Warren Buffett and Jamie Dimon want billionaires to pay their fair share to Uncle Sam. But a ‘millionaires tax’ would likely affect all the wrong people

America’s most celebrated investor and the head of Wall Street’s most powerful bank have had a clear message for Washington: Tax us more.  Warren Buffett and Jamie Dimon, the CEOs of Berkshire Hathaway and JP Morgan Chase, respectively, have both advocated for raising taxes on the rich as a matter of fairness—and to address a burgeoning federal deficit.

Congressional Republicans, traditionally opposed to hiking taxes on the wealthy, are reportedly mulling a so-called “millionaires tax,” underlining how President Donald Trump’s populist appeal has transformed the party. While the proposal faces opposition from plenty of prominent Republicans, the move has been floated to help pay for tax breaks on tips, overtime time, and Social Security benefits, as well as the extension of provisions in the 2017 Tax Cuts and Jobs Act.

That argument aside, however, increasing income taxes on high earners is unlikely to make billionaires like Buffett, Dimon, Elon Musk, and Jeff Bezos pay much more to the government. That’s because ultra-wealthy individuals overwhelmingly accumulate most of their wealth from investment income, rather than from wages and salaries like most Americans. Meanwhile, job cuts in the audit division of the Internal Revenue Service and upheaval at the top of the agency means tax avoidance could get even easier. 

In other words, a “millionaires’ tax” would likely fall more heavily on bakers, doctors, lawyers, professional athletes, and run-of-the-mill executives rather than the likes of Musk, Bezos, Buffett, and Mark Zuckerberg. In fact, legal strategies can allow them to pay little-to-nothing at all.

For reference, Bezos, the founder of Amazon, did not pay a cent in federal income tax from 2007 and 2011 despite being a multi-billionaire, according to an analysis of his tax returns obtained by ProPublica in 2021. Bezos is now the world’s second-richest person with a net worth of $195 billion, per the Bloomberg Billionaires Index.

Tesla CEO Elon Musk, who leads the way with a $304 billion net worth, managed the same feat in 2018. ProPublica found none of the country’s 25 wealthiest people had avoided as much tax over several years as Buffett, however.

The Oracle of Omaha has consistently raised this issue himself, famously pointing out he was subject to a lower tax rate than his secretary, Debbie Bosanek.

Bosanek somewhat inadvertently became the face of tax inequality in the U.S., and, in 2011, President Barack Obama proposed the so-called “Buffett rule,” which aimed to increase the effective tax rate on millionaires to 30% by eliminating certain tax breaks and subsidies. A bill was eventually blocked by a Republican filibuster.

A ‘millionaires’ tax’ wouldn’t cut it

Six states—California, Connecticut, Maine, Massachusetts, New Jersey, and New York (along with Washington D.C.)—have adopted “millionaire taxes,” all of which focus on income. At the federal level, a top rate of 37% applies to individuals making at least $626,350. Congressional Republicans have reportedly considered increasing that rate to 40% for those making about $370,000 more.

For now, however, it appears the proposal would not affect qualified dividends and long-term capital gains, which are currently hit with a top rate of 23.8%. Private equity also benefits from being taxed at that rate for carried interest, which also accounts for the bulk of compensation for venture capital and hedge-fund managers. Trump has indicated he wants to close the loophole, which the Congressional Budget Office estimates would cut the federal deficit by $13 billion through 2034.  

Some argue the ultra-wealthy are already subject to high tax rates, however. The American Tax Foundation, a conservative-leaning think tank, says a 2024 study from the Treasury Department shows the country’s wealthiest individuals are hit with effective tax rates as high as 60% when accounting for corporate income and estate taxes at home and abroad, as well as state and local taxes.

“The Treasury study was no doubt commissioned to demonstrate that wealthy Americans pay a relatively small amount of income taxes compared to their total wealth,” Tax Foundation President emeritus Scott Hodge wrote. “But most governments, foreign and domestic, tax people and businesses on their income and not their wealth.”

A simple “millionaires’ tax” likely wouldn’t change that.

This story was originally featured on Fortune.com