For the 400 U.S. taxpayers with the highest adjusted gross income, the effective federal income tax rate—what they actually pay—fell from almost 30 percent in 1995 to just under 17 percent in 2007, according to the IRS. And for the approximately 1.4 million people who make up the top 1 percent of taxpayers, the effective federal income tax rate dropped from 29 percent to 23 percent in 2008. It may seem too fantastic to be true, but the top 400 end up paying a lower rate than the next 1,399,600 or so.
That’s not just good luck. It’s often the result of hard work, as suggested by some of the strategies in the following pages. Much of the top 400′s income is from dividends and capital gains, generated by everything from appreciated real estate—yes, there is some left—to stocks and the sale of family businesses. As Warren Buffett likes to point out, since most of his income is from dividends, his tax rate is less than that of the people who clean his office.
Tax Day Reminder: Richest Americans Probably Pay at a Lower Rate than You Do
After 40 years of prosperity from the 1940s until the 1980s. When President Ronald Reagan convinced Americans that trickle down economics was good for America. What Reagan and his faithful followers fails to understand was that business mainly focused to maximizing its profits, and cut its cost of operation. Business didn't always concern itself with the public good, but what was good for the bottom line. This is especially true with global corporations, whose management, and employees live elsewhere. They're not part of the community in which they work.
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