Most people know that the very wealthy (billionaires) pay less in taxes (based on their wealth) than the average worker, but a new report from ProPublica shows that this disparity may be greater than most people realize. Jeff Bezos, Mark Zuckerberg, Elon Musk and other billionaires have vast fortunes and pay extremely low or no income taxes. ProPublica reported its findings based on documents from the Internal Revenue Service (IRS), the government agency responsible for collecting taxes.
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However, ProPublica emphasizes that Bezos, Musk and the other billionaires are not doing anything illegal to avoid taxes. None of the activities were illegal. They are exploiting legal tax tactics that allow them to reduce their taxes. Tax records, however, reveal how billionaires minimize taxes, sometimes taking out loans using their stocks as collateral. Wage earners, on the other hand, live mainly on their salaries, which are taxed as income. Essentially, a large part of billionaires’ wealth comes from sources that are taxed at a low rate, while ordinary workers have no such sources of profit.
ProPublica's analysis reveals extremely personal and secret information about Bezos, Zuckerberg, Musk and other wealthy and well-known Americans (George Soros and Warren Buffett).
What did the report reveal about Jeff Bezos and Elon Musk?
Jeff Bezos
The Amazon and one of the richest people in the world is said to have paid no federal income taxes for the years 2007 and 2011. In 2007, Bezos' wealth increased by $3.8 billion, according to Forbes, but he (legally) reported income of $46 million. He offset that income with investment losses, debt write-downs and other expenses, resulting in zero taxes, according to ProPublica.
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Between 2006 and 2018, Bezos' wealth reportedly increased by $127 billion, but his total reported income for that period was $6.5 billion, and he paid taxes (in total) of $1.4 billion. That equates to a tax rate of about 21% on his reported income, or 1.1% on his total wealth.
Elon Musk
According to ProPublica, Tesla 's CEO paid zero taxes in 2018.
A chart showed that Musk's wealth increased by $13.9 billion from 2014 to 2018. He reported income of $1.52 billion and paid taxes of $455 million for that period.
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Musk has used Tesla shares as collateral for personal loans, a strategy used by many wealthy people.
How do billionaires get tax exemption?
The federal government taxes only “income,” which includes wages, stock dividends, bond interest, and proceeds from the sale of financial instruments. A significant portion of billionaires’ wealth, however, comes from other sources that are not taxed or taxed at a low rate.
Billionaire investor Warren Buffett is a proponent of higher taxes on the wealthy, even though he himself uses current laws to keep his tax payments low relative to his wealth. Buffett has described the current tax system as part of a “class war” and has said that “his class has won” that war.
Source: CNET
