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An anonymous tipster at the Internal Revenue Service gave Pro Publica the tax returns of America’s richest people. This act was illegal. But it showed how little the billionaires paid, in some years, nothing at all.
The Washington Post, which is owned by billionaire Jefff Bezos, published the story without pulling punches.
The wealthiest Americans — including Warren Buffett, Elon Musk and Jeff Bezos — paid little in federal income taxes at times in recent years despite soaring fortunes, according to Internal Revenue Service data obtained by ProPublica.
The release of the records sent shock waves through Washington, with the federal government referring the unauthorized disclosure to investigators and some Democrats saying the revelations affirmed their long-held view that the richest Americans are able to shield much of their wealth from taxation.
The information published Tuesday shows how billionaires are able to legally reduce their tax burden, highlighting how the American tax system can hit ordinary wage earners harder than the richest people in the country. That’s often because the richest Americans tend to have their wealth tied up in stocks and real estate, allowing them to avoid taxes on unrealized profits….
ProPublica analyzed the data by focusing on the soaring fortunes of the country’s wealthiest people in recent years and asserted they were paying a “true tax rate” of just 3.4 percent. The news organization came up with that rate by calculating estimates of the value of their stock portfolios and other assets and then how much they paid in federal income taxes. That is not how tax rates are normally measured.
The core issue for many of these billionaires is how their income grows compared with how their wealth grows. The U.S. tax system focuses on income, not what is known as unrealized gains from unsold stocks, real estate or other assets….
Biden has rejected a so-called wealth tax, such as the one proposed during the presidential campaign by Sen. Elizabeth Warren (D-Mass.), which would institute a tax on unsold assets for the ultrarich.
Biden has also proposed raising taxes on corporations, a number of which pay little if any corporate income taxes, according to some estimates. The president has also pushed to require wealthy people to pay taxes on all previously untaxed capital gains when they die, a change from current policy.
Another way of taxing wealth has been floated by Sen. Ron Wyden (D-Ore.), who has proposed an annual tax on unrealized gains on stocks and bonds for wealthy individuals.
Warren said the new details about wealthy taxpayers supported her proposal for an annual tax on assets above $50 million for ultrarich individuals, undercutting criticism that valuing nonliquid investments would be too complex. Those people appear to hold the majority of their wealth in public-company stock, which is easy to value, she said.
“What this shows is, actually, it’s not that hard to value hundreds of billions of dollars of wealth and tax it on an annual basis,” Warren said…
The IRS publishes a report on the taxes paid by the top 400 taxpayers based on adjusted gross income. The most recent version, which uses anonymous data, showed that in 2014 these richest Americans paid an average 23.13 percent federal income tax rate…
The records, though, purport to show Buffett, head of Berkshire Hathaway, as having paid $23.7 million in federal income taxes on total income of $125 million from 2014 to 2018, which would indicate a personal income tax rate of 19 percent. ProPublica estimated that Buffett saw his wealth soar by $24.3 billion during that period and so his “true tax rate” was 0.10 percent.
Buffett has in the past called for tougher restrictions on the wealthy to prevent them avoiding taxes.
Likewise, Musk, chief executive of Tesla, paid $455 million on $1.52 billion in income during the same period, when his wealth grew by $13.9 billion, accounting for a “true tax rate” of 3.27 percent, according to ProPublica.
Bezos, chief executive of Amazon and the owner of The Washington Post, paid $973 million in taxes on $4.22 billion in income, as his wealth soared by $99 billion, resulting in a 0.98 percent “true tax rate.”