A major exposé by ProPublica has revealed how U.S. billionaires pay little in income tax compared to their massive wealth, or sometimes even nothing. Private tax records of some of the country’s top billionaires show that between 2014 and 2018 the wealthiest 25 Americans saw their collective wealth jump by more than $400 billion, but they paid just over $13 billion in federal income taxes — amounting to a tax rate of just 3.4%. “Typical wage earners like you or me, we pay taxes every time we get a paycheck,” says Jeff Ernsthausen, a senior data reporter at ProPublica. “But for the ultra-wealthy, it’s a completely different story.”
AMY GOODMAN: A major leak of IRS tax filing has revealed new details about how U.S. billionaires pay little in income tax compared to their massive wealth — sometimes even nothing. ProPublica obtained the private tax records of some of the nation’s wealthiest billionaires, and the findings are stunning. Between 2014 and 2018, the wealthiest 25 Americans saw their collective wealth jump by $400 billion, but they paid just over $13 billion in federal income taxes — that’s just 3.4% of their wealth increase.
Warren Buffett paid a true tax rate of just 0.1% on income taxes during that period, while seeing his wealth grow by $24 billion. Jeff Bezos, the world’s wealthiest man, paid no federal income taxes in 2007 or 2011. Elon Musk, the second-richest person in the world, paid no federal income taxes in 2018. George Soros paid no federal income tax for three years in a row. And former New York City Mayor Michael Bloomberg also paid no income tax one year.
The Biden administration responded to the explosive report by announcing a probe into who leaked the private IRS filings.
Meanwhile, Senator Elizabeth Warren repeated her call for a wealth tax, saying, quote, “Our tax system is rigged for billionaires who don’t make their fortunes through income, like working families do. The evidence is abundantly clear: it is time for a #WealthTax in America to make the ultra-rich finally pay their fair share,” she said.
In a moment, we’ll be joined by the ProPublica reporter who, along with several others, broke the story. But first we turn to a short video produced by ProPublica about the ultra-wealthy, how they avoid paying taxes.
NARRATOR: Some of the very richest Americans pay little in taxes compared with how fast their fortunes grow each year. How? They use a tax strategy known as “buy, borrow, die.” It’s like the ultra-wealthy are living on another planet. Average people need income to pay for basics, like housing and food. But the ultra-wealthy don’t. They can just live on borrowed cash.
Step one: buy. The ultra-wealthy buy an asset or build a company or inherit a fortune. As long as they don’t sell, they owe no taxes. They keep their income as low as possible, since every dollar they earn can be taxed.
Step two: borrow. They borrow against their holdings, and the bank gives them a really good deal.
BANKER: I’ll loan you $10 million with only 3% interest. But if you take a $10 million salary from your company, you’ll owe almost 37% to the IRS.
NARRATOR: So the ultra-wealthy use loan money to fund their lifestyles. That’s how a billionaire can live the most luxurious life imaginable while reporting little to no taxable income.
Step three: die. When they die, these lucky few often use complicated trusts and philanthropic foundations to avoid the estate tax. And their heirs can inherit stocks and other assets tax-free. A new generation is ultra-wealthy, and the cycle starts all over again.
AMY GOODMAN: That’s a new video from ProPublica. We’re joined now by Jeff Ernsthausen, senior data reporter there. He’s co-author of the exposé headlined “The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax.”
Welcome to Democracy Now!, Jeff. It’s great to have you with us. What a stunning report. I think it’s always easiest to link with one person to understand this whole story, and the video was very good. But why don’t you start with Jeff Bezos? And, I mean, this is a man, wealthiest in the world, who got a $4,000 child tax credit, is building a half-a-billion-dollar yacht. Can you explain how this system works?
JEFF ERNSTHAUSEN: Thank you for having me.
