America’s richest are paying less tax than working-class people in a historical first.
Data published by The New York Times shows that America’s top billionaires are now paying less taxes than they have for decades.
In the 1960s, the 400 richest Americans paid more than half of their income in taxes, according to the Times. By 2018, America’s wealthiest individuals paid just 23 percent of their income in taxes. Meanwhile, the bottom half of income earners paid 24 percent of their income in taxes.
Today, America’s richest people control a greater share of the country’s wealth than during the “Gilded Age of Carnegies and Rockefellers,” the paper said, referring to a period of unprecedented wealth concentration in the late 19th and early 20th centuries.
This is partly due to significant decreases in taxes on the rich.
Wealthy individuals once paid high taxes on corporate profits, which were typically their primary source of income, and estate taxes on wealth passed down to their heirs.
However, these taxes have been significantly reduced in recent years—the top corporate tax rate in the U.S. was reduced from 35 percent to 21 percent in 2018, and the estate tax now generates only a quarter of the tax revenues it raised in the 1970s, the Times noted.
Another factor is that many modern billionaires live off their wealth rather than their incomes, unlike most ordinary Americans.
The paper cited Amazon founder and chairman Jeff Bezos as an example. While Bezos earned a modest salary as CEO of Amazon, he continues to accumulate significant wealth through his Amazon shares.
Amazon retains its profits and does not typically distribute dividends to shareholders. Companies like Berkshire Hathaway and Tesla follow the same practice, which means that billionaires who own large shares of these companies can minimize their taxable income.
Economist Gabriel Zucman of the Paris School of Economics and the University of California, Berkeley, called for a “coordinated minimum tax on the superrich” in his opinion piece for the Times.
The article noted that in the past, higher tax rates for wealthy individuals helped mitigate inequality and helped fund social welfare programs such as Medicare, Medicaid and food stamps.
“The idea that billionaires should pay a minimum amount of income tax is not a radical idea. What is radical is continuing to allow the wealthiest people in the world to pay a smaller percentage in income tax than nearly everybody else,” Zucman wrote.
“In liberal democracies, a wave of political sentiment is building, focused on rooting out the inequality that corrodes societies. A coordinated minimum tax on the superrich will not fix capitalism. But it is a necessary first step,” he said.
