The IRS puts out an interesting tax document each year, looking at the returns of the nations wealthiest 400 people. The most recent year of complete data is 2007, when 143 million individuals filed tax returns.
Some of the data is quite astonishing:
"¢ The top 400 U.S. individual taxpayers got 1.59% of the nation's household income in 2007 — 3X the p% they got in the 1990s.
"¢ The top 400 paid 2.05% of all individual income taxes in 2007.
"¢ Only 220 of the top 400 were in the top marginal tax bracket.
"¢ Average tax rate of the 400 = 16.6% — the lowest since the IRS began tracking the 400 in 1992.
"¢ Minimum annual income to make the top 400 = $138.8 million.
"¢ Top 400 reported $137.9 billion in income; they paid $22.9 billion in federal income taxes.
"¢ 81.3% of income was from capital gains, dividends or interest. Salaries and wages? Just 6.5%.
"¢ The top 400 list changes from year to year: 1992-2007, it contained 3,472 different taxpayers (out of a maximum 6400).
Happy tax day to you to! > Thanks to David Wessel for the tip!
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Sources: The 400 Individual Income Tax Returns Reporting the Highest Adjusted Gross Incomes Each Year, 1992-2007 http://www.irs.gov/pub/irs-soi/07intop400.pdf
A Look at the Tax Returns of the Top 400 Taxpayers David Wessel WSJ, FEBRUARY 17, 2010 http://blogs.wsj.com/economics/2010/02/17/a-look-at-the-tax-returns-of-the-top-400-taxpayers/
81.3% of income was from capital gains.
Can you imagine the general outrage if anyone were to ever seriously suggest taxing capital gains as income?
The report must include tax exempt municipal interest as part of income. The AMT rate is 25%; I don’t see any other way for a tax rate of just 16.6%. This is another way to make statistics lie when you add in the municipal interest. Someone needs to finance the deficits for our local profligate spenders.
Assuming a 4% return for interest dividends and capital gains, the asset base needed to generate $138.8 million is $3.47 Billion. This brings me back to yesterday’s comment – what are the Democrat’s thinking with a 0% estate tax for 2010? If you pretend to be outraged that a billionare only pays 16% tax because he/she does the logical thing and invests in tax exempt bonds, then how can you stay silent that the $3.47 billion estate(average size) will pass to heirs free from estate taxes for the 1%-3% of these billionaires who die this year?
I don’t think the income tax is too low. The estate tax encourages more billionaires to do the Buffet/Gates thing and give most of their estates to charity. The money still won’t go to taxes, but, it won’t create a perpetual line of billionaire descendants.
According to the CBO, the average effective federal tax rate (all taxes, including payroll) is 20.7 percent. (That’s a 2006 number, but it probably hasn’t changed all that much). http://nyti.ms/15XTJx
I wonder how many people earning more than $200,000 a year realize they’re paying much, much higher marginal tax rates because finance guys earning tens of millions are benefiting from things like corporate tax rates and capital gains rates. Just, wow.
There you go. As previously said lets fix the alternative minimum tax (AMT). First of all let it apply to the total of all income (including market value of option, futures and other non-traditional income as well as capital gains), without ANY deductions. No AMT on the first 100K, then 20%, 30% and 40% on that which exceeds 100K, 1M and 10M respectively. For most upper middle class people it would never apply because their regular taxes would exceed the AMT taxes. For these multimillionaire tax evaders it would take a rightful chunk out of their income so we finally could get some tax fairness.
@Cynic_FA, the AMT allows all kind of deductions and these free-loading tax-evaders know all about how to use them.
How about we quit trying to engineer society through manipulations of the tax code? Take out all the deductions. Figure out the level of taxation needed for supporting the level of spending, then make everyone pay, progressively, on all forms of income above the minimum required for survival. Start at about 10% for those just above the poverty line, and then for only the amount by which they exceed it. Cap it at about 45%, so the wealthy won’t all flee for fairer tax shores.
