The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

[NVP]

https://www.propublica.org/article/...ds-reveal-how-the-wealthiest-avoid-income-tax

ProPublica has obtained a vast cache of IRS information showing how billionaires like Jeff Bezos, Elon Musk and Warren Buffett pay little in income tax compared to their massive wealth — sometimes, even nothing.

by Jesse Eisinger, Jeff Ernsthausen and Paul Kiel

June 8, 5 a.m. EDT

"Many of the ultra wealthy pay NO income taxes for entire years - Soros three times, Bezos and Icahn twice, Musk and Bloomberg once. Bezos one year even claimed a S4000 child credit."


"As a percentage of their gains in wealth, Buffett has paid 0.1% (10 cents on every S100), Bezos 1.1%, Bloomberg 1.3%, the 25 richest as a group just 3.4%. Even on just their income, the richest pay less than 16%, far below the 37% top rate."


"The 25 richest Americans are collectively worth $1.1 trillion. It takes 14.3 million average wage earners to tally the same weatth. The average eamer group paid literally 70 times as much in income taxes in 2018 as the 25."


What a country! I wonder how ours stacks in comparison?

 

[NVP]

To capture the financial reality of the richest Americans, ProPublica undertook an analysis that has never been done before. We compared how much in taxes the 25 richest Americans paid each year to how much Forbes estimated their wealth grew in that same time period.

We’re going to call this their true tax rate.

The results are stark. According to Forbes, those 25 people saw their worth rise a collective $401 billion from 2014 to 2018. They paid a total of $13.6 billion in federal income taxes in those five years, the IRS data shows. That’s a staggering sum, but it amounts to a true tax rate of only 3.4%.

It’s a completely different picture for middle-class Americans, for example, wage earners in their early 40s who have amassed a typical amount of wealth for people their age. From 2014 to 2018, such households saw their net worth expand by about $65,000 after taxes on average, mostly due to the rise in value of their homes. But because the vast bulk of their earnings were salaries, their tax bills were almost as much, nearly $62,000, over that five-year period.

 

[NVP]

...But their wealth grew in the main due to the indicative value of their stock holdings growing? I don't get how representing that as a 'true tax rate', then comparing that as a %age to mr average's tax bill is valid.

I admit I overlooked that part.

 

[NVP]

I'm not sure what's worse, the poor understanding of tax law by the publishers of the article, or the fact that people like the op fall for this nonsense.

Question: How come Bezos paid no federal income tax in 2007? Legal loophole?

 

[NVP]

Damn, now that's smart. Do we have similar in the UK?

 

[NVP]

For the most part people pay tax on their earnings, not their net worth or the gross income of their company. As long as there is a way to avoid directly paying yourself from your own company or asset portfolio, tax can be avoided. It's also that there are some jurisdictions which don't have certain taxes, meaning they often avoid tax by doing the right economic activities in the most fitting jurisdiction.

The main reason most normal people don't consider such things is it often costs some amount of money to setup these tax avoidance schemes. It's often cheaper to just pay the tax than setup an avoidance scheme if you're not dealing with at least 6 figure sums on a regular basis. That said, a common one most people can do if they run a small company (like a solo contractor) is tax deductibles.

Well yeh, as a contractor I paid myself a salary and took dividends - but to run a company and not have any taxable income from it at all appears quite peculiar and would most likely be investigated by HMRC over here, no?

So do the IRS not look into these guys?

 

[NVP]

Hey if you paid yourself $200m the year before and there is nothing you want/need to buy and you havent spent all of the £200m why take any more money the next year?

That's a very good point. Oh, to be in that position...