The Homa Files

Great analysis presented in the WSJ.

Key is the chart below which takes official IRS data for the top 1% of pre-tax-earners, adjusts for inflation (by stating all years in constant 2008 dollars), and breaks income into it’s components

The key points:

1) Business income is roughly 25% of reported income

2) Average inflation-adjusted salary has stayed pretty flat.

3) Until the crash in 2008, capital gains grew … note: cap gains tax rates were reduced in 2003 .. coincidence?

4) Similarly, dividends increased after the dividend tax rate was cut to 15% … another coincidence?

The mega-point of the analysis is that behavioral economics is alive and well … dink with marginal rates and folks will simply shift income … causing an inverse relationship between marginal tax rates and tax receipts.

Just do the the math.

* * * * *

Full article is a worthwhile read:
WSJ,Taxes and the Top Percentile Myth, Dec.  23, 2010
http://online.wsj.com/article/SB10001424052748703581204576033861522959234.html?mod=djemEditorialPage_h

This entry was posted on December 24, 2010 at 6:59 am and is filed under Income - Earnings, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.