The top 1% and what they pay

NEW YORK (CNNMoney)

Here is the breakdown:

It takes at least $389,000 to make the club: That was the minimum threshold of adjusted gross income in 2011, the most recent year for which the IRS has final data.

In 2001, you had to make at least $306,635 to make the cut. But if you factor in inflation, that's roughly the same amount as in 2011.

The minimum threshold was much higher in 2007, just ahead of the economic collapse. That year you needed $426,439 to be in the top 1%.

The 1% as a group pay a bigger share of income taxes than their share of adjusted gross income: As a group, the top 1% earned nearly 19% of all adjusted gross income reported in 2011 and paid 35% of all federal income taxes.

Of course, adjusted gross income doesn't measure all income, only what must be reported for taxes. So, for instance, it doesn't include income that those in the top 1% may have made from tax-exempt investments, such as municipal bonds.

Nor do federal income taxes represent any income group's entire tax burden.

The effective tax rate of the top 1% was 23.5%: The average tax rate paid by these high-income households was 23.5% -- which represents the percent of their income they paid in federal income taxes.

That's below the 27.6% they paid in 2001 -- a high point for the decade that followed.

Related: Who pays most income taxes? People 45 and up

Some people may think those rates sound low.

But they're still well above the average tax rate paid by others.

For instance, the top 50% of filers -- who had an AGI of at least $34,823 -- paid an average tax rate of just under 14%.

Who's in the top 1%: There's been remarkable consistency over the years in terms of which professions typically occupy the top 1%.

Analyzing IRS data from 1979 through 2005, tax researchers at Williams College and at the Treasury Department found that five occupations accounted for the lion's share of the top 1% again and again.

They were executives at non-financial companies, financial professionals, doctors, lawyers and an occupational category that lumps together computer, math, engineering and technical jobs in non-financial firms.

Not surprisingly, these same five occupational groups also account for the majority of folks in the top 0.1%.

At the same time, membership in the top 1% isn't a decades-long experience for everyone. That's because a sizeable number of households are catapulted into the group thanks to one-time event.

This story is part of a CNNMoney series exploring Americans' real tax burden. We'll look at who pays the most and who pays the least; and why two people with the same income can have very different tax bills. We'd love to hear how you feel about your tax burden at #YourEconomy.

First Published: April 4, 2014: 7:26 AM ET

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The bow ties that are taking D.C. by storm

Eliot Payne started sewing his own bow ties and eventually turned it into a business.

NEW YORK (CNNMoney)

"I got compliments every time I wore it," he said. "But when I looked [around], I didn't see any I really liked. They were very traditional looking, mostly striped or patterned silk."

So he started making his own on his girlfriend's sewing machine.

"First, I had to teach myself how to sew," Payne said. He sought out unique materials like "small batches of cloth with unusual textures, like ultrasuede, and some vintage fabrics."

Related: 7 hot businesses to start now

Sales of old-school neckties have shrunk as workplaces get more casual, but bow ties "have become a fashion statement," said Lauren Rothman, head of Washington-based consulting company Styleauteur and author of Style Bible: What to Wear to Work. "Guys in their twenties and thirties, especially, want to wear something to the office that shows off their personal style."

Though Payne started sewing his own bow ties in 2009, he didn't start Accoutre until a few years later, and even then, it was a side gig. But in early 2013, Payne lost his job as part of the government's $84.5 billion spending cuts and suddenly he had a lot more time to devote to his business.

At first, Payne's marketing was up close and personal: He'd carry an extra tie in his pocket and give it to anyone who asked about his own.

"People would come up to me on the street and say, 'Can you teach me how to tie one of those?'," he said. "Showing people how was great word-of-mouth advertising."

It helped that Accoutre's fabrics and patterns are a far cry from their stodgy forefathers: One of the bestsellers is a leopard-print tie dubbed "Bad Kitty."

The company's D.C. base also made it stand out against competitors.

"There are so few fashion companies [in D.C.], said Payne. "If you have one, you're kind of a local celebrity."

Related: From farmers' market to mass market

These days, Payne sells his bow ties mainly through Accoutre's website for $60 to $70 apiece. Payne still makes all the ties himself -- "I tried hiring people to do it, but that didn't work out" -- and, while he declined to give revenue or profit figures, he said sales have more than tripled in the past three years.

