ProPublica, Meet the Billionaire and Rising GOP Mega-Donor Who’s Gaming the Tax System:
Susquehanna founder and TikTok investor Jeff Yass has avoided $1 billion in taxes while largely escaping public scrutiny. He’s now pouring his money into campaigns to cut taxes and support election deniers.
One day in July 1985, three young men from Philadelphia, their lawyer and a burly Pinkerton guard arrived at a horse track outside Chicago carrying a briefcase with $250,000 in cash.
Running the numbers on a Compaq computer the size of a small refrigerator, Jeffrey Yass and his friends had found a way to outwit the track’s bookies, according to interviews, records and news accounts. A few months earlier, they’d wagered $160,000, gambling that, with tens of thousands of bets, they could nail the exact order of seven horses in three different races. It was a sophisticated theory of the racing odds, honed with help from a Ph.D. statistician who’d worked for NASA on the moon landing, and it proved right. They bagged $760,000, then the richest payoff in American racing history.
But that summer day, when they presented their strikingly long list of bets at the track window, they were turned away. Their appeal to the track owner got them ejected. Yass, just 27, then sued for the right to place the bets. The track’s lawyer fumed to a federal judge that the men were trying to corner the betting market “through the use of their statistics and numbers.”
Yass lost, but that year he and his friends repeated variations of the strategy at horse and greyhound tracks around the country. Then they decided to turn their focus from a world of hundreds of thousands of dollars to a world of billions: Wall Street.
Four decades later, the firm he and his friends founded, Susquehanna International Group, is a sprawling global company that makes billions of dollars. Yass and his team used their numerical expertise to make rapid-fire computer-driven trades in options and other securities, eventually becoming a giant middleman in the markets for stocks and other securities. If you have bought stock or options on an app like Robinhood or E-Trade, there’s a good chance you traded with Susquehanna without knowing it. Today, Yass, 63, is one of the richest and most powerful financiers in the country.
But one crucial aspect of his ascent to stratospheric wealth has transpired out of public view. Using the same prowess that he’s applied to race tracks and options markets, Yass has taken aim at another target: his tax bill.
There, too, the winnings have been immense: at least $1 billion in tax savings over six recent years, according to ProPublica’s analysis of a trove of IRS data. During that time, Yass paid an average federal income tax rate of just 19%, far below that of comparable Wall Street traders.
Yass has devised trading strategies that reduce his tax burden but push legal boundaries. He has repeatedly drawn IRS audits, yet has continued to test the limits. Susquehanna has often gone to court to fight the government, with one multiyear audit battle ending in a costly defeat. The firm has maintained in court filings that it complied with the law.
Yass’ low rate is particularly notable because Susquehanna, by its own description, specializes in short-term trading. Money made from such rapid trades is typically taxed at rates around 40%.
In recent years, however, Yass’ annual income has, with uncanny consistency, been made up almost entirely of income taxed at the roughly 20% rate reserved for longer-term investments.
Congress long ago tried to stamp out widely used techniques that seek to transform profits taxed at the high rate into profits taxed at the low rate. But Yass and his colleagues have managed to avoid higher taxes anyway.
The tax savings have contributed to an explosion in wealth for Yass, who has increasingly poured that fortune into candidates and causes on the political right. He has spent more than $100 million on election campaigns in recent years. The money has gone to everything from anti-tax advocacy and charter schools to campaigns against so-called critical race theory and for candidates who falsely say the 2020 election was stolen and seek to ban abortion.
ProPublica has pieced together the details of Yass’ tax avoidance using tax returns, securities filings and court records, as well as by talking to former traders and executives. (The former employees spoke on condition of anonymity, with many citing a desire to avoid angering Yass.)
Through a spokesperson, Yass declined to be interviewed for this article. The spokesperson declined to comment in response to a long list of questions for Susquehanna and the firm’s founding partners.
Gregg Polsky, a University of Georgia law professor and former corporate tax lawyer who was retained by ProPublica to review Susquehanna’s tax records, said the tax agency may have more to scrutinize. The strategies revealed in Yass’ records, he said, were “very suspicious and suggestive of potential abuse that should be examined by the IRS.”
ProPublica, How Susquehanna’s Jeff Yass Avoided $1 Billion in Taxes:
The billionaire TikTok investor specializes in securities trades that are taxed at around 40%. A ProPublica analysis reveals how Yass and his partners have kept their tax rates at 20% or lower.
Prior TaxProf Blog coverage:
- ProPublica: America’s Richest People Pay Little To Nothing In Federal Income Taxes (June 8, 2021)
- ProPublica: How Peter Thiel Turned $2,000 In A Roth IRA Into $5,000,000,000 (June 28, 2021)
- ProPublica: Why You Can’t Turn Your Roth IRA Into a Billion-Dollar Tax Shelter (July 1, 2021)
- ProPublica: The Billionaire Playbook — How Sports Owners Use Their Teams To Avoid Millions In Taxes (July 12, 2021)
- ProPublica: The Number Of People With IRAs Worth $5 Million Or More Has Tripled, Congress Says (July 29, 2021)
- ProPublica: Secret IRS Files Reveal How Much the Ultrawealthy Gained by Shaping Trump’s “Big, Beautiful Tax Cut” (Aug. 11, 2021)
- ProPublica: How The Trump Tax Law Created A Loophole That Lets Top Executives Net Millions By Slashing Their Own Salaries (Aug. 20, 2021)
- ProPublica: House Bill Would Blow Up The Massive IRAs Of The Superwealthy (Sept. 22, 2021)
- ProPublica: More Than Half Of America’s 100 Richest People Exploit GRATs To Avoid Estate Taxes (Sept. 30, 2021)
- ProPublica: 18 Billionaires Received Taxpayer-Funded Stimulus Checks During The Pandemic (Nov. 4, 2021)
- ProPublica: How These Ultrawealthy Politicians Avoided Paying Taxes (Nov. 5, 2021)
- ProPublica: More Billionaire Tax Games (Dec. 9, 2021)
- ProPublica: How Three Families Shielded Their Fortunes From Taxes For Generations (Dec. 15, 2021)
- Wall Street Journal Editorial, The Internal Revenue Leak Service (Dec. 15, 2021)
- ProPublica: When Billionaires Don’t Pay Taxes, People ‘Lose Faith In Democracy’ (Mar. 4, 2022)
- ProPublica Names The 15 Americans Who Reported The Most Income And Reveals Data For The Top 400 (Apr. 14, 2022)
- ProPublica: If You’re Getting A W-2, You’re A Sucker (Apr. 19, 2022)
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