Jeff Bezos: The story of his life & how he avoids taxes

Many of us today could not imagine a world without Amazon. This company has hooked us so easily that we go straight to Amazon when we need to make our online purchases. The complete ease of going online, ordering an item, and seeing it appear within 2 days for us Amazon Prime members, is a luxury I do not want to be taken away! However, we also understand that getting those packages delivered so quickly does come at the expense of Amazon employees.

This segment focuses on self-made billionaires, and I tackle the topics of their youth, first projects, accomplishments as adults, tax avoidance strategies. As well as tips you can implement into your daily life to start the path towards financial freedom just like these self-made billionaires did. 

My goal today is to focus on the story of how Jeff Bezos came to be one of the richest men in the world (ranking in the top 5, Jan. 2022). Previously, I dove into how Elon Musk, the world’s richest man (Mar. 2022), has a tax return rate of under 4% (compared to the average American tax rate of 13.30%).

Jeff Bezos has always loved playing with computers and learning about computer science from an early age. As he continued to grow, he converted his parent’s garage into his own lab, where he would create contraptions and devices. As a high schooler, Bezos created his first business called the Dream Institute. The idea was for this business to be an educational summer camp for children in grade school. 

Afterward, he pursued an electrical engineering background while studying at Princeton. Once he graduated, Bezos decided to begin a career in Wall Street. He climbed his way up the ladder to be the youngest V.P. of the investment firm D.E. Shaw. Four years later, he decided to quit his lucrative career and jump on the tech bubble train popping off in Seattle, Washington. 

Amazon Journey

The move was inspired by his drive to create Amazon.com, which began as an online bookstore and sold its first book in 1995. I am highlighting these things from his youth because it gives you the backstory of him being passionate about computer science engineering and wanting a financially comfortable life! Folks, to be successful, it is essential that you at least like what you are doing. Bezos talked about how his life on Wall Street no longer fulfilled him, and he wanted to pursue his passions and dreams.

In the beginning, he was working out of his home and hired some people to come work out of his garage to help create Amazon. He continued to expand his house to have more rooms, allowing more people to develop the software. After this point, within 30 days, Amazon was able to sell books to 45 different countries located outside of the United States. Not only that, but 2 months later, Amazon hit a new sales record of bringing in $20,000 in one week. 

This success resulted in Amazon going public by 1997, and in 1999, Amazon had officially bypassed its competitors. To jump forward, Amazon’s sales in 1995 were around $510,000, but by 2011, they had amassed a sales record of $17 billion. After 2018, Amazon officially hit over $1 trillion in company value. At this point in his career, he is the Founder and Executive Chairman of Amazon. The owner of The Washington Post (2013) acquired Whole Foods (2017) and is the founder of Blue Origin (2000).

Tax Avoidance

Okay, fantastic, we already know he is a successful SOB; what about paying his taxes like every other citizen?! According to ProPublica (a non-profit newsroom investigating those who use their powers to abuse others), they obtained IRS tax forms on the top 25 billionaires. Jeff Bezos was on that list, and it was shown that for both 2007 and 2011, Bezos did not pay any federal taxes. This mega-billionaire paid $0 FEDERAL TAXES THOSE TWO YEARS! 

To give you more perspective on what I am talking about, let me give you an example. You filed taxes as single, and you made around $50,000 in 2011. You would have paid in federal taxes approximately $8,625. While Jeff Bezos paid nada… 

From 2014 to 2018, it was reported that Jeff Bezos had earned a whopping $4.22 billion in revenue but only paid around $973 million in federal tax, aka 0.98% as his tax rate. Compared to the 37% he should have paid as an American citizen. From 2006 to 2018, his actual tax rate was only 1.1%, which is significantly less than the 10% Americans have to pay if they earn up to $19,050 as a married couple. Learn more about why we have taxes and why I have to pay for them.

Strategies!

Now that we are all worked up and pissed off, let’s discuss some tax avoidance strategies he consistently uses. He utilizes an essential technique every year to report that he lost more money from his investments, deductions, or debts he owes. By claiming he lost more money than he made, he can reduce how much he owes in taxes. Also, he takes a tiny amount of yearly income as the CEO of Amazon. In 2020, it was around $81,840. He does this because he only had to pay 22% in federal taxes when he filed as a single person. In contrast to the standard 37%, he should pay as the CEO of a trillion-dollar corporation. You can also read about where does my tax money go and why I pay – 10 reasons! 