Payne is now teaming up with menswear blogger Paul Beirne to start a new line of men's suits. To be called Paul Eliot, it's aimed at the same style-minded crowd that has flocked to Accoutre's bow ties (and will be largely funded by cash from the existing business). The new line is scheduled to launch next fall.

"It won't be a traditional suit. It's a lot more unstructured and casual," Payne said. "Paul and I both wanted to design something with some edge to it -- something that we'd like to wear ourselves."

First Published: April 4, 2014: 7:23 AM ET

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Facebook's new face recognition knows you from the side

New technology developed by Facebook researchers uses 3-D modeling to identify the subject of an image.

NEW YORK (CNNMoney)

Facebook (FB, Fortune 500) researchers published a paper last month in which they detailed the capabilities of a new artificial intelligence system known as "DeepFace." When asked whether two photos show the same person, DeepFace answers correctly 97.25% of the time; that's just a shade behind humans, who clock in at 97.53%.

Facebook already uses facial-recognition technology to suggest tags on photos uploaded by users; Google (GOOG, Fortune 500) has similar technology for its Google+ social network. But DeepFace represents a big step forward.

Most current facial-recognition software struggles with images that don't include clear, frontal views of their subjects. That's not the case with DeepFace, which creates 3-D models of the faces in photos and then analyzes them using artificial-intelligence technology known as "deep learning."

Deep learning systems mimic the structure of neurons in the brain to analyze large data sets and draw connections. The DeepFace system conducts its analysis based on more than 120 million different parameters.

All this adds up to a substantial improvement on current state-of-the-art facial-recognition systems, the researchers said.

Related: Where your face is being tracked

For now, it's not clear how -- or if -- Facebook will use DeepFace. The technology remains "theoretical research," said Facebook spokeswoman Lydia Chan.

"[W]e don't currently use the techniques discussed in the paper on Facebook," she said.

But it's easy to see how more accurate facial recognition could be a boon for technology and marketing companies that rely on knowing your identity -- and a potential nightmare for privacy advocates.

Intel (INTC, Fortune 500) has already developed digital signs that use facial-detection cameras and software to determine a consumer's age and gender and then tailor ads accordingly. Law enforcement agencies, meanwhile, have been been experimenting with facial recognition programs for investigation and surveillance.

More sophisticated software could mean individually targeted ads and the ability of governments to track the movements of citizens in public.

Related: Cameras on cops, coming to a town near you

The Federal Trade Commission issued recommendations on the use of facial recognition by private companies back in 2012, calling for consumers to be informed of its use and given the choice to opt out.

But the American Civil Liberties Union said these guidelines skirted the heart of the issue, which is whether anonymity in public "will come to an end through the use of face recognition technology and ever-more-pervasive video surveillance."

The Facebook researchers said in their paper that society will have to deal with these questions as the technology advances.

"The social and cultural implications of face recognition technologies are far reaching, yet the current performance gap in this domain between machines and the human visual system serves as a buffer from having to deal with these implications," the researchers wrote.

The DeepFace system, they added, "has closed the majority of the remaining gap."

First Published: April 4, 2014: 8:02 AM ET

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Dow, S&P 500 hit new highs

NEW YORK (CNNMoney)

The Dow and S&P 500 both reached record levels in early trading, while the Nasdaq was flat. On Wednesday, the S&P 500 closed at a new high, it's eighth of the year.

Investors are keeping an eye on jobs. The big report is due tomorrow, but there was modestly good news yesterday from the ADP release, and the Labor Department will share the latest figures on jobless claims today.

Across the pond, the European Central Bank said it will keep its key interest rate unchanged at 0.25%, as widely expected. But the central bank is facing growing pressure to do more to stimulate the Eurozone economy as risks of deflation rise and the euro remains stronger than some would prefer.

ECB President Mario Draghi tried to use words to calm the markets. He affirmed in a press conference the bank's commitment to keep inflation at a healthy level, but he didn't announce any new measures to prop up the economy.

European markets were mixed in afternoon trading following the announcement.

Related: Fear & Greed Index back in greed mode

In corporate news, newly issued Google shares started trading Thursday as a result of the tech giant's long-anticipated 2-for-1 stock split. The new class C shares, which trade under the original "GOOG," symbol and have no voting rights, rose in morning trading. Old Google class A shares, which retained their voting rights and trade under the new symbol, "GOOGL," were also up.

Shares of both classes of Google began trading at around $570 -- roughly half the value of Wednesday's closing price, but the A shares are trading slightly higher, as expected.

