In this season of giving, the words hurled at America’s wealthiest citizens have been far from generous.
The recent debate over the Obama-GOP tax-cut compromise featured language best described as “affluphobic.”
Sen. Bernie Sanders of Vermont, a self-styled socialist, spent nearly nine hours on December 10 excoriating affluent Americans. Sanders complained to colleagues that “when the rich get richer…they say: ‘I am not rich enough. I need to be richer.’ What motivates some of these people is greed and greed and more greed.” Sanders further filibustered: “Greed is, in my view, like a sickness. It’s like an addiction. We know people on heroin. They can’t stop. They need more and more.”
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Sanders wailed that the top 1 percent of taxpayers (who made more than $380,354 apiece) earned 20 percent of America’s Adjusted Gross Income (AGI) in 2008, according to IRS data analyzed by the Tax Foundation. True. They also paid 38 percent of all federal income taxes. The top 5 percent (with incomes exceeding $159,619) earned 34.7 percent of AGI and paid 58.7 percent of taxes. The top 10 percent (with incomes above $113,799) earned 45.8 percent of AGI and paid 69.9 percent of federal income taxes.
So, do these rich people pay their “fair share?” If not, should the top 10 percent finance 75 percent of income taxes? Eighty percent?
In contrast, the bottom 50 percent of taxpayers generated 12.8 percent of AGI and paid 2.7 percent of all federal income taxes.
High-income taxpayers also cough up state and local levies and often pay taxes on sales, property, capital gains, dividends, partnerships, and corporate income. Their wealth floods public coffers and flows into government programs, many targeted at low-income Americans.
So what? Generosity is a snap when tax authorities demand tribute. How do the rich behave absent government coercion?
“These people who are worth hundreds of millions of dollars,” Sanders stated on the Senate floor, “Maybe they’ve got to go back to the Bible or whatever they believe in understanding that there is virtue in sharing, in reaching out, that you can’t get it all.”
Sanders should appreciate these IRS data:
To be surgically precise, as Ryan Ellis of Americans for Tax Reform notes, an IRS review of Returns with Itemized Deductions (columns CI and CJ) indicates that in tax year 2008, Americans who earned at least $200,000 filed 3,912,225 tax returns or 9.96 percent of that year’s 39,250,369 total returns. This group deducted $72,336,640,000 in charity, or 41.83 percent of the $172,936,002,000 for such deductions that all filers claimed. In short, the top 10 percent of taxpayers paid 42 percent of all charitable deductions, worth $72 billion in 2008 alone.
To understand wealthy Americans’ “virtue in sharing,” consider The 2010 Bank of America Merrill Lynch Study of High Net Worth Philanthropy. Conducted by Indiana University’s Center on Philanthropy and released November 9, this fascinating document (recommended by the National Taxpayers Union’s Andrew Moylan) finds rich people doing what Senator Sanders asked.
This survey included 801 respondents who made at least $200,000 and/or enjoyed at least $1 million in net worth, excluding housing. The average respondent was worth $10.7 million.
Among these multi-millionaires, 98.2 percent contributed to charity, versus just 64.6 percent of the general population. The wealthy typically gave away about 8 percent of their incomes in 2009. This figure has slipped as the economy has slid. In 2007’s survey, the rich donated between 9.3 percent and 16.1 percent of income.
In 2009, 26.8 percent of Americans volunteered with charitable organizations. However, 78.7 percent of wealthy people volunteered — nearly triple the national figure. The average rich respondent volunteered 307 hours. Rather than merely write checks, the average wealthy American last year gave to charity the equivalent of 38 eight-hour shifts.
The Center on Philanthropy’s researchers valued each hour of voluntarism at $20.85. So, the average rich American’s 307 volunteer hours equaled $6,400.95.
“High net worth households play an important role in the philanthropic landscape,” the Bank of America study concluded. “They give between 65 and 70 percent of all individual giving and between 49 and 53 percent of giving from all sources, which includes giving from corporations, foundations, and both living and deceased individuals.”
"While most wealthy people acquire their money legally . . . ."
What do you mean by "legally"? Millisecond trading? Synthetic CDOs? Loan-to-own?
When you think of "wealthy people," do you think of the small shopkeeper or tinkerer who, by dint of superior drive and skills, builds a large business practically from scratch? Or do you think of people who shift paper around and make big fees doing so without creating anything of value (unless you call bubbles "value")?
There are plenty of capitalists who take real risks pumping real money into ventures, most of which don't pan out. Papering these deals is vital. But how about the vast amount of paper that backed the subprime lending bubble? You know, all that paper created before 2005 when Fannie and Freddie came late into the game. What was that all about? Do you understand what a credit default swap is? Ever securitize loans? And you blame the crisis on the poor schlub who believed the Countrywide ad?
When reporting charitable contributions of the wealthy, one must remember that many of these individuals and families have established foundations that do the bulk of the contributions for the wealthy. So the annual IRS statistics from form 1040 are generally understated, as many contributions are not made from personal holdings.
Likewise this may be true when a political figure releases his/her tax return that reflects a small amount of charitable contributions.
Don't forget that these people were bailed out to the tune of 3/4 Trillion dollars by the taxpayer. Why is it that government help for the poor (welfare, unemployment insurance, etc) is considered as a hand out but bail out for the rich is considered an obligation.
A fine article. It amazes me that people like Bill Gates, his father, and Warren Buffett advocate for higher taxes on "the rich" even though Mr. Buffett was so impressed with Mr. Gates' philanthropy that he pledged his fortune to the Gates Foundation instead of setting up his own!
If Mr. Gates and Mr. Buffett really think that the government can do a better job than they can of spending their billions on welfare, then they should wind up the foundation and give the assets to the government. I'm sure the IRS would accept it.
Income taxes are not the only federal taxes people pay. When you include payroll taxes federal tax loads are much more equalized between the top 4 income quintiles.
Top earners give a smaller percentage of income than those making the least amount. They give more because they have more. Also, much giving by the super-rich goes to various cultural charities - such as universities or museums - which do serve a valid and important purpose but also buy the giver status. When an extremely wealthy person gets a building in a university named after him or her the gift is not necessarily a sacrifice. It is a purchase of social standing.
