When it comes to federal income tax, the more you make, the more of it you pay — in theory.
It’s no surprise, of course, that some uber-wealthy taxpayers use sophisticated tax strategies that are beyond the reach of most of us to pay less in taxes than they otherwise would. But exactly how much they pay is now known, via ProPublica, a nonprofit newsroom.
The online publisher recently received — even ProPublica doesn’t know from whom — “a vast trove” of leaked Internal Revenue Service records, including tax returns, audits and other data on thousands of the nation’s wealthiest people.
The records show, ProPublica says, that at times, two of the world’s richest men — Jeff Bezos (in 2007 and 2011) and Elon Musk (in 2018) — paid no U.S. income tax at all. George Soros, Michael Bloomberg and Carl Icahn also reportedly paid no tax at times.
“Taxpayer information is confidential, and there are potential criminal penalties for IRS employees or others who release such information.”
Using the leaked data, ProPublica calculated a “true tax rate” for four tycoons, comparing their taxes paid with Forbes’ estimate of how much their net worth grew from 2014 through 2018. This “true tax rate” is not an effective tax rate, however: It is not the percentage of a billionaire’s income that he actually paid in income taxes.
Money Talks News founder Stacy Johnson explains:
“The U.S. has an income tax, not a wealth tax. ProPublica confuses people by conflating these very different things and by doing so, turns visionaries into villains by implying these people are violating laws that literally don’t exist. At the very least, they should have included the tax rates these people actually paid on their income.”
So, that’s what we did.
Following is ProPublica’s “true tax rate” paid by Bezos, Musk, Bloomberg and Warren Buffett — along with their effective tax rate.
Net worth growth 2014-2018: $13.9 billion
Total income reported 2014-2018: $1.52 billion
Total taxes paid 2014-2018: $455 million
Share of income paid in taxes (effective tax rate): 29.93%
Share of net worth growth paid in taxes (ProPublica’s “true tax rate”): 3.27%
Musk made his initial fortune from founding X.com, an early online bank. It merged with Confinity in 2000, eventually becoming financial services giant PayPal and earning Musk a cool $180 million.
Other Musk ventures range from Tesla to Neuralink, as we detail in “Elon Musk’s 8 Greatest Accomplishments to Date.”
Net worth growth 2014-2018: $22.5 billion
Total income reported 2014-2018: $10 billion
Total taxes paid 2014-2018: $292 million
Share of income paid in taxes (effective tax rate): 2.92%
Share of net worth growth paid in taxes (ProPublica’s “true tax rate”): 1.3%
Michael Bloomberg launched his fortune in 1981 by starting Innovative Market Systems, an influential financial news service now known as Bloomberg LP.
He added Bloomberg Business News in 1990, and a TV channel four years later, creating “a major force behind changes in journalism,” says Britannica.
Bloomberg — along with Warren Buffett, Bill Gates and other tycoons — has signed the Giving Pledge, vowing to donate “nearly all of my net worth” to philanthropy, as we detail in “22 Filthy Rich People Who Will Give Away Their Fortunes.”
Net worth growth 2014-2018: $99 billion
Total income reported 2014-2018: $4.22 billion
Total taxes paid 2014-2018: $973 million
Share of income paid in taxes (effective tax rate): 23.06%
Share of net worth growth paid in taxes (ProPublica’s “true tax rate”): 0.98%
At times, Jeff Bezos has been the world’s richest man, although his ranking can fluctuate daily.
Bezos’ ideas and ambitions have defined and continue to shape e-commerce. After earning degrees in electrical engineering and computer science, he became an investment banker. Later, he created Amazon as an online bookstore that made its first sale in 1995, says Britannica.
Amazon Web Services, another venture, now describes itself as “the most extensive global cloud infrastructure.”
The coronavirus pandemic only multiplied Bezos’ fortune, with Amazon revenues soaring, as we reported in “6 Billionaires Making a Fortune During the Pandemic.”
Net worth growth 2014-2018: $24.3 billion
Total income reported 2014-2018: $125 million
Total taxes paid 2014-2018: $23.7 million
Share of income paid in taxes (effective tax rate): 18.96%
Share of net worth growth paid in taxes (ProPublica’s “true tax rate”): 0.1%
The Oracle of Omaha, as Buffett is sometimes known, is CEO and chair of Berkshire Hathaway, a multinational conglomerate with origins as a 19th- and 20th-century textile manufacturer.
Buffett “is widely considered the most successful investor of the 20th century,” according to Britannica.
Ironically, perhaps, Buffett has advocated passionately for higher tax rates on the wealthy.
He defended his tiny “true tax rate” in his recent response to ProPublica, writing:
“I believe the money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing U.S. debt.”