Having Your Cake and Eating It Too

I wanna be a billionaire so f***ing bad

Buy all the things I never had

Uh, I wanna be on the cover of Forbes magazine

Smiling next to Oprah and the Queen

                                                            - Bruno Mars

The WSJ had an interesting story on how tax-avoidance by the wealthy is far larger than previously thought. A study by IRS researchers and academic economists estimates that the top 1% of households fail to report about 21% of their income, and unreported income could be twice that for the top 0.1%. It's good to be a billionaire.

Referencing the study, the IRS Commissioner recently asked Congress for more resources contending that each additional dollar spent on tax enforcement could yield $5-$7 in revenue and result in perhaps as much as $1 trillion of additional collections over a decade, without raising any taxes. 

One of the co-authors of the study is Gabriel Zucman, a leading economist on income equality. His research reveals the striking disparity in income distribution in the U.S. starting in the 1980s. Looking at average annual real income growth rates (1.4%) between 1980 and 2018, the median American's income grew by less than 0.5% per annum while the top 0.001% group's income shot up by 6% per annum. Notice prior to the 1980s, results were very different--average income growth (2%) was fairly even across all income percentiles; in fact the income of the richest Americans actually grew at a slower rate (1%) than that most of the population (click chart below to enlarge). 

Next, the chart below shows just how tax rates have changed by income groups over the last 70 years. In the '50s, '60s and '70s the highest-earning Americans paid significantly more taxes--shockingly more, like Nordic-countries more. The top 400 richest Americans had a marginal tax rate of 70%. But over the last 20 years, and by 2018, the richest Americans have effectively paid less taxes than working class Americans!!

So, through a variety of laws, tax-shielding strategies and offshore accounts the one percent get to have their cake and eat it too! I wanna be a billionaire so f***ing bad...