A quarter of U.S. millionaires pay taxes at a lower rate than some in middle class

www.washingtonpost.com

By Lori Montgomery, Published: October 12

A quarter of millionaires in the United States pay a smaller share of their income in federal taxes than many middle-class families, according to a new congressional analysis that offers fresh support for President Obama’s push to raise taxes on the nation’s wealthiest households.

The report, by the nonpartisan Congressional Research Service, found that when all federal taxes are taken into account — including those on wages, investment income and corporate profits — some households earning more than $1 million a year paid as little as 24 percent of their income to the Internal Revenue Service in 2006.

That’s substantially less than the share paid by many families making less than $100,000 a year that faced a top effective tax rate exceeding 26.5 percent, the report said.

All told, 94,500 millionaires paid a smaller share of their income in taxes than 10 million households with moderate incomes, the report found.

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Late Tuesday, Senate Republicans rejected a variation on the Buffett Rule — a 5.6 percent surtax on income over $1 million — to cover the cost of Obama’s $447 billion jobs package.

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hiring by new startup firms,” which “generally do not generate much business income in their first years in operation.” Consequently, higher taxes on millionaires are unlikely to affect them, the report says.

As to savings, the report argues that private savings rates have fallen over the past 30 years even as the capital gains tax rate dropped from 28 percent in 1987 to 15 percent today, suggesting that “changing capital gains tax rates have had little effect on private saving.”

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