The 25 richest Americans paid little to no federal income tax between 2014 and 2018 by taking advantage of loopholes in the tax code, according to a ProPublica report based on confidential Internal Revenue Service tax data.
Why it matters: The analysis found that billionaires like Jeff Bezos, Elon Musk, Warren Buffett and Michael Bloomberg paid a tiny fraction in federal income taxes as their wealth grew.
How it works: ProPublica, using the IRS data, compared how much the 25 richest Americans paid in federal income taxes over those years to how much Forbes estimated their wealth grew in that same time five-year period to determine what the news organization called their "true tax rate."
- Their collective worth rose $401 billion from 2014 to 2018, but they paid a total of $13.6 billion in federal income taxes, amounting to a true tax rate of only 3.4%.
Yes, but: They were able to pay so little in federal income tax largely because the value of their assets — like stock and property — grew but are not considered taxable income until they are sold.
- But the billionaires also used other legal tactics, such as deductions, to reduce their payments.
By the numbers, according to tax data obtained by ProPublica:
- Buffett had the smallest true tax rate of 0.1%. Even though his wealth grew by an estimated $24.3 billion between 2014 and 2018, he payed $23.7 million in federal income taxes.
- Bezos’ wealth increased by an estimated $99 billion between those years, and he paid $973 million in federal taxes, which amounted to a 0.98% true tax rate.
- Bloomberg's wealth jumped by $22.5 billion, and he paid $292 million, working out to be a 1.30% true tax rate.
- Musk's fortune rose $13.9 billion but he paid $292 million, which was a true tax rate 3.27%.
Thought bubble, via Axios' chief financial correspondent Felix Salmon: It’s hardly surprising that billionaires paid no taxes on their unrealized capital gains, since unrealized capital capital gains are taxed as income nowhere in the world.
- There will also now be a massive leak investigation, encompassing the IRS, the FBI, and others. A lot of Washington seems to be much angrier about the leak than they are about the rather unsurprising revelations therein.
- ProPublica did not say how it obtained the confidential tax data but they were able to use it "with no conditions or conclusions."
IRS Commissioner Charles Rettig told the Senate Finance Committee Tuesday that the service is currently investigating the origins of the report and said those who shared data in violation of law will be prosecuted.
The big picture: Though progressive Democrats like Sen. Elizabeth Warren (Mass.) have pushed for legislation that would impose a new tax on the assets of America's wealthiest individuals, the Biden administration has focused on other tax reforms that would ensure that the wealthy pay more.
- President Biden has proposed raising the corporate rate, imposing a global minimum tax on profits from foreign subsidiaries, taxing capital gains as regular income and unrealized capital gains at death and returning the top individual rate for those making more than $400,000 to the pre-Trump rate of 39.6%.
- Biden also wants $80 billion over 10 years for the IRS so it can close the gap between taxes owed and taxes paid.
Go deeper: Biden eyes 15% minimum corporate tax rate to pay for infrastructure