The American tax system is a labyrinth of brackets, deductions, loopholes, and special provisions that most of us will never fully understand. We dutifully watch chunks of our paychecks disappear every two weeks, trusting that the system is fair, that everyone is contributing their share. But what if the wealthiest among us are playing an entirely different game with entirely different rules? I decided to pose a provocative question to ChatGPT and dive deep into the research to understand what would actually happen if America’s billionaires paid taxes at the same rate as middle-class workers. The answers I found were surprising, nuanced, and sometimes infuriating.
The Numbers That Started It All
Before we can understand what changing billionaire tax rates would mean, we need to understand what those rates actually are. According to ProPublica’s groundbreaking investigation using leaked IRS data, the 25 richest Americans saw their worth rise a collective $401 billion from 2014 to 2018, yet they paid a total of just $13.6 billion in federal income taxes during those five years. That amounts to a true tax rate of only 3.4%. Compare that to the typical middle-class household. According to the Institute on Taxation and Economic Policy, middle-income Americans pay about 26% of their income in combined federal, state, and local taxes. The gap is staggering, and it gets worse the deeper you look.
Americans for Tax Fairness found that the 400 richest billionaire families paid an effective federal income tax rate of just 8.2% in recent years, nearly half of the 14.9% that the average middle-class family pays. These aren’t cherry-picked statistics from partisan sources. White House economists conducted their own study and found that the 400 wealthiest American families gained $1.8 trillion from 2010 to 2018 while paying just 8.2% in taxes. The disparity exists because our tax system fundamentally treats different types of income in radically different ways.
How Billionaires Actually Make Their Money
Understanding why billionaires pay such low rates requires understanding how their wealth accumulates. Jeff Bezos’s Amazon salary is a modest $80,000 per year. The reason Bezos and other billionaire CEOs opt for low salaries is that wage income is taxed at a higher rate than their assets. When you work a regular job, your employer withholds taxes from every paycheck. The money arrives in your bank account already reduced by your contribution to Social Security, Medicare, federal income tax, and state income tax. You never even touch that portion of your earnings.
The 25 richest Americans only reported $158 million in wages for the 2018 tax year
This equates to a mere 1% of the income reported on their tax forms. The rest of their wealth consisted of dividends, stock sales, and other investments, and these income sources are taxed at a much lower rate than workers’ wages. But here’s where it gets really interesting. According to UC Berkeley economists Emmanuel Saez and Gabriel Zucman, American billionaires hold $4.25 trillion in wealth, and $2.7 trillion of that wealth is deemed unrealized, referring to shares in companies that billionaire founders typically retain, which fluctuate in value according to stock market conditions.
Under current tax law, you only pay taxes on investment gains when you sell the asset, not while you’re holding it and watching its value climb. New Federal Reserve data analyzed by Americans for Tax Fairness shows that America’s billionaires and centi-millionaires collectively held at least $8.5 trillion of unrealized capital gains in 2022. That’s $8.5 trillion in wealth that has never been taxed and, under current law, may never be taxed at all.
The Buy, Borrow, Die Strategy
So how do billionaires actually fund their lavish lifestyles if they’re not selling assets and triggering taxes? The concept of buy, borrow, die was developed by Professor Edward J. McCaffery in the 1990s as a way to explain how people get rich and stay that way. The theory holds that rich people aren’t gaming the tax system with loopholes or fraudulent practices. Instead, they’re limiting what they have to pay in taxes through strategic investing and planning.
The strategy works like this. First, a wealthy family buys stocks, bonds, real estate, art, or other high-value assets. It strategically holds on to these assets and allows them to grow in value. The family won’t owe income tax on the growth in the assets’ value unless it sells them and makes a profit. So far, this sounds like what any reasonable investor might do.
How Billionaires Turn Their Wealth Into Tax-Free Cash
Next, the wealthy family borrows against its assets’ growing value and uses the newly available cash to live off or invest in other assets. The family does not owe taxes on its asset leveraged loans because the government doesn’t tax borrowed money. This is the key insight that separates how billionaires operate from how regular workers operate. When you or I need money, we work for it and pay taxes on it. When a billionaire needs money, they borrow against their wealth and pay no taxes at all.
