Thursday, January 29, 2009

Significant Turnover in the Top 400 U.S. Earners

The IRS has a new report on the 400 taxpayers reporting the highest adjusted gross incomes (AGI) from 1992 to 2006, summarized in the table above. The 6,000 tax returns (400 highest earners x 15 years) from 1992 to 2006 represented 3,305 unique, individual taxpayers, since some taxpayers made it into the top 400 earner group more than one year. The data show that:

1. Of the group of 3,305 top earners from 1992-2006, 2,394 individuals made it into the top 400 only one time during the 15-year period. Those 2,394 one-timers represent 72.44% of the total (3,305), so only 27.56% made it into the top 400 more than once (see columns 2 and 3).

2. Moreover, 2,394 earners made it into the top 400 once (72.44%), and another 408 (12.34%) made it into the top group twice. So 84.78% made it into the top group either once or twice, and only 15.22% made it into the top group more than twice (see columns 2 and 3).

3. There were only 8 taxpayers out of 3,305 (1/4 of 1%) who were in the top 400 in all of the 15 years.

4. In any given year, on average, about 40% of the returns were filed by taxpayers that are not in any of the other 14 years (see columns 4 and 5).

According to the IRS, "the data shown in the table mostly represent a changing group of taxpayers over time, rather than a fixed group of taxpayers."

HT:
Tax Foundation

25 Comments:

At 1/30/2009 7:12 AM, Anonymous poor boomer said...

I'm not finding this particularly remarkable either.

I suspect a large number of these one-timers had a singular event which shot them into the stratosphere for that one year.

Such as sale of a outsized personal or family business. Obviously this sort of event is unlikely to be repeated by an individual or family.

 
At 1/30/2009 7:55 AM, Anonymous poor boomer said...

Did anyone catch this from DealBook at NYT?

The top 400 paid just more than $18 billion in federal income taxes in 2006, or an average of $45 million, on a record $105 billion in total income — the lowest effective tax rate in the 15 years since the agency began releasing such data.

An effective FIT rate of less than 4.5 percent. What was "1" saying earlier about a progressive tax system?

 
At 1/30/2009 8:48 AM, Blogger Michael Smith said...

poor boomer wrote:

An effective FIT rate of less than 4.5 percent. What was "1" saying earlier about a progressive tax system?

If you go to the IRS website and look at the actual data, you will see that most of this income is in the form of capital gains subject to preferential treatment. For instance, for 2006, 64% of their AGI consisted of such gains.

The relatively large turnover indicates these people experienced a one-time gain of some sort that isn't likely to be repeated. For instance, profits on the sale of one's home are not taxable, provided they are invested in another home. Other capital gains are taxed at 15%.

So this data really doesn't tell us much about the progressivism of the income tax system. But here are some facts that do:

- According to the latest data from the IRS, the top 1% of income earners pay 39% of all income taxes, up from 37% when Bush took office.

- The top 25% of all income earners now pay 86% of all income taxes, up from 84% when Bush took office.

- The top 50% of all income earners now pay 97% of all income taxes, up only .5% since Bush took office.

So we are very close to reaching a point where those who pay little or no taxes can vote into office those who promise to further “soak the rich” and “spread the wealth”. It remains to be seen how long the upper income earners will be willing to go on producing under such conditions.

 
At 1/30/2009 9:40 AM, Blogger gator80 said...

An effective FIT rate of less than 4.5 percent.

I don't understand that calculation. Taxes of $18 bn on income of $105 bn is 17%.

 
At 1/30/2009 10:06 AM, Blogger wcw said...

It remains to be seen how long the upper income earners will be willing to go on producing under such conditions.

Nice one -- I'm still chuckling. Or wait, were you serious? Dadgumit, I think you were. If you actually think raising US tax rates will lead to tax flight, I encourage you to peruse total tax ratios as percentage of GDP. Where are these upper-income earners supposed to flee, Turkey?

