Alexandria Ocasio-Cortez was in the midst of a long Twitter exposition the other day about wages and taxes and her adjustment from being a waitress relying on tips to making a congressional salary of $174,000 a year when she made a provocative statement about how many rich people she’d like to tax.
“When we say ‘tax the rich,’ we mean nesting-doll yacht rich. For-profit prison rich. Betsy DeVos, student-loan-shark rich. Trick-the-country-into-war rich. Subsidizing-workforce-w-food-stamps rich. Because THAT kind of rich is simply not good for society, & it’s like 10 people.”
First of all, don’t get distracted by Ocasio-Cortez’s really interesting description of wealth. Definitely don’t click on this video about super yachts or this story about for-profit prisons or this fact-check about Amazon and food stamps. This is a story about tax returns.
The New York freshman has bold plans to reorient the US economy around climate change and social justice. To pay for that, she wants to raise taxes on the very wealthy, who would see a tax rate of 70% on everything they make over $10 million. (Everything under $10 million would be taxed at lower rates.)
She immediately got dinged for it, because it’s not “like 10” people. But her point – that the merely well-off don’t have to be afraid of her, or the Green New Deal, or “socialism” – is sound, because not very many people make more than $10 million a year.
Turns out the IRS publishes exactly how many. In 2016, the most recent year for which information is available, the IRS estimated there were 16,087 tax returns claiming income of $10 million or more.
The vast majority of those returns are for married people filing jointly and for households, so those returns represent more than 16,087 Americans. But that’s nowhere near even 1% of the 150,272,157 total tax returns filed that year.
The total income reported on these top returns was $482,067,421,000. So about 16,000 returns representing about half a trillion dollars of income. They paid a combined $121 billion in taxes.
For comparison, 11.7 million returns reported between $75,000 and $100,000 in income. They combined to pay $108 billion in income tax.
A small number of the top earners – 555 of them – even took the standard deduction!
But at the $10 million-and-up income level, taxes are essentially a sport, according to US President and gleeful tax-avoider Donald Trump. (The IRS data is what the New York Times used to deduce that Trump declared more in losses than any other US taxpayer and didn’t pay income taxes in most years during a 10-year period in the ‘80s and ‘90s.)
Some are better at the game than others. Of the 16,087 returns reporting $10 million or more income, 16,047 reported taxable income. That suggests 40 tax filers who said they had $10 million or more in income also said they had no taxable income.
Income is not always the same as wealth, however.
Massachusetts Democratic Sen. Elizabeth Warren has noted this with her proposal to place a new annual 2% tax on assets more than $50 million and an additional 1% on assets over $1 billion.
It’s not clear if such a tax on assets would be constitutional, however, and it’s also not immediately clear how the value of assets would be calculated. Trump, for instance, has bragged about the value of his golf courses but then claimed they were worth far less for property tax purposes.
You can imagine the same kind of issue coming to bear if Warren’s asset tax were to be enacted. Trump, for instance, has been accused of inflating his worth to get on the Forbes billionaire list.
The data company Wealth-X tries to track billionaires and according to their recent annual census, more than a quarter (28.8%) of the world’s billionaires live in the US.
In total, they say 705 billionaires lived in the US in 2018 and they had a combined total wealth of more than $3 trillion. But they’re clustered in cities, according to the group, and San Francisco has the highest concentration.
One in every 11,612 San Franciscans is a billionaire. They could, theoretically, brush elbows with one of the city’s approximately 7,000 strong homeless population.
And California has already benefited from the wealth concentrated in the state – in much the way Ocasio-Cortez and Warren envision.
In 2007, for instance, when 16 Google employees cashed out $3.7 billion in stock, the state netted an unexpected $380 million windfall. Then-Gov. Arnold Schwarzenegger used the money for roads and classrooms, according to reports at the time.
The federal government, however, recently cut taxes substantially. That means those in the top income brackets will get to keep more of their income unless, or until, an Ocasio-Cortez-style tax plan is implemented.