Tax rates collapse for billionaires in France
The paper by Laurent Bach, Antoine Bozio, Arthur Guillouzouic, and Clément Malgouyres, employs a novel shareholder registry linking French households’ personal tax records to corporate tax returns for the fiscal year 2016. The authors created a comprehensive income measure by combining three data sources: corporate tax returns, household tax records, and newly available Country-by-Country Reporting (CbCR) data on multinational groups. This integration allows the attribution of undistributed corporate profits to households that control firms (defined as owning at least 10% of shares).
The comprehensive income measure is constructed as: taxable income plus non-contributory social security contributions plus undistributed profits of controlled companies minus capital gains on securities. This approach captures all monetary income available to households, including income retained within corporations, making it payout-policy neutral—unlike traditional taxable income measures which fluctuate with dividend policies.
Findings
- Income concentration: Comprehensive income is substantially more concentrated than taxable income. The top 0.1% income share nearly doubles from 3.4% (taxable) to 6.2% (comprehensive), and for billionaires (top 75 households), comprehensive income is approximately six times larger than taxable income.
- Tax progressivity breakdown: Personal taxes remain progressive up to the top 0.1% of earners but then decline dramatically. While the top 0.1% pays approximately 35% in personal taxes, billionaires pay only 2%—a striking regression at the very top.
- Total tax burden decline: The combined effective tax rate (personal income, wealth, and corporate taxes) falls from 45% at the top 0.1% threshold to 25% for billionaires—a decline of 20 percentage points.
- Corporate tax as “backstop”: The corporate income tax becomes the dominant tax at the very top, shifting from a minor contributor at the top 1% to the primary tax burden for the top 0.01%. However, this substitution occurs at a lower tax rate (33% corporate versus 45% personal), creating the net decline in total tax burden.
- Holding company prevalence: Almost all billionaires employ pyramidal control structures through holding companies, which allow them to retain earnings within corporate vehicles while minimizing personal dividend income.
- Global tax dimension: Approximately half of the corporate taxes paid by billionaires are remitted abroad at lower average rates than France’s statutory rate, reflecting substantial foreign operations of French multinationals.
Do Billionaires Pay Taxes?
Authors: Laurent Bach, Antoine Bozio, Arthur Guillouzouic, Clément Malgouyres
From: ESSEC Business School, Paris School of Economics, Aix-Marseille School of Economics, CREST-IPP
Tax rates collapse for billionaires in the United States
This working paper by Akcan S. Balkir, Emmanuel Saez, Danny Yagan, and Gabriel Zucman employs a comprehensive administrative data approach to estimate effective tax rates for the wealthiest Americans. The authors matched Forbes 400 data to individual income tax returns, business tax returns, estate and gift tax returns, and corporate financial data covering 2010–2020. The match rate was 98% for years 2010–2020.
The core methodological approach uses “economic income” (basic-price national income) as the denominator for calculating effective tax rates. This captures all income sources including profits from public corporations, private businesses, wages, and capital gains—regardless of how they’re reported for tax purposes. Bakir et al. allocate all corporate taxes directly to business owners rather than shifting them economy-wide, ensuring a direct link between corporate tax payments and shareholder effective rates. The paper includes all federal, state, local, and foreign taxes across individual income, payroll, corporate, estate, gift, and property taxes.
Unlike the Bach et al. paper above, Bakir et al.’s US income measure is explicitly designed to align with national accounts methodology for international comparability, while the French measure more closely approximates Haig-Simons income (excluding only price-effect-driven capital gains) and incorporates country-specific tax treatments like non-contributory social contributions.
Findings
The top 0.0002% (approximately 400 Americans) paid an effective tax rate of 23.8% of economic income in 2018–2020, compared to 30.2% for the full U.S. population and 45% for top labor income earners. This lower rate for billionaires reflects several structural features of wealth taxation:
- Base erosion mechanisms: The most significant factor is that taxable income reported on individual tax returns represents only 40% of economic income for the top 400, versus 70% for the general population. C-corporations owned by billionaires distribute just 19% of pretax income as dividends, and passthrough businesses reported negative taxable income on average despite positive book income, primarily due to depreciation and full expensing provisions introduced in the Tax Cuts and Jobs Act.
- Corporate tax role: Corporate taxes account for 37% of total tax payments for the top 400, contributing approximately 9 percentage points to their 23.8% effective rate. This highlights that individual income taxes alone understate the tax burden on wealth owners.
- Temporal decline: The effective tax rate fell significantly from approximately 30% in 2010–2017 to 24% in 2018–2020, driven by lower statutory corporate tax rates (reduced from 35% to 21%) and narrowing individual income tax bases due to increased use of tax-reducing provisions.
The analysis reveals that billionaires’ lower tax burden is not primarily attributable to tax evasion but rather reflects legal provisions allowing income to escape the individual income tax base through retained earnings, depreciation allowances, and full expensing provisions that create divergences between economic and taxable income.
How Much Tax Do US Billionaires Pay? Evidence from Administrative Data
Authors: Akcan S. Balkir, Emmanuel Saez, Danny Yagan, Gabriel Zucman
From: University of California, Berkeley
