Study Shows Billionaires Pay Lower Taxes Than Average Citizens: Ultra-Wealthy Benefit from 24% Rate Due to Trump's 2017 Tax Cuts

Tax Rates for Billionaires

• Effective Tax Rate Decline: The effective tax rate for the wealthiest 0.0002% of Americans, specifically those on the Forbes 400 list, decreased from 30% to 24% following the 2017 GOP tax overhaul.
• Comparison with Average Rates: In contrast, the average effective tax rate for the general U.S. population is around 30%, while top wage earners face rates close to 45%. The top 100 richest Americans have an even lower effective tax rate of 22%.

Impact of the 2017 Tax Cuts

• Significant Tax Cuts: The study by economists Emmanuel Saez and Gabriel Zucman indicates that the 2017 Tax Cuts and Jobs Act was pivotal, leading to a notable drop in tax rates for the wealthiest individuals.
• Wealth Share Growth: The wealth of the top 0.0002% has surged from about 2% of U.S. GDP in 1982 to an estimated 20% by 2025, with the top 100 individuals accounting for nearly three-quarters of this increase.

Changes in Wealth Taxation

• Decrease in Wealth Taxation: Taxes on wealth, calculated as a share of holdings, fell from 2.7% before the 2017 cuts to 1.3% afterward. The U.S. does not impose a direct wealth tax, although there is growing interest in such proposals.
• Business Structures and Tax Savings: Many billionaires utilize business structures that allow them to report low income, with pass-through entities creating paper losses that offset taxable gains. The corporate tax rate was reduced from 35% to 21%, benefiting the billionaire class significantly.

Tax Rate Breakdown

• Corporate Tax Contribution: Of the effective tax rate of 23.8% for the top 400, approximately 9% is derived from corporate taxation, highlighting how policy changes affect tax liabilities for the wealthiest.

Effects on Lower-Income Americans

• Wealth Shift: The Congressional Budget Office noted that the extension of tax cuts in July disproportionately shifted wealth from lower-income Americans to the affluent, exacerbating resource reductions for poorer households due to cuts in health care and social programs.
• Global Wealth Disparity: A 2018 United Nations report revealed that the 26 richest individuals possess as much wealth as the poorest half of the global population, approximately 3.8 billion people.

Emergence of a New Class Structure

• Political Redistribution: Scholars describe the current economic dynamics as "politically engineered upward redistribution," where policies consistently favor the wealthiest, contributing to the rise of a new global class structure.