Wealthy lost income, paid lower taxes
By David Cay Johnston
New York Times News Service
The incomes of the top 1 percent of Americans fell 18 percent in 2001, as did their income taxes, shaving $66 billion off revenues and showing how dependent the federal government has become on its wealthiest citizens.
Overall, Americans had 2.8 percent less income in 2001 than in the previous year. But federal tax revenues fell 9.4 percent because the incomes of those at the top, who pay the highest tax rates, dropped much more than the average.
The top 1 percent reported $1.09 trillion of income, down from $1.34 trillion in 2000, according to data posted on the Internet on Friday by the Internal Revenue Service.
The minimum income to reach the top 1 percent was $293,000 last year, down from $313,500 in 2000, but almost identical to the threshold in 1999.
The sharp decline in incomes at the top "is obviously due to the collapse of the stock market boom and the recession," said Bruce Bartlett, a senior fellow at the National Center for Policy Analysis, a lobbying group.
The combination of a sharp drop in income, if sustained for several years, and the tax cuts that were enacted this year could result in another sharp drop in taxes paid by the top 1 percent. The top rate on capital gains and dividends, the source of much of the income in the elite group, has been cut to 15 percent from 20 percent.
Taxes paid by the top group fell to $300.1 billion in 2001 from $366.9 billion in 2000. The decline accounted for the bulk of the $92.7 billion drop in individual federal income tax revenue in 2001.