They don't. In an ongoing series, ProPublica is uncovering how this happens. The first in the series was The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax:
Now I know the defenders of the ultra-rich, JoeMemphis, Glenn and BluDogDem/GreenGrass, will probably jump in to say that oh, the rich are overtaxed, but the reality is quite different.Taxes are a kind of collective sacrifice. No one loves giving their hard-earned money to the government. But the system works only as long as it’s perceived to be fair.
Our analysis of tax data for the 25 richest Americans quantifies just how unfair the system has become.
By the end of 2018, the 25 were worth $1.1 trillion.
For comparison, it would take 14.3 million ordinary American wage earners put together to equal that same amount of wealth.
The personal federal tax bill for the top 25 in 2018: $1.9 billion.
The bill for the wage earners: $143 billion.
Another in the series just came out - These Real Estate and Oil Tycoons Avoided Paying Taxes for Years, on how real estate and oil tycoons don't have to pay taxes. On thing that stood out to me was this -
But the apologists for the ultra-wealthy will still pretend the rich pay more in taxes than us working stiffs. And they do it for free! Idiots.Then, there are even more tax benefits that can be used when they do meet their demise — at least to benefit their heirs. For starters, all the gains in the value of the moguls’ properties are wiped out for tax purposes (a process known by the wonky phrase “step-up in basis”). The tax slate is similarly wiped clean when it comes to the depreciation write-offs that were taken on the properties. The heirs don’t have to pay depreciation recapture taxes.
Real estate heirs then get another quirky benefit: They can depreciate the same buildings all over again as if they’d just bought them, using the piggy bank of write-offs to shield their own income from taxes.
As for Ross, after filing his taxes for 2017, he still had a storehouse of tax losses that ProPublica estimates exceeded $440 million. It was entirely possible that he’d never pay federal income taxes again.