This is how the 1% avoids paying US taxes

Uncovering tax files
Giving Uncle Sam his cut
The 1% paying 1%
Average taxes for average people
Winning by losing
Three years in a row without paying taxes
'...higher taxes for wealthy Americans'
Common and legal loopholes
Buy, Borrow and Die
Stock options
Dividends
Tech giants
Unrealized gains
Symbolic salaries
The 1$ Salary Club
No money, no problem
'Billionaire tax plan'
'There are two tax codes in America'
The Build Back Better Act
Holding out
Untouchable
Uncovering tax files

Investigative news website ProPublica published in 2021 an in-depth piece going through the tax files of some of the wealthiest men in the world, such as Jeff Bezos, Michael Bloomberg, George Soros, and Elon Musk.

Giving Uncle Sam his cut

They also uncovered some of the tricks they use to avoid giving back their fair share to the United States government. Here are some of them.

The 1% paying 1%

Jeff Bezos, regarded as the richest person alive, paid an income tax rate of less than 1% between 2014 and 2018 of his reported income of 4,2 billion US dollars, per ProPublica data.

Average taxes for average people

In comparison, the median US household paid 14% in income taxes in 2021, with the highest tax rate being 37%.

Winning by losing

With the aid of deductions and losses from side investments, Bezos claimed that he lost money in 2011 and even received a tax credit for his children. Forbes reports that the Amazon founder made 127 billion US dollars during that time.

Three years in a row without paying taxes

Hungarian-born financial investor and philanthropist George Soros, meanwhile, paid no income federal taxes for three years in a row, according to ProPublica.

'...higher taxes for wealthy Americans'

A representative of Soros stated to PropPublica that Soros did not pay income taxes due to his losses during that time and that the billionaire “has long supported higher taxes for wealthy Americans.”

Common and legal loopholes

There are many common and legal ways to circumnavigate taxes in the United States without taking a trip to Switzerland, Andorra, or Panama (pictured). The US tax system, unlike many European countries, doesn't focus on the sum of assets but on income.

Buy, Borrow and Die

Regular people generally have to take a loan out of necessity. For the rich, it can be a helpful loophole. Forbes reports that the Internal Revenue Service (IRS), the agency that collects taxes in the US, doesn’t consider loans income and therefore isn't taxed. The strategy is summed up in the mantra: “Buy, Borrow and Die.”

Stock options

Another strategy is company shares. Taxes apply to profit and wages. However, you can’t tax stock holdings that haven’t been cashed in, as they technically have yet to yield dividends. Many US companies have stock options for employees at higher levels. No wonder why Wall Street is such a popular place!

Dividends

Dividends are the periodical earnings generated by stocks. In theory, they are a portion of the company’s profit. However, many companies eschew paying dividends to their shareholders, investing the profit directly into their growth. This keeps the value of the shares up and certain taxes at bay.

Tech giants

Some of the biggest companies listed on Investopedia as not offering dividends to their shareholders are tech giants such as Alphabet (parent company of Google), Amazon, Meta (formerly Facebook), and Tesla. Apple and Microsoft are notable exceptions.

Unrealized gains

Economists Emmanuel Saez and Gabriel Zucman from the University of California in Berkeley claim that half of the money of US billionaires is in company stocks, which are regarded as “unrealized gains”. Stocks dividends, bonds, and other investments are generally taxed at a much lower rate than wages.

Symbolic salaries

The Washington Post reported in 2014 that Facebook founder Mark Zuckerberg was just one out of many billionaires that had a symbolic salary equal to one US dollar.

The 1$ Salary Club

Others that have done the same are Twitter’s Jack Dorsey and late Apple CEO Steve Jobs, pictured here in 2007.

No money, no problem

Elon Musk doesn’t even have a salary from his company Tesla. On November 2021, he tweeted the following: “I do not take a cash salary or bonus from anywhere. I only have stock, thus the only way for me to pay taxes personally is to sell stock.”

'Billionaire tax plan'

Some US politicians have tried to change the landscape. The most recent idea was a “Billionaire tax plan” proposed by Democratic senator Ron Wyden in October 2020. Forbes reports that it would have made roughly 600 of the wealthiest taxpayers in the country pay for their unrealized gains, such as shares.

'There are two tax codes in America'

“There are two tax codes in America,” Senator Wyden said, as quoted by The New York Times. “One that’s mandatory for workers and one that’s voluntary for billionaires.”

The Build Back Better Act

The Biden administration has been unable to pass the tax plan, framed within the Build Back Better Act, to help the US economy after the pandemic with a focus on climate change and social policy.

Holding out

Forbes writes that some high-profile billionaires and bipartisan politicians have opposed the bill. One vocal critic is West Virginia Senator Joe Manchin (pictured), was singled out by CNN and other news outlets as being the leading Democrat holding out against the bill.

Untouchable

If Biden's economic plan gets approved at this point, it won't touch on unrealized gains due to the concessions made and simply become an additional tax. People like Jeff Bezos and Elon Musk won't have anything to worry about for the foreseeable future.

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