With a vote looming on an Illinois bill (HB 689) that would impose a graduated income tax with a top rate of 11.25 percent on pass-through businesses (previous coverage here and here), the Illinois Department of Revenue...
- Orange County Register quotes Scott Hodge on Millionaire ...
Orange County Register quotes Scott Hodge on Millionaire Taxpayers
By JAN NORMAN / ORANGE COUNTY REGISTER
Millionaire taxpayers are more likely to earn their taxable income through partnerships or S corporations than sole proprietorships, according to an analysis of income tax returns by the Tax Foundation, an advocate for low taxes.
Since most small businesses are S Corporations, partnerships or sole proprietorships, their income is passed through to owners who pay income taxes on it as individuals. In 2009, individual taxpayers reported $896 billion in total business income from all sources. After subtracting net losses, individual taxpayers earned $696 billion in net business income.
In recent years, New York, New Jersey, Connecticut and Maryland have increased taxes on high-income residents. California Gov. Jerry Brown is seeking to qualify a measure for the November election that would increase income taxes on state residents who make more than $250,000 a year.
The Tax Foundation analysis of the most recent IRS data is an effort to describe who America's millionaire taxpayers are, foundation President Scott A. Hodge said. "There is a serious ongoing political debate over the tax rates paid by millionaires. Neither side of this debate, however, has made any attempt to provide a basic profile of who these taxpayers are."
"When we look beyond the basic financial statistics, we learn that these taxpayers are married - and most of them are two-earner couples - they are highly educated, many are business owners and nearly half are over the age of 55," he added.
The IRS reports 267,936 tax returns with more than $1 million in adjusted gross domestic income for the most recent year available, 2010 after the recession ended. That's down from 392,220 million-dollar returns in 2007 before the recession started.
In the United States, 60% of income tax returns are filed by unmarried people. Yet 86% of the $1 million-plus incomes are reported by married couples, in most cases having two or more earners.
Also, 78% of those reporting incomes over $200,000 ( no breakdown for $1 million-plus incomes) have a bachelor's degree or higher from college. Most (69%) of those with a high school diploma or less reported no income and only 9% reported incomes of more than $200,000.
However, earning $1 million-plus a year isn't a way of life for most taxpayers. Half only file million-dollar tax returns once; 15% do it twice and 3% have done it six years.
"The volatile nature of capital gains realizations and business income appears to be the leading factors for the transiency of millionaires," the report said.
Millionaires' share of the nation's total adjusted gross income was 9% in 2001, rose to 16% in 2007 then declined to 10% in 2009 and 2010. Their share of total taxes paid for those years was 18%, 28%, 20% and 22% respectively.
Click here to read the full report.
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