A ProPublica journalist explains how Jeff Bezos, Elon Musk, and other billionaires approach taxes in a new interview. Here are the 15 best quotes.

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Elon Musk and Jeff Bezos.

  • ProPublica’s Jesse Eisinger explained how billionaires may minimize their income to avoid taxes.
  • The journalist discussed Jeff Bezos, Elon Musk, Warren Buffett, Carl Icahn, and Michael Bloomberg.
  • He flagged the tax system’s shortfalls and argued that philanthropy can’t replace government.
  • See more stories on Insider’s business page.

ProPublica recently published a bombshell report on how billionaires including Jeff Bezos, Elon Musk, and Warren Buffett pay minimal federal income tax relative to their vast fortunes. Jesse Eisinger, one of the journalists responsible for the story, discussed his key takeaways on the latest episode of The New York Times’ “Sway” podcast.

Eisinger explained how some of America’s wealthiest people have minimized their incomes and paid zero federal income tax in recent years, argued that philanthropy isn’t a substitute for government, and called for changes to the tax system.

Here are Eisinger’s 15 best quotes, lightly edited and condensed for clarity:

1. “The ultra-wealthy are not in our tax system. They’re off in an entirely different universe, one where income is essentially voluntary. The shorthand for what they’re doing is ‘buy, borrow, die.’ You buy, or you build, or you inherit your money. You borrow against it. You don’t pay taxes on the gains. And then when you die, there are various ways that you can avoid estate tax.”

2. “The means that they have at their disposal – their purchasing power, their political power, their influence, their charitable givings – all emanate from their wealth and, more directly, their wealth growth. We thought that wealth growth is more properly thought of as income for these people. Everybody has said, ‘Checkmate, ProPublica, you idiots, we don’t tax unrealized gains in this country,’ to which we say, ‘Yes, that is the point of our article.'”

3. “If you had asked tax experts and wealth experts last week, ‘Does Jeff Bezos pay zero in federal income tax? Does Elon Musk pay zero? Does Mike Bloomberg?’ – most people would say no. That’s a pretty shocking thing.”

4. “There is a wealth tax in this country for average Americans. It’s property tax. Most people’s houses are their font of wealth, and they’re taxed every year.”

5. “Warren Buffett is really astonishing. He’s the king. He has avoided more tax than anyone in America by our measurements.” – the famed investor minimizes his income by keeping his fortune in Berkshire Hathaway stock and not paying a dividend, ProPublica reported. He defended himself to the publication.

6. “Elon Musk is outside of the regular tax system. He gets paid when he wants to get paid. He takes income at the time and place of his choosing. If you can imagine arranging your affairs so that you can control when income comes in, that gives you an enormous amount of leeway over your taxable income.”

7. “Carl was great. He was incredibly charming and was totally perplexed by the concept of needing to pay taxes. ‘If you don’t have income, you don’t pay taxes.’ He was very amusing.” – discussing how billionaire investor Carl Icahn declared $500 million of income between 2016 and 2017, but reduced his taxable income to zero by borrowing against his assets to boost his investment returns, then deducting the interest costs of the loans.

8. “What the wealthiest person in the country contributes to American society through a tax system that we all need to contribute to – that’s a little bit more newsworthy than a crotch shot.” – dismissing a comparison between ProPublica publishing details of Amazon CEO Jeff Bezos’ tax returns and tabloids releasing supposedly intimate photos of him.

9. “We don’t have any evidence that Warren Buffett borrows. Not all these guys have exactly the same model or do all of this in lockstep with each other. But what we do know is that Buffett takes hardly anything for income, so when he talks about raising tax rates for the rich, it’s essentially irrelevant to him. It’s really irrelevant for all these guys.”

10. “Bloomberg said it’s a violation of his privacy, which was an interesting statement for a person who runs one of the most important media companies in America.” – on Michael Bloomberg’s response to ProPublica publishing details of his tax returns.

11. “We have thousands of people. We’re going to be doing stories all year on various aspects of it. And we’ll name many, many more people, but only in what we consider to be responsible ways that are in the public interest.”

12. “Warren Buffett said to us, ‘I’m going to give 99%-plus of my fortune to charity … that’s going to be better for society than paying down the United States debt.’ I would like to allocate my tax dollars the way I want, spend them on this and not that. But we collectively have a society, and we have a democracy. And the democracy gets together and makes priorities. And then we influence the democracy through the vote.”

