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(CNN Money) By Jeanne Sahadi - In case you haven't heard, President Obama wants the wealthiest to pay more in taxes.
Noting the rise in income inequality in recent years and the need to reform the U.S. tax system, the president on Tuesday said that some of the wealthiest in America pay far less in federal taxes as a percentage of their income than many lower down the income scale.
"A quarter of all millionaires now pay lower tax rates than millions of middle-class households. Some billionaires have a tax rate as low as 1%," Obama said in a speech in Kansas.
Here are some of the facts behind the claim: In 2006 roughly 25% of those with adjusted gross incomes over $1 million paid a smaller portion of their income in federal taxes -- income, payroll and corporate -- than 10% of those with AGIs below $100,000, according to a recent study from the Congressional Research Service.
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As for the president's assertion that some billionaires have a tax rate as low as 1%, Roberton Williams, a senior fellow at the Tax Policy Center, said that it's definitely possible but hard to verify.
"Billionaires are still rare enough that we cannot get data for them without running afoul of privacy rules," he said.
But for a lot of reasons, Chris Bergin, president and publisher of Tax Analysts, said, "It is certainly not implausible."
Last year, 4,000 households with incomes over a million dollars owed no federal income tax whatsoever, according to Tax Policy Center estimates.
What's more, of the top 400 federal tax returns with the highest adjusted gross incomes in 2008, 30 had an effective tax rate of less than 10%, noted Mark Luscombe, the principal federal tax analyst at CCH.
A big reason is that a large percentage of wealthy Americans' income comes from investments, which are often taxed at lower rates than ordinary wages and salaries.
What's more, some perfectly legal tax code provisions allow taxpayers to reduce their investment tax bills even further.
Read full story at CNN Money...
