How Billionaires Get Away with Barely Paying Taxes

How often have you looked at your paycheck and lamented how much money is deducted in taxes? You work hard for your money, so seeing how much you lose to taxes can be frustrating. Now imagine a scenario where the richest people in the country are not only dodging their fair share but sometimes get away with paying no taxes. It’s hard to comprehend, but that’s exactly what’s happening in the United States.

How Common Is It for the Rich to Get Out of Paying Their Taxes?

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A statistic that may be shocking to some is that the top 1% of the wealthiest people in the United States avoid paying taxes on over 1/5 of their income. Given that these are billionaires, that is a hefty amount of taxes they don’t have to pay.

Revenue Is Being Hidden

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Another interesting fact is that not only are the richest 1% barely paying taxes, but they are also hiding over 20% of their earnings, according to a study cited by The Washington Post. The federal government loses roughly $175 billion worth of tax revenue yearly.

Funding Cuts Are Partly to Blame

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Who should be blamed for allowing billionaires to get away with not paying taxes?  While there are a lot of factors, some people are pointing to years of funding cuts to the IRS. There is the belief that these continuous funding cuts have made it easier for tax evasion to occur.

Tax Evasion Has Become More Sophisticated

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Another reason tax evasion seems to be growing is that the techniques themselves have changed and become much more sophisticated. It’s becoming more challenging for the IRS to not only spot but track and prove tax evasion.

What Happened to Random Audits?

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Random audits used to be successful at discovering potential tax evasion, but that’s no longer the case. These random audits simply can’t keep up, and they cannot find the needed evidence to prove tax evasion. Even when the IRS tried to make its audits more sophisticated, it’s still only scraping the surface of finding tax evasion.

Who Are the Most Famous Billionaires Barely Paying Taxes?

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The following is a list of a few of the billionaires who barely pay taxes:

  • Mark Zuckerberg
  • Jeff Bezos
  • Elon Musk
  • Warren Buffet
  • George Soros
  • Michael Bloomberg

This doesn’t mean they didn’t pay any taxes, it just means they managed to barely pay any. It’s a feat plenty of non-billionaires would love to be able to do.

How Long Can They Go Without Paying Taxes?

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Some billionaires have gone years without paying federal income taxes. This list includes Michael Bloomberg, Elon Musk, and Jeff Bezos.

Is It Legal?

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Here’s where we get into muddy waters. Is it legal for billionaires to barely pay taxes? Well, it comes down to how smart they are with their money and filing taxes. The IRS contends that there are legal ways for a billionaire to avoid paying taxes on their billions and instead pay taxes on a fraction of their wealth.

The Rich Keep Getting Richer

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Because the ultra-wealthy barely pay any taxes, their fortunes continue to grow annually and exponentially. This provides them with even more money to invest and earn interest on.

Jeff Bezos Hasn’t Owed Taxes in Years

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Looking at Jeff Bezos in particular, The Hill reported that he didn’t pay federal income taxes in 2007 and 2011. In both years, he was able to offset his income with deductions and investment losses. He even claimed and received a tax credit for his kids in 2011.

Elon Musk Has Found Ways to Avoid Paying Taxes Too

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Elon Musk isn’t just a billionaire; he is the second richest person in the world. Sure, his assets have taken a hit in the past year or so, but he is still extremely wealthy. Yet he didn’t have to pay federal income taxes in 2018. Between 2014 and 2018, his wealth grew by almost $14 billion, yet he only paid $455 million in taxes.

Warren Buffet Is Another in the Spotlight

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Warren Buffet is currently the sixth richest person in the world, and he has also found ways to limit his federal income taxes. ProPublica stated that Buffet paid only 0.1% in taxes from 2014 to 2018.

The COVID-19 Pandemic Highlighted Just How Wealthy the Rich Were Getting

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While the ultra-wealthy have been finding ways to pay barely any taxes for decades, the COVID-19 pandemic made it possible for the rich to get even richer. During the first 17 months of the pandemic, Jeff Bezos saw his fortune grow by $75 billion. Considering he pays very little federal income tax, the growth rate is even more shocking. Musk’s wealth grew by $150 billion during that time, while Zuckerberg added $74.2 billion to his fortune.

Income from Wealth vs Income from Work

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Another key point is that income tax for wealth differs greatly from income tax for work. Generally, billionaires collect the most wealth from assets, not from working. These assets increase and decrease in value depending on the markets. Income tax on wealth only occurs if they sell an asset and profit from it.

Ultra-Rich Use Loans to Their Advantage

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Finally, the ultra-rich tend to use loans to their advantage. They don’t often have a lot of wealth in cash sitting in the bank; rather, their wealth is tied up in assets. They would need to liquidate or sell assets to come up with large amounts of cash. Therefore, they often rely on loans instead.

A Deep Dive That Continues to Shock

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While it may seem shocking that the richest in the country pay the smallest share of federal income tax, that’s the reality, and it happens all the time.

 Source

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