Two of America’s most prominent figures in the finance sector, investor Warren Buffett and JP Morgan Chase CEO Jamie Dimon, have issued a joint message to lawmakers in Washington: increase taxes on the wealthy. Both leaders of Berkshire Hathaway and JP Morgan Chase, respectively, are advocating for higher taxes on the rich. Their reasoning centers on notions of fairness and the need to address the growing federal deficit.
Despite traditional opposition from Congressional Republicans against raising taxes on affluent individuals, there is emerging consideration within the party for a “millionaires tax.” This shift is attributed to President Donald Trump’s populist influence. The proposed tax aims to finance tax reductions on tips, overtime pay, Social Security benefits, and extend certain aspects of the 2017 Tax Cuts and Jobs Act. However, the proposal faces resistance from several prominent Republicans.
Experts suggest that raising income taxes for top earners might not significantly impact billionaires such as Buffett, Dimon, Elon Musk, and Jeff Bezos, who derive most of their wealth from investments rather than wages. Additionally, reductions in the IRS audit division and changes in its leadership could further facilitate tax avoidance.
Consequently, a “millionaires tax” would more likely affect professionals such as bankers, doctors, lawyers, professional athletes, and executives, rather than ultra-wealthy individuals who can employ legal strategies to minimize their tax liabilities. For example, Jeff Bezos, Amazon’s founder, reportedly paid no federal income tax from 2007 to 2011, despite his multibillion-dollar status, according to an analysis of his tax returns by ProPublica in 2021. Bezos is currently the world’s second-richest individual, with a net worth of $195 billion, according to the Bloomberg Billionaires Index.
Tesla CEO Elon Musk, who leads with a net worth of $304 billion, similarly managed to avoid paying federal income tax in 2018. ProPublica revealed that Warren Buffett avoided more taxes than any other top 25 wealthiest individuals over several years.
Warren Buffett has publicly addressed this issue, famously noting that his tax rate was lower than that of his secretary, Debbie Bosanek. This discrepancy turned Bosanek into a symbol of tax inequality in the United States. In 2011, President Barack Obama introduced the “Buffett Rule,” which aimed to ensure millionaires paid a minimum of 30% in tax by removing specific tax breaks and subsidies. The proposal was ultimately blocked by a Republican filibuster.
In terms of specific legislative action, six states, including California, Connecticut, Maine, Massachusetts, New Jersey, and New York (as well as Washington, D.C.), have implemented “millionaire taxes” based primarily on income. Federally, a top rate of 37% applies to individuals earning at least $626,350, and there are discussions about raising this to 40% for those making approximately $370,000 more.
Despite these discussions, the proposal is unlikely to impact qualified dividends and long-term capital gains, which face a top tax rate of 23.8%. Additionally, private equity gains from carried interest are taxed at this rate, which also forms the bulk of compensation for venture capital and hedge-fund managers. Trump has shown interest in closing this loophole, a move estimated by the Congressional Budget Office to reduce the federal deficit by $13 billion by 2034.
Some contend that the ultrawealthy already face significant tax burdens. The American Tax Foundation, a conservative-leaning think tank, references a 2024 study by the Treasury Department highlighting effective tax rates as high as 60% for the wealthiest individuals when accounting for corporate, estate, state, and local taxes both internationally and domestically.
Despite these perspectives, a straightforward “millionaires tax” would likely remain ineffective in altering the broader tax landscape.
This report was initially published on Fortune.com.
