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Details have been leaked to a news website revealing just how little income tax America's billionaires pay.
ProPublica said it had seen tax returns from some of the world's richest people, including Jeff Bezos, Elon Musk and Warren Buffett.
The website claims that Amazon's Bezos paid no taxes in 2007 and 2011, and that Tesla's Musk paid no taxes at all in 2018.
A White House spokesman called the leak “unlawful” and the FBI and tax authorities are investigating.
ProPublica said it was analyzing “a trove of Internal Revenue Service data” on billionaires' taxes and would publish more details in the coming weeks.
The BBC has not been able to verify the claim, but the leak is said to come at a time of heightened debate about how much tax the wealthy pay and widening inequality.
ProPublica said the 25 richest Americans pay an average of 15.8% of their adjusted gross income in taxes, less than most mainstream American workers.
Jesse Eisinger, a senior reporter and editor at ProPublica, told the Today program: [tax] If you're a billion-dollar person, you pay zero tax. It's actually amazing that you can pay zero tax. The super-rich can get around the system completely legally.”
“They have a great ability to find deductions and credits and take advantage of loopholes in the system,” he said.
Thus, although owning stock in the company significantly increases the value of their assets, it is not recorded as income.
But that's not all: “They're also taking aggressive tax breaks because they're borrowing to cover living expenses,” he said.
He said America's billionaires buy, build or inherit wealth and then borrow against that wealth.
Since they don't make profits or sell shares, they don't earn taxable income.
“They can borrow money from the bank at a relatively low interest rate, live off it and use the interest expense as an income deduction,” he said.
“By using entirely legal tax strategies, many of the ultra-wealthy have been able to reduce their federal tax payments to zero or close to zero, even as their wealth has skyrocketed over the past few years,” the website states.
The wealthy, like many ordinary citizens, can reduce their income tax burden through charitable donations and by withdrawing funds from investment income rather than from employment income.
Using data collected by Forbes magazine, ProPublica said the 25 richest Americans saw their fortunes grow by a combined $401 billion between 2014 and 2018, but paid $13.6 billion in income taxes during that period.
President Joe Biden has promised to raise taxes on the wealthiest Americans as part of a push to improve equality and fund a massive infrastructure spending plan.
He wants to raise the top tax rate, double the tax on investment gains made by high earners and change the inheritance tax.
But the ProPublica analysis concludes: “While some wealthy Americans, such as hedge fund managers, would pay more in taxes under the Biden administration's current proposals, the vast majority of the top 25 would see little change.”
One of the billionaires mentioned, philanthropist George Soros, is also said to pay minimal tax. Soros's office did not respond to the BBC's request for comment but in a statement to ProPublica said he had not paid tax for several years due to investment losses.
The statement also noted that Trump has long supported raising taxes on wealthy Americans.
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'illegal'
Former New York City Mayor Michael Bloomberg, whose tax details were among the documents, said in US reports that the revelations raised privacy concerns and that he would use “legal action” to uncover the source of the leaks.
Investigative journalism website ProPublica said it received the leaked documents in response to several stories it has written about how budget cuts at the IRS are hindering its ability to enforce taxes on the wealthy and big corporations.
White House press secretary Jen Psaki said “any unauthorized disclosure of classified government information” was unlawful.
In an emailed statement to Reuters, Treasury Department spokeswoman Lily Adams said the matter had been referred to the FBI, federal prosecutors and two internal Treasury Department oversight agencies, “all of which have independent investigative authority.”
IRS Commissioner Charles Rettig said, “I can't speak to any specific taxpayers. I can confirm that the allegation that the IRS was the source of this story is being investigated.”
What could be wrong? Let's do a very simplistic analysis. If the shares in a company I founded are worth £1 billion at the start of the tax year and rise to £2 billion by the end of the tax year, how much income tax should I pay? The answer is simple: zero, because I have twice the wealth but zero income.
Meanwhile, if you have zero assets and earn £30,000, you'd pay around £6,000 in income tax and national insurance. So the revelation that some wealthy Americans pay little or no income tax may spark outrage, but it shouldn't be a surprise – it's not an apples-to-apples comparison.
That's not to say these super-rich don't have the income to pay for their yachts: they widely use the practice of borrowing cash against their vast fortunes – again, not income, but loan proceeds, which is the (totally legal) biscuit grab.
The interest on that loan can be deducted from your other income, further reducing your income tax liability. It sounds terrible, but it's legal.
It is no wonder that many politicians around the world (Elizabeth Warren in the US, Jeremy Corbyn/John McDonnell in the UK) and academics such as Thomas Piketty have argued that we need a way to tax wealth rather than income.
The billionaire in this example would currently pay 20% capital gains tax in the UK the moment he sold the shares and made a profit.
However, unless the profits are put into another business, the current tax system is designed to encourage this, to spur economic growth and new jobs. New jobs generate revenue and therefore taxes.
Advocates say that's just how capitalism works, but calls for tax reform are growing louder, as is a new global agreement on taxing multinational corporations.
