Very Richest's Share of Income Grew Even Bigger,
By DAVID CAY JOHNSTON
The 400 wealthiest taxpayers accounted for more than 1 percent of all
income in the United States in the year 2000, more than double their
just eight years earlier, according to new data from the Internal Revenue
Service. But their tax burden plummeted over the period. The data,
report that the I.R.S. released last night, shows that the average
the 400 wealthiest taxpayers was almost $174 million in 2000. That
nearly quadruple the $46.8 million average in 1992. The minimum income
qualify for the list was $86.8 million in 2000, more than triple the
income of $24.4 million of the 400 wealthiest taxpayers in 1992.
While the sharp growth in incomes over that period coincided with the
market bubble, other factors appear to account for much of the increase.
cut in capital gains tax rates in 1997 to 20 percent from 28 percent
encouraged long-term holders of assets, like privately owned businesses,
sell them, and big increases in executive compensation thrust corporate
chiefs into the ranks of the nation's aristocracy.
This year's tax cut reduced the capital gains rate further, to 15 percent.
The data from 2000 is the latest available from the I.R.S., but various
government reports indicate that salaries, dividends and other forms
income have continued to rise since then, even as the stock market
fallen. The top 400 reported 1.1 percent of all income earned in 2000,
from 0.5 percent in 1992. Their taxes grew at a much slower rate, from
percent of all taxes in 1992 to 1.6 percent in 2000, when their tax
averaged $38.6 million each. Those numbers can be read to show that
wealthiest, as a group, carried a disproportionate share of the overall
burden - 1.6 percent of all taxes, versus just 1.1 percent of all income
evidence that all sides in the tax debate will be able to find ammunition
In 2000, the top 400 on average paid 22.3 percent of their income in
income tax, down from 26.4 percent in 1992 and a peak of 29.9 percent
1995. Two factors explain most of this decline, according to the I.R.S.:
reduced tax rates on long-term capital gains and bigger gifts to charity.
Had President Bush's latest tax cuts been in effect in 2000, the average
bill for the top 400 would have been about $30.4 million - a savings
million, or more than a fifth, according to an analysis of the I.R.S.
by The New York Times. That would have resulted in an average tax rate
17.5 percent. The rate actually paid by the top 400 in 2000 was about
same as that paid by a single person making $123,000 or a married couple
with two children earning $226,000, according to Citizens for Tax Justice,
labor-backed group whose calculations are respected by a broad spectrum
The group favors higher taxes on the wealthy, and its director, Robert
McIntyre, said yesterday that the I.R.S. data bolsters that viewpoint.
"Regardless of which party these 400 are in, these are the guys Bush
to help, even though they have so much money they don't know what to
it," he said. "How Bush feels about the half of the population that
have much money is he got them a tax cut worth an average of $19 each."
William W. Beach, a tax expert at the Heritage Foundation, a conservative
organization that favors lowering taxes for all Americans, said that
400 taxpayers made "the significant contribution" to government revenue
about one in every $64 of individual income tax paid. Cutting taxes,
said, will prompt the wealthy to invest more in the economy's growth.
Detailed information about high-income Americans has become increasingly
important in setting tax policy, because the government relies on the
1.3 million households for 37.4 percent of individual federal income
revenue. The half of Americans who earned less than $27,682 in 2000,
less than 4 percent of income taxes.
All of the I.R.S. data is based on adjusted gross income, the figure
reported on the last line on the front page of individual income tax
returns. Interest earned on municipal bonds, which are exempt from
not included. Over the nine years of tax returns that were examined
new report, only a handful of taxpayers showed up in the top 400 every
according to I.R.S. officials. In all, about 2,200 taxpayers made the
even once. There were a few incomes of more than $1 billion a year
group, but none as high as $10 billion.
The names of the wealthiest taxpayers are not disclosed in the report,
was prepared at the urging of Joel Slemrod, a University of Michigan
business school professor who serves on an I.R.S. advisory panel and
leading authority on taxation of high-income Americans. The figures
include the incomes of the many wealthy Americans who use shelters
their reported incomes below the level of the top 400. In 1999 and
example, William T. Esrey - then the chief executive of Sprint, the
telecommunications company - earned more than $150 million in stock
profits, lofting him onto many lists of the best-paid corporate managers.
