For the Press

Tax Analysts' Contributing Editor Martin A. Sullivan Exposes America's "Progressive" Income Tax -- Shows That Those at the Very Top Pay Lower Effective Tax Rate Than Those Just Below

December 14, 2009

FALLS CHURCH, VA – Do you think that the United States has a progressive income tax, with people at the top paying the highest effective rate of all taxpayers? Think again.

As Martin A. Sullivan explains in his cover piece in this week’s Tax Notes, the weekly journal on federal taxation, those with adjusted gross incomes (AGIs) of over $10 million a year actually pay a lower effective rate than those with AGIs between $1 million and $2 million.


“There is a simple explanation for this,” writes Sullivan, an economist and contributing editor of Tax Analysts, the nonprofit publisher of Tax Notes. “The statutory tax rate on capital gains and qualified dividends is 15 percent… as income rises, the proportion of income in the form of capital gains and qualified dividends grows rapidly.”

Specifically, Sullivan found after studying new Internal Revenue Service data for tax year 2007, the effective income tax rate reached 24.1 percent for those with AGIs between $1 million and $2 million. For those with AGIs of over $10 million, the rate dropped to 19.7 percent.

“My casual impression is that some people favor progressive rates and about an equal number favor flat rates,” Sullivan wrote. “Very few openly endorse regressive rates. Nevertheless, that is what we have in the United States.”

Read Sullivan's article.