I think that may be the interesting bit. Because it’s a weird number.
Let’s assume someone is a capital billionaire, who inherited Daddy’s packet of money and is just living off the dividends/interest/rents. Everything’s in long-term investments, nothing gets messed with, and everything gets taxed at the long-term capital gains rate (which was 15% in 2005). With a billion bucks producing the average good ROI of 10%, that means $100M in income, of which the Feds get 15% ($15M) and our nominal billionaire has $85M a year to roll around in, pay rent, buy stupid shoes, pay the assholes who manage the packet and put children through college. Easy enough to do, with a tax rate of 15%. This someone could literally do nothing with his days but smoke bowls and eat Cheetos and would still be exceedingly comfortable.
Let’s assume this someone is not capable of sitting still and bong-hitting his way through $85M a year. Our someone gets a limited run TV show that pays $3M an episode for 14 episodes a year. That will be taxed at the income rate, which in 2005 was either 39%, or the 35% AMT rate, paying $14.7M on $42M. Assume the lower, which puts gross total income at $142M a year, total tax bill of $29.7M, and pushes the tax rate up to 20% total.
So… that other $8M in income, $8.3M in taxes and and 5% on the tax rate that comes from… where? Short-term capital gains? Churn? Russian suitcases full of money? But 2005 was a dog of a stock-market year – it lost 200 points between Jan 1 and Dec 31 and was all over the trend map, up to 10,800, down to 10,100. Credit was tight, money was expensive because that was year 3 of Shrub’s War on Nouns and we were looking at a mini-recession. Real estate was janky that year – while the middle class was fine on regular fixed, insured mortgages, the luxury buyers were in a credit crunch. (Also, if this was a normal to better than average year for Cheeto-duster, then he’s barely an asset billionaire, and not anywhere close to an income billionaire. He’s not in the same class with Gates, Musk, Buffett or Soros, and he’s nowhere near the oligarchs’ playground. Which may be what’s gotten him and us into this quagmire. He really wants to be on that team, and a classless trust-funder from Queens just doesn’t play at that level.) I doubt the extra funds and taxation were entirely short-term gains given that it was a bad year, and there’s a fairly large write-down in there to account for, as well. Given that developers usually are leveraged up to their eyebrows, if not their hairlines, how much damage did a credit crunch do? Is that why we’re getting 2005 now, because it’s the best of the bad lot?
I don’t know what the hole is, but there is a hole in these numbers.
