The earnings of the 400 highest-income Americans hit new highs in 2007 while the tax rates they paid hit new lows, according to a recent IRS report.
Former New York Times tax reporter David Cay Johnston reported the findings of the newly uncovered report for Tax Analysts:
In 2007 the top 400 taxpayers had an average income of $344.8 million, up 31 percent from their average $263.3 million income in 2006, according to figures in a report that the IRS posted to its Web site without announcement that were discovered February 16.
Bloomberg noted that the wealthy's low tax rate can be directly attributed to the George W. Bush tax cuts. Bloomberg:
Almost three-quarters of the highest earners’ income was in capital gains and dividends taxed at a 15 percent rate set as part of Bush-backed tax cuts in 2003, the statistics show. Of the 400 earners, 289 paid a total effective federal tax rate of 20 percent or less in 2007, the last year for which figures were available, the data show.
But the trend didn't start under Bush; rather, it started under former President Bill Clinton. While the average income of the Top 400 more than doubled during the Bush years (accounting for inflation), it more than tripled during Clinton's eight years in office, the data show. Also, the effective tax rate paid by the highest earners fell more than 7 percent during Clinton's two terms, according to Johnston's calculations. It fell by about six percent during the Bush years.
Top Clinton-era economic officials like Larry Summers now populate the Obama administration.