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Friday, July 31, 2009

Top 1% of American Tax Filers Pay 40.4% of Nation's Taxes

By Kathryn Elizabeth Tuggle

FOXBusiness

According to newly released Internal Revenue Service data, the top 1% of American tax filers earned 22.8% of the nation’s income in 2007 and paid 40.4% of the nation’s federal income tax.

This would mean the top 1% of tax filers pays more federal income tax than the bottom 95% of tax filers combined, according to a Tax Foundation analysis.

In 2007, income tax hit for the top 1% of tax returns hit an all time high, according to the Tax Foundation, a nonprofit group that historically has advocated for lower tax rates and a simple tax system. The top 1% of tax returns in the U.S. for that year had an average gross income of more than $410,000.

But Tax Foundation Senior Economist Gerald Prante said in a release that the trend for such disproportionately high income tax shares was likely to end in 2007 in light of the economic slump that began in 2008.

"This pattern at the top of the income spectrum is the same during almost every recession and recovery," said Prante in a company release. "Unlike middle-income wage-earners whose incomes and tax liabilities are fairly steady, high-income people have incomes and tax liabilities that fluctuate wildly with the economy.”

See our Taxes page for the latest news and videos on the topic.

Prante said that the rise in government tax revenue during 2003-2007 would likely be followed by a drop in 2008 through 2010 as the economy comes out of its worst downturn in more than 20 years.

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