Eli5 How does billionaires evade paying tax and not get arrested?.

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Eli5 How does billionaires evade paying tax and not get arrested?.

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Anonymous 0 Comments

They don’t. Billionaires have dedicated accountants that know the tax codes inside-out. This allows them to minimize their taxes owed. They aren’t (usually) evading paying taxes like you mean. They pay what they are legally required to pay.

Whether the laws are requiring an appropriate amount is a whole other issue.

Anonymous 0 Comments

There’s a distinction between tax avoidance and tax evasion. Tax evasion is a crime, while tax avoidance is more using tax laws in specific ways that aren’t obvious or necessarily available to everyone.

Billionaires generally don’t evade taxes, since that’s an unnecessary risk and could wind them up in jail (in theory). Tax avoidance is far simpler, and it just costs money to hire accountants and tax lawyers to do – it’s not cost effective for a little person, but for a billionaire saving a couple percent on taxes can far outweigh the cost of hiring the people who know how to do it.

Anonymous 0 Comments

It isn’t so much that they evade paying tax, as much as it is that they utilize the rules of the system to their advantage.

With income tax, you are able to reduce your taxable income by doing things like donating money to charities. So for example, if you make 1 million dollars of taxable income, but you donate 50K to charity, you won’t have to pay any income tax. (I don’t know the exact math here, but that’s the gist of what they do). They still are making money, but they reduce their taxable income through donations and the like.

Anonymous 0 Comments

Billionaires don’t really earn income. Their money works for them and they access it in ways that legally avoid being taxed as income.

Anonymous 0 Comments

I’m pretty sure all these answers are correct but they are a combination of the lot of them, but ill also add one more. When you hear about “[person] paid no taxes last year” its often because they didn’t get paid. A lot of rich peoples wealth comes from owning things like shares as opposed to just having money, as the shares grow in value the owners wealth does too, but this doesn’t get taxed until they are sold.

Anonymous 0 Comments

Billionaires buy politicians to write the tax laws so the ways they acquire and hoard money aren’t taxed like regular people’s income.

Anonymous 0 Comments

Not evasion, because that’s unnecessary risk when you can do it legally.

There’s the increasingly talked about “Buy, Borrow, Die” where billionaires borrow using stocks as collateral, which allows them to access a small portion of wealth while dampening taxable income. On death, their inheritors have stepped up value which voids the tax on what would be their gains.

There’re charitable foundations, like Patagonia did, where they spend a minor pittance of tax to create a foundation they board that uses the money in the same way they always wanted, but it’s tax free

There’s the Roth IRA, like Peter Thiel did, where they got their IRA to invest in their company early. As tax is paid before withdrawing, he was able to collect all the gains with the tax already “paid.”

Some industries like oil are so absurdly lobbyist-bought that you can just write off much of the spending and take the profits.

Anonymous 0 Comments

They often stay within the law (using tax avoidance methods as explained by other answers) rather than outright evasion.

They often influence those laws in the first place which allow them to do so (usually by lobbying, or funding politicians who will support the laws they want).

Anonymous 0 Comments

A billionaire might have a legit tax bill of $500 million in a given year so instead, they will spend $10 million hiring a team of accountants and lawyers who help them:

– create a bunch of fake businesses around the world

– hire family members to fake jobs that pay hugely inflated wages so that they can claim their salaries as an expense to lower their tax burden even though the money is just going right back to the billionaire

– set up various bank accounts around the world and then moving their money constantly making it an extremely difficult and time-consuming process for the IRS to even track how much money there is or where it came from

– bribe politicians that in turn defund the IRS or cut inheritance, income, capital gains, property or other wealth taxes, or even write and pass new laws that make their tax fraud schemes and loopholes legal but only accessible to the ultra-wealthy

– spread pro-billionaire, anti-income-equality propaganda

Anonymous 0 Comments

From a more macro perspective, you want to tax billionaires, but not too much. If you over-tax them, they can fund your opponent in the next primary (with an unlimited amount of dark money, without ever revealing the source, thanks Citizens United). They can also just become citizens of a rando carribean island to avoid taxes if they feel over taxed. And then you lose all the tax money, and your political career is over.

So you make the loopholes in the tax code everyone else is talking about.