Lion’s Share of Capital Growth Taken by the Richest 400 During Market Meltdown Year

2008 was a tough year that ended with many blue chip companies recording losses or decreases in profits. Dow Jones Industries’ average went down by 33.8%, S&P 500 index went down by 38.5% and so did the NASDAQ, which compounded 40.5% off. On the contrary, the 400 highest-income Americans realized massive gains of an amazing 13.1% of net capital gains that were reported to the IRS in their annual report on the 400 highest income taxpayers.

On the other hand, the report indicated that the highest income folks, forbes who rely on capital gains, felt the market pinch in equal measures. Each of the top 400 taxpayers realized an average of $153.7 millions, totaling to 61.5 billion in gains when compounded. This was a drop from 2007 when each of the top 400 taxpayers in America gained $228.6 million (or a compounded value of $91.4 billion). This resulted in a decline of nearly 22% in the average adjusted gross income of the 400 to a measly USD 270.5 million, from a record breaking $ 263.3 million in 2007. Despite the decline, the 2008 average adjusted gross income was still second after topping the 2006’s $ 263.3 million average AGI. The 2008’s cut-off for making the top 400 was an AGI of $110 million, down from $139 million in 2007.

The historically low 15% tax rate dani-info on longterm capital gains makes the very wealthy folks pay a lower effectual federal income tax rate than the commonplace rich fellows who rely on salaries and other everyday income, usually taxed at a top of 35%. The top earning 400 paid in 2008 an effective federal income tax rate of 18.11% which was a swell from the previous year’s record low of 16.62%, the same year that realized an even higher split of their total income from capital gains. Taxpayers with an Adjusted Gross Income between $500,000 and $1 million paid an effective tax rate of 23.4%. Those taxpayers with an average earning of between $200,000 and $500,000 paid 19.6%, which was higher than the tycoons. home4cloud

The IRS’s top 400 list differs from the Forbes 400 Richest Americans, which is usually based on projected net worth, as opposed to the IRS’s reported earnings. However, there are considerable similarities between the two lists and the IRS acknowledges picking the 400 number as a result of the Forbes list.

The first report of the top 400 taxpayers was first published in an analysis by the IRS in 2003. To come up with the list, the IRS had todig out returns from 1992. Ever since, four taxpayers have featured on the list each year while another 83 have been on it for at least 10 years. There would be more year-to-year variations on the IRS list than the Forbes list because wealthy taxpayers can decide when to recognize income through capital gains.

The 400 moguls also recorded the highest share of all income from Subchapter S corporations and partnerships that don’t pay income tax but pass through all their income, losses, and credits to the tax returns of their individual owners. Politicians are well known for using the income of subchapter S corporations as surrogates of “small business.” Companies organized as a Subchapter S have no limits on their sizes but limits on the number of shareholders each company can have exist.

The IRS report indicated that, in 2008, of the 400 top taxpayers, 202 reported $21.6 billion net S Corp and partnership income. This corresponds to a record 3.97% of all such income, an increase from 3.06% in 2007 and the 1.47% realized in 1999. In the interim, 184 of the 400 reported Sub S and partnership losses totaling to $4.9 billion, which is comparable to 2.79% of all such losses reported.


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