Since the government primarily taxes the citizens through income tax, many billionaires do not want to claim income (aka from a job, salary, yearly wages, etc.). So the question becomes, well, how does he pay for his lifestyle if he doesn’t make income? He receives money from all assets like stocks, bonds, dividends, interest, real estate, other businesses, etc. 

Generally, this money is considered non-cash, so he cannot easily pull this money out and buy a new space shuttle. Instead, he would put up one of these accounts as collateral damage to a bank. The bank would then say, we will give you a loan in the amount of this account you are using as insurance (saying that you will pay back this massive loan because you have an account with the same dollar value). 

Now that he has that loan, he can access the money directly, AND because it is a loan, Bezos can pay back the amount with meager loan rates of around 3-4%. Lastly, a common tax avoidance strategy is to hire/support lobbyists, lawyers, and tax professionals who will fight for you. The IRS does not have the employee bandwidth or financial power to complete a full audit investigation.

After everything you have learned so far about this man, let’s get into the good stuff of why you clicked this article! There are many lessons you can take away from Jeff Bezos that he implemented into his daily life to become a self-made billionaire. 

• He is positively obsessed with customer obsession. You can find numerous videos of Bezos discussing customer obsession as the reason for Amazon’s success. A vital strategy is to conduct research and ask people what is it that they want? A path you can take towards achieving financial success is understanding when there is a problem and how to provide a solution for said problem. You don’t have to create a conglomerate corporation, but let’s say that you’ve heard from many people in your area that there are not enough Italian restaurants close by. Suppose that is something you are passionate about. In that case, you can provide a solution to that problem by creating a blog website that pulls different articles or videos of popular recipes/chefs that are experts in Italian food. You can base the website around the fact that you are a foodie who appreciates good Italian food and wants to provide at-home solutions to other Italian foodies. As your website becomes popular, you can work with advertisement companies and affiliate marketing groups that want to pay you, so they can advertise on your website. Many bloggers that put in the work openly discuss replacing their day job income within their first few years. The ones who really grind, makeover 6-figure, sometimes 7-figure incomes. 

Another strategy Jeff Bezos uses is to shave his head daily, just kidding!

• Be consistent with your investment strategy and philosophy. For example, if you are a safe investor and want to play the long game of consistently putting in $200 to your stock market account every month for the next 20 years, then stick. To. That. Strategy! Jeff Bezos saw success when he stuck to his investment morals and created a plan that worked for him. Some people may see success with quick decisions and day trading, whereas others may succeed in mutual fund investments. The key is to understand your monthly and yearly budget to create an investment strategy that works best for you. It is always best to look at your investment account as if you could lose half of it by tomorrow due to an unforeseen future catastrophe. You could lose this money, so budget your necessity versus your okay to invest money. I always recommend working with or hiring a professional that can walk you through the pros and cons of investments. 

• Do not regret starting your own company or dream. Jeff Bezos said he would always regret it if he had not created his own business. He quit Wall Street because he did not want to die with that regret in his heart. Even though he knew he could completely fail at launching Amazon, at least he would have tried. Personally, I have felt that way ever since I was a teenager. I did not want to leave this Earth knowing there was so much of what I could have done. We only have this one life as ourselves, and too many times, we see people wasting that opportunity. If there is something you are genuinely passionate about, stop wasting time and get after it! I was sick and tired of the corporate 8-5 workday, the same thing repeatedly that I felt like ripping my hair out. I felt that my life was meant for more and that I deserved more than sitting at home, working from my computer 40 hours a week. My passion was wanting to help people, specifically in the financial literacy department. Because I realized that if I wanted to be a multi-millionaire, I needed to learn vital adult skills that could get me financial independence. And that is precisely what I am working on right now! 

• “Most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, you’re probably being slow in most cases. Either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow will be expensive for sure.” Amazon letter from Bezos to shareholders. Whatever you wish to pursue, create or build, have an idea of what that plan will look like. Do the due diligence when it comes to research, talk to people in that field, listen to problems or concerns in the area you wish to be a part of. Work on solutions and ideas as to how you can create a more successful path for people. Most importantly, understand that whatever your dream is, it will require real work. If it didn’t, you would already have everything you ever desired. Many of these self-made billionaires had day jobs, and after their day jobs were done, they dived into the actions that needed to be done to turn their dream into a reality. 

This concludes today’s article, and I hope that it was helpful to you and got you thinking more about your own financial goals. I always want to hear your thoughts and questions, especially about finances. Please ask questions and leave comments below because I want to know what you think. Continue reading more articles on the website!

And remember, like Earl Nightingale said, “Everything begins with an idea.” See you again next time!