock in the knowledge that better wages and opportunities exist — then welcome to the United States of America.
But the CBO figures tell an even more complete story than that. They also show just how the “wealthiest one percent” have increased their income in this century. And it isn’t the way the class warriors of the “stacked deck” philosophy would have you think.
The highest earners have not increased their income since 2000 by taking inflated CEO-type salaries — in fact, pre-tax wages of the top one percent declined during that period by about 5 percent. Nor did they sit back and rake in ever-increasing dividends or interest payments from their capital assets.
Rather, the nation’s top earners have been taking in more and more — and an increasing share of their income — from running and investing in profitable businesses. According to CBO, business income in this group rose, on average, by $109,000 in inflation-adjusted dollars between 2000 and 2011, a staggering 50 percent increase. The data show that the top earner of the early twenty-first century is more likely to be an entrepreneur than at any time going back at least to 1980 and probably far beyond.
Clinton was right to point out that Americans have come through hard economic times, and they are still suffering from the Great Recession of six years earlier. But this Tax Day, you can feel a bit less pain in writing that check to the IRS, in the knowledge that the class warriors are wrong, and Americans do not live in a fundamentally unjust society where robber barons make their fortunes by despoiling the poor.
