Warren Buffett warned the Bill & Melinda Gates Foundation’s CEO about the ‘ABCs.’ The investor has flagged those threats before

bill gates warren buffett dairy queen
Warren Buffett and Bill Gates.

  • Warren Buffett warned the Bill & Melinda Gates Foundation’s CEO about the “ABCs” last year.
  • The investor sees arrogance, bureaucracy, and complacency as major threats to large organizations.
  • Buffett, who has gifted $33 billion to the foundation, once called the ABCs “corporate cancers.”
  • See more stories on Insider’s business page.

Warren Buffett told the CEO of the Bill & Melinda Gates Foundation that the greatest threats to the philanthropic behemoth were cockiness, red tape, and self-satisfaction. The billionaire investor and Berkshire Hathaway CEO, who has gifted a total of $33 billion to the foundation and resigned as its trustee in June, has warned about those forces in the past.

Mark Suzman took charge of the Gates Foundation early last year, and promptly flew to Buffett’s hometown of Omaha, Nebraska to have lunch with the investor and seek his guidance.

“He told me then that my most important job was to guard against the ‘ABC’ risks of decay that all very large organizations face: arrogance, bureaucracy, and complacency,” Suzman wrote in a recent email to the foundation’s employees.

Buffett pledged in 2006 to donate over 99% of his wealth to the Gates Foundation and four other foundations, and reached the halfway mark towards that goal in June. His advice to Suzman isn’t surprising; he wrote in his 2014 letter to Berkshire shareholders that when he retires, a big part of his replacement’s job will be warding off those exact threats.

“My successor will need one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency,” Buffett said. “When these corporate cancers metastasize, even the strongest of companies can falter.”

The Berkshire chief went on to highlight General Motors, IBM, Sears Roebuck, and US Steel as examples of corporate titans that once appeared to have unassailable grips on their industries. “The destructive behavior I deplored above eventually led each of them to fall to depths that their CEOs and directors had not long before thought impossible,” he said.

Buffett noted in the letter that he structured his company to minimize red tape. Berkshire’s decentralized web of autonomous subsidiaries, underpinned by a culture of trust, acts as the “ideal antidote to bureaucracy,” he said. Berkshire also saves money and boosts efficiency by not having HR, PR, IR, legal, acquisitions, and other departments in its headquarters, he added.

The investor singled out the “B” in the ABCs again in his 2009 shareholder letter.

“We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly – or not at all – because of a stifling bureaucracy,” Buffett said.

Given Buffett’s clear disdain for the ABCs, it’s no surprise that he told Suzman that his primary focus should be preventing the Gates Foundation from succumbing to them.

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Warren Buffett and Bill Gates met on 4th of July weekend 30 years ago. Here’s how their iconic friendship began.

Bill Gates and Warren Buffett
Bill Gates and Warren Buffett.

  • Warren Buffett and Bill Gates first met 30 years ago on Fourth of July weekend.
  • The investor and the Microsoft cofounder expected to have little in common.
  • Buffett and Gates became close friends and philanthropic partners.
  • See more stories on Insider’s business page.

Warren Buffett and Bill Gates are very close friends who have partnered in philanthropy, political activism, and online bridge. Their iconic friendship began almost 30 years to the day on Fourth of July weekend, 1991.

Buffett was visiting Meg Greenfield, a Washington Post editor based in Washington state at the time, he recalled at Berkshire Hathaway’s annual meeting in 2000. Greenfield was friends with Gates’ parents, so she took Buffett down to visit them. Gates initially had no interest in meeting Buffett as he had little respect for the investor’s livelihood.

“I didn’t even want to meet Warren because I thought, ‘Hey, this guy buys and sells things, and so he found imperfections in terms of markets – that’s not value added to society, that’s a zero-sum game that is almost parasitic.’ That was my view before I met him … he wasn’t going to tell me about inventing something,” Gates said at a conference in 2019.

However, Gates changed his mind after Buffett began peppering him with “amazingly good questions that nobody had ever asked,” he recalled in a 2016 blog post.

Buffett wasn’t thrilled to meet Gates either, but he quickly warmed to the Microsoft cofounder.

“We hit it off immediately,” the investor said in 2000. “We had a great time. He had this chimpanzee to whom he was going to try and explain this technical stuff. But I was kind of an interesting chimpanzee to him, and he’s a terrific teacher.”

The fateful meeting ultimately led to Buffett pledging in 2006 to give virtually all of his wealth to the Bill & Melinda Gates Foundation and four other foundations. He reached the halfway mark towards that goal last month, and decided it was the right time to resign as a trustee of the Gates Foundation.

