A new analysis of leaked Internal Revenue Service (IRS) documents shows that some of the U.S.’s wealthiest people have paid a disproportionately low federal income tax rate in recent years.
In an analysis released Thursday, Americans for Tax Fairness found that, in relation to their wealth, 26 of the nation’s richest billionaires paid an average effective federal income tax rate of just 4.8 percent between 2013 and 2018. Collectively, they paid just $24 billion in taxes — a miniscule amount compared to an immense growth of $500 billion in their wealth over those six years.
The report demonstrates the vast disparities between the tax code for the rich and for regular Americans.
Billionaires are able to dodge taxes on a large portion of their wealth due to tax laws allowing them to accrue wealth largely tax-free through investments and other sources. The taxes they did pay are on their relatively low taxable incomes — which Americans for Tax Fairness calculates in this case to be $132.2 billion, or only about a fourth of their wealth gain.
By comparison, a Tax Foundation analysis found that, as a whole, Americans paid an average tax rate of 13.3 percent in 2018.
“This revelation underscores the need to tax billionaires and other ultra-wealthy Americans more effectively, as proposed in plans from President Biden and Congressional Democrats,” according to the report.
A handful of these billionaires paid an effective tax rate of about 2 percent or less, including some of the world’s richest people. Jeff Bezos and Mark Zuckerberg, currently the world’s second and 15th richest people, respectively, paid an effective federal tax rate of 1.1 percent. Conservative bankrollers Charles and David Koch paid only 1.3 and 1.4 percent, respectively. The world’s fifth richest person, Warren Buffett, paid a diminutive 0.1 percent in income taxes.
Elon Musk, now the world’s richest man, according to Forbes, paid a tax rate of only 2.1 percent between 2013 and 2018 — which may have set the stage for his wealth to increase exponentially over the following years.
“As long as we fail to tax their main source of income — the growth in their fortunes — many billionaires will continue to live largely tax-free lives,” said Americans for Tax Fairness Executive Director Frank Clemente. “Teachers, plumbers, firefighters and other working Americans can already pay higher tax rates than billionaires — and that’s just counting the small part of billionaire income that is now taxed. When you include their untaxed wealth growth in the calculation, many billionaires pay almost nothing.”
This is what a rigged and corrupt system looks like.
Effective Tax Rate:
0.1%: Warren Buffett worth $111 billion
1.1%: Jeff Bezos worth $131 billion
1.8% Mike Bloomberg worth $82 billion
2.1%: Elon Musk worth $210 billion
13.5%: Registered Nurse
Yes. It’s time to #TaxTheRich
— Bernie Sanders (@SenSanders) May 19, 2022
Thursday’s report echoes previous findings that the richest Americans pay lower tax rates than the average American. Last year, a White House analysis estimated that the nation’s richest 400 families paid an income tax rate of just 8.2 percent over 2010 and 2018, largely because of the flexibility allowed to the wealthy in reporting their incomes and “preferred rates” for the types of taxes they pay, like taxes on stock sales.
The wealthy often use incredibly complex ways to manage and store their wealth, making it difficult for IRS auditors to ensure that they’re taxed correctly. According to a Government Accountability Office report released Tuesday, a lack of IRS funding and complex audits of those with incomes of $200,000 and more are causing audits to go down overall, opening up avenues for the wealthy to dodge taxes even further.
Some Democratic lawmakers have introduced measures to combat the growing wealth gap in the country; earlier this year, President Joe Biden requested in his 2023 budget proposal that Congress pass a “Billionaire Minimum Income Tax” of 20 percent to capture not only salaries but also unrealized gains from assets like stocks.