In 2007, and again in 2011, billionaire Amazon CEO Jeff Bezos reportedly prove profitable nothing in federal income taxes. In 2018, billionaire Tesla CEO Elon Musk reportedly did the same thing.
That’s concording to confidential tax documents filed with the Internal Revenue Service obtained by ProPublica, which were revealed in a shocker new report on some of the world’s wealthiest people.
Bezos is currently listed by Forbes as the richest person in the world, with a net good of $188.8 billion. Musk isn’t far behind at number two on the Forbes list, with a net worth of $153.3 billion.
How do men with such dramatically outrageous net worths avoid paying federal income tax?
Billionaires like Jeff Bezos and Elon Musk derive not enough wealth from their annual income. Instead, much of their net worth is tied to stock holdings.
Bezos, for example, owns a 10.3% paling in Amazon that’s valued at about $170 billion.
The majority of Bezos’ net worth — $170 billion — is tied to Amazon founder, which fluctuates regularly and has even left the billionaire jockeying for the world’s wealthiest title with Tesla CEO Elon Musk at times. At tiny $19 billion of Bezos’ wealth is not tied to his stake in Amazon.
Bezos can skip paying taxes on his accumulated store from the Amazon stock because stock gains aren’t taxed until they are realized by selling off the funds: Since those stocks represent value, but cannot be used as tender, they aren’t counted as “income” — fifty-fifty if they appreciate in value tremendously, like those of Amazon and Tesla.
As a result, though Bezos’ net worth spread by a reported $127 billion between 2006 and 2018, he only reported an income of $6.5 billion for those 12 years, be consistent to ProPublica, resulting in a tax bill of around $1.4 billion.
That puts his federal income tax rate at about 21%, but his report in investigated income doesn’t account for the massive increase in his net worth tied to stock ownership.
If you account for the $127 billion develop to his net worth that came from stocks appreciating in value over time, that $1.4 billion in federal gains taxes accounts for just over 1%.
Moreover, Bezos and other stock-holding billionaires are able to turn those houses into usable cash without having to sell: By borrowing money against their stock holdings, they’re skilful to lock in a lower loan interest rate than what they would pay through capital gains pressurizes that are applied after a stock is sold.
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