Buffett and Gates have engaged in plenty of antics over the past three decades, from competing in newspaper-tossing and table-tennis competitions, to buying lunch at McDonald’s with coupons and picking up a shift at Berkshire-owned Dairy Queen. Gates also baked a cake to celebrate Buffett’s 90th birthday last fall.

Given their special bond, both billionaires must be very happy that they didn’t skip that Fourth of July gathering 30 years ago.

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Warren Buffett just donated $4.1 billion of Berkshire Hathaway stock – yet he owns more of his company now than he did a year ago

warren buffett
Warren Buffett.

  • Warren Buffett donated $4.1 billion of Berkshire Hathaway stock to charity this week.
  • The investor’s stake in Berkshire has still grown from 15.5% to 15.8% over the past year.
  • Berkshire has ramped up share buybacks, increasing Buffett’s ownership of his company.
  • See more stories on Insider’s business page.

Warren Buffett gifted $4.1 billion of Berkshire Hathaway stock to good causes on Wednesday, yet he owns more of his company today than he did a year ago. Stock buybacks explain that disconnect.

The famed investor’s stake in Berkshire has grown from 15.5% last July to 15.8% today, thanks to the conglomerate ramping up share repurchases. It plowed around $18 billion into buybacks in the second half of 2020, $6.6 billion in the first quarter of this year, and an estimated $6.5 billion of repurchases this quarter so far. It has spent about $38 billion in total on repurchases since the start of last year.

The latest $6.5 billion outlay is based on Buffett’s disclosed Berkshire stake in a regulatory filing this week. We calculated the approximate number of outstanding shares using that information, and subtracted that figure from the share count at the end of March. We then multiplied the decline in shares by Berkshire’s average share price over the past 12 weeks to estimate how much the buybacks cost.

It appears that Berkshire has reduced its outstanding shares by about 5% over the past year, while Buffett parted with around 4% of his Berkshire stock to make his latest charitable contribution. As a result, he now owns more of the company, despite holding fewer shares.

Buffett has celebrated the ability of buybacks to passively increase ownership in the past. “I love the idea of having our 5%, or whatever it may be, grow to 6% or 7% without us laying out a dime,” he said about Apple’s share repurchases at Berkshire’s annual meeting in 2018.

The investor highlighted in his latest annual letter that Berkshire’s Apple stake has grown from 5.2% to 5.4% since it established a position in mid-2018, even though Buffett and his team sold about 6% of their holding for $11 billion last year. Moreover, he pointed out that Berkshire’s own share repurchases have boosted its shareholders’ indirect ownership of Apple, the biggest position in Berkshire’s stock portfolio by far.

“The math of repurchases grinds away slowly, but can be powerful over time,” Buffett said in the letter. “The process offers a simple way for investors to own an ever-expanding portion of exceptional businesses.”

Buffett’s rising ownership of Berkshire despite his latest act of philanthropy is a great example of that process in action.

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Warren Buffett just donated $4.1 billion of Berkshire Hathaway stock – and has now given away 50% of his fortune

warren buffett
Warren Buffett.

  • Warren Buffett gifted $4.1 billion to philanthropic groups on Wednesday.
  • The investor has now given away 50% of his Berkshire Hathaway “A” shares.
  • Buffett discussed his wealth, his approach to philanthropy, and his taxes.
  • See more stories on Insider’s business page.

Warren Buffett donated $4.1 billion of Berkshire Hathaway stock to good causes on Wednesday, he said in a statement. The famed investor has now given away 50% of his Berkshire “A” shares, which account for more than 99% of his net worth.

The Berkshire CEO still owns close to 239,000 “A” shares, down from nearly 475,000 in 2006, when he pledged to donate virtually all of his money to charity and began distributing stock to the Bill & Melinda Gates Foundation and four other foundations each year. His remaining shares are worth about $100 billion.

Buffett reflected on his wealth amd his philanthropy in the statement marking his giving milestone. He also revealed he was resigning as a trustee of the Gates Foundation, weeks after its founders, Bill Gates and Melinda French Gates, announced they were divorcing.

The investor said that giving away excess money is the “easiest deed in the world,” but argued that distributing billions of dollars is trickier, especially when the goal is tackling complex problems such as cyberterrorism or weapons of mass destruction.

Buffett also framed his massive fortune as a product of his passion for investing, and said he doesn’t need the money.

“Over many decades I have accumulated an almost incomprehensible sum simply by doing what I love to do,” he said. “I’ve made no sacrifice nor has my family. Compound interest, a long runway, wonderful associates and our incredible country have simply worked their magic. Society has a use for my money; I don’t.”

The 90-year-old hastily added that “these remarks are no swan song” and he’s not quitting Berkshire yet. “I still relish being on the field and carrying the ball,” he said. “But I’m clearly playing in a game that, for me, has moved past the fourth quarter into overtime.”

