The richest Americans pay only 3.4% of their income through taxes, an investigation reveals Income inequality in the United States

Between 2014 and 2018, the 25 richest Americans earned a total of $ 401 billion, but paid only $ 13.6 billion – about 3.4% of them – in taxes, according to a proPublica bombing investigation into the finances of the most Rich Americans, published Wednesday.

The investigation is the latest in a series of ProPublica, launched in June 2021, which looks at the tax records of 0.001% of the richest Americans. This contribution uses multiple tax returns from 2013 to 2018 to immerse yourself in the wealth of the 400 richest Americans, all of whom earn more than $ 110 million a year. He found that the rich took advantage of lower tax rates on financial assets and deductions from charitable contributions to keep their taxes low.

According to the investigation, the difference in tax rates between the richest Americans and the average worker comes down to two critical factors: first, the income of the rich is taxed at a lower rate because much of their wealth is accumulated through investments such as stocks; and second, the rich are able to use large charitable donations to receive huge contributions.

Instead of the standard salary that most American workers receive, which includes Social Security deductions and Medicare taxes, the richest Americans earn their income through financial assets, such as stocks, which are usually taxed at a lower rate. The percentage of long-term capital gains is 20% since 2013.

Technology billionaires pay the lowest tax rate, averaging 17% of their income, largely because their wealth comes from such investment income. Bill Gates, whose revenue from 2013 to 2018 averaged $ 2.85 billion a year, pays an average federal income tax rate of 18.4%. Lauren Powell Jobs, the widow of Apple co-founder Steve Jobs, earned an average of $ 1.57 billion and pays an average tax rate of 14.8 percent. Ten of the top 15 winners on the list are billionaires who have made their money in technology.

By comparison, the average worker who earns $ 45,000 pays an average tax rate of 21%. A married couple with one child earning $ 200,000 pays a rate of 26%. In 2018, the highest rate of ordinary income that excludes investment was 37%, but the average tax rate for the 400 richest Americans was 22% from 2013 to 2018.

Managers and founders of private equity firms, of which 43 are on the list, may be taxed at a lower rate through a loophole that allows them to account for client money management fees as investment income that is taxed at a higher rate. lower rate than ordinary income.

In addition to taxing lower taxes by generating investment income, the wealthiest Americans can also write off huge portions of their income by deducting large charitable donations. Michael Bloomberg, who earned an average of $ 2.05 billion a year from 2013 to 2018, was deducted 66% of his income, giving him one of the lowest tax rates in the group – 4.1%.

ProPublica noted that when asked for comment, no one mentioned in the story disputed figures reported in the investigation, and few provided answers. A spokesman for Ken Griffin, CEO of hedge fund company Citadel, said IRS data “significantly underestimates[s]What Griffin pays because the rate is reduced by charitable contributions and does not include local and state taxes. A spokesman for Mark Zuckerberg said: “Mark has always paid the taxes he has to pay”, while a spokesman for Bloomberg also said that he “pays the minimum tax rate on all federal, state, local and international taxable income, as prescribed by law”.

The discrepancy between the incredible incomes of the richest Americans and their tax rates is something that has already caught the attention of lawmakers. Last month, Joe Biden proposed a new tax on households earning more than $ 100 million a year. The plan, called the “minimum tax on the income of billionaires”, will impose a minimum tax of 20% on the realized and unrealized income of an individual, which will cover investment income.

“In 2021 alone, more than 700 billionaires in America saw an increase in their wealth of $ 1 trillion, but in a typical year, billionaires like these will pay only 8% of their total realized and unrealized income in the form of taxes. A firefighter or teacher can pay double that tax rate, “the White House said in a statement, detailing the plan.

At the recent meeting of the Patriotic Millionaires, a group of people with high net worth who believe that the rich should pay more taxes, the topic of conversation was the wave of changes in the taxation of the rich that seems to be happening.

“No one was talking about taxing the rich when we started,” said Maurice Pearl, chairman of the Patriotic Millionaires and former managing director of BlackRock. “We have seen a huge change. You have a president who talks about taxing the rich, people talk about wealth taxes – these were not even extreme ideas 10 years ago. I’m not saying this will happen and pass into law, but there are talks at the highest level. “

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