The United States lives in a bit of a fantasy. That fantasy is that everyone, rich or poor, is paying a fair share of their income in federal taxes. According to a recent analysis by the nonprofit newsroom ProPublica, the top 25 wealthiest Americans pay a very low rate of taxation when they pay taxes at all.
When billionaires argue that they’re taxed fairly, they often point to the gross amount they pay, as opposed to the percentage of their income. In theory, the ultra-rich pay the majority of taxes in the U.S., even when their actual tax rate is lower. That turns out not to be true.
For example, in 2018, according to ProPublica, the top 25 wealthiest Americans were worth $1.1 trillion, combined. That left the remaining 327.2 million Americans in the dust; it would take about 14.3 million average wage earners to equal those earnings.
In 2018, the top 25 richest Americans paid a combined total of $1.9 billion. The 14,3 million average wage earners paid much, much more: $143 billion in taxes.
And that doesn’t even account for the fact that the top 25 richest Americans’ incomes have been growing, sometimes spectacularly, even during the pandemic.
The true tax rates of the top 25 wealthiest Americans
ProPublica considers this growth when calculating the true tax rate of the top 25. Between 2014 and 2018, the top 25 paid taxes equivalent to 3.4% of the gains in their wealth. In 2018, according to the IRS Statistics of Income Division, a wage earner making around $50,000 paid an average of $4,688 in federal taxes – 9.376%.
Some of the top 25 paid even less in federal taxes than the 3.4% average between 2014 and 2018. For example, Mike Bloomberg paid a true tax rate of 1.3% and Jeff Bezos paid less than 1%. Yet Warren Buffett, who advocates for higher taxes on the rich, paid a 0.1% federal tax rate.
Perhaps even more surprising, Jeff Bezos actually reported negative income in 2011 despite an estimated total wealth at the time of $18 billion. He offset all of his income with losses and deductions and then claimed a $4,000 child tax credit – and received it.
Is this all legal?
Although ProPublica didn’t actually determine if all of the top 25 had submitted accurate, legal returns, it’s quite possible that these results were indeed legal. This is partly because the American tax system focuses on income from wages, and most of the money earned by the top 25 does not come in the form of wages.
Indeed, ProPublica says that in 2018, the top 25 combined earned a total of $158 million in wages – just 1.1% of their total reported incomes.