For example, Larry Ellison, Oracle’s chief executive officer and one of the world’s richest people, has pledged over 300 million shares of Oracle stock worth over $45 billion as collateral for a personal credit line. This lets him obtain cash without selling shares, thus he avoids paying taxes, and the stock can continue growing in value. The borrowed money isn’t income, so it isn’t taxed. Meanwhile, the underlying assets keep appreciating, building even more untaxed wealth. Elon Musk was able to buy Twitter by borrowing $25.5 billion tax-free against his Tesla stock rather than selling it off, which would have been a taxable event.
The Death Loophole
The final piece of the puzzle is what happens when wealthy asset holders die. Wealthy parents or benefactors of the family keep the original appreciated assets until their death, leaving those assets to an heir. Neither the current federal nor local tax code requires the original asset holders or the heir to pay taxes on the growth in value up to that point. Instead, the tax code wipes out any tax liability for the capital gains by stepping up the baseline value of the assets from the original price to their value at the time of the benefactors’ death.
The stepped-up basis is one of the largest federal tax expenditures. According to the Joint Committee on Taxation, it will account for $58 billion in forgone revenues for the federal government in 2024 alone. That is equal to about a quarter of all revenues from taxes on capital gains.
Here’s how it works in practice
A stepped-up basis is a tax provision that allows heirs to reduce their capital gains taxes. When someone inherits property and investments, the IRS resets the market value of these assets to their value on the date of the original owner’s death. Then, when the heir sells these assets, capital gains taxes are applied based on this reset value. This means decades of appreciation, often totaling billions of dollars, simply vanish from the tax rolls.
If someone holds onto shares until they die and passes them on to their heirs, they are not taxed on any of the gains. So, if the shares increase in value to $130,000 and the new owners sell, their gain will only be calculated from that new stepped-up basis. This means that for tax purposes, it is as if the massive accrual in value during the first owner’s lifetime never occurred.
What ChatGPT Said Would Happen
When I asked ChatGPT what would happen if billionaires paid taxes at the same rate as middle-class workers, the AI provided a fascinating analysis. First, ChatGPT corrected a common misconception. Based on actual data from PolitiFact and ProPublica investigations, the 25 wealthiest Americans currently pay an average federal income tax rate of 16% under existing law. Meanwhile, households earning $50,000 to $100,000 typically pay an effective tax rate between zero and 15%.
Wait, what?
On paper, it seems like billionaires are actually paying more than teachers? ChatGPT explained that the issue isn’t necessarily the tax rates themselves, but how different types of income get taxed. This is where the system becomes genuinely unfair. Billionaires benefit from tax strategies that lower their effective tax burden compared to what ordinary income earners face on wages. The current system taxes work more than wealth.
The real disparity emerges when you account for all the wealth billionaires accumulate that never shows up on a tax return. Using the ProPublica data, if those top 25 billionaires had been taxed at a 20% rate on their wealth growth, they would have paid around $80 billion instead of $13.6 billion. Extrapolate that across approximately 1,000 billionaires and you’re talking hundreds of billions in added revenue annually.
The Revenue Potential
The most conservative estimate suggested that making billionaires pay taxes at the same rate as working-class Americans could generate $500 billion to $1 trillion per year in additional revenue. Other scenarios were even more dramatic. If the top 1% paid just 10% points more in taxes, that could raise $300 billion annually or $3 trillion over 10 years.
To put these numbers in perspective
Even the conservative estimate of $500 billion per year could pay for transformative programsThat amount could cover free public college tuition, universal pre-K programs, massive infrastructure investments, and a huge healthcare expansion. It could fund comprehensive child care support and food assistance programs.
Calculations from Oxfam found that a modest 3% tax on wealth over $1 billion would raise nearly $52 billion just from the 10 richest billionaires alone. We’re not talking about confiscatory taxation here. A 3% annual wealth tax, applied only to the amount exceeding a billion dollars, would barely be noticeable to someone with $100 billion but would generate transformative revenue for public services.
