I just completed a blog on a statement by Harry Reid that million-dollar-earners are primarily hedge fund managers and wealthy lawyers. Businesses owned by millionaires that create jobs are as rare as unicorns.
I decided to fact check this bizarre statement (which National Public radio appeared to support) myself. My results will be posted on my Forbes Econworld blog shortly. I use this note to list my data sources:
Data on tax filers earning one million dollars or more is from IRS’s Table 1.4 “Sources of income, adjustments, and tax size of adjusted gross income, 2009.” Table 4 gives the total number of million-dollar tax filers, their sources of income. Income from businesses is over $220 billion. The number of millionaire tax filers is 237,000, and they pay an average tax rate of 30 percent.
Data on employment in investment banking is from the Bureau of Labor Statistics study of investment banking in 2006.
Data on the number of investment bankers earning million-dollar-plus bonuses is from Morgan Stanley. I apply their ratio of employees making million dollar plus bonuses to investment bank employment in general to approximate the total.
Data on the number of general corporate counsels earning a million dollars or more (77) is from Law.Com.
Data on the number of equity partners in law firms earning total compensation of a million or more is from American Lawyer.com. I deliberately overestimate the number of million-dollar lawyers (14,000) by counting all equity partners in firms averaging million dollar compensation as earning a million or more.
My fact check shows how bizarre Harry Reid’s numbers are.
What are the tax rates reduced to after deductions? I doubt that it's 30%. Hedge fund management is a business, it can be a one-person business, so you haven't disproved anything just by saying that the income from filers over $1M came from businesses. Maybe you should try to interview one of the business-income filers because, even after your Google search, you have not produced anyone to interview.
ReplyDelete@ Innervisions,
ReplyDeleteThose are the rates AFTER deductions. Also it is an AVERAGE deduction, which means that although some may pay less, others will pay more. Perhaps you should read the article a little more carefully. As to your hedge fund manager comment, if you can somehow manage a multi-billion dollar investment portfolio all by yourself and you aren't doing so, you may be in the wrong business.
I'm not he, but let's face it, someone to interview has yet to be produced.
ReplyDeleteThe United States has 29.4 million businesses. Approximately 26.2% or 7.7 million of them are employers. 39,662 millionaire filers earned income from business and professions. 141,035 earned income from partnerships and S-corporations. Ignoring that a number of these were the same people, I count 180,697 millionaire filers involved in business activity that fits within Mr. Gregory's definition. These 180,697 make up just 0.6% of the businesses in the United States. If the same 26.2% number were to hold true, that would mean just 0.16% were millionaire owned job producing businesses. Now I'll submit that number wouldn't hold true, but that number could be 100% and millionaire owned job producing businesses would still make up just 0.6% of those out there.
ReplyDeleteReid's first claim: "Only a tiny fraction of people making more than a million dollars, probably less than 1 percent, are small business owners."
This claim isn't true in the literal sense, but I have to wonder if he misspoke. I have to wonder if he meant to say that only a tiny fraction of businesses, probably less than 1 percent, are owned by people making more than a million dollars. This correction would make the claim fall more in line with Reid's past statements and with the general views of the Democratic party. If that's the case, the data above says 0.6%. Which would make the claim very true.
Reid's second claim: "And only a tiny fraction of that tiny fraction are traditional job creators…"
The data above suggests this could be as small as 26.2%. Good sense would say the number is much larger, but even 80% would be a fraction of an already small percentage (0.6%). Making this essentially true if you cut out the word "tiny". Only someone stricken with autism, a severe form of OCD or bound to a far right agenda would nitpick at this one.
Mr. Gregory managed to get one thing right, tax policy should be serious business. In that light, I say this isn't the time for commentators who have an axe to grind and a proven extremist agenda.
In general I have found that Mr. Gregory is a man to be taken with a bit more than just a grain of salt.
Why on earth would anyone who makes more than a million a year and has employees working for their business want to conduct an interview based upon that fact?
ReplyDeleteI'm pretty sure I know a couple of such folks and I can think of plenty of reasons not to want that notoriety.
The data above suggests this could be as small as 26.2%
ReplyDelete