Elon Musk pokes fun at Joe Biden’s tweet urging the super-rich to “pay their fair share.” So some billionaires pay less income tax than you

The fairness of the US tax system has long been debated.

Earlier this month, President Joe Biden tweeted, “It's about time the super-rich start paying their fair share.”

The news caught the attention of Elon Musk, CEO of Tesla Inc. and owner of Twitter Inc.

“Please give him the password so he can compose his own tweets,” Musk replied, implying that the tweet was not authored by the Supreme Commander himself.

But the billionaire business tycoon actually agrees with Biden's view.

“Seriously, I agree that we should make sophisticated tax avoidance schemes illegal,” Musk later tweeted. “But acting on that would upset many donors, so we'll see words but not action.”

The reality is that billionaires make most of their fortunes from assets. Your net worth increases as your assets appreciate in value over time. However, the US tax system is not designed to capture capital gains: capital gains are generally taxed at lower rates than wages and salaries.

“Those who will actually be forced to shoulder the burden of excessive government spending are low- to middle-income wage earners because they cannot escape payroll taxes,” Musk said.

Cash:

Some billionaires pay less income tax than you

According to a ProPublica report, some billionaires in the US paid little or no income tax in relation to the vast fortunes they had amassed over the years.

The report noted that Amazon.com Inc. founder Jeff Bezos “didn't pay a penny in federal income taxes” in 2007 and 2011. It also noted that Musk paid no federal income tax in 2018, and investment legend George Soros did the same “three years in a row.”

Billionaires do pay taxes, but the amount is small compared to what they actually earn. For example, ProPublica's report showed that between 2014 and 2018, Bezos paid a total of $972 million in taxes on $4.22 billion in income. Meanwhile, his fortune grew by $99 billion, meaning the actual tax rate over that period was just 0.98%.

The good news? You don't have to be in the three point club to invest in the assets that made these people rich.

Tax hacks for billionaires

For many well-known billionaires, most of their wealth is tied up in the companies they helped create.

If these companies are publicly traded, individual investors can get on board by buying shares. For those who want to follow Bezos, check out Amazon. If you want to bet on Musk, check out Tesla.

The beauty of this is that when the value of stocks increases, investors only pay taxes on realized gains. In other words, if investors don't sell anything, they won't have to pay capital gains tax even if the value of their stock holdings has skyrocketed because the gains aren't realized.

As a result, according to ProPublica, some billionaires are choosing to borrow on their wealth rather than sell it. This will give the super-rich money to spend while indefinitely deferring taxes on capital gains.

That means if they sell their shares, they can still incur a significant tax bill. After selling a slew of Tesla stock in 2021, Musk tweeted that he would be paying over $11 billion in taxes that year.

Another popular option for billionaires is real estate, which also comes with numerous tax benefits.

If you receive rental income from an investment property, you can claim a deduction. This includes expenses such as mortgage interest, property taxes, property insurance, and ongoing maintenance and repairs.

There is also depreciation, which refers to the increasing depreciation of a property due to wear and tear. Real estate investors can claim depreciation for many years and realize significant tax savings over time.

The best part? Investing in housing is easy for private investors – and you don't have to buy a house to do it. You can invest in publicly traded real estate investment trusts (REITs), which own income-producing real estate and pay dividends to shareholders. And if you don't like the volatility of the stock market, there's an opportunity to invest directly in rental properties through the private market for as little as $100.

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This article will ‘anger many donors': Elon Musk pokes fun at Joe Biden's tweet urging the super-rich to ‘pay their fair share'. For example, some billionaires pay less income tax than originally appeared on Benzinga.com

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