As recent tax initiatives have been aimed at collecting more tax revenues from millionaires, you may ask, just who are these millionaire taxpayers? According to research by the Tax Foundation, a group that advocates for lowering taxes, many of these millionaire taxpayers are owners of small businesses.
It is more likely for partnership and S corporation small business owners to be million taxpayers than sole proprietors. Based on IRS data, the Tax Foundation calculated that 51% of partnerships and S corporations reported income of $1 million or more, as compared to 6% from sole proprietors.
The study also found that most of these million taxpayers are highly educated, mainly business owners, married, mostly two-earner couples, and about half of them were 55 or older. The number of million-dollar tax returns has dropped, from 392,220 in 2007 prior to the recession, to 267,936 in 2012. And just because they have filed a million-dollar tax return one year does not mean that they will do it the next. Half the taxpayers in the study were found to earn a million or more only once, with 15% managing this twice, and only 3% for six years. This makes sense with the when you take into account the fluctuations that occur even with successful businesses.
So how much do these $1 million-plus incomes make up of America’s total adjusted gross income (AGI), and how big of a share did they pay in taxes? In 2001, they represented 9%, while paying 18%. It grew to 16% and 28% paid in 2007. In 2009 and 2010, it dropped back to 10% of the AGI, and paying 20% and 22% respectively.
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