Learning that billionaires pay little to no income taxes doesn’t exactly come as a surprise, given the already existing dearth of reporting on income inequality, tax rates, and loopholes.
So the value of new reporting in ProPublica that confirms just how little the billionaire class pays in taxes isn’t that it reveals the existence of something that no one knew was happening; it’s in detailing the shape and scope of what is happening, and how it stops working and middle-class American families from being able to access a basic social safety net in the wealthiest country in the world.
IRS Data Revealed Billionaires Pay Very Little in Taxes
The non-profit investigative outlet’s report is based on “a vast trove” of IRS data on thousands of the nation’s wealthiest people dating back more than 15 years. It contains information on their income, taxes, investments, trades, gambling winnings, and even the results of tax audits. An anonymous source illegally leaked the information, which ProPublica independently confirmed and concluded was in the best interests of the public to publish.
Bezos, Bloomberg, and Musk Tax Rates Were Revealed
So far, only the fortunes of Warren Buffett, Jeff Bezos, Michael Bloomberg, and Elon Musk have been described in any detail. The chief way all four men avoided paying taxes is fundamental to how the IRS operates. The agency is set up to collect tax on income. The increasing value of assets isn’t counted as income until those assets are sold.
That means that while the normal employees of Bloomberg LP have to pay taxes on the wages they earn, Michael Bloomberg doesn’t have to pay taxes on the increased value of his company, the value created by the labor of those same workers.
The end result is that the rich have true tax rates—the ratio of taxes paid to the wealth accumulated—that are much, much lower than those paid by ordinary people simply because they acquire their wealth in a different way. This is enormously important when we talk about taxing the wealthy — and the reality is that middle-class people are paying a higher rate of taxes than the uber-wealthy.
Between 2014 and 2018, Elon Musk paid a true tax rate of 3.27%, Bloomberg 1.30%, and Jeff Bezos 0.98%. But the best avoided was Warren Buffett, who paid $23.7 million in taxes while accumulating $24.3 billion in wealth. That’s a true tax rate of 0.10%.
Of course, these small percentages still added up to millions of dollars, but there were many individual years when the actual amount of taxes paid by these billionaires was less than what middle earners paid.
Musk, Bloomberg, and Bezos all paid zero income taxes in at least one of the years covered by the data; Bezos even claimed a $4,000 tax credit for his children in 2011, one of the years he paid no income tax, after reporting that he lost money thanks to investment losses.
The means testing that’s ostensibly there to prevent people who don’t need benefits like the child tax credit from receiving them objectively and miserably failed.
What Does This Report Actually Mean for American Families?
“Taken together, it demolishes the cornerstone myth of the American tax system: that everyone pays their fair share and the richest Americans pay the most,” the report says of the revelations. “The IRS records show that the wealthiest can — perfectly legally — pay income taxes that are only a tiny fraction of the hundreds of millions, if not billions, their fortunes grow each year.”
How bad is it? At the end of 2018, the 25 wealthiest Americans were worth $1.1 trillion. It would take 14.3 million ordinary American wage earners to equal that same amount of wealth, a reflection of just how bad income inequality has gotten.
Billionaires Aren’t Contributing Enough to the Social Safety Net
The billionaires paid $1.9 billion in taxes. The wage-earners paid $143 billion, more than 75 times as much as them. And they certainly aren’t getting 75 times as many benefits as the wealthy. In a country with so many billionaires, the middle-class parent, works and lives in a country that doesn’t even provide universal child care, affordable health care, clean water, or a basic income for the worst-off. Middle-class families struggle while others thrive.
The problem with billionaires not paying taxes isn't even primarily that we need the tax revenue; it's that they use that wealth to manipulate the political system.
— Ken Klippenstein (@kenklippenstein) June 8, 2021
All of these people should be paying a higher percentage of their wealth to the IRS than those with less money do. That’s the cornerstone of progressive taxation and how the IRS has always structured tax brackets. That none of them do — and wouldn’t even if the Biden administration’s proposed increase in the top marginal tax rate becomes law — points to much deeper problems.
If Billionaires Were Taxed More, What Could American Families Get?
Let’s imagine that these 25 obscenely wealthy individuals simply paid what the 14.3 million typical earners did. That money, $141.1 billion, could pay for a lot of things.
- President Biden’s plan to give everyone two years of free community college costs $109 billion.
- His clean water plan is $111 billion.
- His plan to ensure all Americans have broadband access is $100 billion.
- A universal child care plan could be covered by about a third.
A single year of a still incredibly low tax rate on just 25 people would be more than enough to pay for any of these programs without deficit spending. It’s nuts!
But this story isn’t about what specifically we would do with the money that should be collected from multi-billionaires. It’s about the system that allowed them to accrue such obscene wealth at the expense of everyone else in the first place, and whether revelations like these will be enough to transform it into a system that works for the working and middle-class families instead.