Leona Helmsley's statement that "the rich don't pay tax" isn't true; they pay about 16%.
An annual IRS study of the top 400 taxpayers was first made public during the Clinton presidency. When Bush became president he curtailed public access to the top 400 report for eight years. The Obama administration has made the report available this year, with embarrassing statistics.
According to David Cay Johnston, America's premier tax journalist (formerly of the New York Times), newly released IRS data shows that the country's very wealthiest citizens -- the top 400 -- marked enormous income gains while paying less and less in taxes. For purposes of comparison, Johnston notes that the bottom 90 percent of Americans saw their incomes rise by only 13 percent in 2009 dollars, compared with a 399 percent increase for the top 400
In a single year, between 2006 and 2007, the income of those top 400 taxpayers rose by 31 percent -- from an average of $263.3 million to an average of $344.8 million per year. The top 400 report actually understates incomes because of deferral rules. Managers of offshore hedge funds who deferred their gains may not be counted in the top 400 reports, which are based on the figure on the last line of the front page of Form 1040.
At least three hedge fund managers made $3 billion in 2007. It is not known how much of their income they deferred. Most of the income going to the top 400 tax returns is from capital which is taxed at a maximum 15% rate. Salaries and wages accounted for only 6.5 percent of the top 400's income in 2007.
The long-term data show that under current tax and economic rules, the incomes of the top earners rise when the economy expands and contract during recessions, only to rise again. Their effective income tax rate fell to 16.62 percent, down more than half a percentage point from 17.17 percent in 2006, the new data show. That rate is lower than the typical effective income tax rate paid by Americans with incomes in the low six figures, which is what each taxpayer in the top group earned in the first three hours of 2007.
Taxpayers on the 95th to 99th steps on the income ladder paid an effective income tax rate of 17.52 percent, according to calculations by the Tax Foundation, a nonprofit research group that favors less taxation and lower rates. Taxpayers in this category earned between $255,000 and $451,000 in 2007, compared with an average daily income of almost $945,000 for the top 400, who paid lower effective tax rates on average.
Payroll taxes did not add a significant burden to the top 400, not changing the rounding of rates by even one decimal. With payroll taxes taken into account, the effective tax rate of the top 400 would be 17.2 percent in 2006 and 16.6 percent in 2007, my analysis shows -- the same as not counting payroll taxes. As a point of comparison, about two-thirds of Americans pay more in Social Security, Medicare, and unemployment taxes than in federal income taxes.
There's an excellent PDF chart of year-by-year stats for both the top 400 and the bottom 90% in the article.
http://www.tax.com/...
Strange stuff for those of us old enough to remember the 91% top rate under Republican Eisenhower.