IRS Stats Reveal Tax Drop For Top 400 US Earners
Monday, February 22, 2010
The Internal Revenue Service (IRS) has published statistics for the period 1992 to 2007 that reveal the top 400 earners in the US saw a substantial rise in income, and falling tax rates.
In 2007, the average income of the top 400 was USD345m – equivalent to around 1.6% of the nation's income for that year, and more than double the average top 400 income earned in 2001. Total income earned by these 400 taxpayers totaled some USD138bn in 2007, compared with USD18.7bn in 1992.
Their average tax rate dropped, however, to 16.6%, compared with 22.85% in 2001 and a high of 29.93% in 1995. The drop is attributed to tax cuts introduced by former President George W Bush, who reduced the income tax rate on capital gains and dividends to 15% (compared with 28% in 1992).
This lower rate has given the top 400 the opportunity to arrange their tax affairs in such a manner as to benefit from this reduced rate, and thus avoid the much higher 35% top income tax rate on salaries. Gains realized by the top 400 as a proportion of their total income doubled from 33% in 1992 to 66% in 2007.
Bush's tax reforms are due to expire after 2010, unless Congress moves to keep them in place. If not, capital gains tax will revert to 20%, and the top income tax rate may revert to 39.6% – which President Barack Obama is said to favor.