April 10, 2009 02:28 PM | Permalink | 
As we approach April 15 th, one complaint we often hear is that Americans who work hard and become successful have to pay over a third of their income in federal income taxes. But a recent report from the Internal Revenue Service (IRS) shows that this is not remotely true.1 The IRS data show that the federal income tax rates paid by the highest-income Americans have dropped substantially since 2000, largely due to cuts in the tax rates on capital gains and dividends pushed through by the Bush Administration. While income from work (salaries and wages) is subject to rates as high as 35 percent, income from investments (long-term capital gains and stock dividends) is taxed at only 15 percent.
The IRS report shows that in 2006 (the latest year for which data are available), the 400 richest income tax filers paid just 17.2 percent of their adjusted gross income (AGI) in federal income taxes. That is down from 22.3 percent in 2000, and is less than half of the top statutory income tax rate of 35 percent. Almost 65 percent of the income reported by those 400 taxpayers consisted of capital gains and dividends subject to the preferential rates.
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