In the Wall Street Journal, Carol Ryan writes:

[D]ebate about how much tax billionaires pay is likely to grow as America’s fiscal situation deteriorates and its wealth gap widens. Data from the Federal Reserve shows that only the richest 1% of households have grown their share of overall U.S. wealth since 1990. Their share hit a record 32% in the third quarter of 2025, equivalent to $54.8 trillion.

Gains made by the billionaire class, the very top 0.1% of households and a subset of the 1%, have eclipsed the merely extremely rich. This group’s share of U.S. net wealth has risen nearly 6 percentage points to 14.4% since 1990.

The impacts of this are visible in booming sales at businesses that cater to the ultrarich. Wealth concentration is so intense that it is even causing a divergence among luxury-goods companies: Brands such as Cartier or Hermès that cater to the superwealthy are soaring, while sales at labels that rely on affluent middle-class consumers are slack.

Meanwhile, the bottom half of American households have lost ground. Their 2.5% cut of the country’s wealth has slipped from 3.5% in 1990. Also striking: The share owned by the decile of wealthy households that rank just below the top 1% has shrunk slightly.

The tax code may be one reason why billionaire households have raced so far ahead of mere millionaires. One argument used to push back against calls for the rich to pay more into the system is that 1% of the highest earners pay 40% of income taxes, while 40% of Americans pay no income tax at all. This is true, but billionaires aren’t captured by this picture because most of their wealth lies outside the income-tax system.

Billionaires have ways to lower their tax bills that aren’t available to most Americans. A common strategy is to avoid salaries, which are heavily taxed. Ray Madoff, a law professor at Boston College and author of The Second Estate: How the Tax Code Made an American Aristocracy, points to Mark Zuckerberg’s dollar-a-year wage at Meta. Warren Buffett took an annual salary of $100,000 for decades.

Billionaires prefer to be paid in shares, which are subject to capital-gains taxes when sold. But they don’t need to sell to fund their lifestyles. Billionaires use borrowed money for living expenses, pledging their shares or other assets as collateral. The interest on the debt is much lower than a capital-gains tax bill would be, and their stock portfolios can continue accumulating paper gains.

A third of America’s billionaires have inherited their wealth. The ultrarich can use structures such as dynasty trusts to shield their assets from estate taxes for generations, while the step-up provision adjusts the cost basis of an inherited asset to its fair market value.

Amassing assets like stocks, borrowing against them rather than selling during the owner’s lifetime, and passing them to the next generation after death is sometimes called the “buy borrow die” tax-avoidance strategy.

Billionaires put less into the tax pot as a percentage of their wealth than wage earners. One working paper by the National Bureau of Economic Research found that the effective tax rate for the U.S.’s 400 wealthiest individuals is 24%—compared with 45% for top labor income earners. [Continue reading…]