Wealthiest Americans paid little in income taxes, report says
WASHINGTON – The wealthiest Americans — including Warren Buffett, Elon Musk and Jeff Bezos — paid little in federal income taxes at times in recent years, despite soaring fortunes, according to Internal Revenue Service data obtained by ProPublica.
The tax information published Tuesday shows how billionaires are able to legally reduce their tax burden, highlighting how the American tax system can hit ordinary wage-earners harder than the richest people in the country, ProPublica said. The report comes after President Joe Biden and other Democrats have complained the U.S. tax system is unfair and tilted to benefit corporations and the wealthy.
ProPublica analyzed the data by focusing on the soaring fortunes of the country’s wealthiest members in recent years and alleged they were paying a “true tax rate” of just 3.4%. The news organization came up with this rate by calculating estimates of the value of their stock portfolios and other assets and then how much they paid in federal income taxes.
The publication of information from these personal income tax forms comes as the Biden administration pushes to raise income taxes on the country’s top wage-earners. But ProPublica’s data shows how taxing income would have little effect on the richest Americans, whose wealth is mostly held as assets.
The U.S. tax system focuses on income, not so-called “unrealized gains” from unsold stocks, real estate or other assets.
“These are extremely well-known facts,” said Jeffrey Hoopes, a tax expert and associate professor at the University of North Carolina at Chapel Hill.
“If you don’t realize [the income], you don’t pay,” Hoopes added.
This wouldn’t change under Biden’s proposals for changing the U.S. tax code. Biden wants to nudge the top income tax from 37.9% to 39.6% for Americans earning more than $400,000 a year and raise taxes on the sale of certain assets — known as capital gains — from 20% to the top income rate.
Biden has rejected a so-called wealth tax, such as the one proposed during the presidential campaign by Sen. Elizabeth Warren, D-Mass., which would institute a tax on unsold assets for the ultrarich. Biden has also proposed raising taxes on corporations, a number of which pay little if any corporate income taxes, according to some estimates.
The Trump administration and congressional Republicans slashed taxes across the board in 2017, and Republicans have vowed to block any efforts by the Biden administration to roll back those changes. Their position has created a big roadblock for key pieces of Biden’s agenda, including the White House’s push to approve an infrastructure package.
There already was some data about taxes paid by the wealthiest Americans, but not with the detail found in what ProPublica said it obtained.
The IRS publishes a report on the taxes paid by the top 400 taxpayers based on adjusted gross income. The most recent version, which uses anonymous data, showed that in 2014 these richest Americans paid an average 23.13% federal income tax rate.
Information from individual IRS tax forms are closely guarded secrets and, in recent years, have loomed large in political fights after President Donald Trump refused to release his personal income tax forms in the run-up to and during his presidency, claiming his tax forms were under an IRS audit. It was unclear how ProPublica obtained the records.
The records, though, purport to show Warren Buffett, head of Berkshire Hathaway, as having paid $23.7 million in federal income taxes on total income of $125 million from 2014 to 2018, which would indicate a personal income tax rate of 19%. ProPublica estimated that Buffett saw his wealth soar by $24.3 billion during that period and so his “true tax rate” was 0.1%.
Buffett has in the past called for tougher restrictions on the wealthy to prevent them avoiding paying taxes.
Likewise, Elon Musk, chief executive of Tesla, paid $455 million on $1.52 billion in income during the same period, when his wealth grew by $13.9 billion, accounting for a “true tax rate” of 3.27%, according to ProPublica.
Jeff Bezos, chief executive of Amazon and the owner of The Washington Post, paid $973 million in taxes on $4.22 billion in income, as his wealth soared by $99 billion, resulting in a 0.98% “true tax rate.”
Spokespeople for Musk and Bezos did not immediately respond to a request for comment.
In a statement to ProPublica, Buffett said that his company, Berkshire Hathaway, pays a large amount of corporate income tax and that he has planned for more than 99% of his personal wealth to go to taxes and philanthropy.
“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,” Buffett wrote in the statement.
“But that will be for Congress to determine,” through changes to U.S. tax policy, he added.