The richest 1% account for 37.3% of declared wealth in the IR, according to the Treasury report

According to the report, when looking only at the declared wealth of a sovereign wealth fund, the focus is clearer than income. Among the richest 10%, the share is 64.2% of total wealth reported by taxpayers. The richest 5% account for 54.7%.

These numbers, according to the Environmental Experts Association, may still underestimate true inequality. This is because the study classifies the groups based on their reported income – not their accumulated assets – which could shift a portion of taxpayers with a large amount of assets, but low taxable income, into lower bands of the distribution.

The report compares income tax data with the results of the ongoing National Household Sample Survey (PNADC). The main difference appears in the richest segments of the population.

While the IPF estimates that the richest 0.1% own about 2.9% of national income, IPF data shows that in returns filed with the Federal Revenue Service, this group represents 12.5% ​​of total income – nearly four times as much.

According to the Environmental Experts Association, this discrepancy occurs because household surveys:

• It rarely reaches people with very high incomes;
• They rely on the answers given by interviewees;
• They do not record profits, dividends and capital gains as accurately as returns filed with the IRS.

Under IRPF, on the contrary, financial income, capital gains and dividends are shown in detail.

The effective rate falls among the rich

In addition to the distribution of income and wealth, the report analyzes how income tax effectively affects each bracket. The study notes that although the rate of return scale is progressive—that is, it charges higher rates as income increases—this progress is lost at the top of the distribution.

The average effective rate (the proportion a taxpayer actually pays on all of his or her income) rises to a certain range, but falls again among the wealthy. In the richest 0.01% group, the average effective tax rate was 4.6% lower than the average tax rate among middle-income taxpayers.

• A large portion of the highest income consists of profits, profits, and now insects;
• Financial investments and capital gains are taxed exclusively at lower rates;
• Deductible expenses and special regulations reduce the basis of the calculation.

Thus, even with high incomes, the share of tax paid relative to total income received declines at the top.

Income composition explains the decrease in taxes

The document divides the principal income among the rich. In the top 0.1%, income consists of:

• 5.8% of taxable income;
• 43.1% of income from exclusive/final taxes;
• 51.1% of exempt income.

In the richest 0.01%, the share of taxable income is smaller, 2.3%, while exclusive income is 55.8% and exempt income is 41.9%. SPE highlights that this pattern affects the progressivity of the system, as the majority of this group’s profits do not pass through the traditional IRPF schedule.

Formation of Brazilian heritage

IRPF data also allows us to detail how a taxpayer’s assets and interests are distributed:

• 50.2% of these are financial assets (such as applications and investments);
• 36.7% of them are real estate;
• 6.7% are “other assets and rights”;
• 6.4% of them are movable assets such as vehicles.

Financial assets are more concentrated among the richest people and affect wealth inequality and generate income that is exempt or taxable outside the progressive scale.

Women have less wealth and pay relatively more income tax

The report also highlights relevant differences between men and women. slim:

• They represent 44.1% of IRPF advertisers;
• They represent 38% of total income;
• They have 46.9% less average wealth than men.

Because women have a higher proportion of taxable income and less exempt income, women, on average, end up paying proportionately more income tax than men, even when they have similar income.

Racial inequality appears strongly at the top of the distribution

Another section of the report combines IRPF data with PNADC information to estimate the racial distribution among different levels of income and wealth. According to SPE: