You probably don’t get to have one the 400 highest adjusted gross incomes in the U.S. without having a clever accountant — and probably an entire law firm — at your disposal. So it shouldn’t come as much of a surprise that the folks who have attained that level of wealth are paying less income tax these days than they were in the early ’90s.
According to the IRS, those 400 folks averaged around $345 million in income in 2007. And on that great big beast of a number the average federal income tax rate was 17%, a substantial drop from the 26% they paid in 1992. Meanwhile, the average federal income tax rate only dropped a hair over those same 15 years, from 9.9% to 9.6%.
On the other end of the spectrum, the Tax Policy Center estimates around 45% of American households won’t pay any federal income tax this year, and not because they are scofflaws, but because there are so many possible deductions and credits.
“It’s the fact that we are using the tax code both to collect revenue, which is its primary purpose, and to deliver these spending benefits that we run into the situation where so many people are paying no taxes,” explains a Tax Policy Center fellow to the AP.