The effective tax rate for the wealthiest 0.0002 percent of Americans—essentially billionaires akin to those on the Forbes 400 list—has fluctuated from 30% down to 24% consistently since the 2017 GOP tax cuts.
Meanwhile, the average tax rate for the entire U.S. population hovers around 30%, with those at the top of the salary scale facing rates closer to 45%. Yet, for the 100 richest Americans, the rate dips to about 22%, according to a recent survey released by the National Bureau of Economic Research.
These declines are particularly linked to the 2017 Trump tax cuts, formally known as the Tax Reduction and Employment Act.
Research highlights that “the top 400 tax rates fell significantly at the end of the sample,” underlining the impact of various economic and policy shifts, including tax regulations and employment legislation.
This study was conducted by economists Emmanuel Schiez and Gabriel Zukman from the University of California—recognizable names in the realm of wealth inequality, which has notably surged over recent decades.
In their findings, they noted that the wealth held by the top 0.0002% in 1982 accounted for roughly 2% of U.S. gross domestic product (GDP), a figure that ballooned to about 20% of GDP by 2025, with a significant portion of this increase attributed to the ultra-wealthy.
When considering wealth rather than purely income, the taxes paid by the top 400 saw a drop to 1.3% from 2.7% prior to the 2017 tax reforms. While the U.S. doesn’t impose a direct wealth tax, there is an increasing discussion among the Supreme Court about the potential for such taxation.
Interestingly, part of the reduced tax burden for the ultra-rich stems from income generated by private businesses. Pass-through entities that report taxable losses can diminish the overall tax liability for affluent Americans, allowing them to offset taxes from other income streams, such as wages and dividends.
A focal point of Trump’s 2017 tax reform was lowering the corporate tax rate from 35% to 21%, a change that significantly affected the billionaire class.
According to Zucman and his colleagues, about nine percentage points of the top 400’s effective tax rate of 23.8% directly relate to corporate taxation.
A distribution analysis conducted by the Congressional Budget Office regarding the continuation of the 2017 tax cuts indicated a shift in wealth from lower-income Americans to the rich. This resulted in decreased resources for the lowest earners, particularly as social programs like healthcare faced funding cuts, while wealth accumulation concentrated among the affluent.
Such profits have been notably pronounced at the higher income levels, with substantial gains for the top decile, primarily manifesting through tax savings.
This phenomenon extends globally; while wealth disparities among nations have somewhat lessened, the wealth gap within countries like the U.S. has escalated dramatically.
A report from the United Nations highlighted that, as of 2018, the 26 wealthiest individuals possessed as much wealth as half of the world’s population—approximately 3.8 billion people—down from 43 individuals the year prior.
Economic historians are now contemplating new classifications within global class structures, factoring in these changing trends in inequality.
“We are witnessing the rise of a new class structure alongside politically driven upward redistributions of wealth,” noted economic historian Robert Brenner and sociologist Dylan Riley in a paper published in 2022.
