what financial tools/mechanisms billionaires employ to not pay any taxes?

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Do they just not file paperwork and then bribe a judge? Are their taxes so complicated that even the IRS gives up? What the hell, man…

In: Economics

4 Answers

Anonymous 0 Comments

Hold your wealth in assets and don’t liquidate. Taxes are typically only due on realized gains. So if you bought a piece of land or company share that has appreciated and continue to hold it, your “net worth” (which is kind of a BS estimate generally speaking) goes up but you don’t pay taxes.

Buy US treasuries (if you are a US tax resident) – anyone can do this. Take loans if you need cash using assets as a pledge. A wealthy person does not rely on salaries and wages. Hence their “income” taxes will be low relative to their total wealth.

Nonetheless, it is not true that they don’t pay taxes – the rich pay most of the income taxes in the US. Your political or moral inclinations determine if you believe this is too much or too little but the objective numbers still hold. It is also true that other (non income) taxes are far less progressive and this burden doesn’t fall on the wealthy as much.

Anonymous 0 Comments

If you can make it look like you have made very little profit, you won’t get taxed as much. A lot of corporations pay themselves “fees” to make it appear like they have not made as much money even though they have.

Anonymous 0 Comments

A lot of people misunderstand how billionaires get their wealth.

They own a company. Company becomes big. The fact that this company makes profit or likely makes profit makes this company valuable.

For most companies and billionaires, this involves “going public,” meaning being listed on the stockmarket. This process involves the original owners giving up part of their ownership in the company in exchange for raising money for the company, but on top of this this also puts pricetag on the company itself on the open market.

When people say “Jeff Bezos earned 4 billion dollars this year” they do not mean that Bezos was handed a check with that money. That just means that the overall value of Amazon went up by a few percent and Bezos as the owner of some 20% of the company, got an “increase in net worth.” Bezos is paid for his position as CEO of amazon 88K a year (though about a million a year in benefits on top of this, security for the CEO is fairly important).

Anyways, Bezos owns say 60 billion worth of amazon stock. This number is misleading in many ways.

Taxes on stocks for him work largely the same way they do for everyone else, owning it is not a taxable event. For it to be taxable, he has to sell it for cash or other goods and services. So if bezos doesn’t sell any stock, he merely has to pay the income tax on the 88K he makes a year from amazon, same tax as everyone else.

So when bezos does sell some of his shares, he does pay tax. If bezos were to step down from his positions, not sell any shares, and amazon didn’t issue any dividends, then he would not pay any tax. After all, he didn’t get any money that year.

Secondly, this 60 billion in stock is not money he can take out easily. Whenever he sells shares, there are strict rules as to how he can sell them due to him owning so much to avoid him using his position to manipulate the market in his favor.

On top of this, that 60 billion is also very conditional. If Bezos were to sell all his shares in one instant, the laws of supply and demand state that share price would tank. He wouldn’t earn nearly that 60 billion off shares.

Anyways they do use various tax deductions and what not to reduce the taxes they pay once spending this but these are quite limited, deducting 5000 in tax from a billionaire is hardly anything.

Anonymous 0 Comments

In the US, in 2016, 37.3% of individual tax revenue was collected by the top 1% of earners. By comparison, the bottom 50% of earners contributed 3% to tax revenue.

Billionaires ARE paying taxes. On average, they pay about 27%. However, you need to understand that “billionaire” refers to net worth, not income or actual cash holdings. Jeff Bezos doesn’t have $120 billion in a bank account. It’s all tied up in stocks and those don’t get taxed until/unless he sells them.

In fact, Jeff Bezos only makes $83,000 per year in salary, so he pays something like $7000 in income tax if he doesn’t sell any stock. And if he does sell stock, if gets taxed at capital gains rates, which are much lower than income tax rates.