New York City is ‘subsidizing the slackers,’ professor says

New York is where the 1% live, and they have the tax returns to prove it.

Nine of the 10 most heavily taxed neighborhoods in the United States are in the city’s metropolitan area, Internal Revenue Service data show.

The nine neighborhoods, which range from Manhattan to Fairfield County, Conn., accounted for 0.2% of all federal income tax filers in 2008, the latest year for which data are available, according to IRS statistics compiled by Bloomberg. They paid 1.6% of all individual income taxes, eight times their proportionate share of the filing population.

The $16.5 billion paid in the nine ZIP codes would be enough to buy a controlling interest in General Motors Co. or match the combined economies of the Bahamas, Fiji and Tajikistan.

The disproportionate amount also counters arguments by anti-Wall Street protesters who claim to represent “99%” of Americans and say the rich should be taxed more, said Mitchell L. Moss, an urban policy professor at New York University’s Robert F. Wagner Graduate School of Public Service.

“We’re subsidizing the slackers in the rest of the country,” he said. “This is the most productive part of the United States of America, in terms of taxes paid.”

The only ZIP code outside the New York area to make the top 10 was a West Houston suburban area that accounted for $1.5 billion in federal individual income taxes. The neighborhood includes the Houstonian Hotel, Club & Spa, which George H.W. Bush listed as his primary residence during his presidency.

Nationally, 137.7 million U.S. households paid $987.4 billion in federal taxes in 2008, according to the IRS. The nine New York-area ZIP codes reported $70.1 billion, or 0.9% of the nation’s total adjusted gross income of $7.98 trillion.

Individual income taxes are the federal government’s largest source of tax revenue, accounting for 45 cents of every $1 raised. Payroll taxes, which are more regressive, make up 36 cents; corporate taxes another 12 cents; and other taxes account for 7 cents of every tax dollar raised by the government.

INCOME INEQUALITY

There is no doubt that income inequality is growing.

The Congressional Budget Office recently reported that after-tax income for the richest 1% of U.S. households grew 275% between 1979 and 2007. For the lowest 20%, after-tax income grew 18% over the same period.

And the Occupy Wall Street protesters in Manhattan and elsewhere have been pressing for more taxes on the highest earners, or the “1%,” as one way to curb the growing income disparity.

The share of taxes paid in the New York neighborhoods “is irrelevant and a distortion of the fact that as a percentage, wealthy people pay far less as a portion of their earnings,” Karanja Gaçuça, an Occupy Wall Street spokesman who identifies himself as a former analyst for Deutsche Bank AG, wrote in an e-mail.

NO. 1 ZIP CODE

The largest amount of high-end individual tax collections came from the 10021 ZIP code on New York’s Upper East Side.

The IRS data show that 29,820 individual returns were filed from residents there, with total income taxes of $2.85 billion, or an average tax bill of $95,489. More than 93% of taxes in the ZIP code came from households with adjusted gross income greater than $200,000, the IRS records show.

The ZIP code extends from the East River into Central Park, between 69th and 77th streets. Property owners include Stephen Schwarzman, founder and chairman of The Blackstone Group LP; David Koch, co-owner of Koch Industries Inc., one of the largest privately held U.S. companies; and John Thain, chairman and chief executive of CIT Group Inc.

Households in the 10021, 10023, 10128, 10022, 10024 and 10028 ZIP codes, which represent the most heavily taxed neighborhoods in the nation, paid $12.3 billion in individual income taxes during 2008. Residents of the Scarsdale, N.Y., ZIP code of 10583 paid another $1.5 billion in taxes, and households in two Fairfield County ZIP codes, 06830 and 06831, handed over $2.65 billion to the federal government.

General Electric Co. chairman and CEO Jeffrey Immelt owns a condominium in the 10022 ZIP code, which covers the East 50s in Manhattan. Lloyd Blankfein, chairman and CEO of The Goldman Sachs Group Inc., lives in ZIP code 10023, which covers part of the Upper West Side.

Citigroup Inc. CEO Vikram Pandit owns an apartment across from the Museum of Natural History in ZIP code 10024.

Jeff T. Blau, president of real estate developer Related Cos., owns a residence in 10028 across from the Metropolitan Museum of Art — a floor below where the late Jacqueline Kennedy Onassis lived.

A NATIONAL TREASURE

The $1.4 trillion economy of the New York metropolitan area is a “huge contributor” to the national treasury, said Kathryn Wylde, president and chief executive of the Partnership for New York City, a nonprofit coalition that includes more than 100 chief executives.

“Clearly, New York City is paying a disproportionate share of the tax burden,” she said. “It’s the country’s economic engine.”

The average tax burden — or the average amount paid per filer in each ZIP code — also was highest in New York ZIP codes.

The IRS reported that 527 individual tax returns were filed from the 10274 ZIP code, which corresponds to a downtown post office. It is about a three-minute walk from the Charging Bull sculpture and less than half a mile from Zuccotti Park, the scene of recent anti-Wall Street protests.

The average filer in the ZIP code paid $1.48 million in income taxes, for a total of $778.5 million.

BEYOND INCOME TAXES

The individual income tax figures don’t take into account the burden of local property and sales taxes, as well as state income taxes that typically affect lower-and middle-income households more than wealthy filers, said Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice. The nonprofit group advocates for a more even distribution of taxes.

Individuals in the lowest 20% of earners, or those who have an average cash income of $12,500 a year, pay 3.9% of their income in federal taxes and 12.3% in state and local taxes, Ms. Wilkins said.

Those in the highest 1%, who have an average cash income of almost $1.3 million annually, pay 22.1% in federal taxes and 7.9% in state and local taxes.

“The federal income tax is very progressive,” Ms. Wilkins said. “It’s the state and local taxes that are borne more by lower-income brackets.”

Another high per-capita federal tax area included was the 33109 ZIP code in Fisher Island, Fla., where Andre Agassi, Julia Roberts and Oprah Winfrey have owned property. The IRS data show that 275 people there had an average tax bill of $268,156.

The Oklahoma City ZIP code of 73154 had 368 households filing an average $246,758 tax bill, and the 90067 ZIP code in the Los Angeles neighborhood of Century City, on the periphery of Beverly Hills, reported 3,606 households claiming an average of $187,188 in taxes due.