Or how about this one: The rich get richer … because they don’t always pay their fair share into the community chest.
ProPublica also reports that Musk, the second wealthiest human on Earth, whose wealth has grown many billions in recent years and who also has a passion project space company, told the government he owed no income tax in 2018.
Bloomberg, during his run for the 2020 Democratic presidential nomination, tangled with Sen. Elizabeth Warren of Massachusetts over whether the government should tax extreme wealth in addition to income.
How is this possible? The report analyzes how this is possible, and the reasons are many. First, US tax law is focused on income and much of the superwealth is tied up in company stock or other investments that have real value but aren’t taxable year to year.
Wealth vs. income. ProPublica cites guesstimates from Forbes, but it’s an imperfect assessment. It lists Bezos as gaining $99 billion in wealth between 2014 and 2018. But his income was much lower — he reported $4.22 billion and paid $973 million in income tax in those years. So he paid more than 20% on his reported income. The issue is that his wealth skyrocketed at the same time. This is something that plays out on a smaller scale for your average American homeowner or 401(k) holder, whose wealth grows without being taxed by the federal government every year. The difference is in scale. Also, everyday Americans likely pay property taxes and utilized mortgages to buy their homes.
Tax avoidance strategies. The report does show how the wealthy finance their lifestyles with loans taken against assets, like real estate or stocks, rather than realizing the value of an asset. They’ll pay less to the bank in interest than they would to the government in income tax.
Carl Icahn, the investor, gave an interview to ProPublica about his tax returns and it printed this illuminating response:
“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.”
He added: “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?”
But in these cases, the loans do act as the income.
Even on the income the superwealthy do claim, often in the form of capital gains, they often pay a lower rate than Americans who make far less money.
Taxes are very much in the policy conversation at the moment.
President Joe Biden wants to raise both corporate tax rates and income taxes on the wealthy, although it faces a tough path forward in the US Senate, where the minority Republicans can block it.
The idea is that if everyone had at least a 15% corporate tax rate, it would keep companies from avoiding taxes.
All of this feeds into the growing frustration with extreme inequality and what governments should do to make sure everyone pays their fair share, which is increasingly complicated when so much wealth is locked away from the tax man and more and more people think the government should be doing more to improve people’s everyday lives.
It is technically against the law to publish an individual’s tax information, although ProPublica argues the public interest in an informed tax debate justifies the risk. A spokesperson for at least one of the people whose taxes it dissects — that’s Bloomberg — is quoted as promising some kind of legal action, although against whoever or whatever leaked the documents, rather than ProPublica.
ProPublica doesn’t seem to know who the source of the documents is and even suggests it could have been a foreign actor, like China or Russia, that has shown an interest in stoking class resentment in the US. That means the reporting needs to be considered against the backdrop of the mystery of its provenance. It’s notable that none of the billionaires mentioned in the story deny the accuracy of the tax returns and some argue they were simply following the rules. Others did not respond, according to ProPublica.
When asked about the ProPublica report on Tuesday, White House press secretary Jen Psaki told reporters, “Any unauthorized disclosure of confidential government information by a person of access is illegal and we take this very seriously.” She said the IRS commissioner has referred the matter to investigators.
Sunlight > secrets. Given the status these men have in society, the deference their wealth affords them and the fact many of them have publicized their opinions on tax policy — either endorsing or opposing higher income taxes, corporate taxes and wealth taxes, I respect ProPublica’s decision.
Senate aides said investigators intentionally avoided the most politicized topics — like Trump’s culpability — because they wanted to keep the probe bipartisan. Sources told CNN that to keep Republicans in the fold, the report avoided using the word “insurrection” to describe the attack.