Several of the richest Americans including Jeff Bezos, Warren Buffet, Michael Bloomberg and Elon Musk, paid very little, and sometimes nothing, in income taxes for years, according to a report on Tuesday. The confidential Internal Revenue Service (IRS) records from the wealthiest people in the United States were obtained by New York-based journalism nonprofit ProPublica and published on Tuesday that made the revelations.
The revelations come just at a time when Washington is weighing new proposals to address tax avoidance by the wealthiest individuals and companies. The IRS is now investigating how the confidential tax return data got leaked that divulged how billionaires have evaded income tax for years.
Making Billions
Citing the confidential IRS data, ProPublica reported that the 25 richest Americans "saw their worth rise a collective $401 billion from 2014 to 2018." However, when it came to paying income tax, these people paid a total of just $13.6 billion over those five years, which "amounts to a true tax rate of only 3.4%," the article noted.
The report also shows that Amazon Chairman Jeff Bezos paid no income tax in 2007 and 2011, while Tesla chief Elon Musk avoided all payments in 2018. Also, investor George Soros didn't pay federal income tax for three consecutive years — between 2016 and 2018, according to the records.
Investor Carl Icahn evaded federal income tax in 2016 and 2017. Warren Buffett, the CEO and chairman of Berkshire Hathaway, has avoided paying income tax the most in recent years, according to the report.
While reviewing the tax paid by these billionaires, ProPublica calculated what it called a 'true tax rate' for the billionaires by comparing how much tax they paid annually from 2014 to 2018 to how much Forbes estimated their wealth had grown in that same period.
Buffet's wealth grew by around $24.3 billion between 2014 and 2018 but he paid a meager $23.7 million in taxes. Records showed a so-called true tax rate of 0.1 percent, which equates to less than 10 cents for every $100 Buffet added to his wealth in that period.
On the other hand, Bezos' wealth grew by almost $99 billion between 2014 and 2018, while his total reported income was $4.22 billion during that period. However, he paid $973 million in tax, which equates to a 0.98 percent true tax rate.
It's not only about paying less income tax but also there were years when many of these wealthy Americans completely evaded tax. In 2007 when Bezos paid no income tax, the Amazon founder - in a joint tax return with then-wife MacKenzie Bezos - reported $46 million in income, which was mostly from interest and dividend payments from investments.
Paying Less than Average Americans
The report found that, overall the richest 25 Americans pay less in tax than the average worker does. The median US household in recent years earned around $70,000 annually and paid 14% in federal taxes. Couples in the highest income tax rate bracket paid a rate of 37% on earnings higher than $628,300, the report said.
Much like Buffet, Bezos and others, Musk's wealth also swelled to an estimated $13.9 billion between 2014 and 2018. However, he reported $1.52 billion in total income and paid $455 million in taxes. It equates to a 3.27 percent true tax rate.
Moreover, he didn't pay federal income tax in 2018. The records show he paid only $68,000 in 2015 and $65,000 in 2017.
ProPublica in its report mentioned that billionaires, unlike most other people whose earnings come from conventional wage income, often benefit from "tax-avoidance strategies beyond the reach of ordinary people."
When ProPublica reached out to Icahn, he told that his adjusted gross income is misleading because his interest on his loans is higher. "I didn't make money because, unfortunately for me, my interest was higher than my whole adjusted income," he said.
In fact, he hit back at questions over whether he thought it was inappropriate he hadn't paid federal income tax some years. "There's a reason it's called income tax," he said. "The reason is if, if you're a poor person, a rich person, if you are Apple - if you have no income, you don't pay taxes. Do you think a rich person should pay taxes no matter what? I don't think it's germane. How can you ask me that question?"
IRS Opens Investigation
The report comes just days after G7 finance ministers endorsed a global minimum corporate tax rate of at least 15 percent, one of several tax proposals aimed at ensuring profitable multinationals pay their fair share.
Other efforts include Democratic Senator Elizabeth Warren's initiative to tax the super-wealthy, including the value of their stock holdings and homes, rather than focusing on income alone.
White House spokeswoman Jen Psaki on Tuesday was asked about the leak of tax information to Pro Publica. "Any unauthorized disclosure of confidential government information by a person with access is illegal, and we take this very seriously," she told reporters at a news conference.
IRS Commissioner Charles Rettig revealed during a scheduled Senate Finance Committee hearing just hours later that authorities are investigating the leak of the tax data. "We have turned it over to the appropriate investigators, both external and internal," Rettig said.
The Treasury Department also confirmed that multiple agencies were investigating the leak, including the FBI, DC's US Attorney's Office and the Treasury's Office of the Inspector General.
