Richer & Poorer

 Number of HouseholdsAverage Income per HouseholdAverage Tax Cut per HouseholdGroup’s share of all income in the U.S.*Race
Richest 1% 1.4 million $1,370,662 $66,384 19% No Census Data
Richest 5% 7.1 million $477,453 $19,855 33% 83% White, 4% Black, 8% Asian, 5% Latino
Next 75% 107  million $60,213 $1,464 63% 76% White, 10% Black, 4% Asian, 10% Latino
Poorest 20% 28.4 million $12,974 $107 4% 66% White, 18% Black, 3% Asian, 13% Latino

Source: Citizens for Tax Justice, U.S. Census Bureau

"Households" refers to the number of tax returns submitted in each income group.

All numbers are for 2011, with the exception of race data, which is current as of 2009, the most recent year for which information is available.

Average tax cuts are calculated based on the extension of the Bush tax cuts signed into law in December 2010.

Income figures include wages as well as capital gains, dividends, and other types of income.

No race data are available for the top 1% of households because Census data combine all households making more than $250,000 into a single group.

* Totals add up to more than 100% because the richest 1% is part of the richest 5%.

 

The 1% & 99%

 Number of HouseholdsAverage Income per HouseholdAverage Tax Cut per HouseholdGroup’s share of all income in the U.S.
Richest 1% 1.4 million $1,370,662 $66,384 19%
The other 99% 140.8 million $58,506 $1,463 81%

Source: Citizens for Tax Justice, U.S. Census Bureau

"Households" refers to the number of tax returns submitted in each income group.

Average tax cuts are calculated based on the extension of the Bush tax cuts signed into law in December 2010.

Income figures include wages as well as capital gains, dividends, and other types of income.

How Tax Rates Work

Among the tax provisions enacted by President Bush and extended by President Obama were reductions in the top marginal income tax rates, from 36 and 39 percent, respectively, down to 33 and 35 percent.

What is a “marginal tax rate?”

A marginal tax rate is the rate at which your last dollar of income is taxed. So, for example, if you’re single and you make $22,000 per year, then your first $8,500 of income is taxed at a rate of 10 percent, and the rest of your income is taxed at 15 percent. In that case, 15 percent is your “marginal” tax rate (See the illustration below for all marginal tax rates and the income levels to which they apply).

The top marginal tax rates—now 33 and 35 percent—affect American families making at least $212,301 and individuals making at least $174,401.

According to the nonpartisan Congressional Research Service, when President Bush lowered those top rates, and when President Obama extended them, doing so was almost perfectly “regressive”—that is, the benefits went to the wealthiest Americans.

The U.S. House of Representatives passed a budget resolution for fiscal year 2013 that would lower the top marginal tax rate again, this time down to 25 percent. (See National Priorities Project’s comparison of the Ryan budget, President Obama's budget, and a budget introduced by the Congressional Progressive Caucus.)

 

Taxes on Capital Gains

The tax rates discussed above apply to payroll wages, but there are two other types of income that mostly go to the wealthy and are taxed at lower rates than regular wages: "Capital gains," which are profits earned from selling assets like real estate, and "dividends" earned from stocks.

Under President Bush’s tax cuts, and President Obama’s extension, capital gains and dividends are taxed at a maximum rate of 15 percent. Effectively, this means taxpayers earning more than $34,500 per year in wages pay a higher marginal tax rate than millionaires earning their income from investments. In 2007, 80 percent of all capital gains went to Americans earning more than $200,000 per year.