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Posted: June 01, 2012

The Economist: That pesky 1 percent

Tucker Hart Adams

Back in the dark ages when I was in college (that would be the 1950s), our professors used to lament the fact that we didn’t protest and demonstrate like European students did. Clearly we were inferior when it came to having a social conscience. I’ve often wondered what they thought after the changes the 1960s brought.

Occupy Wall Street certainly brought out a diverse group of demonstrators – everyone from scruffy types who looked like they’d never held a job to gray flannel suits to the homeless. Most didn’t have a lot of staying power – when the weather got cold they packed up their down sleeping bags and went home – but now that spring has arrived they’ll be back.

I think it is fine to complain about the huge salaries a few executives receive. As I’ve said before, no one is worth tens of millions a year. But before we move back onto the sidewalk for a summer of subversive disruption, perhaps we should take a look at exactly who comprises the 1 percent.

According to the most recent Internal Revenue Service data, it was anyone earning more than $343,927 in 2009. (Other, less dependable but more recent data put it as high as $516,000.) Now, I’ve never earned $344,000 in a year, although I’ve voted salaries that high for the CEOs of companies for which I served as a director. I don’t think it is an outrageous amount for a job that consumes one’s life 24/7 and imposes a huge level of responsibility for thousands of jobs and incomes and product safety for millions.

Or look at it another way. After adjusting for inflation, who are the 1 percent? According to the most recent IRS data, it was anyone earning more than $360,603 in 2011 dollars.

Even at the peak of the boom in 2007, the cutoff point in inflation-adjusted dollars, $460,433, was below 1986. It was much lower during the Great Recession in 2009.

The 1 percent receives about 21 percent of gross income but they pay 40 percent of all federal income taxes and 21 percent of total taxes, including payroll, state and local taxes. They would pay far more if the Social Security tax were imposed on all income (as I think it should be), not just the first $110,000. That’s one reason Warren Buffett pays a lower tax rate than his secretary.

One third of the hated 1 percent are executives in non-financial firms, 16 percent are in medicine, 14 percent are in finance and 8 percent are lawyers. There is also a smattering of engineers, entrepreneurs, scientists, professors and celebrities from sports, arts and the media.

My question to the Occupiers is, "Why should we limit our discussion to the 1 percent in America?" Shouldn’t we be protesting the amount of money that goes to the top 1 percent in the world, not just the U.S.? Sounds reasonable to me.

Who would that be? Anyone earning more than $34,000 a year. Ooops, got me on that one. In fact, since median per capita income in the U.S. is about $20,000 ($51,914 for an average household of 2.59 people), it puts most of us in the 1 percent. We are getting way more than our "share" and live at a level of unbelievable luxury for much of the world’s middle class, who may earn as little as $12 a day ($4,380 a year).

Perhaps I’m naïve or the world has changed, but it seems to me that America is about equality of opportunity, not equality of outcome. It’s fine to protest; we were too complacent in the 1950s. It’s even fine to occupy City Park for a while, as long as it is done responsibly without trashing the place and scaring off the tourists.

But we need to remember that it is the rich protesting against the richer, not the downtrodden poor protesting a tiny group who has taken everything from them. I, for one, am glad there is a 1 percent and a 10 percent who pay such a large chunk of the federal income tax that almost half of Americans don’t have to pay any. Including, I would guess, a large percentage of the Occupy Wall Street protesters.

Tucker Hart Adams, president of the Adams Group, monitored and analyzed the Colorado economy for 30 years. She can be reached via her website, coloradoeconomy.com.

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Readers Respond

P.E. – Talking points from the Heritage Foundation aside, obesity cuts across race, class and gender. Also, by dismissing the fact that a portion of the U.S. poor has access to appliances ignores an important issue from the discussion of poverty. Namely, electronics and household appliances are not luxuries, but necessities for living in a developed country like ours. Children today won’t do well in school without access to a computer or internet. Parents can’t find a job and do well at work without access to transportation. Households won’t function well without: A/C in warm climates; appliances like microwaves or refrigerators (for modern food preparation and storage); and even a TV for keeping connected in some way to the world. By Tony P. on 2012 06 06
Lisa, The metric you want is PPP (Purchasing Power Parity). The US has one of the highest standards of living by this or any other standard. We also have: highest life expectancy and highest rate of survival of most cancers Many "poor" in the US are obese - they are getting not only all the food they need, but then some. The US "poor" also have color televisions, cars, air conditioning, and electricity and hot and cold indoor plumbing. These are all luxuries that most of the world's population does not enjoy. Instead of creating artificial class distinctions, driving a wedge between people, and using hateful, divisive rhetoric - you and President Obama should think about what is required to help lift everyone up. But all you want to do is talk about how to tear others down. By Publius Etiam on 2012 06 05
Would like to see an article addressing the transfer of wealth from the U.S. middle class to the 1%. Also, re this article, the cost of living is also higher in the U.S. A better comparison would be to calculate the amount of money needed to live a median standard of living in a given country, and then calculate that amount's share of median income for that country and compare across countries. Re Mr. Baker's comment: you're ignoring the fact that the "rich", in order to maintain their power and control, have stacked the legislative deck against the middle class. It's the best Congress that money can buy. You're either rich or gullible. By Lisa H. on 2012 06 04
My aspiration is to be in the 2%. There I could enjoy a comfortable home - perhaps even a second home, drive a late model performance car or SUV, load up a couple of carts at Costco each month, take luxury vacations, send my kids to top schools, etc, all while locking arms with my brothers and sisters in the 0 – 97% against the evil 1%. A bas les aristos! By Matthew Lewis on 2012 06 04
Very well said ! Funny thing about an income bell curve. . . there will ALWAYS be a 1% !! You can bump them off and take their money, but then there's a new 1% who have more than you. Unless we have total income equality. . .to which I quote Archie Bunker who said "WHAT GOOD IS WORKING HARD ALL YOUR LIFE IF ALL YOU GET IS EQUAL ?" By Tom Balla on 2012 06 04
"I think it is fine to complain about the huge salaries a few executives receive. As I’ve said before, no one is worth tens of millions a year." Why do the people who complain about business executive pay - like you - never say a dirty word about the even higher salaries many sports figures make? Because they like watching sports. I see this double-standard applied all the time, even though sports merely entertains, while business creates real material value. Obviously the boards of these corporations think the executives are worth that. And it's their choice. It neither your business nor mine how some private corporation chooses to pay its employees. Fortunately, this isn't the United States of Tucker Hart Adams Gets To Tell Everyone What To Do. By Jawaid Bazyar on 2012 06 04
Great article and an interesting slant to the conversation. Often when I ask my liberal friends what they define as rich and how much is too much, it comes down to anything more than they make. I enjoy asking "When was the last time you got a job from a poor person?" By Steve Baker on 2012 06 04
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