13. “There are certain collective functions of government that charities could never do. We do need government to do some things, and government can’t do it if it’s starved, if the roads and bridges are crumbling, if we think that Social Security and Medicare are going to go bankrupt.”

14. “There are whole swaths of the tax system that just simply do not function anymore. We don’t have enforcement. We don’t have auditing from the IRS. The budget has been gutted. The wealthiest among us could be paying tens of billions of dollars more every year in income taxes – not even talking about a wealth tax -if we had a different kind of income tax system or taxation system in general.”

15. “There are two extraordinary things about death in our tax code that are great gifts to the ultra-wealthy.” – highlighting the “step-up in basis” which raises the cost base of appreciated assets when they’re inherited, and structures such as trusts that let recipients avoid paying inheritance tax.

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The wealthiest Americans avoided billions in taxes by voluntarily doing something most only do out of necessity: borrowing money.

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  • America’s 25 wealthiest people got $401 billion richer from 2014 to 2018, according to Forbes.
  • ProPublica reported the income taxes they paid amounted to just 3.4% of that new net worth.
  • One way the ultra-rich avoid taxes: borrowing money at low-interest rates, according to ProPublica.
  • See more stories on Insider’s business page.

ProPublica reported Tuesday it had obtained a massive trove of IRS documents, revealing that America’s wealthiest individuals have avoided paying billions of dollars in taxes for years, resulting in income tax bills that amount to a fraction of their net worth.

One of the key strategies employed by the ultrawealthy to keep their tax bills low: borrowing money.

Many Americans borrow money only when they have to for large purchases like college tuition or a house, as interest can quickly add up, especially if they’re not able to pay back the loan right away.

But according to ProPublica and independent experts, America’s billionaires have often financed their lavish lifestyles by using their vast fortunes as collateral for loans, which can come with single-digit interest rates.

Borrowing money allows the ultrawealthy to earn minuscule salaries, avoiding the 37% federal tax on top incomes, as well as avoid selling stock to free up cash, bypassing the 20% top capital gains tax rate. Since loans aren’t considered taxable income, the wealthy need only pay back the principal and interest, rather than the higher taxes that would accompany multimillion-dollar incomes and investments.

America’s 25 wealthiest individuals saw their net worth grow by $401 billion from 2014 to 2018, according to Forbes. But they paid a total of $13.6 billion in federal income taxes in that same period, amounting to 3.4% of that newly acquired wealth, ProPublica found.

By contrast, a middle-class American in their 40s who had amassed a “typical amount of wealth for people their age,” saw their net worth grow by $65,000 from 2014 to 2018, but paid $62,000 in income taxes, or 95% of that new wealth, according to ProPublica.

The US does not directly tax individuals’ total wealth, unlike some European countries. Nor does it tax stock holdings until they are sold. And billionaires tend to have a lot of their net worth wrapped up in stocks.

However, ProPublica’s analysis revealed in new detail how America’s tax code allows the ultrawealthy to take advantage of a litany of tax loopholes and wealth-management strategies to increase their wealth without also increasing their tax bills substantially.

To illustrate the gap between wealth and taxes paid by the ultrawealthy, ProPublica created what it called a “true tax rate.” ProPublica defined this as the total federal income tax a person paid, in this case from 2014 to 2018, compared to how much new wealth they acquired in that same time period.

ProPublica did not publish its source data or disclose how it obtained IRS data.

According to ProPublica, the top 25 wealthiest Americans paid a “true tax rate” of 3.4% – a result of tax avoidance strategies that are out of reach for most Americans.

Borrowing, it turns out, is one of those strategies.

In 2014, for example, Oracle cofounder Larry Ellison disclosed he had used 250 million of his Oracle shares as collateral to secure a $9.7 billion personal line of credit.

Elon Musk has similarly put up a massive amount of his equity in Tesla and SpaceX as collateral for loans, rather than sell those shares and pay 20% in capital gains tax to free up the money. From 2014 to 2018, Musk paid $455 million in taxes on a reported income of $1.52 billion, resulting in an effective tax rate of 29.9%. But his wealth grew by $13.9 billion during that time, meaning his “true tax rate,” according to ProPublica’s methodology, was just 3.27%.

