26 billionaires, including Elon Musk and Jeff Bezos, paid just a fraction of the taxes the average American owes

• A new analysis from Americans for Tax Fairness finds several billionaires paid below 5% in taxes in recent years.
• That's because America's highest earners' fortunes often come from their assets, and not paychecks.

Last month, Americans got ready to sit down and pay their taxes. Many of them may have owed money to the government, especially if they cashed in on the Great Reshuffle and got paid more.

One group has perennially seen their fortunes grow, but not necessarily their tax rates: America's billionaires.

According to a new analysis from the left-leaning Americans for Tax Fairness (ATF) of IRS data obtained by ProPublica and wealth data from Forbes, 26 of the wealthiest people in America paid an average federal income tax rate of 4.8% from 2013-2018, based on ATF's calculation of effective tax rate on wealth growth.

The effective tax rates on wealth growth varied for these billionaires. For instance, the effective tax rate on wealth growth for Jeff Bezos was 1.1%. For Bill Gates, it was 10.7%. The following table shows what the effective tax rates were for 14 billionaires on reported income compared to how much their wealth actually grew.

To calculate the effective tax rate on wealth growth for these billionaires, ATF used taxes paid data from the ProPublica IRS release covering January 1, 2013 to December 31, 2018. This was then divided by wealth increases estimated by Forbes between February 14, 2013 and February 8, 2019, except for Buffett which covered wealth growth from February 12, 2014 and February 8, 2019.

The numbers show that billionaires' taxes came out to just a small percent of their increases in wealth. Many of the richest Americans derive most of their wealth from their assets — things like stocks and bonds. Those are only taxed when they're sold off as capital gains. Even then, they're taxed at the lower capital gains rate.

For instance, that meant that from 2013 to 2018, Elon Musk reported about $1.5 billion in income, according to Americans for Tax Fairness' analysis. He paid $411 million in taxes on that income — a 27% effective tax rate. But according to ATF's analysis of Forbes billionaire data, his wealth actually grew by around $20 billion over a similar period. That means the effective tax rate on his wealth growth was actually 2.1%.

Those low tax rates that ATF and ProPublica have uncovered are perfectly legal, and, as the data indicates, have persisted for years. For instance, inequality researchers Emmanuel Saez and Gabriel Zucman found that the average tax rate in 2018 for the 400 wealthiest households came in at 23%, while the average American paid 28%.

The White House has also done its own calculations: When accounting for unrealized capital gains — those assets that are getting more valuable, but aren't sold off — the 400 wealthiest families in America paid an average 8.2% tax rate from 2010 to 2018.

The Biden administration has repeatedly tried to reform the tax code and cut down on some of the provisions that lead to those low tax rates. In the now-stalled Build Back Better plan, President Joe Biden originally proposed raising the top individual tax rate from 37% to 39.6% for taxpayers who make over $400,000. He also wanted to raise the capital gains tax rate for Americans who are earning $1 million or more.

However, tax hikes faced stiff resistance from centrist Sen. Kyrsten Sinema, a key vote in Democrats' razor-thin majority. Another pivotal centrist, Sen. Joe Manchin, later pronounced Build Back Better "dead."

In March, Biden released another plan to tax billionaires' wealth. He called it a "Billionaire Minimum Income Tax," where households would pay a 20% minimum tax rate on income that includes their unrealized capital gains. Manchin almost immediately poured cold water on the proposal.