Jeff Bezos's televised tax mythology, performed with an army of advisers, is the loud variety, but the quieter, more common myths pervade Canadian conversations, warns tax expert Kim Moody. In a recent interview, Bezos made two confident claims that would not survive a first-year tax course, potentially harming public understanding of the Canada Revenue Agency (CRA) rules.
The 'Buy, Borrow, Die' Myth
Bezos claimed, "There's no truth to this buy, borrow, die thing." However, this strategy—buying appreciating assets, borrowing against them, and holding until death—is standard in U.S. estate planning. In the United States, heirs inherit assets at fair market value due to the step-up in basis rule, avoiding capital gains tax on appreciation. Bezos's rebuttal that he sells Amazon stock routinely misses the point: the vast majority of his wealth remains unrealized, and at death, the step-up washes away potential income tax.
Canada lacks such a step-up rule. Instead, the CRA imposes a deemed disposition at death, taxing accrued gains on the terminal return. The third step of buy-borrow-die does not apply here, making Bezos's dismissal misleading for Canadian taxpayers.
The 'Bottom Half Should Pay Zero Tax' Myth
Bezos also asserted that the bottom half of earners should pay zero income tax. While many low-income individuals already pay little or no tax due to credits and deductions, such a blanket statement ignores the progressive nature of tax systems and the need for broad-based revenue. Moody notes that this oversimplification undermines the complexity of tax policy and can lead to unrealistic expectations.
Impact on Tax Literacy
Moody, a veteran tax professional, emphasizes that myths like these—whether from billionaires or casual conversation—erode trust in the tax system. He recounts hearing at parties that doing a sliver of work on a personal trip allows a deduction, which is false. Personal expenditures cannot be deducted against business income, and attempts can trigger CRA reassessments, penalties, or even criminal investigations.
"A tax system that ordinary working Canadians cannot understand is not a healthy system," Moody writes. He urges taxpayers to rely on professional advice rather than folklore, especially as the CRA increasingly uses data analytics to detect non-compliance.
In conclusion, while Bezos's myths may not hurt him personally, they damage public understanding of tax rules in Canada, where the CRA applies strict standards. Moody advises Canadians to seek credible information and avoid repeating tax myths that could lead to costly mistakes.
