Imagine a club where you have to earn $137 million per year to join, and which limits membership to 400 people.  That, we’d all agree, is an exclusive club.  Mitt Romney, for example, probably thinks he is rich, but he could not get in.  He’d be told he would be happier elsewhere.

The club is the IRS top-400 income-tax returns.

In June, the IRS released details on the 2009 returns.  The average income of a 400 Club member in 2008 was $270 million per year.  In 2009, the average income was down to $202 million.  Some members do substantially better than the average.  In 2009, the top 25 hedge-fund managers reported an average income of $1.01 billion.

In 1955 (in 1990 adjusted dollars), you could get in the club for only $13 million per year.  The average income of a 400 Club member almost tripled during the Clinton presidency (in 1990 adjusted dollars), from $17.4 million in 1992 to $42 million in 1999.  It rose to $87 million in 2007 and dropped to $49 million in 2009.

Today’s 400 Club, as a whole, pays a lot of taxes—$16 billion (1.9 percent of total taxes paid).  Six members, however, paid no tax in 2009.  The average member pays $40 million in taxes—an overall effective rate of 20 percent.  In 1955, by contrast, the 400 Club paid a 51-percent effective rate.  Declining rates in the 1980’s and 90’s—and, particularly, the 2001 and 2003 Bush tax cuts, reducing capital gains and dividends to 15 percent—have been a big help to club members.  Capital gains account for 48 percent of the typical member’s income, with dividends at 13 percent and interest at 7 percent.  Salary and wages are substantial, averaging $22 million, about nine percent of total income.  Club members account for 1.34 percent of total Adjusted Gross Income and pay 2 percent of all taxes.

Most club members, 237 of them, seem active in business, since they report substantial Partnership and Subchapter S net income.  Of those returns, the average reports $84 million, or 25 percent, of his or her Adjusted Gross Income from such business.  Only 52 members are in business for themselves—i.e., they file Schedule C (“Profit or Loss from Business”).  They average ten million dollars in business income.

Club members make good use of the charitable-contribution deduction—only 13 members did not report any.  The 387 members who did took an average of $16 million and accounted for four percent of all charitable deductions taken.

Mitt Romney’s 2010 return, which he has released, reports $129,697 in foreign-tax credits.  Credits are particularly desirable, since they reduce taxes dollar for dollar.  Foreign-tax credits are also popular with the members of the 400 Club.  In 2009, 325 members took foreign-tax credits.  The average taken was $2.4 million and accounted for about six percent of all foreign-tax credits taken.  In 2007, members took over ten percent of all foreign-tax credits taken, which, considering that the 400 Club represents an infinitesimal percentage of returns filed, is astounding.

The 400 Club has a fair amount of turnover; 39 percent made it for only 1 year of the 18 for which the IRS has kept records (1992-2009).  A lucky 87 were members for 10 or more of the 18 years.

Definitions of “rich” vary widely.  President Obama sees $250,000 as rich.  Sen. Charles Schumer (D-NY) understands that no one in New York City earning $250,000 would claim he is rich, and thinks the number should be higher.  Republicans also define rich higher, probably around one million dollars.  But by any definition, the members of the 400 Club are rich.  A less-exclusive club, but whose members are undoubtedly rich, comprises those 13,480 taxpayers who report annual income of ten million dollars or more (2008 figures).  Even less exclusive are those reporting one million dollars or more (321,294 members).

The top one percent of taxpayers get a lot of attention from President Obama: He thinks they are not paying their fair share.  The top one percent is a far-less-exclusive group than the 400 Club.  There are 1.4 million members out of 140 million returns filed.  You can get in for a modest $343,000.  Their average income is $1.3 million; they receive 17 percent of all income and pay $318 billion, 37 percent of all taxes.  Their effective tax rate is 24 percent, which is higher than that of either the 400 Club or any other class.  In 1986 the top one percent reported ten percent of all income, so its share has almost doubled.

How much money does a man need?  Theodore Roosevelt, in his 1910 Sorbonne speech, “Citizenship in a Republic,” noted that after a certain measure of tangible material success is achieved, the question of increasing it becomes of constantly less importance compared with other things that can be done in life.  The 400 Club, by any standard, has reached the point of which TR spoke.  Said Roosevelt: The man who, far surpassing that point, continues to pile up great wealth but “returns no corresponding benefit to the nation as a whole” is a poor citizen.  The IRS does not identify the individuals in the top 400, so there is no way of knowing if they are meeting Roosevelt’s standard of good citizenship.

Is the existence of the 400 Club consistent with a republican form of government?  Is the concentration of income and wealth in the club just too great?  Thomas Jefferson, in 1786, wrote from Paris to Archibald Stuart that our disposition to luxury, if not restrained, would lead to the “loss of those manners which alone can preserve republican government.”  Republican manners are probably not to be expected from 400 Club members.  Democracy, after all, is not simply a form of government; it is a condition of society.