Fact check: Biden says billionaires pay 'about 3%' in taxes
During a visit to a labor union in suburban Maryland on Feb. 15, President Joe Biden there were "about 720 billionaires" at the start of his administration. "Now we have about 1,000. You know what (the) average tax they pay is? About 3%."
Posted — UpdatedDuring a visit to a labor union in suburban Maryland, President Joe Biden made a pitch for more stringent taxes on billionaires.
In Lanham, Maryland, Biden told members of the International Brotherhood of Electrical Workers union he was calling on Congress to pass his proposal for a minimum tax on billionaires.
At the Feb. 15 event, Biden said there were "about 720 billionaires" at the start of his administration. "Now we have about 1,000. You know what (the) average tax they pay is? About 3%. Look, no billionaire should pay a lower tax than a schoolteacher or a firefighter."
The number of billionaires in the U.S. is hard to pin down, and can be heavily influenced day-to-day by changes in the value of stocks. But the 720 to 1,000 figure is broadly in line with recent estimates made by news outlets.
However, the tax rate Biden cited is wrong, as is the claim about what schoolteachers or firefighters pay.
Tax rate for billionaires is more than 3%
However, even this 8% figure needs important context.
The White House report found that if you include unrealized gains in the income calculations of the 400 richest U.S. families, those families are ultimately paying a tax rate of 8.2%.
Economists and policymakers have long debated whether the government should tax unrealized gains. But Biden made it sound as if 3% (or, in previous instances, 8%) was the standard tax rate paid by billionaires today. It’s not; that calculation is made by taxing unrealized wealth, rather than income, as is done under current law.
There is one study that pinpointed a roughly 3% tax rate for the ultrarich, but that, too, was based on a theoretical model in which unrealized wealth was taxed.
At the same time, ProPublica found that the actual tax rate these 25 billionaires paid under current law is 16%.
How do teachers and firefighters compare?
The median annual income without overtime for firefighters is $50,939, and $67,080 for K-12 teachers.
Households with adjusted gross incomes from $50,000 to $100,000 paid an effective tax rate ranging from 5% to 15%, the Tax Policy Center found.
Some of those households even paid an effective overall rate below 5%, or paid nothing at all or got money back from the government.
So, even if a teacher or a firefighter paid at the highest of these estimates — 15% — that would still be below the 16% the top 25 billionaires paid.
Why Biden has reason to be concerned
Tax analysts said Biden has a point when he talks about billionaires finding ways to avoid paying a lot in taxes.
"Higher earners can borrow on their unrealized gains for consumption, and then avoid taxes at death when passing along those assets," said Garrett Watson, senior policy analyst with the Tax Foundation, a Washington D.C.-based think tank. This "buy-borrow-die" strategy allows the very richest Americans to avoid a large share of taxes they might otherwise have to pay.
However, Watson said this tactic "could be tackled more directly in the tax code without requiring a complicated minimum tax" like the one Biden is proposing.
The super-wealthy own many assets with fluctuating and sometimes difficult-to-determine values, and creating and verifying these values for them annually would be a burden both for the taxpayer and for the government. In addition the courts may view this as a "direct tax," which must be apportioned among the states according to their population; this might be impossible, since in some states, there may be no billionaires.
PolitiFact ruling
Biden said the "average tax" for billionaires is "about 3%," which is "a lower tax than a schoolteacher or a firefighter."
Biden has previously cited an 8% figure, based on calculations by the White House’s Council of Economic Advisers. But even the 8% figure doesn’t fully align with what Biden said.
Both figures stem from calculations made under a theoretical proposal. Under current laws, the 25 highest-earning billionaires paid a 16% tax rate on average, estimates show.
Meanwhile, among households earning between $50,000 and $100,000 a year — the category that many teachers and firefighters would fall into — the vast majority paid effective tax rates of between 0% and 15%. Even the very richest billionaires are paying rates higher than that under today’s tax code.
We rate the statement False.
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