Greedy Whiners and Misleading Statistics

The March 7th issue of the National Journal asks the question:

President Obama has announced plans to raise income taxes on the wealthy and curb various tax breaks for upper-income Americans. What percentage of income taxes is now being paid by this group, compared with 1986?

According to them, the percentage of income taxes paid by the top 1 percent of earners jumped from 25.75% to 39.4%. The percentage of income taxes paid by the top 25 percent jumped from 76% to 86%. When you put it like that, it sounds like the rich have had some serious tax hikes in the last couple decades.

Before you start sending sympathy cards to Donald Trump, let's take a look at those figures a little more closely.

Tax is a percentage of your income. More income means more tax. And the richest Americans have been taking a larger slice of the income pie. In 1986, the richest one percent earned only 11% of all income. By 2005 they were earning 21% of all income. The top 25% went from collecting 59% of all income to collecting 67.5% of all income.

Let's break that down into numbers that a person like me can wrap their heads around. Let's say that America consisted of 100 people and the gross income pie was 1 million dollars for both years. What would that have looked like in 1986 and 2005?

In 1986

• 1 person would have earned $110,000 for the year
• 24 people would have received about $20,000 each
• 75 people would have received about $5,466.67 each
  

In 2005

• 1 person would have earned $210,000 for the year
• 24 people would have received about $19,375 each
• 75 people would have received about $4,333.33 each
  

In this (admittedly over-simplified) example, in 1986 one person lived well on $110,000 a year while 75 people scraped by on $5,466.67. By 2005, that one wealthy person nearly doubled their income by skimming a little off the top of those who could least afford it.