BY BILL AHERN – Washington, DC, – All stripes of the income spectrum earned markedly less during recessionary 2008 than they had during 2007, according to newly published income tax data from the IRS.
As usual during a recession, incomes shrank by larger percentages at the top of the income spectrum where sources of business income dried up.
The top-earning 1 percent of tax filers were the 1.4 million tax returns out of 140 million filed who earned at least $380,354.
In 2008, their share of all income was 20.0 percent, down from 22.8 percent in 2007. Their share of total income taxes paid also shrank: they paid 38.0 percent of all income taxes collected in 2008, down from 40.4 percent in 2007.
The study is Fiscal Fact No. 249, “Summary of Latest Federal Individual Income Tax Data,” by Tax Foundation Senior Economist Gerald Prante and Staff Economist Mark Robyn.
“This pattern at the top of the income spectrum is the same during almost every recession,” said Prante. “Unlike middle-income wage-earners whose incomes and tax liabilities are fairly steady, high-income people have incomes that include significant capital gains that fluctuate wildly with the economy, causing their income tax liabilities to fluctuate wildly as well. As the economy grew from 2003 to 2007, high-income people earned larger shares of income, increasing income inequality despite their payment of larger shares of tax. When the economy reversed course in recessionary 2008, income at the high end shrank, reducing both federal revenue and income inequality.”
Fiscal Fact No. 249, available online at www.taxfoundation.org/news/show/250.html also takes a look at the top 0.1 percent of tax returns (the top 10 percent of the top 1 percent), which the IRS only began singling out in recent years. In 2008, those 140,000 tax returns accounted for nearly 10 percent of AGI earned (down from almost 12 percent in 2007), and they paid around 18.5 percent of the nation’s federal individual income taxes (down from 20 percent in 2007).
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
Fiscal Fact No. 249 is available online at https://www.taxfoundation.org/news/show/250.html