Billionaire Peter Thiel has accrued a $5BN TAX-FREE nest egg in a retirement account designed to help ordinary Americans save for their golden years
- Billionaire Peter Thiel used a retirement account that was designed to help middle-class Americans save for their golden years to amass a $5billion tax-free nest egg
- When he co-founded PayPal, Thiel placed 1.7million shares - worth $0.001 a share -of then-private PayPal into a Roth IRA in 1999
- Within a year, time, the value of his Roth IRA jumped from $1,664 to $3.8 million, ProPublica reported.
- In 2002, eBay purchased PayPal, and the proceeds went untaxed into is Roth IRA, which he used to invest in companies like Facebook
- By 2019, his Roth IRA grew to $5billion, which is an untaxed nest egg if he doesn't withdraw until he's 59.5 years old. He's currently 53
Billionaire Peter Thiel, co-founder of PayPal, has a $5billion, tax-free nest egg, according to ProPublica
Billionaire Peter Thiel used a retirement account that was designed to help middle-class Americans save for their golden years to amass a $5billion tax-free nest egg.
The PayPal co-founder, who's been an outspoken opponent of 'confiscatory taxes,' opened a Roth IRA worth less than $2,000 in 1999, according to Internal Revenue Service data obtained by ProPublica.
Within three years the retirement account grew to $3billion, even though Thiel didn't contribute any money into the account, according to ProPublica.
Now it's worth $5billion, when the average Roth IRA account is worth about $39,000, the outlet reported.
If Thiel, 53, waits until he's 59 and a half, he can with withdraw the money tax free.
Theil is pictured hearing speaking during the final day of the Republican National Convention in Cleveland
Theil's Roth IRA started with less than $2,000 in 1999, which he used to make tax-free investments until he amassed $5billion
As a way of background, traditional IRAs, established in 1974, deduct contributions now to lower adjusted gross income to help tax payers qualify for other tax incentives, but they pay taxes on withdrawals later.
With Roth IRAs, which were established in 1997 to help the 'hard-working, middle-class Americans' stow money away, tax-free, the tax payer pays taxes on contributions now but can withdraw the money tax-free after they turn 59.5 years old.
Roth IRAs are subject to income-eligibility restrictions.
To skirt those restrictions, Thiel placed 1.7million shares of then-private PayPal into a Roth IRA in 1999. The shares were valued at just $0.001 per share, The Guardian reported.
Within a year, time, the value of his Roth IRA jumped from $1,664 to $3.8 million, ProPublica reported.
Then in 2002, eBay purchased PayPal.
That same year, Thiel sold the shares, which were still inside his Roth IRA, and the tax-free proceeds poured into his account.
By the end of 2002, Thiel's Roth was worth $28.5 million, ProPublica said his tax records showed.
Theil continued to make lucrative, un-taxable investments from his Roth IRA in ventures like Palantir, a data analytics company, and Facebook, ProPublica reported.
By 2019, his Roth IRA grew to $5billion 'spread across 96 subaccounts inside his Roth,' ProPublica said.
Forbes currently lists Theil's value at $5.3billion, not including his Roth IRA.
ProPublica said a Thiel spokesman took a list of detailed questions, but then didn't respond to emails or phone calls.
It isn't clear how ProPublica has gotten its cache of IRS information, and its publishing has led to calls of partisan politics - that liberals within the IRS could be releasing information on wealthy people to force the issue of higher taxes.
The FBI has been called in to investigate the leaking of a trove of IRS documents which showed some of America's richest residents paid zero federal income tax in recent years.
The CEOs of ProPublica - a non-profit news site - admitted in an accompanying article that they did not know the identity of the person or persons who provided them with the IRS documents.
'We have considered the possibility that information we have received could have come from a state actor hostile to American interests,' the liberal news organization said.
Earlier this month, Douglas O'Donnell, the IRS's deputy commissioner for services and enforcement, stated that other outside agencies have been contacted as part of a probe to figure out how the confidential tax records leaked out.
Meanwhile, other members of the super rich amassed large Roth IRA accounts.
