How much do billionaires pay in taxes in the US?
There are more than 700 billionaires in the US, and they have long been accused of not paying their fair share. How are the richest people taxed?
Tax season has begun for 2024 and eyes will be fixed upon how much tax you will be paying. For the last year with full data, people pay on average 13.6% of their wage on taxes. Though this varies based on state, and is much lower than other so-called western nations, there are a few problems. Most notably, America’s richest pay a very similar amount despite earning far more. The country’s wealthiest people have long been accused of not paying their fair share and there are plenty of ‘legal’ methods to get around it.
Analysis from the White House published in 2021 suggested that the wealthiest 400 billionaire families in the US paid an average tax of just 8.2% of their income. Your average Joe or Jane has a starting tax rate of 10%, making billionaires the least taxed group in the country. There are large and unfair differences in the way that income from work is taxed compared to income from assets.
“That income [is only] subject to taxes if they actually sell the asset that generated that income,” Chye-Ching Huang, executive director of the Tax Law Center at NYU School of Law, told Teen Vogue. “So, unlike the ordinary wage and salary owner who’s paying taxable income in real time, very high net worth people can choose whether and even when to pay taxes on the growth of their wealth.”
What tactics do billionaires use to pay less tax?
A method to avoid paying tax is gaming capital gains taxes. The tax can only be levied on investments once the investment has been sold, which is when an asset becomes ‘realized’. Therefore, this money gained can be offset against loans taken to keep someone’s income low. This was shown to be the case when 18 billionaires received covid-19 stimulus checks, as their taxable income was next to zero.
There has been a growing link between politics, capital, and billionaires in recent years. America’s richest want to keep a hold of their money so lobby politicians to keep taxes low. In terms of corporation tax, the rate in the US sits at 21%, lower than many other countries in the G7 economic group.
Another tactic is the hiring of top-grade lawyers who can navigate complex tax law to get their clients the best outcome.
What happened to President Biden’s billionaire tax?
In 2021 the Democrats announced there would be tax hikes for America’s wealthiest, while not increasing tax for those earning under $400,000. The Billionaire Minimum Income Tax (BMIT) would require American households worth over $100 million to pay a minimum tax of at least 20% on all income.
This initiative would have affected 0.01% of households in the country. However, the president’s proposal was wrapped up inside the dead reconciliation bill. Some politicians have said they do not believe in a tax on unrealized assets.