Bezos, Buffett, and Musk Pay Minuscule Taxes: Why? How?

The news headlines frequently make mention of the ultra-rich paying little to no taxes. Names like Bezos, Buffet, and Musk are painted in a negative light because of their low tax burdens. How is it possible that these high-net-worth individuals (HNWIs) are paying so little taxes? In this article, we are going to take a closer look at it.

Jeff Bezos is the richest man in the world, and in 2007 and 2011, he did not pay anything in federal income taxes. Elon Musk, founder of Tesla, is the second richest man in the world, and in 2018, records show that he did not pay a single cent in federal income taxes. ProPublica studies scrutinized the tax records of some of the wealthiest people in the world, and as part of their research, they found that not everyone in the U.S. is paying their fair share of taxes.

While we are taught to believe that we all pay our share of taxes, and that the more you make the more you pay, evidence indicates otherwise. How is possible? Well, it is quite simple. It all comes down to tax law.

Tax Laws Favor HNWIs?

While it might seem unfair that the wealthy are paying just a fraction of their wealth in taxes, they are perfectly within their legal rights to do so. As it turns out, they are not doing anything illegal. There is no financial crime being made. In fact, they are within the law set forth by the IRS and the U.S. government. What might surprise you is that while these ultra-wealthy individuals are paying extremely small shares of taxes - or none - is that their wealth is skyrocketing. That is part of their tax avoidance strategy. You see, the IRS allows for increases in stock and real estate to go untaxed until they are sold, which is a great way to leverage against taxation.

The big question is: how can the rest of us do it? It is possible to reduce or even negate our tax burdens along the lines of how HNWIs are doing it? The answer is ‘maybe’. Reducing your taxation, the legal way comes down to how you manage your finances and your wealth management strategy.

How to Pay Less Taxes for the Rest of Us

One of the biggest components we see in a wealth management strategy that’s hedging against taxation is setting up offshore companies and/or offshore banking accounts.

Before we dive into offshore banking and taxation, let us discuss what offshore banking is not. You might be thinking about hiding your assets in a Swiss bank account, but that is not really a possibility anymore. There are some jurisdictions that are more secretive than others, but you should not go into offshore banking with the idea that you are going to be hiding assets from tax authorities. That is not how it works. To stay clear of legal trouble, you need to know that offshore banking is a legal way to reduce your tax liability.

Remember, tax avoidance does not equate to tax evasion.

It is also possible to completely relocate to an offshore jurisdiction with the tax incentives you are looking for, and that is really the only way to max out these types of benefits. Some of these jurisdictions also allow part-time residency, so that is something to keep in mind. The challenge with this avenue, however, is that it is challenging to get in. It takes time and money to take up residency in a zero-tax jurisdiction, so this might not be your best option.

There are also low tax jurisdictions such as Bulgaria, Panama, Montenegro, and Georgia. These are perhaps the most popular option for most people who are looking for serious tax savings. You could pay as low as 9% taxes (Montenegro). If you are managing a corporation, you could also find that there are a variety of ways to save on taxes abroad in countries such as these.

The key is finding the right structure that works for you. You do not have to be ultra-wealthy to enjoy some of the benefits that are being enjoyed by HNWIs. You simply must find the right structure. This begins with identifying your needs.

Conclusion

If you are looking for a way to reduce taxes as a corporation, then you will be able to find a myriad of opportunities abroad that come in the form of low corporate taxes in jurisdictions offering favorable regulation towards businesses. Do not be discouraged - you can take advantage of some of the same low taxation that is being enjoyed by people like Bezos, Buffet, and Musk!