Musk replied to ProPublica’s request for comment with: “?”

Investor Carl Icahn also took advantage of borrowing money, paying $0 in federal income taxes despite reporting an adjusted gross income of $544 million, as he had an outstanding loan with Bank of America worth $1.2 billion, ProPublica reported.

“I didn’t make money because, unfortunately for me, my interest was higher than my whole adjusted income,” Icahn told ProPublica, adding that while he does borrow a lot of money, it’s “not at all” meant to lower his tax bill, but rather that he borrows “to win. I enjoy the competition. I enjoy winning.”

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Carl Icahn teased a $1.5 billion crypto bet, called for stricter rules on Wall Street, and warned stocks will tumble in interviews this week. Here are the activist investor’s 10 best quotes.

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Carl Icahn.

  • Carl Icahn is studying cryptocurrencies and could shovel over $1 billion into the space.
  • The billionaire investor cautioned aggressive stimulus will ultimately hammer stocks.
  • Icahn disclosed a stake in Allstate and called for stricter financial regulations.
  • See more stories on Insider’s business page.

Activist investor Carl Icahn revealed he’s mulling a billion-dollar cryptocurrency bet, disclosed a new stake in Allstate, and warned excessive federal spending will eventually tank the stock market in a pair of Bloomberg interviews this week.

The billionaire boss of Icahn Enterprises also defended Reddit and Robinhood, admitted he missed a trick by selling Hertz last year, and called for tougher financial regulations to protect investors.

Here are Icahn’s 10 best quotes from the interviews, lightly edited and condensed for clarity:

1. “It takes a great deal of patience, permanent capital, and negotiating skill – as well as a very thick skin – to be truly a successful activist. Perhaps that’s why it is so lucrative and the best investing model that exists today.”

2. “I’m not necessarily looking at what to buy at this time. I’m just looking at the whole business and how I might get involved in it with Icahn Enterprises in a relatively big way. I do think it’s here to stay in one form or another. – disclosing that he might plow $1 billion or $1.5 billion into cryptocurrencies.

3. “The criticism is a little wrong-headed. ‘What’s the value of a cryptocurrency?’ Well, what’s the value of a dollar? The only value of the dollar is you can use it to pay taxes.”

4. “We do own Allstate, it’s a good example of a company that was undervalued. We bought it around six months ago when it was in the $90s. We never even had to talk to the company because its bosses did what they said there were gonna do. – Allstate, which has been revamping its business to reduce costs and interact directly with customers, boasts a stock price north of $135 today.

5. “We’re pumping a lot of money into this economy. Obviously you’re going to get inflation, which will eventually cause higher interest rates and a major correction in the market. But when it occurs and how severe it will be is a question that is impossible to answer at this time.”

6. “Is it gonna go up and how long is it gonna go up for? I don’t think it’s gonna end tomorrow, I don’t think you should go out and sell your stocks tomorrow. But sooner or later that party’s gonna have to be over.” – warning the boom in asset prices can’t continue indefinitely.

7. “I sure missed the turn there as far as Hertz is concerned. What the heck, you’ve gotta make mistakes in this business, there’s nobody that doesn’t. I congratulate those guys that held it.” – on his decision to sell his Hertz shares at a loss last year, and the news that the bankrupt car-rental company’s shareholders will receive a payout.

8. “I don’t think Reddit and Robinhood and all of those guys are necessarily bad. They serve a purpose, money is funneling back into companies. Some of these companies might be okay, but a number of them, the risk-reward ratio is absurd.” –Icahn described some meme stocks as “ridiculously priced” and warned there will be “a price to pay” in the form of higher inflation and future losses.

9. “Some of these egregious investments, who pays for them? In the end the small individual’s gonna pay. We’re going to excess in a lot of things.” – Icahn highlighted shopping-mall debt and GameStop as examples.

10. “We should do what we can to control Wall Street and this excess buying. We should be doing something to control fund management, we should be doing more corporate governance. If you did all that, a lot of these middle-class people wouldn’t lose all the money they’ve invested when this thing hits.” – calling for stricter government regulation of companies and markets.

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Former bitcoin skeptic Carl Icahn says he may pour more than $1 billion into cryptocurrencies – but predicts many digital assets won’t survive

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Activist investor Carl Icahn.

