Less income flowing to the top could have broad effects, from the amount of revenue the government collects to the kinds of cars piling up on dealers lots. For instance, the top 1% of earners will pay 36% of all federal individual income taxes this year, according to an estimate from the Tax Policy Center, a Washington think tank. If their income softens, so will federal revenue, making budgets harder to meet.Less income for the wealthy could lead to a reshaping of the luxury-goods economy, what some call the plutonomy. Half of U.S. consumer spending came from the top 20% of earners in 2000, according to economists Dean Maki and Michael Palumbo. Sales of all luxury goods are expected to decline 15% this year, according to consulting firm Bain & Co.Among big-ticket items, U.S. sales of Bentleys, Maseratis, Maybachs and Lamborghinis have fallen over 50% this year, much worse than the 26% drop for the broader car market, according to Autodata Corp.Another loser: philanthropy. In the brutal second half of last year, the number of charitable gifts of $1 million or more from individuals fell by more than a third from a year earlier, according to the Center on Philanthropy at Indiana
University.
By Bob Davis and Robert Frank, Sept. 10, 2009, WSJ

Link to article

alt