The Misconception About Billionaires Paying Very Little Tax

The reason for this isn’t what you think…It’s a well-known fact that some billionaires pay surprisingly small tax amounts relative to their net worth. In some years, Amazon pays $0 in federal income taxes despite reporting billions of dollars in profit. How can that be?Even when Amazon had to pay taxes in 2019, they paid $162 million which only represented roughly 1.2% of their monthly income.We can all think of a few super-wealthy people who seem to pay relatively little taxes compared to their net worth. This has led to the misconception that the taxing system favors the ultra-rich.However, the taxing system doesn’t favor anyone. The taxing system contains several rules for what gets taxed, at what percentages, and what doesn’t get taxed.Billionaires aren’t favored by the tax code. They just know how to play the game and play accordingly. You can make the argument that billionaires should pay more of their fair share, but that decision isn’t up to me or you. It’s more productive to look at the tax system itself and learn how to play the game. I’d rather focus on what I can control instead of what I can’t control.Very little nuances can save you thousands of dollars over the long run.Mark Zuckerberg is so wealthy that he only takes an annual $1 salary, and several CEOs take on similar salaries. While this can be seen as a good samaritan, it’s also beneficial for them to earn their money by receiving stocks and stock options by hitting certain milestones rather than receiving a salary.A salary is classified as earned income, and this gets taxed at the highest level of any income. Portfolio income, on the other hand, isn’t taxed as much…especially if you’re selling shares you’ve held for at least 1 year and 1 day, qualifying…