Total effective tax rates for the 400 wealthiest Americans have declined in recent years, according to new research from the University of California, Berkeley. The study finds that these individuals now pay a smaller share of their actual income in taxes than the average American.
The research indicates that for the top 0.0002 percent of earners, the effective tax rate dropped from 30 percent between 2010 and 2017 to 23.8 percent during 2018 to 2020. According to the authors, this reduction is due both to increased sheltering of business income and lower tax rates on reported income.
“When taking a comprehensive view of taxation and income, ultra-high-net-worth individuals appear less taxed than the average American,” the researchers concluded.
The findings are detailed in “How Much Tax Do U.S. Billionaires Pay? Evidence from Administrative Data,” a working paper published by the National Bureau of Economic Research. The study was conducted by UC Berkeley economists Emmanuel Saez, Danny Yagan, Gabriel Zucman, and Ph.D. student Akcan S. Balkir.
Their analysis uses administrative data sources such as individual and business tax records and foreign corporate taxes, offering what they describe as a more complete assessment than previous studies based solely on individual returns.
Historically, the U.S. tax system has been progressive—meaning those with higher incomes pay higher rates—but according to this research, when all forms of taxation are considered together, many ultra-wealthy Americans pay lower effective rates than others with less wealth.
For example, among the top 100 wealthiest people during 2018–2020, the overall effective tax rate was found to be 22 percent; for those ranked between 101st and 400th richest it was higher at 26.6 percent. Top earners who made their money through wages or salaries paid an effective rate of 45 percent—significantly more than those whose wealth came from ownership or investments.
The average effective tax rate for all Americans was measured at 30.2 percent during that period—the last three years of President Donald Trump’s first term.
Researchers also observed that total corporate taxes paid by these top earners fell by about one-third between the periods spanning from 2014–2017 to 2018–2020. This change followed a federal law passed in 2018 reducing the corporate tax rate from 35 percent to 21 percent.
As a result of these trends, the top 400 now hold an amount equal to one-fifth of U.S. gross domestic product (GDP). In comparison with past decades: Forbes magazine data shows that in its first ranking in 1982, America’s richest owned just under one percent (0.9%) of total household wealth; today that figure is over four times higher at approximately four percent (4.1%). Measured against GDP, their share has risen tenfold—from two percent in 1982 to twenty percent today—with most gains concentrated among the top hundred individuals.
The study’s methodology allowed for what appears to be an unprecedented level of detail regarding taxes paid by America’s richest citizens.
