Fact check: What is the average tax rate paid by billionaires in the United States?

1. Why the Headline Number Matters—and What Researchers Actually Measured

The central claim across the analyses is that the top 400 Americans paid an average effective tax rate of roughly 23.8–24% in 2018–2020, a figure presented as “total effective tax rate” rather than just federal income tax. This measure aggregates federal income taxes, payroll taxes, state and local taxes, and corporate-level taxes attributable to individuals’ economic income. The NBER working paper explicitly frames the comparison against the ~30% rate for the entire population and the ~45% rate for top labor income earners, signaling that differences arise from income composition and tax treatment. Reporting this as an “effective rate” is important because it captures realized tax burden relative to an economic income measure that the ultra-wealthy may not fully show as taxable individual income ^[2]. Understanding the metric is crucial: the result is about how much tax is paid on measured economic income, not the headline statutory rates.

2. How Billionaires’ Income Composition Lowers Their Tax Bills

Authors of the studies tie the lower effective tax rates to how billionaires earn and time income—capital gains, tax-favored business income, and unrealized appreciation play large roles. The analyses report that wealthy households often report lower taxable individual income relative to their economic income, because significant portions of wealth gains are unrealized or sheltered inside corporations and flow through tax-favored channels. The NBER paper and related summaries conclude that tax-preferred treatments and deductions explain much of the gap between economic income and reported taxable income for the ultra-rich, driving the ~24% effective rate for the Forbes 400 versus higher rates for wage earners who receive labor income taxed at ordinary rates ^{[1] [3] [5]}. Income form matters more than headline wealth.

3. Variation Inside the Ultra-Rich: Top 100 vs. Top 400

The analyses note heterogeneity even within the billionaire group: the top 100 paid slightly less—about 22%—than the top 400’s ~23.8% over the same period. This intra-group variation reflects differences in asset mixes, corporate ownership stakes, and realized vs. unrealized gains. The NBER-linked summaries highlight that the very richest rely more on wealth appreciation and tax planning structures that depress realized taxable income compared with broader subsets of the top 400. These internal splits matter for policy debates because proposals aimed at “billionaire taxes” may affect subgroups differently depending on asset liquidity and ability to realize gains ^{[4] [2]}. Not all billionaires are taxed the same.

4. Policy Responses and Political Framings Pushed by Different Actors

Advocacy and policy proposals respond directly to these findings. The analyses reference legislative ideas like the Billionaires Income Tax Act, which would tax annual appreciation of tradable assets for very high-income or high-wealth individuals to capture unrealized gains and reduce the wedge between economic and taxable income. Proponents frame the lower effective rates as evidence of loopholes and inequality; opponents argue about measurement and incentives. The included materials point to political advocacy behind such measures while the academic studies provide the empirical basis for debate. Research motivates policy options, but proposals will redistribute burdens unevenly across billionaire subgroups ^{[6] [2]}.

5. How Robust Are These Findings Across Sources and Dates?

The core empirical finding—~24% effective tax rate for the top 400 in 2018–2020—appears consistently across multiple recent write-ups and working papers published and summarized between August and October 2025. NBER presentations dated August 25 and later summaries through October 3, 2025, reiterate the same magnitude and mechanism: lower taxable income relative to economic income due to capital gains and business income treatment ^{[2] [1] [4]}. UC Berkeley-related coverage and other summaries published in September 2025 echo the 23.8% figure and emphasize sheltered business income and deductions ^{[3] [5]}. Multiple independent summaries converge on the same estimate and causal explanation.

6. What This Leaves Unsaid—Limitations and Open Questions

The analyses make clear empirical points but leave open questions central to policymaking: how would taxing unrealized gains affect investment, liquidity, and reporting complexity; how stable are effective rates over time beyond 2018–2020; and how much of the gap is driven by timing differences versus permanent tax avoidance? The studies focus on a specific period and use particular definitions of economic income and tax incidence. Policy choices hinge on these technical measurement decisions and on trade-offs between revenue, compliance costs, and economic behavior—factors flagged in the policy proposals but not resolved in the observational studies ^{[2] [6]}.