TOP 1%: What Do They Really Pay In Tax?
(CNNMoney) — Everyone talks about the 1% — but who are they exactly?
Here is the breakdown:
It takes at least $389,000 to make the club: That was the minimum threshold of adjusted gross income in 2011, the most recent year for which the IRS has final data.
In 2001, you had to make at least $306,635 to make the cut. But if you factor in inflation, that’s roughly the same amount as in 2011.
The minimum threshold was much higher in 2007, just ahead of the economic collapse. That year you needed $426,439 to be in the top 1%.
The 1% as a group pay a bigger share of income taxes than their share of adjusted gross income: As a group, the top 1% earned nearly 19% of all adjusted gross income reported in 2011 and paid 35% of all federal income taxes.
Of course, adjusted gross income doesn’t measure all income, only what must be reported for taxes. So, for instance, it doesn’t include income that those in the top 1% may have made from tax-exempt investments, such as municipal bonds.
Nor do federal income taxes represent any income group’s entire tax burden.
The effective tax rate of the top 1% was 23.5%: The average tax rate paid by these high-income households was 23.5% — which represents the percent of their income they paid in federal income taxes.
That’s below the 27.6% they paid in 2001 — a high point for the decade that followed.
Some people may think those rates sound low.
But they’re still well above the average tax rate paid by others.
For instance, the top 50% of filers — who had an AGI of at least $34,823 — paid an average tax rate of just under 14%.
Who’s in the top 1%: There’s been remarkable consistency over the years in terms of which professions typically occupy the top 1%.
Analyzing IRS data from 1979 through 2005, tax researchers at Williams College and at the Treasury Department found that five occupations accounted for the lion’s share of the top 1% again and again.
They were executives at non-financial companies, financial professionals, doctors, lawyers and an occupational category that lumps together computer, math, engineering and technical jobs in non-financial firms.
Not surprisingly, these same five occupational groups also account for the majority of folks in the top 0.1%.
At the same time, membership in the top 1% isn’t a decades-long experience for everyone. That’s because a sizeable number of households are catapulted into the group thanks to one-time event.