Buffett tipped his hat to people who donate their time and effort to helping others with minimal recognition, describing them as “heroes of philanthropy” and their work as “much more admirable” than giving money.

He gave the example of his late sister, Doris, who took charge of fielding the thousands of letters seeking help from Buffett each year. He labeled her efforts at the Letters Foundation as “retail” philanthropy, in contrast to his “wholesale” approach of trusting others to deploy his money.

The Berkshire chief also touched on his taxes, days after ProPublica reported that he and other billionaires pay minimal federal income tax relative to their wealth. Buffett emphasized that he’s only enjoyed about 40 cents of tax savings for every $1,000 he’s given to charity, and explained why he pays very little income tax and how his fortune is being put to work.

“I have relatively little income,” he said. “My wealth remains almost entirely deployed in tax-paying businesses that I own through my Berkshire stock-holdings, and Berkshire regularly reinvests earnings to further grow its output, employment and earnings.”

Buffett also expressed support for Congress adjusting tax policy for charitable contributions, especially for donors who get “imaginative” with their deductions.

Moreover, the Berkshire chief explained why he waited so long to give his money away. He was “charmed by the results of compounding” and had “the desire to retain unassailable control of Berkshire,” he said.

Finally, the investor offered a piece of advice to super-wealthy people on how much money to give the next generation: “Leave the children enough so that they can do anything, but not enough that they can do nothing.”

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Warren Buffett resigns as trustee of the Gates Foundation – weeks after Bill and Melinda’s divorce

warren buffett
Warren Buffett.

  • Warren Buffett is resigning as a trustee of the Bill and Melinda Gates Foundation.
  • Buffett is stepping down weeks after the Microsoft cofounder and his wife announced their divorce.
  • Buffett also hit the 50% milestone in giving away over 90% of his Berkshire Hathaway “A” shares.

Warren Buffett is resigning as a trustee of the Bill and Melinda Gates Foundation, weeks after the Microsoft cofounder and his wife announced their divorce.

“For years I have been a trustee – an inactive trustee at that – of only one recipient of my funds, the Bill and Melinda Gates Foundation (BMG),” the billionaire investor and Berkshire Hathaway CEO said in a statement. “I am now resigning from that post, just as I have done at all corporate boards other than Berkshire’s.

“My goals are 100% in sync with those of the foundation, and my physical participation is in no way needed to achieve these goals,” he added.

Buffett disclosed his resignation in a statement highlighting the fact that he’s now given away 50% of his Berkshire “A” shares – a key milestone in his mission to donate over 99% of his wealth to good causes.

The investor pledged in 2006 to contribute virtually all of 474,998 “A” shares at the time to the Gates Foundation and four other foundations. Following his latest distribution of $4.1 billion of stock, he now owns 238,624 shares worth about $100 billion.

Along with Bill and Melinda, he has encouraged other billionaires to sign the “Giving Pledge” and commit to give at least 50% of their wealth to charity.

Buffett’s statement revealing his resignation also reflected on the challenges of giving effectively and his own thoughts about philanthropy. The release may have been partly inspired by the intense scrutiny he’s faced over the past couple of weeks after ProPublica, citing leaked tax returns, reported that he and other billionaires pay a tiny faction of their net worth in federal income taxes each year.

“The $41 billion of Berkshire shares I have donated to the five foundations has led to only about 40 cents of tax savings per $1,000 given,” Buffett said. “That’s because I have relatively little income. My wealth remains almost entirely deployed in tax-paying businesses that I own through my Berkshire stockholdings, and Berkshire regularly reinvests earnings to further grow its output, employment and earnings.”

“The income I receive from other assets allows me to live as I wish,” he added. “My needs are simple; what made me happy at 40 makes me happy at 90.”

Buffett also reiterated his famous advice for wealthy people pondering what to do with their money when they die.

“After much observation of super-wealthy families, here’s my recommendation: Leave the children enough so that they can do anything but not enough that they can do nothing,” he said.

This story is being updated…

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

bezomusk
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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Warren Buffett is under fire for avoiding taxes. Give him a break.

warren buffett
Warren Buffett.

OPINION

  • Warren Buffett is getting roasted for avoiding taxes after ProPublica’s bombshell report.
  • The billionaire investor is donating almost all of his money to good causes.
  • Buffett lives modestly, supports higher taxes on the wealthy, and doesn’t use popular tax loopholes.
  • See more stories on Insider’s business page.

Warren Buffett is being cast as the face of billionaire greed after ProPublica reported this week that he pays very little in federal income taxes relative to his vast wealth.

However, the investor’s minimal tax bill seems far less outrageous when viewed in the context of his modest lifestyle, philanthropic efforts, the nature of his company and its shareholders, his calls to raise taxes on the wealthy, and his refusal to use popular tax loopholes.

