More on Taxing Millionaires

by Veronique de Rugy

The president talks a lot about the fairness of the tax code, and the notion that people making over $1 million are undertaxed. So in this week’s chart, I look at the data from the Internal Revenue Service’s Statistics of Income to show the number of U.S. millionaires (specifically, people and households earning $1 million or more as reported by the IRS) and their relative contributions in paid income taxes.

In 2009, millionaires made up 0.1 percent, or just fewer than 240,000, of the 140 million tax returns filed that year. Despite their small demographic imprint, the magnitude of their contribution in paid taxes is hard to overlook. Over the past ten years, millionaires have paid 17 to 28 percent of total income tax returns per year.

The 233,435 taxpayers who reported earning seven digits or more in 2009 brought in a total of $702.2 billion, received $77.2 billion in personal exemptions and total deductions, and paid 25 percent ($176.4 billion) of their income in taxes overall. As you may recall, the top 1 percent of income earners pay 38 percent of income taxes and earn 20 percent of income, which makes our tax system highly progressive.

The returns filed in 2009 reflect income from 2008, the depths of the recession and financial crisis. As you can see from this data, although millionaires were not exempt from economic hardship, with a loss of 160,000 reported millionaires in 2008 and 2009 alone, millionaires still paid an overall 20 percent share of the income tax revenue. We can also see that millionaires are paying a slightly higher share of the income tax receipts than they were in 2001.

Finally, one thing you can’t see in this chart is where many of the millionaires come from. The assumption made by the people who spend time decrying the luck of millionaires and calling for much more taxes on them is that they were born with a silver spoon in their mouth and owe their millions to luck. And of course, some do (not that I see anything wrong with it). However, Daniel Foster’s report on millionaire Ted Leonsis’ outrage over the recent class-warfare language coming from the administration is a good example of how wrong this assumption can be. (Check out this Treasury report about income mobility.)