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Wealthiest Americans’ Tax Rate Plummets to 23.8%, New research Confirms growing Inequality
Washington D.C. – A new study from the National Bureau of economic research (NBER) reveals a important decline in the effective tax rate paid by the 400 wealthiest Americans, dropping from 30% between 2010-2017 to 23.8% more recently. The findings underscore a widening gap between the tax burden shouldered by the ultra-rich and that of typical taxpayers, fueling ongoing debate about fairness in the U.S. tax system.
The research, released this week, highlights a decades-long trend of wealth concentration. The top 400 individuals now control over 4% of the nation’s total wealth – a figure that has doubled since the 1980s. This increasing wealth hasn’t translated into a proportional increase in tax contributions.
From 2010 to 2017, the effective tax rate for this group mirrored that of the broader population, hovering around 30%. This parity was largely due to increases in individual income tax rates between 2010 and 2013, and again from 2014 through 2017. though, this alignment began to unravel with the passage of the Tax Cuts and jobs Act (TCJA) in late 2017.
Signed into law during the Trump management, the TCJA, which took effect in early 2018, dramatically altered the tax landscape. The law significantly lowered the corporate tax rate and revised individual tax brackets and rates. the impact was immediate: the effective tax rate for the wealthiest 400 Americans fell sharply, dropping below 24%.
The recent passage of the “One Big Gorgeous Bill Act” (OBBBA) this summer is expected to further solidify this trend. An analysis by the nonpartisan Tax Foundation projects that the OBBBA’s extension of TCJA tax cuts will likely maintain lower effective tax rates for the wealthiest Americans for years to come. The Tax Foundation found that the OBBBA’s passage “means the downward trend in the effective tax rate paid by the richest Americans may stay that way for years to come.”
this shift in tax burden raises questions about the equity of the U.S. tax code. While the wealthiest 400 pay a substantial amount in taxes their proportion of taxes paid relative to their wealth is demonstrably lower than that of average taxpayers. The NBER study provides further evidence supporting concerns that the tax system may be contributing to, rather than mitigating, wealth inequality.
