America’s super rich, new IRS income data show, partied on right through the depth of the Great Recession. And they shared precious little of their good fortune with Uncle Sam.
In 2008, the IRS revealed last week, 400 Americans reported at least $110 million in income on their federal tax returns. These 400, in a year that ended with millions of Americans out of work and home, averaged $270.5 million each, the second-highest U.S. top 400 average income on record.
The IRS only started reporting top 400 income calculations in 2003, and the agency’s official “top 400” totals just go back to 1992. But older IRS data reports do make top 400 estimates from some earlier years possible. And these earlier figures leave the latest IRS numbers in even starker relief.
In 1955, for instance, America’s top 400 averaged — in 2008 dollars — $13.3 million. In other words, the top 400 in 2008 reported incomes that, after taking inflation into account, amounted to more than 20 times the incomes of America’s top 400 a half-century ago.
But 1955’s top 400 didn’t just make far less than 2008’s top 400. The rich in 1955 paid far more of their income in taxes than today’s rich. In 2008, the new IRS data show, the top 400 paid only 18.1 percent of their total incomes in federal income tax. The top 400 in 1955 paid 51.2 percent of their total incomes in tax.
After taxes, and after adjusting for inflation, 2008’s top 400 had a staggering $85 billion more left in their pockets than 1955’s most awesomely affluent.
You don’t have to go all the way back to 1955 to see how little today’s top 400 are paying in taxes. In 1992, the IRS stats detail, only 33 of the top 400 paid less than 20 percent of their incomes in federal income tax. In 2008, 253 did.
The main reason: Today’s rich are getting more and more of their income from capital gains — the profits from buying and selling stocks, bonds, and other assets — and these capital gains now face a substantially lower tax rate than they did two decades ago.
Some specifics: In 1992, the top 400 grabbed 26 percent of their income from paychecks and 36 percent from capital gains. In 2008, by contrast, only 8 percent of top 400 income came from salary — 88 of the year’s top 400 didn’t even have jobs — and 57 percent came from capital gains.
These 2008 capital gains faced only a 15 percent tax rate, down from a 1992 rate almost twice that high.
Incomes for the 2008 top 400 did dip from top 400 levels in 2007, a year that saw the top 400 average $344.8 million. But the dropoff from 2007 to 2008 turned out to be less steep than the dip in 2000 after the dot-com bust.
America’s richest came roaring back, fairly fast, from that dot-com setback. How fast will the next comeback be for America’s super rich? We won’t know for sure until next spring, when the IRS releases top 400 income figures for 2009.
We can, in the meantime, do some reasonable surmising. Next year’s top 400 figures for 2009, we can predict with some confidence, figure to be real stunners. One statistic behind that confidence: In 2009, we already know, the financial industry’s top 25 hedge fund managers averaged a record $1.01 billion, over double the $464 million hedge fund top 25 average in 2008.
Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up to receive Too Much in your email inbox.