Thursday, May 19, 2022

White House Says Wealthiest Families Paid Average 8% Tax

According to Law360, the wealthiest 400 American families paid an average 8% tax rate on income earned from 2010 through 2018. The estimates, crafted by economists from the Office for Management and Budget and the White House's Council of Economic Advisers, included income from unsold stock in its computation of the average tax rate on the wealthiest families in the U.S. 

When That Unsold Stock Is Accounted For, The Average Income Tax Rate For The Wealthiest Families Is 8%, With A Possible Range Of 6% To 12%, The White House Said In An Online Post.

The White House made the case for increasing tax rates on capital gains income and dividends, as well as partially eliminating a tax break for inherited assets known as stepped-up basis, in order to close the gap between taxes paid by wealthy Americans and the less wealthy. The step-up in cost basis raises an heir's basis in an inherited asset so the heir doesn't owe capital gains on its appreciated value, and President Joe Biden has proposed to partly chip away at that advantage.

The estimates from the OMB and CEA economists relied on figures from the IRS and the Federal Reserve as well as Forbes Magazine, according to the White House. The wealthiest 400 families paid $149 billion in federal income taxes for 2010 through 2018, paid roughly $46 billion in state and local taxes during the same period and earned roughly $1.8 trillion in income.

The analysis noted that the estimates are lower than similar figures released by the Congressional Budget Office, the Joint Committee on Taxation and the U.S. Department of the Treasury. For instance, the JCT has estimated that tax rates for families earning at least $1 million is 26%, according to the analysis.

But these groups largely exclude unrealized capital gains from their computations, the analysis said. For people making $100,000 to $200,000 in income this year, the JCT estimated they'd pay a roughly 16% tax rate on earnings including income, employment and excise taxes. 

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