The ‘Billionaire Tax Rate’ Is Not 8.2 Percent
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A recent Facebook post with more than 13,000 shares claims that billionaires pay a tax rate of only 8.2 percent. “Billionaire tax rate: 8.2%, Ours: 14.9%,” it reads. “We really, really need a billionaire’s income tax.” The post was made by Americans for Tax Fairness, a campaign of hundreds of local, state, and national organizations “united in support of a fair tax system that works for all Americans.”
This 8.2 percent tax figure is based on a misleading definition of income, as The Dispatch Fact Check addressed when President Joe Biden shared an identical figure during the 2024 State of the Union address. As we wrote then:
The assertion that billionaires pay an average tax rate of only 8.2 percent does not align with most conventional economic analysis. “No, billionaires do not pay an average tax rate of 8 percent. This has been repeatedly debunked,” Brian Riedl, an economist at the Manhattan Institute, told The Dispatch Fact Check. “The president’s math invents its own definition of income, and then calculates their taxes as a percentage of this fake income number.”
Biden’s 8.2 percent figure comes from an estimate made in September 2021 by Greg Leiserson, a senior economist in the Council of Economic Affairs, and Danny Yagan, chief economist of the Office of Management and Budget. Leiserson and Yagan measured income by looking at changes in estimated net worth among those listed in the Forbes 400—a ranking of the 400 richest Americans. They then compare these changes to IRS data on total income taxes paid by those on the Forbes list to calculate an effective average federal tax rate.
This calculation, however, includes unrealized capital gains (i.e., the change in the value of an asset such as a stock or bond that has not yet been sold) as part of a person’s income. Capital gains—which are not included in conventional measures of income—are typically taxed only after an asset is sold and are generally subjected to a 20 percent rate for high earners, not standard income tax rates.
Estimates by the Treasury Department and the Tax Policy Center in 2020 and 2021, respectively, which don’t include unrealized capital gains, estimated that the average federal income tax for the highest-income families in America was 23 and 25 percent.
The inclusion of unrealized capital gains when assessing income ignores that capital gains are taxed both separately from and differently from traditional income. These important differences were explained in a recent fact check regarding different tax rates in the U.S. and Europe.
Although American billionaires have high net worths based on the value of their assets, many of the county’s wealthiest individuals do not necessarily have high wage incomes—meaning the salary they are paid as part of a job. For example, Jeff Bezos—the founder and executive chairman of Amazon—has taken a yearly base salary of only $81,840 since 1998 despite having an estimated net worth of almost $200 billion. The vast majority of Bezos’ wealth instead derives from his approximately 10 percent ownership of Amazon, which has a total market capitalization of $1.83 trillion. Mark Zuckerberg takes an even lower salary—only $1 per year—as the chief executive officer of Meta. Like Bezos, Zuckerberg’s $177 billion net worth comes primarily from his 13.5 percent ownership stake in the company he helped create.
In most countries, incomes are taxed differently than wealth gained through the appreciation of assets—such as stock owned in a company. Taxes are typically not levied on capital gains until the asset is actually sold. In the U.S., capital gains, once realized, are taxed at a rate of 20 percent for most high earners. So, even if a billionaire sees their net worth grow by hundreds of millions of dollars in a single year, if that growth is in the value of unrealized assets, it will not be taxed as a capital gain until those assets are sold.
Billionaires are fully subject to both federal and state income taxes when applicable. In 2023, the top marginal income tax rate in the U.S. was 37 percent for individuals with an income above $578,125, and state income taxes can add anywhere from an additional 2.5 percent to 13.3 percent, depending on where an individual files. Most states also levy their own tax on capital gains, either as a part of a person’s broader income or at a separate capital gains rate.
While many of America’s wealthiest families and individuals do leverage strategies such as tax loss harvesting or borrowing against investments to minimize their tax liabilities, they are still generally subject to higher levels of taxation than average Americans. The claim that billionaires pay only 8.2 percent on average in taxes relies on a misleading income calculation and is not representative of the actual tax burdens imposed on the wealthiest Americans.
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