Bezos calls for zero income tax on bottom half of earners

Jeff Bezos, the world's fourth-richest person, made a pointed case Wednesday for eliminating federal income taxes on lower-income Americans, while casting doubt on whether raising taxes on the ultra-wealthy would meaningfully improve the lives of those who are struggling.

Speaking on CNBC's "Squawk Box" from Florida, the Amazon executive chair said the bottom half of U.S. earners – those making less than roughly $54,000 per year – should owe nothing to the federal government. The bottom 50% of taxpayers currently contribute about 3% of total federal income tax revenue, a figure Bezos said should be zero.

"I don't want to reduce it, I want to eliminate it," Bezos told anchor Andrew Ross Sorkin. "I think there's something very powerful about zero. Zero is a better number than $1."

Bezos, whose net worth is estimated at approximately $270 billion, argued that zeroing out the tax burden for low earners would free up capital and foster entrepreneurship.

"Maybe they're going to be the next Steve Jobs," he said.

A tale of two economies

Bezos framed his comments around what he described as a bifurcated economic reality – what economists have labeled a K-shaped economy. Higher-income Americans continue to benefit from surging asset values and strong wage growth, while lower- and middle-income households grapple with the lingering effects of inflation, elevated gas prices, and the end of pandemic-era relief programs.

"You have a bunch of people in this country who are doing really well, but you also have a bunch of people in this country who are struggling," Bezos said.

Federal Reserve Bank of New York research has documented how the expiration of pandemic-era subsidies created a measurable economic split beginning in 2023, a trend that researchers say is being aggravated by elevated fuel costs.

For financial advisors serving clients across the income spectrum, the debate over who ought to shoulder the federal tax burden has direct implications for retirement planning, Social Security strategy, and the long-term financial health of working-age Americans. The average income tax rate in 2023 was 14.1%, according to the Tax Foundation, while the bottom half of taxpayers paid an average rate of just 3.7%.

Citing Erica York, vice president of federal tax policy at the think tank, CNBC said that the bottom 40% of households already pay no net federal income tax on average, when accounting for refundable tax credits.

Questioning the 'villain' narrative

Bezos also pushed back against what he called a political reflex to target billionaires to solve income inequality, arguing the approach is more about electoral positioning than economic remedy.

"What's happening here is politicians are using the kind of age-old technique – picking a villain and pointing fingers," he said. "But the problem is that doesn't solve anything."

He used a hypothetical nurse in Queens, New York, to illustrate both sides of his argument: that low-income workers should be exempt from income taxes, and that taxing the wealthy would do little to improve their lot in life. "You could double the taxes I pay, and it's not going to help that teacher in Queens," he said.

"We shouldn't be asking this nurse in Queens to send money to Washington," he added. "They should be sending her an apology. It really makes no sense."

That drew immediate pushback from New York City Mayor Zohran Mamdani. "I know a few teachers in Queens who would beg to differ," he wrote on social media.

Mamdani, a self-described democratic socialist who has built a national profile around taxing the wealthy, recently announced a proposed "pied-à-terre" tax targeting residential property owners who don't live in New York City full time. The announcement was broadcast on Tax Day, with Mamdani standing outside a building where hedge fund manager Ken Griffin paid $238 million for a penthouse in 2019.

In response, Griffin initially threatened to scale back plans for a new Manhattan office tower, though he later conceded he would "probably" move forward with the project.

Read more: Ken Griffin sounds alarm on tax creep as more states target the wealthy

For wealth managers and financial advisors tracking client relocation decisions, the question of whether tax policy actually drives wealthy Americans out of major cities remains largely unsettled.

Early evidence from New York suggests it does not: luxury apartment contracts priced above $4 million surged 25% in the weeks after Mamdani's election, according to NBC News, and transactions above $10 million were up 80% in May year-over-year.

Who actually pays their fair share?

The broader debate over tax fairness is more complicated than either side typically acknowledges. The top 1% of taxpayers accounted for roughly 38% of all federal income taxes paid in 2023, despite earning about 21% of total adjusted gross income, according to the Tax Foundation.

At the same time, critics of the current system note that high earners frequently reduce their effective rates substantially through the "intricacies of the tax code," as a 2024 Yale University Budget Lab analysis put it. There's extreme dispersion among taxpayers in the top 1%, with some paying effective rates as low as 3% while others experience rates as high as 45%.

Read more: State-level groundswell on wealth taxes puts advisors and billionaires on notice

Progressive analysts argue the full picture looks different when all taxes are factored in. Payroll taxes, for instance, are not assessed on wage income above $184,500, meaning Social Security contributions are proportionally heavier for middle-income workers.

When all federal, state, and local taxes are considered, the top 1% account for just 24% of total tax revenue – only slightly above their 20% share of reported income, according to the Institute on Taxation and Economic Policy.