Many Millionaire Taxpayers are Small Business Owners
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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