Mitt Romney’s statement that he pays an effective taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. rate of around 15 percent has generated a great deal of confusion over how much wealthy taxpayers actually pay in taxes and at what their “effective,” or average, tax rates are after credits and deductions. So it is helpful to review the latest data from the IRS for 2009. [Much of this is a reposting of a blog I wrote last September 21st.]
The table below shows that of the more than 140 million tax returns filed in 2009, roughly 237,000 reported adjusted gross incomes above $1 million. Those 237,000 returns had a combined income of $727 billion, about 10 percent of all the income earned that year.
After taking their credits and deductions, there were roughly 235,000 taxable returns that paid a total of $177.5 billion in income taxes that year. They had an average tax liability of $754,000. (There were 1,470 “millionaires” that had no U.S. income tax liability after credits and deductions.) Combined, these high-income taxpayers paid 20 percent of all the income taxes paid in 2009. That’s a greater share of the tax burden than what is paid by everyone earning under $75,000 combined.
The table also shows the average, or effective, tax rate that taxpayers in each income group pay. For the entire universe of American taxpayers, the average tax rateThe average tax rate is the total tax paid divided by taxable income. While marginal tax rates show the amount of tax paid on the next dollar earned, average tax rates show the overall share of income paid in taxes. is 11 percent of our AGI. The highest average tax rate paid by anyone earning under $100,000 is 8 percent. That shows the power of the sundry tax credits available to the “middle-class.”
By contrast, millionaires pay an average rate of 25 percent. Although taxpayers earning between $2 million and $5 million pay an average tax rate of 26 percent, while those earning more than $10 million pay an average of 22 percent. We can speculate that one of the reasons for this is that much of their overall income comes from capital gains, which is taxed at 15 percent (only 20 percent of the total AGI for these $10 million-plus taxpayers is from salaries). However, even with this “preferential” tax rate on capital gains, the data clearly shows that their overall average tax rate is at least twice that of the nation as a whole.
|
Income Tax Summary Statistics for 2009 |
|||||||
|
All Returns |
AGI ($Billions) |
Taxable Returns |
Income Tax After Credits ($Billions) |
Average Tax Rate |
Share of total taxes |
Share of all AGI |
|
|
All returns, total |
140,494,127 |
$7,626 |
81,890,189 |
$865.9 |
11% |
100% |
100% |
|
No adjusted gross income |
2,511,925 |
($199) |
3,820 |
$0.1 |
0.0% |
0% |
-3% |
|
$1 under $5,000 |
10,447,635 |
$27 |
306,587 |
$0.0 |
0.1% |
0% |
0% |
|
$5,000 under $10,000 |
12,220,335 |
$92 |
1,899,331 |
$0.4 |
0.4% |
0% |
1% |
|
$10,000 under $15,000 |
12,444,512 |
$155 |
2,883,906 |
$0.8 |
1% |
0% |
2% |
|
$15,000 under $20,000 |
11,400,228 |
$199 |
4,868,050 |
$2.5 |
1% |
0% |
3% |
|
$20,000 under $25,000 |
10,033,887 |
$225 |
4,639,085 |
$4.7 |
2% |
1% |
3% |
|
$25,000 under $30,000 |
8,662,392 |
$238 |
4,603,763 |
$6.8 |
3% |
1% |
3% |
|
$30,000 under $40,000 |
14,371,647 |
$500 |
9,589,845 |
$20.2 |
4% |
2% |
7% |
|
$40,000 under $50,000 |
10,796,412 |
$483 |
8,381,017 |
$25.4 |
5% |
3% |
6% |
|
$50,000 under $75,000 |
18,694,893 |
$1,149 |
16,449,393 |
$78.0 |
7% |
9% |
15% |
|
$75,000 under $100,000 |
11,463,725 |
$990 |
10,987,101 |
$80.5 |
8% |
9% |
13% |
|
$100,000 under $200,000 |
13,522,048 |
$1,801 |
13,374,553 |
$212.3 |
12% |
25% |
24% |
|
$200,000 under $500,000 |
3,195,039 |
$905 |
3,178,420 |
$176.3 |
19% |
20% |
12% |
|
$500,000 under $1,000,000 |
492,567 |
$332 |
489,904 |
$80.5 |
24% |
9% |
4% |
|
$1,000,000 under $1,500,000 |
108,096 |
$130 |
107,416 |
$32.8 |
25% |
4% |
2% |
|
$1,500,000 under $2,000,000 |
44,273 |
$76 |
44,015 |
$19.4 |
25% |
2% |
1% |
|
$2,000,000 under $5,000,000 |
61,918 |
$183 |
61,535 |
$46.9 |
26% |
5% |
2% |
|
$5,000,000 under $10,000,000 |
14,322 |
$97 |
14,236 |
$24.6 |
25% |
3% |
1% |
|
$10,000,000 or more |
8,274 |
$240 |
8,211 |
$53.8 |
22% |
6% |
3% |
|
Summary for $1 Million+ |
236,883 |
$726.9 |
235,413 |
$177.5 |
25% |
20% |
10% |
|
Source: IRS 2009 Data, Table 1.2 http://www.irs.gov/pub/irs-soi/09in12ms.xls |