America’s tax system and the major social programs (Medicaid and Obamacare) are driven by income. The Social Security Administration has put out a report on income in America. The data covers all wage earners (153.6 million workers and the $6.5 Trillion they earned). The following is a pic of the report (link), if you’re working, you’re somewhere on this page:
Let’s start at the top of the pile, those that are making the really big bucks. For example, consider the number of people who made $50m in 2012 (the 0.0001%). There are 166 people in this group. Who are these folks? Basketballer Lebron James made the list, so did actors/performers Robert Downey Junior, Beyonce, Cameron Diaz and Christian Bale. From the corporate side we have Disney’s Robert Iger and Apple’s Tim Cooke.
Who are the wealthy in America? Anyone making over a million bucks a year is certainly on the list. The plus $1M set totaled 119,400 people (0.08%). These lucky few earned a total of $170b (3% of all income). How much should these folks be paying in taxes? Let’s go hog wild and nail them with a tax of 90%. The incremental revenue (they already are taxed at 39.6%) would be $85b, but sadly, that only covers five weeks of Social Security benefits.
The IRS defines ‘rich’ as an individual with annual income of $200k ($250k per couple). This income level marks the 1%:
1.6m workers (1% of total) earned $900b (14% of all income). This is the measure of US income inequality. The 1% earn 14% of the pie. If the federal tax rate were increased to 75% (double current), it would increase revenue for Uncle Sam by about $150B. That does not fill a $1 trillion bucket, and it would be an economic disaster to set tax levels at French rates. Bottom line – the notion that taxing the rich is a solution is all wet.
Now consider the bottom. In the case of Medicaid, the cut off for availability is equal to 138% of the Federal Poverty Level (FPL). For a single person the number is $16,600, for a couple it’s $22,000, for a family of four it’s $33,000. The average income for all individuals/families that might qualify for Medicaid is about $25,000. If you look that up on the SS chart you see that a whopping 46% of all income earners can qualify for Medicaid.