Shares of Pandora (P) popped after the internet radio service released figures showing notable jumps in its number of active listeners March. The number of hours listened for the month also rose.

Netflix (NFLX)continued its slide Thursday. After a huge run, shares of the entertainment site have pulled back about 20% in the past month as the company faces growing concerns about its high valuation and increasing competition.

Yelp (YELP) shares reversed course after falling more than 5% Wednesday after the Wall Street Journal reported that the review site receives around six subpoenas each month, often relating to business owners suing the company.

Related: CNNMoney's Tech 30

Asian markets ended mixed, shrugging off news of a mini-stimulus package in China. After an initial boost, the Shanghai Composite closed 0.7% lower. Hong Kong's Hang Seng finished narrowly firmer.

First Published: April 3, 2014: 10:06 AM ET

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Stuck in Obamacare limbo

Some Americans have been left in Obamacare limbo

NEW YORK (CNNMoney)

Laporta, 63, is an occupational therapy assistant at a private school in Syracuse, N.Y., and no longer qualified for the school's plan because she was working fewer hours. She suffers from arthritis, requiring injections twice a year that would cost $5,000 each without insurance.

She tried repeatedly to apply online at New York's insurance exchange, but hit technical roadblocks every time. She went to an enrollment counselor trained to walk applicants through the process, but the "navigator" encountered similar problems.

After a couple of hours on the phone with the state call center on Friday evening, Laporta learned the problem: She was still listed as having coverage through work.

Fortunately, her boss agreed to extend her coverage until June. At that point, she's hoping she can try again for Obamacare.

Though the enrollment deadline passed on March 31, those who lose company coverage can apply before the next open-enrollment season.

"I'm going to try but I have no confidence it will work," said Laporta.

Related: Thankful for Obamacare

Like Laporta, a number of Americans could not finish signing up for Obamacare before the deadline. Most, however, hope to complete their applications in coming weeks so they can gain coverage before May 1. Otherwise, they'll be left uninsured until next year. Plus, they will be subject to a penalty.

It's not known how many people have been left in this limbo status. Anyone who says they tried to apply but encountered difficulty may still be able to sign up if they had already started the application process.

Share your story: Have you begun using your Obamacare benefits?

Navigators report mixed success with the special enrollment process.

In Texas, Frank Rodriguez said his team of enrollment counselors are now trying to follow up and finish helping people pick plans.

They say they were only able to sign up about 75% of the 500 people who visited during the Latino Healthcare Forum's five-day enroll-a-thon. The federal exchange site kept crashing and the call center was so overloaded that calls would disconnect.

But there's a lot of confusion surrounding the extension period, said Rodriguez, executive director of the Austin-based non-profit.

On Tuesday, one navigator was told that her client can't enroll until 2015 because she did not contact the call center by March 31.

The Obama administration has been squishy about when people need to pick plans. Though the exchange site does not give a date, an administration official said applicants must finish by April 15 if they want coverage this year.

States running their own exchanges have implemented their own deadline rules. Connecticut, for instance, is not allowing residents to finish their applications after March 31, while Oregon is giving people until April 30.

Even navigators who had a relatively easy time in the final days of open enrollment are looking forward to wrapping it up.

Robin Sommer, the navigator program coordinator for the United Way of Tuscon and Southern Arizona, said only two of her clients were unable to finish the process because their insurance subsidies were not being applied correctly.

Now they are in a holding period. The clients contacted the call center, but were told they'd get a call back within seven to 10 days. One tried again Wednesday after getting antsy, but a recorded message said it's not necessary to leave information a second time.

"Everyone is a little nervous, including myself," Sommer said. "We just want to get it done."

First Published: April 3, 2014: 10:01 AM ET

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Should I take out a 401(k) loan to pay off debt?

NEW YORK (Money Magazine)

Only if you can keep saving for retirement. Yes, a 401(k) loan looks like a good deal initially since the interest you pay (now about 4% to 5%) goes into your account.

One danger, though, is that you just rack up more debt.

"Moving money around is not becoming debt-free," says Gail Cunningham, a vice president of the National Foundation for Credit Counseling.

Related: No 401(k)? You have options

And if you make 401(k) loan payments in lieu of contributions, the tab can be steep.

Not only do you miss out on potential returns, but you also forgo an employer match, says Vienna, Va., financial planner Michael J. Rebibo.

Plus, saving less in your 401(k) means a higher income tax bill.

