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Fact check: How do billionaires use tax deductions to reduce their tax liability?
Executive Summary
Billionaires reduce tax bills through a mix of legal strategies that exploit differences in state taxes, the structure of compensation, and asset management — notably relocation to low-tax states, borrowing against appreciated assets, and estate-step-up rules — described across recent reporting [1] [2] [3]. Reporting and commentary vary: some pieces emphasize a single move or mechanism, while others present a systemic pattern dubbed “Buy, Borrow, Die,” illustrating how the wealthy convert unrealized gains into liquidity while avoiding ordinary income or capital gains taxes [2] [3].
1. Why a Move Can Be a Billion-Dollar Tax Story — State Taxes Matter
Multiple accounts highlight residency changes as a major lever for reducing tax exposure, with Jeff Bezos’s move from Washington to Florida framed as saving roughly $1 billion in taxes, because Florida has no state income tax and no estate or capital gains taxes at the state level [1]. Reporting dates (October 2, 2025) underscore this is a current tactic being scrutinized by journalists, portraying relocation as a straightforward way to avoid progressive state-level levies. Critics argue this tactic highlights inequalities in tax incidence across jurisdictions, while proponents present it as legally optimizing after-tax income; both perspectives appear in the coverage [1].
2. The “Buy, Borrow, Die” Playbook — Converting Wealth Without Realizing Gains
Analyses explain a repeatable pattern where wealthy individuals buy appreciating assets, borrow against them to fund lifestyles or investments at low interest rates, then transfer assets to heirs who receive a stepped-up basis that eliminates capital gains on prior appreciation — the so-called “Buy, Borrow, Die” strategy [2] [3]. The September 2025 coverage lays out how low borrowing costs and tax rules combine to allow wealth extraction without triggering capital gains events. Journalists frame this as a legal but potent method for sheltering wealth from ordinary taxation, with the main factual claim centering on how loans are not taxable income while sales realizing gains would be taxable [2].
3. Compensation Choices: Stock Over Salary and Tax Timing
Reports and a video explain another consistent mechanism: paying executives in stock-based rewards rather than cash salary so that income is tied to equity appreciation, which is not taxed until shares are sold, and can be deferred or offset through borrowing against shares [3]. The narrative from December 3, 2025 emphasizes that stock compensation, combined with borrowing strategies, reduces annual taxable income and shifts the timing of tax events. This places emphasis on tax timing and form of compensation as critical determinants of whether and when taxes are incurred, with coverage noting the policy and fairness implications without asserting illegality [3].
4. Inheritance and Asset Transfer — How Law Creates Gaps
UK reporting on inheritance tax notes that art, land, and buildings valued at large sums can escape inheritance tax under current rules, illustrating cross-jurisdictional gaps where asset types and valuations interact with exemption rules [4]. While that Financial Times piece (September 30, 2025) focuses on inheritance specifics rather than deductions per se, it reveals a broader fact: tax outcomes depend heavily on asset class and legal exemptions, and wealthy estates can exploit deductions, reliefs, and valuation rules to materially reduce estate taxes. This underscores variation in tax regimes and how specific carve-outs produce outsized benefits for large holdings [4].
5. Disagreement and Emphasis Across Sources — What Reporters Highlight
The sources differ in emphasis: October coverage of Bezos centers on state-level tax avoidance through relocation and its scale [1], September pieces emphasize mechanics of asset strategies and the stepped-up basis [2], and the FT focuses on inheritance exemptions by asset type [4]. A December video expands the public-explanation angle, stressing behavioral tactics like receiving stock and borrowing [3]. These divergences reveal editorial choices — spotlighting personalities, systemic patterns, or technical exemptions — while consistently portraying the same factual toolkit used by the wealthy.
6. What’s Missing and What to Watch — Policy Levers and Reform Debates
The pieces document practices but offer limited detail on legislative responses or quantified prevalence beyond singular examples; data on how widespread each tactic is remains underreported in these items [1] [2]. The coverage signals ongoing policy debate about stepped-up basis, state tax competition, and compensation taxation, which are the levers policymakers could alter. Watch for further reporting and legislative proposals that would change how stock compensation, borrowing, and estate rules interact to determine ultimate tax liabilities [2] [3].
7. Bottom Line: Legal Strategies, Big Effects, Clear Policy Choices
Across these recent sources, the facts converge: billionaires use a combination of state residency choices, asset-based borrowing, compensation structure, and estate rules to significantly reduce taxable events and liabilities [1] [2] [3]. Reporting frames these as legal strategies exploiting tax code features and jurisdictional differences; the discrepancy in coverage reflects varied agendas — human-interest reporting on individuals, systemic explainers on mechanisms, and policy-focused stories on exemptions — but all document the same set of tax-reduction tools available to the very wealthy [4].