This weekend, in an understandable bit of schadenfreude, a front page article in the Wall Street Journal noted, “Republican America is now so vast that a traveler could drive 3,600 miles across the continent, from Key West, Fla., to the Canadian border crossing at Porthill, Idaho, without ever leaving a state under total GOP control.”
At last: rascally Democrats confined to their urban, coastal redoubts, as the Heartland goes all red all the way through!
It got me thinking. Despite that blood red swath across the gut of the country, we know that Hillary won the vote, evidently by 1.5 million, 2 million, or more. She only won 20 states it appears, but those were very populous states.
Population is not the only quantity unevenly distributed across the 50 states; personal income is another. True, all things being equal, more populous states will also have more income, but the disproportion goes further.
A couple of quiz questions to focus your mind:
- How many millionaires were there in the most recent IRS tax data—taxpayers reporting more than $1 million in Adjusted Gross Income? (Hint: the answer has six digits, and the first digit is not ‘1’).
- If we define affluence, as in the affluent professional and managerial class, as an AGI between $200,000 and $1 million dollars, how many of those? (Hint: the answer has seven digits, and the first digit is greater than 2).
The answers, given below, are drawn from the IRS reports titled “Statistics of Income,” or SOI, with the most recent covering 2014 (published in Fall of each year, with a two year lag).
Where the Money Lives
There were about 400,000 millionaires in 2014, again defining millionaires as taxpayers, generally married couples, who entered more than $1,000,000 at the bottom of the first page of Form 1040.
There were about 5.8 million affluent professionals and managers, defined as people who entered between $200,000 and $500,000 on that bottom line (about 5 million), or between $500,000 and $1,000,000 (about 800,000 of these).
One more fact, concerning the Republican wish list for tax cuts. The goal for some years has been to cut rates, especially those at the top of the tax structure. Currently the top rate of 39.6% applies above $467,000. That is the rate slated for significant reductions in any Republican plan. Nobody talks about lowering the bottom rates by much.
Simple math indicates that rate cuts carry a bigger and bigger dollar kick at higher income levels. Cutting six points off the rate applied to one million dollars yields $60,000 in discretionary funds. Cutting three points off a 15% rate applied to $60,000 of income saves $900.
Republican tax cuts favor those with higher incomes; they make no bones about it.
Now for the punch line.
The 20 states Hillary won account for 58% of all millionaire income. She won states containing 55% of affluent professional income. These couples won’t see $60,000 in cuts but may see $20,000 in savings (e.g., $400,000 of salary subject to a tax rate reduction of 5 points), or somewhat more (depending on the details).
*At lower income levels, states Clinton won had a proportionate share of taxpayers, e.g. 40% or so, corresponding to the 40% of states she won.
**Michigan has been excluded; add 2 percentage points to the above if Michigan ultimately goes to Clinton.
Conclusion: a strong majority of Republican tax cuts will flow to blue state millionaires and blue state professionals. Any stimulus delivered to the economy by these tax cuts will favor states Clinton won.
What a delicious irony.
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