Mark Zuckerberg is currently the world's sixth richest person with assets of 235 billion USD, according to the Bloomberg Billionaires Index. However, in 2024, he was Meta's lowest-paid employee, earning only 1 USD.

The Facebook owner is not an isolated case in the US. Many other billionaires, including Elon Musk, Larry Page, and Sergey Brin, also prefer low salaries.

Ray Madoff, a law professor at Boston University and author of "The Second Estate: How the Tax Code Made an American Aristocracy," states that the primary reason for this trend is taxes.

In the US, employees are subject to both income tax and payroll tax. For instance, a self-employed individual earning 60,000 USD might owe over 13,000 USD in these combined taxes. High-income earners with a salary of 400,000 USD could pay around 30% of their income in these two tax categories.

"The first step to tax avoidance is to simply not receive a salary. This is precisely what the wealthiest Americans frequently do," Madoff explains.

Mark Zuckerberg wearing Meta Ray-ban glasses. Photo: Instagram/zuck

Elon Musk received a 0 USD salary from Tesla in 2024. Jeff Bezos received just 81,840 USD in 2021, a sum low enough to qualify for specific tax benefits for his children. Even Warren Buffett, one of the higher-paid billionaires, has a total annual salary and bonus of only 100,000 USD.

These individuals reduce their tax obligations by keeping their salaries exceptionally low. Instead, they are generously compensated through the appreciation of their stock holdings. In 2024 alone, Bezos's wealth increased by 80 billion USD, Zuckerberg's by 113 billion USD, and Musk's by 213 billion USD. This strategy allows them to fully enjoy their increased wealth without incurring income tax or additional reporting duties.

Historically, the US tax system served as a safeguard against excessive wealth concentration. However, Ray Madoff notes that over the past 40 years, numerous changes have enabled the wealthy to almost entirely avoid taxes on their investments and inherited assets.

Stock investment exemplifies this. Before 1982, companies could only distribute profits directly to shareholders through dividends, which were heavily taxed. However, in 1982, the US Securities and Exchange Commission (SEC) authorized companies to repurchase their own shares on the open market.

This means companies can buy back shares instead of paying dividends, thereby driving up share prices. Consequently, shareholders can benefit from increased stock value without selling their shares and, crucially, without paying taxes on this gain.

To cover living expenses, one might assume billionaires would need to sell stocks, thus incurring taxes. However, they employ an alternative strategy. Billionaires like Larry Ellison and Elon Musk secure substantial loans to finance their lifestyles, using their stock as collateral. These loans are completely untaxed and often come with preferential interest rates.

"Furthermore, in recent years, stock price appreciation has significantly outpaced the interest owed on these loans. To service the interest and repay the principal, they simply... borrow again," Ray Madoff explains.

Billionaires also minimize tax payments when transferring assets to their children. In the US, assets valued at 15 million USD or more, transferred as gifts or inheritance, are subject to a tax rate of up to 40%. However, inheritance tax is not truly effective due to numerous provisions designed to protect family businesses, according to Ray Madoff.

"Despite the nominal existence of inheritance tax today, the US Congress has not passed any legislation to close loopholes for the past 35 years. This has resulted in countless avenues for the wealthy to shield their assets from taxation," she states.

As a result, the richest 1% of Americans own approximately 50 trillion USD in assets, yet the total revenue collected from inheritance tax in 2024 was only about 30 billion USD—an amount Elon Musk could potentially gain or lose in a single day.

According to Ray Madoff, inheritance tax primarily functions as a "façade" for the wealthiest. Maintaining this tax creates the impression that billionaires contribute their fair share, while in reality, they benefit disproportionately.

If the wealthiest Americans pay minimal taxes, who bears the burden? The expert indicates it falls on the income group earning hundreds of thousands of USD annually. This group, comprising employed CEOs, professionals, and doctors, may pay up to 50% of their income in payroll and income taxes.

Ray Madoff observes that the public often misunderstands statistics regarding top taxpayers. For example, reports that the top 1% income group contributes up to 40% of total income tax can be misleading. This 1% group represents the highest-earning taxable employees (primarily through salaries and bonuses), not the wealthiest individuals based on their overall assets.

Phien An (according to The Conversation)