How much income you need to be in the 1%
The fierce public debate over recent legislative proposals to sharply raise taxes on the rich in the U.S. tends to obscure one thing -- relatively few Americans would be directly affected by such a hike in the so-called marginal rate on top earners.
A proposal by freshman New York Congresswoman Alexandria Ocasio-Cortez to tax incomes above $10 million at a rate of 70 percent would largely impact the "tippy tops" (in her words), or the top 0.1 percent of income earners. The IRS estimates there are about 140,000 tax filers in the top 0.1 percent. According to the agency, the top 0.1 percent of income earners have average annual adjusted gross income -- the metric that's used to determine your taxable income -- of $7.3 million.
Sen. Elizabeth Warren is proposing a "wealth tax" on Americans with more than $50 million. According to the Massachusetts Democrat, that would raise $2.7 trillion over a decade by levying an additional 2 percent tax on individuals with more than $50 million in assets and 3 percent on those with more than $1 billion. There are fewer than 600 billionaires in the U.S., according to UBS. Two leading scholars on inequality estimate that Warren's proposal would affect 75,000 American households.
Public support for higher marginal tax rates is surprisingly strong across party lines, Ocasio-Cortez said on Wednesday.
"When I first brought up the notion of marginal tax rates as high as 70 percent for income earners above $10 million dollars, people thought it would be this very scandalous moment," she said at a panel to discuss tax policies hosted by the Congressional Progressive Caucus. "Just a few short weeks later we find out that 60 percent of Americans agree, including a majority of Republican voters."
About 6 of 10 voters say they support her tax plan, according to a survey from The Hill-HarrisX last month. About 45 percent of Republican voters support it, the survey found.
Are you in the top 1 percent?
The income threshold to enter the top 1 percent of U.S. earners: $421,926. That's according to an analysis from the Economic Policy Center, which analyzed tax data on income.
But many of these earners won't pay the highest tax rate under the 2017 Tax Cuts and Jobs Act because the top marginal rate for married couples -- 37 percent -- only kicks in on every dollar of income above $612,350.
Some U.S. states with a concentration of high-earning households have a higher bar for entering the top 1 percent of earners, EPI found. Connecticut has the highest threshold, with people needing to earn at least $700,800 to enter the top 1 percent. That's followed by New Jersey, at $588,575, and Massachusetts, at $582,774.
The state where it's the easiest to slip into the ranks of the top 1 percent is Mississippi, where the threshold stands at $254,362.
Are you in the top 0.01 percent?
The income threshold for this group, and the Americans who would most likely feel Ocasio-Cortez's tax hike, is $9.8 million, according to EPI. Their average income -- $32.3 million per taxpayer.
Although that falls far below Sen. Warren's prescription for righting the tax system, it's still far greater wealth than the typical taxpayer can fathom. Across all 141 million taxpayers, the average adjusted gross income is less than $72,000, according to a recent IRS report.