October 27, 2000

October 27, 2000 | Commentary on

The 1 Percent Solution

So who are these cads, this "wealthiest 1 percent of taxpayers," anyway? We heard a lot about this select group of villains in the presidential debates. Indeed, certain politicians almost seem to hold their noses, their voices dripping with disdain, as they deplore the notion of extending any tax relief to those people. Which begs the question: Who are they? 

The One Percenters aren't what you'd expect-guys who name their houses, or trace their roots back to the first-class cabin on the Mayflower, or know what quail eggs taste like. In fact, most seem pretty ordinary. The typical top-1-percent taxpayer is about 48 years old and works an average of 44 hours a week, according to the Census Bureau and the Internal Revenue Service (which knows a thing or two about rich people). 

About a third of the 1.18 million One Percenters are executives or managers, another third are professionals, and about 10 percent are in sales. About 8 percent are jobless, which means they're most likely wealthy retirees. Of the $75 billion reported as charitable gifts in 1995, this one-out-of-a-hundred donated $19 billion, roughly $1 out of every $4 given nationally to colleges, hospitals, churches and synagogues, medical research and similar organizations and activities. All well and good, but let's get down to it: 

How much do you have to make per year to be a One Percenter? $10 million? $5 million? $1 million? Not even close. Try $208,000-which, if you think about it, is well within reach of a lot of folks, especially dual-income professional couples who invest wisely. And I'm not talking about couples who live in Silicon Valley or Washington's Georgetown or New York's Upper East Side. An experienced lawyer or other "over 40" professional with a graduate degree in the Houston or Dallas-Fort Worth areas, for example, has a median annual income of about $115,000. So you don't have to be a millionaire to claim membership in the top 1 percent club. But being richer doesn't necessarily make life easier, especially under the current tax code. 

Contrary to populist belief, One Percenters actually pay more in taxes than others and have done so for years. And while liberals have long derided the notion that tax cuts lead to more tax revenues, experience proves otherwise. When President Reagan cut the top income tax rate from 70 percent in 1980 to 28 percent in 1988, the tax burden of the top 1 percent increased from 17.6 percent of total taxes to 27.5 percent. Today, the top 1 percent pays about 30 percent. Two Percenters pay a lot, too. So do Three, Four and Five Percenters. In 1998, the top 25 percent paid 80 percent of the total tax burden, according to the Tax Foundation, a Washington-based research group. Even more sobering, the top half of all taxpayers (with taxable incomes exceeding $100,000) pay 95 percent of all state and federal taxes. 

At the risk of sounding politically incorrect, perhaps it's time we realized that the top 1 percent of taxpayers are at least as deserving of tax relief as any other "Percenters." Without them, after all, there wouldn't be a surplus to argue about.

Edwin J. Feulner, Ph.D. is president of The Heritage Foundation, a Washington-based public policy research institute.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
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