  • Billionaire investor Carl Icahn said he’s looking to get into cryptocurrencies “in a big way.”
  • He told Bloomberg he may invest more than $1 billion into digital assets.
  • He thinks some cryptocurrencies may get flushed out as they don’t boast any safety value.
  • See more stories on Insider’s business page.

Billionaire investor Carl Icahn told Bloomberg on Wednesday that he was looking to get involved in the cryptocurrency space, and may invest more than $1 billion into digital assets.

“I mean a big way for us would be a billion dollars, a billion-and-a-half dollars,” he said in an interview. “I’m not going to say exactly.”

Icahn has changed his tune on cryptocurrencies, after calling bitcoin and other similar assets “ridiculous” only three years ago. Telling CNBC in 2018 that he “wouldn’t touch that stuff,” he said his dislike perhaps stemmed from not understanding them.

Icahn, who currently has a net worth of $22 billion, said he hasn’t yet bought any crypto, but he’s exploring where the opportunities lie within the sector as a whole. He acknowledged cryptocurrencies are gaining mainstream acceptance as a consequence of rising inflation.

The activist investor said many cryptocurrencies in circulation right now may not survive, as there needs to be some form of safety value associated with them. “I don’t think there will be a lot of good survivors that are out there trading today,” he said.

Read More: ‘The best time to buy bitcoin is always now’: The founder of the world’s longest-running crypto exchange told us his best advice for navigating the digital currency’s wild volatility

While questioning the intrinsic value of the dollar, he said skepticism over the value of cryptocurrencies is a “little wrong-headed,” and the only reason the dollar is valuable is “because you can use it to pay taxes.”

According to him, the market is currently in a state of excess due to a combination of factors like an overflow of money in the economy, so-called meme stocks that are “ridiculously-priced,” and certain strategies presented by money managers.

“I don’t think Reddit and Robinhood and those guys are necessarily bad, I think they do serve a purpose,” he said. “Money is funneling back into companies. Some of these companies might be okay, but a number of them, the risk-reward is absurd.”

Icahn isn’t the only high-profile crypto skeptic to have changed his mind. Legendary investor Howard Marks said earlier this year he was being more open-minded towards bitcoin, and that his son Andrew “thankfully” owns a meaningful amount for the family.

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Carl Icahn sells the remaining portion of his Herbalife stake, ending the saga that fueled his long-standing feud with Bill Ackman

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  • Billionaire activist investor Carl Icahn sold his remaining stake in Herbalife, SEC filings show.
  • The nutritional shake company is at the center of his years-long feud with fellow billionaire Bill Ackman.
  • Icahn was an activist investor in the company but said the company no longer needs him.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Billionaire investor Carl Icahn sold his final remaining stake in Herbalife, putting a close to the saga that fueled his long-standing feud with Bill Ackman.

SEC filings from Thursday show that Icahn now holds 0% of the multi-level-marketing nutritional shake seller. In January, the activist investor reduced his share of the company to about 6% from 16% and sold $600 million of stock, saying that the company no longer needed his activism.

Icahn told CNBC’s Scott Wapner on Thursday: “I think this is an example of activism working very well. It was certainly an interesting ride fighting off bear raids as well as aiding the company in their numerous negotiations with the government. But all’s well that ends well and we wish the company the best of luck in the future.”

The nutritional supplement company is at the center of Icahn’s years-long feud with fellow billionaire investor Bill Ackman. Ackman had a $1 billion short position in Herbalife, and publicly disclosed that he believed the company was a pyramid scheme. Icahn became an activist investor in the company, and their arguments over Herbalife came to a head on live television.

In a CNBC interview in 2013, Icahn called Ackman a “liar,” and said to the investor: “I wouldn’t invest with you if you were the last man on Earth.” Ackman slammed back, saying “This is not a guy who keeps his word. This is a guy who takes advantage of little people.”

Ackman eventually exited his short position in Herbalife, and the Wall Street Journal estimates he likely lost hundreds of millions of dollars. Meanwhile, Reuters reported that Icahn started purchasing Herbalife in 2013 at an average of $21.03.

Shares of Herbalife jumped as much as 4.8% to $49.76 a share on Thursday.

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