Your Money
The big news buzz this week was an article from ProPublica that analyzed IRS records of 25 billionaires and found that they paid an average of just 15.8% of their AGI in taxes over the past decade, and in some years had an outright zero-dollar tax liability (e.g., Jeff Bezos paid no tax in 2007 and 2011, and Elon Musk paid no taxes in 2018). The fact that ProPublica accessed such information directly from the tax returns has triggered Federal investigations into the source of the data, suggesting it may have been an illegal leak from the IRS.
ProPublica did not claim any illegal activity among these wealthy individuals. These individuals simply understood and used the existing system of deductions and credits.
In particular, the article highlights the strategy of borrowing against their illiquid assets to fund their lifestyles...and in the process, being able to generate 'income' from their assets, without triggering the recognition of capital gains, and even being able to claim an investment expense deduction for the interest (as the loans are often structured against investment assets).
This same strategy is available to not just the uber-wealthy, but to anyone with a security-backed line of credit.
US super-rich 'pay almost no income tax'
source: BBC
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