So, our story is about a relatively simple concept, which is that typical wage earners like you or me, we pay taxes every time we get a paycheck, right? It comes out automatically. But for the ultra-wealthy, it’s a completely different story. So, they don’t pay taxes until they decide to do something like sell a stock, at which point they’re taxed on it. So this allows them to accrue massive amounts of wealth almost entirely outside of the tax system.
And so, the example of Jeff Bezos is a good one for illustrating this. So, between 2006 and 2018, his wealth grew by almost $130 billion. During that time, he paid something on the order of $1.4 billion in taxes, which sounds like a lot, but it’s almost at 1% on the amount that his wealth went up. And so, in some years he had a very — you know, had registered very low income, and therefore ended up paying almost nothing in taxes, and in a couple years, nothing in taxes.
JUAN GONZÁLEZ: And, Jeff, I was most struck by Warren Buffett’s inclusion in this group, given how often Buffett has publicly decried the unfairness of the tax system. The fact that he is, on a regular basis, utilizing the benefits of being able to avoid paying taxes is really amazing. I’m wondering if you could talk about his situation, in particular.
JEFF ERNSTHAUSEN: Yeah, Warren Buffett is sort of the — one of the best examples of how this works. So, Berkshire Hathaway, somewhat famously, doesn’t pay a dividend. And because of that, Warren Buffett’s income, as a major shareholder of Berkshire, ends up being relatively low every year for someone with as much money as he has. And so, his wealth has, you know, shot up by tens of billions of dollars in the five-year period that we focus on in our story, and he paid in the millions in taxes. And that’s because his company is structured in such a way that he’s not ever really realizing any of those gains in a way that the U.S. tax system recognizes.
JUAN GONZÁLEZ: And what would be the ways that the government could be able to move into this whole area of wealth versus income, in terms — because, obviously, a lot of these ultra-wealthy people, like Michael Bloomberg and Soros and Buffett, end giving a lot of their wealth to foundations as a means for them actually to avoid paying even a wealth tax toward the end of their lives?
JEFF ERNSTHAUSEN: Yeah. I mean, it’s one of the aspects of the system that, you know, if nothing else, if you do donate your money to charity, there’s not going to be a moment when those gains are taxed. So, if you give stock to charity, for instance, you don’t pay. It’s not like you have to sell it and then take a — pay taxes on it and then give it to the charity. You get to give it to the charity, and taxes are never paid on it.
And while these foundations, you know, they may do quite a bit of good in the world, it does sort of allow those who have a great deal of wealth to somewhat pick and choose what they contribute to, while normal, everyday Americans are sort of paying into the general fund, if you will, of expenditures that the government makes.
AMY GOODMAN: I wanted to turn to a moment in Congress. Abigail Disney, the granddaughter of Roy Disney, the co-founder of the Walt Disney Company, recently testified on Capitol Hill in support of a wealth tax. She was questioned by Senator Elizabeth Warren.
SEN. ELIZABETH WARREN: If you don’t mind my asking, how much wealth do you have, and how much did it grow last year?
ABIGAIL DISNEY: I have about $120 million, maybe more, depending on how the stock market is on any given day. It grows at about 4 to 8% annually.
SEN. ELIZABETH WARREN: OK. Thank you. And so, let’s just say — you said 4 to 8%. Let’s just say an average growth of about 6%. That would mean that your wealth grew by about $7 million last year. That is almost 60 times the total wealth of the typical American family. So, let’s, just for a minute, talk about that increase. Do you know how much in taxes you will pay on your $7 million increase in wealth this year, Dr. Disney?
ABIGAIL DISNEY: Not that much. It comes not from wages, but from things like dividends and capital gains and interest and so forth, so all of that qualifies for a lower tax rate than income.
SEN. ELIZABETH WARREN: All right. And what about your total $120 million fortune? How much do you think you’ll pay in taxes on that this year?
ABIGAIL DISNEY: Nothing. There’s no wealth tax.
