It's not easy to become a commercial airline pilot. Getting the necessary licenses, ratings and flight hours can cost as much as $130,000 and take as long as four years.
The same goes for other demanding jobs such as surgeon or oil company engineer.
But if you stick with it and work hard, these are the kinds of jobs where you'll eventually make a hefty salary in the six figures — and you'll have earned it, given the life-and-death decisions you'll be making every day based on your experience and expertise.
When tax time comes, though, be prepared to pay up. Because a new working paper found that Americans who made the most through salaried jobs paid an effective tax rate of 45% in 2020, compared to 30% for the full population.
The 400 richest Americans paid an effective tax rate of just 24%, almost half the rate those pilots and surgeons were paying.
Economists with the National Bureau of Economic Research then combed through tax records to look at the richest Americans — those who were listed on the Forbes 400 — and found they paid an effective tax rate of just 24%, almost half the rate those pilots and surgeons were paying.
That's because the wealthiest Americans don't earn their money from salaried income. Instead, they get it through complex financial instruments, such as stock dividends, interest from bonds, rent from real estate and even gifts or inheritances, which are taxed at much lower rates than salaries.
Most Americans believe the wealthy should pay their fair share. A Pew Research Center study from earlier this year found that 58% of U.S. adults think tax rates on people making more than $400,000 a year should be raised. Even among Republicans, 43% percent thought they should be raised, compared to 27% who thought they should be lowered.
But whenever anyone makes this case in politics, they're attacked for promoting class warfare or attacking the rich. So let's just focus on the wealthy for a second.
The first group of people who do well in America are those who have worked hard, studied for years and gotten jobs where we entrust them with our lives: pilot, air traffic controller, emergency room doctor, surgeon, anesthesiologist. Their income is mostly from salary, some of which goes to paying off the debt they incurred to get that job, and they need to keep doing it to maintain their lifestyle.
The second group of people who do well in America are those who are, in some way, lucky. They inherited their money, or they started a business that was in the right place at the right time. They often work hard, but they could also choose to step back at any time and they would still be among the wealthiest Americans. They may get a big salary, but they could also live off the returns on their other investments if they wanted.
Which group do you think should pay a higher tax rate: the surgeon or the CEO? The pilot or the venture capitalist?
President Donald Trump has made clear what he thinks. The NBER study found that from 2010 to 2017, the tax rate for the wealthiest 400 Americans reached about 30%, similar to the U.S. average. But it fell after Trump signed the Tax Cuts and Jobs Act in 2017, which combined with corporate tax cuts gave a boost to the Forbes 400. A future study will no doubt find similar gains thanks to his One Big Beautiful Bill tax cuts.
That shouldn't be a surprise. Trump, after all, is currently No. 319 on that Forbes list, thanks to a lucrative post-presidency of selling shoddy coffee-table books and Garbage Pail Kid-worthy NFTs and, somehow, running a money-losing social media venture.
I don't begrudge the wealthy the money they've earned. If anything, I'd love to see more millionaires in the United States — and fewer billionaires. But our tax code isn't currently rewarding people who worked hard to get where they are. Instead, it's asking more of them than wealthy people who inherited their money or hit the jackpot with an IPO.
When you reward hard work, people tend to work hard. But what message are we sending when we reward people who got lucky?
