Law professor breaks down how billionaires like Jeff Bezos avoid taxes

If you’ve ever wondered how much income tax the rich and famous have to pay due to their lavish salaries – an expert has revealed that it’s likely not much at all, as she detailed a bizarre legal ‘loophole’ you probably don't know about.

According to Forbes, Amazon founder Jeff Bezos is the third richest person in the world, with a net worth of around $256.3 billion at the time of writing.

Above him lies Larry Page ($277.7bn), the former CEO of Alphabet, and Elon Musk of Tesla and SpaceX ($790.1bn).

With money like what’s on the richest list, you’d be forgiven for thinking the IRS would be collecting buckets of income tax from the businessmen.

However, a law professor has come out to reveal that it’s not quite the case.

Apparently, there's a 'loophole' for billionaires like Jeff Bezos (Photo by Alexander Tamargo/Getty Images for America Business Forum)

In fact, rich people like Bezos may not even pay tax much at all because they know about a so-called loophole that allows them to get away with it.

According to Fortune, Bezos kept his Amazon base salary at around $80,000 for decades, and Professor Ray Madoff, of Boston University, claims there’s a reason for that.

Speaking with The New York Times columnist, Ezra Klein on his podcast, she revealed the ‘secret’ way billionaires are able to keep their salaries modest to avoid a big bill but still live lavishly.

The professor explained that ‘high income lawyers, doctors, finance people’ are all ‘paying a significant chunk of the income taxes’.

‘However, when it comes to the wealthiest Americans, the Zuckerberg, Bezos, Musk, Ellison’, Professor Madoff claimed that they are less likely to pay taxes.

This is because they can use their stocks as a way to offset income tax.

Breaking things down and using the Amazon founder as an example, Professor Madoff said: “He started his own business. He owns a dominant amount of the stock. And over the course of the years, he has taken a salary that is no higher than $82,000. And it’s been over 20 years now. And that’s his salary is always capped at $82,000.”

The expert claims the rich use stocks to offset income tax (Getty Stock Images)

She explained the reason it’s capped at this amount is that if he took a larger salary, he’d be subject to ‘high income taxes and payroll taxes’.

So, what billionaires allegedly do is ‘take their benefits through the growing value of their stock’ because stocks are tax free ‘with no time frame’.

Madoff said the tax is only applicable once sold, ‘and Bezos never has to sell the stock because he can simply borrow against the stock and use that money to support his lifestyle and to pay any interest that’s due on the loan’.

Essentially, this could make his repayment bill a lot less than what he’d pay in income tax.

However, Bezos has recently been periodically selling his stock in a bid to sell 25 million shares before the end of last year.

Prior to this, from 2014 to 2018, an analysis by ProPublica found that Bezos' ‘true tax rate’ was 0.98 percent, which is a lot less than the average 37 percent rate for Americans.

UNILAD has contacted representatives of Bezos for comment.