Top 2 % in U.S.: neither millionaires nor job creators
U.S. President Barack Obama describes them as “millionaires and billionaires” who can afford to pay higher taxes. Republicans call them “job creators” who need to keep their money so they can hire more workers.
As the Democratic president and his Republican opponents debate whether to extend the George W. Bushera tax cuts for the top two per cent of U.S. taxpayers — individuals earning more than $200,000 a year and married couples making more than $250,000 — their poll-tested phrases obscure the truth about who would be affected. They are two-earner professional couples living on the East and West Coasts, doctors, lawyers, engineers and Wall Street executives. Few are billionaires or earn more than $1 million a year, and most are not employers.
“The two per cent, they’re people who are successful in their professions, but they’re not the absolute rock stars,” said Leonard Burman, an economist at Syracuse University in New York. “There’s a big difference between the 99th percentile and the 99.9th.”
Fewer than one per cent of the U.S. population have annual income of more than $1 million. In the top two tax brackets, slightly more than one-third — 35.5 per cent — were employers receiving business income, according to 2007 figures from the Treasury Department.
The U.S. Senate plans to vote next week on an Obama-backed plan to extend expiring income tax cuts for everyone except these top two per cent of earners. The Republicanled House will vote the following week to extend the cuts for all income levels.
Jon Bakija, an economist at Williams College in Massachusetts, has used tax-return data from 2005 to compile occupational breakdowns for the top 0.1 per cent, the top one per cent and the top five per cent of taxpayers.
“As you go up higher in the income scale, you get a larger share of executives and finance people,” he said.
Engineers, architects and information-technology workers make up 9.6 per cent of the top five per cent of taxpayers and 4.2 per cent of the top one per cent of taxpayers, Bakija said. The top five per cent includes managers, financial professionals, lawyers and medical professionals, though all in lower concentrations than in the top 1 per cent.
U.S. households in the top five per cent are more likely to have two spouses working than those in the top one per cent. Of that top five per cent, 23 per cent have spouses who don’t work outside the home, compared with 31.6 per cent of the highest one per cent and 39.3 per cent of the top 0.1 per cent.
“What you have is a growth in two-earner couples at one end of the income scale,” said Scott Hodge, president of the Tax Foundation in Washington, which favours a simpler tax code with fewer targeted breaks. “You have this huge cohort of people reaching their peak earnings potential.”
Geographically, the taxpayers in the two per cent group are concentrated in high-income states along the coasts. In Connecticut, 3.6 per cent of households would pay higher taxes under Obama’s plan, more than triple the 1.1 per cent in Ohio and the one per cent in Idaho, according to Citizens for Tax Justice, a Washington group that favours raising taxes for top earners.
After Connecticut, the greatest concentrations of households that would be subject to higher rates are in New Jersey, Massachusetts and New York, at 3.2 per cent, 2.8 per cent and 2.6 per cent, respectively. The District of Columbia tops all of them at four per cent. Mississippi and West Virginia occupy the bottom of the list, with fewer than one per cent of households in their states over the threshold.