A recent report published by the Joint Committee on Taxation (JCT) is being touted by Congressional Republicans as proof that the ultra-wealthy pay their fair share in taxes, but nothing could be further from the truth. This study says that in 2019 the top 0.01% of highest-income earners—roughly 16,000 taxpayers—paid a cumulative effective federal tax rate of 34%. This figure is being misused by some opponents of progressive tax reform as an argument against making the tax code more fair. Here’s the full picture behind this misleading number:

1.  The JCT calculation excluded the increased value of investments: Billionaires and other hyper-wealthy people can use their unrealized capital gains to pursue lives of luxury and buy key sectors of our economy without ever having to report it as taxable income. It stands to reason that those gains should be included in the calculation of their income. According to the Federal Reserve’s 2019 Survey of Consumer Finances, the top earning 0.01% of households had on average $124 million of unrealized capital gains, that is in addition to the $26.3 million of reported income that JCT estimates for the same year. If all of the top 0.01% income is counted, their effective tax rate goes down dramatically. A White House study determined that the average tax rate of the nation’s 400 wealthiest families between 2010-18 was just 8.2% when unrealized capital gains are included. Using this metric is a more realistic definition of income for the super-rich.

2.  Highest-income taxpayers are not the same as the richest: JCT’s report examined taxpayers by income, not wealth. But billionaires and other ultra-wealthy people can organize their finances so as to generate relatively little taxable income. Because almost all federal taxes are determined based on net realized income, it is possible for the ultra-wealthy to forgo typical forms of income and thus not even get included in the top income percentile or pay much in taxes, while still living lives of luxury. Jeff Bezos in 2011 was worth $18 billion, but reported so little income to the IRS that he was able to claim the Child Tax Credit which at the time was reserved for couples making less than $130,000 of annual income. Donald Trump reported huge paper losses from his business ventures for a number of years, and paid next to nothing in taxes, while being worth several billion dollars. 

3.  The Internal Revenue Service estimates a lower income-tax figure: According to JCT, the bulk of the taxes paid by the top 0.01% are paid through the federal income tax—estimated to be 30.4% in 2019—with the remaining coming from payroll tax, estate tax, and their imputed share of the corporate income tax. But the IRS estimates the top 0.01% paid an effective income tax rate of 24.7% in 2019, substantially less than the headline JCT figure. 

4.  A 34% tax rate on the ultra-rich is a historic low: Even if you accept the JCT figure, it does not come close to what the very wealthy used to pay in taxes in living memory. According to award-winning economists Emmanuel Saez and Gabriel Zucman, the top 0.01% of households paid an effective combined tax rate of 68% in 1950, 55% in 1960, 54% in 1970, and 46% in 1980. This period of the ultra-wealthy paying much higher tax rates corresponds with the broad based economic expansion that followed the Second World War. If the top income cohort just paid the same tax rate in 2019 as they did in 1980, it would have generated up to $50 billion in additional revenue that single year.

5.  JCT relied on a calculation of “national income” that is hotly contested among economists: In addition to excluding the income that flows from the ultra-wealthy’s unrealized gains, JCT relied on a controversial new measure of imputing income that almost certainly undercounts the income received by those at the very top and overcounts it for those at the bottom, skewing their conclusions on effective tax rates.