Based on a 2021 ProPublica investigation into leaked IRS data, a "true tax rate" analysis revealed that between 2014 and 2018, Elon Musk's federal income tax rate was approximately 3.27% and Jeff Bezos's was approximately 0.98%, when compared to the massive growth of their wealth. The claim of 3.4% refers to the average true tax rate for the top 25 richest Americans during that period.
Key findings from the ProPublica report include:
- Definition of "True Tax Rate": This rate is calculated by comparing federal income tax paid to the total increase in wealth (including untaxed unrealized capital gains), which is not a measure used by the IRS or the current U.S. Tax Code.
- Zero Tax Years: Both individuals legally paid $0 in federal income taxes in certain years: Jeff Bezos in 2007 and 2011, and Elon Musk in 2018.
- Legal Avoidance: Billionaires legally minimize their tax liability by earning little in the way of traditional taxable income (like a salary). Instead, they borrow against their growing stock wealth to fund their lifestyles, and the appreciation of their assets generally isn't taxed until they are sold (realized gains).
- Actual Income Taxes Paid (2014-2018): Over the five-year period, Musk paid approximately $455 million in taxes on $1.52 billion of reported income, while Bezos paid around $973 million on $4.22 billion of reported income.
In December 2021, Elon Musk stated he would pay over $11 billion in taxes for that year, a significant amount due to him exercising a large number of stock options, which are taxed as income.
