The Richest Americans Pay Less Tax Than You Do

In 1982, the 400 wealthiest Americans held just 2% of U.S. GDP. Today, that figure is 20%, and their taxes, proportionally, are shrinking. A new working paper from UC Berkeley economists Emmanuel Saez, Danny Yagan, Gabriel Zucman, and Ph.D. student Akcan Balkir, published through the National Bureau of Economic Research, lays out the uncomfortable arithmetic: America’s richest households now pay a smaller share of their income in taxes than the average citizen.

The numbers are stark. Between 2018 and 2020, the top 400 households paid an average effective tax rate of 23.8%. That’s lower than the 30.2% rate borne by the U.S. population at large, and dramatically below the 45% rate faced by top wage earners who rely on salaries rather than stock. Within that elite group, the richest 100 paid even less—just 22%.

The paper’s authors didn’t just tally income tax returns. They pieced together a mosaic from business tax records, estate and gift filings, corporate disclosures, and even foreign tax data. This unprecedented match between Forbes’ annual rich list and IRS administrative data allows them to see the whole picture, not just the part the billionaires volunteer each April.

“When taking a comprehensive view of taxation and income, ultra-high-net-worth individuals appear less taxed than the average American,” the researchers concluded.

How does that happen in a system that’s supposed to be progressive? The reasons are both technical and political. The 2017 Tax Cuts and Jobs Act slashed the corporate tax rate from 35% to 21%, cutting a major stream of revenue. Meanwhile, many of the private businesses owned by the ultra-wealthy reported negative taxable income despite positive book profits—an accounting trick allowed under current law. And public corporations controlled by the rich distributed less than 10% of their profits in dividends, leaving most earnings untaxed unless shares are sold.

As a result, the wealthiest Americans’ taxable income looks much smaller than their real economic income. For the top 100, only about one-third of their economic income showed up on tax returns. For ordinary workers, nearly all of it does.

The contrast is most glaring when wealth transfers are considered. Estate and gift taxes contributed only about 0.6% of the top 400’s effective rate. When billionaires die, most of their fortunes pass to spouses tax-free, and when assets are taxed, clever valuations can shrink the reported estate by more than half. For single decedents, effective estate tax amounted to just 7% of their wealth.

“The top 400’s effective tax rate fell from 30% in 2010–2017 to 24% in 2018–2020, explained both by a smaller share of business income being taxed and by that income being subject to lower tax rates,” the authors wrote.

The researchers note that the richest 400 now own 4.1% of total U.S. household wealth, up from 0.9% when Forbes began its list in 1982. And concentration is getting sharper: three-quarters of that increase comes from the top 100 alone. In practical terms, a small handful of Americans now command a fiscal capacity comparable to that of entire nations.

The political implications are obvious. Saez and Zucman have long been central voices in the debate over wealth taxation, and these new numbers will likely provide fresh ammunition. The Biden administration has floated ideas like a billionaire minimum tax, while some lawmakers push for wealth taxes modeled on European precedents. Business groups counter that raising taxes on the ultra-rich could stifle investment and innovation.

There’s a twist: if charitable giving is treated as a kind of voluntary tax, the numbers flip. The top 400 gave away 0.6% of their wealth annually, equal to 11% of their economic income in 2018–2020. Add that to their actual taxes, and their “combined rate” rises to 35%, higher than the national average. Whether donations to foundations—many of them controlled by the donors’ own families—should be seen as equivalent to taxes is another matter.

For now, the Berkeley team’s analysis underscores how the mechanics of U.S. taxation have evolved to the advantage of those with the most power to shape them. Once, the effective rates for billionaires roughly matched the national average. Today, they don’t. And that gap isn’t just about math—it’s about political choices, made and deferred.

Explainer: What is an “effective tax rate”? It’s the share of a person’s true economic income—wages, business profits, dividends, capital gains—that ends up going to taxes of all kinds, from federal and state income taxes to corporate, payroll, property, and estate taxes. By comparing taxes to economic income, rather than just reported taxable income, economists can see how much of their real earnings the ultra-rich actually give up. For America’s top 400 households, that rate averaged 23.8% in 2018–2020, well below the U.S. population’s 30.2%.

Source: National Bureau of Economic Research Working Paper No. 34170, “How Much Tax Do US Billionaires Pay? Evidence from Administrative Data.” August 2025. DOI: 10.3386/w34170