Average Tax Rate for Richest 2% Drops to 5-Year Low; Richest 3% Still Pay Half of Federal Income Tax Collected

Monday, June 08, 2015
(graphic: Steve Straehley, AllGov)

If your income is in the top 2% in the country, you’re doing pretty well. And as a bonus, according to the Internal Revenue Service (IRS), your tax rate is the lowest it has been in a while.


The IRS has published (pdf) figures from the 2012 tax year showing that those who are among the top 2% in adjusted gross income (AGI) made at least $286,000 and their effective federal tax rate had fallen to a five-year low of 22.52%, the lowest it had been since 2007.


If you’re in the top 3% of AGI, you made at least $228,000 in 2012 and you paid more than half the income tax collected by the IRS in 2012. Those at that level kicked in 51.7% of the tax paid that year.


In general, the U.S. income tax system is progressive: that is, the more you make, the greater percentage you pay. When it comes to the super-rich however, that’s not true. Those 1,360 who made more than $62 million in a year paid a smaller tax rate than those who make $13 million. According to Alan Pyke of ThinkProgress, the reason for that is capital gains tax. Selling an asset that has appreciated, such as stock or real property, is taxed at a lower rate than income. Income is taxed at a maximum rate of 39.6%, plus payroll taxes, while capital gains are taxed at only 23.8%.


Those super-rich, the 0.001% who have more than $62 million in AGI, paid 3.3% of all the income tax collected. Their average tax rate was 17.6%, according to Bloomberg.

-Steve Straehley


To Learn More:

Individual Income Tax Shares, 2012 (by Adrian Dungan, Internal Revenue Service) (pdf)

Top 0.01% of U.S. Households Gain as Income Clusters at Peak (by Richard Rubin, Bloomberg)

New Data Offer First Infuriating Glimpse At How The Richest 0.001 Percent Pay Income Taxes (by Alan Pyke, ThinkProgress)

Richest 7% Get Richer; Poorest 93% Get Poorer (by Noel Brinkerhoff, AllGov)

Economy Recovers for Richest 1%; Income Flat for the other 99% (by Matt Bewig, AllGov)

If Corporations and Richest Americans were Taxed at 1961 Rates, U.S. Would Gain $716 Billion a Year (by David Wallechinsky and Noel Brinkerhoff, AllGov)


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