The incomes of the top 1 percent of Americans fell 18 percent in 2001, as did their income taxes, shaving US$66 billion off revenues and showing how dependent the federal government has become on its wealthiest citizens.
Overall, Americans had 2.8 percent less income in 2001 than in the previous year. But federal tax revenues fell 9.4 percent because the incomes of those at the top, who pay the highest tax rates, dropped so much more than the average.
The top 1 percent reported US$1.09 trillion of income, down from US$1.34 trillion in 2000, according to data posted by the Internal Revenue Service (IRS) on the Web Friday without announcement.
The minimum income to reach the top 1 percent was US$293,000 last year, down from US$313,500 in 2000, but almost identical to the threshold in 1999.
The sharp decline in incomes at the top "is obviously due to the collapse of the stock market boom and the recession," said Bruce Bartlett, a senior fellow at the National Center for Policy Analysis, a lobbying group.
The combination of a sharp drop in income, if sustained for several years, and the tax cuts that were enacted this year could result in another sharp drop in taxes paid by the top 1 percent. The top rate on capital gains and dividends, the source of much of the income in the elite group, has been cut to 15 percent from 20 percent.
Taxes paid by the top group fell to US$300.1 billion in 2001 from US$366.9 billion in 2000. The decline accounted for the bulk of the US$92.7 billion drop in individual federal income tax revenue in 2001.
The sharp drop in incomes caused the share of income taxes paid by the rich to shrink nearly a tenth. The share of total taxes paid by other groups consequently increased. The top group paid 33.9 percent of all income taxes, down from 37.4 percent in 2000.
The share paid by the next wealthiest group, the 4 percent of Americans just below the top group, grew slightly. The bottom half of Americans, the 64 million households making less than US$28,000, accounted for a somewhat larger share of total taxes.
The biggest increase, however, was among those making US$56,000 to US$92,800, whose share of all income taxes increased to 18 percent from 16.7 percent. They accounted for a larger share of income taxes than the very wealthiest, the top tenth of 1 percent of Americans who paid 16 percent of the government's total income taxes.
The IRS also released data on the top tenth of 1 percent, the most prosperous 129,000 households in the country. This group had so much income that they made almost as much as the other nine-tenths in the top 1 percent.
This very top group, representing one in a thousand households, had US$505 billion in income, for an average of US$4 million each. To be counted among this group one needed an adjusted gross income of at least US$1.3 million, down from US$1.6 million in 2000.
This small group received almost US$1 of every US$12 earned by all 129 million American households.
Bartlett, an advocate of lower taxes, noted that the Bush tax cuts in 2001 did not cause the drop in taxes by the wealthy.
"It is pretty clear that the tax cut played no role by the fact that the average tax rate paid by the top 1 percent actually went up slightly," he said.
This group paid US$0.275 in taxes on each dollar of reported income, up a sliver of a penny from the previous year. This increase was caused by a drop in income from capital gains, which are taxed at a much lower rate than wages.