Man Without Qualities

Thursday, June 26, 2003

Misidentifying The Rich

Does the number "400" strike the reader as somehow "natural" or "significant" in an economic context? No?

Has the reader ever considered - say - the "Forbes 400" of richest or biggest this-or-that to be a number chosen on the basis of more than a magazine marketing or promotional program and, possibly, the number of lines of print that can fit on a magazine page? - that is, as something having real significance. No?

Well, then the reader has no prayer of writing New York Times front page headlines or articles - because to the New York Times it matters what the 400 top-earning Americans are paying in federal income taxes - even to the point of misidentifying them as the "400 wealthiest taxpayers."

The 400 wealthiest taxpayers accounted for more than 1 percent of all the income in the United States in the year 2000, more than double their share just eight years earlier, according to new data from the Internal Revenue Service. But their tax burden plummeted over the period. The data, in a report that the I.R.S. released last night, shows that the average income of the 400 wealthiest taxpayers was almost $174 million in 2000. That was nearly quadruple the $46.8 million average in 1992. The minimum income to qualify for the list was $86.8 million in 2000, more than triple the minimum income of $24.4 million of the 400 wealthiest taxpayers in 1992.

What the Times is misreferring to here is "income" not "wealth." Unlike Forbes, the IRS does not even systematically collect data on "wealth" - there is no "Federal Wealth Report Form." It is commonplace for some of the very wealthy - such as, for example, Pinch Sulzberger - to have rather low income in comparison to their wealth, especially low taxable income. For example, Bill Gates probably has rather low income in comparison to his huge wealth. Warren Buffett is continually insinuating that his income is low - but he owns much of Berkshire-Hathaway, and every time its stock price goes up his wealth increases. But such appreciation and wealth-accumulation alone is not "income." In fact, the "double taxation" of dividends discourages wealthy owners of public companies from converting their wealth into income through distribution of dividends. Of course, owners of private companies that are formed as limited liability companies and the like already do not face "double dividends" taxation.

Congress has just reduced the "double taxation" of dividends even for public companies. So, in the near future, it is likely that some of the wealthy will convert more of their wealth into income. So what? Does it matter much from the standpoint of social equity if a person holds wealth personally or indirectly in "corporate solution?"

The Times does show at least some post-Rainesian honesty by including some inconvenient if partial disclaimers. For example:

While the sharp growth in incomes over that period coincided with the stock market bubble, other factors appear to account for much of the increase.

But, then, the Times also says that "big increases in executive compensation thrust corporate chiefs into the ranks of the nation's aristocracy."

Aristocracy? Is Robin Williams, for example, made an "aristocrat" if he makes a largish set of movies in a given year for $20 Million a pop? And doesn't one use "aristocracy" to suggest a person who does not work for his or her income? If the Times is suggesting here that corporate managers are not providing full value in services for thier compensation, why doesn't the article say that instead of hiding behind a charged but ambiguous term like"aristocracy?"

And then there's this:

Those numbers can be read to show that the wealthiest, as a group, carried a disproportionate share of the overall tax burden — 1.6 percent of all taxes, versus just 1.1 percent of all income — evidence that all sides in the tax debate will be able to find ammunition in the data.

But the most important disclaimer is not included: There is no significance to the "top 400," certainly not enough to make it to the front page of a serious newspaper, however the "wealthy" are determined.


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