A newly-published study by the National Bureau of Economic Research has delved into America's wealth disparity by examining the tax records of the 400 richest Americans, as listed annually by Forbes. The findings indicate a discrepancy in the taxes paid by these ultra-wealthy individuals compared to the average American. While their wealth allows them to contribute substantial amounts in corporate taxes, their personal income tax payments often fall short owing to the way their wealth is structured.
From 2018 to 2020, the top 400 paid an average tax rate of 23.8%, with the wealthiest 100 inevitably paying even less at 22%. When compared, the average tax rate for the entire U.S. population stood at 30%, with high earners paying a staggering 45%. Contributing factors to this discrepancy are lower taxable income reported by the ultra-wealthy and their earnings primarily amplifying through investments that have lower tax rates.
The extreme wealth distribution in our country is another glaring sign of wealth inequality, with the top 400 owning 4.1% of our country’s wealth. This is a four-fold increase from 1982 when Forbes first ran its rich list. The wealth ownership of these 400 elite is approximately 20% of America’s GDP, a figure that was only 2% back in 1982.
Despite the ultra-wealthy paying lower individual taxes, their corporate tax contribution is relatively high due to their ownership stakes in various companies. This corporate tax accounts for 9% of the 23.8% effective tax rate borne by them.
Researchers suggest that relying solely on individual income taxes fails to fully assess the contribution made by high-net-worth individuals to government revenues. Although overall tax rates for the ultra-rich are lower than those for the general public, they surpass the tax rates paid by counterparts in several European nations.
The implementation of the Tax Cuts and Jobs Act in 2018 brought a significant drop in the tax rates of affluent Americans. This trend of falling tax rates is anticipated to continue due to the passage of The One Big Beautiful Bill Act, which extends tax cuts for the chronically wealthy. Consequently, various opinions validate the belief that the ultra-wealthy systematically pay less in taxes, intensifying the wealth inequality in America.