1% v. Average American

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Short Lived Millionaires

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Income Mobility

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Top 1 Percent

Well, there were just under 1.4 million households that qualified for entry. They earned nearly 17% of the nation's income and paid roughly 37% of its income tax.

Collectively, their adjusted gross income was $1.3 trillion. And while $343,927 was the minimum AGI to be included, on average, Top 1-percenters made $960,000.

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Average Tax Rate 2009

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Cartoon: Killing the Goose

Was Buffett Wrong?

Mark Perry writes:

We now have a proposal for a tax policy - the "Buffett Rule" - based on Warren Buffett's anecdotal "evidence" of his and his employees' tax burdens. But that "evidence" seems pretty far-fetched and not consistent with: a) average federal income tax rates available from the IRS, nor b) average tax rates for all federal taxes paid, from the CBO. Buffett's anecdote has to be an outlier or exception, because under the current federal tax system, the average "super-rich" taxpayer pays taxes at a rate 2-3 times the average secretary. Instead of raising tax rates, we should probably figure out what kind of loopholes allow Warren Buffet to pay taxes of only 17.4% on his $40 million income last year.

Update: Steve Moore on The Kudlow Report tonight said in reference to myth that secretaries pay taxes at higher rates than the "super-rich," (and citing some of the same tax data that appear above) "It's almost as if Barack Obama and Warren Buffett made those numbers up."

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Top 0.1% of Americans

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Tax Rates by Income

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Who Pays the Taxes?

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It is a Spending Problem

In the debate about raising the debt ceiling, the reality is often lost that the top 10 percent of income earners—those making more than $113,799 in 2008 (the latest year available from the IRS)—already pay 69.9 percent of the income taxes. The same top 10 percent, however, earn only 45.8 percent of the income.

The IRS also reports that in 2008, the top 25 percent of income earners—those earning $67,280 or more—pay 86.34 percent of the income taxes, yet earn only 67.38 percent of all income in the U.S.

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Taxing the Rich

The Rich--A Changing Group

Robert Frank writes:

Researchers and journalists (myself included) often refer to the rich as a
fixed group. There are the “the rich” who keep getting richer, with ever-rising
shares of the nation’s income and wealth. And then there are “the rest,” who
aren’t getting much of either.

At a time when the American Dream is supposedly dead for most Americans,
while Wall Streeters seen as permanently ensconced in government-backed
luxury, the chances of moving up or down would appear slim.

But the rich and poor may be far more fluid than the conventional
wisdom would have us believe. What is most surprising is the churn at the top of
the income ladder.

A Census Bureau study shows that from 2004 to 2007, about a
third of the households in the highest income quintile (the top 20%) moved down to another income group. In the same period, a third of those in the lowest income group moved to a higher group.

This isn’t to say Horatio Alger is the norm, and America ranks below
many other developed countries when it comes to intergenerational mobility, or
the chances of rising higher than your folks did. And wealth mobility, which
measures accumulated assets over a lifetime, is more persistent than income
mobility. The period of 2004 to 2007 also is selective, since the country was
prospering from the real-estate bubble...

“One of the most enduring economic myths in our society is that the
rich keep getting richer, while the poor keep getting poorer,” he writes. “It isn’t true.”

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Income and Tax Liabilities 2007

Higher-income groups earn a disproportionate share of pretax income and pay a disproportionate share of federal taxes. In 2007, the highest quintile earned 55.9 percent of pretax income and paid 68.9 percent of federal taxes. In all other quintiles, the share of federal taxes was less than the income share. The bottom quintile earned 4.0 percent of income and paid 0.8 percent of taxes, and the middle quintile earned 13.1 percent of income and paid 9.2 percent of taxes.

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Top 400 American Taxpayers

• 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).

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Carlos Slim: THe World's Richest Man

Forbes magazine released its annual list of the world's richest people Wednesday, and for only the second time since 1995, Microsoft founder Bill Gates' name was not at the top.

This year, the title of "World's Richest" went to Mexican telecom mogul Carlos Slim, with a net worth of $53.5 billion.

Slim, whose holding company America Movil contains a sprawling collection of telecom assets, is the first non-American to be declared Forbes' richest person since 1994, when Japanese real estate kingpin Yoshiaki Tsutsumi held that honor. (He has since disappeared from the list entirely).

But Slim's financial edge over Gates is, well, slim, at least by billionaire standards -- just $500 million. A $1 increase in Microsoft shares, the compilers of the Forbes list noted at a press conference Wednesday, could send Gates' net worth ahead of Slim's.

Also, were it not for his extensive philanthropy, Gates would have a net worth in the ballpark of $80 billion, Forbes' Matthew Miller estimated.

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The Rich Are Paying Their "Fair Share" and Then Some

The chart shows that the difference between the top 1%'s tax share (about 25% in the late 1980s) and the that group's income share (about 14% in the late 1980s), which increased from 11% in the earlier period to 18% by 2006, when the tax share had increased to about 40% for the top 1% compared to that group's income share of 22%. Stated differently, the income share of the top 1% increased by about .55% per year from 1986 to 2006, compared to the tax share of the top 1%, which increased by about .75% per year.

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Rich People Pay Taxes

The nearby chart shows that the top 1% of taxpayers, those who earn above $388,806, paid 40% of all income taxes in 2006, the highest share in at least 40 years. The top 10% in income, those earning more than $108,904, paid 71%. Barack Obama says he's going to cut taxes for those at the bottom, but that's also going to be a challenge because Americans with an income below the median paid a record low 2.9% of all income taxes, while the top 50% paid 97.1%. Perhaps he thinks half the country should pay all the taxes to support the other half.

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Top 400 Taxpayers

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Wealhiest Americans

Standard of Living for wealthy Americans.

New book:
All the Money in the World: How the Forbes 400 Make--and Spend--Their Fortunes

more charts here