America's Millionaire Capitals

Taxing Millionaires
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Where do this country's most prosperous citizens hang out? How much money do they have? President Obama wants them to pay a bit more in taxes. But how much are they coughing up now?

Answers to these questions can be extracted from a little-utilized IRS database of income tax statistics. The file sorts tax returns by income range and by zip code.

Wary of releasing any data that might reveal something about individual taxpayers, the IRS slices its statistics into broad ranges. In this data set the top tier of income is $200,000 and up. Except, perhaps, to a politician looking for revenue increases, this scarcely qualifies a taxpayer as wealthy.

So I put a finer sieve on the database, zeroing in on communities where the average income within the 200K-and-up set is at least $1 million.

Result: a set of 130,400 tax returns from 64 hot spots of prosperity–suburbs, islands, parts of cities. The list of ritzy places ranges from Fisher Island, an enclave of yacht owners off Miami, to the Tribeca area of Manhattan, where wage slaves with seven-figure salaries have their chic loft apartments.

In Pictures: America's Millionaire Capitals

Your tax return is in this data set if you make at least $200,000 and you have a lot of millionaires as neighbors. The methodology is elaborated here.

Ranked by income, the list of rich places starts with Fisher Island, at $3.2 million per high-bracket taxpayer. Then come Purchase, N.Y. at $2.2 million; two more New York City suburbs, New Vernon and Alpine, N.J., both at $2.1 million, and Atherton, Calif. at $1.9 million.

I did something more with the data that the IRS doesn't do: estimate net worths, using figures on dividend, interest and business income as starting points.

In estimated net worth, the richest five communities are: Fisher Island, at $57 million per high-bracket return; Alpine, at $28 million; Medina, at $26 million; Palm Beach, Fla., at $23 million, and the King's Point/Great Neck area on Long Island, at $22 million.

The recent stock market swoon did some damage to net worths, but not as much as you might think. The moneyed set in this country hold a lot of bonds, too, and bonds have done well this year.

Most of the millionaire hangouts are in California, Florida and the vicinity of New York City, but there are a few in Illinois and Texas.

The taxpayers in my data set pay no small amount to the government, despite all their tax avoidance schemes. The federal tax take from this club is $41 billion, or a fourth of their $164 billion in income. That 25% rate is almost double the rate for the average American paying at least some federal income tax. (And of course a lot of people don't pay income tax.)

So, Warren Buffett isn't quite right in implying, by citing his own and his secretary's taxes, that rich people enjoy lower tax rates than ordinary people. But it's also clear from the data that the wealthy could chip in more to the U.S. Treasury without cutting too deeply into either their incomes or their bank accounts. Combined net worth of the moneyed crowd: $1.6 trillion.

Within this group of 64 rich communities there's a big range in tax burdens. In five of them, high-bracket taxpayers can cover all their tax bills—state, local and federal income taxes plus real estate taxes—with a fourth of the money coming in.

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