How Billionaires Used Tax Loopholes to Save Billions

A bombshell report raises questions about the tax bills of the wealthy.


Continue reading the main story

Supported by

Continue reading the main story



Jeff Bezos claimed a $4,000 child tax benefit in 2011, despite being worth billions.Credit…John Locher/Associated Press

Tax and the .001 percent

The fallout from ProPublica’s bombshell report about billionaires’ tax bills is just beginning. The news outlet obtained tax records for the nation’s 25 richest people, which show that they paid $13.6 billion in federal income taxes between 2014 and 2018, or about 16 percent of their reported income over that period — and a very, very small sliver of their wealth.

What’s revelatory about the scoop is that it provides never-before-seen details of specific billionaires’ tax bills, or lack thereof. Some of the jaw-droppers in the report:

Jeff Bezos claimed a $4,000 tax credit for his children in 2011.

Warren Buffett, who has called for tougher tax rules for the wealthy, paid under $24 million in taxes between 2014 and 2018.

Mike Bloomberg paid $70.7 million in income tax in 2018, despite reporting $1.9 billion in net income, after claiming deductions, charitable donations and foreign tax offsets.

Carl Icahn and Elon Musk took advantage of rules regarding debt. Icahn deducted interest payments on his companies’ debt, helping him pay no federal income tax in 2016 and 2017. Musk regularly borrows tens of billions against his stock holdings: those loans aren’t taxed, and the interest paid can often be deducted. (He paid no federal income tax in 2018.)

George Soros paid no federal income tax between 2016 and 2018, after claiming investment losses.

Something to keep in mind about the numbers, as presented by ProPublica, is that comparing the billionaires’ tax bills with estimates of their wealth isn’t how the U.S. tax system works. (That is, in the absence of a wealth tax, proposed by Senators Elizabeth Warren and Bernie Sanders.) More pertinent to a public policy debate is to look at all the deductions against the billionaires’ incomes that reduce their tax liabilities to, in some cases, zero. The push to raise income tax rates, as President Biden has proposed, would not have a big effect on these fortunes, which generate large amounts of wealth but relatively modest amounts of income.

What can be done? There are changes to the tax code that could arguably capture a larger share of taxes from the ultrarich than a wealth tax, as DealBook has argued. These include:

Eliminating the “step-up” basis of assets in estates when they are transferred after someone dies, which effectively resets the value of assets for capital-gains purposes. This would also reduce the incentive for the wealthy to borrow against their assets — and there should probably be a greater limit on the deductions for interest expenses anyway.

Speaking of capital gains, higher rates for the wealthiest would capture more tax and would somewhat address the “carried interest” provision of the tax code that investment managers use to treat much of their pay as capital gains rather than income, which is one of the most egregious and persistent loopholes in its own right.

The “like-kind exchange” of properties allows real estate executives to depreciate the value of their investments for tax purposes, even when the actual value of a property appreciates. The Biden administration is looking at closing this loophole, which it says would raise nearly $20 billion over 10 years.

Is it acceptable for the wealthy to take deductions when they move money to their own philanthropic foundations? Perhaps the deduction should only happen when the money is spent.

The publication of personal tax records also poses a conundrum. Biden administration officials said they were investigating whether the disclosure of individuals’ tax information constituted a crime; Senator Ron Wyden, Democrat of Oregon, worried about the privacy implications even as he called for changes to the tax code. (A spokesman for Mike Bloomberg told ProPublica that he would “use all legal means” to find and punish those responsible for the leak.)

ProPublica argues that its report serves the public interest in understanding how the wealthy game the U.S. tax system and could influence lawmakers’ efforts to change it. The publication says that it does not know the identity of its source and did not solicit the information. It says it has vetted the information independently.

What others have to say: For billionaires, the federal income tax “has become a voluntary tax,” the economist Gabriel Zucman told David Leonhardt of our sister newsletter, The Morning. “The Real Tax Scandal Is What’s Legal,” reads the headline of a Times editorial. But Megan McArdle, a columnist at The Washington Post, was disappointed: “I genuinely thought the tax avoidance strategies would be something more than unrealized capital gains.”



President Biden breaks off infrastructure talks with Senate Republicans. The end of a weekslong effort to forge a bipartisan compromise came as G.O.P. lawmakers refused to make concessions on spending and taxation plans. The president will try to revive bipartisan talks with a different set of Republicans while Senate Democrats will explore passing portions of Biden’s plan along party lines.

The Senate approves hundreds of billions in spending to compete with China on tech. The 68-32 vote reflects broad support for bolstering research and development to beat Beijing in the race to lead in chip-making and in emerging technologies, like artificial intelligence and quantum computing.

China tries to tame rising inflation. The country said today that prices charged by factories, farmers and other producers in May had risen 9 percent year on year, the biggest increase since September 2008. That portends price increases in goods around the world.

