The NY Times editors bleat about tax injustice and the need for a Buffett Rule, citing this recent Congressional Research Service study (link). They ignore this study documenting tha tmost "millionaires" (by their definition) are just passing through.
We Thought They Wanted to Be Like Buffett
When Warren Buffett pointed out that the American tax system was so egregiously rigged that he paid a smaller share of his income in taxes than his secretary, very few of his peers chimed in. It was so quiet that one might have thought Mr. Buffett’s case was a fluke. It wasn’t.
The Congressional Research Service found that 200,000 millionaires — almost two-thirds of taxpayers with taxable income above $1 million — paid a lower tax rate (combining income and payroll taxes) than the typical taxpayer making less than $100,000.
This is mostly because the rich make a huge chunk of their income from stocks and other investments, in the form of capital gains and dividends. Those are not subject to payroll taxes and are taxed at 15 percent, lower than the 25 percent marginal rate paid by a family earning wages of $100,000 a year.
This approach relies on a very broad definition of "millionaire", namely, anyone earning more than a million dollars in a particular year (the CRS study looked at 2006). The problem, obvious to anyone not parroting Administration talking points, is that many "millionaires" report one year of high income due to some sort of predictable lifetime event. For example, a retiring executive cashing in ten years worth of accumulated stock options might easily have one-time capital gains in excess of $1 million; or, back in 2006, people could still imagine exceeding the $250,000 exclusion on the sale of a home. In either case, this CRS study will depict them as a millionaire relying on the favorable capital gains rate.
Per this study, which looked at tax returns from 1999 to 2007, roughly 50% of "millionaires" reported income in excess of $1 million just once in that nine year period. Look, that is still a lot of money, but it is not Warren Buffett money nor are we talking about a lifestyle involving private jets, as Obama always does.
Unlike the Times editors I am not so sure that a person who just cashed out and retired and is looking down a twenty or thirty year road of uncertain health care costs with a couple of million in the bank and kids and grand-kids to think about is really representative of what the Times calls the "undertaxed" rich.
LIKE TWO PAPERS IN ONE: By eerie concidence, NY Times reporter Jane Gross has a column today titled "How Medicare Fails the Elderly" making the point that the elderly can spend a lot of money in a hurry on uninsured health care costs:
In the case of my mother, who died at 88 in 2003, room and board in various assisted living communities, at $2,000 to $3,500 a month for seven years, was not paid for by Medicare. Yet neurosurgery, which I later learned was not expected to be effective in her case, was fully reimbursed, along with two weeks of in-patient care. Her stay of two years at a nursing home, at $14,000 a month (yes, $14,000) was also not paid for by Medicare. Nor were the additional home health aides she needed because of staffing issues. Or the electric wheelchair after strokes had paralyzed all but the finger that operated the joy stick. Or the gizmo with voice commands so she could tell the staff what she needed after her speech was gone.
She paid for the room. My brother and I paid for the private aides and bought her the chair and the “talking board.” What would her life have been like without the skilled care she required and the ability to get around her floor and communicate her needs? I shudder to think. But none of this was Medicare’s responsibility.
Yet Medicare would pay for “heroic” care for a woman who was dying of old age, not a disease that could be treated: Diagnostic tests. All manner of surgery. Expensive medications. Trips to the emergency room or the hospital — had she not refused all of them, in the last year of her life. So, in less than a decade, by my low-ball estimate, my mother spent $500,000 of her own money and uncalculated sums from her two children before winding up what she considered, with shame, “a welfare queen.”
Depending on whether her mother collected that $500,000 in savings from a one-time event, she may have been a undertaxed millionaire.