The richest 25 people in the US—including Jeff Bezos, Elon Musk and Warren Buffett—paid as little as 3.4 percent of their gains in wealth in tax between 2014 and 2018.
An investigation by US news organisation ProPublica into the tax returns of the 25 revealed their net worth rose by £282.77 billion in those years.
They paid a total of £9.62 billion in federal income taxes in the same period. The White House’s response? To call the leak of tax information “illegal”.
Internal Revenue Service data shows Amazon founder Bezos paid no federal taxes in 2007, or in 2011 when he instead received a £2,800 tax credit for his children.
Bezos’ wealth grew by £70 billion in the four-year period, but he paid 0.98 percent of it in tax. He was the first person to be worth $200 billion (£141 billion) last year during a global pandemic and economic crisis.
Buffett paid £16.7 million in taxes between 2014 and 2018 on a reported income of £88 million. Yet Buffett’s wealth grew by £17.1 billion—giving him a “true tax rate” of 0.1 percent.
He is currently worth £67 billion.
And Tesla owner Musk, now worth some £106 billion, paid 3.27 percent. Michael Bloomberg paid 1.3 percent between 2014 and 2018..
He told ProPublica he paid the taxes he owed, and cited his “philanthropy”.
The crooks have managed to get away with paying so little because America’s tax laws do not treat increases in wealth from assets in the same way as wealth from wages. This means the mega rich are “using perfectly legal tax strategies”.
And the value of their wealth grows through the ownership of shares in their companies—not as recorded income.
“America’s billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people,” ProPublica reported. “Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by US laws as taxable income unless and until the billionaires sell.”
Jesse Eisinger, editor of ProPublica, said, “Ultra-wealthy people can sidestep the system in an entirely legal way.
“They have enormous ability to find deductions, find credits and exploit loopholes in the system. They also take aggressive tax deductions, often because they have borrowed to fund their lifestyle.”
US billionaires buy an asset, build one or inherit a fortune, and then borrow against their wealth. And if they don't sell any stock, they're not taking any income that could be taxed.
“They then borrow from a bank at a relatively low interest rate, live off that and can use the interest expenses as deductions on their income,” Eisinger explained.
They are also able to reduce their income tax bills through charitable donations and taking money from investment income rather than wage income.
In America the richest 400 people currently own more wealth than the bottom 150 million Americans combined.
President Joe Biden says he will raise the top rate of tax, double the tax on what high earners make from investments, and change inheritance tax.
But ProPublica said, “While some wealthy Americans, such as hedge fund managers, would pay more taxes under the current Biden administration proposals, the vast majority of the top 25 would see little change.”
Some say the solution is taxing wealth, not income. But billionaires would still hoard and hide vast amounts of wealth.
The solution is to take their profits and their ownership away.