Tuesday, June 26, 2012

Who wants to be the millionaire next door

Don't expect to be there for long says the Tax Foundation.  According to the latest data, most (65%) people with incomes of $1 million per year only do it once or twice;
During this nine year period [1999-2007], about 675,000 taxpayers earned over a $1 million for at least one year. ... of these taxpayers, 50 percent (about 338,000 taxpayers) were millionaires for only one year, while another 15 percent were millionaires for only two years. By contrast, just 6 percent (38,000 taxpayers) remained a millionaire in all nine years. Based on these results, it is clear that taxpayers move in and out of millionaire status with great frequency. The volatile nature of capital gains realizations and business income appears to be the leading factors for the transiency of millionaires.
And, expect to pay a lot of income tax if you're one of them;
Millionaires’ share of total AGI followed a similar path. In 2001, they earned 9 percent of total AGI and that share grew to 16 percent in 2007. By 2010, however, millionaires’ share of total AGI fell back to 10 percent—about the same level it had been ten years before.
Throughout the last ten years, the share of income taxes paid by millionaires has been roughly twice their share of total AGI. In 2001, millionaires paid 18 percent of all federal income taxes. This share grew to 28 percent by 2007 and now stands at 22 percent even though millionaires’ share of the nation’s income has fallen by a greater amount.
Despite claims that the tax code has become less progressive, the average effective tax rate of millionaires has remained fairly high throughout the period. Before the full implementation of the Bush-era tax cuts in 2003, the average tax rate paid by millionaires was 29 percent. By 2007, their effective tax rate had fallen to 23 percent, before rising to 25 percent by 2009 and 2010.  

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