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News :: Economy |
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Very Richest's Share Of Income Grew Even Bigger, Data Show |
Current rating: 0 |
by DAVID CAY JOHNSTON (NYTimes) via rporter
Email: rporter (nospam) newtonbigelow.com (verified) |
26 Jun 2003
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June 26, 2003 |
The 400 wealthiest taxpayers accounted for more than 1 percent of all the income in the United States in the year 2000, more than double their share just eight years earlier, according to new data from the Internal Revenue Service. But their tax burden plummeted over the period.
The data, in a report that the I.R.S. released last night, shows that the average income of the 400 wealthiest taxpayers was almost $174 million in 2000. That was nearly quadruple the $46.8 million average in 1992. The minimum income to qualify for the list was $86.8 million in 2000, more than triple the minimum income of $24.4 million of the 400 wealthiest taxpayers in 1992.
While the sharp growth in incomes over that period coincided with the stock market bubble, other factors appear to account for much of the increase. A cut in capital gains tax rates in 1997 to 20 percent from 28 percent encouraged long-term holders of assets, like privately owned businesses, to sell them, and big increases in executive compensation thrust corporate chiefs into the ranks of the nation's aristocracy.
This year's tax cut reduced the capital gains rate further, to 15 percent.
The data from 2000 is the latest available from the I.R.S., but various government reports indicate that salaries, dividends and other forms of income have continued to rise since then, even as the stock market has fallen.
The top 400 reported 1.1 percent of all income earned in 2000, up from 0.5 percent in 1992. Their taxes grew at a much slower rate, from 1 percent of all taxes in 1992 to 1.6 percent in 2000, when their tax bills averaged $38.6 million each.
Those numbers can be read to show that the wealthiest, as a group, carried a disproportionate share of the overall tax burden — 1.6 percent of all taxes, versus just 1.1 percent of all income — evidence that all sides in the tax debate will be able to find ammunition in the data.
In 2000, the top 400 on average paid 22.3 percent of their income in federal income tax, down from 26.4 percent in 1992 and a peak of 29.9 percent in 1995. Two factors explain most of this decline, according to the I.R.S.: reduced tax rates on long-term capital gains and bigger gifts to charity.
Had President Bush's latest tax cuts been in effect in 2000, the average tax bill for the top 400 would have been about $30.4 million — a savings of $8.3 million, or more than a fifth, according to an analysis of the I.R.S. data by The New York Times. That would have resulted in an average tax rate of 17.5 percent.
The rate actually paid by the top 400 in 2000 was about the same as that paid by a single person making $123,000 or a married couple with two children earning $226,000, according to Citizens for Tax Justice, a labor-backed group whose calculations are respected by a broad spectrum of tax experts.
The group favors higher taxes on the wealthy, and its director, Robert S. McIntyre, said yesterday that the I.R.S. data bolsters that viewpoint. "Regardless of which party these 400 are in, these are the guys Bush wants to help, even though they have so much money they don't know what to do with it," he said. "How Bush feels about the half of the population that doesn't have much money is he got them a tax cut worth an average of $19 each."
William W. Beach, a tax expert at the Heritage Foundation, a conservative organization that favors lowering taxes for all Americans, said that the top 400 taxpayers made "the significant contribution" to government revenue — about one in every $64 of individual income tax paid. Cutting taxes, he said, will prompt the wealthy to invest more in the economy's growth.
Detailed information about high-income Americans has become increasingly important in setting tax policy, because the government relies on the top 1.3 million households for 37.4 percent of individual federal income tax revenue. The half of Americans who earned less than $27,682 in 2000, paid less than 4 percent of income taxes.
All of the I.R.S. data is based on adjusted gross income, the figure reported on the last line on the front page of individual income tax returns. Interest earned on municipal bonds, which are exempt from tax, is not included.
Over the nine years of tax returns that were examined for the new report, only a handful of taxpayers showed up in the top 400 every year, according to I.R.S. officials. In all, about 2,200 taxpayers made the cut even once. There were a few incomes of more than $1 billion a year in the group, but none as high as $10 billion.