My favorite piece of evidence on the compensation of top earners comes from historical top earner Jack Welch.

'And this was brought home to me when I was at a boot camp for CEOs where the audience was being lectured on how to be a CEO by Jack Welch, who had just retired. And, when asked who should chair the compensation committee on the board, Welch said, "Put someone in charge who is nearing the end of their career, so they're not jealous of you as a younger CEO, is immensely rich, much richer than you, and enjoys seeing other people get rich." And someone raised their hand and said, "I had a distinguished academic as my compensation chair." And everyone else in the room just shook their heads and sort of held their heads in their hands, and Welch said, "Never, ever make a distinguished academic your compensation committee chair because you'll be a poor man by the end of it."'

 
At 1/30/2009 11:08 AM, Blogger misterjosh said...

"It remains to be seen how long the upper income earners will be willing to go on producing under such conditions."

Nice one -- I'm still chuckling. Or wait, were you serious? Dadgumit, I think you were. If you actually think raising US tax rates will lead to tax flight, I encourage you to peruse total tax ratios as percentage of GDP. Where are these upper-income earners supposed to flee, Turkey?


I read it differently - not that they will flee taxes, but that if the incentive (income after taxes) to make more money decreases, then they will make less money i.e. work less hard.

As for the "Distinguished Academic" something tells me that Perfesser Perry wouldn't exactly be a skinflint with the corporation's money. Then again, I don't know how distinguished he is.

 
At 1/30/2009 12:15 PM, Blogger Michael Smith said...

wcw asked:

Where are these upper-income earners supposed to flee, Turkey?

They won’t flee anywhere. They’ll simply stop producing and -- even more critical -- they’ll stop investing. In effect, they’ll go on strike until conditions improve -- just as they did from 1929 until 1942.

 
At 1/30/2009 2:55 PM, Blogger 1 said...

poor boomer asks: "An effective FIT rate of less than 4.5 percent. What was "1" saying earlier about a progressive tax system?"...

YOU still haven't answered my question why the rich should pay one more penny in taxes than you do...

How about it?

BTW couldn't you find something credible? I mean the New York Times! Come on!

Professor Mark might remember this from The Detroit News but brought to us courtesy of Diggers Realm (nice little graphic included): Tax Cut Aftermath

Across 109.4 million tax-paying households — from the wealthiest 1 percent with incomes averaging over $1 million to the lowest-earning 20 percent of people with incomes averaging $14,900 — the report shows that all income classes have seen their income tax rates lowered thanks to Bush’s cuts in 2001, 2002 and 2003...

 
At 1/30/2009 4:41 PM, Blogger Patrick said...

"It remains to be seen how long the upper income earners will be willing to go on producing under such conditions."

The great thing about our government is that if the rich stop producing and paying taxes, they will find a way to tax them that isn't tied to production. We can just slap a tax on net worth, or something else the rich can't escape. That'll show 'em!

 
At 1/30/2009 5:46 PM, Anonymous Anonymous said...

We can just slap a tax on net worth, or something else the rich can't escape. That'll show 'em!

What a fantasy. How do you think the Kennedys stay Kennedys?

 
At 1/30/2009 5:53 PM, Anonymous Anonymous said...

Where are these upper-income earners supposed to flee, Turkey?

You know the difference between you and a common criminal? The criminal acts independently and accepts that his actions are immoral.

You on the other hand rely on the mob. You think that by inciting your neighbors to larceny and getting them to vote on the job that your actions are noble.

Here's an idea, take responsibility for yourself. Stop coveting your neighbors property. Poverty does not equal nobility.

 
At 1/30/2009 6:07 PM, Blogger Patrick said...

Anon,
I'm being facetious when I say things like that, but really the government is going to get their money one way or another. Just look to California where home values have dropped, and property tax revenues declined. Did they just make do with less? No, they had to raise mil rates to compensate.

 
At 1/30/2009 8:33 PM, Blogger wcw said...

