U.S. Billionaires Pay Lower Tax Rates, Pro Publica Finds Out

A trove of IRS data obtained by ProPublica has revealed the incomes and tax rates of the 400 Americans with the highest incomes from 2013 to 2018. It took an average of $110 million per year in income to crack that list — with plenty of names you would expect and some that may surprise readers, Paul Kiel, Ash Ngu, Jesse Eisinger, and Jeff Ernsthausen reported.

Photo Insert: The name of Elon Musk, bruited about as the world’s richest man, does not appear on the list of top US taxpayers led by Bill Gates.

In theory, the US tax system is designed to tax the rich at higher rates than everyone else. That’s not the way it works at the loftiest incomes. The data reveal the very highest earners, on average, pay far lower tax rates than the merely affluent.

Even among the top 400, some groups have it better than others: Tech billionaires pay rates well below even other business owners. On average, the rate of income tax that people pay does climb as incomes ascend into the top 1%, but when you get to the range of $2 million to $5 million, that trend stops.

The group earning in this range, composed mostly of business owners and workers with extremely high salaries, paid an average income tax rate of 29% from 2013 to 2018. After that, average tax rates actually drop the further up in income you go. The name of Elon Musk, bruited about as the world’s richest man, does not appear on the list of top US taxpayers led by Bill Gates.

In an era of widening gaps between the rich and everyone else, ProPublica’s analysis shows that the US tax system is making inequality worse. To make it into the top 400 taxpayers led by Bill Gates, each person on this list had to make an average of at least $110 million each year.

A typical American making $40,000 would have to work for 2,750 years to make what the lowest-earning person in this group made in one. Each of the top 11 averaged over $1 billion in income annually from 2013 to 2018. The typical American would have to work for 25,000 years to make $1 billion.

Among the top 400, certain groups of people stood out. Tech billionaires made up 10 of the top 15 incomes. Their income generally came from selling stock. About a fifth of the top 400 earners were managers of hedge funds, making them the largest group we identified.

Because their companies are typically set up as private firms, the income they make each year from trading stocks, options and other financial instruments flow directly to them. Executives and founders of private-equity firms also stood out. These people generally make their money by buying companies and reselling them for a profit.

Heirs of large fortunes also make appearances. Among the top 400, there are 11 heirs of Walmart founders Sam and Bud Walton and four of Amway founder Richard DeVos. These Walton and DeVos heirs generally received their income from dividends or other forms of investment income produced by their large inheritances.

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