And if you quit or get laid off and can't repay the loan within 60 days, you'll owe a 10% early-withdrawal penalty (assuming you're under 59½) as well as taxes.

How a $7,300 loan can hurt a 401(k)

Tapping a 401(k) to pay off high-rate debt cuts your interest costs. But repaying the loan instead of saving is costly too.

Lower contributions	$7,650
Lost employer match	$3,825
Lost returns	$800
Loss after two years	$12,275

NOTES: Assumes 6% annual return on 401(k), 4.5% interest rate on two-year loan, 25% tax bracket, 50% employer match, and contribution reduced by the amount of loan repayment. SOURCE: MONEY calculations

First Published: April 3, 2014: 10:23 AM ET

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Homebuyers getting priced out in cities across U.S.

NEW YORK (CNNMoney)

"Many big metros are incredibly hot sellers' markets right now," said Stan Humphries, chief economist for Zillow. Nationwide, home prices were up 13% in the 12 months through January, according to the S&P Case-Shiller Home Price Indices. But in cities like Las Vegas, San Francisco, San Diego, prices have climbed by as much as 20% or more.

Related: 'I've been priced out of my housing market'

Add to that the fact that mortgage rates have climbed by almost one percentage point to 4.3% over the past 12 months. That means a buyer who gets a $200,000, 30-year mortgage now with 20% down would pay $896 month, 25% more than what a borrower would pay a year ago.

Even those who have no problem affording a home on their own are having a hard time closing the deal.

Helen Cittadino bid $600,000 in cash on an 890 square-foot two-bedroom condo in Palo Alto, Calif. -- a $20,000 premium to the seller's $580,000 listing price. And she was still outmatched by a higher all-cash offer.

"What's crazy is how many people here are capable of putting in all-cash offers," said Cittadino.

Nationwide, about 35% of all offers were in cash in February, a nearly 30% increase from a year earlier, according to RealtyTrac.

Related: Buy vs. rent: What you'll pay in 10 biggest cities

In the Bay Area, the cash is coming from deep-pocketed tech workers. In New York, Wall Street workers, flush with bonus checks, and foreign buyers looking to park assets, are paying with cash. Meanwhile, South Americans have been buying up real estate in South Florida as a safe haven for their money. In February, more than 71% of sales in the Miami area were all-cash deals.

All of these cash buyers are picking up what little housing there is available in these hot markets. New home construction is still well below normal levels, which has kept inventory tight.

Making matters worse: many prospective sellers are waiting to put their homes on the market for fear they won't be able to buy a home to move into.

Related: Cost of living -- how far will my salary go in another city?

As housing becomes more expensive some worrisome trends that occurred during the bubble years are re-emerging, said Humphries. These include a greater reliance on non-traditional financing, like low-downpayment loans and adjustable-rate mortgages, and a greater pressure to move further away from urban job centers in order to find affordable housing.

Jeff Cuthbertson and his wife have bid on more than a dozen homes in Austin, Texas over the past several years and have been outbid on every one.

"We have been priced out of the market -- literally," he said. "Now we are planning a move, probably to North Carolina or Tennessee."

First Published: April 3, 2014: 6:04 AM ET

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ECB ignores calls to tackle deflation risk

ECB President Mario Draghi was in Athens this week. Greece is one of a handful of European countries where prices are falling as companies seek to restore competitiveness.

LONDON (CNNMoney)

The ECB decided Thursday to keep its main interest rate at 0.25%, the record low level it has held since November last year.

Eurozone inflation fell to 0.5% in March, its lowest level since November 2009, fueling speculation that the ECB may act to stimulate the economy. It targets inflation of just below 2% in the medium term.

New surveys of purchasing managers suggest the region's economic recovery remains intact, with activity expanding for the ninth month in a row.

But they also reflect the intense pressure on companies to cut prices in the face of anemic growth and an unemployment rate that has barely moved from its crisis peak of 12%.

"Prices charged by manufacturers fell for the first time in seven months and charges levied for services were cut at a stronger rate, having fallen continually over the past 28 months," commented Chris Williamson, chief economist at Markit.

The International Monetary Fund, among others, continues to warn that a prolonged period of very low inflation in Europe could suppress demand and jobs, creating an obstacle to an acceleration in the global economy.

"More monetary easing, including through unconventional measures, is needed in the euro area to raise the prospects of achieving the ECB's price stability objective," IMF Managing Director Christine Lagarde said Wednesday.