Warren Buffett, who has argued that billionaires should pay higher taxes, had $20.2m in a Roth IRA at the end of 2018, according to ProPublica.
| Warren Buffett | ||
|---|---|---|
| Year | Total taxes paid | Total income reported |
| 2014 | $7.93 million | $46.8 million |
| 2015 | $1.85 million | $11.6 million |
| 2016 | $3.82 million | $19.6 million |
| 2017 | $4.75 million | $22 million |
| 2018 | $5.36 million | $24.8 million |
| Jeff Bezos | ||
| Year | Total taxes paid | Total income reported |
| 2014 | $85.4 million | $367 million |
| 2015 | $126 million | $542 million |
| 2016 | $320 million | $1.35 billion |
| 2017 | $398 million | $1.68 billion |
| 2018 | $43.5 million | $284 million |
| Elon Musk | ||
| Year | Total taxes paid | Total income reported |
| 2014 | $30.4 million | $165 million |
| 2015 | $78.5K | $3.15 million |
| 2016 | $42 million | $1.34 billion |
| 2017 | $73.7K | $6.22 million |
| 2018 | $8.41K | $3.85 million |
| Source: IRS DATA OBTAINED BY PROPUBLICA | ||
Ted Weschler, an investment manager at Buffett's Berkshire Hathaway, had $264.4m in his Roth in 2018, and hedge fund manager Randall Smith of Alden Global Capital had $252.6m in his.
Buffett didn't respond to a request for comment. Weschler said his retirement account employed completely legal strategies - but he said he supported an overhaul of the tax system.
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ProPublica's Thursday report follows an earlier report that found the 25 richest Americans pay less in income tax than the average worker does.
The median American household, in recent years, earned an average salary of about $70,000 and paid 14 percent in federal taxes per year.
Based on data from the 25 richest Americans, they collectively paid a 'true tax' rate of 3.4 percent between 2014 to 2018 on wealth growth of $401 billion.
The organization computed the 'true' tax rate using the growth in wealth for a list of rich people; the U.S. doesn't tax wealth and while some economists say its a good idea, others say it makes no sense to tax an asset that has appreciated - like a stock or a house - before it's sold.
Senator Ron Wyden of Oregon, the chairman of the tax-writing finance committee, told The Guardian that Congress is working on a set of recommendations to tackle the issue.
'Billionaires are going to have to pay their fair share, every year,' he told the outlet in a recent interview.
IRS probes leak of confidential records showing how Elon Musk, Jeff Bezos and George Soros paid NO income tax - but NOT the billionaires' creative accounting!
The IRS is now investigating how confidential tax return data was leaked that divulged how billionaires like Elon Musk and Jeff Bezos have paid zero federal income tax in some years.
The confidential IRS records from the wealthiest people in the United States were obtained by ProPublica and published on Tuesday.
IRS Commissioner Charles Rettig revealed during an already scheduled Senate Finance Committee hearing just hours later that authorities are investigating the leak of the tax data.
Amazon founder Jeff Bezos paid no income tax in 2007 and 2011, while Tesla founder Elon Musk's income tax bill came to zero in 2018, according to IRS records obtained by ProPublica and published on Tuesday
In reviewing the tax data, the site calculated what it called a 'true tax rate' for the billionaires by comparing how much tax they paid annually from 2014 to 2018 to how much Forbes estimated their wealth had grown in that same period.
The report found that, overall, the richest 25 Americans pay less in tax than the average worker does.
The median American household, in recent years, earned an average salary of about $70,000 and paid 14 percent in federal taxes per year.
Based on data from the 25 richest Americans, they collectively paid a true tax rate of 3.4 percent between 2014 to 2018 on wealth growth of $401 billion.
Warren Buffett, the CEO and chairman of Berkshire Hathaway, has avoided the most tax in recent years, according to the records.
Between 2014 and 2018, Buffet's wealth grew by about $24.3 billion but he reported paying $23.7 million in taxes.
It showed a so-called true tax rate of 0.1 percent, which equates to less than 10 cents for every $100 Buffet added to his wealth in that period.
For Bezos, his wealth grew an estimated $99 billion and his total reported income was $4.22 billion between 2014 and 2018.
In that period, Bezos paid $973 million in tax, which equates to a 0.98 percent true tax rate.
In 2007 when Bezos paid no income tax, the Amazon founder - in a joint tax return with then-wife MacKenzie Bezos - reported $46 million in income, which was mostly from interest and dividend payments from investments.
He was able to offset his earnings with losses from other investments and deductions.
In 2011, his tax return showed he had lost money and he claimed a tax credit worth $4,000 for his children.
