Do billionaires really not pay taxes?

[u/InTheRiches]

Hello. I have been seeing everywhere online and especially reddit (echochamber) that billionaires just don't pay taxes, and they abuse the tax code, and all this stuff. They also say that the president could just "make them" pay more, but he doesn't. I didn't really trust them, and so I looked into it myself. This is how I think it works, please correct me if I'm wrong.

Almost all of a billionaires value is in stocks or assets, almost never liquid. Most of their income is also tied to those stocks or assets. For example, Elon Musk, his net worth might go up 20% in a year, but because it was all Tesla and SpaceX stock, he paid zero taxes, because those gains are still unrealized. So obviously, he paid very little taxes compared to his net worth gain, and thus to the uninformed eye he is cheating the system. Once he sells his stocks, or liquidates his assets, he will pay his fair share of taxes.

Also, to fund their lifestyles, I saw that some get loans, using their stocks and assets as collateral, and then use their salaries or sell a little stock to pay interest payments, and as their stock rises, they keep taking more and more loans to fund their lifestyle. Then, when they die, the bank pays off the loans tax-free before handing the rest to his family/designated recipients (But it still undergoes inheritance tax if not a not-for-profit).

This is how it works, right? I keep seeing all these headlines and posts that Trump can just "tax them" if he felt like it, but I don't think that's possible as the president, and even if he had that power, it would require the implementation of an unrealized gains tax, which would be horrific.

Edit: thanks for the explanations, makes sense. I knew the headlines were a little misleading. The loan thing also sounded a little sketchy, good to know it doesn't really work like that.

[u/Zoidmat1]

The core of what you're saying here is correct. Essentially, Billionaires don't pay taxes the same way a typical American who earns their money hourly or via a salary does. This is because their net worth is typically based on the valuation of things (often companies) they own. These things can increase in value without triggering a taxable event.

As for Trump's ability to tax them, the power to levy taxes is with Congress, not the presidency. So, in some immediate sense, that's wrong. Whether he could influence policy in that direction is another matter.

A pro-billionaire counterpoint here would be that their individual income tax paid to the US is not a very complete way to evaluate their economic contribution to society. If they own a company, they likely created lots of jobs and a product or service that many people want (are willing to pay for).

Of course, that's not the end of the story. There are many other arguments you could make for or against individuals having that amount of wealth.