Post written by Norm Luther, Underwood

 A frequently quoted statistic by those trying to justify the huge disparity in US wealth is that the top 10% pays 70% of federal income taxes.  This is a classic example of a true, but meaningless statistic because this situation can happen with all sorts of income and tax rate scenarios.  These include some with huge income disparities–and also with flat tax rates that are currently popular with Republican presidential candidates. 

 As a simple hypothetical example, this statistic would be true of any population in which 10% each earn $700,000, the remaining 90% each earn $33,333.33, and there is a flat income tax rate of 10%; then after tax, the 10% each take home $630,000 and the 90% each take home $30,000 so the income inequity is a huge $600,000.  (Using a 25% flat rate, closer to current reality, would still create a huge inequity of $500,000 in after-tax income.)  And clearly from this example, if we increase the inequity in income between the top 10% and the bottom 90%, we increase the percentage paid by the top 10%, even with a flat rate that favors the rich and penalizes the poor.  

 Some really meaningful statistics are: (1) From 1935 until 1980, the top income tax bracket rate was at least 70% (90% under the Republican Eisenhower administration), whereas now the top rate is 35%; (2) CEOs made 40 times the average wages of their workers in 1980, whereas it is almost 400 times today; (3) After-tax income of the top 1% grew 275% from 1979 to 2007, compared with 65% growth for the next 19% of the population,  just 40% for the middle 60%, and only 18% for the bottom 20% (recent nonpartisan Congressional Budget Office report) .

 Astoundingly, in 2007 the top 1% owned 42 % of the country’s financial wealth (total net worth minus the value of one’s home) compared with only 7% for the bottom 80% (http://sociology.ucsc.edu/whorulesamerica/power/wealth.html ).

 Occupy Wall Street is indeed right-on!