February 18, 2012
NY Times: The Tax Rate of the 400 Richest Americans
I thought Mr. Romney’s 13.9% federal tax rate would be hard to beat. But among the 400 Americans with the highest adjusted gross incomes in 2008, 30 of them paid less than 10% and another 101 paid less than 15%. ... The top 400 paid an average of $49 million, or 18.1% of their AGI, in federal tax — lower than taxpayers in the $200,000 to $500,000 bracket. They reported an average $14.1 million in state and local taxes, bringing their total income tax level to about 23% of AGI, far below my rate. And not one of them paid more than 35% of their AGI in federal tax. ...
I’ve never minded paying my taxes. I’ve always been proud of it. But when people making hundreds of millions a year are paying a substantially lower rate than I and the many people who wrote to me do, something has gone haywire.
Prior TaxProf Blog coverage of the Top 400 taxpayers:
- The Top 400 Taxpayers, 1992-2006: Income Up, Tax Rate Down (Jan. 30, 2009)
- IRS Releases 2007 Tax Return Data on Wealthiest 400 Americans: Income Soared 31% (to $345m), Tax Rate Fell 3.2% (to 16.6%) (Feb. 18, 2010)
- More Tax Return Data on the Richest 400 Americans (Feb. 24, 2010)
- The Top 400 Taxpayers: Incomes Fell 21.5%, Tax Rates Rose 8.2% in 2008 (May 11, 2011)
- Johnston: Beyond the 1 Percent (Oct. 26, 2011)
- The 99% and the 1%: Income Mobility and Income Inequality (Nov. 7, 2011)
(Hat Tip: Bill Turnier.)
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Mr. Stewart has not covered himself with glory. The articles are diffuse, do not refer to any coherent economic theory, and do not grapple with the methodological shortcomings of the raw IRS data -- the chief one being that it makes no attempt to integrate the income of corporations and their shareholders.
The CBO attempts to do overcome those problems. They use comprehensive income, and they try to put corporations and shareholders together. The comparison is interesting. In the most recent CBO Analysis, they find that the top 1% (a much larger group that the top 400) had an effective income tax rate of 19% in 2007, (compare to the above 18.1% in 2008), but that they a had total effective federal tax rate (including corporate taxes) of 29.5%.
Further, 400 tax payers is not many when we are talking about 120,000,000 households. I doubt that there is any intellectual or statistical validity to studying the system that governs 120 million by selecting one out of 300,000 by a non random method. Further, the way the IRS presents data makes it impossible to know whether these 400 people are consistent group (i.e. The Rich) or whether they are simply people who realize enormous capital gains in the course of liquidating the work of a lifetime, or even of several generations.
Incidentally, the CBO data shows that for both the income tax and total taxes, higher percentiles paid higher rates than lower percentiles. The system is progressive. It just doesn't punish the people Mr. Stewart hates.
Posted by: Walter Sobchak | Feb 19, 2012 1:27:39 AM
Walter is correct. Maybe Republicans should just propose to exclude capital gains and dividends entirely from AGI. Then the average tax rate (as defined by taxes divided by income) would be high for the rich.
Posted by: AZ | Feb 19, 2012 11:30:04 AM
The type of analysis that "Walter SobchaK" offered is something completely missing in the political and class-envy debates, mainly that it is good and makes sense. The NYT would never post one of his letters.
Posted by: Woody | Feb 19, 2012 10:52:30 PM
Why should taxes be on income at all? Why not consumption?
And why not an alternative MAXIMUM tax?
The wealthy do not use roads, bridges, schools, or defense at 40x the rate of middle class people. Therefore...
....No household should pay more than $200,000 a year in income tax (an amount above what 99.9% pay anyway). Anyone who makes enough to hit that limit, just send in the check for $200,000, and avoid any other paperwork.
It is fair? Sure. As I said, the rich don't use the government 40x more than average people.
Sure, leftists will whine that a $10M earner paid just 2%. But he didn't consume in proportion to his income.
Plus, the US will attract tons of ultrawealthy people from around the world, since they would pay much less than in their own countries. Brazilian soccer players, Bollywood movie stars, Russian petro-billionaires, you name it, they will all want to become US citizens to pay the low $200K amount.
Posted by: Toads | Feb 23, 2012 2:00:05 AM