How much tax do billionaires pay in America

BreakingMarketsRichest AmericansIncluding Bezos, Musk And BuffettPaid Federal Income Taxes Equaling Just 3.4% Of $401 Billion In New Wealth, Bombshell Report ShowsSarah HansenForme

How much tax do billionaires pay in America

BreakingMarkets

Richest AmericansIncluding Bezos, Musk And BuffettPaid Federal Income Taxes Equaling Just 3.4% Of $401 Billion In New Wealth, Bombshell Report ShowsSarah HansenFormer StaffI cover breaking news.Jun 8, 2021,09:19am EDT|Updated Apr 14, 2022, 02:05pm EDT

Topline

With issues of wealth inequality and tax avoidance by the ultrarich front and center in Washington, a new analysis from ProPublica of more than 15 years of leaked confidential individual tax data shows how the wealthiest Americans pay very littleor, in some cases, nothingin federal income tax.

Amazon CEO Jeff Bezos

zz/Dennis Van Tine/STAR MAX/IPx

Key Facts

ProPublica found that while the median American household earning roughly $70,000 per year paid 14% in federal taxes each year, the 25 richest Americans (by Forbes tally) paid a true tax rate of just 3.4% on wealth growth of $401 billion between 2014 and 2018.

ProPublicas true tax rate is a novel and sure-to-be-controversial measure of how much taxes an individual paid each year compared to Forbes calculation of how much their wealth grew during the same time, meaning that ProPublica is counting unrealized capital gains, which are not taxed under the current U.S. Tax Code.

According to ProPublicas analysis, billionaire investor Warren Buffett, an advocate of higher taxes on the rich, saw his wealth grow by more than $24 billion from 2014 to 2018 and paid a true tax rate of 0.10%a reflection of the fact that he reported just $125 million in income during that period, makes large charitable contributions and (since he pays himself a minimal salary), most of his income comes in the form of lower-taxed capital gains.

Amazon founder and CEO Jeff Bezos paid a true tax rate of 0.98% as his wealth grew by a staggering $99 billion between 2014 and 2018; he reported just $4.22 billion in reported income during the same period.

As Elon Musk, the billionaire CEO of Tesla, saw his wealth balloon by $13.9 billion between 2014 and 2018, he reported $1.52 billion in income and paid a true tax rate of 3.27%.

Suprising Fact

Bezos paid no federal income tax in 2007, ProPublica found, even though he added $3.8 billion to his fortune that year. Thats because he was able to offset the $46 million in income he reported with losses from investments and deductions on debts and other expenses, according to ProPublicas analysis. ProPublica also found that Musk paid no income tax in 2018.

Big Number

$175 billion per year. Thats how much the top 1% of taxpayers contribute to the tax gapthe difference between federal taxes legally owed and those actually collectedeach year, according to a March study. The study estimated that the top 1% of taxpayers dont pay taxes on 20% of their income. Significantly, however, ProPublicas report does not suggest those billionaires broke the law and calculates the true tax not on income, but on wealth, which for the very rich is a much bigger number, since unrealized gains arent taxed.

What To Watch For

In order to pay for his $1.8 trillion American Families Plan, an ambitious spending proposal designed to dramatically increase investment in education, childcare and universal family and sick leave, President Biden has proposed a series of tax hikes on the wealthiest Americans and wants to funnel more money to the IRS so it can step up enforcement and audits of the wealthy.Bidens proposed hikes include increasing the top ordinary income tax rate from 37% to 39.6% and taxing capital gains and dividends at the higher ordinary income rate for households making more than $1 million per year. Biden also wants to eliminate the step-up in basis for previously untaxed capital gains passed down to heirs above $1 million for individuals or $2 million per couple-currently, step-up means that all the unrealized capital gains that accrued to a wealthy person who has just died are never taxed.

Further Reading

More Than 50 Major U.S. CorporationsIncluding Nike And FedExPaid No Federal Taxes Last Year (Forbes)

Here Are The Biggest Winners And Losers In Bidens Individual Tax Plan (Forbes)

Biden Will Seek To Nearly Double Capital Gains Tax For Wealthy, According To Report (Forbes)Get the best of Forbesto your inbox with the latest insights from experts across the globe.Follow me onTwitter.Send me a securetip.Sarah Hansen

I'm a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my masters degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.Read MoreRead LessEditorial StandardsCorrectionsReprints & PermissionsLoading ...

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