- A new ProPublica report shows how much some of the wealthiest Americans pay in taxes.
- The top 25 richest people have an average total income and payroll tax rate of 16%, ProPublica reported.
- Billionaires like Michael Bloomberg and Bill Gates pay lower tax rates than someone earning $45,000.
Millions of Americans are preparing to file their taxes right now, looking at the chunks of their salaries withheld for payroll and income taxes, and figuring out if they owe more.
Those filers may be paying a bigger share of their incomes than the richest Americans.
That's according to newly released data from left-leaning investigative outlet ProPublica. Last year, ProPublica reported that it had received a trove of IRS data on America's highest earners — and documented the various methods that the richest people in the country use to cut down their tax bills.
Now, ProPublica has released a massive report that details just how much the 400 wealthiest people in the country made on average annually from 2013 to 2018, and how much they paid in taxes.
They find that the highest-earning Americans don't pay the highest income tax rates; instead, the top 400 earners pay an income tax rate of 22%, while people earning $2 million to $5 million pay 29% in income tax.
That's because America's richest don't get most of their income from a paycheck. Instead, their wealth comes from the assets they own — things like stocks and real estate. Their incomes, as ProPublica notes, come from selling off those assets, which are taxed at a much lower rate than wages and salaries.
"What's radical is that wealthy people, a lot of their income never gets taxed," Chuck Marr, the director of federal tax policy at the liberal-leaning Center on Budget and Progressive Priorities, previously told Insider.
But the more jarring discrepancy in taxes comes from payroll taxes. While the rich do still pay a higher income tax rate than typical workers, lower-earning Americans see a higher percentage of their paychecks going to Social Security and Medicare taxes. But because the richest Americans don't collect most of their income from wages, payroll taxes are a much smaller percentage for them.
"Because payroll taxes hit low- and middle-income workers disproportionately, they can wipe out the progressivity of income taxes," ProPublica reports. "It's common for wage earners to pay a higher rate of personal federal taxes than even the highest-earning Americans."
For example, a single worker who earns $45,000 has a "total tax rate" of 21% when accounting for both income and payroll taxes. The top 25 richest people have a total tax rate of 16%.
The wealthy paying less in taxes isn't a new revelation, but it is one that's drawn some political fire recently. After the publication of ProPublica's initial report, Sen. Bernie Sanders told reporters: "To the surprise of nobody I know, the rich and powerful aren't paying their fair share, what else is new?"
More recently, President Joe Biden proposed a minimum income tax on billionaires, which would count unrealized capital gains — assets whose value keeps going up, but haven't been sold yet — as part of income. However, previous attempts to raise taxes on the wealthy have been swatted down by centrist Democrats.
Sen. Joe Manchin of West Virginia already effectively killed Biden's proposal, arguing that people shouldn't be taxed on anything beyond earned income.