It’s a common headline: a billionaire public petitions for higher taxes on the ultra-rich. Yet, you rarely see those same individuals cutting voluntary checks to the U.S. Treasury.
That’s because the American tax system isn’t built for donations, but rather for taxable income, deductions, and incentives. So, even if a high-net-worth person sent money to the federal government, that extra cash would simply go toward the nation’s $39 trillion national debt — without changing the donor’s tax liability.
This disconnect is key since it helps explain a broader frustration with the IRS tax code.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
A recent Pew Research Center study finds that 60% of Americans believe wealthy individuals and corporations don’t pay their “fair share” in taxes.
And, in response, some point out that high earners technically fund a large portion of federal income taxes, but they do so based on income rather than wealth. That difference means more of what makes the ultra-rich wealthy isn’t taxed at ordinary rates. This gives wealthier individuals more flexibility to control which assets are taxed and for how much.
Here’s how high-net-worth individuals leverage the tax code, who actually pay the most federal income taxes, and what it means for your own income tax bill in 2026.
Why billionaires don’t use the ‘donation box’
You can’t donate to the IRS since your tax bill is a legal obligation, not a charitable choice. You also can’t pay another person’s income taxes.
However, the U.S. Treasury Department maintains a program called Gifts to Reduce the Public Debt that receives donations to reduce the national debt.
- Since 1996, this program has received roughly $67 million in total donations.
- As of May 2026, the national debt stands at approximately $39 trillion.
- So at current federal spending rates, that 30-year total of donations would fund the U.S. government for about 20 minutes.
As the high-net-worth advocacy group Patriotic Millionaires notes, individual gifts cannot replace structural policy.
“A few wealthy people giving our money to the government wouldn’t fund a massive investment in our country’s infrastructure,” the group stated in a release. “….our individual funds simply aren’t enough to make a difference.”
This is because federal income taxes are the bedrock for multi-billion-dollar programs like the Supplemental Nutritional Assistance Program (SNAP), Medicaid, and national defense. Since these obligations are generally permanent, they require dependable funds that the government can budget for.
And consistency is key. While the federal government isn’t a charity, the importance of consistent revenue is shared with nonprofits.
“Recurring donations are vital to organizational growth and long-term sustainability,” NextAfter, a fundraising research lab, reported in a recent benchmark study. “Not only do they bring consistency…they also create longer-lasting and more valuable donors.”
(Image credit: Getty Images)
Who actually pays the most tax?
According to data from the National Taxpayers Union Foundation (NTUF), the current U.S. tax system is progressive. This means that, as taxable income increases, so does the percentage of federal income tax you pay.
In the most recent reporting cycle (updated April 2026):
|
Taxpayer Group |
Income Threshold |
Share of Total Income |
Share of Federal Income Tax Paid |
|
Top 1% |
$675,602 or more |
20.6% |
38.4% |
|
Top 5% |
$272,209 |
36.4% |
59.3% |
|
Top 10% |
$187,608 |
47.6% |
70.5% |
|
Top 25% |
$105,604 |
68.5% |
86.3% |
|
Top 50% |
$53,801 |
87.7% |
96.7% |
|
Bottom 50% |
Under $53,801 |
12.3% |
3.3% |
What does this table mean? Well, the top 1% earns about 20% of the nation’s income, but pay nearly 40% of the taxes. The top 10% earn about 48% of U.S. income but pay about 70.5% of the annual federal income tax bill. Both groups’ tax shares exceed their income shares.
But it’s important to note that the data only covers federal income tax. The table does not include payroll taxes (Social Security and Medicare) or state and local taxes, both of which disproportionately affect lower and middle-income earners more than high-income earners, as reported by the Institute on Taxation and Economic Policy (ITEP).
Meanwhile, the U.S. tax gap — which is the amount of federal taxes owed but not paid — remains a sticking point for your tax dollars. The IRS estimates this gap at roughly $600 billion, with a large share of unreported income coming from the top 1% of earners.
Closing the gap through enforcement on the top 1% alone could theoretically recover $163 billion, per recent Treasury estimates, far more than any donation program could achieve through voluntary checks to the government.
However, the funding levels for IRS enforcement have been a point of significant legislative debate in 2026, impacting how the agency addresses the tax gap and similar initiatives.
How the wealthy employ tax strategies
According to the Pew study, many Americans think some corporations and wealthy people don’t pay their “fair share” in taxes. But if the top 10% of earners pay 70.5% of all federal income tax, why the disparity in perception?
Part of the answer lies in the source of income. Most Americans live on “earned income” (W-2 wages, 1099s, etc.), taxed at ordinary federal rates up to 37%, plus subject to payroll taxes like Social Security and FICA.
But high-net-worth individuals often live on wealth that bypasses these taxes, utilizing a so-called “Buy, Borrow, Die” strategy:
- Buy. They acquire appreciating assets (stocks, real estate, etc.).
- Borrow. Instead of selling (which triggers capital gains tax rates), they take low-interest loans against those assets. Loans are not taxable income.
- Die. Heirs receive the assets at a “stepped-up basis,” meaning the capital gains built up over a lifetime are essentially erased for tax purposes.
High-wealth individuals might also make large donations to private foundations to allow for immediate deductions, employ business expense deductions, and receive compensation through stock options or distributions (rather than salaries or wages) to further lower their income tax liability.
While these methods are theoretically available to all, unless you have significant capital to begin with, it’s difficult to “break in” to the wealth-preservation strategies used by high-net-worth individuals.
Note: These strategies involve significant legal and liquidity risks and are not one-size-fits-all solutions.
The bottom line: Ways to lower your tax bill
Although the average taxpayer might not be able to live off loans against a billion-dollar stock portfolio, you can still move the needle on your own “tax gap” by using the IRS code’s intended incentives.
Here are a few ideas for lowering your income taxes (if you’re eligible):
- Audit your “voluntary” overpayment. If you’re getting a massive refund every year, you’re essentially giving the IRS an interest-free loan. Adjusting your tax withholding ensures your money stays in your pocket for investment throughout the year.
- Create your own “tax-free” bucket. You may not have a private foundation, but traditional 401(k)s or individual retirement accounts (IRAs) allow you to shield income from the IRS today. By using pre-tax dollars, you’re effectively lowering your taxable income and withdrawing those funds at perhaps a lower rate during retirement.
- Prune your portfolio. Use tax-loss harvesting to offset capital gains with losses (just be mindful of the “wash-sale” rule, which disallows the loss if you buy the same or a “substantially identical” asset within 30 days). Also, keep an eye on the calendar: assets held for more than one year qualify for long-term capital gains rates, which, at 0%, 15%, or 20%, are significantly lower than the ordinary income rates applied to short-term gains.
And if you’re feeling generous…
Starting this year, new charitable deduction rules take effect. Up to $1,000 ($2,000 for married filing jointly couples) in qualified cash donations can be deductible on your federal return, even if you claim the standard deduction.
But whether you send that check to the Treasury to fund a millisecond of federal overhead — or provide thousands of meals at a qualified food bank — the choice is yours. After all, we can’t all be billionaires.
This article is for informational purposes only and does not constitute professional tax or financial advice. Tax laws are subject to change and vary by individual circumstances. Consult with a qualified tax professional regarding your specific situation.