The names of the wealthiest taxpayers are not disclosed in the report, which was prepared at the urging of Joel Slemrod, a University of Michigan business school professor who serves on an I.R.S. advisory panel and is a leading authority on taxation of high-income Americans.
The figures do not include the incomes of the many wealthy Americans who use shelters to reduce their reported incomes below the level of the top 400.
In 1999 and 2000, for example, William T. Esrey — then the chief executive of Sprint, the telecommunications company — earned more than $150 million in stock option profits, lofting him onto many lists of the best-paid corporate managers.
That income might have put Mr. Esrey in the I.R.S.'s top 400 taxpayers. But, as later came to light, Mr. Esrey bought a tax shelter from Ernst & Young, the accounting firm, designed to let him delay reporting the profits for tax purposes until the year 2030. Sprint's board forced Mr. Esrey to resign in March after he acknowledged that the shelter was the subject of an I.R.S. audit.
Over the nine years reviewed in the new report, the incomes of the top 400 taxpayers increased at 15 times the rate of the bottom 90 percent of Americans; their average income rose 17 percent, to $27,000, from 1992 to 2000.
Long-term capital gains accounted for 64 percent of the income of the top 400 in 2000, nearly double the level in 1992. Wages contributed 16.7 percent to the incomes of the top 400 in 2000, down from 26.2 percent in 1992, and dividends made up 2.8 percent.
A second report that the I.R.S. will make public today shows that the number of Americans with high incomes who pay no taxes anywhere in the world has reached a record. In 2000, there were 2,022 Americans with incomes of more than $200,000 who paid no income tax anywhere in the world, up from just 37 in 1977, when the report was first issued.
Copyright 2003 The New York Times Company |
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Total Compensation For CEOs In The S&P 500 Increased By An Average Of 63.24 Percent In 2002 |
by The Corporate Library
(No verified email address) |
Current rating: 0
26 Jun 2003
Modified: 10:52:34 AM |
PORTLAND, ME - June 20 - Poor pay practices and excessive compensation were key factors in each of the boards in TCL's bottom ten list of America's largest public corporations (www.thecorporatelibrary.net/ratings_press_release.html); and a new research report, showing CEO compensation spiraling ever upward, indicates that TCL’s tough stance on directors who permit excessive executive pay is needed more than ever.
Instead of setting an example, it is in the biggest companies that pay is growing fastest. Total compensation for CEOs in the S&P 500 grew at a faster rate from 2001 to 2002 than it did for CEOs at companies outside the S&P 500. The average increase in total compensation for S&P 500 CEOs was 63.24 percent, compared to 51.02 percent for CEOs of non S&P 500 companies. “We look to the largest companies to lead the way in reform, but only a very few have made any attempt to rein in compensation,” said Paul Hodgson, senior research associate at The Corporate Library and author of the report, 'What Really Happened to CEO Pay in 2002', published today, The analysis is based on a matched sample of 1,019 CEOs who were in the job for the full fiscal year in 2001 and in 2002. The average increase in total annual compensation – including base salary and annual bonus – was also higher in the S&P 500 than in companies outside that group. The average rate of increase in total annual compensation was 26.65 percent for S&P 500 CEOs and 23.28 percent for other CEOs. Over the same period, the S&P 500 Index was down 23.3% and the S&P 1500 Index was down 22.5%.
Given the relatively low increases seen for base salary, the growth rate for total annual compensation and total compensation shows a significant rise in incentive payments. Total compensation includes all long-term incentives – restricted stock grants, profits from stock options and other long-term bonus payouts. But the economy’s performance would not seem to justify such growth rates. Some analyses from earlier in the year suggested that the recovery in incentives was a result of particularly poor performance in 2001, it was pay bouncing back from a bad year. But, in a separate analysis of matched CEOs in the S&P 500, Hodgson confirmed that 2002 also showed real growth over pay in 2000. Bonuses, restricted stock grants and profits from stock options were all higher in 2002 than in 2000. “To confirm the overall impression of continuously climbing CEO compensation, the median increase in total compensation for this same matched group of CEOs was 90.83 percent between 2000 and 2002,” commented Hodgson.
