How the Ultra-Rich Avoid Taxes

On June 8, 2021, ProPublica, an independent nonprofit investigative journalism organization, released a report titled "The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax." ProPublica claimed to have obtained a massive cache of tax returns from wealthy individuals and conducted an in-depth analysis. Using this report as a foundation, let’s explore the tax practices of America’s ultra-rich and uncover how they manage to avoid paying taxes.

When former U.S. President Donald Trump took office in 2016, The New York Times revealed that he paid only $750 in federal income tax that year. In fact, he paid the same amount in his second year as president. (Click here to read more about Trump’s tax avoidance strategies.) Clearly, Trump wasn’t an isolated case—America’s wealthiest individuals routinely pay minimal taxes or, in some cases, no taxes at all.

Ultra-Rich Who Paid No Taxes (in Certain Years):

• Jeff Bezos, founder of Amazon and the world’s richest man as of September 24, 2021, with a net worth of $198.2 billion (according to Forbes), paid no federal income tax in 2007 and 2011.
• Elon Musk, founder of Tesla and the world’s second richest man on the same date, with a net worth of $195 billion, paid no income tax in 2018.
• George Soros, the legendary hedge fund manager, paid no income tax between 2016 and 2018.

Ultra-Rich Who Paid Minimal Taxes:

• Warren Buffett, the world’s ninth richest person and CEO of Berkshire Hathaway, with a net worth of $100.9 billion, saw his wealth increase by $24.3 billion between 2014 and 2018. However, he paid only $23.7 million in income tax, resulting in an effective tax rate of just 0.1%.
• Michael Bloomberg, the world’s 20th richest person and media mogul, with a net worth of $59 billion, saw his wealth increase by $22.5 billion between 2014 and 2018. Yet, he paid only $292 million in income tax, with an effective tax rate of 1.3%.

So, how exactly do these ultra-rich individuals manage to avoid or significantly minimize their taxes? Let’s break down their strategies.