How Big Is This Wealth Pool?
At the close of 2024, there were 813 billionaires in the United States with a combined total wealth of $6.72 trillion, according to an analysis of Forbes wealth data. The combined wealth of this group increased by $1 trillion over just nine months, from $5.7 trillion at the beginning of April to $6.72 trillion at the end of 2024.
American billionaires reached a record-breaking $7.6 trillion of personal wealth as of Labor Day 2025, up $4.7 trillion, or 160%, in less than eight years since the first Trump tax law was enacted in December 2017. Most of that wealth increase, an estimated 56% or $4.2 trillion, has never been taxed and may never be under current law. There are now 15 U.S. billionaires with more than $100 billion each. Their combined wealth totals $2.4 trillion. Many top billionaires have seen their wealth surge since the onset of the COVID-19 pandemic. On March 18, 2020, Elon Musk had a wealth valued just under $25 billion. By 2024’s end, his wealth soared to an unfathomable $428 billion.
The Concentration Problem
The bottom half of households in America, 66 million of them, had $4.1 trillion altogether at the end of 2024. Meanwhile, the 905 billionaires in the United States hold a combined $7.8 trillion in wealth. Let that sink in. Fewer than a thousand individuals control nearly twice as much wealth as half of all American households combined.
Since 1989, the richest 1% have seen their household wealth more than quadruple from $11.74 trillion to $50 trillion at the end of 2024. Their share of the $162 trillion U.S. wealth pie increased from 23% in 1989 to 30.9% in 2024. The concentration is accelerating, not slowing down.
The Counterarguments
Not everyone agrees that raising taxes on billionaires would be beneficial or even feasible. ChatGPT noted that political resistance from powerful lobbying interests would be intense. The people who benefit from the current system have a lot of resources to fight changes. There are also technical challenges. Wealth taxes face administrative hurdles and potential constitutional questions. Some economists argue that dramatic tax rate increases could reduce economic growth enough to actually decrease total tax revenue.
A Treasury study provides data showing that the rich not only pay more than the middle class, but they pay more than one-third of their annual income in federal taxes and more than 45% when state and local taxes are included. This is the counterpoint frequently raised by those who believe the wealthy are already paying their fair share. The dispute largely comes down to how you define income.
A certified public accountant named Brian Kofford offered this perspective:
“It sounds nice on paper, but reality is messier. Billionaires don’t earn most of their wealth as wages. If the income isn’t realized, the IRS won’t see those hundreds of billions people imagine.” Kofford added that he isn’t convinced tax hikes alone would fix inequality. “Billionaires didn’t just save harder, they built scalable businesses and assets that compound. Education, entrepreneurship access, and smarter financial literacy for the middle class play a bigger role than simply raising someone else’s rate.”
The Middle Class Reality
Meanwhile, what are regular Americans actually paying? The truth is that America’s tax system overall is progressive, but not as progressive as some lawmakers claim. Those in the top 1% will pay a little over a third of their income in taxes this year on average, those in the middle will pay about 26%, while those among the poorest fifth of Americans will pay about 17% of their income in taxes on average.
A study by White House economists found that the 400 wealthiest U.S. families paid an average income tax rate of just 8.2% from 2010 to 2018. This illustrates how wages are taxed at higher rates than income derived from wealth and demonstrates how this tiered rate system benefits the richest members of American society.
Two of the main types of assets that middle-income households own
Their homes and defined contribution retirement accounts like 401(k)s, are already taxed in ways that resemble proposals to tax the unrealized capital gains of the very wealthy. A family’s property taxes typically rise as the value of their home rises, and middle-class people pay the tax year after year in amounts reflecting those gains without selling their homes. In other words, ordinary Americans already pay annual taxes on unrealized gains in their most significant asset. Why should billionaires be exempt from a similar treatment on their stock portfolios?
