Tesla saved half a billion in taxes last year using accelerated depreciation. Tax breaks for executive stock options shaved a quarter billion off the company’s tax bill. Unspecified “U.S. tax credits” were good for $300 million of tax savings. Musk’s company also used net operating losses to offset current year income, although it’s hard to know how much of that affects U.S. income rather than the company’s far-larger foreign income.
Congress might give Tesla even more tax breaks. A bill passed by the House of Representatives in the previous Congress would have retroactively reinstated a provision allowing full expensing of research and development expenses which could save the company up to $2.4 billion in taxes.
Wealthy individuals use legal tax avoidance strategies to minimize or eliminate their tax liability, resulting in an effective tax rate far lower than their earnings would suggest
. While the top federal income tax bracket is high, most billionaires do not earn a traditional salary. Instead, their wealth comes from the appreciation of assets like stocks and real estate, and they can borrow against these assets to fund their lifestyle without generating a taxable income