Former economic council director Larry Kudlow has called for an investigation into the leak of a trove of Internal Revenue Service documents which showed some of America’s richest residents paid zero federal income tax some years.
Kudlow, who served as director of the National Economic Council under President Donald Trump, made the demand on Wednesday after ProPublica, which published a bombshell report on the documents, revealed it was in the dark about the source of the information.
The news non-profit’s CEOs Stephen Engelberg and Richard Tofel said in an accompanying article: ‘We do not know the identity of our source. We have considered the possibility that information we have received could have come from a state actor hostile to American interests.’
Kudlow suggested the leaker could have corrupt motives and called it ‘a little more than coincidental’ that ProPublica released its report so close to announcements by Democrats and President Joe Biden about efforts to bolster IRS funding and raise taxes on the rich.
‘Tax records are supposed to be confidential, but the muckraking group ProPublica, it’s kind of left-of-center, they just happened to get their hands on tax records of a number of very rich Americans,’ Kudlow told Fox Business.
Ex Trump Treasury Secretary Larry Kudlow called for an investigation into the leak of tax information on the wealthiest Americans Wednesday saying it was ‘a little more than coincidental’ that a report based on the information would come out as Democrats push for increased taxation on the rich
‘Then they just happened to put this out publicly on the eve of a left-wing “tax the rich” campaign. Now that kind of strikes me as a little more than coincidental, but truly we don’t know for sure.’
Kudlow suggested that techniques such as lowering the marginal tax rate on the rich and broadening the base of deductions and credits would be more effective at getting the richest Americans to pay more in taxes than increasing funding at the IRS to better enforce tax collection as Democrats have called for.
In particular, he called on Treasure Secretary Janet Yellen, who oversees the IRS to investigate the leak.
‘There has just got to be an urgent, immediate investigation of these IRS leaks, or whatever happened and that investigation should be announced immediately, and it should be launched immediately. Not a day longer should be wasted in restoring the trust of the American taxpayer.’
ProPublica’s report released Tuesday showed that many of the country’s top earners, such as Jeff Bezos and Elon Musk, have paid little to nothing in federal income taxes in recent years.
IRS Commissioner Charles Rettig said authorities are investigating the leak of the tax data during a Senate Finance Committee hearing Tuesday, just hours after the release of the report.
‘We have turned it over to the appropriate investigators, both external and internal,’ Rettig said.
The Treasury Department said multiple agencies were investigating, including the FBI, DC’s US Attorney’s Office and the Treasury’s Office of the Inspector General.
A report based on the leaked data revealed that the country’s top earners such as Jeff Bezos (left) and Elon Musk (right) paid little to no income tax in recent years
‘The unauthorized disclosure of confidential government information is illegal,’ a Treasury spokeswoman said.
‘Any unauthorized disclosure of confidential government information by a person with access is illegal, and we take this very seriously,’ Biden Press Secretary Jen Psaki also said on Tuesday.
ProPublica says that its releasing of findings from the leak comes at a time when the issue of taxing the richest Americans has taken on serious consideration.
‘Our publication of this tax data comes at a possibly pivotal moment in America’s long, often contentious debate about the fairness of our tax system. The Biden administration has proposed raising a number of taxes to pay for additional trillions of dollars in government spending,’ ProPublica chief executive officers Stephen Engelberg and Richard Tofel wrote in an op-ed accompanying the report’s release.
‘So far, the conversation in Washington has been dominated by an issue long seen as central on Capitol Hill: whether to increase the top tax rate from its current level of 37 percent by a few percentage points. Such a change, as our story shows, would touch the richest hardly at all.’
The two admitted that they do not know the motivations of those who released the information to them, but were not concerned.
‘We understand that nearly everyone who provides material to a reporter is doing so in ways that reflect their worldview, agenda or biases. We have long held that those motives are irrelevant if the information is reliable,’ they wrote.
What the data reveals
The trove of records showed that Amazon founder Jeff Bezos paid no income tax in 2007 and 2011, while Tesla boss Elon Musk’s income tax bill came to zero in 2018.
Investor George Soros went three straight years – between 2016 and 2018 – without paying federal income tax, according to the records.
Fellow investor Carl Icahn did not pay federal tax in 2016 and 2017.
In reviewing the tax data, the site calculated what it called a ‘true tax rate’ for the billionaires by comparing how much tax they paid annually from 2014 to 2018 to how much Forbes estimated their wealth had grown in that same period.
The report found that, overall, the richest 25 Americans pay less in tax than the average worker does.
The median American household, in recent years, earned an average salary of about $70,000 and paid 14 percent in federal taxes per year.
Based on data from the 25 richest Americans, they collectively paid a true tax rate of 3.4 percent between 2014 to 2018 on wealth growth of $401 billion.
Warren Buffett, the CEO and chairman of Berkshire Hathaway, has avoided the most tax in recent years, according to the records.
Warren Buffett, the CEO and chairman of Berkshire Hathaway, has avoided the most tax, according to the records. Between 2014 and 2018, Buffet’s wealth grew by about $24.3 billion but he reported paying $23.7 million in taxes. It showed a so-called true tax rate of 0.1 percent
Investor Carl Icahn, who is ranked the 40th wealthiest American with an estimated fortune of $14.9 billion, didn’t pay federal income tax in 2016 and 2017. He is pictured with wife Gail Golden
|Year||Total taxes paid||Total income reported|
|2014||$7.93 million||$46.8 million|
|2015||$1.85 million||$11.6 million|
|2016||$3.82 million||$19.6 million|
|2017||$4.75 million||$22 million|
|2018||$5.36 million||$24.8 million|
|Year||Total taxes paid||Total income reported|
|2014||$85.4 million||$367 million|
|2015||$126 million||$542 million|
|2016||$320 million||$1.35 billion|
|2017||$398 million||$1.68 billion|
|2018||$43.5 million||$284 million|
|Year||Total taxes paid||Total income reported|
|2014||$30.4 million||$165 million|
|2016||$42 million||$1.34 billion|
|Source: IRS DATA OBTAINED BY PROPUBLICA|
Between 2014 and 2018, Buffet’s wealth grew by about $24.3 billion but he reported paying $23.7 million in taxes.
