Very Richest's Share of Income Grew Even Bigger, Data Show

The 400 wealthiest taxpayers accounted for more than 1 percent of all the 
income in the United States in the year 2000, more than double their share 
just eight years earlier, according to new data from the Internal Revenue 
Service. But their tax burden plummeted over the period. The data, in a 
report that the I.R.S. released last night, shows that the average income of 
the 400 wealthiest taxpayers was almost $174 million in 2000. That was 
nearly quadruple the $46.8 million average in 1992. The minimum income to 
qualify for the list was $86.8 million in 2000, more than triple the minimum 
income of $24.4 million of the 400 wealthiest taxpayers in 1992.

While the sharp growth in incomes over that period coincided with the stock 
market bubble, other factors appear to account for much of the increase. A 
cut in capital gains tax rates in 1997 to 20 percent from 28 percent 
encouraged long-term holders of assets, like privately owned businesses, to 
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 of 
income have continued to rise since then, even as the stock market has 
fallen. The top 400 reported 1.1 percent of all income earned in 2000, up 
from 0.5 percent in 1992. Their taxes grew at a much slower rate, from 1 
percent of all taxes in 1992 to 1.6 percent in 2000, when their tax bills 
averaged $38.6 million each. Those numbers can be read to show that the 
wealthiest, as a group, carried a disproportionate share of the overall tax 
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 
the data.

In 2000, the top 400 on average paid 22.3 percent of their income in federal 
income tax, down from 26.4 percent in 1992 and a peak of 29.9 percent in 
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 tax 
bill for the top 400 would have been about $30.4 million - a savings of $8.3 
million, or more than a fifth, according to an analysis of the I.R.S. data 
by The New York Times. That would have resulted in an average tax rate of 
17.5 percent. The rate actually paid by the top 400 in 2000 was about the 
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, a 
labor-backed group whose calculations are respected by a broad spectrum of 
tax experts.

The group favors higher taxes on the wealthy, and its director, Robert S. 
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 wants 
to help, even though they have so much money they don't know what to do with 
it," he said. "How Bush feels about the half of the population that doesn't 
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 the top 
400 taxpayers made "the significant contribution" to government revenue - 
about one in every $64 of individual income tax paid. Cutting taxes, he 
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 top 
1.3 million households for 37.4 percent of individual federal income tax 
revenue. The half of Americans who earned less than $27,682 in 2000, paid 
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 tax, is 
not included. Over the nine years of tax returns that were examined for the 
new report, only a handful of taxpayers showed up in the top 400 every year, 
according to I.R.S. officials. In all, about 2,200 taxpayers made the cut 
even once. There were a few incomes of more than $1 billion a year in the 
group, but none as high as $10 billion.

The names of the wealthiest taxpayers are not disclosed in the report, which 
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 is a 
leading authority on taxation of high-income Americans. The figures do not 
include the incomes of the many wealthy Americans who use shelters to reduce 
their reported incomes below the level of the top 400. In 1999 and 2000, for 
example, William T. Esrey - then the chief executive of Sprint, the 
telecommunications company - earned more than $150 million in stock option 
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. But, 
as later came to light, Mr. Esrey bought a tax shelter from Ernst & Young, 
the accounting firm, designed to let him delay reporting the profits for tax 
purposes until the year 2030. Sprint's board forced Mr. Esrey to resign in 
March after he acknowledged that the shelter was the subject of an I.R.S. 
audit. Over the nine years reviewed in the new report, the incomes of the 
top 400 taxpayers increased at 15 times the rate of the bottom 90 percent of 
Americans; their average income rose 17 percent, to $27,000, from 1992 to 

Long-term capital gains accounted for 64 percent of the income of the top 
400 in 2000, nearly double the level in 1992. Wages contributed 16.7 percent 
to the incomes of the top 400 in 2000, down from 26.2 percent in 1992, and 
dividends made up 2.8 percent. A second report that the I.R.S. will make 
public today shows that the number of Americans with high incomes who pay no 
taxes anywhere in the world has reached a record. In 2000, there were 2,022 
Americans with incomes of more than $200,000 who paid no income tax anywhere 
in the world, up from just 37 in 1977, when the report was first issued.
Tax Cut Casualties

The juxtaposition was perfect. On Monday, the same day that President Bush 
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 formally 
approve the largest tuition hike in the school's history. This is how it is 
in the United States these days, massive tax cuts for the very wealthy at 
the same time that the poor and working classes are being clobbered by 
reduced services and myriad tax increases of one kind or another. For the 
students at CUNY, who have traditionally come from poorer backgrounds, a 
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 - and I 
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 of the 
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 CUNY 
(and youngsters in similar situations around the country) deserve as much 
support as we can give them as they try to distance themselves from the many 
evils associated with poverty and an inadequate education. Instead we're 
pushing some of them out of college.

Crystal Welch, a student at Hunter College, spoke this week of a friend who 
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, a 
teacher's aide, is struggling herself, relying on student loans to see her 
through. "I have no clue how I'm going to pay it all back," she said. "I 
have no clue at all." There was a time when it was normal for politicians to 
pay at least some attention to the needs and the longings of middle- and 
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 of 
federal government assets by the people at the top of the economic pyramid 
have left little for distressed state and local governments to draw upon for 
short-term sustenance or long-term recovery. Which is just another way of 
saying there's very little left for ordinary Americans. A recent 
announcement to students at Baruch College, which is where the CUNY trustees 
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 do is 
get a decent education so you can make something of yourself. We can't help 
you with that. While the president has been trumpeting his federal tax cuts, 
57 of the 62 counties in the state of New York have raised property taxes. 
Ten counties have raised sales taxes. Another 35 are trying to, but have 
come up against statutory limits. Some are pleading for permission to break 
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 history 
(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 on 
income taxes. Even water fees are going up. And, of course, it's not just 
New York City and New York State. California might as well throw its budget 
into the Pacific. And Oregon is a fiscal basket case. The CUNY students who 
will have to shoulder a heavier tuition load next year are part of a broad 
mass of Americans who are going backward rather than forward, and who are 
not being helped in the least by the obsession in Washington with tax cuts.


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