Uber-rich ‘pay next to no income tax’
AMAZON founder Jeff Bezos paid no income tax in 2007 and 2011, while Tesla founder Elon Musk’s income tax bill was zero in 2018, according to a report from the nonprofit investigative journalism organisation ProPublica.
Overall, the richest 25 Americans pay less in tax – an average of 15.8% of adjusted gross income – than many ordinary workers do, once you include taxes for Social Security and Medicare, ProPublica found.
Its findings are likely to heighten a national debate over the vast and widening inequality between the very wealthiest Americans and everyone else.
An anonymous source delivered to ProPublica reams of Internal Revenue Service data on the country’s wealthiest people, including Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg.
ProPublica compared the tax data it received with information available from other sources. It reported that “in every instance we
were able to check – involving tax filings by more than 50 separate people – the details provided to ProPublica matched the information from other sources”.
Using perfectly legal tax strategies, many of the uber-rich are able to shrink their federal tax bills to nothing or close to it.
A spokesman for financier George Soros, who has supported higher taxes on the rich, told ProPublica that the billionaire had lost money on his investments from 2016 to 2018 and so did not owe federal income tax for those years.
Mr Musk responded to ProPublica’s initial request for comment with a punctuation mark – “?” – and did not answer detailed follow-up questions.
The federal tax code is meant to be progressive – that is, the rich pay a steadily higher tax rate on their income as it rises. And ProPublica found, in fact, that people earning between $2m (£1.4m) and $5m (£3.5m) a year paid an average of 27.5%, the highest of any group of taxpayers.
Above $5m in income, though, tax rates fell: The top .001% of taxpayers – 1,400 people who reported income above $69m (£48m) – paid 23%. And the 25 very richest people paid still less.
The wealthy can reduce their tax bills through the use of charitable donations or by avoiding wage income (which can be taxed at up to 37%) and benefiting instead mainly from investment income (usually taxed at 20%). President Joe Biden, in seeking revenue to finance his spending plans, has proposed higher taxes on the wealthy.
Mr Biden wants to raise the top tax rate to 39.6% for people earning $400,000 (£283,000) a year or more in taxable income, estimated to be fewer than 2% of US households. The top tax rate that workers pay on salaries and wages now is 37%.
Mr Biden is proposing to nearly double the tax rate that high-earning Americans pay on profits from stocks and other investments. In addition, under his proposals, inherited capital gains would no longer be tax-free.
Using calculations by Forbes magazine, ProPublica noted that the wealth of the 25 richest Americans collectively jumped by $401bn (£283bn) from 2014 to 2018.
They paid $13.6bn (£9.6bn) in federal income taxes over those years – equal to just 3.4% of the increase in their wealth.