How much does the Government rely on “We the People” to finance it’s everyday functioning? In the chart below you’ll note that the two largest sources of income are Personal income tax (blue) and Social Security/Medicare (yellow). Income taxes garner about $1.25 Trillion and SS another $1 Trillion. That’s $2.25 Trillion of a total $2.6 Trillion, more or less. That means 87% of federal revenues are paid by you and me.
So, what happens if unemployment goes from 4% to 10%? That’s a decrease of 6% in the two largest sources of income, more than that because Excise taxes also go down as consumer spending goes down. So the overall income is about 7% short.
Next is a graphic of income distribution in the US. If the incomes were spread across a football field with the lowest at one goal line ($0) and the highest at the other, a middle class family making $40k a year would find themselves at the 40 yard line. That is the median income where ½ make less and ½ make more. That’s a stack of $100 bills 1.6 inches high. Way down at the 95 yard line family income reaches $100k/year, or a stack of $100 bills 4 inches tall. At the 99 yard line the income is $300k, a stack of bills one foot tall.
One foot from the goal line (.33% of income earners) the number is $1 Million, a stack of bills 40 inches high. At 6 inches from the goal line (.5% of incomes) the stack of $100 bills is as tall as a Giant Sequoia tree, $100 million.
And it goes up from there. In the last inch (.1% of incomes) the stack of bills is one kilometer (.6 miles) high, $1 billion. There are 400 billionaires in the U.S. And it still goes up from there. If Bill Gates’ income was represented by a stack of $100 bills that stack would be almost as tall as Mount Everest. Bill Gates can’t match the Walton Family, heirs to the Walmart fortune.
We can assume that everybody from the 30 yard line to the 95 yard line pays from 15% to 35% in income taxes. At the $ million mark virtually all of the income is from interest, investments and other stock/bond income. This income is considered capitol gains and the highest tax rate paid is 15%.
Taking into account the differential in tax rates for the uber-wealthy vs. the working class the effect on Federal income from unemployment becomes even more drastic.
Eventually the house of cards will fall and no amount of shoring up the wealthy and the corporations will make any difference.
http://www.youtube.com/watch?v=woIkIph5xcU The L curve of incomes.
http://www.marktaw.com/culture_and_media/TheNationalDebt.html National debt and revenues (original sources included at the bottom of the page)
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