America's wealthiest citizens are paying a lower share of their income in taxes than the rest of the country, according to a new study by economists at UC Berkeley. Researchers found that billionaires—specifically the top 400, as listed by Forbes—had an average effective tax rate of 24% between 2018 and 2020, per CBS News. By comparison, all other US taxpayers paid 30%, on average. The analysis, conducted by Emmanuel Saez and Gabriel Zucman, comes as the latest tax legislation signed by President Trump further expanded tax breaks for the highest earners, including a higher estate-tax exemption.
These changes build on the 2017 Tax Cuts and Jobs Act, which dropped the richest Americans' effective tax rate from 30% to 24%. The study's methodology assigns a portion of corporate taxes to the billionaires who own stakes in large companies, meaning the tax burden for someone like Amazon founder Jeff Bezos includes a share of that company's corporate tax bill. "The economic income of the wealthiest are essentially the profits of the businesses they own," Saez says.
While the US tax system is meant to be progressive, so that higher earners fork over a larger share of their income, capital gains and business income—major components of billionaire wealth—are taxed at lower rates than high-wage labor. For instance, top earners pay 37% on regular income but just 20% on long-term capital gains and 21% on business income. Moreover, if the wealthy don't sell their assets, those gains can go untaxed.
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So what does Saez see as a possible remedy? "[A] wealth tax is the most direct and powerful way to specifically target the ultra-rich and increase tax progressivity at the very top," he tells CBS. "The wealth tax on the ultra-rich is also popular but will obviously be fought by billionaires, and they have disproportionate influence."
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