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posted: 12/17/2012 9:22 AM

Peoria among richest ZIP codes backing Obama

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  • People living in ZIP codes where tax filers report adjusted gross incomes of $200,000 or more -- including Peoria -- voted to return to the White House a man who wants to raise them.

      People living in ZIP codes where tax filers report adjusted gross incomes of $200,000 or more -- including Peoria -- voted to return to the White House a man who wants to raise them.
    Associated Press

 
Bloomberg News

They're U.S. ZIP codes to be coveted. Just 140 exist, places where at least a quarter of tax filers report adjusted gross incomes of $200,000 or more.

Representing a sliver of the nation's more than 40,000 ZIP codes, they're situated in Manhattan, suburban Philadelphia, Beverly Hills and even Peoria, Illinois.

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As Congress and the president debate a deficit-reducing budget deal, Internal Revenue Service data compiled by Bloomberg shows the greatest concentrations of those most likely to see higher tax rates live in places that voted to return to the White House a man who wants to raise them.

"The irony is that many of these wealthy states also tend to be more Democratic states that favor a more progressive tax code," said Jim Kessler, a senior vice president and co-founder at Third Way, a Washington-based Democratic policy group. "Republicans are essentially defending tax rates for people who don't live in their state."

The debate is at the heart of the negotiations to reach an agreement that would prevent automatic tax increases and spending cuts in January, the so-called fiscal cliff.

President Barack Obama is insisting that before any discussions begin on cutting such entitlement programs as Medicare, Republicans must agree to a tax rate increase on the portion of annual incomes exceeding $200,000 for individuals and $250,000 for married couples. He's called them "millionaires and billionaires who can afford to pay a little more."

Manhattan Codes

The Bloomberg list of where those people reside is based on tax returns filed in 2009, the most recent publicly available ZIP code-level data available from the IRS. For privacy reasons, the agency suppresses data for ZIP codes with fewer than 250 returns.

An adjusted gross income of $200,000 or more is the top category in the IRS data. Among ZIP codes with at least 250 tax filers, about a third don't have anyone with an adjusted gross income of $200,000 or more.

Manhattan has the most ZIP codes where a third or more of returns have adjusted gross incomes of $200,000 or more, a reflection of the city's high incomes and cost of living.

The 10281 ZIP code, which includes the World Financial Center, holds the top spot in New York City. Work addresses are sometimes used by employees living outside the country because their employers have tax departments that assist with the multinational filings, and addresses of accountants or attorneys are also used. In 10281, 45 percent of the returns had adjusted gross incomes of $200,000 or more.

Peoria Ranking

While many of the areas with the greatest proportion of high-income tax filers are where they'd be expected -- northeast U.S. communities, suburban Chicago, Beverly Hills and other wealthy enclaves -- there are a few outliers as well.

The 61629 ZIP code in Peoria, Illinois, which includes the global headquarters for heavy equipment maker Caterpillar Inc., ranks second for proportion of tax filers with top incomes.

That's because some employees living outside the U.S. use the company's headquarters for their tax filings, said Caterpillar spokesman Rusty Dunn. In some cases, their incomes are inflated by reimbursements for housing cost and taxes related to their foreign assignments. As in the case of the wealthy urban zones, Peoria County backed Obama over Republican challenger Mitt Romney, 51.3 percent to 46.9 percent.

Energy Companies

A Houston ZIP code that has the highest concentration of high-income filers in the nation has a similar story. It is home to post office boxes used by energy companies and others, boosting its concentration of high incomes.

The list of ZIP codes where most of the wealthiest taxpayers are concentrated also shows the reach of higher rates would extend well beyond large metropolitan areas.

In total, there were in 2009 more than 4.1 million tax filers with adjusted gross incomes of $200,000 or more, the data shows. They were located in almost 19,000 ZIP codes.

If rates are raised, it will disproportionately hit such higher-income metropolitan areas as New York, Philadelphia, Chicago and San Francisco, where residents with those elevated earnings also typically have higher housing and other expenses.

"You get paid more, but your cost of living is so high," said David Albouy, an economics professor at the University of Michigan who has studied geographic tax inequality. "You are also paying a lot more in federal taxes."

Geographic Imbalance

Politicians from higher-cost areas have tried in vain to advance proposals for indexing federal taxes and benefits to local costs. The late Senator Daniel Patrick Moynihan of New York pressed the case that northeastern states send more in federal taxes than they receive in federal spending, while those in the South and Midwest get more from the federal government than they send to Washington in taxes.

"It would be nice to have this amount adjusted geographically, but it's going to be tough," Albouy said, noting how bigger cities are proportionally under-represented in the Senate, where even the least populous states have two lawmakers.

"A lot of these things are political non-starters because of the Senate," he said.

Some lawmakers and business leaders have suggested that rates be raised at a higher income threshold than proposed by the president. That would protect those in the most expensive housing markets, where Senator Chuck Schumer of New York has argued many making $250,000 a year are "not rich."

Higher Bar

Schumer, a Democrat, has in the past backed raising the top tax rate only on couples earning more than $1 million. That concept also once had some support from House Minority Leader Nancy Pelosi, a Democrat representing a high-income San Francisco district.

Billionaire investor Warren Buffett said late last month in an opinion piece in the New York Times that he supports Obama's proposal to end the Bush-era tax cuts for the wealthy, although he'd like to see the level set at $500,000 in earnings and above. That figure won support from a small group of Republicans in the House, including Representative Mike Simpson of Idaho, if it's tied to an overhaul of spending on entitlements such as Medicare.

"In an ideal world, from my perspective, the income threshold ought to be not $250,000," said Representative Gerry Connolly, a Democrat who represents a northern Virginia district that has the nation's highest median household income. "It ought to be much higher. I've suggested $1 million."

Connolly said it isn't uncommon to have two professional workers in his district outside Washington, D.C. with $250,000 in combined income.

"They don't see themselves as rich," he said. "They're both working. They're making ends meet. They're trying to do soccer in the evening and day care in the day and school plays and everything else."

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