By Cliff Montgomery – Dec. 5th, 2014
In 2010, the 400 individuals in America’s highest-income bracket forked over only about 18 percent of theiryearly earnings to federal tax officials – down from the roughly 20 percent those individuals paid in 2009,according to data obtained from the Internal Revenue Service (IRS).
A full 37 of these elite taxpayers effectively paid a tax rate of below 10 percent in 2010.
These super-wealthy individuals reported to the IRS a total income of $106 billion – which made up 1.3percent of all U.S. income reported to the Service that year. The multi-billion-dollar total averages out to$265 million per person.
“Composite data on the 400 Americans reporting the most income on their tax returns is released by the IRSevery year,” according to the Center for Effective Government, a Washington, DC-based think tank.
The IRS allows taxpayers three years to amend their annual tax returns. Therefore, 2010 tax returns currentlyprovide the most recent finalized data.
The tax rate decline for America’s most wealthy appears to be part of a long-term trend.
“Back in 1995, the country’s 400 wealthiest paid nearly 30 percent of their income to support public servicesand investments provided by the federal government,” the Center pointed out this week.
What’s the main cause of this disturbing trend? The mega-rich receive almost two-thirds of their yearly incomefrom capital gains, which by 2010 enjoyed a paltry 15 percent tax rate.
By comparison, those who work for their daily bread are saddled with a tax rate above 30 percent – more thandouble the tax rate on capital gains.
And according to IRS data, there have been other long-term trends for those sitting at the very top ofAmerica’s economic pyramid.
“In 1992, the first year the IRS released data, it took $24.4 million to qualify for the list ($40 million in 2010dollars),” according to the Center’s recent statement.
But “by 2010, the cutoff level had more than doubled to $99.1 million,” it added.
And one other thing: Nearly one out of every four of the ‘elite 400’ have “been on the list in at least ten of the19 years for which the IRS has released this data,” the Center declares.
The Center offers a policy suggestion for this dilemma that is both simple and obvious.
“If we are serious about reducing inequality and the wealthy paying their fair share of taxes,” declares theCenter’s statement, “it is time we stop privileging income earned from investments over income earned fromwork.”
“The wealthiest 400 should not have their own discounted tax schedule,” declares the Center.
“Instead, they should pay taxes at the same rates as those who work every day for a living,” it added.
