— This is the script of CNBC's news report for China's CCTV on June 9, 2021, Wednesday.
It is known that America's super riches have various ways to dodge taxes. Warren Buffett has said many times before that billionaires like him pay too little tax. His income tax rate is even lower than that of his secretary. So how little do they actually pay? ProPublica, a nonprofitable media agency headquartered in New York City, obtained tax records of the wealthiest Americans in over 15 years, and they found that the income tax rates for the rich are much lower than those for the general public. In some years, some of the richest paid zero.
According to this report, Jeff Bezos, founder of Amazon and the world's richest man, paid zero federal income tax in 2007 and 2011. Tesla founder Elon Musk, who became the second richest man last year, paid nothing in 2018. Legendary investor George Soros paid no federal income tax three years in a row. In the five-year span from 2014 to 2018, the wealth of the 25 richest Americans grew by $401 billion according to Forbes; but they only paid a total of $13.6 billion in federal income taxes. That means the actual income tax rate for them was merely 3.4%, asserts ProPublica. Among these richest, Warren Buffet paid the least, with an actual rate of 0.01%, and that of Jeff Bezos is also below 1%, followed by Elon Musk with 3.27%.
It's a different picture for middle-class households. From 2014 to 2018, wage earners in their early 40s saw their net worth expand by about $65,000 after taxes on average, whereas their tax bills as much nearly $62,000. In recent years, the median income of American households has been around $70,000, with a federal income tax rate of 14%.
The big difference between the wealthiest and the middle-class in paying income taxes is because their incomes are generated in different ways. Most American families rely on wages as a major source of income, whereas the richest amass significant wealth largely from stocks and other investments. The rich can report little income for tax if they don't sell stocks or receive dividends. They can borrow against their wealth to finance living expenses. Then, when they die, those appreciated assets aren't taxed as capital gains, meaning they can pass the assets down to their children without paying any taxes.
Now, the U.S. Congress is working on proposals, hoping to plug the loophole in the tax system. The widening income gap between the rich and the poor in the United States has been a problem for decades and even more so under the pandemic. The issue is more than just the tax system. It is also about social justice and education opportunities. To narrow the income gap is one major task for President Biden. We will see how he plans to tackle the issue.