The case against Buffett

ProPublica analyzed leaked copies of Buffett’s tax returns between 2014 and 2018, and found the Berkshire Hathaway CEO paid just $24 million in federal income taxes on $125 million of reported income. The non-profit publication emphasized how little tax he paid by pointing out that his net worth grew by an estimated $24 billion in that five-year period.

“No one among the 25 wealthiest avoided as much tax as Buffett, the grandfatherly centibillionaire,” ProPublica declared.

Read more: Warren Buffett is hoarding $80 billion of cash, cleaning up his stock portfolio, and declining to bash bitcoin. Veteran investor Thomas Russo says why that strategy will ultimately pay off.

Politicians including Sen. Chris Murphy, Sen. Bernie Sanders, Sen. Elizabeth Warren, and Rep. Pramila Jayapal rushed to condemn Buffett and his fellow billionaires, calling for heftier taxes on the super rich and the closure of loopholes in tax laws.

ProPublica highlighted Buffett’s two main strategies to minimize his income, and therefore his taxes. The investor keeps over 99% of his wealth in Berkshire stock – which isn’t taxed until sold – and his company doesn’t pay a dividend, which shareholders would have to pay taxes on.

Not a typical billionaire

ProPublica reported that billionaires such as Amazon CEO Jeff Bezos and Tesla CEO Elon Musk paid no federal income taxes in some years, partly by taking out loans and deducting the interest paid on them from their incomes. There’s no indication that Buffett uses the same tricks; the investor said in 2016 that he has paid taxes every year since 1944.

Bezos is reportedly building a yacht so large that it comes with a support yacht, while Musk previously boasted a real-estate portfolio valued at north of $100 million – although he appears to have sold most of it to fund his dream of colonizing Mars.

The 90-year-old Buffett lives far less extravagantly. He resides in the same house in Omaha, Nebraska that he bought for less than $32,000 in 1958 ($290,000 in today’s dollars). He grabs breakfast at McDonald’s on his daily drive to Berkshire headquarters, guzzles Coca-Cola, and snacks on See’s Candies. He treats himself with an occasional trip to Dairy Queen, and entertains himself by playing online bridge.

The investor doesn’t use a company car, belong to any clubs where Berkshire pays his dues, or commandeer company-owned aircraft for his personal use – even though Berkshire owns NetJets, which sells fractional ownership of private jets.

Buffett also buys damaged cars and has them repaired to save money, and drove the same Cadillac for eight years until his daughter told him it was embarrassing and badgered him into upgrading to a newer model in 2014.

Notably, the Berkshire chief has drawn a $100,000 annual salary for the past 40 years – a fraction of the $15 million average pay of S&P 500 CEOs in 2019 – and doesn’t receive bonuses or stock options. While some details might be embellished, it’s clear that he lives a modest lifestyle relative to other billionaires.

Giving it all away

Buffett defended his tiny tax bill in a detailed statement to ProPublica, explaining that he’s pledged to donate more than 99% of his fortune to good causes. He’s donated about half of his Berkshire stock – worth about $100 billion at the current stock price – to five foundations since 2006.

The Berkshire chief told ProPublica that he prefers to hand his money to charitable organizations such as the Bill and Melinda Gates Foundation instead of the government.

“I believe the money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing US debt,” he said.

Read more: Warren Buffett’s Berkshire Hathaway has $140 billion in cash, yet it pulled billions out of Apple, Costco, and Chevron. Veteran investor Chris Bloomstran explains why the cash pile isn’t excessive and the sales made sense.

Buffett, aware that skeptics would likely dismiss his charity as a tax write-off, added that he’s only garnered 50 cents in tax benefits for every $1,000 he’s donated over the past 15 years.

The investor made a similar point in 2016, after Donald Trump accused him of taking a massive tax deduction. Buffett shared the details of his 2015 tax return, highlighting that he paid $1.8 million in federal income tax on $11.6 million of gross income, and only deducted $3.5 million for charitable contributions despite giving almost $2.9 billion to charity that year.

Moreover, Buffett noted that only $36,000 of his $5.5 million in total deductions that year were unrelated to charity or state income taxes. He added that he’s never used a “carryforward,” which allows taxpayers to deduct losses or tax credits from previous years. He pegged his unused carryforward at north of $7 billion in 2010.

Buffett clearly sees charitable donations as a reasonable way to pay fewer taxes, and has championed them in the past.

“If you want to give away all of your money, it’s a terrific tax dodge,” he quipped in response to an investor’s question at Berkshire’s annual shareholder meeting in 2010. “I welcome the questioner or anybody else following my tax dodge example and giving away their money. They will save a lot of taxes that way, and the money will probably do a lot of good.”