A strong euro isn't helping. The currency has climbed steadily over the past 12 months and is now worth about $1.38, after touching its highest level since October 2011 last month. That's making life harder for the region's exporters and adding to downward pressure on prices by cutting the cost of imported goods.

ECB President Mario Draghi and other central bank policymakers have been sounding more dovish in recent weeks, with references to negative deposit rates -- effectively charging banks for parking excess cash with the ECB -- and Fed-style quantitative easing, or buying assets.

But their remarks have been seen as an attempt to talk down the currency -- with little effect -- rather than as preparing the way for aggressive action just yet.

First Published: April 3, 2014: 7:55 AM ET

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More new records for stocks?

Click the chart for more markets data.

NEW YORK (CNNMoney)

As widely expected, the ECB said it will keep its key interest rate unchanged at 0.25%. But the central bank is facing growing pressure to do more to stimulate the eurozone economy as risks of deflation rise and the euro remains strong.

To that end, investors will be listening closely to what ECB President Mario Draghi says in a press conference for clues about whether the ECB will take further steps to prop up the economy.

European markets were mostly lower in afternoon trading following the announcement. But with futures still pointing to a higher open in the U.S., it's possible that the S&P 500 could hit another new all-time high and that the Dow, which fell just short of a closing peak Wednesday, could do so as well.

Related: Fear & Greed Index back in greed mode

Investors are also getting ready for Friday's March jobs report. They'll get another readout on the labor market Thursday when the Labor Department reports the latest figures on jobless claims.

In corporate news, Google issued new shares late Wednesday as part of the tech giant's long-anticipated 2 for 1 stock split. The new class C shares will begin trading Thursday under the ticker, "GOOG," and will come with no voting rights. Old Google class A shares will trade under the new symbol "GOOGL," and will retain their voting rights.

Shares of both classes of Google should begin trading at around $570 -- roughly half the value of Wednesday's closing price.

Tesla (TSLA) stock rose slightly in premarket trading. The stock surged late Wednesday on news that it's appealing New Jersey's decision to ban direct car sales in the state.

Yelp (YELP)was down slightly ahead of the market open after the Wall Street Journal reported that the review site receives around six subpoenas each month, often relating to business owners suing the company. Shares of Yelp fell more than 5% on Wednesday.

Related: CNNMoney's Tech 30

Asian markets ended mixed, shrugging off news of a mini-stimulus package in China. After an initial boost, the Shanghai Composite closed 0.7% lower. Hong Kong's Hang Seng finished narrowly firmer.

First Published: April 3, 2014: 5:32 AM ET

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High-speed trading firm postpones IPO

High frequency trading firm Virtu Financial is reportedly delaying its IPO after a new book on the industry.

NEW YORK (CNNMoney)

Citing people familiar with the matter, several news outlets said part of the New York-based company's decision was related to the release of Michael Lewis's new book, "Flash Boys: A Wall Street Revolt."

Related: Wall Street responds to Michael Lewis' 'Flash Boys'

In his book, which has been accompanied by promotional interviews and a much-discussed 60 Minutes segment, Lewis claims that the stock market is rigged in favor of high-frequency trading -- a strategy where traders use computer algorithms to buy and sell stocks in the blink of an eye, often beating out traditional investors.

Virtu was supposed to begin marketing its IPO Friday, but the company is postponing the IPO by at least a week, the reports said. It still plans to trade on the Nasdaq under the symbol VIRT.

Virtu filed for its IPO in March, seeking to raise $100 million, but IPO firm Renaissance Capital at the time estimated the size of the deal could be as high as $250 million.

For its part, Virtu intends to persuade the public and investors that it doesn't have an unfair advantage and is, in fact, one of the "good guys".

Related: Flash Boys face off: Michael Lewis on CNBC

Brad Katsuyama, an ex-trader who is portrayed as a hero in Lewis' book because of his alternative IEX exchange that prevents firms from gaining unfair trading advantages from speed alone, told the Wall Street Journal that Virtu is one of the "good high-frequency traders."

"They are one of the few HFT firms trading on IEX and I think that says a lot about them and a lot about some of their competitors," Katsuyama said.

Virtu's track record is remarkably impressive. According to its SEC filing, the firm had only one losing trading day in the four-year period between January 2009 and December 2013.

Its risks include the potential for increased government regulation of high-speed trading as well as the possibility of technological failures on its trading platform, the filing said.

First Published: April 2, 2014: 9:34 AM ET

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