It’s a huge scoop, but also a hopeless open secret. Investigative journalists from the site Propublica took advantage of a massive information leak from the IRS, the US federal tax authorities to prove, in black and white, that the twenty-five richest Americans, titans like Jeff Bezos , Elon Musk, Warren Buffett, George Soros or Carl Icahn, the crème de la crème of the business, handle the mysteries of American taxation well enough to reduce their tax sheets to a minimum, to the point of sometimes avoiding paying the slightest federal contribution despite the staggering growth of their wealth and financial assets.
A crucial point: these multibillionaires did not commit any crime, nor concealed the slightest income. They are content, most legally in the world, to follow to the letter an American tax code scandalously favorable to financial income and investors, indifferent to the tangible wealth of the moguls, but on the other hand intractable for the employees who constitute the vast majority of US citizens. The affair, for the first time fueled by precise and undeniable figures, erupts – it is no coincidence – when the government of Joe Biden is considering a tax overhaul in the United States, one of the causes popular resentment and hatred of the elite that contributed to the rise of Donald Trump and the bellicose cleavage of the country.
The figures are indeed staggering. Jeff Bezos, the legendary centimillionaire, did not pay a dime of federal tax in 2007. Despite an increase of 127 billion dollars in his fortune since 2006, including 99 billion between 2014 and 2018, the titan of e-commerce n ‘declared only 4.22 billion in actual income and paid, in all, just over 900 million to the federal tax authorities during this period, an amount which represents, at most, 0.98% of its assets .
Tempting deductions
Elon Musk, boss of Tesla and SpaceX, declared $ 1.52 billion in revenue over four years while at the same time, his assets increased by $ 14 billion and paid a total of only 455 million in taxes, a rate of d actual tax of just 3.8%. Warren Buffett, who has repeatedly hit the headlines by recalling that the receptionist secretary of his investment firm Berkshire Hathaway pays a larger share of his income than he, the oracle of American investors, has also blithely benefited from the system: 125 million declared while his fortune increased by more than 24 billion, and only 25 million paid to the tax authorities. Michael Bloomberg, he declared 10 billion in income, an amount representing half of the 20 billion jump in his fortune, and paid 292 million in taxes.
The information from Propublica should be compared to the fate of the average American citizen. During the period when Bezos saw his woolen stocking grow by 127 billion and his taxes stagnate at 1.4 billion, everyone, deprived of the tempting deductions reserved for the top investors, saw the amount of his taxes increase by 125,000 dollars while the value of his property, shattered in 2008 by the financial real estate crisis, grew by only $ 86,000.
The injustice stems from the philosophy of the tax department, and rules established for more than a century by Congress, which mark an absolute difference between fortune and income. Despite the gigantic sums listed in Forbes’ list of great fortunes, this money remains virtual, because it essentially represents shares of companies and stocks that only acquire tangible value at the time of their sale. Then there is the tax rate: reduced to 15% during the Bush presidency, and increased to 20% since, the taxation of financial assets remains lousy compared to that of the average taxpayer.
Holes in tax legislation
Moreover, the maximum taxation of upper income brackets, the heart of the notion of tax progressivity, exceeded 70% until the early 1980s. It is now capped at 37.5%, this which is of great benefit to the wealthier citizens. Added to this are the myriad of deductions, the famous “loopholes”, the holes in the legislation into which accountants of great fortunes are engulfed. Jeff Bezos, expert in the matter, did not hesitate, for the anecdote, to ask as he has the right, the reduction of 4,000 dollars for child care, but he especially postponed, legally , for years the losses incurred by Amazon at the beginning of its ascent and massively reinvested its profits in non-taxable financial assets before their realization.
The moguls keep repeating that they virtuously refuse any salary for their leadership roles, but their fortune in company shares opens up a much more lucrative Ali Baba cave for them: the loan. With hundreds of billions in shares registered in their accounts with their “brokers”, multi-billionaires can take out tax-free loans at leisure by pledging their financial assets, and in addition, deduct the amount of interest from their tax sheets. Hence the miracle. Elon Musk pledged 92 million Tesla shares worth $ 57 billion in 2019 to secure a series of personal loans, invested or used for his lifestyle. Carl Icahn frankly responded to reporters who asked him about his federal tax exemption. If he declared half a billion in income, he would write off the interest on the loans he had contracted from the account. At the end of 2018, says Propublica, the twenty-five largest American fortunes totaled $ 1.1 trillion, and paid $ 1.9 billion in federal taxes. This wealth represents the assets of more than 14 million ordinary citizens. Employees, they paid 143 billion in taxes.
Joe Biden, reelected for decades senator from Delaware, a tax haven state whose local tax rate rivals that of the Bahamas, has made a drastic shift in consciousness on the question of taxation. However, anxious to avoid appearing, at the outset, as the revolutionary he never was, the new president refused the wealth tax project requested by advocates of the Democratic left like Elisabeth Warren and rather aims at progressive reforms.
The project remains open: the idea of an increase to 39.5% of the maximum rate of income tax, and above all, a small revolution, the taxation of financial income at this same rate, instead of the 20% in force today. This reform may come up against, in addition to the hostility of Republicans and moderate Democrats, the flagrant ineffectiveness of the American tax authorities. Affected by budget cuts of 20% since the mid-2000s, the tax administration was, for a time, unable to finance its telephone information standards. Its tax audits are greatly affected. We can bet that even with an increase in taxes, the super rich and their armies of experts will know how to make the most of American tax injustice.
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