Buffett is also happy to keep his fortune in Berkshire stock. It signals to investors that he’s confident in his company and focused on generating long-term value, and means he has more skin in the game than anyone else. Moreover, he doesn’t feel guilty as his company’s success will ultimately benefit society.

“Many shareholders, including me, enjoy the long-term buildup in value, knowing that it is destined for philanthropy, not consumption or dynastic aspirations,” he told ProPublica.

Buffett also explained that Berkshire doesn’t pay a dividend because its shareholders overwhelmingly voted against one in 2014. They prefer Buffett to allocate Berkshire’s profits across the conglomerate and use them to buy quality stocks and businesses, instead of returning cash to them. Buffett also views buybacks as superior to dividends for several reasons, not just tax efficiency.

Buffett wants higher taxes

While some billionaires complain of excessive taxes on the wealthy, Buffett has called for higher taxes on the richest 1% of Americans, as well as changes to the tax code to prevent tax avoidance.

The investor highlighted more than a decade ago how ridiculous it was that his secretary paid a higher tax rate than him. The revelation spurred President Barack Obama to pursue the removal of tax breaks for the wealthy, and name his ultimately unsuccessful bill after Buffett. “If all the diseases have been taken, I’ll take a tax,” the investor joked at the time.

Buffett has also called for policies to reduce income inequality, such as expanding the earned-income tax credit to help workers get ahead. He once testified to Congress that estate taxes should be higher and better enforced, he told ProPublica, but his “persuasive powers proved to be limited.”

Overall, it’s not surprising that under the current tax rules, a 90-year-old who keeps his fortune in his company’s stock, and funds a simple lifestyle with a modest income, doesn’t pay a lot of tax.

It seems harsh to go after Buffett when he’s giving away virtually all of his money, calling for higher taxes on the wealthy, refusing to use several loopholes to pay less tax, and running a company where holding its stock for the long term and not paying a dividend makes perfect sense.

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Warren Buffett defends himself after ProPublica says he avoids taxes

warren buffett
Warren Buffett

  • ProPublica reported this week that Warren Buffett pays relatively little income tax, despite huge gains in his wealth.
  • The investor pays minimal tax by holding Berkshire Hathaway stock and not paying a dividend.
  • Buffett pointed out that shareholders don’t want a dividend and he’s giving his fortune away.
  • See more stories on Insider’s business page.

Warren Buffett minimizes his personal tax bill by keeping his fortune in Berkshire Hathaway stock and not paying a dividend, ProPublica said in an investigative report published on Tuesday.

The billionaire investor and Berkshire CEO defended himself in a detailed statement to the news outlet, explaining that his shareholders don’t want a dividend, and saying he’s on track to give virtually all of his money to good causes.

ProPublica analyzed Buffett’s income-tax returns between 2014 and 2018 and determined that even though his wealth grew by $24 billion in that period, he only reported $125 million of income and paid just $24 million in taxes.

“No one among the 25 wealthiest avoided as much tax as Buffett, the grandfatherly centibillionaire,” ProPublica declared. It added that Buffett’s annual income of $12 million to $25 million between 2015 and 2018 was tiny; more than 14,000 US taxpayers reported a higher income than he did in 2015.

Buffett responded to ProPublica’s main assertions – that he squirrels away his money in Berkshire stock and eschews a dividend to keep his tax bill low – with 23 pages of documents. They included a written statement, as well as excerpts from several of Berkshire’s annual reports, news releases, and photocopies of newspaper and magazine stories.

The investor pointed out that Berkshire shareholders overwhelmingly prefer the company to reinvest its profits instead of paying a dividend, as they know a big chunk of the funds will ultimately go towards good causes.

“Many large shareholders, including me, enjoy the long-term buildup in value, knowing that it is destined for philanthropy, not consumption or dynastic aspirations,” Buffett said.

The investor highlighted that holders of Berkshire’s “A” shares voted 87-1 against a dividend in 2014, and “B” shareholders voted 47-1. He likely wanted to show that Berkshire doesn’t pay a dividend because the vast majority of its shareholders don’t want one, not because he wants to lower his personal tax bill.

Buffett defended his decision to keep virtually all of his fortune in Berkshire stock. The 90-year-old billionaire has pledged to give over 99% of his net worth to philanthropic causes, and has already donated about half of his nearly 475,000 “A” shares since 2006, he said.

Moreover, Buffett calculated the tax benefits from his donations to date at less than 50 cents for every $1,000 he’s given away. He also prefers to hand his cash to charities, instead of giving it to the federal government to pay off the national debt.

“I believe the money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing US debt,” he said.

