Wealthy family buys stocks, bonds, real estate, art, or other high-value assets. It strategically holds on to these assets and allows them to grow in value. The family won't owe income tax on the growth in the assets' value unless it sells them and makes a profit.
Jeff Bezos isn't paying massive taxes on his wealth, and here's why: He doesn't rely on a big salary from Amazon. Taking just $80K a year avoids that brutal 37% tax rate (plus Social Security and Medicare taxes).
If that sounds impossible to achieve, just look at the leaked tax returns of the wealthiest Americans that nonprofit news site ProPublica analyzed in 2021: Over several years, billionaires Elon Musk, Jeff Bezos, and Michael Bloomberg, among others, paid no federal income taxes at all. How do they do it?
“Companies are allowed to 'carry forward' excess losses to years with profits, with the old losses canceling out current earnings,” the report explains. That's how Tesla, which last year made $10 billion in profit on $96 billion in revenue, was able to pay no federal income tax.
The report concluded the rich were less likely to donate in settings with high economic inequality because they were concerned about losing their “privileged position.” A separate study published in Nature Aging found people living in poorer countries are more willing to donate to a hypothetical charity than those in ...
Most of the government's federal income tax revenue comes from the nation's top income earners. In 2021, the top 5% of earners — people with incomes $252,840 and above — collectively paid over $1.4 trillion in income taxes, or about 66% of the national total.
He paid $1.4 billion in personal federal taxes, a true tax rate of 1.1%.
According to the latest IRS data, the top 1% of earners paid 40.4% of all federal income taxes in 2022. This underscores the extent to which the burden of the income tax system falls on taxpayers from the highest income groups.
A tax loophole is a provision or ambiguity in tax law that allows individuals and companies to lower their tax liability. Loopholes are legal and allow income or assets to be moved with the purpose of avoiding taxes.
By pledging their appreciating assets as collateral, billionaires are able to live off their loans as long as their loan payments don't exceed their investment gains.
Others will object to taxing the wealthy unless they actually use their gains, but many of the wealthiest actually do use their gains through the borrowing loophole: They get rich, borrow against those gains, consume the borrowing, and do not pay any tax.
Elon Musk to pay record-breaking $12 billion tax bill. CNBC's Robert Frank reports on Elon Musk's tax bill which is the largest in history. Musk will pay a total of $12 billion for 2021.
2023 Rankings. For the tenth year in a row, Estonia has the best tax code in the OECD. Its top score is driven by four positive features of its tax system.
Pros and Cons of a Wealth Tax
Critics allege that wealth taxes discourage the accumulation of wealth, which they contend drives economic growth. They also emphasize that wealth taxes are difficult to administer. Administration and enforcement of a wealth tax present challenges not typically entailed in income taxes.
“The crown jewel of this oligarchy is a billionaire president, backed and bought by the world's richest man Elon Musk, running the world's largest economy.
Among the countries with the lowest tax rates in the world are Malta, Cyprus, Andorra, Montenegro and Singapore. Aside from zero income tax, in Antigua and Barbuda, individuals are also free from paying taxes on wealth, capital gains, and inheritance.
“On the other hand, the middle class primarily earns through wages, which are subject to higher income tax rates,” Feniak said. The IRS taxes long-term capital gains on a graduated scale that maxes out at 20%. That means even the richest households can pay no more than one dollar in five on their capital gains.
Even though personal income tax rates differ from one country to another, they can also vary depending on the tax brackets. In general, taxes in Europe vs US tend to be higher.
Giving by income level
Middle-class Americans donate a little less. But the lower-income population surprises by giving more than the middle—and in some measures even more than the top. (As a percentage of available income, that is. In absolute dollars, those in higher income groups give much, much more money.)
According to Forbes, there are more billionaires than ever before (141 more than last year and 26 more than the 2021 record), with their collective worth reaching $14.2 trillion. Swift's inclusion comes after Forbes declared the singer a billionaire in October 2023 and reported her net worth at $1.1 billion.
The rich hoard lots of cash because they ultimately want to have peace of mind. As we've learned in a previous article, saving more money continuously increases happiness compared to making more money where happiness plateaus around $150,000 – $200,000 a year. Cash is King except for in a bull market.