Obama and income inequality

Source:  http://elsa.berkeley.edu/~saez/saez-UStopincomes-2012.pdf

Plain English analysis:  http://money.cnn.com/2013/09/15/news/economy/income-inequality-obama/index.html

Will the real party of the rich please stand up?

The release of more of Mitt Romney’s tax returns on his campaign website recently is sure to spark a new discussion on wealth and politics. A letter from Romney’s accountants notes that the Romneys paid an average federal tax rate of 20.2 percent between 1990 and 2009. In 2011, the Romney’s paid an effective rate of 14.1 percent on a taxable income of $13.7 million. Romney’s income was mostly from investment returns which had already been taxed as the corporate income. The U.S. has the world’s highest tax rate on corporate income.

Democrats have long accused the Republicans of being the party of the rich and have attacked Romney’s nomination on the grounds that he would cut taxes on the wealthy and raise them on everyone else. In reality, both Romney and President Obama are millionaires, as are almost half of the members of Congress.

According to the Center for Responsive Politics 47 percent of congressional representatives are millionaires. In the current term, Republicans have 110 millionaires in the House of Representatives compared with 73 Democrats. In the Senate, Democratic millionaires outnumber Republicans 37-30. These numbers are probably a reflection of the fact that the Republicans hold a majority in the House while Democrats control the Senate.

In Georgia, 11 Alive reports that three of the top four representatives are Republican. Rep. Tom Price (R-6) is the wealthiest, followed by Senator Johnny Isakson and Rep. Phil Gingrey (R-11). At fourth is the wealthiest Georgia Democrat, Rep. John Barrow (D-12). Since 2010, Republicans hold eight of Georgia’s 13 House seats and both Senate seats.

For the poorest Georgia representatives, the reverse is true. Rep. Lynn Westmoreland (R-3) is the poorest Republican. Below him are Democrats John Lewis (D-5), Hank Johnson (D-4) and Sanford Bishop (D-2). Interestingly, 11 Alive notes that Johnson has a net worth of zero and Bishop has an estimated net worth of negative $159,496. Bishop’s debt stems from legal bills from a GBI investigation into possible nepotism according to a report from Macon’s WMAZ. Bishop was cleared of wrongdoing.

CNN exit polls from 2008 show that it was Barack Obama who won the millionaire vote that year. Obama won the majority of voters who earn more than $200,000 by a margin of 52-46 percent. Obama also won majorities of voters who earn less than $50,000. John McCain won most of the middle class vote however.

According to CNN’s polling from 2004, George W. Bush handily won both the middle and upper class vote. John Kerry only prevailed with voters who earned less than $50,000. Polling Report shows similar results from 2000. Al Gore won the lower income vote while upper and middle class voters went for Bush.

In general, wealthy voters seem to alternate between the Republicans and Democrats while the Democrats always win lower income voters and the Republicans win the middle class. The last time that a Democrat won the middle class was in 1996 according to CNN when Ross Perot acted as a spoiler and stripped votes away from Republican Bob Dole. The wealthy voted for Dole that year.

A similar result was found in 1992 when Clinton faced George Herbert Walker Bush and Ross Perot. Bush and Clinton split the wealthy vote at 41 percent each according to CNN, but Clinton won both lower and middle class voters.

An interesting experiment is to correlate the ten wealthiest zip codes with political preference. Of these, six are represented by Democrats and four by Republicans. The wealthiest zip code in the country is represented in Congress by Henry Waxman, a California Democrat. The wealthiest Republican zip code is represented by Allen West of West Palm Beach, Fl. In one St. Louis, Mo. zip code ranked eighth on the list there are three representatives. Two Democrats represent half the zip code while one Republican represents the other half.

In contrast, when the poorest zip codes are examined, Democrats represent seven of the bottom ten. The poorest zip code in the country is in the Andover, Mass. district of Democrat Nikki Tsongas.

When the entire congressional district’s wealth is considered, the results are much the same. MeasureofAmerica.org lists the top five congressional districts by income. Of these, the top three are Democratic. The fourth and fifth place districts are Republican.