It showed a so-called true tax rate of 0.1 percent, which equates to less than 10 cents for every $100 Buffet added to his wealth in that period.
For Bezos, his wealth grew an estimated $99 billion and his total reported income was $4.22 billion between 2014 and 2018.
In that period, Bezos paid $973 million in tax, which equates to a 0.98 percent true tax rate.
In 2007 when Bezos paid no income tax, the Amazon founder – in a joint tax return with then-wife MacKenzie Bezos – reported $46 million in income, which was mostly from interest and dividend payments from investments.
He was able to offset his earnings with losses from other investments and deductions.
In 2011, his tax return showed he had lost money and he claimed a tax credit worth $4,000 for his children.
George Soros, the founder of Soros Fund Management, has an estimated wealth of $8.6 billion. He paid no federal income tax between 2016 and 2018, according to the records. He is pictured with wife Tamiko Bolton
ProPublica reported that Mike Bloomberg, who is the 13th richest American with an estimated wealth of $48 billion, hasn’t paid federal taxes in recent years but did not specify when. His spokesman noted that when he was running as a 2020 Democratic presidential candidate he had advocated for tax hikes
Elon Musk’s wealth grew an estimated $13.9 billion between 2014 and 2018. He reported $1.52 billion in total income and paid $455 million in taxes. It equates to a 3.27 percent true tax rate.
In 2018, Musk paid no federal income tax. The records show he paid $68,000 in 2015 and $65,000 in 2017.
Investor Carl Icahn, who is ranked the 40th wealthiest American with an estimated fortune of $14.9 billion, didn’t pay federal income tax in 2016 and 2017.
Records show he reported, at the time, an adjusted gross income of $544 million. According to the IRS records, he had an outstanding Bank of America loan of $1.2 billion.
HOW CAN THE SUPER-RICH PAY LOWER TAXES?
Many billionaires are able to reduce their federal tax bills using legal tax strategies.
Among the ways they can reduce tax bills are:
Making sizable donations to charity
The rich can reduce tax bills through the use of charitable donations.
They can deduct up to 60 percent of adjusted gross income with donations.
Investing in stocks to avoid wage income
The rich can reduce taxes by avoiding wage income, which can be taxed at up to 37 percent.
They can instead benefit from investment income, which is often taxed at 20 percent.
Paying themselves lower salaries
If the mega-rich pay themselves a lower salary, they can then take a higher portion of the income as dividends.
The lower salary is then taxed a normal rate. Dividends are often taxed the same as the capital gains rate, which is between 15 to 20 percent.
Another option is to opt for part of their compensation in their company stock options. Stock is usually only taxed when the options are exercised.
Icahn told ProPublica that his adjusted gross income is misleading because his interest on his loans is higher.
‘I didn’t make money because, unfortunately for me, my interest was higher than my whole adjusted income,’ he said.
Icahn hit back at questions over whether he thought it was inappropriate he hadn’t paid federal income tax some years.
‘There’s a reason it’s called income tax,’ he said. ‘The reason is if, if you’re a poor person, a rich person, if you are Apple – if you have no income, you don’t pay taxes.
‘Do you think a rich person should pay taxes no matter what? I don’t think it’s germane. How can you ask me that question?’
Michael Bloomberg’s wealth grew $22.5 billion between 2014 and 2018 – a period where he reported a total income of $10 billion.
Bloomberg paid $292 million in taxes during that time, which is a 1.30 percent true tax rate.
ProPublica reported that Bloomberg, who is the 13th richest American with an estimated wealth of $48 billion, hasn’t paid federal taxes in recent years but did not specify when.
His spokesman said in a statement that when Bloomberg was running as a 2020 Democratic presidential candidate he had advocated for tax hikes.
‘Mike Bloomberg pays the maximum tax rate on all federal, state, local and international taxable income as prescribed by law,’ a statement read.
‘Taken together, what Mike gives to charity and pays in taxes amounts to approximately 75 percent of his annual income.
‘The release of a private citizen’s tax returns should raise real privacy concerns regardless of political affiliation or views on tax policy. In the United States no private citizen should fear the illegal release of their taxes. We intend to use all legal means at our disposal to determine which individual or government entity leaked these and ensure that they are held responsible.’
George Soros, the founder of Soros Fund Management, has an estimated wealth of $8.6 billion.
He paid no federal income tax between 2016 and 2018, according to the records.
‘Between 2016 and 2018 George Soros lost money on his investments, therefore he did not owe federal income taxes in those years. Mr Soros has long supported higher taxes for wealthy Americans,’ his spokesman said.
After examining the IRS records, ProPublica found that Americans earning between $2 million and $5 million per year paid an average of 27.5 percent in tax.
Meanwhile, the top .001 percent of taxpayers – the 1,400 people whose reported income came in at more than $69 million – paid 23 percent in tax.
Many billionaires are able to drastically reduce their federal tax bills using legal tax strategies.
Among the ways they can reduce tax bills is via charitable donations or by avoiding wage income, which can be taxed at up to 37 percent. Instead, they can benefit from investment income, which is taxed roughly at 20 percent.