US Millionares Face 19 Percent Tax Rate

October 13, 2011 Taxation in USA

TaxesWASHINGTON – A significant portion of American millionaires face lower tax rates than their middle income counterparts, with some paying as little as 19 percent tax.

The public policy research arm of the US Congress Congressional Research Service (CRS) released a new report this week, which aimed to examine the overall tax obligations of the richest taxpayers in the USA.

According to the report, nearly 25 percent of the richest taxpayers in the USA face a lower overall tax rate than some middle income earners. Approximately 94 500 households with incomes above USD 1 million faced a tax rate of below 26.5 percent, which is a lower rate than 10.4 million middle income families. Overall, households with incomes exceeding USD 1 million per year faced an average tax rate of approximately 30 percent. Families with incomes below USD 100 000 saw tax rates of approximate 19 percent. The authors of the report noted that wealthy taxpayers faced high variation in their paid rates, with a range from 19 to 24 percent.

Thomas Hungerford, a researcher at CRS, explained that the disproportionately low tax payments were due to some high income households drawing their wealth from investment incomes. Under current rules in the US, investment incomes such as capital gains and dividends, face a tax rate of no more than 15 percent.

The report also addressed claims that raising tax rates on high income earners would lower national levels of investment into new businesses. According to the report, high income earners are not likely to invest in startup businesses, which typically see funding from specialist foundations or pension funds.

Photo by John-Morgan