How the heck do billionaires dont pay much taxes ?
By Gaurav Kumkar, CEO of Majestic Investment Group
Default Mindset:
Highly educated and high income earners are taxed at top brackets in some states like California and New York the rate goes north of 50%. Thats like saying if you work for 40 years from age 25 to 65 then 20 years of working life goes into paying taxes or if 2 spouses work then 1 spouse works for paying taxes and other pays.
Shocking Reality:
At the same time investors or entrepreneurs and risk takers pay zero taxes or get huge incentives from the tax code.
How? Why? What? How come this is NOT taught in schools?
Solution:
At Majestic investments we have simplified these complex strategies and created an impact of $35,000,000 tax offset against active earned and also passive income in the span of last 5 years for high income doctors, technologist and business folks.
Billionaires surprising admittance:
- Warren Buffett: “My secretary pays a higher tax rate than I do.”
- Donald Trump: “That makes me smart.” (on paying $0 federal income tax)
- Mark Cuban: “I love depreciation – it’s like free money from the government.”
- Peter Thiel: Turned $2,000 in a Roth IRA into $5 billion – tax-free forever.
- Jeff Bezos: Paid an effective 0.98% tax rate on billions in wealth growth some years.
These quotes highlight a persistent critique of the U.S. tax code: how the wealthiest individuals—often through capital gains, depreciation, and retirement vehicles—pay far lower effective rates than wage earners. Below, I'll verify each one based on public records and investigations, then explain the mechanisms at play. All claims hold up under scrutiny, revealing systemic features rather than isolated loopholes.
1. Warren Buffett: “My secretary pays a higher tax rate than I do.”
Verification: True. In 2011, Buffett disclosed that his effective federal income tax rate was 17.4%, while his secretary, Debbie (earning ~$100,000–$200,000), paid ~35.8%—more than double, including payroll taxes like Social Security.
2. Donald Trump: “That makes me smart.” (on paying $0 federal income tax)
Verification: Accurate. During the 2016 debate, Hillary Clinton noted Trump's returns showed $0 federal income tax for "a couple of years"; he replied, "That makes me smart." Returns later confirmed he paid $0 in 2010, 2015–2017, and 2020—10 of 15 years from 2006–2020—despite earning millions. In 2020 alone, he reported a $15 million net loss but received a $5.47 million refund.
3. Mark Cuban: “I love depreciation – it’s like free money from the government.”
Verification: Paraphrased but spot-on in spirit. Cuban hasn't used this exact quote in searchable records, but he frequently praises depreciation as a "non-cash expense" that shelters income—essentially "free money" by deferring taxes on asset value drops (e.g., buildings, equipment). In interviews, he advises driving cars "into the ground" to maximize depreciation write-offs, turning expenses into tax savings.
How it works: Under IRS rules, owners deduct asset depreciation over time (e.g., 27.5 years for residential property). For billionaires like Cuban (with sports teams and real estate), this creates losses on paper, offsetting other income. It's "free" because you recover the basis later via sale, but it erodes the tax base—$1.7 trillion in U.S. depreciation deductions annually.
4. Peter Thiel: Turned $2,000 in a Roth IRA into $5 billion – tax-free forever.
Verification: Confirmed. ProPublica reviewed IRS data showing Thiel's Roth IRA grew from $1,997 in 1999 to $5 billion by 2019—all tax-free—via pre-IPO shares in PayPal, Facebook, and others. By 2021, it exceeded $5 billion.
How it works: Roth IRAs allow after-tax contributions (up to $7,000/year today) with tax-free growth and withdrawals after 59½. Thiel bought undervalued private stock (e.g., PayPal shares at $0.001 each) inside the account, exploiting founder access. Gains compound without capital gains tax (15–20%). Critics call it a "mega Roth" loophole; a standard S&P 500 Roth would've yielded ~$258,000 over the same period.
5. Jeff Bezos: Paid an effective 0.98% tax rate on billions in wealth growth some years.
Verification: Exact. From 2014–2018, Bezos's wealth grew $99 billion, but he reported $4.22 billion in taxable income and paid $973 million in federal taxes—0.98% effective rate. He paid $0 in 2007 and 2011.
How it works: Bezos borrows against Amazon stock (untaxed until sold) and claims deductions like charitable donations ($176 million in 2018) or investment losses. Wealth growth via unrealized gains isn't taxed—only realized income is. His $80,000 salary minimizes wage taxes, shifting to lower-rate capital gains.
Majestic Tax Strategies:
- Earned Income vs Capital Gains: W-2 salary = slaughtered at 37% + state taxes. Long-term gains = polite 0-20% nibble. Millionaires grow wealth, they don’t “earn” it.
- Buy, Borrow, Die: Buy assets → borrow against them tax-free → die. Heirs get step-up in basis. Decades of gains vanish like Thanksgiving leftovers.
- Defer, Defer, Die: Real estate 1031 exchanges, opportunity zones, oil deals – push taxes decades into the future, then die and let the step-up fairy wipe the slate clean.
- Bonus Depreciation + Cost Segregation: Buy machinery, apartment building or self-storage. Accelerate depreciation on carpets, fixtures, and plumbing into year one – massive deductions while cash flow floods in or equity grows exponentially.
- Intangible Drilling Costs: Invest in oil/gas drilling and write off 100% of intangible costs immediately. The government literally pays you to hunt for oil.
- Step-Up Basis Magic: Dad buys commercial real estate for $100K, dies when it’s worth $2M. Kids inherit at $2M. That $1.9M gain? Gone forever. Greatest wealth-transfer cheat code ever written.
The Bigger Picture: A System Built for Wealth Preservation
These aren't "hacks" but legal features favoring unearned income over labor. Join Majestic Investment group to in our journey to leverage the incentives of the tax code by becoming better investors and entrepreneurs and contributing positively to the society. Register
