The 25 richest Americans pay little or no federal income taxes. According to a report released Tuesday by nonprofit news organization ProPublica, the claims sparked debate over the tax code and sparked the IRS investigation into the leak of private tax documents.
NBC News did not independently review the documents, and ProPublica declined to reveal how it gained access to what it called “a massive amount of Internal Revenue Service data on the tax returns of thousands of the nation’s richest people. covering more than 15 years”
The report did not provide details on any illegality. of those who have inspected tax documents This includes some of the richest people in the US such as Jeff Bezos and Elon Musk. The White House is pushing for plans to tax capital gains on people who make more than $1million a year.
IRS Commissioner Charles Rettig said at an earlier hearing on Wednesday morning before the Senate Finance Committee that the agency was investigating leaks of documents.
“I can confirm that there is an investigation into allegations that the source of information from the article came from the Internal Revenue Service,” he said. Appropriate contacts have been made and the auditor will investigate.”
Board Chairman Ron Wyden, D-Ore., seized upon the revelation to underline his point. This is now reflected by the Biden administration that the richest employ tactics that most Americans do not use.
“The IRS is responsible for protecting taxpayer information. And you have confirmed that the matter is being investigated,” Wyden said.
“The overall picture is that this data shows that the country’s wealthiest people which made huge profits during the pandemic Haven’t paid their fair share yet,” he added.
This article reveals the huge differences between how the very wealthy pay taxes compared to most earning Americans. and how they did that using a simple three-pronged approach. Known in tax circles as “buy, borrow, die.”
This strategy focuses on making money from investments and capital. This is taxed only when an asset is sold, known as “realization” or “realized profit.” Investors will pay significantly lower real tax rates compared to those who pay the same wages.
Lilian Faulhaber, a professor of tax law at Georgetown University, said the current tax code is useful for people who maximize their wealth by investing primarily and paying little on income taxes.
“But when you look at the inequality in our society It has a real impact,” she said.
Samuel Branson, a professor of tax law at Loyola University at Chicago, said it was unlikely the rich would pay more in taxes. If the current system still exists
“Due to the realization requirement As long as the wealthy hold on to their wealth They will not have to pay taxes on the increased wealth,” he said in an email. “As the article states It dates back about a century. It is unclear whether the fulfillment requirement is a constitutional requirement. but is what we have As long as they don’t sell their valuable assets. They will not pay taxes. about profit
This article focuses on a small number of people, including Amazon ProPublica CEO Bezos, said to have reviewed Bezos’ tax records from 2006 to 2018.
“Bezos’ wealth has increased by $127 billion. According to Forbes But he reported gross income of $6.5 billion,” the article said. “The $1.4 billion he paid in federal taxes was a huge amount. But there is still a real tax rate of 1.1% on the increase in his wealth.”
The Tax Foundation, an independent tax policy non-profit organization. It was found that the average personal income tax rate was 14.6 percent.
A representative for Bezos did not respond to requests for comment.
However, billionaires still use a second strategy: borrowing money in “Single interest rate and tax-free,” ProPublica reported.
For example, Carl Icahn, identified by Forbes as the 40th richest American, has a $1.2 billion loan with Bank of America, according to ProPublica. That means he can. “Turbocharged his return on investment” and “had deducted interest on his taxes.”
When asked if it was appropriate that he should not pay income tax at all – as he did in 2016 and 2017 – Icahn objected.
“You think the rich should pay taxes no matter what. I don’t think it’s nonsense,” he told ProPublica. “How could you ask me that question?”
ProPublica also details the last part of its “buy, hold, die” strategy — the massive wealth that can be passed on. For the most part, they are not taxed from one generation to the next.
In tax circles, that’s what is called. Investments and assets passed on to a person’s heirs are not subject to any capital gains tax if sold immediately upon receipt.
The elimination of the “stepped” rule, or according to President Joe Biden called it “Trust fund loopholes” could be a way of earning federal taxes to pay for the many social programs he wants to enact.
“We have to make choices to eliminate loopholes,” Biden said last month if “a person dies and leaves their property for their son or daughter. [they] They pay nothing for that multi-million dollar profit when they sell that stock.”