The recent volume of  "tax the rich" cries would suggest the rich don't pay any (or very little) taxes. The reality is that wealthy US individuals pay vastly different amounts of tax, primarily due to the composition of their income, driven by whether that income comes from labor/wages or capital (investments), and their use of tax planning strategies. High-income earners often face high marginal rates, while ultra-wealthy individuals often avoid taxes through unrealized gains. This is mostly a Federal tax code issue, not a state and/or local tax code issue. Local politicians never say this part out loud, the rich are different, especially within the same demographic.

• Income Source (Labor vs. Capital): Taxpayers with high salaries (e.g., executives, doctors, professionals) pay higher income taxes. In contrast, those with wealth generated from stock appreciation (capital gains) or dividends pay lower rates and only when they sell assets.
• Unrealized Capital Gains & "Buy-Borrow-Die": The ultra-rich often avoid income tax by not selling assets, holding assets for life (avoiding capital gains tax), borrowing against them for cash flow, and passing them on with a "stepped-up basis," wiping out the tax liability on gains for heirs.
• Tax Avoidance Strategies: Wealthy individuals use complex structures, including business losses, deductions, and tax-advantaged vehicles (e.g., trusts, family offices) to reduce their taxable income.
• Effective Tax Rates: Research shows that the top 0.0002% of taxpayers often pay a lower effective tax rate than merely rich "the 1%" because of their ability to leverage these tax loopholes. Yes, "the rich" are different.

DID YOU KNOW?

• In 2022, the top 1% of earners paid 40.4% of all federal individual income taxes. That is up from 37.3% in 2016.
• In 2024, the top 1% of earners in the U.S. earned approximately 20.1% to 22.4% of all income, up from 19.7% in 2016.
• In 2024, the top 1% paid approximately 23.9% of  all federal, state, and local taxes combined, slightly exceeding their 20.1% share of total income.