Recession reduced wealthy’s income while raising tax rate
A CBO report has found that the before-tax income of top earners fell by 36.3% between 2007 to 2009 while their tax rate rose
Before-tax income for the top 1 percent of U.S. households fell by 36.3 percent from 2007 to 2009 while their federal tax rate increased to 28.9 percent from 28.3 percent, said a report by the Congressional Budget Office.
Capital gains reported by all taxpayers decreased by 75 percent in the period, the nonpartisan CBO said in the report released today. That means a greater share of earnings reported by high-income households were taxed at ordinary income tax rates of up to 35 percent rather than the 15 percent capital gains rate.
Because of the lower income, the share of federal taxes paid by the top 1 percent dropped to 22.3 percent from 26.7 percent. In 2009, the average before-tax income of someone in the top 1 percent was $1.2 million, down from $1.9 million two years earlier.
The CBO issued its report as President Barack Obama and congressional Republicans engage in an election-year debate over whether to extend expiring tax cuts for the top 2 percent of taxpayers.
Obama says married couples making more than $250,000 should see their tax rates return to pre-2001 levels, while Republicans want to extend for everyone the tax cuts first enacted under President George W. Bush
The report found that the combination of lower income and tax cuts enacted to fight the recession drove down the average federal tax rate for the population.
The average rate for 2009, including payroll, income, corporate and excise taxes, was 17.4 percent, down from 18 percent in 2008 and 19.9 percent in 2007.
‘False Claims’
“However much Republicans try to perpetuate false claims, the facts speak for themselves: tax rates have never been lower than under President Obama,” said Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, said in a statement. “Yet instead of asking the very wealthiest to contribute to deficit reduction, Republicans are doubling down on the Bush tax cuts by proposing massive new tax breaks for the very wealthy.”
Since 2009, income has grown slowly for all U.S. households while growing faster for high-income households, the report said.
–Bloomberg News–
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