ProPublica tax investigation proves billionaires are not paying their share
Everyone who lives in America knows that billionaires don’t pay their fair share of taxes. but extraordinary new documents from ProPublica prove it in unprecedented details. The public interest news agency has secured a vast treasure trove of private tax information on some of the richest people in America, including Amazon founder Jeff Bezos, magnate and investor Warren Buffett, Tesla CEO Elon Musk, Microsoft co-founder Bill Gates, Facebook’s Mark Zuckerberg and the right-wing media mogul Rupert Murdoch. The documents show how these men pay pathetic sums of federal income taxes, even if their stock holdings run into the billions.
ProPublica does not reveal how it got the astonishing amount of tax information which, as its reporters write, has been given “in raw form, with no conditions or inferences.” The newsroom has determined that the value of public disclosure – amid an intensive investigation into wealth inequality in America – trumps the privacy interests of those whose tax information is published.
The news agency makes it clear that most of the tax avoidance it has documented is perfectly legal. It just so happens that the richest benefit from a tax system that has been wildly manipulated in their favor. The specifics of taxation can be obvious. But the main way the richest avoid taxes is simple: they make relatively little of their money as wage income, which is taxed according to the regulations Income tax brackets know most of us.
Instead, their assets consist mainly of stocks that can and have been extravagantly upgraded without taxation. According to our current tax laws, these investments are only taxed when they are sold. Average Americans also benefit from this tax break.
But for the billionaire class, there are ways to effectively convert that wealth into income while getting a tax deduction. A billionaire CEO’s equity – in Amazon, Tesla, or Facebook – can be used as collateral for very low-interest loans. That’s money for mega yachts and mansions and other billions in extravaganzas. But this money is not taxed. In fact, the interest paid on these loans can often be booked as a tax deduction.
The ProPublica research examines the “true tax rate” of these billionaires and measures their explosive wealth gains by the taxes they paid on wages and dividends (cash that companies pay to shareholders). To be clear, that’s a bit conceited. ProPublica effectively argues that increasing wealth for the handover should be taxed annually, like other sources of income, by the IRS. And it’s hard to read this research without concluding that a fair tax system would actually include a mechanism to tax such explosions of wealth.
Warren Buffett, the CEO of Berkshire Hathaway, makes an interesting case study because he has a lot of positive publicity for promoting the so-called Buffett’s rulethat would create a minimum income tax rate of 30 percent for millionaires. But here’s the twist. Buffett earns very little compared to other mega-billionaire executives. One reason for this is that Berkshire Hathaway doesn’t pay dividends to shareholders – it instead chooses to reinvest excess profits.
ProPublica looked at the increase in billionaire net worth from 2014 to 2018. During that time, Buffett’s net worth rose more than $ 24 billion and he reported an income of $ 125 million – a huge number in absolute terms but tiny compared to others in his ranks, like Mike Bloomberg, who declared $ 10 billion. Buffett only paid about $ 24 million in taxes. ProPublica calculates the taxes paid as a percentage of the growth in his wealth and finds that Buffett paid a “true tax rate” of just 0.10 percent. For his part, Buffett has been open about how the American system favors the richest, arguing in 2011, “There has been a class war in the last 20 years and my class has won.”
The ProPublica study shows how much it costs the country to let the billionaire class live untaxed. The 25 richest people were worth $ 1.1 trillion at the end of 2018, it says. It would take the annual wages of “14.3 million ordinary American wage earners combined to achieve the same fortune”.
From the average wage earner, the federal government would have raised $ 143 billion. The billionaires in question only paid $ 1.9 billion to the IRS that year.
The ProPublica inquiry is ongoing and is likely to continue to fuel public debate. But this is an extraordinary first part. You should read every word of it.