Buffett v. The Data, Part Deux

In the comments of my previous post, co-blogger Steve stated, “[o]nly at the very top do taxes become regressive”; and – by way of supporting this statement – pointed (indirectly) to an IRS report regarding the 400 highest-AGI tax returns for 2008.  The data from this report, as well as other IRS data for that year, illustrates two things:

  1. Effective income tax rates do start to decline at the highest income levels.
  2. OTOH, the effective income tax rates at those levels remain well above those for most lower-income categories.

These points are graphically illustrated in Figure 1, which gives the effective income tax rates for various Adjusted Gross Income categories in 2008.

Figure 1

Granted, Fig. 1 only considers income taxes.  However, as Figure 2 shows, the aforementioned points remain valid when we include other federal taxes (e.g., FICA, excise, corporate).

Figure 2

I find it hard to get excited about the very-very-rich paying a somewhat lower federal tax rate than the very-rich, when rates for both groups remain higher than those for most other income categories.

Sources and Notes

In Figure 1:

  • The effective income tax rates for the categories between $1 & $50k, and between $500k & $10 mil, were calculated using the Adjusted Gross Income data in col. 2 of this IRS table, and the “Total income tax” numbers in col. 41 of this table.
  • The effective income tax rates for the categories between 50k & 500k were calculated using the AGI & “Total income tax” numbers from columns 2 & 62, respectively, of Table B in IRS Publication 1304 (Rev. 07-2010).
  • The effective income tax rate for the “Top 400” was calculated using 2008 AGI & aggregate income tax data from Table 1, pp. 1 & 10, of this IRS report.
  • The aggregate AGI for the “$10 mil+ ex Top 400” category was calculated by subtracting the AGI for the top 400 from the AGI of the “$10,000,000 or more” category in this table; the same procedure was used to calculate the aggregate income tax for the “$10 mil+ ex Top 400” category.

Figure 2 was generated using the 2005 Total Effective Federal Tax Rate data in Table 1 of this CBO report.

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One Response to “Buffett v. The Data, Part Deux”

  1. It should also be noted that many of the breaks that these folks take advantage of to reduce their effective tax rates involve various inducements provided by the tax code to encourage certain behaviors (charitable donations, investments, etc.) One wonders if Fedgov would make better use of that money in tax revenue, instead of how these folks use their money themselves.

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