China's Push to Tax the Rich, Explained
China's effort to tax the rich now includes a 20% tax on offshore trusts, set out in July 2026, on top of a 45% top income tax rate. Personal income tax raised about 9% of China's tax revenue in 2025, while the US federal individual income tax brought in about half of federal receipts.
China has not adopted an inheritance tax or a national tax on homes. What it has done in 2026 is collect more of the income tax it already charges, including on money wealthy families hold through trusts abroad. The country’s tax code has a higher top rate than the US federal code, yet its personal income tax raises a much smaller share of government revenue.
This page sets out what China changed, what its 2025 revenue figures show, who pays US federal income tax according to the IRS, and the arguments people make on each side of the “tax the rich” debate. It reports what the documents say and takes no side.
What China changed in 2026
A 20% tax on offshore trusts. Reuters reported on 20 August 2026 that, in late July, Chinese authorities overhauled the rules to put a 20% income tax on offshore trusts, with income from such trusts taxed each year at 20%. Caixin Global reported on 25 July that the Ministry of Finance and the State Taxation Administration had issued guidance applying a 20% personal income tax when a trust is set up, while it operates and when it is wound up.
A look back to 2023. Reuters and the law firm Morgan Lewis both say unpaid tax on assets placed in offshore trusts since January 2023 must be reported within 90 days. Morgan Lewis names the rules as Announcement No. 21 of 2026 from the two agencies, issued on 24 July 2026.
Why it is called a push on the rich. In October 2021 the Communist Party journal Qiushi published an essay by Xi Jinping on “common prosperity”, his drive to narrow the gap between rich and poor. The China Project and Asia Financial both report that in it he called for property tax legislation to be advanced “vigorously and steadily” (The China Project translates it as “actively and steadily”).
What has not changed. China still has no national tax on the homes people live in. NPC Observer, which tracks China’s legislature, lists the national Real Estate Tax Law as not yet enacted, as of its June 2025 update. PwC’s China summary, last reviewed on 22 July 2026, says individuals are exempt from the annual real estate tax unless the property is used for business or rented out.
How it works: two different tax systems
China’s rate table. For residents, annual taxable income from wages and similar sources is taxed on a scale from 3% to 45%. The 45% rate applies to annual taxable income over CNY 960,000. The table is the same in PwC’s summary and the Shanghai government’s guide, and Chongqing’s government states the 3% to 45% range. Taxable income is counted after a standard deduction of CNY 60,000 a year.
Investment income is flat. Interest, dividends, rent and gains on selling assets are taxed at a flat 20% in China, whatever the person’s income, according to PwC and the Chongqing government’s summary of the law.
The US federal rate table. For tax year 2026, the IRS says the top rate stays at 37% for single filers with taxable income over $640,600, and $768,700 for married couples filing jointly. The standard deduction for a single filer is $16,100.
Taxes China does not levy. PwC and a Chambers and Partners private wealth guide both state that China has no inheritance or gift tax. In the US, the IRS sets the 2026 estate tax exclusion at $15 million per person, and Haynes Boone notes that the top federal estate tax rate remains 40%.
Who each country taxes. Chinese residents are generally taxed on worldwide income, according to PwC. The US goes further: the IRS says US citizens are taxed on worldwide income from all sources wherever they live.
Few others do the same. Very few other countries tax their citizens abroad. GGI Insider and Greenback Tax Services both name Eritrea, which charges its citizens abroad a 2% tax. Greenback and the law firm Allen & Gledhill both report that Myanmar began taxing its citizens’ income earned abroad in October 2023.
Leaving the US has a tax. The IRS treats a covered expatriate, a test that includes a net worth of $2 million or more, as having sold their property at fair market value on the day before leaving. For 2025, the first $890,000 of gain is excluded, per the IRS and Taxes for Expats.
Who pays US income tax
The IRS Statistics of Income table for tax year 2023, the latest year published, covers 153.1 million returns that paid $2.14 trillion of federal income tax. The 1.5 million returns in the top 1% needed adjusted gross income of at least $675,602.
That group reported 20.6% of all adjusted gross income and paid 38.4% of all federal income tax, or $823.4 billion. Its average tax rate was 26.3%. The top 10% paid 70.5% of the tax while reporting 47.6% of the income.
At the other end, the bottom half of returns reported 12.3% of income and paid 3.3% of the tax, an average rate of 3.7% by our arithmetic from the same table. The Tax Foundation and the National Taxpayers Union Foundation both report the 38.4%, 70.5% and 3.3% shares, and the Tax Foundation gives the 26.3% and 3.7% rates.
The Tax Foundation also notes that the top 1% paid nearly as much as the bottom 95% combined. In the IRS table, the bottom 95% of returns, about 145.4 million of them, paid $872.8 billion.
The original data
We drew three charts from the official tables. The first compares the top income tax rates and where they start, with China’s threshold converted at the 2025 average rate of 7.1875 yuan per dollar, the mean of 250 daily Federal Reserve rates published on FRED.
At that rate CNY 960,000 is about $133,600, so China’s 45% rate starts at a far lower income than the US 37% rate. The US figure is federal only; most states add their own income tax on top.