AMY GOODMAN: So, that’s Abigail Disney, the granddaughter of the co-founder of the Walt Disney Company. And that, she was being questioned by Elizabeth Warren. The senator responded to the ProPublica investigation by tweeting, “Our tax system is rigged for billionaires who don’t make their fortunes through income, like working families do. The evidence is abundantly clear: it is time for a #WealthTax in America to make the ultra-rich finally pay their fair share.”
Jeff Ernsthausen, can you explain what a wealth tax would look like and also how you calculated the true tax — the true tax, as you called it, on these billionaires — of these billionaires?
JEFF ERNSTHAUSEN: Sure. So, our article was focused on sort of putting out information that we think is important to inform the public debate. There are a number of proposals that people have made for how wealth taxes would work, although it wasn’t sort of the focus of our article. And the way that we did our analysis — and it was something that couldn’t, obviously, be done without having the tax information of these individuals — was to compare how much their wealth went up over a five-year period, according to Forbes, with how much they were paying in taxes. And that’s really the key concept for these folks, because they’re not bringing in a lot of money in wages and traditional income. They’re bringing in money through things like capital gains, growth in stock value. And that really illustrates what matters most for them, which is how much their wealth grows each year.
JUAN GONZÁLEZ: And, Jeff, I wanted to ask you — given that this individual tax information, the information of taxpayers, is generally considered secret information, not available to the public, and that you obtained some of these records, there’s now criticism in some parts, especially among some Republicans, that this was somehow an illegal dump of information to you. How do you respond to the Biden administration concentrating now on trying to find out how this leak occurred, rather than try to deal with what it reveals?
JEFF ERNSTHAUSEN: Well, obviously, we think it’s important to inform a public debate about taxation and spending in this country, you know, to know what the wealthiest Americans pay. And we’re being very selective in what we are disclosing in our stories. So, we think this is vitally important information to inform the public.
AMY GOODMAN: [inaudible] spokesperson.
PRESS SECRETARY JEN PSAKI: [Any unauthorized] disclosure of confidential government information by a person with access is illegal, and we take this very seriously. The IRS commissioner said today that they are taking all appropriate measures, including referring the matter to investigators.
AMY GOODMAN: So, again, that is White House spokesperson Jen Psaki. I think it’s interesting this comes right after the Biden administration and the Department of Justice promised they would not be investigating journalists. So, maybe, Jeff, your email and other records will be safe, if in fact this leak investigation goes on. But it’s an interesting contrast between Senator Warren calling for a wealth tax and the Biden administration calling for a leak investigation.
JEFF ERNSTHAUSEN: Absolutely. And we’re, of course, hoping that the administration sticks to some of the rhetoric that we’ve heard in previous days, in recent previous days, regarding that.
AMY GOODMAN: And finally, you have one of the — a number of articles here. It’s a whole compilation of articles. “You May Be Paying a Higher Tax Rate Than a Billionaire.” Explain.
JEFF ERNSTHAUSEN: Yeah. So, we released two articles. One sort of focused on what we’ve discussed so far, which is this tax rate on wealth growth. The other, we focus on the sort of very traditional measure that the IRS often uses, which is taxes paid divided by income as the IRS recognizes it. And it’s what a lot of people think of when they think of their tax rate. And the interesting thing is that, even on that measure, the ultra-wealthy pay less than a large swath of Americans, because the income that they do take, it tends to be at preferential rates, like capital gains, which is taxed at a lower rate than wages. So, even on the sort of traditional measure, this group of the wealthiest Americans pays relatively little.
AMY GOODMAN: And what do you plan to do with all this information? You haven’t released a lot of details. What are you doing over these months?
JEFF ERNSTHAUSEN: Yeah, we’re going to continue to write stories that are related to the information in here. And you can expect a number of additional stories over the coming months based on this trove.
AMY GOODMAN: Jeff Ernsthausen, senior data reporter at ProPublica, co-author of the investigative series, which we will link to, just out, headlined “The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax.”
Coming up, we’ll look at the shocking treatment of migrant children in U.S. custody. Videos emerged of officials in Texas tasering a 16-year-old boy from Honduras.