Wow, you kids are a sad lot. In turn:
- if the incentive (income after taxes) to make more money decreases, then they will make less money i.e. work less hard.
-- Quite. Which lets the next guy on the totem pole make the same dollar. Or are you telling me that if Wal-Mart hadn't expanded as aggressively as it did, that Target would have sat on its ass? Business opportunities do not vanish because John Galt takes vacation, and 300 million people provide for a lot of entrepreneurs to eat Mr. I've-Taken-A-Vacation Galt's lunch.
- they’ll go on strike until conditions improve -- just as they did from 1929 until 1942.
-- For which you may read, "until wartime spending kicked in, FDR's stimulus was woefully inadequate in size." No evidence exists that super-magic-extra-productive members of the workforce went on strike for a decade and a half. None. But your assertion and five bucks will buy you a crappy sandwich in midtown Manhattan.
- Here's an idea, take responsibility for yourself. Stop coveting your neighbors property. Poverty does not equal nobility.
-- this is my pardon-my-French motherfucking favorite. So, Jack Welch takes full advantage of the principal-agent problem, and you cheer. I note that rich people don't matter, since they essentially are fungible, and you complain that the poor aren't poor enough. Nothing personal, but if the entire polity were like you I would welcome the mob stripping you and yours of absolutely everything. And get back to me the next time I kick down your front door and rummage through your garage.

 
At 1/31/2009 1:37 AM, Anonymous poor boomer said...

First, a mea culpa. I sloppily read incorrectly the DealBook clip I quoted.

An average of $45 million in income tax paid does not make for an effective rate under 5 percent.

Obviously, $18 billion is just a hair under 18 percent of $105B, which of course is a heckuva lot more than 5 percent.

 
At 1/31/2009 1:55 AM, Anonymous poor boomer said...

1 said:

"YOU still haven't answered my question why the rich should pay one more penny in taxes than you do...

How about it?



Government in this country affords the rich and wealthy substantial advantage in building income and wealth. Capital is welcome here because it is safe.

Anyone who disputes this should try investing in a third world country - see how safe your investments are there.

Government regulations often favor those with money and wealth. Socialized property rights prohibit the poor from acquiring real property in increments they can afford, thereby keeping them in rent slavery, in turn, facilitating the expansion of wealth by those who have some.

I've been saying as much for years, and inadvertantly missed this earlier; I wasn't trying to duck the question.

 
At 1/31/2009 1:59 AM, Anonymous poor boomer said...

Patrick said:

The great thing about our government is that if the rich stop producing and paying taxes, they will find a way to tax them that isn't tied to production. We can just slap a tax on net worth, or something else the rich can't escape. That'll show 'em!


I often wonder, what are the idle rich going to do, stop collecting dividends?

I can see them selling their businesses and kicking back, but then the same businesses would be run by others willing to work harder, so I'm having difficulty expecting a big drop in productivity.

 
At 1/31/2009 2:49 AM, Blogger Plamen said...

"We can just slap a tax on net worth, or something else the rich can't escape."

Try on retirement savings. And try not tax, but outright nationalization - "forget those risky markets, wouldn't it be nice if the government gave you a nice, safe pension, just like they it used to in the Soviet Union?" See Argentina for reference.

 
At 1/31/2009 2:59 AM, Blogger Plamen said...

wcw, with the last comment about kicking in garage doors you have earned a permanent "ignore" from me - not that I expect that to upset you a lot. You are entitled to your opinions, and I to mine about you. Come kick down my front door - just do not be surprised to receive an instant boost to the lead content in your body.

Have a good life.

 
At 1/31/2009 3:39 PM, Blogger wcw said...

Oh, Plamen, you erstwhile trader and pathetic little loser: I mention it because about a week ago some lovely from down the street kicked down my front door and rummaged through my garage. If you need the link to the police blotter, drop me a line.

