American billionaires pay lower tax rate than rest of population: study

The individuals on the Forbes 400 list, including Tesla CEO Elon Musk and Amazon founder Jeff Bezos, paid an average effective tax rate of 24% from 2018 to 2020, according to a recent study from University of California, Berkeley economists.

This was lower than the 30% rate paid by other taxpayers, said the study, published by the National Bureau of Economic Research.

The new findings calculate the tax rate by considering all income taxes, as well as corporate taxes paid by companies owned by the wealthiest Americans.

Elon Musk gestures to his eye during a news conference with US President Donald Trump in the Oval Office of the White House in Washington, DC, on May 30, 2025. Photo by AFP

Corporate taxes are levies on the profits generated for the shareholders.

"The economic income of the wealthiest is essentially the profits of the businesses they own," Saez told to CBS MoneyWatch.

"Jeff Bezos owns about 10% of Amazon, and hence his true economic income is 10% of Amazon's profits."

However, because capital gains – profits from selling stocks, bonds, real estate, and other assets – and business income are taxed at a lower rate than the top income tax rate on earnings from jobs, the wealthiest Americans receive a significant tax break.

Additionally, if the wealthy do not sell their shares, they do not owe taxes on that wealth since they have not realized a capital gain, Saez pointed out.

"The individual income tax is designed to be progressive due to its increasing tax rates by brackets, and it works well except for the billionaire class," Saez said.

But the rich are still shouldering the largest share of the U.S.’ taxes.

Internal Revenue Service data shows that the top 1% of earners – those making more than roughly $663,000 per year – contribute about 40% of all federal individual income taxes.

The top 50% pay 97% of federal individual income taxes, while the bottom half account for just 3%.

The findings about the richest 400 Americans suggest that a wealth tax is still needed to reduce inequality in the U.S., Saez said.

"The wealth tax is the most direct and powerful way to specifically target the ultra-rich and increase tax progressivity at the very top," he added.

In early July, President Donald Trump's "big, beautiful bill" was signed into, providing the largest benefits to the wealthiest Americans through a mix of new and extended tax breaks.

These include raising the estate tax exemption to $15 million per person, up from about $14 million.