400 People Giving Thanks

Back in 1982, Forbes magazine compiled their first “Forbes 400” list of the richest Americans. It took $75 million to gain entry to that first list, which featured an entire country club’s worth of Rockefellers, Mellons, and DuPonts. Shipping magnate Daniel K. Ludwig reigned above the rest, with a net worth of $2 billion. (You all remember that guy, right?) Since then, the Forbes 400 has become the magazine’s most eagerly awaited feature, with Silicon Valley tech billionaires and hedge fund superstars replacing the blue-blood heirs of yore.

They say that imitation is the sincerest form of flattery. Ten years later, in 1992, our friends at the IRS got into the “400” game, compiling statistics on the 400 highest incomes. And while the IRS isn’t telling us _every_thing we want to know (like their names!), the report offers a fascinating peek into the wallets of 400 people with great reasons to give thanks this season.

Last week, the numbers geeks in the IRS Statistics of Income division released their Top 400 summary for 2010. (It took awhile to sift through the 143 million returns the IRS got that year.) It took $99.1 million in adjusted gross income to make the list. (That means that, among others, billionaire Warren Buffet didn’t make the list, as he revealed his adjusted gross income for that year was a “mere” $63 million.) The average income for the top 400 was $265.1 million, and the group as a whole reported 1.31% of the entire country’s adjusted gross income.

The big surprise isn’t how much our top 400 make, it’s how they make it. Not salaries and wages, those made up just 6.41% of the total. Not interest and dividends, those made up just 8.54% and 16.41%, respectively. No, the real action came from capital gains, which averaged $165.9 million for each of our top earners. In fact, those 400 taxpayers all by themselves accounted for over 14% of capital gains reported by the entire country.

And how much tax did our top 400 pay? Remember, rates on capital gains were capped at just 15% in 2010, and there was no 3.8% net investment income tax as there is today. So, the average “top 400” tax bill was $47.8 million, and the group as a whole paid 2.01% of the entire country’s tax bill. Sure, that sounds like a lot. But it equals a rate of just 18.04% of the average “top 400” income and barely half the top 35% marginal rate. In fact, 37 of those 400 paid less than 10% of their income in tax, while just 54 paid over 30%.

4,024 taxpayers have joined the IRS Top 400 over the last 19 years. 2,909 of them appeared just once, which reinforces the fact that most of those lucky winners make it by selling something like a business they spend a lifetime nurturing. 504 have appeared twice; 175 have appeared three times, and 126 have appeared four times. Just 95 taxpayers have appeared on the list 10 or more times, and you can imagine the holidays are pretty lavish at their houses.

This holiday season, we want to give thanks to you, our loyal readers. This includes those of you who are clients, and those of you who aren’t (yet). We wish you and your families the best, and we understand that the best reasons to give thanks don’t show up on your tax returns.

But hey, as long as we’re talking, if you haven’t called us yet for a plan to pay less tax, what are you waiting for? There’s still time left for planning in 2014 and we’re confident that if you do, you’ll have more to give thanks for, in 2014 and in all the years to come.

Donna Bordeaux, CPA with Calculated Moves

Creativity and CPAs don’t generally go together.  Most people think of CPAs as nerdy accountants who can’t talk with people.  Well, it’s time to break that stereotype.  Lively, friendly, and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux.  They have over 50 years of combined experience as entrepreneurial CPAs.  They’ve owned businesses and helped business owners exceed their wildest dreams.   They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.