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US richest ‘pay almost no income tax’

Episode 210610 / 10 Jun 2021

The story

Details claiming to reveal the amount of income tax US billionaires pay have been leaked to a news website.

Useful vocabulary

reveal – make something secret known

leaked – exposed information, often illegally

tax returns – documents submitted to declare how much tax needs to be paid

alleges – accuses

mainstream – considered normal

uber-rich – extremely wealthy

shrink – reduce in size

soared – increased rapidly

equality – the right for everyone to be treated in the same way

infrastructure – facilities, such as transport, that a city or organisation need to function

inheritance – things such as money or property received after someone dies

watchdogs – organisations responsible for making sure illegal activities don’t occur

Questions about the story...

1. What did a White House spokeswoman say was illegal?

2. How can people legally reduce their tax bill?

3. According to the website, by how much did the wealth of the 25 richest Americans collectively increase from 2014 to 2018?

4. What steps does Joe Biden intend to take in relation to increasing taxes?

5. What were the conclusions of ProPublica's analysis of the tax plan?

More about the story…

What has happened?
ProPublica, a news website, says it has seen the tax returns of some of the world's richest people. These people include Jeff Bezos, Elon Musk and Warren Buffett.

The website alleges Amazon's Mr Bezos paid no tax in 2007 and 2011, and that Tesla's Mr Musk paid nothing in 2018.

A White House spokeswoman called the leak "illegal", and the FBI and tax authorities are investigating.

The BBC has not been able to confirm the claims.

What were the findings?
ProPublica said that the richest 25 Americans pay less in tax than most mainstream US workers.

The website said that "using perfectly legal tax strategies, many of the uber-rich are able to shrink their federal tax bills to nothing or close to it". The was despite that fact wealth soared over the past few years.

The wealthy, as with many ordinary citizens, are able to reduce their income tax bills doing such things as making charitable donations and drawing money from investment income rather than wage income.

ProPublica, using data collected by Forbes magazine, said the wealth of the 25 richest Americans collectively increased by $401bn from 2014 to 2018. However, they had paid $13.6bn in income tax during the same time.

What steps have the government taken regarding taxation?
President Joe Biden has vowed to increase tax on the richest Americans. This is part of a mission to improve equality and raise money for his massive infrastructure investment programme.

He wants to increase the top rate of tax, double the tax on what high earners make from investments, and change inheritance tax.

However, ProPublica's analysis concluded: "While some wealthy Americans, such as hedge fund managers, would pay more taxes under the current Biden administration proposals, the vast majority of the top 25 would see little change."

What other reaction has there been?
According to reports in the US, Michael Bloomberg, a former mayor of New York whose tax details were among the documents, said he would use "legal means" to uncover the source of the leak.

White House Press Secretary Jen Psaki said that "any unauthorised disclosure of confidential government information" is illegal.

Treasury Department spokeswoman Lily Adams said in an emailed statement to Reuters that the issue has been referred to the FBI, federal prosecutors and two internal Treasury Department watchdogs, "all of whom have independent authority to investigate".

Find out more from the original BBC news report.

The answers

1. What did a White House spokeswoman say was illegal?
The leak of the tax returns.

2. How can people legally reduce their tax bill?
People can reduce their tax bill by doing such things as making charitable donations and drawing money from investment income rather than wage income.

3. According to the website, by how much did the wealth of the 25 richest Americans collectively increase from 2014 to 2018?
ProPublica, using data collected by Forbes magazine, said the wealth of the 25 richest Americans collectively increased by $401bn from 2014 to 2018.

4. What steps does Joe Biden intend to take in relation to increasing taxes?
He wants to increase the top rate of tax, double the tax on what high earners make from investments, and change inheritance tax.

5. What were the conclusions of ProPublica's analysis of the tax plan?
ProPublica's analysis concluded: "While some wealthy Americans, such as hedge fund managers, would pay more taxes under the current Biden administration proposals, the vast majority of the top 25 would see little change."

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