Imagine a club where you have to earn $137 million per year to join, and which limits membership to 400 people. That, we’d all agree, is an exclusive club. Mitt Romney, for example, probably thinks he is rich, but he could not get in. He’d be told he would be happier elsewhere.
The club is the IRS top-400 income-tax returns.
In June, the IRS released details on the 2009 returns. The average income of a 400 Club member in 2008 was $270 million per year. In 2009, the average income was down to $202 million. Some members do substantially better than the average. In 2009, the top 25 hedge-fund managers reported an average income of $1.01 billion.
In 1955 (in 1990 adjusted dollars), you could get in the club for only $13 million per year. The average income of a 400 Club member almost tripled during the Clinton presidency (in 1990 adjusted dollars), from $17.4 million in 1992 to $42 million in 1999. It rose to $87 million in 2007 and dropped to $49 million in 2009.
Today’s 400 Club, as a whole, pays a lot of taxes—$16 billion (1.9 percent of total taxes paid). Six members, however, paid no tax in 2009. The average member pays $40 million in taxes—an overall effective rate of 20 percent. In 1955, by contrast, the 400 Club paid a 51-percent effective rate. Declining...