- On Wednesday, President Joe Biden tweeted he was tired of the wealthy and big corporations not paying a fair share of taxes.
- Then, White House economists released a report that showed just how little the wealthiest pay.
- America’s 400 wealthiest families pay an average of 8.2% in income tax, per the report.
- See more stories on Insider’s business page.
President Joe Biden has set his sights on hiking taxes on America’s richest families and biggest corporations to offset the cost of ambitious infrastructure spending.
Now, a new White House report provides data to back up his frustrations. A blog post by economists Greg Leiserson and Danny Yagan said they found that the 400 wealthiest families in America pay around 8.2% in income taxes every year. That’s a lot less than the average rate in America, which according to the Tax Policy Center, was around 14.3% in 2015, as the New York Times notes. Leiserson and Yagan say that lower rate is because they looked at income not just from salaries, but from assets like stocks that accrue capital gains and are often untaxed.
On Wednesday night, Biden tweeted: “I’m sick and tired of the super-wealthy and giant corporations not paying their fair share in taxes. It’s time for it to change.”
His tax plans amount to an unwinding of Trump-era tax cuts. Most recently, House Democrats put forward a proposal to fund their infrastructure plans that would tax capital gains. They estimate it would bring in $US2.9 ($AU4) trillion. Biden has said that hikes would level the “playing field” but, don’t worry, “the superwealthy are still going to be able to have their three homes.”
-President Biden (@POTUS) September 22, 2021
In 2021, the lowest tax bracket in the US – individuals who earned taxable income between $US0 ($AU0) to $US9,950 ($AU13,741) – had a 10% federal income tax rate, according to Insider’s Tanza Loundenback. The White House report looked at Americans who earned between $US2.1 ($AU3) billion to $US160 ($AU221) billion, using data from the IRS, the Survey of Consumer Finances, and wealth estimates by Forbes and found the average rate of 8.2%.
That low rate for the wealthiest Americans is because many of them see a large chunk of their income come from assets, not salaries – which is generally not the case for the majority of taxpayers. As the left-leaning Center on Budget and Policy Priorities found in 2019, “a critical tax advantage for wealthy households is that much of their income doesn’t appear on their annual tax returns because the tax code doesn’t consider it ‘taxable income.'”
That’s because, according to the CBPP report, capital gains taxes – which tax the sales of assets like stocks – are “effectively voluntary.” Your stocks could net a whole lot of money every year, but those gains won’t be taxed unless you sell them off. Capital gains are also taxed at a far lower rate than regular income, with a top rate of 20%, Insider’s Tanza Loudenback reported.
Under the most recent proposal from House Democrats, the capital gains rate would increase to 25% – far lower than Biden’s initial proposal to nearly double the rate to 43.4%. That Biden proposal was meant to bring capital gains more in line with the top income tax rate of 37%.
The White House methodology also has resonances of a different tax on the rich: Sen. Elizabeth Warren’s outright wealth tax, which would tax households with a net worth of $US50 ($AU69) million or more – which would include any assets racking up gains.