The second chart compares how much each government relies on the personal income tax. China’s Ministry of Finance reported national tax revenue of CNY 17,636.3 billion for 2025, of which personal income tax was CNY 1,618.7 billion, up 11.5% on the year. That is 9.2% of tax revenue, or about $225.2 billion at the 2025 average rate.
The US Treasury’s statement for fiscal 2025 shows $2,656.0 billion of individual income tax out of $5,234.6 billion in federal receipts, or 50.7%. The American Action Forum, reading the CBO and Treasury reports, gives the same totals rounded to $2.7 trillion and $5.2 trillion.
The two systems lean on different taxes. In the same Ministry of Finance release, domestic value-added tax brought in CNY 6,894.7 billion in 2025 and corporate income tax CNY 4,130.4 billion, about 4.3 and 2.6 times the personal income tax. In the US, payroll taxes for Social Security and Medicare are the other large source of federal receipts. So the personal income tax is a much smaller part of China’s revenue than of US federal revenue.
The third chart is the IRS table for 2023: each group’s share of income set beside its share of federal income tax.
Set side by side, the US top 1% paid $823.4 billion in 2023, about 3.7 times China’s entire personal income tax take for 2025 in dollars. The years differ and so do the economies, so treat that as a sense of scale, not a like-for-like test.
A worked example: bracket versus real rate
A single filer in 2026 with $70,000 of wages, no other income and no credits:
- Taxable income. $70,000 minus the $16,100 standard deduction leaves $53,900.
- The 10% band. The first $12,400 is taxed at 10%, which is $1,240.
- The 12% band. The next $38,000, up to $50,400, is taxed at 12%, which is $4,560.
- The 22% band. The last $3,500 is taxed at 22%, which is $770.
- The total. $6,570 of federal income tax, about 9.4% of wages, even though the top bracket reached is 22%.
In China, a resident with CNY 1,000,000 of annual taxable income works out the tax as 45% of the income minus a fixed quick deduction of CNY 181,920. That gives CNY 268,080, an average of about 26.8%, though the top rate is 45%.
The case each side makes
For taxing the top more. A 2021 White House study by the Council of Economic Advisers and the Office of Management and Budget estimated that the 400 wealthiest US families paid an average federal individual income tax rate of 8.2% over 2010 to 2018, once rising stock values they had not sold were counted as income. It gave a range of 6% to 12%. Gains are not taxed until an asset is sold, which is the gap that study points to.
Against that study’s method. The Tax Foundation responded that counting unsold gains as income needs a matching measure of tax, including corporate taxes, for a full picture. IRS data counts only realized income, which is why the 26.3% average for the top 1% and the 8.2% estimate can both be true of different measures.
On wealth that moves. Henley & Partners projected, in its June 2025 report, a net outflow of 7,800 millionaires from China in 2025 and 16,500 from the UK, while the UAE would gain 9,800 and the US 7,500, as Forbes Australia and Business Standard both reported. These are projections from a migration consultancy, not counts.
On rules and courts. In the World Justice Project’s 2025 Rule of Law Index of 143 countries, the US ranked 27th and China 92nd, per StatRanker and Adda247. The index scores factors such as limits on government power and regulatory enforcement; it does not measure tax policy.
What it means for you
Know your effective rate. A bracket describes only the last slice of income. The bottom half of returns had an average rate of 3.7% in 2023. Divide your total federal income tax by your total income to find your own figure, as in the worked example.
Know what triggers tax on investments. In the US, a gain is taxed only when you sell, which is why the capital gains tax page focuses on timing. Dividends are a different story: the tax on dividends is due in the year they are paid, even if they are reinvested.
Check where your investments sit. Holdings in a taxable account are taxed as income and gains occur, while retirement accounts follow their own rules. Which account holds which investment can change the bill.
If you live or plan to live abroad. US citizens whose income meets the filing threshold still file a US return each year, whatever country they live in. Moving does not end that duty; giving up citizenship can bring the exit tax described above.
When it fails: where these comparisons break
Statutory rates are not what people pay. A 45% or 37% top rate applies only to the last slice of income, after deductions. The average rates on this page come from IRS returns; no comparable Chinese figure by income group is published.
The comparisons mix definitions. China’s share is of national tax revenue in calendar 2025, which leaves out social insurance contributions. The US share is of all federal receipts in fiscal 2025, which includes payroll taxes, and it leaves out state and local income tax. A different denominator would move both percentages.
One exchange rate changes the dollar figures. We used the 2025 average of 7.1875 yuan per dollar. The rate was 6.7038 on 2 October 2026, which would make CNY 960,000 about $143,200 instead.
New rules take time to show up. The trust rules began in July 2026, after the 2025 revenue figures were recorded. Their effect on China’s revenue will not appear until later data is published.
The 400-family estimate is one study. It uses a broader idea of income than the tax code, and its own authors give a 6% to 12% range.
Related
For how US investment gains are taxed and when, start with capital gains tax and taxes on trading. The tax on dividends page covers income that arrives while you still hold an investment, and taxable accounts explains where asset location changes the cost.
Before reacting to a headline about who pays too much or too little tax, work out your own effective rate. Take last year’s total federal income tax and divide it by your total income, then compare that with your bracket.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.