An article in The New York Times' Business section digs down into the numbers to demonstrate something people need to know in order to understand just how much the 1 percent runs things. James B. Stewart looked at the income tax rates the richest among us paid in 2009, arguably the worst year for our economy since the Depression. Here's what he found.
According to IRS data, the top 400 taxpayers (i.e., the top sliver of the top 1 percent), had an average adjusted gross income (AGI) of $202 million. That year, the top federal rate was 35 percent (it's now 39.6 percent). And what percentage did they pay to the federal government in income taxes: less than 20 percent (!)
How about the top 1 percent overall, people with AGI's over $344,000? They paid an average of just over 24 percent.
And the top 0.1 percent? Those with AGI's over $1.4 million? They paid 24 percent.
Fascinating. The rate dropped the higher you went into the top 1 percent. No one is paying close to the actual top marginal rate. And bear in mind that tax exempt interest doesn't even count in the AGI for these people, with it, their incomes would be higher and their effective tax rate even lower.
This is why it drives me bananas when people whine about the supposedly high taxes paid by the rich. There was that golfer, Phil Mickelson, who complained that with the federal and state tax rate (in CA), he was paying more than 60 percent of his income in taxes, or some such nonsense.
These rich yahoos ignore (or lie) about the fact that the payroll tax only is levied on the first $100K in income, and that capital gains taxes -- the source of a disproportionate share of income for those at the tippity top -- is taxed at a rate much, much, lower than the marginal rate, and so on and so on. Stewart explained that in 2009 capital gains made up 46 percent of the total income for the top 400 taxpayers, which is "much higher than for most people." The top 400 received 16 percent of all the capital gains earned by Americans. 400 households. Think about that.
Raising the top income rate to 39.6 percent as of this year will help, as will the increased Medicare taxes on higher incomes as well as the higher capital gains taxes on higher incomes (both of these last two are elements of Obamacare).
The reality is that, even with these coming changes, no one will be even coming close to paying that 60+ percent rate cited by Mickelson (actually, he said 62-63 percent, to get all technical and stuff), let alone 50 percentor even 40 percent, even including all federal, state, and local income and payroll taxes.
When we progressives say that the rich, especially the ultra-rich, need to pay their fair share, this is what we mean.