David Kay Johnston has a great piece out today from Reuters that takes a close look at the taxes paid by the 400 highest income earning families in the U.S., a group that averaged about $200 million in income. The findings show just how inconsequential the nation’s progressive income taxation brackets can be for the very wealthy. For example:
–Six families paid no federal income taxes at all, despite earning roughly $200 million each.
–Just 82 of the top 400 paid the full 30% annual income tax that President Obama has proposed as part of the buffet rule. (The income tax bracket for these families is officially 35% on all income after the first $388,350.)
–The top 400 paid an average income tax rate of 19.9%, which is about what a single worker who makes $110,000 pays, and may be less than you pay.
–The top 400 made more every three hours than the average worker makes in a year, and many had lower tax rates.
The issue is that there are, as Johnston notes, two tax systems in America: One for those who make their money the old fashion way–as wages or pensions–and one for those who make their money through investments, or have enough money to hire lawyers and accountants to exploit loopholes in the tax laws. With a round of tax reform on the horizon, this is sure to be an issue in the 2012 election.