A hot potato: How much tax do you think Jeff Bezos paid in 2007, the year his fortune increased $3.8 billion, and in 2011 when he was worth $18 billion? The same amount Elon Musk paid in 2018: nothing at all. That's according to a new report that reveals how the super-rich use legal methods to avoid or pay very little in federal taxes.
Using Internal Revenue Service data on the tax returns of some of America's wealthiest citizens, ProPublica found that the 25 richest people in the US were worth $1.1 trillion as of 2018 and had a combined personal tax bill of $1.9 billion. It would have taken 14.3 million ordinary American wage earners put together to equal that amount of wealth, but the tax bill for those everyday workers would have been $143 billion---around 75 times more.
World's richest man Bezos, whose current net worth stands at $177 billion, saw his wealth increase $3.8 billion in 2007 but was able to legally report $46 million in income, which he offset with losses from investments and tax deductions, allowing him to pay no tax. In 2011, when he was worth $18 billion, his income for the year was offset by investment losses. Because the law stated he earned so little, the billionaire claimed and received a $4,000 tax credit for his children, according to the report.
Even when Bezos did pay taxes, it was paltry in comparison to what he was earning. The CEO's fortune increased by $127 billion between 2006 to 2018, yet his total reported income for that period was $6.5 billion. The $1.4 billion Bezos paid in taxes over those 13 years works out at 1.1% of his total wealth or 21% of his reported income. In contrast, ProPublica writes that a typical American household paid more in taxes than it accumulated in wealth over the last decade.
World's third-richest man and alleged Anonymous target Elon Musk also avoided paying any federal income tax in 2018 while handing over just $68,000 in 2015 and $65,000 in 2017. Despite his wealth growing $13.9 billion between 2014 and 2018, he reported $1.52 billion in income and paid $455 million in taxes. Between 2014 and 2018, he had a true tax rate of 3.27%. The CEO has used Tesla shares as collateral on personal loans, a tactic employed by many billionaires to lower their tax bills.
Investor Warren Buffet, who has long called for the rich to pay more taxes, paid less than any of the top 25. His wealth rose $24.3 billion between 2014 and 2018, but he handed over just $23.7 million in federal tax---a true tax rate of 0.1%.
Most billionaires pay so little because the government only taxes what it defines as income, so when the value of the stock they hold increases, their wealth isn't taxed. They can then borrow against the stock to pay living expenses. This means they don't have to sell their stocks, and the money from loans isn't taxable as it has to be paid back.