Global Implications
ChatGPT pointed out that if major economies like the United States started taxing billionaires at working-class rates, it could encourage similar moves worldwide. This might lead to reduced global tax avoidance, more coordinated international tax policies, and pressure on tax havens to reform their systems.
The AI suggested that with global cooperation on tax policy, like international minimum tax agreements, it would be harder for billionaires to simply move their money elsewhere to avoid taxes. This matters because one of the primary arguments against taxing the wealthy is that they’ll simply relocate themselves or their assets to friendlier jurisdictions. International coordination could close that escape route.
What Would Change?
The AI outlined several ways this massive revenue increase could transform government services. Healthcare improvements could include expanding Medicare and Medicaid, potentially moving toward universal coverage. Education funding could support universal pre-K or make community college free for everyone. Infrastructure and climate investments could fund clean energy projects and fix crumbling roads and bridges. Debt reduction could allow us to actually pay down the national debt instead of adding to it every year.
ChatGPT noted that this extra revenue could stabilize the economy by boosting the spending power of everyday Americans, basically reducing inequality in a way that helps everyone, not just those at the bottom.
The Wealth Transfer Looming
There’s another dimension to this conversation that doesn’t get enough attention. Billionaires aged 70 or more will transfer an estimated $6.3 trillion over the next 15 years, mainly to families but also to chosen causes. That is a significant increase from 2023’s estimate of $5.2 trillion over 20 to 30 years, due to asset price inflation and the aging of billionaires.
Without changes to the stepped-up basis rules, much of this transfer will happen with minimal or no taxation. The Congressional Budget Office estimated that in 2019, 56% of the benefit of stepped-up basis went to the top 20% of the income distribution, with 18% going to the top 1% alone. The wealth concentration problem will only intensify as this intergenerational transfer accelerates.
Reform Proposals
Various policy proposals have attempted to address these inequities. The so-called buy, borrow, die strategy is a tax planning technique that allows wealthy Americans to pay low tax rates on consumed income, creates horizontal inequities, and distorts portfolio allocation decisions. Buy, borrow, die has attracted growing attention from economists, legal scholars, and politicians seeking ways to reform how capital gains are taxed in the US.
Proposals to reform stepped-up basis generally fall into two categories. Carryover basis would mean that rather than receiving a stepped up basis set to the current market value of an asset at the time of death, the inherited asset would retain the basis from the decedent. Alternatively, some proposals would treat death as a realization event, making capital gains taxable at death. Senator Elizabeth Warren’s wealth tax proposal could generate $113 billion annually, while Senator Ron Wyden’s billionaire income tax might add $56 billion per year. The most ambitious estimate came from Oxfam’s analysis of a comprehensive wealth tax on millionaires and billionaires, which could raise $664 billion annually.
The Bottom Line
ChatGPT concluded that if we could successfully tax billionaires more like middle-class workers, the results would mean hundreds of billions in additional revenue annually and potentially better funding for health, education, and climate programs. What’s more, it could have the power to reduce inequality and improve public trust in the tax system.
Maybe the real question isn’t whether billionaires should pay more taxes, but whether our entire approach to taxing work versus wealth makes sense in an economy where most billionaires’ fortunes come from asset appreciation rather than traditional income.
The research paints a clear picture
We have a tax system designed for an economy where most wealth comes from wages, operating in a world where the richest people accumulate fortunes through asset appreciation, they never need to sell. Middle-class workers pay taxes on every dollar they earn the moment they earn it. Billionaires watch their wealth multiply tax-free and borrow against it to fund whatever lifestyle they choose. When they die, the tax slate is wiped clean for their heirs.
Whether you believe this is an outrage that demands immediate reform or a reasonable system that encourages investment and economic growth, the facts themselves are not in dispute. The question is what we as a society want to do about them. ChatGPT’s analysis suggests the potential upside is enormous, the technical challenges are real but surmountable, and the political obstacles are formidable. What happens next depends on whether enough people decide the current arrangement is acceptable or whether they demand something different.
Read More: 5 Things Rich People Never Buy & 5 They Stock Up On Instead