Government transfers provide 90% of income for bottom percentile

This should give you pause.

"As government transfer payments to low-income households exploded, their labor-force participation collapsed and the percentage of income in the bottom quintile coming from government payments rose above 90%."

People experiencing income in the bottom fifth of the US population get 90% of their income from the government. Think about that. And while you're complaining about greedy rich people, remember who supplies the transfers.

"Americans pay $4.4 trillion a year in federal, state and local taxes. Households in the top two earned-income quintiles pay 82% of the tax bill."

But enough is never enough.

The Grumpy Economist: Defining inequality so it can't be fixed (johnhcochrane.blogspot.com) 

 Incredible Shrinking Income Inequality - WSJ

Income Mobility in the U.S. from 1996 to 2005, updated in 2014

The degree of mobility in the overall population and movement out of the bottom quintile in this study are similar to the findings of prior research on income mobility.

• There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period.
• Roughly half of taxpayers who began in the bottom income quintile in 1996 moved
• Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent
• only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers declined over this period. </
• The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
• Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups.

Previous research on income mobility over the past several decades has generally found that about half of those in the bottom quintile move to a higher quintile and also that more than half of households move to a different income quintile within about 10 years.

Report of the Department of Treasury, updated 2008 

 http://reason.com/archives/2014/06/04/income-mobility-myths

Who is middle class?

There is no definition of middle class by the U.S. government.  There are approximately 117 million households in America, 36% of households fall in the poverty range (Under $15 – $35K annual income), 43% of households are between $35K to $100K. 16% are between $100K and $200K and nearly 4% are above $200K annual income levels as of 2009. After 2009, the U.S. Census Bureau confirms that the upper open-ended interval for which to assist in calculating the median income is $250,000, being that is the considered upper class income. So Middle Class could safely be considered above $35K and below $100K annual income levels, which is 43% of American Households.  The Black alone households total 14.7 million. Of that, approximately 38.4% are in the middle class, with earnings between $35K – $100K annually.  Their household income has gone down under Obama.  Because the Census looks at Households, the middle class, if shrinking, is doing so because of single women raising families with no husband. I’m no math whiz, but two incomes equal more than one income in most cases. Marriage of their parents who have finished high school, and have a job, any job, almost guarantees that children will not grow up in poverty. Not growing up in poverty, is probably the single best way to achieve Middle Class status, better than any socialist or government transfer program, which tends to keep people down and “in their place.”

SOURCE: U.S. Census Bureau: Income, Poverty, and Health Insurance Coverage in the United States: 2009, Current Population Reports, Consumer Income

Why there is an income gap

Five people in a household working make more money than one person working part time.

Households with two full-time workers earn five times as much as households in which nobody works.

Here is a summary  (from 2010) of some of the key demographic differences between American households in the bottom and top income quintiles in 2010:

1. On average, there were significantly more income earners per household in the top income quintile households (1.97) than earners per household in the lowest-income households (0.43).

2. Married-couple households represented a much greater share of the top income quintile (78.4 percent) than for the bottom income quintile (17 percent), and single-parent or single households represented a much greater share of the bottom quintile (83 percent) than for the top quintile (21.6 percent).

3. Roughly 3 out of 4 households in the top income quintile included individuals in their prime earning years between the ages of 35-64, compared to only 43.6 percent of household members in the bottom fifth who were in that age group.

4. Compared to members of the top income quintile, household members in the bottom income quintile were 1.6 times more likely to be in the youngest age group (under 35 years), and three times more likely to be in the oldest age group (65 years and over).

5. More than four times as many top quintile households included at least one adult who was working full-time in 2010 (77.2 percent) compared to the bottom income quintile (only 17.4 percent), and more than five times as many households in the bottom quintile included adults who did not work at all (68.2 percent) compared to top quintile households whose family members did not work (13.3 percent).

6. Family members of households in the top income quintile were about five times more likely to have a college degree (60.3 percent) than members of households in the bottom income quintile (only 12.1 percent). In contrast, family members of the lowest income quintile were 12 times more likely than those in the top income quintile to have less than a high school degree in 2010 (26.7 percent vs. 2.2 percent).