In any event, something has got to be done. Money for all the promises the government has made has got to come from somewhere, or those promises will be broken. Revenue has to increase, or benefits will have to decrease. It’s as simple as that.
“81.3% of income was from capital gains, dividends or interest. Salaries and wages? Just 6.5%”
That goes a long way towards explaining why it’s so difficult to squeeze more money out of them.
Rasing the cap gains rate isn’t going to do the trick.
2007. hmm… I seem to remember something about that year… oh yeah, it was the top of a bull market!
Before getting worked up over their tax rate remember two things.
Dividends are taxed twice. I think it is fair to attribute the corporate tax rate to their earnings to an extent. Also a lot of their income is municipal bonds which they are paying a sort of tax by accepting a lower tax rate from the muni in return for the tax exempt status.
My point they are paying a much higher rate than the rate listed because of indirect taxes (Corporate and accepting a lower interest rate from munis)
The carried interest thing problem needs fixed though which is an area a lot of these guys make their money and hence get a low tax rate.
Average tax rate of the 400 = 16.6% "” the lowest since the IRS began tracking the 400 in 1992
Coincidently, that was my effective tax rate too. Amazing.
So why does the Wal-Mart demographic vote Republican and why are the Tea Partiers (80% of households earning <$100k) so enamored of the Steve Forbes Fantasy Flat Tax or worse still, a national sales tax?
As they say, truth is stranger than fiction.
“With corporate tax receipts at 20-year low, the GAO takes a look through the books and finds 94% of all U.S. companies paid less than 5% — and 61% paid nothing at all.” http://moneycentral.msn.com/content/Taxes/P80242.asp
“Two-Thirds of Corporations Pay No Taxes, But McCain Still Wants To Lower the Corporate Tax Rate
A cornerstone of Sen. John McCain's (R-AZ) economic plan "” Jobs for America "” is cutting the corporate tax rate from 35 percent to 25 percent, which McCain claims will turn America into a "low-tax business environment." But as it turns out, even with the rate at 35 percent, most corporations are not paying taxes.” http://wonkroom.thinkprogress.org/2008/08/12/no-corporate-taxes/
Capital gains are tax at a lower rate than wages.
“About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.” http://www.cbsnews.com/stories/2008/08/12/national/main4342535.shtml
“Some of the world’s biggest, most profitable corporations enjoy a far lower tax rate than you do–that is, if they pay taxes at all.
The most egregious example is General Electric ( GE – news – people ). Last year the conglomerate generated $10.3 billion in pretax income, but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit
Avoiding taxes is nothing new for General Electric. In 2008 its effective tax rate was 5.3%; in 2007 it was 15%. The marginal U.S. corporate rate is 35%. http://www.forbes.com/2010/04/01/ge-exxon-walmart-business-washington-corporate-taxes.html
“CAYMAN ISLANDS – Kellogg Brown & Root, the nation’s top Iraq war contractor and until last year a subsidiary of Halliburton Corp., has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in this tropical tax haven.” “With an estimated $16 billion in contracts, KBR is by far the largest contractor in Iraq, with eight times the work of its nearest competitor.” http://www.boston.com/news/world/articles/2008/03/06/top_iraq_contractor_skirts_us_taxes_offshore/ Note these contracts are funded with TAXPAYER DOLLARS
Federal revenue sources chart. http://www.publicagenda.org/charts/federal-budget-revenue-sources
This confuses me a bit: "¢ The top 400 U.S. individual taxpayers got 1.59% of the nation's household income in 2007 "” 3X the p% they got in the 1990s.
"¢ The top 400 paid 2.05% of all individual income taxes in 2007.
"¢ Only 220 of the top 400 were in the top marginal tax bracket.
"¢ Average tax rate of the 400 = 16.6% "” the lowest since the IRS began tracking the 400 in 1992.
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