Leaked IRS Data Shows 'True' Tax Rate of 3.4 Percent for 25 Richest Americans

By:
Chris Gaetano
Published Date:
Jun 9, 2021
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IRS data leaked to ProPublica shows that, after using a wide variety of legally allowed tax avoidance measures, the 25 richest Americans had an average tax rate of about 3.4 percent over a five-year period, and some had a much lower rate, depending on the year, reaching 0 percent in many cases.

A big part of the analysis has to do with the rules around unrealized gains, which allow billionaires to boast of a $1 salary while still maintaining a lavish lifestyle. It is common, according to ProPublica, for the ultra-wealthy to use unsold assets as collateral for loans, which apparently is where their actual spending money comes from. Since the assets' gains are unrealized, and because the loans don't count as income, this means that, despite being literally richer than Marcus Licinius Crassus at the height of his wealth and power, these billionaires technically would have little to no taxable income. While the estate tax is meant to claw back some of the unrealized gains at death, the step-up in basis rule (which President Biden said he wants to eliminate) means that only a little bit winds up in government coffers. While corporate taxes may be another avenue for the IRS, ProPublica noted that these costs tend to get passed on to either shareholders or the public at large, suggesting that there's little that actually impacts a corporation itself.

The report goes over a number of other ways that the ultra-wealthy minimized their tax bills far beyond what one might expect, such as Jeff Bezos using deductions from investment losses across his various business ventures to get a taxable income so low he got $4,000 back from the IRS.

Despite engaging in these avoidance practices, some, such as Warren Buffet, have advocated for higher taxes on the wealthy, which ProPublica hinted could be due to them having little fear of actually paying them. It noted that, between 2014 and 2018, the net worth of the 25 wealthiest people in the country grew by $401 billion, on which they collectively paid $13.6 billion, or about 3.4 percent. (The average American has an effective tax rate of about 18 percent.) Some paid even less, such as Elon Musk, who paid no taxes in 2018, and Carl Icahn, who paid no taxes in 2016 and 2017.

Confronted with this information, many of the billionaires named in the report balked at the implication that they were doing anything wrong, and justified their behavior by saying that they give lots of money to charity; it seems many took more umbrage over their tax information being leaked in the first place. The White House seems to agree, as CNN reports that the administration is currently investigating the leak. 

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