The wealthiest 400 families in the United States are paying an average income tax rate of just 8.2%, according to a new analysis from the Biden administration. President Joe Biden and Democrats are pushing to raise taxes on the richest Americans as they look for ways to pay for their ambitious agenda, making its way through Congress as a $3.5 trillion budget reconciliation package.
The analysis estimated billionaires paid 8.2% of their income between 2010 and 2018, including on forms of income that go largely untaxed — lower than the rates paid by most Americans. It notes in that final year of analysis, those families had at least $2.1 billion in wealth, according to Forbes.
The analysis by economists from the Office of Management and Budget and the White House Council of Economic Advisers drew from publicly available data and says the disparity is driven largely by how the tax code treats income generated from wealth — such as income from stocks, whose worth increases over time — rather than wages, which are immediately taxed.
“How is it possible for millionaires and billionaires that can pay a lower rate of tax than teachers, firefighters or law enforcement officers?” Mr. Biden said during remarks on the economy last week. “This is our moment to deal working people back into the economy. This is our moment to prove to the American people that their government works for them, not just for the big corporations and those at the very top.”
The Biden administration is pressing for changes to the tax code that they say will force the wealthiest Americans to “pay their fair share.”
Their proposal includes raising the income tax bracket for the wealthiest Americans back to 39.6% from the 37%, which currently hits taxpayers with a taxable income of more than $523,600 for single filers. It also includes taxing capital gains for households making more than $1 million each year at the same tax rate, 39.6%, instead of 20%, leveling the rate on wages versus investment returns. The president has also called for closing the loophole that allows wealthy Americans to pass gains down to their heirs.
However, even among Democrats there is disagreement over how to proceed in the reconciliation legislation. In the bill unveiled last week, House Democrats proposed raising the top capital gains rate from 20% to 25%, far less than President Biden’s proposal, while instead including a 3% surtax on individuals making more than $5 million. It did not address wealth passed from generation to generation, a move Senate Democrats have said needs to be tackled in their final legislation.
On Thursday, Senate Majority Leader Chuck Schumer, standing alongside House Speaker Nancy Pelosi and Treasury Secretary Janet Yellen, said they have worked out an agreement on how to pay for the final legislation by raising revenue. However, they did not reveal exactly what the agreement would include.
Mr. Biden has vowed not to raise taxes on those making less than $400,000 a year as Democrats aim to deliver wide-ranging legislation that tackles issues impacting Americans at every stage of life.