A lot has been reported lately on the plight of the Top 1% in the US. This made me curious, so here is a profile of the Top 1% in the US:
- what income it takes to be in this group — 24%
- how much of the nation’s worth you own — 35%
- how much of the nation’s tax revenues they produce — 28%
What Percentage Are You?
Before we get started, let’s get personal — go ahead and find out how your income ranks, and what portion of the tax burden you bear according to your income.
Simply enter your AGI from your most recent tax return. You’ll find it on line 37 if you used the Form 1040, line 21 on Form 1040A or line 4 on the 1040-EZ. Or enter your annual salary (the IRS categories are broad enough that your result will likely be the same).
Now, let’s talk about the actual Top 1%, starting with their income.
The Top 1% receive/earn 21% of all income in the US
In 2009 of a total of 75.6 million wage earners, 1.4 million received an adjusted gross income of $343,927 or more. At an hourly wage, that means you need to earn at least $165.35/hr to be part of this group. The average hourly wage in the US is $18.52.
And that was 2009. In 2011, the number increased to 24%, up from 9% in 1976 — meaning their share of the national income pool has nearly tripled since. In terms of income inequality, that ranks the US 52 out of 125 nations.
To put that in a global perspective, there are only 107,565 other people in the world making more than this amount — that’s the top 0.001% richest people in the world.
The Top 1% Owns 35% of the Nation’s Wealth
Where is the wealth of the top 1%? In terms of net worth — total assets minus total outside liabilities —— the top 1% own 34.6% of all privately held wealth in the US.
What you quickly see is that the top 1% don’t invest like the rest of us. For one, that wealth isn’t from real estate. In fact, the top 1% isn’t investing heavily in deposits, pensions, life insurance, or their homes. This is different from the vast majority of Americans, in which their homes are the most significant wealth they possess — 70% of white families’ wealth is in the form of their principal residence; for Blacks and Hispanics, the figures are 95% and 96%, respectively.
What’s more, when you look at financial wealth — total net worth minus the value of one’s home — we find that the top 1% own 42.7% of income-producing assets.
And they are especially not investing it in debt — the top 1% have only 5% of the nation’s personal debt.
The Top 1% pay 28% of all federal taxes
While it’s true that the top 1 percent of wage earners paid 38 percent of the federal income taxes in 2008, it shouldn’t be forgotten that income tax is less than half of all federal taxes, and only 1/5 of all government taxes at all levels.
On the flip-side, Social Security, Medicare and unemployment insurance taxes (known as federal payroll taxes) are covered mostly by the bottom 90 percent of wage earners. That’s because, once you reach $106,800 of income, you pay no more for Social Security. Think of it this way — Warren Buffett pays the exact same amount of Social Security taxes as everyone who earns $106,800+.
Why does this distinction of income vs payroll taxes matter? More than half of all wage earners pay more in Social Security and Medicare taxes than they do income tax. What’s more, if you count both the employer and employee share of the taxes, the percentage of those paying more payroll tax than income tax soars to nearly 90%.
Here are what the Top 1% share for each federal tax:
- Federal income taxes: 39.5 percent share
- Federal payroll taxes: 4.1 percent share
- Federal corporate taxes: 57.0 percent share
- Federal excise taxes: 4.7 percent share
Why Does This Matter?
This post isn’t support any market theory or fiscal policy. Rather, it was my research into better understanding what it means to say “the top 1%”.
During this research, it was most interesting to discover two things. First, how bad all of us, regardless of our gender, income, or political party affiliation, are at guessing where we fit in to the top 1%.
Second, it seems that when you look at these ACTUAL, IDEAL and ESTIMATE by INCOME, GENDER, and VOTING, you find that people generally have the same IDEAL wealth distribution. In other word’s — we aren’t that different in what we think is fair, we just have different ways of expressing it.