Growls

At the American Thinker today, Randall Hoven writes: “Class warriors got what they wished for in the first year of the Obama presidency. Now the 2009 tax return numbers are out . . . and yes, they do show that same pattern.” See also yesterday's Growls, which discussed who pays income taxes for tax year 2008.

In Hoven’s article today, he focuses on tax return data for 2007 and 2009, which was recently published by IRS’ Statistics of Income Division. Hoven notes that comparisons between those two years capture the depth of the Great Recession. He writes:

“The main reason federal revenues were down was that personal incomes were down. Total adjusted gross incomes (AGI) less deficits declined $1.1 trillion, or 12%. However, due to our progressive income tax, the percentage decline in taxes collected was even greater: 22%.

“You see, when you get rid of rich people, like class warriors want, you also get rid of the taxes they used to pay. Of the $250-billion drop in personal income taxes, $175B (70%) was due to declines in incomes over $200K. No rich people, no taxes from rich people.

“The chart below shows the total incomes of those making over $200K and over $1M per year from 200(7) through 2009. The total income on those making over $1M was cut almost in half from 2007 to 2009.

“In the Great Recession, the "rich" suffered the most. (For convenience, I use the term "rich" loosely here, simply meaning higher incomes in a given year, not wealth.). The tables below show how the number of "rich," their incomes, and taxes collected from them all declined. These tables also show that the higher the income group, the greater the decline in income and taxes on that income.”

I encourage you to take a minute and look at the three tables in Hoven’s article, i.e., total number of returns, total income (AGI less deficit), and total tax. Let’s take a brief look at some numbers, however:

• Total number of returns. From 2007 to 2009, the number of returns with AGI over $1M dropped by just over 155,000, a drop of 40%. Returns with AGI over $200K dropped 14% while returns with AGI under $200K dropped 1.8%.

• Total income. From 2007 to 2009, total income of those with AGI over $1M dropped by 48% while total income of those with AGI over $200K dropped 31% and 1.5% for returns with AGI under $200K.

• Total tax. From 2007 to 2009, the total tax paid by those with AGI over $1M decreased by 43% while the total tax of returns with AGI over $200K dropped 29% and those with AGI under $200K dropped 15%.

Hoven ends the article saying:

“I can think of two ways to solve the dilemma, if you call lack of federal revenue a dilemma.  (1) Create more rich people.  (2) Raise tax rates on those making under $200K.  Wow, class warriors aren't going to like those choices.

“After all, raising taxes on those making over $200K, as President Obama constantly urges, does no good if no one is making over $200K, as all of Obama's other policies constantly promote.

“It's a conundrum.”

A very informative article, Mr. Hoven. We’ll write more about tax year 2009 tax returns so revisit Growls often.