Super Rich Made $345 Million Each in 2007 as Their Tax Rates Plummeted
"This just-disclosed data shows that government policy is concentrating incomes at the very top and steadily lowering their tax burden, thus shifting it on to Americans who in a lifetime don't make what these people make in a week," Johnston told DailyFinance.
For Super-Rich, Incomes Go Up, Tax Rates Go Down
Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, told Bloomberg that the new data highlights "two long-term trends: That income at the very top has exploded and their taxes have been cut dramatically."
Between 1992 to 2007, the last year included in the data, the income of the 400 richest Americans rose 637% to the average $345 million mark. During that same period, their effective tax rate declined by over one-third, from a peak tax rate of nearly 30% to 16.6%. Meanwhile, their share of all adjusted gross income increased from 0.52% to 1.59% over that same period. In other words, in a nation of over 300 million people, the 400 richest Americans accounted for nearly 1.6% of all income earned in 2007.
Bill Ahern of the Tax Foundation, which pushes for lower taxes, said the 2007 data -- taken during the final year of the last boom -- doesn't accurately gauge the situation in 2010, nearly two years into a crippling recession. "In a good year like 2007, it's not surprising to see that the owners and managers of the nation's largest firms made a fortune," Ahern told Bloomberg. "Notice that two-thirds of their 2007 income was in capital gains, which have dropped like a rock since then."
But Johnston says the new data belie recent reports that the super-rich have become "poorer." Johnston says their incomes have likely decreased since 2007 thanks to the financial crisis and recession. But he disputes that these people, worth hundreds of millions of dollars, have become "poorer."
Clinton, Bush Tax Cuts For The Wealthy
Just 15 years ago, the 400 richest Americans earned an average of just over $50 million and had an effective tax rate of about 30%. So while the incomes of the 400 richest have increased by seven-fold over that period, their effective tax rate has been cut by over one-third.
Johnston said decreasing share of taxes paid by the ultra-rich has been driven by government polices that are concentrating wealth at the very top of the income scale. Dating back to the administration of Bill Clinton, Congress has lowered tax rates on the extremely wealthy several times.
"Bill Clinton cut these people's tax rates 8% and Bush added another 5.5% decrease," Johnston said. Most of the income increases for the super-rich came from cuts in the capital gains tax, he said. Prior to the tax cuts put in place by former President George W. Bush, the tax rate for top 400 was about 22%. Since those tax cuts, their rate to 16.6% in 2007.
Capital gains -- profits made from investments -- represented "66.3% of 2007 income for the top 400, up from 62.8% in 2006 and 36.1% in 1992," Johnston reported. Since 1992, "the bottom 90% of Americans have seen their incomes rise by 13% in 2009 dollars, compared with an increase of 399% for the top 400."
"The annual top 400 report was first made public by the Clinton administration, but the George W. Bush administration shut down access to the report," Johnston wrote. "Its release was resumed a year ago when President Obama took office."