Top Taxpayers made less in 2008 while their tax burdens continued to grow

Contrary to a common public perception, IRS data illustrates that America’s 400 richest taxpayers saw a dramatic drop in income during the recession. IRS tax attorneys say the data also shows they gave less to charities during this same time period.

According to several tax lawyers the reduction in income within the group of top taxpayers was occasioned, in large part, due to a reduction in capital gains. According to the IRS’s data, capital gains dropped more than 32%, or $74.8 million dollars, from an average of $228.5 million dollars in 2007 to an average of $153.7 million dollars in 2008.

Tax attorneys explain the IRS determines who are the top taxpayers based upon adjusted gross income figures, and then publishes a report about them annually. What’s more, the data suggests, and IRS attorneys agree, the “top income earners” are not a stagnant group of individuals who appear year after year.

According to the IRS, and consistent with what tax lawyers have been saying for years, looking at the top four hundred (400) taxpayers over a fifteen (15) year period reveals a typical taxpayers’ name appeared only one time in the fifteen year period; or put another way, in seventy two (72%) percent of the time America’s richest taxpayers were in the top four hundred (400) income earners only one (1) year out of fifteen (15).

The IRS data also reveals that taxpayers reporting earnings more than one hundred and fourteen thousand dollars ($114,000.00) in personal income in 2008 represented the top ten percent (10%) of U.S. income earners for that year. Most would agree these folks are not millionaires and they would hardly be regarded by many as “rich.” Never the less, it is this group of taxpayers who are really bearing the greatest tax burden and who ought to be getting some relief from the federal government.

Many of them find themselves dealing with unfiled returns, owing back taxes, IRS wage garnishments, IRS levies and IRS liens year after year. Despite arguably having the resources to stay on top of their tax liabilities (i.e. personal managers, CPAs, tax attorneys), often America’s wealthiest have the most difficulty staying current on their taxes.

IRS attorneys and other tax professionals agree, income earners in this group frequently have complex tax issues, earn income sporadically (rather than a regular predicable pay check where taxes is already being taken out), and are often forced to rely on others to manage their financial affairs, which can cause them to have unfiled returns or owe back taxes through no fault of their own.

If the IRS data tells us anything, America’s richest taxpayers saw a drop in income in 2008, at a time when politicians and less advantaged tax payers began lobbying harder to impose greater tax burdens on this group to help pay for budget shortfalls and to minimize government cuts. Something many tax lawyers suggest should be considered next time everyone starts jumping on the band-wagon and calling for more taxes on the rich!


Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

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