Lordstown warns that it’s low on cash. The electric truck maker said it couldn’t begin commercial production without raising more money. The news may increase concerns about start-ups that have recently gone public via blank-check firms known as SPACs.

Speaking of SPACs, Clover Health is the newest darling of internet traders. Shares in the health insurer, which went public by merging with one of Chamath Palihapitiya’s SPACs, nearly doubled yesterday after it drew the attention of Reddit trading forums. One theory is that traders are forcing up its price to squeeze short sellers like Hindenburg Research that have accused the company of misleading investors.


Where are the workers?

American employers had 9.3 million jobs available at the end of April, the most in at least two decades, according to the latest stats released yesterday. Hiring rose, too, but not by nearly as much; workers have been emboldened to seek new opportunities, and nearly four million voluntarily quit their jobs in April, the most on record.


In short, workers have the upper hand as employers struggle to hire and retain them while the economy recovers from the pandemic. That is leading to higher pay for employees who have kept their jobs. It has also brought more generous offers for job seekers in sectors that are hiring rapidly to match pent-up demand unleashed after lockdowns.

Companies are getting creative. “The result is a cornucopia of new benefits as human resources officers and employees alike rethink what makes for a compelling compensation package,” writes The Times’s Nelson Schwartz. It’s not just about pay, but also:

Education: Waste Management will pay for employees to earn bachelor’s and associate degrees and, in a notable expansion of this kind of benefit, will begin offering scholarships for spouses and children as well. The meatpacking giant JBS began paying for college degrees for workers, and one of their children, in March.

Housing: Omni is offering free rooms for summer employees at some properties.

Chips and dip: Applebee’s is giving out vouchers for a free appetizer to anyone who simply schedules a job interview.

“It was a complicated password, I want to be clear on that. It was not a ‘Colonial123’-type password.”

— Joseph Blount, the C.E.O. of Colonial Pipeline, explained at a congressional hearing how hackers infiltrated its systems with a single password, installing ransomware that crippled the East Coast’s fuel supplies for days.

Small-business owners are worried, but hopeful

Small-business owners were hit hard by the pandemic. But according to a new survey of 10,000 businesses, conducted by Goldman Sachs and reported first by DealBook, they’re feeling pretty optimistic. That’s even as they stare down three big concerns:

Inflation: 82 percent of small-business owners are concerned about inflation, and 83 percent have experienced an increase in operating costs in the past few months.

Hiring: 71 percent of small businesses are currently hiring full-time or part-time employees, and 81 percent of those hiring say they are finding it difficult to recruit qualified candidates. (Why is it so hard to hire right now? The answer is complicated.)

Access to capital. The majority of small businesses that took a rescue loan from the Small Business Administration (82 percent) expect to exhaust their funding this summer, and less than a quarter are very confident that they will be able to maintain payroll without additional government relief. “If you have a bad financial statement from last year, which most do, you’re not able to qualify for an S.B.A. loan,” said Joe Wall, a managing director of government affairs at Goldman Sachs. “So that’s the immediate crisis that we see coming.”

Even with those worries, 67 percent of business owners think things are moving in the right direction. “People aren’t wearing their masks,” Wall said, a sign that vaccinations have helped business conditions improve, especially compared with this time last year. “So I think there’s a reason for them to be optimistic.”




The Canada Pension Plan Investment Board is reportedly weighing whether to stop investing with Apollo Global Management amid disappointment with performance and the firm’s handling of Leon Black’s ties to Jeffrey Epstein. (Bloomberg)

The Senate approved a big increase of the regulatory fees that apply to deals worth $5 billion or more, in the latest sign of skepticism of large mergers. (Reuters)

Two executives from the collapsed investment fund Archegos are said to be planning a new firm that would use the same risky strategy. (N.Y. Post)

Politics and policy

Senate Republicans blocked debate on a bill to address pay discrimination against women and L.G.B.T.Q. workers. (NYT)

The Koch political network has put pressure on Senator Joe Manchin, Democrat of West Virginia, to oppose big swaths of the Biden agenda, including eliminating the filibuster and overhauling voting rights. (CNBC)


Google should be declared a public utility subject to tighter regulation, Ohio’s attorney general argued in a lawsuit. (NYT)

Read all about Fastly, the cloud-computing company behind yesterday’s internet outage. (NYT)

Best of the rest

Why the days of cheaper Uber rides and Airbnb rentals are gone. (NYT)

“The Criminals Thought the Devices Were Secure. But the Seller Was the F.B.I.” (NYT)

A new, in-depth look into the relationship between Jeffrey Epstein and Les Wexner. (Vanity Fair)


We’d like your feedback! Please email thoughts and suggestions to

Leave a Reply