Five quintiles, four races, four pillars of success

There are five quintiles the government uses to show economic groups in the U.S. The top quintile (incomes about $94,000+) pays almost 84% of the income taxes. The quintile figure doesn't provide number of earners in a household, and most in that quintile have two  earners, which lower the quintiles may not.

There are four groups tracked--Asian households have the highest income, then white, then Hispanic, then black. There are four pillars holding up the higher and upper middle earning groups--1) marriage, 2) higher education, 3) social capital by which they contribute to their community--local clubs, politics, sports, and 4) organized religion.

There are a lot of sources to check for this information:  The CBO, https://www.cbo.gov/publication/49440 and Charles Murray "Coming Apart" (2012) and  The Heritage Foundation to name a few. http://blackdemographics.com/households/marriage-in-black-america/  The Wikipedia article has a good bibliography, but is about 6-7 years old.

The big lie Obama tells again and again

Another favorite lie of Obama is the BIG ONE--income gap/inequality. Few remember this but Bush took office with the effects of the 1999 recession on his hands; income of the top 1% plummeted well before 9/11. You've probably forgotten because Bush didn't waste a lot of breath blaming Clinton. And the income of the top 1% has been going up since, and has really taken off under Obama.  Have you heard him mention how well they are doing—surely you’ve seen the photos of the parties.

Also, wealthier households are usually married couples and better educated. Why promote education as a solution to poverty if you demonize those whose parents, grandparents and self have finished college? And do the math. Two wage earners with college educations are better off than a single mom who didn't finish high school. There will be a gap!

The biggest loss in wealth in 2008 was from the housing recession. Progressives will argue this to the grave, but it was our own federal bank regulations (the 1977 CRA and its expansion)  intended to help the poor by putting them in mortgages they couldn’t possibly afford and punishing banks if the didn’t, that created that. Blacks and Latinos were hurt the most in the housing collapse. CRA was bad for the poor and bad for the country, and ended up hurting everyone.

Also, people are retiring at a baby boomer rate--that means pensions pay less than jobs and people move down a quintile or two. We certainly did. Our children now have incomes much higher than ours, but it wasn't that way in 2000 when we had two incomes. Boomers also have different work rates and divorce rates than pre-boomers.  Women earned much more than previous generations, and the men earned less. After divorce, they both have less.

Yes, Obama’s big one is the wealth gap—the gap has always been there, but his policies plus factors he had no control over because they began years ago are the reason.  Yes, the federal government discourages marriage and encourages dependence on hand outs, and that’s not a good formula for wealth building.

Are the wealthy getting all the breaks?

So you think the wealthy are getting the tax breaks? You're absolutely right. But they are the ones paying the taxes. It's hard to cut what you don't pay in.

http://taxfoundation.org/blog/cbo-tax-expenditures-eye-beholder

As we roll off the fiscal cliff

Don't be fooled as we roll off the fiscal cliff. It's not about the wealth of the top 1 or 2 percent. The federal tax system is "progressive" and has been for close to 100 years--wealthier people pay taxes at a higher rate than others, but there just aren't enough of them to impact our debt. That plan he dangled during his campaign isn't enough to float the government even 2 weeks. You can't get blood out of a turnip--even the top 20% of households now pay more than 94 percent of income taxes. What he really wants is the wealth of the middle class, that middle bracket (20%) of the 5 quintiles. Now, there's something that really matters, and you all have it, so in this administration it obviously belongs to someone else--our government. (The 2 lowest quintiles--40%--pay no federal taxes--they get money and stuff from the gov't).

http://taxfoundation.org/article/cbo-report-shows-increasing-redistribution-tax-code-despite-no-long-term-trend-income-inequality

The rich pay far more. Is that fair?

"Taxpayers earning at least $200,000 represented 2.8 percent of all people filing tax returns in 2009, according to Internal Revenue Service data. However, they donated 37 percent of the $158-billion in itemized charitable gifts made that year."  The president not only wants to raise their taxes, but he wants to take away “charitable” loopholes.

http://philanthropy.com/article/Does-the-Charitable-Deduction/129212/ .

