The 400 highest-earning U.S. households reported a total of $108.2 billion in income for 2008, a 21.5 percent decline from a year earlier and the first drop since 2002, according to Internal Revenue Service data.
The figure reflects the effect of the recession on the wealthiest U.S. taxpayers, who earned an average of $270.5 million in 2008, the most recent figures available. President Barack Obama and Democratic leaders in Congress have proposed increasing taxes on top earners to reduce the U.S. budget deficit. Republicans in Congress resist such plans.
The drop in income will do little to blunt those efforts. Average income reported by the 400 highest-earning taxpayers was more than five times higher in 2008 than it was in 1992, according to the data. Even when held constant for inflation, the income of those taxpayers rose almost four times during the same period.
“Democrats are focused on the top 1 percent,” said David Kautter, the managing director of the Kogod Tax Center at American University in Washington. “Your income went down but you’re still in that top 1 percent.”
Recent polls suggest overwhelming public support for raising the taxes of top earners. An April McClatchy-Marist poll found 64 percent of respondents favor raising taxes for those with income exceeding $250,000, with 33 percent opposed.
The wealthy aren’t the only U.S. taxpayers earning less as a result of the recession. A separate IRS report in April said adjusted gross income at all levels fell 6.9 percent in 2009 while unemployment compensation increased 91.5 percent.
Since 1992, there have been five instances of declining income among the top earners. Besides the 2008 drop, income fell 1 percent between 1992 and 1993, 0.3 percent between 1993 and 1994, 24.6 percent between 2000 and 2001 and 20.6 percent between 2001 and 2002.
Income at the top rose at a steep pace after President George W. Bush signed tax cut legislation in 2001 and 2003. The top 400 earners more than doubled their income between 2002 and 2005, according to IRS data.
The Bush-era tax cuts were extended in December and most are slated to expire at the end of 2012. Obama has said he won’t extend them for individuals earning more than $200,000 a year and married couples making more than $250,000.
Effective Tax Rates
More than one quarter of the top 400 taxpayers, or 112 filers, had an effective tax rate of between 15 percent and 20 percent, according to the IRS. Another 101 paid effective rates between 10 percent and 15 percent, while 30 had effective rates of zero to 10 percent. There were 59 taxpayers in the top brackets from 30 percent to 35 percent.
The IRS data also illustrates the compensation breakdown of the highest earners. Salaries and wages comprised more than a quarter of their adjusted gross income in 1992 and just 8.18 percent in 2008.
During the same period, capital gains reported for this group rose from 36 percent of adjusted gross income to 56.8 percent. Most of these gains are taxed at a 15 percent rate. Obama’s deficit reduction panel last year recommended taxing capital gains and dividends as ordinary income as a way to raise revenue and cut income tax rates.
Capital gains income fell 32.8 percent between 2007 and 2008 to $61.5 billion.
The IRS data also shows a change in composition of the top 400 earners. Just four taxpayers, whom the IRS didn’t identify, have been included in the top 400 each year since 1992.
--Editors: Jodi Schneider, Laurie Asseo.
To contact the reporter on this story: Steven Sloan in Washington at email@example.com
To contact the editor responsible for this story: Mark Silva at firstname.lastname@example.org
© Copyright 2017 Bloomberg News. All rights reserved.