The Million Dollar Question: What tax rate did the 25 wealthiest Americans actually pay from 2014 to 2018?
The Million Dollar Question this Friday:
From 2014 to 2018, what federal income tax rate did the 25 wealthiest Americans actually pay, measured as the income tax they paid divided by how much their wealth grew?
A) 0% B) 3.4% C) 15.8% D) 37%
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Most people asked this guess somewhere near the top marginal rate — 37% — or, for anyone who knows the wealthy mostly earn capital gains, the 23.8% top long-term capital-gains rate. The actual answer is 3.4%, and the gap between that number and the tax code’s official rates is the whole story.
The source is ProPublica’s 2021 investigation into IRS data on the 25 richest Americans, which found they paid roughly $13.6 billion in federal income tax against $401 billion in wealth growth from 2014 to 2018 — a 3.4% “true tax rate” by ProPublica’s own calculation. Measured against their reported income instead of their wealth growth, the same group paid 15.8%, as ProPublica explained in its methodology writeup — both numbers are accurate, they just answer different questions. The mechanism behind the 3.4% figure is not a loophole; it’s three ordinary features of the tax code working together. Long-term capital gains are taxed at 23.8% versus 37% for wages. Gains are only taxed when an asset is sold, so the wealthy can choose whether to realize them at all. And at death, inherited assets get a stepped-up basis, wiping out decades of unrealized gain for tax purposes. Together, those three rules are the engine behind “buy, borrow, die” — hold appreciating assets, borrow against them to fund spending instead of selling, and let heirs inherit the gain tax-free.
What the answer reveals: the 3.4% rate isn’t evasion — it’s the predictable output of a tax code that was written to treat unrealized wealth growth differently from earned income. Every household above roughly $5 million starts having real access to the same three levers, just at smaller scale.
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This question is treated in full in Taxes: How Wealth Is Structured and Preserved, which walks through the trust structures, charitable tools, and residency moves built on top of those three foundational rules.
If you have a Million Dollar Question you’d like to see treated in a future Friday email, send it to [email protected].
— Logan Pierce
Editor, How Millionaires Live