That income might have put Mr. Esrey in the I.R.S.'s top 400 taxpayers.
as later came to light, Mr. Esrey bought a tax shelter from Ernst &
the accounting firm, designed to let him delay reporting the profits
purposes until the year 2030. Sprint's board forced Mr. Esrey to resign
March after he acknowledged that the shelter was the subject of an
audit. Over the nine years reviewed in the new report, the incomes
top 400 taxpayers increased at 15 times the rate of the bottom 90 percent
Americans; their average income rose 17 percent, to $27,000, from 1992
Long-term capital gains accounted for 64 percent of the income of the
400 in 2000, nearly double the level in 1992. Wages contributed 16.7
to the incomes of the top 400 in 2000, down from 26.2 percent in 1992,
dividends made up 2.8 percent. A second report that the I.R.S. will
public today shows that the number of Americans with high incomes who
taxes anywhere in the world has reached a record. In 2000, there were
Americans with incomes of more than $200,000 who paid no income tax
in the world, up from just 37 in 1977, when the report was first issued.
Tax Cut Casualties
By BOB HERBERT
The juxtaposition was perfect. On Monday, the same day that President
was raking in $4 million and touting his tax cuts at a Manhattan
fund-raiser, the trustees of the City University of New York met to
approve the largest tuition hike in the school's history. This is how
in the United States these days, massive tax cuts for the very wealthy
the same time that the poor and working classes are being clobbered
reduced services and myriad tax increases of one kind or another. For
students at CUNY, who have traditionally come from poorer backgrounds,
tuition hike - in this case $800 a year - is the equivalent of a tax
increase. And it can be devastating.
"A lot of students will drop out," said Lev Sviridov, president of the
undergraduate student government at City College. "CUNY estimates -
think it's a low estimate - that 60 percent of the students come from
households that make $30,000 or less." At City College, which is part
CUNY system, it's believed that most of the students come from households
earning less than $25,000. Students who are working their way through
(and youngsters in similar situations around the country) deserve as
support as we can give them as they try to distance themselves from
evils associated with poverty and an inadequate education. Instead
pushing some of them out of college.
Crystal Welch, a student at Hunter College, spoke this week of a friend
has already decided that she can't afford the tuition hike. She's leaving,
said Ms. Welch, "and she was a year away from graduating." Ms. Welch,
teacher's aide, is struggling herself, relying on student loans to
through. "I have no clue how I'm going to pay it all back," she said.
have no clue at all." There was a time when it was normal for politicians
pay at least some attention to the needs and the longings of middle-
working-class Americans, and the poor. That is how we managed to get
(despite conservative opposition) such vital programs as Social Security,
Medicare, unemployment insurance, college loans, environmental protections
and so forth.
But now the related problems of a tanking economy and the hijacking
federal government assets by the people at the top of the economic
have left little for distressed state and local governments to draw
short-term sustenance or long-term recovery. Which is just another
saying there's very little left for ordinary Americans. A recent
announcement to students at Baruch College, which is where the CUNY
met to hike the tuition, said, "As you know, the New York State Legislature
has passed a budget for next year that, due to current and projected
shortfalls in state tax revenues, contains significant cuts in education
So it's too bad, kids, but this is the new American reality. You'd be
getting a windfall if you were one of the high rollers at Bechtel or
Halliburton. The game is rigged in their favor. But all you want to
get a decent education so you can make something of yourself. We can't
you with that. While the president has been trumpeting his federal
57 of the 62 counties in the state of New York have raised property
Ten counties have raised sales taxes. Another 35 are trying to, but
come up against statutory limits. Some are pleading for permission
through those limits.
In New York City, which includes five of the state's counties, the situation
is dire. Residents have been hit with the largest fare increase in
(yes, that's another tax hike), the largest property tax increase in
history, an increase in the sales tax and an increase in the top rate
income taxes. Even water fees are going up. And, of course, it's not
New York City and New York State. California might as well throw its
into the Pacific. And Oregon is a fiscal basket case. The CUNY students
will have to shoulder a heavier tuition load next year are part of
mass of Americans who are going backward rather than forward, and who
not being helped in the least by the obsession in Washington with tax