IRS Report Shows Drop In Number Of Wealthy Americans

by Leroy Baker, Tax-News.com, New York

05 July 2005

The number of Americans earning $200,000 or more annually fell in 2002 for the first time in a quarter of a century, according to an Internal Revenue Service report.

The annual study by the IRS found that the number of high-income tax returns fell by 7% in 2001 and 6% in 2002 - the latest year for which figures are available - after the number of Americans declaring income of $200,000 or more had risen every year since 1977.

"For 2002, both the numbers of high-income returns and their percentage of all returns were lower than in 2000," the report stated.

The IRS did not give reasons why the trend was reversed in these two years, although the US economy teetered on the brink of recession for much of this period, while the stock markets continued to slump.

The report also revealed that 2,959 high-income tax returns reported no US tax liability in 2002. Of those, 2,551 returns reported owing no taxes anywhere in the world.

Wealthy individuals can legitimately use various deductions and tax credits to offset their tax liability.

According to the data, 36.5 million of the total 130 million tax returns filed in 2002 reported no US income tax liability. Of those, 36.2 million returns were filed by Americans with adjusted gross incomes of less than $50,000.

However, analysts believe that the ranks of America's wealthy will once again begin to swell when more recent figures are analysed. Indeed, the the 2005 World Wealth Report released last month by Merrill Lynch and Capgemini showed that number of high-net-worth individuals (HNWIs) — individuals with a net worth of at least US$1 million, excluding their primary residence — grew worldwide by 7.3% to 8.3 million, a net increase of 600,000. North America led the way with a nearly 10% growth rate to 2.7 million HNWIs.

Recommended