In 2011, the world’s richest man didn’t pay a single dollar in federal taxes: with an $18 billion fortune, Jeff Bezos claimed a $4,000 tax credit for his children. He got it. In 2018, the world’s second richest man, Elon Musk, paid zero in federal taxes. From 2014 to 2018, the world’s dean of financiers, Warren Buffett, paid 0.98% of the $24 billion he accumulated in federal taxes.
And there was no divine justice to rain fire and brimstone from the sky. On Wednesday, the FBI and the U.S. Internal Revenue Service launched investigations into the sensational leak of tax data published by the online magazine ProPublica: 15 years of tax returns of the 25 richest men in the country, showing everything they’ve accumulated and the little or nothing they’ve paid in.
ProPublica is not a small charity run by idealists. It’s a brass-knuckle online publication that has won four Pulitzers in the past decade, published since 2007 by a nonprofit created by Herbert and Marion Sandlers, a New York husband and wife who sold the bank they owned and started their innovative newsroom back in 2007.
ProPublica did not reveal its source, stating only that it “received a large collection of raw data.” But its prestige, and the meticulous work it has done on the data for months, has led every other global news outlet to take the data at face value.
The White House said the publication of the tax data was “illegal,” while the rest of the world read the documents in astonishment. In the four years 2014-2018, America’s top 25 billionaires saw their fortunes increase by $401 billion, and during that time they paid $13.6 billion in federal taxes.
Does that sound like a big number? It’s a joke: a rate of 3.4%. Less than a quarter of the average tax rate paid by American families, which earn about $65,000 a year and pay 14% in tax. And it’s all legal. ProPublica’s tax return scoop comes at a sensitive time, when newly elected President Biden is talking about raising taxes on the rich. But Biden wants to raise the tax rate on large fortunes from 37% to 39%. The problem is that the owners of large fortunes aren’t paying 37%, or even 3.7%. They’re paying just 3.4%—if they’re paying anything, that is. Because it’s all the rage among America’s high rollers to pay nothing at all.
Jeff Bezos (Amazon) paid nothing at all in 2007 and 2011—and in 2021, after blocking the unionization of its employees, Amazon is asking for public funding. Elon Musk (Tesla) paid nothing in 2018. In four years, the grandmaster of speculators, Warren Buffett (Berkshire Hathaway), paid 0.98%. George Soros paid nothing in tax in 2016, 2017 and 2018.
Former New York City Mayor Michael Bloomberg (Bloomberg LP Group) paid 1.30% in tax from $10 billion he earned in 2018. More data is still to come, ProPublica promises. At the end of 2018, the 25 billionaires under scrutiny were all together worth $1.1 trillion. Their wealth is equal to that of 14.3 million regular Americans put together.
The dismantling of “Keynesian” tax systems that occurred in the 1980s and 1990s, and the notion that markets would be more efficient than states in redistributing resources, has led to this extraordinary result. The problem is that the IRS, which has 80,000 employees, keeps chasing income, and leaves wealth undisturbed.
But it’s this wealth that gives the super-rich their income. Not a single crime was uncovered in this outrageous data from ProPublica, only the result of decades of pro-wealth tax laws. In April, economists Emmanuel Saez and Gabriel Zucman calculated and made public the fact that America’s vast tax-free wealth was worth a total of $2.7 trillion. And once again, there was no fire and brimstone raining from the heavens.
Earlier in April, none other than Forbes magazine looked at 55 major American companies that hadn’t paid a single dollar in federal taxes in the previous year, thanks to the tax cut bill signed by Donald Trump. They included the country’s elite: Nike, FedEx, food giant Archer Daniels Midlands, cable TV giant Dish Network, software giant Salesforce, etc. Back in 2003, when George W. Bush passed the first tax cuts for the rich, it was Warren Buffett himself—back then a sprightly 73 years old—who stood up against the measures, writing a fiery editorial in the Washington Post against “voodoo taxes” and calling for raising the tax rates for the rich. Il manifesto was the only newspaper in Europe that carried that op-ed. But nothing happened. And old Warren got fed up and ended up breaking all records in taking advantage of the tax cuts—he’ll give it all to charity when he dies, he says.
And this is where we see another problem: aside from a few liberal politicians, the only ones really fighting to tax the rich are other rich people. Particularly active is the curious group of the Patriotic Millionaires, a group of highly affluent people founded by Morris Pearl, a former executive of the mammoth BlackRock fund (the largest private investor in the world), and business lawyer Erica Payne. Pearl and Payne wrote Tax the Rich, a veritable Bible of all the tricks the wealthy use to dodge the taxman. For instance, taking out enormous loans secured by the stocks you own, and spending and investing those (untaxed) funds while keeping the principal safe; organizing charity campaigns whose main beneficiary is the organizer; or investing in works of art whose value rises and falls based on fanciful criteria.
The Patriotic Millionaires—one needs to have $1 million in cash to join the group—are spreading awareness about the book, organizing shows, pressing the media and politicians and putting up billboards everywhere with the faces of Bezos or Musk and the words “Tax me if you can.” Their flagship proposal is the “Buffett rule,” that very proposal for higher taxes on the rich that old mega-billionaire Warren had called for—and which he never applied to himself.
Because one thing is undeniable: taxing income is easy, but taxing wealth is, in technical terms, a real nightmare. The IRS has long since thrown in the towel. But it needs to done—before a global popular uprising comes and forces the tax-dodging uber-rich to flee to the remote islands where they’ve stashed their money.
