Eli5 How does billionaires evade paying tax and not get arrested?.
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They generally do pay taxes. But taxes are applied to cash events such as getting paid, a payout, or when selling an asset. They don’t pay taxes on anything that’s increased in value until it is sold (in the US).
If you take the founders of Amazon for example, they didn’t have net profit for well over a decade as all revenue was poured back into growing the business. When the business matured and started earning profits, taxes were paid by the corporation and any of those profits distributed to the owners were also taxed. When those owners started selling their stock, they paid a tax on that.
Edit to add:
The tax code recognizes that business cycles can be multi-year, so businesses that had huge losses may be able to offset that with gains in other years. Depending on the losses, there may be little or no tax in “good” years.
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