The number of millionaires soared during last year’s stock market rally

People with north of $1 million cumulatively reported $252.5 billion in capital gains, an 80% increase from the previous year. Their salaries and wages have increased by 45%.

“It’s a dramatic increase,” said Mark Booth, a former senior Congressional Budget Office official.

The numbers show how many people have behaved well during the pandemic.

They can also help explain why the economy has held up better than expected and why inflation has proven to be so persistent, since some people had much more disposable income than it looked.

And the data points to the tidal wave of tax revenues now flowing into the Treasury. Tax revenue this year is expected to jump nearly $1 trillion, more than the Pentagon’s annual budget. Forecasters expect total income taxes paid by individuals to reach their highest level in more than a century.

Experts warn that the IRS figures are preliminary.

People who have applied for filing extensions, who tend to be of higher income, have until Oct. 17 to file their returns. And comparisons to 2021 aren’t perfect because last year’s filing deadline was moved to May, so the IRS may have processed a different mix of returns last summer.

The agency says the new return statistics cover 95% of expected filings this year.

The number of people declaring incomes of a million dollars has not only increased since the start of the pandemic, but also compared to previous ones. In the 2020 filing season, covering the previous year’s earnings, the IRS counted 260,000 seven-figure returns during the same period.

The agency’s figures also show that more people are declaring capital gains.

So far this year, the IRS says it has recorded 27 million returns with such gains or losses, up from 23.2 million last year and 20.6 million the year before the pandemic.

Prices for stocks, homes and other assets have inflated much of the past year, helped by ultra-low interest rates, which caused budget forecasters to repeatedly revise their capital gains estimates.

The Federal Reserve has since raised interest rates dramatically, in an effort to reduce inflation, which has triggered a sharp decline in asset prices – meaning that many of the gains people have enjoyed in recent years are reversing.

“Usually capital gains realizations follow the stock market,” Booth said.

“You expect a significant reduction in capital gains realizations in tax year 2022 based on the first nine months” of this year.


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