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A website leak alleges some of the super-rich from the United States pay very little income tax. ProPublica, the website at the heart of the leak, have publicly stated it is analysing a ‘vast trove of internal Revenue Service Data’ on the tax details of many billionaires. The non-profit investigative journalism claims to have tax returns for some of the richest people in America.

ProPublica claims the 25 richest Americans pay less in tax than a lot of average workers. They claim they pay, on average 15.8% of adjusted gross income.  Whilst these claims are yet to be fully validated, ProPublica report they will share the full details in the coming weeks. A spokeswoman for the White House claim the leak is ‘illegal, and is currently being investigated by the FBI.

How do the Super Rich Avoid Paying Taxes?

It is important to note, these actions taken by the super-rich to avoid paying income tax are perfectly legal. US Tax Law is based around income, not wealth. It doesn’t take into account investments, shares or the likes of company stock. Furthermore, the super-rich have the ability and expert advice to exploit loopholes in the system, including finding credits and using deductions against their earnings.

Billionaires will purchase an asset, inherit one or developed one. If they don’t make any gains or sell any of the stock, they are in effect not generating any income, which could be taxed. They would loan money against their extreme wealth. The intention would be to live lavishly off the loans which are agreed at a low interest rate. The expenses accrued from interest rates would be then be offset against any income realised. This would be in addition to other aggressive tax reductions.

The wealth generated through companies, or tied up in stock would be paid through their companies. Corporate tax in America is only 21%, much lower than the higher personal tax rate of 37%. They can also use charitable donations to offset any income tax. Furthermore, they can draw money from investments rather than ‘wages’ per se.

Sone of the super-rich in the spotlight includes Jeff Bezos, Warren Buffett and Elon Musk.

Joe Biden Proposes to Increase Income Tax

President Biden has vowed to focus on the taxes of the richest Americans. His mission is to improve equality across America and to raise money for the ambitious infrastructure investments he has planned. He wants to raise income taxes on the wealthy and also to increase the rate of corporate tax. It will need to be passed through the Senate, although it is predicted some Republicans would oppose it.

If you would like advice on your tax affairs please contact us. Call us on 0800 471 4546 or you can contact us here.