"There are 133,000 male heads of households and 143,000 female heads of households who make more than $200,000 a year." Obama calls them rich and wants to increase their taxes. Oh my goodness, a gender difference in income--but the female high earners (who need free stuff like birth control from the government) exceed the men.

http://www.csmonitor.com/USA/DC-Decoder/2012/0710/Obama-tax-proposal-Who-makes-more-than-250k-and-are-they-rich-video

I was looking at the table by the CBO of “Share of Federal Tax Liabilities for all Households, 1979-2009” and noticed a lot that wasn’t “fair.”  The top quintile (20%) in 2009 had a tax liability of 67.9% (55.3% in 1979) and the lowest quintile had .3% (2.1% in 1979).   The top 5% had a tax liability of 39.6% (28.1 in 1979) and there is no comparable figure for the bottom 5% because I think it is a negative number.

http://www.cbo.gov/publication/43373

Charles Murray points out the top earners in the United States also tend to be college educated, industrious, married, and participate in a faith family.  And what does Obama reward?  High college debt, sloth, single women and spits in the face of the religious.

http://online.wsj.com/article/SB10001424052970204301404577170733817181646.html

He's a poor step-dad and significant other

Eighty six% of the households in the top 5% are married couple families. Only 19% in the lowest 5th are married couple families. Do you suppose this affects the income gap? You betcha! Households with two full-time workers earn five times as much as households in which nobody works. Median income for households with two full-time earners was $85,517 in 2003 compared with $15,661 for households in which nobody worked. Median income for households with one worker who worked full-time all year was $60,852, compared with $28,704 for those who worked part-time for 26 weeks or less.

Oh, the injustice of it. Two married people who work have higher incomes than people who receive government money provided by the people who work. Not only that, but the median income of working people increased by 13% from 1987 to 2003, but those who don’t work and depend on Uncle Sam only got a 1.4% increase. Indeed, marriage may actually penalize poor people while helping their children (they get fewer benefits, but studies show children do much better with married parents). Both Democrats and Republicans tossed the ball of control back and forth during that time period. And since social programs (far exceeds defense) grew faster than anything else in government during those years, especially under Republicans, do you suppose we could conclude that Uncle Sam is not only a lousy step-dad, he’s not even all that great as a lover and significant other? Source

Dear IRS

I hardly ever buy a T-shirt with text, but this is tax time and I thought this one for the Internal Revenue Service was cute: "Dear IRS: I would like to cancel my subscription. Please remove my name from your mailing."

On or before the first Monday in February, the President of the United States is required to submit to the Congress a budget proposal for the following fiscal year, beginning in October. The Congress reviews it and makes changes, setting its own priorities. In fiscal year 2006 (Oct. 1, 2005 - Sept. 30, 2006) here's what they did with $2.655 trillion (income of $2.407 trillion, deficit of $.248 trillion).

1. Social security, Medicare and other retirement took 36% of the income.

2. Social programs like Medicaid, food stamps, needy families, health research, public health, unemployment compensation, assisted housing and social services got 13%.

3. Physical, human and community development--agriculture, national resources, environment, education, commerce, energy, community development, science, etc. got 12%.

4. National defense, veterans and foreign affairs takes about 23%, most of that for the war on terrorism, or 19% of the government's income, and the rest for veterans, economic assistance to foreign countries, and embassies abroad.

5. Interest on the debt eats up about 8%.

6. Law enforcement and general government gets 2%.

The above percentages are from p. 33 of the 1040EZ booklet, which despite 35 pages, contains no forms. The government figures you will use 26.4 hours ($207 average) to do your taxes--most of that in preparation and gathering information. (p. 32)

Most of the taxes in the United States are paid by the wealthiest income earners--the people in the top quintile. Many people at the bottom receive from the government, they don't pay the government--except gasoline taxes, cigarette and other sin taxes, but those are called "miscellaneous," not income taxes. (This is not true at the local and state levels because even the poor pay real estate taxes, sales taxes, etc.--often far beyond a reasonable percentage of their income). Ohio doesn't charge sales tax on food, but many states do. Now, I've never been in the top group, but for awhile in the 80s and 90s, when we were "DINKS" double income no kids, we did make it to the 4th. Now, being retirees, we're back in the bottom quintile like when we were first married. Income, however, does not mean assets, so therefore, many retirees are very well off because we're in good health, saved when we were younger, sheltered some of our income when we worked, inherited from our parents, or just had good luck.

At my age, true wealth is figured in how healthy you are, your relationship with God, and what is the status and proximity of your social and family network.