When their astronomical wealth gains are taken into account, dozens of the top billionaires in the United States paid an average federal tax rate of just 4.8% from 2013 to 2018—a significantly higher rate than the nation’s average taxpayer.
“As long as we fail to tax their main source of income—the growth in their fortunes—many billionaires will continue to live largely tax-free lives.”
That’s according to a new analysis released Thursday by Americans for Tax Fairness (ATF), a progressive group that has been tracking the explosion of billionaire wealth over the past several years, particularly during the coronavirus pandemic.
Under current U.S. law, unrealized capital gains from stocks and other assets are not taxed, allowing billionaires such as Amazon executive chairman Jeff Bezos and Tesla CEO Elon Musk to accumulate massive fortunes tax-free. And even when assets are sold and gains are “realized,” the long-term capital gains tax rate is significantly lower than the top marginal tax rate of 37%.
Drawing on Forbes figures on billionaire wealth and recent Internal Revenue Service data leaked to ProPublica, ATF estimates that 26 of the richest people in the U.S. paid an average federal income tax rate of 4.8% between 2013 and 2018 when wealth gains are counted as income.
Some prominent billionaires—including Berkshire Hathaway CEO Warren Buffett, Facebook CEO Mark Zuckerberg, and Bezos—paid tax rates of less than 2% during the six-year period, ATF found.
On Twitter, ATF pointed out that the average U.S. taxpayer pays a 13.3% tax rate on their income.
“Teachers, plumbers, firefighters, and other working Americans can already pay higher tax rates than billionaires—and that’s just counting the small part of billionaire income that is now taxed,” Frank Clemente, ATF’s executive director, said in a statement. “When you include their untaxed wealth growth in the calculation, many billionaires pay almost nothing.”
BREAKING: Uncovered IRS tax records of 26 U.S. billionaires show they paid an average tax rate of just 4.8% from 2013 to 2018, despite collectively gaining $500 billion in wealth— Americans For Tax Fairness (@4TaxFairness) May 19, 2022
Effective tax rates
Musk: 2.1% pic.twitter.com/phtFyBDPrM
ATF argues that it’s reasonable to count billionaires’ unrealized wealth gains as income because the ultra-rich can borrow against their assets, securing “low-interest loans that fund lavish lifestyles without owing income tax.”
“At the scale enjoyed by billionaires, growth in the value of assets—even if those assets are not sold—can be as good as money in the bank, which Elon Musk is putting to good effect in his purchase of Twitter,” the group said.
In October, Sen. Ron Wyden (D-Ore.)—the chair of the Senate Finance Committee—introduced legislation that would impose an annual tax on unrealized gains that the wealthy accumulate from tradable assets, a proposal that ATF has applauded.
At present, the bill has no path to passage in the Senate, largely because of Sen. Joe Manchin’s (D-W.Va.) opposition.
“As long as we fail to tax their main source of income—the growth in their fortunes—many billionaires will continue to live largely tax-free lives,” Clemente said Thursday.