Where Are the Millionaires Who Are Paying the Taxes?

We hear a lot, these days, about the desirability of taxing the wealthy and leaving the lower income brackets out of the tax increase. But we need to also think about the little problem we have of paying for the activities of the government.

In 2007, 390,000 tax filers reported adjusted gross income of $1 million or more and paid $309 billion in taxes. In 2009, there were only 237,000 such filers who paid $178 billion in taxes; that was a decline of 39% in the number of millionaires. Almost four of 10 millionaires vanished in two years, and the total taxes they paid in 2009 took a drop of 42%.

The millionaires who are left still pay a mountain of tax. Those who make $1 million accounted for about 0.2% of all tax returns but paid 20.4% of income taxes in 2009. Those with adjusted gross income above $200,000 a year were just under 3% of tax filers but paid 50.1% of the $866 billion in total personal income taxes. This means the top 3% paid more than the bottom 97%. Yet the 3% are the people that President Obama claims do not pay their fair share. Before the recession, the $200,000 income group paid 54.5% of the income tax.

Government has discovered that the easiest way to produce income equality is to destroy trillions of dollars of wealth owned by a small proportion of the population. However, those destroyed dollars are taken out of the investment pool of the country leaving everyone out of luck. Those dollars would otherwise be useful to increase jobs. Everyone loses, but the rich lose relatively more than the poor and the middle class. By that measure, if few others, Obamanomics has been a raging success.

This blog post was excerpted from the Wall Street Journal 17 August 2011, page A14.