Millionaires’ Effective Tax Rate Has Been Cut by Half Since Mid-20th Century

🌈 Abstract

The article discusses how millionaires are currently being taxed at half the effective tax rate they were paying in the mid-20th century, as the tax code has become increasingly regressive and wealth inequality has reached record highs in recent years.

🙋 Q&A

[01] Millionaires' Effective Tax Rates

1. What were the effective tax rates for millionaires in the mid-20th century compared to today?

• In the mid-20th century (1945-1980), millionaires were paying effective tax rates between 40-60%, with an average of 50.1%.
• In 2021, millionaires were paying an average effective tax rate of 26.2%, while households with incomes over $10 million paid an average rate of 25.1%.

2. How has the effective tax rate on the wealthy changed over time?

• The downturn in the effective tax rate on the wealthy began in the 1980s, when a wave of neoliberalism shifted power and wealth away from the working class and toward corporations and the rich.
• Over the course of just a decade, the effective tax rate went from roughly 50% to roughly 25%, a rate that it has hovered around ever since.

3. What is the impact of the lower tax rates on the wealthy?

• The slashing of the tax rate for the wealthy has caused wealth inequality to surge, especially in recent years following the 2017 Donald Trump tax cuts.
• The U.S.'s 806 billionaires' collective wealth has hit an all-time high of $5.8 trillion, which is double the amount of wealth they controlled in 2017.

[02] Tax Code Reforms

1. What tax code reforms are suggested to make tax rates more equitable?

• Raising the estate tax
• Increasing statutory tax rates for high-income households
• Ending benefits for offshore tax havens
• Other reforms to make the tax code more progressive