So if you pathetic lackwit rightwingers can't understand the difference between the hoodlum who kicked down my door and the internet gadfly who calls them on their bullshit, please: put me on "ignore". And send me a link to the software that does so. Because as usual you are making shit up.

As for lead content, if our intrepid hoodlum hero had kicked down our apartment door, my choice was the 10" chef's knife to the kidney. A pistol shot at close range in a confused situation is surprisingly easy to miss, as my much-missed gold-medal-shot grandfather taught me. If you miss the kidney with a knife, you still hit the gut.

Loser.

 
At 2/01/2009 8:14 AM, Blogger 1 said...

poor boomer says: "Government in this country affords the rich and wealthy substantial advantage in building income and wealth. Capital is welcome here because it is safe"...

So this is some sort of rationlization that said wealthier person should pay more taxes in order finance the socialist nanny state programs you think are important?

"Anyone who disputes this should try investing in a third world country - see how safe your investments are there"...

What does this have to do with your desire to see other peoples' money in the hands of big government?

"Government regulations often favor those with money and wealth. Socialized property rights prohibit the poor from acquiring real property in increments they can afford, thereby keeping them in rent slavery, in turn, facilitating the expansion of wealth by those who have some"...

Wait a sec! I thought you were living in the US... Was that a bad assumption on my part?

 
At 2/01/2009 4:13 PM, Anonymous poor boomer said...

1 said:

So this is some sort of rationlization that said wealthier person should pay more taxes in order finance the socialist nanny state programs you think are important?


No, only that one pay for the benefit you receive. The rich and wealthy receive staggering benefits here, I think they're getting a very good deal.

Again, try putting your money in a Third World country, good luck!

 
At 2/01/2009 4:18 PM, Anonymous poor boomer said...

1 said:


"Government regulations often favor those with money and wealth. Socialized property rights prohibit the poor from acquiring real property in increments they can afford, thereby keeping them in rent slavery, in turn, facilitating the expansion of wealth by those who have some"...

Wait a sec! I thought you were living in the US... Was that a bad assumption on my part?


I am living in the US. My government prevented me from buying the 400-sf home in which I was living several years ago.

You see, it was on a lot with a larger house, the lot could not be legally split, so when the propewrty sold for $120K, I was unable to buy only the small portion which I needed and could afford, thereby keeping me in rent slavery.

Or did you mistakenly believe that the assetless poor in this country have property rights?

 
At 2/02/2009 10:37 AM, Blogger 1 said...

"You see, it was on a lot with a larger house, the lot could not be legally split, so when the propewrty sold for $120K, I was unable to buy only the small portion which I needed and could afford, thereby keeping me in rent slavery"...

Hmmm, sounds like that old saw in play again, "elections have consequences"...

Someone elected the people who made those laws and YOU made the decision to continue to live in an area where those laws are in effect...

"Or did you mistakenly believe that the assetless poor in this country have property rights?"...

I never said that but I can easily believe you might have said it...

 
At 2/02/2009 10:38 AM, Blogger 1 said...

"You see, it was on a lot with a larger house, the lot could not be legally split, so when the propewrty sold for $120K, I was unable to buy only the small portion which I needed and could afford, thereby keeping me in rent slavery"...

Hmmm, sounds like that old saw in play again, "elections have consequences"...

Someone elected the people who made those laws and YOU made the decision to continue to live in an area where those laws are in effect...

"Or did you mistakenly believe that the assetless poor in this country have property rights?"...

I never said that but I can easily believe you might have said it...

 
At 2/02/2009 8:09 PM, Blogger steve said...

I'm a little late to this discussion, but I wanted to add to another way a government could get at your savings.

Years ago, Argentina instituted a private retirement savings plan much like our 401K. The present government has run into severe financial difficulties, so they have proposed nationalizing the private accounts. Yes, that means the 401K account now belongs to the government, with their promise to continue paying at the same rate.

http://ipsnews.net/news.asp?idnews=44384

Hope our Congress hasn't heard about this great idea.

 

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