With respect to the current presidential election, recent polling by Gallup supports the historical trend of low income voters supporting Democrats and Romney wins voters who earn between $48,000 and $99,000. Obama wins a slice of upper middle class voters from $90,000 to $120,000. Currently, Mitt Romney is the favorite of voters who earn more than $120,000 with an almost double digit lead.

In general it can be said that the Democrats have a lock on lower income voters while Republicans almost always win the middle class. Neither party is the exclusive province of wealthy voters, however. The wealthy vote for different goes for candidates of different parties and candidate of the wealthy does not always win. It can be said however, that most of the wealthiest congressional districts do vote Democrat.

Originally published on Examiner.com

Occupy Wall Street’s “One Percent” myth

One of the pervasive myths of the Occupy Wall Street movement is that one percent of the population controls 99 percent of wealth. Conversely, the occupiers, who claim to be among the other 99 percent, are left with only one percent of the nation’s wealth. The truth is available in online data from the U.S. government.

According the IRS, there were 2,196 people with a net worth of more than $1.5 million each in 2004, the most recent year for which data was available. Their combined net worth was $9.7 trillion. According to the 2004 edition of the CIA World Fact Book, the GDP of the United States in 2004 was $10.9 trillion. This works out to only about 88% of the GDP for the top seven percent of the population (using a census estimate of 308,745,538 Americans in 2004). This is a far cry from one percent controlling nine percent of the total American wealth. This is even assuming that all of the wealth of the top seven percent is in the United States when in reality much of it is probably international.

The census data also lists individuals with more than $1.5 million in net worth by state. The 2004 data reveals that Georgia was home to 56 of these high net worth individuals. Ironically, most of the states with the largest numbers of high net worth residents are blue states. Of the states that were home to more than 100 high net worth residents, three states, California, New York, and Illinois are reliably Democratic. One state, Florida, is a swing state, and one, Texas, is an established red state.

The statistic is harder to disprove when it is applied to the world at large because many countries simply do not generate reliable statistics. However, a World Bank poverty report from 2008 shows that poverty rates around the world have been falling since 1980. If the world's poor are getting richer, it would seem that they would also be controlling a larger share of the wealth.  The report also shows that most of the world’s poor live in underdeveloped and authoritarian regions of the world, particularly Africa, central and southeast Asia, and the former Soviet bloc countries of Europe.

Similarly, in the United States the poverty rate has remained consistently between 12 and 15 percent for the past half century according to census data. In most cases, Americans do not stay in poverty. As the St. Louis Fed pointed out in a 2010 article, there is ample movement between income classes in the United States. Americans might be in poverty after graduating from college or while changing jobs or careers, then quickly move to an upper income bracket. Ironically, the U.S. poverty rate was at the highest level in 20 years as the Great Recession, slow economic growth, and high unemployment took their tolls.

The protesters at Occupy Wall Street, Occupy Atlanta, and the other encampments around the country also ignore an important fact: That the top one percent of income earners pays more than their share of taxes. According to IRS data from 2008, the most recent year available, the top one percent of income earners pays 38 percent of all income taxes. The top ten percent of earners pays 70 percent of all taxes. The bottom 50 percent of earners pay only three percent of taxes. By this measure, the U.S. tax system is one of the most progressive in the world.

If the occupiers believe that millionaires are the root of all that is wrong with America, then they should be encouraged by statistics reported in the Wall Street Journal on August 17, 2011. The number of millionaire tax filers declined by 39 percent from 2007 to 2009. The number of filers with more than $10 million declined by 55 percent. The tax contributions of these demographics declined accordingly as well as the recession hit the wealthy. There is some speculation that the number of millionaires may be on the rise as stock markets recover, however.

In the end, even if the one percent statistic is false or unverifiable, it is still a potent propaganda tool. It is easy to understand, easy to communicate, and ubiquitous. As one of the Occupy Atlanta activists put it, regardless of whether the statistic is verifiable or not, he believes it because it should be “obvious” from “what you see.”

As published on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/the-occupy-movement-s-one-percent-myth