While many Americans might have aspirations of becoming a millionaire, only 3.8 million — or 1.1% of the U.S. population — have managed to meet this wealth marker, per Empower.
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And while approximately one out of 100 Americans might have notched that life goal on their belt, the fact is that the U.S. tax system, as a progressive tax system, also levies a higher effective tax rate on these richer citizens.
So, how much are millionaires paying in taxes, exactly? GOBankingRates turned to OpenAI’s latest ChatGPT 5.2 model to get some definitive answers.
A Tale of Two Millionaires: Net Worth Versus Annual Income
As ChatGPT pointed out, there are two ways of categorizing a millionaire: Those who hold assets resulting in a net worth exceeding $1 million, and the somewhat rarer category of those who earn $1 million or more annually. Concerning the latter cohort, Realtor.com suggests that number rests at ~800,000 Americans.
The more common category of those holding long-term wealth to accrue $1 million-plus in net worth was suggested by ChatGPT to have earnings mostly garnered through capital gains on investments. Using a combined calculation of capital gains taxes, net investment income tax (NIIT), and a very broad assumption on state and local taxes pulled from the Institute on Taxation and Economic Policy (ITEP), the AI model suggested that these millionaires enjoy a combined effective tax rate of 26.45%.
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The bottom line, per year, is that so-called “long-term capital gains” millionaires submit just over $264,000 in taxes, according to OpenAI’s LLM.
On the other hand, those pulling down a cool $1 million or more in annual income are harder-hit by taxes, per IRS guidelines.
In a much more basic calculation employing only looking at W-2 wage income, ChatGPT predicted that this second sort of hypothetical millionaire would end up paying just over $425,000 in taxes. This is based on raw income taxes of almost exactly $320,000; Social Security Administration taxes of $11,439; Medicare taxes of $21,700, and a the aforementioned loose state/local tax bill of $72,000 (for an effective tax rate of ~42.51%).
State and Local Tax Calculation for a Hypothetical Millionaire, Explained by ChatGPT
Critically reflecting on the model’s projections, the most nebulous factor in these calculations is likely the attempt to corral a correct number when it comes to average state or local income taxes, as ChatGPT underscored.
“A truly ‘average state income tax’ for a millionaire is slippery because: Some states have no broad income tax, some have high top brackets, local income taxes exist in some places, and state/local burdens include sales + property too.
“What we can source cleanly as an average is ITEP’s weighted national average effective state+local tax rate by income group,” it added, proceeding to incorporate those numbers into its estimate.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT How Much the Average Millionaire Pays in Taxes — Here’s What It Revealed
