Harry Reid’s statement on December 6 on his proposed 1.9 percent surtax on million-dollar incomes has kicked up some dust. Here is his statement:
“Millionaire job creators are like unicorns. They’re impossible to find, and they don’t exist… Only a tiny fraction of people making more than a million dollars, probably less than 1 percent, are small business owners. And only a tiny fraction of that tiny fraction are traditional job creators…Most of these businesses are hedge fund managers or wealthy lawyers. They don’t do much hiring and they don’t need tax breaks.”
Unlike Harry Reid’s office, I went to the IRS’s Table 1.4 “Sources of income, adjustments, and tax size of adjusted gross income, 2009” to check things out. (I summarize my sources in a separate blog posting).
What does the IRS have to say about this? Millionaire tax filers earn a total taxable income of $623 billion, on which they pay the highest average rate (30 percent) of any tax bracket. (Either Warren Buffet’s secretary has an incompetent tax accountant or Buffet has some pretty juicy tax breaks. I think the latter is more likely). A 1.9 percent tax surcharge on million-dollar-earners would yield $11 billion, assuming those shifty millionaires take no evasive action to avoid the tax.
Millionaire tax filers earn $221 billion – almost a quarter of a trillion — from business and professions, partnerships, and S-corporations. This is puzzling: If Harry Reid’s figure is correct (2,361 millionaire businesses), then the average millionaire-owned business earns almost a hundred million dollars, and all, except 118 of them, do this without hiring anyone. These super heroes do their own typing, selling, drafting. public relations, building, and manufacturing. They do not need employees. Remarkable!