This may not qualify as news. Yesterday non-profit ProPublica published details of what it called a “vast trove of Internal Revenue Service data.” The report revealed that many billionaires go to great lengths to shield themselves from the tax man (not news).
But the specifics (with names attached), and the reality of just how little some of the richest pay in tax, is noteworthy.
The report concluded that legal tax-avoidance strategies allowed the 25 richest Americans to pay just $13.6 billion in federal income taxes in the five years leading up to 2018. During that same time frame, the value of their collective stocks, properties, and other assets had swelled in value by an estimated $401 billion.
The tactics used to shield income were fairly run of the mill:
- People can create significant wealth as their companies appreciate in value, but pay little to nothing in income tax if they don’t sell shares or receive dividends.
- But how do they pay for the yachts, you ask? The wealthy individuals then borrow against their holdings to finance their living expenses. Then, when they die, those appreciated assets (historically) haven’t been taxed as capital gains.
For someone like Elon Musk, that meant paying zero in federal income taxes in 2018 (despite having an actual taxable income of over $1.5 billion during that five year stretch.
So What’s Next? As for the leak itself, the investigation is underway. Charles Rettig, the IRS commissioner said he shared “the concerns of every American” that sensitive confidential information had been disclosed.
Mike Bloomberg, the former New York mayor and presidential candidate, pledged to use “all legal means” to uncover the source of the leak. He said he “scrupulously obeys the letter and spirit of the law” and distributes about three-quarters of his annual income in taxes and charitable giving.