Right before tax season ended last month, ProPublica published a list of the country’s highest earners and how much they pay in taxes, based on a trove of secret IRS files the newsroom obtained last year.
ProPublica reporter Paul Kiel joined Boston Public Radio to explain his findings, including why the ultra-rich — the top 400 earners in the entire country — pay lower income tax rates than affluent Americans, how Tesla founder Elon Musk is paying for Twitter, and his thoughts on proposals to change the country's tax system.
Through its IRS files, ProPublica found that Amazon founder Jeff Bezos did not pay any federal income taxes in 2007 and 2011. In 2018, Musk also paid no federal income taxes, despite reporting an income of $3.85 million that year and being one of the richest people in the world.
“We have an income tax system that taxes income and does not tax wealth,” Kiel explained.
That means billionaires like Bezos and Musk, who keep much of their wealth in the form of stock, can avoid calculating much of their wealth in income taxes. The government would only tax total billionaire wealth if they sold their stock and converted it to cash. But Bezos or Musk do not have to sell their stock in order to use their wealth.
One common strategy, Kiel said, is to borrow against that stock. Musk borrowed against Tesla stock to finance his Twitter purchase. Kiel explained this also led to some of the richest people in the U.S. receiving stimulus checks during the pandemic, because Congress used tax returns to figure out who qualified.
Kiel gave the example of real estate developer and Miami Dolphins owner Stephen Ross, who did not pay income taxes for over 10 years. “He just won a lot of big projects here in New York where I live, nobody says that he's in a tailspin financially,” Kiel said. “But if you look at his taxes, you'll see numbers like negative $400 million on the line that says his income … that's how you end up with a stimulus check, even if you know you're worth $7 billion.”
Another problem comes from tax breaks written into law decades ago that benefit businesses, like giveaways to oil drillers. Kiel said business professionals can always argue why increased taxes would hurt the market, but they're not inclined to speak about who would be responsible paying those taxes.
"It's never, you know, 'Rich people should pay less taxes,'" he said. "But if you look at who owns businesses, it's going to be wealthier people."
Kiel pointed to President Joe Biden’s March proposal that would raise taxes on the wealthiest citizens and corporations, but he is not sure when it could pass, given Democratic Sen. Joe Manchin’s opposition.
“It’s a really big deal that Biden came out with that proposal,” Kiel said. “It's the first of its kind, and it shows a real shift in thinking, that in a young enough person's lifetime, perhaps might lead to big change.”
Produced with assistance from the Public Media Journalists Association Editor Corps funded by the Corporation for Public Broadcasting, a private corporation funded by the American people.
