Billionaires Pay Lower Effective Tax Rates Than Average Americans, New Data Show

August 29, 2025

A recent study by the National Bureau of Economic Research reveals that America's wealthiest billionaires, representing the top 0. 0002 percent of households, pay an effective tax rate of just 24 percent, which is lower than the 30 percent national average and significantly less than the 45 percent paid by top labor income earners. Using comprehensive data from 2010-2020, researchers Balkir, Saez, Yagan, and Zucman found that structural features of the U.S. tax code enable billionaires to minimize taxation through corporate ownership strategies that limit dividend distributions and through passthrough businesses that report negative taxable income despite high profits.

Who is affected

The general U.S. population who pay an average 30 percent tax rate
Top labor income earners who pay approximately 45 percent in taxes
The wealthiest 0.0002 percent of Americans (roughly the "Forbes 400")
The U.S. government, which collects less revenue from billionaires relative to their economic income
Charitable organizations that receive donations from billionaires (approximately 0.6 percent of billionaire wealth)

What action is being taken

Economists are conducting research and analysis on billionaire tax rates using administrative data and Forbes 400 information
Billionaires are utilizing structural features of the tax code to minimize their tax burden
Wealthy individuals are distributing relatively little in dividends from C-corporations to avoid individual income tax
Passthrough businesses owned by billionaires are reporting negative taxable income despite high profits
Billionaires are making charitable donations equivalent to 0.6 percent of their wealth and 11 percent of their economic income

Why it matters

The findings reveal inequality in the tax system where the ultra-wealthy pay lower effective tax rates than average Americans
Corporate taxes represent a significant portion (9 percentage points) of billionaires' effective tax rates
Estate taxes have minimal impact, with Forbes 400 decedents paying just 0.8 percent of their wealth in estate tax when married
The 2017 Tax Cuts and Jobs Act reduced billionaires' effective tax rates from 30 percent to 24 percent
When measured against wealth instead of income, billionaires paid only 1.3 percent in taxes annually during 2018-2020, down from 2.7 percent in 2010-2013
Similar patterns of lower taxation for the ultra-wealthy exist internationally in countries like the Netherlands and France

What's next

No explicit next steps stated in the article

Read full article from source: The San Diego Voice & Viewpoint