President Joe Biden distorts income tax rates for the richest Americans

Sophia Voight
·5 min read
4
President Joe Biden, speaking in Superior, Wis., last week, criticized the tax payments of America's richest people.
President Joe Biden, speaking in Superior, Wis., last week, criticized the tax payments of America's richest people.
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Joe Biden

Statement: "There are a thousand billionaires now, and you know what their average tax rate is? Eight percent."

In a recent speech touting his economic policies, President Joe Biden took aim at the tax rates of the wealthiest Americans.

During the president’s Jan. 25 stop in Superior, Wis., he said: "There are a thousand billionaires now, and you know what their average tax rate is? Eight percent."

Biden has used this figure before, but it’s inaccurate because it uses a hypothetical calculation and isn’t a reference to the current tax code.

A PolitiFact rating from 2022 fact-checked the same claim and found it false. Here is what we previously found:

What is the average federal income tax for the richest Americans?

When we asked the White House back in 2022 about the 8% figure, it told PolitiFact that it comes from a White House report that looked at what would happen if the United States were to tax unrealized gains on stocks.

Currently, if a person's stock shares rise in value over time, those gains are not taxed unless and until the shares are sold. If the shares are never sold, they are never taxed, and under current law, they may be passed on to the next generation with little or no taxation.

The White House report found that if you include unrealized gains in the income calculations of the 400 richest U.S. families, their taxes paid would account for just 8.2% of their income.

Economists and policymakers have long debated whether the government should tax unrealized gains. But Biden made it sound as if 8% were the standard rate today, not what would happen under a potential proposal.

IRS data from 2020 shows that the top 1% of taxpayers paid an average federal income tax rate of 25.99% — more than three times the White House’s estimate.

A more elite group, the top 0.001% — which in 2019 meant people earning about $60 million or more — paid a portion that was only modestly smaller, 22.9%.

"Using the existing definition of taxable income, really rich people pay an average federal income tax rate in the mid-20s," said Howard Gleckman, a senior fellow at the Urban Institute-Brookings Institution Tax Policy Center. "If you want to include unrealized gains in your denominator, as the White House does, the average rate would go way down."

Biden
Biden

Do typical workers pay tax rates two to three times higher than wealthy Americans?

When Biden claimed in 2022 that the wealthiest Americans are taxed only 8%, he added, "If you’re a cop, a teacher, a firefighter, union worker, you probably pay two to three times that.”

He was off base on middle-class tax rates, too.

For starters, Biden’s statement ignores that 43.6% of households paid zero or negative net federal individual income taxes in 2019, according to the Urban Institute-Brookings Institution Tax Policy Center. (The percentage was higher in 2020, but that was because of temporary tax relief provisions during the coronavirus pandemic, so tax experts said it’s best to use the prepandemic figure from 2019.)

That’s a lot of Americans paying zero federal income taxes. They might have paid payroll or other federal taxes, and possibly state or local taxes, but Biden specifically cited the "federal income tax" in his remarks.

For a sense of scale, the bottom 40% of American incomes in 2018 were those earning below about $43,000 a year.

The specific professions Biden cited earn more than $43,000. The median annual income without overtime for police officers is $64,605; it’s $50,939 for firefighters and $67,080 for K-12 teachers.

Measured by actual taxes paid under current law, the effective tax rate for incomes in this range are not two or three times higher than what the wealthiest pay.

For households with adjusted gross incomes between $50,000 and $100,000, the Tax Policy Center found, a plurality of 42% paid an effective tax rate between 5% and 10%, while another 30% paid an effective rate between 10% and 15%. Also, 15% of those households paid an effective overall rate below 5%, and 5% paid nothing at all or got money back from the government.

In addition, while ordinary Americans have smaller stock holdings than the richest families do, many middle-income Americans have retirement accounts with plenty of unrealized income. Biden’s comparison takes unrealized income into account for the richest Americans, but not for ordinary Americans.

PolitiFact's ruling

Biden said: "There are a thousand billionaires now, and you know what their average tax rate is? Eight percent."

The wealthiest Americans currently pay an effective tax rate of more than 20% of their income, not 8%.

Once again, we rate Biden’s statement False.

Our sources

This article originally appeared on Austin American-Statesman: President Joe Biden distorts income tax rates for the richest Americans