Taxes and Recessions

A tweet from Mark J. Perry got me interested in looking at the IRS data on tax returns. We are just getting the 2009 data so we can see how things changed from the business cycle peak in 2007 to the trough in 2009. Looking at the 400 tax returns with the largest AGI some interesting things show up.

To make it into the top 400 in 2007 you had to have an AGI of $138.8 million. In 2009, only $77.4 million. That is a decrease of 44.2%.

Total AGI for the top 400 was $137.9 billion in 2007 and $81.0 billion in 2009. A decrease of 41.3%

Total AGI for all returns fell 12.2% from $8.688 trillion in 2007 to $7.626 trillion in 2009.

Total taxable income for the top 400 fell 42.5% from $118.5 to $68.1 billion. For all returns total taxable income fell 16.1% from $6.063 to $5.088 trillion.

Total income tax payments from the top 400 fell 29.7% from $22.9 billion in 2007 to $16.1 billion in 2009. For all returns total income tax payments fell 22.3% from $1.115 trillion in 2007 to $866 billion in 2009.

From a tax policy standpoint what this tells us is that high incomes are very pro-cyclical. They go up faster than the economy grows and fall faster than the economy contracts. If you skew your tax payments with a very progressive income tax then your tax revenues do the same thing.

A Geography Digression

The EPA has come out with some new proposals on what Arizona needs to do with three different power stations. In selling their proposal, they use the following:

EPA is also proposing additional pollution controls for nitrogen oxide at those plants.  These actions will improve visibility and human health at 18 national parks and wilderness areas, including the Grand Canyon, Saguaro National Park and the Petrified Forest.

More than 11 million people visit national parks in Arizona every year. Yet for many visitors the spectacular vistas are veiled in haze, dulling the natural beauty. Ninety percent of the time, the Grand Canyon’s air is impaired by pollution. On average, pollution reduces the Grand Canyon's pristine natural visual range by more than 30 percent.

Since we clearly don't want to impair the view of the Grand Canyon we must submit to their wishes.

However, let's have a look at their map.

Note that the Grand Canyon is at the far western edge of the "impact area" of two of the plants. Since the wind blows from west to east here in Arizona, the chance that any of the airborne pollution from the plants would make it to the Grand Canyon is essentially zero - but the EPA has to hype the potential impact on the Grand Canyon.

I've been in marketing and understand what you are temped to do sometimes to try to sell something. What I don't understand is why the EPA thinks anyone looking at their own map would believe them.