Recession reduced wealthy's income while raising tax rate

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
OCT 11, 2012
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--

Latest News

Integrated Partners, Kestra welcome multigenerational advisor teams
Integrated Partners, Kestra welcome multigenerational advisor teams

Integrated Partners is adding a mother-son tandem to its network in Missouri as Kestra onboards a father-son advisor duo from UBS.

Trump not planning to fire Powell, market tension eases
Trump not planning to fire Powell, market tension eases

Futures indicate stocks will build on Tuesday's rally.

From stocks and economy to their own finances, consumers are getting gloomier
From stocks and economy to their own finances, consumers are getting gloomier

Cost of living still tops concerns about negative impacts on personal finances

Women share investing strengths, asset preferences in new study
Women share investing strengths, asset preferences in new study

Financial advisors remain vital allies even as DIY investing grows

Trump vows to 'be nice' to China, slash tariffs
Trump vows to 'be nice' to China, slash tariffs

A trade deal would mean significant cut in tariffs but 'it wont be zero'.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.