Buffett reiterated his support for changes to the tax code that would reduce wealth inequality.

“I hope that the earned-income tax credit is greatly expanded and additionally believe that huge dynastic wealth is not desirable for our society,” he said.

Buffett attached photocopies of a Fortune cover story from 1986 to his statement. It was titled, “Should you leave it all to the children?” and included his advice on how much to pass down: “Enough money so that they would feel they could do anything, but not so much that they could do nothing.”

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Warren Buffett defends himself after ProPublica says he avoids taxes and pegs his ‘true tax rate’ at 0.1%

warren buffett
Warren Buffett

  • Warren Buffett’s “true tax rate” is 0.1%, ProPublica reported this week.
  • The investor pays minimal tax by holding Berkshire Hathaway stock and not paying a dividend.
  • Buffett pointed out that shareholders don’t want a dividend and he’s giving his fortune away.
  • See more stories on Insider’s business page.

Warren Buffett’s real income-tax rate is 0.1%, and he minimizes his personal tax bill by keeping his fortune in Berkshire Hathaway stock and not paying a dividend, ProPublica said in an investigative report published on Tuesday.

The billionaire investor and Berkshire CEO defended himself in a detailed statement to the news outlet, explaining that his shareholders don’t want a dividend, and saying he’s on track to give virtually all of his money to good causes.

ProPublica analyzed Buffett’s income-tax returns between 2014 and 2018 and determined that even though his wealth grew by $24 billion in that period, he only reported $125 million of income and paid just $24 million in taxes. That put his “true tax rate” below the almost 1% paid by Amazon CEO Jeff Bezos and well below Tesla CEO Elon Musk’s 3.3%.

“No one among the 25 wealthiest avoided as much tax as Buffett, the grandfatherly centibillionaire,” ProPublica declared. It added that Buffett’s annual income of $12 million to $25 million between 2015 and 2018 was tiny; more than 14,000 US taxpayers reported a higher income than he did in 2015.

Buffett responded to ProPublica’s main assertions – that he squirrels away his money in Berkshire stock and eschews a dividend to keep his tax bill low – with 23 pages of documents. They included a written statement, as well as excerpts from several of Berkshire’s annual reports, news releases, and photocopies of newspaper and magazine stories.

The investor pointed out that Berkshire shareholders overwhelming prefer the company to reinvest its profits instead of paying a dividend, as they know a big chunk of the funds will ultimately go towards good causes.

“Many large shareholders, including me, enjoy the long-term buildup in value, knowing that it is destined for philanthropy, not consumption or dynastic aspirations,” Buffett said.

The investor highlighted that holders of Berkshire’s “A” shares voted 87-1 against a dividend in 2014, and “B” shareholders voted 47-1. He likely wanted to show that Berkshire doesn’t pay a dividend because the vast majority of its shareholders don’t want one, not because he wants to lower his personal tax bill.

Buffett defended his decision to keep virtually all of his fortune in Berkshire stock. The 90-year-old billionaire has pledged to give over 99% of his net worth to philanthropic causes, and has already donated about half of his nearly 475,000 “A” shares since 2006, he said.

Moreover, Buffett calculated the tax benefits from his donations to date at less than 50 cents for every $1,000 he’s given away. He also prefers to hand his cash to charities, instead of giving it to the federal government to pay off the national debt.

“I believe the money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing US debt,” he said.

Buffett reiterated his support for changes to the tax code that would reduce wealth inequality.

“I hope that the earned-income tax credit is greatly expanded and additionally believe that huge dynastic wealth is not desirable for our society,” he said.

Buffett attached photocopies of a Fortune cover story from 1986 to his statement. It was titled, “Should you leave it all to the children?” and included his advice on how much to pass down: “Enough money so that they would feel they could do anything, but not so much that they could do nothing.”

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The incredible life and career rise of Melinda Gates – one of the world’s richest and most powerful women

Melinda Gates
She heads a foundation with a $40 billion endowment.

  • Melinda Gates is one of the most powerful women in the world, according to Forbes.
  • She could be worth $73 billion if she and Bill Gates split their fortune equally in the divorce.
  • Gates will continue in her role as co-chair of the Bill and Melinda Gates Foundation.
  • See more stories on Insider’s business page.

Melinda Gates is the fifth most powerful woman in the world, and the second American – after Vice President Kamala Harris – to make Forbes’ The World’s 100 Most Powerful Women list.

She and her husband, Bill, announced on May 3 plans to divorce after being married 27 years. Though they don’t have a prenuptial agreement, if they split their $146 billion fortune equally, Melinda would be worth around $73 billion.

Gates has become one of the most prolific philanthropists in the world as co-chair of The Bill and Melinda Gates Foundation, which she helmed virtually on her own for the first six years of operation. She is now co-chair of the foundation with Bill, positions they said they will maintain even after the divorce.

