A trove of leaked IRS files revealed that many of the country’s richest billionaires pay next to nothing in taxes, ProPublica reports.
The cache of files obtained by the outlet shows that Amazon founder Jeff Bezos paid no federal income taxes at all in 2007 and 2011. Tesla founder Elon Musk paid no taxes in 2018. Former New York Mayor Michael Bloomberg, billionaire investor Carl Icahn, and billionaire George Soros have also had years with no federal income taxes.
The data covers 15 years and shows that billionaires routinely pay lower tax rates than average Americans.
The average US tax rate is 14% and the top income tax rate is 37% but many of the billionaires paid far less, especially when accounting for how much their wealth grew during that time.
“True tax rate”:
ProPublica compared how much taxes the richest 25 Americans paid to how much Forbes estimated their net worth grew over that time.
In total, the 25 richest Americans saw their wealth rise $401 billion between 2014 and 2018 and paid just $13.6 billion in federal income taxes over that stretch. That puts them at an effective tax rate of just 3.4%.
By comparison, the average worker in their early 40s grew their net worth by $65,000 over that same period while paying $62,000 in taxes.
Some billionaires paid well below the 3.4% rate. Musk paid a “true tax rate” of just 3.27%. For Bloomberg, it was 1.3%. For Bezos, it was 0.98%. For top investor Warren Buffett, it was just 0.1%.
How the wealthy avoid taxes:
None of the billionaires appeared to use illicit schemes to avoid taxes.
Many of the top CEOs have taken low salaries, which are taxed at a higher rate than investments. Bezos receives a salary of $80,000 per year. Facebook’s Mark Zuckerberg takes just $1 per year.
The top 25 wealthiest Americans reported just $158 million in wages in 2018, just 1.1% of what they listed on their tax forms as their total reported income.
The rest came from dividends and stock sales, which are taxed at a lower rate. But they’re not taxed at all if they are not sold. So many investors keep their stock holdings to avoid paying taxes as their wealth rises. Some companies have even eliminated stock dividends, which pay out to shareholders when a company earns a profit, to avoid additional taxes.
More importantly, these billionaires often take out loans, which currently come with low-interest rates and no tax, to lower their taxable earnings while using their unsold stock holdings as collateral.
Others also use tax credits, deductions, and losses to offset earnings. Some properties, like sports teams and commercial buildings, come with built-in tax deductions.