The highest-income earners pay the most federal income tax, with the top 1% of taxpayers contributing nearly 40% of all income taxes, and the top 10% paying over 70% of the total, despite earning a smaller portion of the nation's total income. The bottom half of earners contributes a very small fraction, around 3%, of federal income tax revenue.
The Bezos $2.7 billion income tax payment, Liu noted in her Forbes analysis, represented only 4.5 percent of the 2024 increase in his personal net worth — approximately $60 billion — and barely more than 1 percent of his overall $230 billion net worth. Props to Liu for her reporting.
In 2021, Elon Musk set a record by paying an estimated $10–11 billion in taxes—the largest single-year tax payment ever made by an individual. The staggering bill came after he exercised about 23 million Tesla stock options awarded back in 2012 that were nearing expiration.
What is a higher rate taxpayer? Higher rate taxpayers in England and Wales pay 40% income tax on anything they earn over £50,271, even more if they're an additional rate taxpayer earning over £125,140 a year.
But if Zuckerberg received the $700 million as a straight salary, Schmidt estimated he'd be looking at a roughly $259 million tax bill on the wages after they were taxed at the top marginal rate of 37%.
In fact, the list of billionaires paying $0 in income tax reads like a who's-who of the world's most famous executives. Amazon CEO Jeff Bezos and Tesla CEO Elon Musk, for example, are the two wealthiest people in the world, according to the Forbes Billionaires' List.
Yes, Jeff Bezos famously kept his Amazon base salary at around $80,000 per year for decades, choosing to take most of his compensation through stock options, which grew immensely as the company succeeded, making him one of the world's wealthiest individuals without a high executive paycheck. He felt he had enough incentive as a major owner and preferred building wealth by increasing the value of his existing equity rather than taking more salary or bonuses.
Yes, it is illegal to intentionally not pay federal taxes, as the U.S. tax system requires compliance, and failing to pay can lead to severe civil penalties (fines, interest, wage garnishment) and criminal charges (tax evasion, imprisonment), even if the system is described as "voluntary" due to self-assessment. While simple failure to file due to oversight might result in penalties, deliberate evasion, underreporting income, or making frivolous legal arguments against paying are criminal offenses.
In 2022, the top 5% of earners — people with incomes $261,591 and above — collectively paid over $1.3 trillion in income taxes, or about 61% of the national total. If you include the top 10% — everyone who made at least $178,611 — that figure rises to $1.5 trillion, or 72% of the total.
10 Top Tips To Reduce Your Tax
Before the Trump tax cuts (Tax Cuts and Jobs Act of 2017 - TCJA), individual income tax rates ranged from 10%, 15%, 25%, 28%, 33%, 35%, up to a top rate of 39.6%, with different income brackets for single and married filers, while the top corporate tax rate was 35%, significantly higher than the post-TCJA 21% rate. The TCJA maintained seven brackets but adjusted rates and income thresholds, alongside major changes to deductions, credits, and the corporate tax structure, notes this Tax Foundation article.
Billionaires often employ the “buy, borrow, die” strategy to avoid income and capital gains taxes. First, they acquire appreciating assets like stocks or real estate. Instead of selling these assets when they need cash (which would trigger capital gains tax), they borrow against them at favorable interest rates.
Musk paid $455 million in taxes on $1.52 billion of income between 2014 and 2018. According to ProPublica, Musk paid no federal income taxes in 2018. He stated his 2021 tax bill was estimated at $12 billion based on his sale of $14 billion worth of Tesla stock.
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
For most married couples, filing jointly is better due to a larger standard deduction, lower tax brackets, and access to valuable credits (like Child Tax Credit), but filing separately can be advantageous if one spouse has high itemized deductions (like medical bills) or if you want to avoid joint liability for a spouse's tax issues, often making the choice dependent on your specific income levels and financial circumstances.