The survey also looks at compensation levels for a larger sample of CEOs who have been in their jobs for the full 2002 fiscal year. Average total compensation for CEOs in the S&P 500 was nearly $6.4MM, and nearly $2.4MM for other CEOs. The highest total compensation for an S&P 500 CEO was found at Tenet Healthcare, where CEO Jeffrey Barbakow received a total of $116,682,680 largely as a result of the exercise of 3MM stock options. Outside the S&P 500, Dwight Schar, CEO of construction company NVR, earned the highest total compensation of $94,303,279, again largely due to profits from the exercise of options. “While the returns on the exercise of stock options by NVR’s CEO Dwight Schar could be considered excessive, there is little doubt that the company has performed extremely well over the long term, with a total stockholder return over five years of 926.93 compared to 11.76 for its construction industry peers. Even with the award of index-linked stock options, the rewards would have been extremely high. Schar made a profit of around $261 per share on the exercise of 333,333 options,” said Hodgson.
The full report is available free from The Corporate Library at www.thecorporatelibrary.com/company_research/reports/CEOpay2002_061903.pdf
Board Analyst (http://www.boardanalyst.com) is The Corporate Library’s premium research product, available by subscription only. Board Analyst provides access to The Corporate Library’s unique corporate governance data and analysis for over 2,000 US, UK and other international firms, as well as over 20,000 individual directors. It’s proprietary Board Effectiveness Rating module has just been released. |
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IRS Report Says A Higher Percentage Of Filers Whose Incomes Exceed $200K Escaped Tax Liability |
by Reuters
(No verified email address) |
Current rating: 0
27 Jun 2003
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WASHINGTON (Reuters) - More than 2,000 individuals with incomes of $200,000 or more paid zero in federal income taxes in the year 2000, according to a report released by the Internal Revenue Service Thursday.
The report shows the percentage of tax filers with $200,000 or more in income that escaped all income tax liability was at its highest since 1994 but remained a very small group. The report was in the IRS "Statistics of Income" bulletin.
A separate IRS report showed the average income tax rate paid by the 400 tax filers with the highest incomes in 2000 was 22.29 percent, up from 22.23 percent in 1999 but below a recent peak of 29.35 percent in 1993.
The numbers may raise questions about the effectiveness of the so-called Alternative Minimum Tax, a method of calculating an individual's tax liability aimed at ensuring wealthy people pay at least some income taxes.
The Alternative Minimum Tax, a method of calculating an individual's tax liability, was created in 1969 in response to worries that some of the rich were managing to avoid taxes completely by using tax shelters. Then-Treasury Secretary Joseph Barr told Congress that 155 individuals with incomes of more than $200,000 paid no income taxes in 1966.
In 2000, that number was 2,328, up from 1,605 in 1999. Looked at as a percentage of all tax filers with incomes of $200,000 or more, the group amounted to only 0.084 percent. That's the highest percentage since 1994, when it was 0.102 percent of the $200,000 earners.
Adjusted for inflation since 1976, the number of non-payers was smaller, at only 464, the IRS said.
Taxes can be offset by several factors, including credits for state and local income taxes or foreign taxes paid or extraordinary losses from personal businesses, experts said.
Analysts worry, though, that the AMT, which is not indexed for inflation, will start to affect middle-income families in coming years unless it is overhauled.
William Beach, a senior fellow with the conservative Heritage Foundation think tank, said the AMT performs "extraordinarily poorly."
"It has now leached into the upper middle class," he said. Unless it is reformed, it could touch about 30 million tax filers by 2012, he said.
Len Burman, co-director of the Urban-Brookings Tax Policy Center, said the reports on non-payers and the 400 highest income filers were related, in that they showed the role of capital gains in reducing taxes.
Of $69.57 billion in adjusted gross income reported by the top 400 filers in 2000, about $44.53 billion was made through capital gains, Burman said
"Capital gains is the linchpin of every tax shelter I know of, except for municipal bonds," he said.
Capital gains are generally taxed at a lower rate than wages for all but low-income taxpayers. With the tax package passed in May, the rate will fall to 15 percent.
Copyright 2003 Reuters All rights reserved. |
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