Warren Buffett, the CEO and chairman of Berkshire Hathaway, has avoided the most tax, according to the records. Between 2014 and 2018, Buffet's wealth grew by about $24.3 billion but he reported paying $23.7 million in taxes. It showed a so-called true tax rate of 0.1 percent
Investor Carl Icahn, who is ranked the 40th wealthiest American with an estimated fortune of $14.9 billion, didn't pay federal income tax in 2016 and 2017. He is pictured with wife Gail Golden
Elon Musk's wealth grew an estimated $13.9 billion between 2014 and 2018. He reported $1.52 billion in total income and paid $455 million in taxes. It equates to a 3.27 percent true tax rate.
In 2018, Musk paid no federal income tax. The records show he paid $68,000 in 2015 and $65,000 in 2017.
Investor Carl Icahn, who is ranked the 40th wealthiest American with an estimated fortune of $14.9 billion, didn't pay federal income tax in 2016 and 2017.
Records show he reported, at the time, an adjusted gross income of $544 million. According to the IRS records, he had an outstanding Bank of America loan of $1.2 billion.
Icahn told ProPublica that his adjusted gross income is misleading because his interest on his loans is higher.
'I didn't make money because, unfortunately for me, my interest was higher than my whole adjusted income,' he said.
Icahn hit back at questions over whether he thought it was inappropriate he hadn't paid federal income tax some years.
'There's a reason it's called income tax,' he said. 'The reason is if, if you're a poor person, a rich person, if you are Apple - if you have no income, you don't pay taxes.
'Do you think a rich person should pay taxes no matter what? I don't think it's germane. How can you ask me that question?'
George Soros, the founder of Soros Fund Management, has an estimated wealth of $8.6 billion. He paid no federal income tax between 2016 and 2018, according to the records. He is pictured with wife Tamiko Bolton
ProPublica reported that Mike Bloomberg, who is the 13th richest American with an estimated wealth of $48 billion, hasn't paid federal taxes in recent years but did not specify when. His spokesman noted that when he was running as a 2020 Democratic presidential candidate he had advocated for tax hikes
Michael Bloomberg's wealth grew $22.5 billion between 2014 and 2018 - a period where he reported a total income of $10 billion.
Bloomberg paid $292 million in taxes during that time, which is a 1.30 percent true tax rate.
ProPublica reported that Bloomberg, who is the 13th richest American with an estimated wealth of $48 billion, hasn't paid federal taxes in recent years but did not specify when.
His spokesman said in a statement that when Bloomberg was running as a 2020 Democratic presidential candidate he had advocated for tax hikes.
'Mike Bloomberg pays the maximum tax rate on all federal, state, local and international taxable income as prescribed by law,' a statement read.
'Taken together, what Mike gives to charity and pays in taxes amounts to approximately 75 percent of his annual income.
'The release of a private citizen's tax returns should raise real privacy concerns regardless of political affiliation or views on tax policy. In the United States no private citizen should fear the illegal release of their taxes. We intend to use all legal means at our disposal to determine which individual or government entity leaked these and ensure that they are held responsible.'
George Soros, the founder of Soros Fund Management, has an estimated wealth of $8.6 billion.
He paid no federal income tax between 2016 and 2018, according to the records.
'Between 2016 and 2018 George Soros lost money on his investments, therefore he did not owe federal income taxes in those years. Mr Soros has long supported higher taxes for wealthy Americans,' his spokesman said.
After examining the IRS records, ProPublica found that Americans earning between $2 million and $5 million per year paid an average of 27.5 percent in tax.
Meanwhile, the top .001 percent of taxpayers - the 1,400 people whose reported income came in at more than $69 million - paid 23 percent in tax.
Many billionaires are able to drastically reduce their federal tax bills using legal tax strategies.
Among the ways they can reduce tax bills is via charitable donations or by avoiding wage income, which can be taxed at up to 37 percent. Instead, they can benefit from investment income, which is taxed roughly at 20 percent.
The release of the confidential IRS records comes as President Joe Biden is proposing tax hikes on the wealthy to finance his spending plans.
Biden wants to hike the top tax rate to 39.6 percent for people earning $400,000 a year or more in taxable income, which is less than 2 percent of US households. The current top tax rate workers pay on wages is 37 percent.
He has also proposed nearly doubling the tax rate high-earners pay on earnings from stocks and investments.
- Roth IRA Vs. Traditional IRA: What's the Difference?
- Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank — ProPublica
- Billionaire Peter Thiel amasses $5bn tax-free nest egg in retirement account | Peter Thiel | The Guardian
- Peter Thiel
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