20 February 2010
The incomes of the very rich in the US grew phenomenally
between 1992 and 2007, while their tax rates plummeted,
according to recently uncovered IRS statistics. The figures
were published on the IRS web site in December of 2009,
but received little notice because they were not
announced. The report only became widely known when
Tax Analysts, a news outlet for tax information, discovered
the document and wrote about it on its web site, www.tax.com,
on Thursday.
The report shows that the average income for the top-earning
400 families, denominated in 1990 dollars, grew from $17
million to $87 million, representing a five-fold increase in real
terms. During this time, the percentage of the total national
income that went to the top 400 families tripled, from .52
percent in 1992 to 1.59 in 2007.
The data shows that these families saw their incomes
increase by 31 percent between 2006 and 2007 alone,
while the average income of each family reached $345
million.
The amount of money earned by the group more than
doubled from 2001, when its members earned on
average $131.1 million. In 1993, the top 400 tax return
filings amounted on average to $46 million. This means
that there was an eight-fold nominal increase in the
average earnings for this group between 1993 and 2007.
Meanwhile, the effective tax rate on this group the
amount actually paid in taxesfell to 16.6 percent, the
lowest figure on IRS records dating to 1992.
Congressional Democrats have sought to place blame
for falling taxes on the wealthy solely on the Bush
administrations tax cuts. But the IRS figures show that
the effective tax rate on the top 400 income earners
actually fell faster under the last part of the Clinton
administration than at any later time.
The effective tax rate hit a high point of nearly 29
percent in 1995. By the end of the Clinton administration,
the rate had fallen to 22 percent. The trend continued
under Bush, with the effective tax rate falling another
6 percentage points between 2001 and 2007.
The Bush administration lowered the capital gains tax
by 5 percentage points, to 15 percent, in 2003. But
Bushs policies were only a continuation of laws passed
under the Clinton administration, when the capital gains
tax was lowered from 28 percent to 20 percent for the
top income brackets.
The top income earners received a total income of
$138 billion in 2007. This figure is larger than the yearly
output of most of the worlds countries, and is nearly as
large as the GDP of Chile. Out of this amount, the group
paid only $23 billion in taxes.
If the top 400 earners had been taxed in 2007 at the
1995 rate, they would have paid an additional $18.4
billion in taxes, enough to cover the entire 2010
budget shortfall of the state of California.
About three quarters of income for earners in this
tax bracket came from capital gains, which were
taxed at 15 percent, as opposed to income, which
is taxed at a rate of 35 percent for the top bracket.
The top 400 families actually paid lower taxes
compared to other high-income earners. In 2005,
the Congressional Budget Office found that the
top 1 percent as a whole paid a tax rate of 19.7
percent.
The median 20 percent of income earners paid a
tax rate of 12.5 percent, including Social Security
payments, which are negligible for the very rich.
The IRS report on the top 400 families was first
regularly published by the Clinton administration,
but the Bush administration shut down its release,
according to the www.tax.com article by Cay
Johnston, a tax law professor at Syracuse University.
The Obama administration resumed publication of
the figures, with the 2006 figures published about a
year ago.
Johnston also noted, At least three hedge fund
managers made $3 billion in 2007. He added, only
33 of the top 400 paid an effective tax rate of 30
percent to 35 percent, which is the maximum
federal tax rate.
The data further substantiates the highly
publicized conclusions of economists Thomas
Piketty and Emmanuel Saez, who found that two
thirds ( 66%) of income increases between 2002
and 2007 went to the wealthiest 1 percent of
society and that income for the top 1 percent
grew 10 times faster than that of the bottom 90
percent. Piketty and Saez found that the top 1
percent of earners got a higher share of income
in 2007 than at any time since 1928.
The latest figures come amid constant calls by
the White House and Congress to cut social
programs in order to balance the budget. The
federal government, we are told, has been
bankrupted by the profligacy of social programs
and the proportion of social resources allocated
to the general population.
But the latest figures show that the opposite
is true. It is the rich who have
bankrupted the state, with the full
assistance of the two big-business
parties.
