Tax the Patriarchy: Especially the Part of It Buying Twitter

Elon Musk is rich enough to buy Twitter, but has paid little to no taxes in recent years. And he’s not alone. U.S. billionaires’ wealth increased by $1.7 trillion in the first two years of the pandemic—but right now, the average billionaire pays a lower effective tax rate than a typical first-year school teacher. And between 2014 and 2018, Musk had a tax rate of just over 3% 

How is this possible? As we explore in our new tax report, Advancing Gender and Racial Equity by Taxing Wealth, loopholes in the tax code and decades of unfair tax cuts have helped billionaires multiply their billions while leaving everyone else—especially women and people of color—behind. Here are five ways billionaires use the tax code (and their own resources) to avoid paying their fair share: 


1. Their Wealth Is Taxed at a Lower Rate Than Your Work

Billionaires don’t make most of their money from working—for example, Elon Musk took no salary at all in 2020. Instead, wealthy people make their money from their wealth, such as their stock and other investments. Musk’s wealth grew from $24.6 billion to $234 billion in the first two years of the pandemic, mostly in the increased value of his Tesla and SpaceX stock. 

What difference does this make? Unlike ordinary people, who pay taxes on their wages and salaries every time they get a paycheck, wealthy people only have to pay taxes on their investment increases when they sell their investments. (This is how Musk got away with paying zero income taxes in 2018.) And even when they do sell their investments, they still pay a lower tax rate!

2. They Can Still Use Their Wealth to Buy Whatever They Want (Including Social Media Sites) 

 If billionaires delay selling their investments to avoid taxes, how can they have money to spend? It turns out, very easily. Banks are happy to let wealthy people take out personal loans using their stock and investments as collateral. Musk recently took out a $12.5 billion in loans against his Tesla stock to help fund his Twitter purchase. This “Buy, Borrow, Die” strategy let’s wealthy people enjoy their wealth—without paying taxes on it. 

 3. They Can Avoid Paying Some Taxes Forever 

What happens if billionaires never sell their stock and investments? Thanks to a loophole called “stepped-up basis,” wealthy people can pass down unsold investments to their children without ever paying taxes on them. For example, if Musk passes down his unsold Tesla and SpaceX stock to his children when he dies, neither he nor his children will have to pay any taxes on the amount the stock’s value increased over the course of Musk’s life. To give you some idea of how much money would go untaxed: if Musk were to use the loophole right now, he would avoid $50 billion in taxes. 

4. Their Fortunes Aren’t Taxed Fairly Between Generations 

Not only can billionaires pass along their investment gains tax-free, but they often are able to avoid the estate tax. The estate tax was specifically designed to stop the super-wealthy from transferring massive fortunes from generation to generation. Unfortunately, the estate tax has been greatly weakened over time—most recently, a Trump-era tax law lowered the tax rate and allows wealthy families to exempt up to $24 million of their estate from taxation altogether. Additionally, wealthy people can use trusts and other loopholes to lower their estate taxes even more. This makes it easier for billionaires’ wealth to just keep growing larger and larger over generations—leaving the rest of us behind. 

5. They Can Use Their Resources to Keep From Paying Taxes They Owe 

Thanks to all of these loopholes and tax cuts, billionaires pay far fewer taxes than they should. But it turns out some wealthy people don’t even pay the taxes they do owe. The IRS commissioner estimates there could be up to $1 TRILLION every year in unpaid taxes—most of it from wealthy taxpayers who can afford armies of lawyers and accountants to manage their finances and help them fight audits. The IRS simply doesn’t have enough funding to go after them.  


But it doesn’t have to be this way. We don’t have to let billionaires—overwhelmingly white, cis men—continue to use a broken tax code to their advantage. As we discuss in our new report, the tax code can be a powerful tool to reduce inequality and to raise revenue to help women, families, and communities. And our Tax Calculator breaks down how money raised by taxing billionaires could be invested in women and families.  

Together we can make sure billionaires pay their fair share—and create a tax code that works for all of us.