Did you know American Billionaires Jeff Bezos and Elon Musk paid a total of $0 in income taxes in 2007, 2011, and 2018 respectively? Did you know in 2007 while the Average Berkshire employee paid federal taxes to the tune of 33%, Warren Buffet paid only 18%?
In addition, billionaire George Soros didn’t pay any income tax from 2016 to 2018 i.e., 3 years in a row, another billionaire investor Carl Icahn too could avoid it twice and Michael Bloomberg (founder and CEO of Bloomberg LP) have managed to do the same in recent years.
Now above facts thrash the myth of the American Tax system that every person pays their fair share of income tax and the richest pay the most, isn’t it? As fascinating as it seems, IRS (Internal Revenue Service) data shows that the wealthiest Americans can legally and perfectly pay taxes that are only a tiny fraction of what they earn in millions and billions.
So, How Do American Billionaires Avoid Income Taxes Legally?
Every year American billionaires avoid more than $160 Billion in income taxes. You might be wondering how can one be a billionaire and easily avoid taxes when we middle class ends up paying a huge chunk in income taxes?
Well, well, they make use of tax-avoidance strategies that are perfectly legal yet beyond the reach of ordinary people.
American billionaires do not prefer getting salaries like us. They prefer to hold shares of the company they run. Interestingly, in the US, there’s a difference in the way salaries and shares are taxed.
Going by the tax slab, the highest tax rate for salaries and wages is 37% but for shares, it is only 20%. Moreover, it is a well-known fact that shareholders only pay taxes when they sell their shares. So, this 20% tax i.e., the capital gain tax will be only paid by the billionaires if and when they sell their shares.
So, what’s the easiest way to avoid income taxes legally?
Well, you guessed that right, never sell those shares!
But Then How Do these US Billionaires Afford and Fund their Needs and Luxurious Lifestyle?
Well, by following the Tax Strategy – Buy, Burrow and Die.
STEP 1: BUY
The ultrarich buy an asset or build a company or inherit a fortune and do not sell them. Now, as long as they do not sell their asset and company they do not attract any taxes. Besides, they keep their income as low as possible because every dollar they earn can be taxed.
STEP 2: BORROW
Using their assets and holdings as collateral they borrow from the bank. Being super-rich and creditworthy the banks give them a super deal. For instance, $10 million for 3 to 4%. However, if you earn a salary of $10 million, you owe 37% income taxes to the state. This is how American billionaires avoid income taxes legally and fund their lavish lifestyles by reporting little to no taxes.
STEP 3: DIE
Upon the death of these billionaires, their heir inherits the asset and stocks tax-free. The billionaires also have complicated trusts and philanthropic foundations to escape the estate tax.
This is how a new generation becomes super rich and ultrawealthy and the cycle of evading taxes legally continues.
And that’s precisely how American Billionaires Avoid Income Taxes Legally
