The Biden Administration has announced that it is currently investigating the leak of tax information of some of the world’s wealthiest people, including Elon Musk, Jeff Bezos, and Warren Buffet. The leaked information published on ProPublica indicates that many billionaires legally avoided paying income taxes.
“The unauthorized disclosure of confidential government information is illegal. The matter is being referred to the Office of the Inspector General, Treasury Inspector General for Tax Administration, Federal Bureau of Investigation, and the US Attorney’s Office for the District of Columbia, all of whom have independent authority to investigate,” said Treasury spokeswoman Lily Adams.
White House press secretary Jen Psaki stressed that “Any unauthorized disclosure of confidential government information by a person of access is illegal and we take this very seriously,” but also added that the Biden Administration still supports having wealthy individuals and corporations pay their fair share.
Although Joe Biden has proposed raising the top tax rate from 37% to 39.5%, the IRS has a complex tax code that makes it possible for the wealthy to claim enough deductions to pay very little income tax in relation to their incomes. They can hire tax accountants who know how to navigate the tax code and keep up with changes.
Attempts to simplify the tax code to reduce the number of deductions that billionaires and other taxpayers can take may lead to a political minefield to walk, however. Common deductions include credits for real estate taxes and local income taxes, mortgage interest, medical expenses, charitable donations, and IRA contributions – all things that people may be able to take advantage of even if they aren’t billionaires.
Billionaires may also prefer to keep some control over how the money that they would otherwise pay in taxes are used. For instance, Elon Musk recently donated a total of $30 million for community improvement projects and education in the Boca Chica, Texas, area, where SpaceX has its test launch facility.
SpaceX does have some contracts to launch hardware for the military, including the Department of Defense’s most recent awarding of a contract to launch satellites for a laser-based communications experiment. However, military spending is very often the elephant in the room when it comes to discussing taxes on the wealthy. Although Biden has talked about ending the “forever wars” in nations like Afghanistan, Elon Musk may prefer to spend the money on community improvement projects in SpaceX’s own backyard rather than see any taxes he might pay go toward supporting a proposed defense budget of $752.9 billion for Fiscal Year 2022.
The “person of access” that Psaki spoke of is likely to be a government employee or contractor who is also an activist and saw an opportunity to send the information to the press. Either the person would have had access to the nature of their work or could gain temporary access through a security loophole such as another employee leaving their computer logged in while taking a lunch break.
Previous leaks of sensitive information to support activist causes include the case of a former intelligence specialist named Reality Winner who was convicted of “removing classified material from a government facility and mailing it to a news outlet” after leaking a report on alleged Russian interference in the 2016 presidential election that she claimed would prove that Trump had colluded with the Russians. Searches of her house turned up a diary in which she expressed support for Islamic radicals and fantasized about burning down the White House.
Although the leaked tax information did confirm what a lot of people already knew – that many billionaires pay very little in income tax – it could be seen as a violation of privacy and is certainly illegal. Multiple government agencies are now conducting a serious investigation of the matter.
In a response to the leak, Elon Musk explained in a series of tweets:
Meaning primarily that income taxes and capital gains taxes only apply if billionaires like Musk actually sell their assets and not to any increase in value of the assets while they’re holding it. Musk expects to pay state and federal income taxes on what he got from selling three of his California homes to a real estate developer, for instance. However, he does not expect to pay any income taxes on assets that he still owns, like his Tesla stock holdings. This is normal for billionaires, whose wealth usually isn’t just sitting in a bank account somewhere.