A recent study from the National Bureau of Economic Research (NBER) underscores the impact of the 2017 Tax Cuts and Jobs Act (TCJA) on effective tax rates for high-asset individuals, with some provisions reportedly extended earlier this year.
A team of economists at the University of California conducted the study to understand the effective tax rate of the wealthiest individuals in the United States. Looking at wealth inequality, the authors evaluated the rise of wealth of high-asset individuals. Citing Forbes' list, the study notes that in 1982, the 400 wealthiest Americans by net worth owned 0.9% of total U.S. household wealth. By 2025, the top 400 Americans by net worth owned 4.1% of household wealth. Given the disparities, researchers sought to analyze the tax rate actually paid by the ultra-rich.
High-asset individuals have also received a great deal of attention from the Internal Revenue Service (IRS) in recent years. With funding to staff IRS investigations, the IRS pursued high-asset individuals with outstanding tax debt. By September 2024, approximately 80% of those taxpayers had made payments of more than $1.1 billion to the IRS. Along with income tax audits and scrutiny of offshore holdings, the IRS addressed periods when its budget was constrained.
Enforcement priorities and legislation evolve over time. Earlier this summer, certain provisions of the 2017 tax changes were extended. Those extensions could influence the effective tax rates paid by high-asset taxpayers going forward.
In preparing the study, researchers used administrative tax statistics, business, individual, estate and gift tax returns, as well as other public materials, to evaluate the actual tax rates for the current Forbes 400 group.
Findings on tax rates of the wealthiest people in the U.S.
Findings of the study included the following:
- For the Forbes 400, the effective tax rate from 2018 to 2020 averaged 23.8%. An increase in fortune corresponded to even lower tax rates. For the wealthiest 100 capital owners in the U.S., the tax rate declined to 22%.
- By comparison, the average tax rate for the U.S. population is 30%, with high-income wage earners paying 45%. By comparison, the highest asset individuals in the U.S. pay just over half the tax rate of top earning wage workers.
- The tax rate of the Forbes 400 dropped at the end of the study period (2018–2020). Between 2010 and 2017, the average tax rate of the top 400 was about the same as the average tax rate of the U.S. population, approximately 30%. The study notes the drop related to a similar decline in corporate taxes following legislative changes such as the TCJA, and to a shift toward pass-through business income.
- Study authors report that similar trends are observed internationally.
Bottom line? Opportunities and outcomes differ across taxpayer groups. Understanding your exposure, and your options, matters.
Concerned about business or offshore tax compliance?
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