[Peace-discuss] NYTimes.com Article: More Get Rich and Pay Less in Taxes

Thu Feb 7 05:13:13 CST 2002

More Get Rich and Pay Less in Taxes

February 7, 2002 

By DAVID CAY JOHNSTON

The number of Americans with million-dollar incomes more
than doubled from 1995 through 1999, as their salaries and
their profits from stocks soared, government figures to be
published today show. The percentage of their income that
went to federal income taxes, however, fell by 11 percent. 

The incomes of Americans who made less grew as well,
though by far less, and the share of their income that went
to taxes rose slightly, according to Internal Revenue
Service income tax data for the five years through 1999,
the latest year available. 

The wealthiest Americans paid a smaller share of their
income in taxes because in 1997 Congress reduced taxes on
capital gains, which account for a significant share of
their income. 

Congress also cut taxes for the middle class, but only one
in five taxpayers qualified for those cuts, which involved
new tax credits for children and education expenses. So, as
a group, the portion of their income going to taxes rose. 

For those with million-dollar incomes, the share of their
income that went to taxes fell to 27.9 percent in 1999,
from 31.4 percent in 1995. 

For those Americans who did not make a million dollars, the
portion of their income going to taxes edged up in those
years, to 12.8 percent from 12.5 percent. 

About 205,000 taxpayers made $1 million or more in 1999, up
from less than 87,000 in 1995. The average income of those
who made $1 million or more rose by $568,000 to $3.2
million. 

Critics of the latest Bush administration economic stimulus
and tax cut plan, announced this week, regarded the latest
figures as evidence that the wealthy have received too many
breaks. 

"Congress cut taxes on rich people in 1997," Robert
McIntyre, director of Citizens for Tax Justice, a nonprofit
Washington organization with labor union backing, said.
"The rate that they pay fell by quite a bit, while they
didn't do much for everyone else and their taxes went up a
little. The law did what Congress intended. Their intent
was to make sure the wealthier people paid less in taxes
and they weren't worried about the rest of the people." 

President Bush, who won a major tax cut from Congress last
year, and his supporters argue that permanent cuts in tax
rates encourage investment, which results in more jobs and
economic growth. 

"We need to pass a bill that will help workers and help
stimulate the economy," Mr. Bush told reporters on Tuesday.

The president's new tax cut plan appeared to die on Tuesday
when Senator Tom Daschle, Democrat of South Dakota and the
majority leader, moved to shelve it. 

Those making a million dollars or more, just one of every
625 taxpayers in 1999, more than doubled their slice of the
nation's income to 11.2 percent that year, from 5.4 percent
in 1995. These high-income taxpayers also captured a
quarter of the nation's total personal income growth from
1995 through 1999. 

The incomes of taxpayers making less than $1 million also
rose, though not as sharply. The income of everyone making
less than a million dollars averaged $41,000 in 1999, up
from $33,500 in 1995, a 22 percent increase, the data,
using adjusted gross incomes, showed. 

The tax return data show that the number of taxpayers
reporting incomes of less than $25,000 declined slightly,
while those reporting incomes at higher levels increased. 

William Beech, an economist at the Heritage Foundation in
Washington, which supports lower tax rates to foster
economic growth, said that these figures may be misleading
in several ways. 

The data fail to capture the growing number of the working
poor, and their meager incomes, because many of them are
immigrants who work off the books, he said. 

"The reported income that the I.R.S. picks up from tax
returns reflects people who are making their way up the
economic ladder," Mr. Beech said. "If we had fully accurate
reporting of income, we would see that within the poorest
fifth, the median income would be falling because of the
millions of people coming into the United States, who
mostly earn low incomes." 

He also noted that among those who file income tax returns,
many of who appear poor may actually be retirees with
substantial investments. But they need only modest incomes
because their mortgages are paid off and their children are
grown. 

The stock market played a large role in creating more
million-dollar annual incomes, the figures show. Capital
gains over all more than tripled during the five years,
with almost three quarters of the increase going to those
with million-dollar incomes. 

The capital gains tax cut of 1997 appeared to favor the 400
richest taxpayers most of all. Harvesting 7 percent of all
capital gains in 1998, these very rich Americans paid just
22 percent of their incomes in taxes that year, down from
30 percent in 1994. 

Although more than half of all families are investors in
the stock market, largely through 401(k)'s and similar
retirement plans, wealth in America is more highly
concentrated today than at any time since 1929, said
Professor Edward N. Wolff, a New York University economist.

http://www.nytimes.com/2002/02/07/business/07TAX.html?ex=1014087940&ei=1&en=
79110aed1ae30db2

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