She said in a statement posted to Twitter that she and Bill continue to believe in the mission of the foundation and will continue their work there.

Read more: Agritech startup Enko just raised $45 million in a funding round led by the Gates Foundation

In addition to the foundation’s education and healthcare initiatives, Gates takes a personal interest in women’s issues around the world. At the forefront of her agenda is expanding the availability of contraception and bringing awareness to the concept of time poverty – the notion that hours of daily unpaid work like household chores end up “robbing women of their potential.”

In 2016, Gates was awarded the Presidential Medal of Freedom, the highest civilian award in the US, by President Obama.

Keep scrolling to learn more about her life and how she became one of the world’s richest and most powerful women.

Additional reporting from Tanza Loudenback.

Melinda Gates (neè French) grew up in Dallas, Texas, with her parents – a stay-at-home mother and an aerospace-engineer father – and her three siblings. The family belonged to the local Roman Catholic parish.

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St. Monica Catholic Church, where the French family attended church, in Dallas, Texas. Facebook/St. Monica’s Catholic Church

Source: Telegraph

The Frenches were intent on sending all four of their children to college, so Melinda’s father started a side business for rental properties. “We would help him run the business and keep the books,” she said. “We saw money coming in and money going out.”

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The family used an Apple III computer to keep the rental business organized. Melinda was in awe of the computer at the time but would later denounce the brand when she became a Microsoft employee.

Source: Photo by Mark Madeo/Future via Getty Images

Gates was valedictorian and head of the drill team at her high school, Ursuline Academy of Dallas. In 2007, the Gates Foundation donated $7 million to Ursuline for the construction of The French Family Science, Math, and Technology Center – a 70,000 sq. ft. LEED Gold certified laboratory and classroom building.

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Melinda Gates visits 3rd grade students at Solar Preparatory School for Girls in Dallas, TX on May 3, 2019. Pivotal Ventures

Source: Ursuline Dallas, Marie Claire

She went on to earn a double bachelor’s degree in computer science and economics from Duke University and an MBA from Duke’s Fuqua School of Business in just five years.

Duke University

Source: Duke Today

But Gates’ dedication to her school work did not deter her from a social life. She was a member of Duke’s Beta Rho chapter of Kappa Alpha Theta Sorority. In a 1995 interview, a sorority sister remembered her as a serial monogamist and a reserved dresser.

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Philanthropist Melinda Gates participates in AOL’s BUILD Speaker Series at AOL Studios on Tuesday, March 10, 2015, in New York. Photo by Evan Agostini/Invision/AP

Source: Heritage, Seattle Times

Gates has been generous to her alma mater. Her gifts include The French Family Science Center, the University Scholars Program, and the DukeEngage Program. She also served as a Duke trustee from 1996 to 2004.

Melinda Gates with parents Ray and Elaine French
Ray French, Melinda French (Melinda Gates), and Elaine French on commencement day at Duke University, Durham, North Carolina, May 1987. Gates Archive

Source: Duke Today

Shortly after graduation, Gates was recruited by Microsoft just after the company went public and its stock began to soar. During her time at the company, she served as project manager of Microsoft Bob, Microsoft Encarta, and Expedia.

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William Gates, the father of Microsoft Chairman Bill Gates, sits in the crowd waiting for the start of Windows 95 Launch Event held on the Microsoft corporate campus in Redmond, Wash., on Aug. 24, 1995. Seated next to him is Melinda French Gates, the wife of Bill Gates. AP Photo/Gary Stewart

Source: Seattle Times

At a company picnic, Gates’ soon to be ex-husband, Bill, asked if she’d like to join him on a date in two weeks. She turned him down because he wasn’t spontaneous enough. Within an hour, he asked to take her out that night and she agreed. The pair kept a low profile at work and asked colleagues and family members to respect their privacy.

Bill and Melinda Gates
File photo from November 24, 1998. Reuters

Source: Business Insider, Seattle Times

Gates called the couple’s first trip to Africa in 1993 the turning point. During a walk on the beach in Zanzibar, they decided to do something about the devastation they’d seen. Thus, the Gates Foundation was born.

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FILE – In this Wednesday, March 23, 2011 file photo, Microsoft Corp. founder and philanthropist Bill Gates, right, and his wife Melinda Gates attend to a child as they meet with members of the Mushar community at Jamsot Village near Patna, India. The Gateses won the Lasker public service award “for leading a historic transformation in the way we view the globe’s most pressing health concerns and improving the lives of millions of the world’s most vulnerable,” the Lasker foundation said Monday, Sept. 9, 2013. AP Photo/Aftab Alam Siddiqui

Source: TED.com

In 1994, after seven years of dating, Bill and Melinda married in a secret ceremony on the 17th hole of a Hawaiian golf course after a pre-wedding fireworks display and a performance by Willie Nelson. The wedding tab was reportedly $1 million. The two were married for 27 years before filing for divorce.

