The 25 richest Americans – including Jeff Bezos, Elon Musk and Warren Buffett – paid a “true tax rate” of just 3.4 per cent between 2014 and 2018, despite their collective net worth skyrocketing by $400 billion in the same period, a bombshell ProPublica investigation has revealed.
Using what it called a “vast trove of Internal Revenue Service data”, the non-profit news organisation delved into the tax returns of some of American’s most prominent individuals. It discovered that in 2007, when he was already a billionaire, Amazon founder Bezos paid no federal taxes.
In 2011, when he had a net worth of $18bn, he again paid no federal taxes – and even pocketed a $4,000 tax credit for his children. Bezos’s net worth topped $200bn last year.
ProPublica created a so-called “true tax rate” for the 25 wealthiest Americans by comparing federal income tax paid between 2014 and 2018 to how their net worth increased on Forbes’ rich list in the same period.
“The results are stark,” reporters wrote. “According to Forbes, those 25 people saw their worth rise a collective $401bn from 2014 to 2018.
“They paid a total of $13.6bn 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 per cent.”
The median American household, by contrast, paid 14 per cent in federal taxes. The top income tax rate is 37 per cent on incomes over $523,600 – a threshold that was reduced from 29.6 per cent by Donald Trump.
ProPublica revealed that Buffett, the founder of investment firm Berkshire Hathaawy, paid $23.7bn in taxes between 2014 and 2018, on a total reported income of $125 million. But his wealth grew by $24.3bn, meaning his “true tax rate” was just 0.1 per cent.
Bezos’s wealth grew by $99bn over the four-year period, but he paid a true tax rate of 0.98 per cent, ProPublica found. Musk and Michael Bloomberg paid 3.27 per cent and 1.3 per cent respectively.
While not exposing anything illegal, the investigation lays bare America’s struggle to tax wealth derived from assets in the same way it taxes wages.
“America’s billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people,” ProPublica reported. “Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by US laws as taxable income unless and until the billionaires sell.”
Jesse Eisinger, senior reporter and editor at ProPublica, told BBC Radio 4’s Today Programme: “We were pretty astonished that you could get it [tax] down to zero if you were a multi-billionaire. Actually paying zero in tax really floored us. Ultra-wealthy people can sidestep the system in an entirely legal way.”
While the organisation did not reveal how they obtained IRS information, they said reporter had been analysing the data for months, and would be releasing more reports. A White House spokeswoman called the leak “illegal”, and the FBI and tax authorities are said to be investigating.
Bezos, the richest person in the world, “declined to receive questions” about the report, ProPublica said. Musk, who has an estimated net worth of $151bn, reportedly replied to a query “with a lone punctuation mark: ‘?’”.
Buffett – worth $96bn – defended his practices in an email. “I continue to believe that the tax code should be changed substantially,” he told ProPublica, adding that “huge dynastic wealth is not desirable for our society”.
He has said that 99 per cent of his wealth will go to philanthropic causes “during my lifetime or at death” and, in 2020, donated $2.9bn in Berkshire stock to five charities.
Joe Biden has proposed raising the top rate of income tax and increasing capital gains tax, both of which fall short of the “wealth tax” pushed by Senators Bernie Sanders and Elizabeth Warren, who want to introduce a 3 per cent tax on the net worth of the ultra rich.