Would you choose being wealthy and paying income tax or making little enough to escape income tax? Americans have a far greater chance of being in the latter group.
Sometimes there are statistics that you really need to meditate on for awhile. They open the door to critical thinking about American society. They shed light on a host of hot political and public policy issues. This is especially true for rich versus poor issues, taxes, justice and equality. First, note the number of households in the United States: now at 115 million, which equates to an average of 2.6 people per household.
Now, think for a few moments and guess the answers to this question: What fraction of households have assets of $1 million or more and what fraction will pay no federal income tax for 2009?
Take a moment, think seriously about what these two fractions might be. To have net assets of $1 million or more certainly signifies people at the top of the economic ladder, but is a far greater number than the superrich, because a million bucks is not what it used to be. A lot of ordinary people seeing themselves as middle class, but making good incomes and probably older, even with lower house values, can have wealth at this level.
And to pay no federal income tax certainly covers people at the bottom of the economic spectrum, but not necessarily just the very poor. They too may see themselves as middle class or, for some, the working poor. For example, for 2009, a family of four with two children under 17 could have made $50,000 and escaped paying any federal income tax because of various tax credits and other benefits. Many two income households could avoid paying federal income tax, because of low but rather typical salaries.
Here are the answers to the above question. Households with $1 million or more in net assets number just 7.8 million or 6.8 percent of the national total. Households that will pay no federal income tax for 2009 number 54 million or 47 percent of the national total.
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