Tuesday, October 26, 2010

Stat of the day

Well, it's actually "stats" of the day dealing with those individuals breathing the rarefied air at the tippy top of our income pyramid in the US. We're talking about people making over $50 million/year. I assume this includes Spielberg, Howard Stern, Oprah, Tiger and a bunch of guys on Wall Street you've never heard of (sadly for yours truly, many of them were former colleagues and competitors. Wall Street has been berry, berry good to them). Courtesy of tax.com:

"The number of Americans making $50 million or more, the top income category in the data, fell from 131 in 2008 to 74 last year."

The first thing that strikes me there is that only 74 people in the entire US make over $50 million. I know many people take equity as pay instead of a salary so it's hard to actually cross that threshold after deductions, but still $50 million seems like it would be doable for more than 74 people, but I digress.

"But that’s only part of the story. The average wage in this top category increased from $91.2 million in 2008 to an astonishing $518.8 million in 2009.

That’s nearly $10 million in weekly pay!

You read that right. In the Great Recession year of 2009 (officially just the first half of the year), the average pay of the very highest-income Americans was more than five times their average wages and bonuses in 2008. And even though their numbers shrank by 43 percent, this group’s total compensation was 3.2 times larger in 2009 than in 2008, accounting for 0.6 percent of all pay.

These 74 people made as much as the 19 million lowest-paid people in America, who constitute one in every eight workers."

I applaud the success of these individuals that can pull down $500 million in the midst of the Great Recession (remember while Wall Street has been basically flat for a decade it's been very volatile for the past 2 years so active traders are getting paid. Active hedge fund managers probably dominate this list in my opinion - the top hedge fund man pulled down a cool $4 BILLION in 2009), but the fact that 74 people earned more than the 19 million lowest paid individuals in the US is a shocking statistic.

Again, keep in mind this is really who we are talking about when you hear candidates bickering about extending all or part of the Bush tax cuts - these 74 people making $500 million/year, not the family farmer or the local dry cleaner.

If you feel they reaped some benefits during the past decade under the "temporary" Bush tax cuts and they could pay another 3% of their income (a significant $15 million average in this case) then you might want to consider voting for a Democrat.

If you feel that these people are already taxed excessively - despite the fact that they employ legions of minions from the Big 4 accounting firms to minimize their tax burden - and you'd like to see them continue to pay 36% of their income in tax, then you probably should vote for a Republican.

It's almost election day!

Cheers!

1 comment:

The Artful Blogger said...

Question: Would raising the tax rate on the highest earners force them to leave the US?

It's a fair question. The bulk of the people on this list are Wall St. hedge fund managers. I worked for a hedge fund in a 2 room office in the middle of a corn field in Pennsylvania so yes you can do that job anywhere there is an internet connection. I could really see many of the big funds relocating to tax havens around the world.

However, one mistake many make is assuming these people are paying a high rate of income tax. Many of these people have a substantial portion of their income coming from capital gains which is tax substantially below the income tax rates. Thus, their effective tax rate is actually probably below that of a person making $200k.

Thanks for all of the comments and emails.