Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data

[dtotire]

Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data


David Cay Johnston* for Tax Analysts

The incomes of the top 400 American households soared to a new record high in dollars and as a share of all income in 2007, while the income tax rates they paid fell to a record low, newly disclosed tax data show.

In 2007 the top 400 taxpayers had an average income of $344.8 million, up 31 percent from their average $263.3 million income in 2006, according to figures in a report that the IRS posted to its WebTax Rates site without announcement that were discovered February 16. (For the report, see Tax Analysts Doc 2010-3372 .)

The figures came at the peak of the last economic cycle and show that widely published reports in major newspapers asserting that the richest Americans are losing relative ground and "becoming poorer" are not supported by the official income data.

The long-term data show that under current tax and economic rules, the incomes of the top earners rise when the economy expands and contract during recessions, only to rise again. Their effective income tax rate fell to 16.62 percent, down more than half a percentage point from 17.17 percent in 2006, the new data show. That rate is lower than the typical effective income tax rate paid by Americans with incomes in the low six figures, which is what each taxpayer in the top group earned in the first three hours of 2007.

Taxpayers on the 95th to 99th steps on the income ladder paid an effective income tax rate of 17.52 percent, according to calculations by the Tax Foundation, a nonprofit research group that favors less taxation and lower rates. Taxpayers in this category earned between $255,000 and $451,000 in 2007, compared with an average daily income of almost $945,000 for the top 400, who paid lower effective tax rates on average.

Payroll taxes did not add a significant burden to the top 400, not changing the rounding of rates by even one decimal. With payroll taxes taken into account, the effective tax rate of the top 400 would be 17.2 percent in 2006 and 16.6 percent in 2007, my analysis shows -- the same as not counting payroll taxes. As a point of comparison, about two-thirds of Americans pay more in Social Security, Medicare, and unemployment taxes than in federal income taxes.

The top 400's share of all income grew from 1.31 cents out of every dollar earned by all Americans to 1.59 cents.

Adjusted for inflation to 2009 dollars, the top 400 enjoyed a 27 percent increase in their income, or nine times the rate of increase for the bottom 90 percent, based on an earlier analysis of tax data published by Profs. Emmanuel Saez and Thomas Piketty, economists at the University of California at Berkeley who have been studying global income trends.




more:
http://www.tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692

[Tuesday Afternoon]

1. keep it up, Guys. When you have all the money the rest of us can barter

and then we won't need you anymore. Once you have no worth why should we keep you around ....................

[indepat]

2. If the effective income tax rate of the top 400 earners, even the top 5%, were increased to greater

than the reported effective rates of 16.62% and 17.52%, life in the western world as we have known it would cease, for the economy would stop growing and be in shambles since less would trickle down to the little people. :banghead:

[young_at_heart]

3. How many homes do they need?

And yachts, and jewelry, and, and ----.

[notesdev]

4. This is why "tax the rich" doesn't work

"Their effective income tax rate fell to 16.62 percent, down more than half a percentage point from 17.17 percent in 2006, the new data show."

What people should really be screaming is "cut tax loopholes for the rich"

Of course that doesn't happen since so many of these targeted loopholes favor one group or another, all these commons-spoiling groups want to keep this in place.

So what's a person making huge amounts of money to do? Ignore that they can keep much more of it by hiring an accountant to add up all the ways (in 17000+ pages of tax code) that have been provided to allow them to reduce what they pay in taxes?

A flat tax would put an instant end to all this bullshit, and could realistically be done in a dozen pages or less that ANYBODY could understand.

[freebrew]

5. Bumper Sticker on my car:

"Tax the Rich, then Fuck Them, then Kill Them"

Not that I advocate such violence...