New data from the IRS shows that the average tax rate paid by the richest 400 Americans fell by a third from 22.9% to 17.2% in the first six years of the Bush presidency, even as their average incomes doubled to $263.3 million.But here's what's interesting: their incomes doubled and the tax rate only fell by 5.7% meant that, on average, they paid more in taxes.
Bush's capital gains tax cuts were a huge driver of the decrease in tax rates but Dean Baker, co-director of the Center for Economic Policy and Research in Washington, told Bloomberg that the rich "are realizing more of their gains due to the lower tax rate."
So by lowering the capital gains tax rate, Bush's plan spurred tax revenue generating asset sales that otherwise would have continued to compound tax-free. It isn't that the tax cuts spurred job creation and economic productivity, but they did at least generate some capital-gains tax revenue.
The fact that the rich paid a smaller percentage of their incomes is not especially problematic because they still generated more tax revenue. The IRS study is sure to generate many "Rich get richer" and "Tax rates for top earners decline" headlines but the reality is actually better than that.
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Reader Comments (Page 1 of 1)
2-20-2009 @ 1:12PM
JOEL WEINBERGER said...
As usual the spin is the poor rich. they the rich canoot live through forweclosures. the rich do not have to pay a doubling of food costs, utilities and all basic costs. medicAl insurance is not reachable or if ylou have insurance the policies are as good as having no medical insurance policies. the lost of jobs. the middle class does not exist. there is the rich and richer. Everyone else is in levels of the lower ckass. A Two CAST ECONOMY. NOW WE HAVE THE POOR FINANCIAL SECTOR. WHO IS WATCHING OUT FOR THE AMERICAN DREAM. NOT THE GREEDY CORPORATIONS, THE RICH, TH BUNCH OF COHORTS UP ON THE HILL. WHAT HAS HAPPENED. WE ARE A LOST SOCIETY THAT HAS BEEN SOLD TO THE FOREIGN GOVERNMENTS FOR GREED. GREED CAUSE OPEN MARKETS, OUTSOURCING AND SOOO MUCH MORE. THE END OF THE AMERICAN ECONOMY. THIS COUNTRY IS OWNED AND BOUGHT BY FOREIGN NATIONS. RICH AND GREED HAS CAUSE THIS. I AM TIRED OF THE LIES AND TWISTS THAT ARE PUT ON. THE MO NEY BROKERS RUN THIS COUNTRY AND THE WORLD.
1-30-2009 @ 3:14PM
Michael Schneider said...
Rich getting richer is not so bad in and of itself and in fact probably is an inherent feature of capitalism. However if inequities get too great- and when they are combined with other problems such as fraud, extreme and unwarranted bonuses etc. there can be huge consequences. One problem is that there can be increased populist political pressures which leading to bad policies and wasteful spending. Further, it should be remembered that vast economic inequities are damaging to the economic system-- in the years of the Great Depression this lead to a deepening of the crisis and made that crisis more difficult to manage. While we are nowhere near the situation we were in in the 1930's there are still lessons to be learned from our economic history-- or to be ignored at our great risk. Michael Schneider
2-08-2009 @ 7:11PM
CJ said...
The 400 richest Americans probably gave a lot of money to charities and to the arts. The richest 400 Americans probably gave money to colleges for scholarships as well as charities and churches.
Warren Buffet gave a billion to Gates' charitible foundation. The Gates' give a lot of money to the poor, too.
This article doesn't inform how much money the 400 richest Americans give to charities.