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Computer mogul Bill Gates III and bride Melinda French greet guests in a reception line at a private estate in Seattle, Jan. 9,1994. The couple was married in Hawaii the week prior. AP Photo/Dave Weaver

Gates gave birth to their three children in 1996, 1999, and 2002. Though they won’t be poor, the Gates children will not inherit their parents’ billions, most of which will go to the foundation. “We want to strike a balance where they have the freedom to do anything but not a lot of money showered on them so they could go out and do nothing,” Bill said in 2014.

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(L-R) Jennifer Gates and her parents, Bill and Melinda Gates, listen to former U.S. President Barack Obama speak at the Gates Foundation Inaugural Goalkeepers event on September 20, 2017 in New York City. Photo by Yana Paskova/Getty Images

The Gates children have all been to Africa a number of times for philanthropic work. In 2014, Gates and her eldest daughter traveled to Tanzania to do a homestay for the first time. In a TED talk, Gates said, “As they get older, they so know that our family belief is about responsibility, that we are in an unbelievable situation just to live in the United States and have a great education, and we have a responsibility to give back to the world.”

Melinda and Jenn Gates
Melinda and Jennifer Gates visit Tanzania.

Source: TED.com

U2 frontman Bono once said of Melinda: “Lots of people like him [Bill] – and I include myself – are enraged, and we sweep ourselves into a fury at the wanton loss of lives. What we need is a much slower pulse to help us be rational. Melinda is that pulse.”

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Olivier Chassignole, Pool via AP

Source: Fortune

In 2006, Warren Buffett agreed to give 80% of his multi-billion dollar fortunate to the Gates Foundation. Buffett, a close friend of the family, told Fortune that Bill is “smart as hell, obviously … but in terms of seeing the whole picture, [Melinda’s] smarter.”

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AP Photo/Seth Wenig

Source: Fortune

In 2014, Gates joined Bill for a speech during Stanford’s commencement. She gave advice to students and families about hands-on charity: “Let your heart break. It will change what you do with your optimism.”

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Bill Gates and Melinda attend the 123rd Stanford commencement ceremony June 15, 2014 in Stanford, California. Photo by Justin Sullivan/Getty Images

Source: Stanford

In 1995, a Seattle Times article predicted that perhaps Gates would one day head up a Gates foundation. For the last 15 years, she has been the co-chair of the Bill and Melinda Gates Foundation, a private, global foundation with a $40 billion endowment.

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Melinda Gates participates in the “No Ceilings: The Full Participation Project,” in New York, Monday, March 9, 2015. Photo by Greg Allen/Invision/AP

Source: Seattle TimesGates Foundation

Gates is taking a number of domestic and world issues head-on. Despite her Catholic faith, she has worked to expand the availability of contraception for women, writing in a Fortune article that birth control is “too important to let it be a politicized issue.”

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Melinda Gates talks to reporters about the 2016 annual letter from the Bill and Melinda Gates Foundation, in New York, Monday, Feb. 22, 2016. AP Photo/Seth Wenig

Source: Huffington PostFortune

She’s recently begun a new initiative to transform the 21st century workplace into one of inclusivity, specifically when it comes to the gender gap.

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Melinda Gates appears on stage at the 2013 Glamour Women of the Year Awards on on Monday, November, 11, 2013 in New York. Photo by Brad Barket/Invision /AP Images

Source: LinkedIn

In November 2016, Gates was awarded the Presidential Medal of Freedom by then-President Obama, the highest civilian award in the US, for her work in health and poverty in America and abroad.

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President Barack Obama, accompanied by Bill Gates, left, presents the Presidential Medal of Freedom to Melinda Gates, center, during a ceremony in the East Room of the White House, Tuesday, Nov. 22, 2016, in Washington. Obama is recognizing 21 Americans with the nation’s highest civilian award, including giants of the entertainment industry, sports legends, activists and innovators. AP Photo/Andrew Harnik

Gates describes the legacy she hopes to leave: “On the day I die, I want people to think that I was a great mom and a great family member and a great friend. I care about that more than I care about anything else.”

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Melinda Gates attends a meeting at the G-7 Finance in Chantilly, north of Paris, on Thursday, July 18, 2019. Philanthropy is in a unique position to speed global change, but government action is necessary to implement it, Melinda Gates, co-chair of the Bill & Melinda Gates Foundation, said Wednesday, March 17, 2021. AP Photo/Michel Euler

Source: Fortune

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