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2002: The year the rich got poorer but paid higher tax rates, as the Bush tax cuts proved progressive.

Just released IRS Statistics of Income data for 2002 tax returns show that as a result of the Bush tax cuts the lower your income was as a US taxpayer the more your tax rate probably was reduced, while only the rich paid higher rates. (Hey, doesn’t this sound backwards?)

At the same time the rich got poorer, as income at the highest levels continued to plunge through the second straight year (after falling 60% at the highest levels the year before).

As the IRS explains (.pdf) ...

... The adjusted gross income (AGI) reported on [2002] returns totaled just over $6.0 trillion, a 2.2-percent drop from the previous year. This was the second consecutive year that AGI fell.

In both years, the decline in AGI reported on all returns occurred for returns with AGI of $200,000 or more. AGI reported on returns with income below $200,000 increased both years.

The principal cause of the decline in AGI between 2001 and 2002 was a large decline in net capital gain (less loss), which fell 26.9 percent for 2002...

The average tax rate for all returns also declined for 2002, by 1.2 percentage points, to 13.2 percent of AGI.

A lower average tax rate was reflected in all of the income-size classes for AGI of less than $1.5 million … The average tax rate was unchanged for returns with AGI between $1.5 million and $2.0 million. The average tax rate increased, however, for all of the income-size brackets of returns reporting more than $2 million of AGI.

The rich got poorer --
Change in total adjusted gross income at each level, 2002 from 2001:

$200,000 to under $500,000 -5%
$500,000 to under $1 million: - 6%
$1 million to under $1.5 million: - 9%
$1.5 million to under $2 million: -14%
$2 million to under $5 million: -16%
$5 million to under $10 million: -18%
$10 million and over: - 26%

Changes in tax rates --
Adjusted gross income / tax rate as % of income / point change in rate / % change in tax rate

Total : 13.2%, -1.2, -8.3%

$1 to under $10,000: 0.7%, -0.3, -30.0%
$10,000 to under $20,000: 2.6%, -0.8, -23.5%
$20,000 to under $30,000: 4.7%, -1.2, -20.3%
$30,000 to under $50,000: 7.4%. -1.3, -14.9%
$50,000 to under $100,000: 10.5%, -1.1, -9.5%
$100,000 to under $200,000: 15.8%, -0.8, -4.8%
$200,000 to under $500,000: 22.7%, -0.6, -2.6%
$500,000 to under $1 million: 27.9%, -0.2, -0.7%
$1 million to under $1.5 million: 29.2%, -0.1, -0.3%
$1.5 million to under $2 million: 29.5%, 0.0, 0.0%
$2 million to under $5 million: 29.6%, +0.1, +0.3%
$5 million to under $10 million: 29.4%, +0.4, +1.4%
$10 million and over: 25.9%, +0.2, +0.8%

Commentary will follow.

In the meatime someone call Paul Krugman, Brad DeLong and David Cay Johnston. This is not what they said was happening with tax rates.