The Rich get Richer . . . and Richer . . . and Richer. . . .
February 25, 2010
The Center on Budget and Policy Priorities earlier this week examined U.S. Internal Revenue Service data and found that the richest 400 taxpayers in America saw their tax rates decline by almost 50 percent over the past two decades, while their pre-tax incomes have grown almost five-fold.
According to the Center:
The top 400 households paid 16.6 percent of their income in federal individual income taxes in 2007, down from 30 percent in 1995. This decline works out to a tax cut of $46 million per filer in 2007, or a total of $18 billion in tax cuts for these households per year.
To make it into the top 400, a household needed an adjusted gross income of at least $35 million in 1992 (in 2007 dollars) and $139 million in 2007.
The decline in effective tax rates at the very top is due in large part to the capital gains tax cuts enacted in 1997 and 2003. The top marginal tax rate on capital gains is now 15 percent, less than half the top tax rate on wages and salaries. The top 400 taxpayers derived two-thirds of their income from capital gains and qualified dividends in 2007.
Over roughly the same period, the top 400 filers enjoyed huge gains in pre-tax incomes. The average pre-tax income of this group rose by over 400 percent between 1992 and 2007, equivalent to a $275 million increase per person, after adjusting for inflation. In 2007 alone, average pre-tax incomes rose by 31 percent among these individuals.
In short, the top 400 filers now pay much lower effective tax rates on vastly larger incomes.
The top 400 taxpayers saw their average adjusted gross income increase by more than 400 percent, after adjusting for inflation, between 1992 and 2007. However, due to tax cuts their after-tax incomes grew even greater with an increase of 475 percent.
And, to add insult to injury, during the last period of economic expansion–end of 2001 to end of 2007–"two-thirds of the nation's total income gains flowed to the highest-income 1 percent of Americans."
For a great rant about this wealth disparity see the Housing Time Bomb's February 20th blog: Wealth Disparities Approach Levels of the 1920s.
