By Jeph Ajobaju, Chief Copy Editor
Nearly all the wealthiest in the United States, among them Jeff Bezos, Elon Musk, and Warren Buffet, exploit tax loopholes like Donald Trump to avoid paying little or no tax, according to an expose by ProPublica, an investigative website.
The White House is rattled by the report and warns that it is illegal to obtain personal tax information from the Inland Revenue Service (IRS) without the consent of the individual concerned.
Regardless, the report bolsters President Joe Biden’s argument – supported by Bezos – that the top wealthiest in the US should pay higher income tax to fund social infrastructure that would raise living standards for the poor and the middle class.
Biden also wants to raise corporate tax to between 25 and 28 per cent. Trump had in 2017 slashed it to the current 21 per cent from 35 per cent to cater to his cronies.
Congressional Republicans oppose both tax initiatives. Even if the plans pass the House with a tiny Democratic majority, they may be scuttled in the Senate with a 50-50 split between Democrats and Republicans.
Details claiming to show how little income tax US billionaires pay were leaked to ProPublica, which says it has seen the tax returns of some of the world’s richest people, including Bezos, Musk, and Buffett.
Per BBC reporting, the website alleges Amazon’s Bezos paid no tax in 2007 and 2011, while Tesla’s Musk paid nothing in 2018.
White House Press Secretary Jen Psaki called the leak “illegal”, and the FBI and tax authorities are investigating.
ProPublica says it is analysing a “vast trove of Internal Revenue Service data” on the taxes of the billionaires, and would release further details over coming weeks.
The BBC says while it has not been able to confirm the claims, the alleged leak comes at a time of growing debate about the amount of tax paid by the wealthy and widening inequality.
ProPublica says the richest 25 Americans pay less in tax – an average of 15.8 per cent of adjusted gross income – than most mainstream US workers.
“We were pretty astonished that you could get [tax] down to zero if you were a multi-billionaire. Actually paying zero in tax really floored us. Ultra-wealthy people can sidestep the system in an entirely legal way.
“They have enormous ability to find deductions, find credits and exploit loopholes in the system,” Jesse Eisinger, senior reporter and editor at ProPublica, told BBC Today Programme
So while the value of their wealth grows enormously through their ownership of shares in their company, that’s not recorded as income.
But there’s more than that, Eisinger said: “They also take aggressive tax deductions, often because they have borrowed to fund their lifestyle.”
He said US billionaires buy an asset, build one or inherit a fortune, and then borrow against their wealth.
Because they don’t realise any gains or sell any stock, they’re not taking any income, which could be taxed.
“They then borrow from a bank at a relatively low interest rate, live off that and can use the interest expenses as deductions on their income.”
Biden tax plans
ProPublica said “using perfectly legal tax strategies, many of the uber-rich are able to shrink their federal tax bills to nothing or close to it” even as their wealth soared over the past few years.
The wealthy, as with many ordinary citizens, are able to reduce their income tax bills via such things as charitable donations and drawing money from investment income rather than wage income.
ProPublica, using data collected by Forbes magazine, said the wealth of the 25 richest Americans collectively jumped by $401 billion from 2014 to 2018 – but they paid $13.6 billion in income tax over those years.
Biden has vowed to increase tax on the richest Americans as part of a mission to improve equality and raise money for his massive infrastructure investment programme.
He wants to raise the top rate of tax, double the tax on what high earners make from investments, and change inheritance tax.
However, ProPublica’s analysis concluded that “while some wealthy Americans, such as hedge fund managers, would pay more taxes under the current Biden administration proposals, the vast majority of the top 25 would see little change.”
One of the billionaires mentioned, philanthropist George Soros, is also alleged to have paid minimal tax.
His office said in a statement to ProPublica that Soros did not owe tax some years because of losses on investments. The statement also pointed out that he had long supported higher taxes on America’s wealthiest people.
‘Illegal’ disclosure of information
US media reports quote Michael Bloomberg, former mayor of New York whose tax details were among the documents, as saying that the disclosure raised privacy concerns and he would use “legal means” to uncover the source of the leak.
ProPublica, an investigative website, has written several articles about how budget cuts at the IRS have hampered its ability to enforce tax rules on the wealthy and large corporations.
It said it received the leaked documents in response to these articles.
But Psaki insisted that “any unauthorised disclosure of confidential government information” is illegal.
Treasury Department spokeswoman Lily Adams said in an emailed to Reuters that the matter has been referred to the FBI, federal prosecutors and two internal Treasury Department watchdogs, “all of whom have independent authority to investigate.”
IRS Commissioner Charles Rettig said: “I can’t speak to anything with respect to specific taxpayers. I can confirm that there is an investigation, with respect to the allegations that the source of the information in that article came from the [IRS].”