ProPublica got its hands on a trove of IRS documents.
Most people know that the ultrarich pay far less in taxes as a percentage of their wealth than the average working hardliner, but a new report from ProPublica suggests that inequality may be greater than imagined.
Jeff Bezos, Mark Zuckerberg and Elon Musk, among other moguls, built up their wealth in the high billions while paying almost nothing in federal taxes by structuring their salaries to avoid income, the investigation site reported, according to IRS documents. Reported after a hide.
None of the activity was illegal, ProPublica said. However, tax records show how the super-rich minimize taxes, sometimes by taking loans from their stock holdings as collateral. Wage earners, by comparison, live primarily from their salaries, which are taxed as income.
As of 2018, the 25 richest people in America had a net worth of $1.1 trillion, according to an analysis of ProPublica’s tax records. The publication said it would have taken the assets of 14.3 million average American wage earners equal to that amount. Those wage earners would have paid an estimated $143 billion in taxes, which is 75 times more than the $1.9 billion the 25 wealthiest Americans paid $1.9 billion in 2018.
The analysis uncovers highly personal and secret information about Bezos, Zuckerberg and Musk, as well as other famous members of the richest ranks in America, including George Soros and Warren Buffett. The tech CEO did not immediately respond to Nerdshala’s requests for comment, and did not provide comment to ProPublica (though Musk did respond to initial inquiries with the only “?”).
Here’s what we learned about the major tech majors from the report:
The man who is currently the second richest person in the world reportedly paid no federal income taxes for two different years, 2007 and 2011. In 2007, Bezos’s net worth increased by $3.8 billion, according to a Forbes figure, but he (legally) reported $46 million in income. They offset that income with losses on investments and tax deductions, resulting in zero dollars of taxable income, ProPublica said.
Between 2006 and 2018, Bezos’ wealth reportedly increased by $127 billion, but his total income in that 13-year period was $6.5 billion, with a cumulative tax bill of $1.4 billion. This works out to a tax rate of about 21% on his reported income, or 1.1% on his net worth.
According to ProPublica, the average wage earner Bezos age pays more in federal income taxes than the increase in his average wealth during the same 13 years.
Amazon did not respond to a request for comment.
As of Tuesday morning, the world’s third-richest man reportedly paid no federal income tax in 2018, according to ProPublica. The news outlet also reported that the Tesla CEO paid $68,000 in federal income tax in 2015 and $65,000 in 2017.
A graph that accompanies the story shows that Musk’s wealth grew by $13.9 billion in the five years from 2014 to 2018. They reported income of $1.52 billion and paid taxes of $455 million in the same period.
Musk has used Tesla shares as collateral for personal borrowings, a strategy employed by many wealthy people.
Musk does not accept direct messages through his Twitter account. Tesla did not immediately respond to a request for comment.
How does wealth go to waste
The federal government only taxes “income,” which includes wages, dividends from shares, interest from bonds, and income from the sale of financial instruments. The result is that when a billionaire owns stocks that skyrocket in value, that money itself won’t be taxed.
Like Musk, wealthy people can still extract value by using company shares as collateral for loans without selling them. Money from loans is not taxed because they have to be paid back.
Ultrarich investor Warren Buffett has said he believes the tax law should be reformed, even as he uses existing laws to keep his tax payments low relative to his wealth. Buffett has repeatedly called the current taxation system part of a “class war” and declared, “My class has won.”