A recent comprehensive analysis by the National Bureau of Economic Research (NBER) sheds light on a persistent public concern: the tax contributions of America's wealthiest individuals. The study confirms a long-held suspicion that the ultra-rich, despite their vast fortunes, often benefit from a lower effective tax rate compared to the average American. This phenomenon is largely attributed to the intricate ways their wealth is structured and the significant impact of recent tax reforms, particularly the Tax Cuts and Jobs Act of 2017. The research, which meticulously examined the tax records of the nation's top 400 earners, including data from Forbes' annual list, reveals a complex interplay of corporate, individual income, and estate taxes that contributes to this disparity, further exacerbating the growing wealth inequality in the United States.
The NBER study highlighted that from 2018 to 2020, the effective tax rate for the wealthiest 400 Americans was approximately 23.8%, with the top 100 paying an even lower 22%. This contrasts sharply with the average U.S. population's tax rate of 30%, and a staggering 45% for high-wage earners. This significant gap stems from the fact that the ultra-wealthy often report less taxable income and derive a larger portion of their earnings from investments, which are frequently subject to lower tax rates than conventional wages.
Furthermore, the study underscored a dramatic increase in wealth concentration at the very top. The top 400 richest individuals now control 4.1% of the total U.S. wealth, a substantial rise from just 0.9% in 1982 when Forbes first began tracking this group. This accumulation of wealth represents roughly 20% of America's gross domestic product, up from 2% in 1982, serving as a stark indicator of widening wealth disparities. While these affluent individuals contribute significantly through corporate taxes due to their substantial business ownerships, accounting for about 9% of their total effective tax rate, the overall picture shows a clear trend.
A critical factor influencing these tax rates was the Tax Cuts and Jobs Act, implemented in early 2018. This legislation, enacted during the previous presidential administration, significantly reduced corporate tax rates and recalibrated individual tax brackets and rates. Consequently, the effective tax rate for the richest Americans saw a sharp decline. Prior to these changes, from 2010 to 2017, the 400 wealthiest individuals paid an effective tax rate of 30%, largely mirroring the national average. This period saw rising individual income tax rates, which then plummeted in the subsequent years of the study due to the new act. Experts suggest that recent legislative developments, such as the 'One Big Beautiful Bill Act,' may further entrench this downward trend in tax rates for the ultra-wealthy, potentially for years to come.
In summary, the latest findings from the NBER corroborate public sentiment regarding tax fairness: the most affluent members of American society bear a disproportionately smaller tax burden. While the wealth held by the nation's top 400 individuals has more than doubled over the past four decades, their effective tax rate remains considerably lower than that of the average taxpayer. This growing discrepancy has been exacerbated by recent tax legislation, leading to ongoing debates about economic equity and the long-term implications for national revenue and social welfare.