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For years, politicians have insisted on the importance of balancing the federal budget. Recurring budget deficits -- with hardly any intervening surpluses -- have created a national debt of $18.2 trillion, and federal spending continues to outpace tax receipts.
Sen. Lindsey Graham, R-S.C., recently came to New Hampshire to test the waters for a presidential bid, talking about the deficit at a Politics and Pies appearance in Concord. During a question-and-answer session, he said the country needed to simplify the tax code and reform entitlements.
To put in perspective just how much money he was talking about, he said, "If you took every penny of the (richest) 1 percent, including their dog, you wouldn't even begin to balance the budget."
Really? Politifact New Hampshire decided to check it out.
We first checked with Graham’s Senate office. His spokesman, Kevin Bishop, sent along a piece from the Wall Street Journal opinion section that talks about the difficulty of balancing the budget solely by taxing the income of the country’s richest people.
That may be true, but it’s also not the way Graham phrased it. Graham didn’t single out the income taxes of the richest 1 percent; he said "every penny of the 1 percent" (while throwing in their pets for good measure).
There’s enough wiggle room in Graham’s statement to allow for three plausible ways to define "every penny" -- total wealth, total income and total taxes for the richest 1 percent. We’ll look at each.
Figuring out how much wealth -- stocks, bonds, income, real estate, and the like -- is held by the nation’s richest 1 percent holds is somewhat tricky because some of those elements are hard to measure. But there have been several estimates.
On the low end, the Boston Consulting Group puts the amount of privately held wealth in the United States at $39 trillion for 2012. The group’s figure is based on a proprietary formula and excludes real estate, businesses owned by investors and luxury goods.
On the upper end, the U.S. Federal Reserve cited the net worth of all U.S. households and nonprofits at $69.5 trillion for 2012. That number includes the value of real estate and of nonprofit organizations, some of which are closely held by individuals.
A middle ground can be found in data compiled for the nonprofit National Bureau of Economic Research by Emmanuel Saez and Gabriel Zucman. Their definition of national wealth excludes nonprofits, and comes in at $55.2 trillion for 2012.
These estimates all look at the entire nation’s holdings. What about the share owned by the richest 1 percent?
In a paper, Saez and Zucman found that the top 1 percent own 41.8 percent of the country’s wealth. Estimates from other researchers showed a somewhat lower percentage -- 35.6 percent and 35.4 percent, depending on the year.
Using their own data set, that means the richest 1 percent have holdings worth about $23 trillion. If you apply their 41.8 percentage to the other two estimates, the amount ranges from $16 trillion to $29 trillion.
Each figure is easily enough to balance the U.S. budget, which ran a $483 billion deficit last year and which is projected to be $486 billion in the red this year, according to the Congressional Budget Office. Even adding up deficits for the next decade gives us $7.7 trillion -- a total easily covered by that $26.2 trillion that could (at least in this example) be confiscated from our nation’s richest residents.
Another way to look at it: All federal spending in 2012 totaled $3.5 trillion. So the richest 1 percent’s wealth could also pay off the year’s entire budget -- six-and-a-half times over.
In fact, even the lowest of the three wealth estimates would come close to wiping out the country’s current level of accumulated debt, which stands in excess of $18 trillion.
Even if you use the income of the 1 percent, it’s still a number far greater than you would need to balance the budget. The data collected by Saez and Zucman show a national income of $14 trillion for 2012. The Federal Reserve reports the same number for the same year. On the low end, the IRS reported $9 trillion in adjusted gross income for 2012.
The richest 1 percent’s share of the income for 2012, according to the Paris School of Economics’ interactive database, is 22.8 percent (including capital gains). That means taking the entirety of the group’s income that year would net us somewhere between $2 trillion and $3.2 trillion.
In other words, if you use total income of the 1 percent, you don’t even have to raid Fido’s food bowl to do what Graham suggests.
And what of the actual tax burden of the 1 percent? According to estimates from the independent Urban Institute-Brookings Institution Tax Policy Center, the richest 1 percent paid 27 percent of all federal income taxes in 2012. They had an average income of $1.8 million apiece that year and paid an average of $489,437 in taxes.
That works out, roughly, to some $563 billion in taxes collected from the richest in 2012. A tidy sum, to be sure, but it has already been applied to offset our government’s costs. One would have to double the taxes collected from the group to cover current deficits.
This is the one scenario in which Graham has a point.
Graham said, "If you took every penny of the (richest) 1 percent, including their dog, you wouldn't even begin to balance the budget."
Graham has a point if you take it the way his staff suggests he meant to say it. But the talking point (which, to be clear, no one is suggesting as a real policy) came out more broadly. If you use either total wealth or total income -- interpretations we think are at least as plausible given his "every penny" remarks -- Graham is off base.
On balance, we rate his claim Mostly False.
The Debt to the Penny and Who Holds It, Treasury Direct, March 24, 2015
At first Politics and Pies, South Carolina Sen. Graham stresses national security, Concord Monitor, March 8, 2015
Where the Tax Money Is, The Wall Street Journal, April 17, 2011
Global Wealth 2013: Maintaining Momentum in a Complex World, The Boston Consulting Group
Financial Accounts of the United States, The Federal Reserve, fourth quarter 2014
Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data, National Bureau of Economic Research, October 2014
Wealth, Income and Power, Who Rules America, University of California at Santa Cruz
March 2015 Baseline, Congressional Budget Office,
Individual Income Tax Returns, Preliminary Data, 2012, Internal Revenue Service
The World Top Incomes Database, Paris School of Economics, updated Jan. 3, 2015
Email correspondence with Kevin Bishop, spokesman for Sen. Lindsey Graham, March 24-27
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