MacKenzie Scott says she won’t be disclosing how much money she donated this year because she wants people to focus on the ‘intention and effort’ in philanthropy

MacKenzie Scott head shot
MacKenzie Scott.

  • In a new note on Medium, Mackenzie Scott said she would no longer disclose how much money she donates.
  • The billionaire philanthropist had previously disclosed $8.6 billion in total donations over the last 18 months.
  • Scott said she wants to turn the focus away from thinking about philanthropy just in terms of money.

Billionaire philanthropist MacKenzie Scott said she wouldn’t reveal how much money she donated to charity since her last philanthropic disclosures in June.

In a Medium blog post titled “No Dollar Signs This Time,” the ex-wife of Amazon founder Jeff Bezos said she wants to turn the focus away from thinking about philanthropy just in terms of money.

“How much or how little money changes hands doesn’t make it philanthropy,” she wrote. “Intention and effort make it philanthropy. If we acknowledge what it all has in common, there will be more of it.”

With that in mind, Scott said she wouldn’t be disclosing how much she’d donated over the last six months. 

“I want to let each of these incredible teams speak for themselves first if they choose to, with the hope that when they do, media focuses on their contributions instead of mine,” she wrote. 

Scott is worth about $60 billion according to the Bloomberg Billionaires Index and has signed the Giving Pledge, promising to give her wealth away “until the safe is empty.” She previously announced a total of $8.6 billion in donations over the last 18 months.

Most recently, in June, Scott revealed she had donated more than $2.7 billion to 286 organizations in the first six months of the year. 

In her long reflection posted on Wednesday, Scott said philanthropy goes beyond monetary donations by wealthy people.

“Even by the traditional yardstick — money — contributions to the welfare of others by financially wealthy people don’t merit disproportionate attention,” she wrote.

Examples of other forms of philanthropy she cited include an employee at a nonprofit who takes leave from work to care for a dying parent or someone who helps an isolated elderly neighbor get a cell phone she can use to talk to her kids.

“This is all philanthropy,” Scott wrote.

Scott’s fortune has grown since she divorced Amazon founder Jeff Bezos in 2019. She received a 4% stake in the company in the couple’s divorce settlement, and Amazon shares are up 11% year-to-date.

While Scott’s latest blog post takes the debate about philanthropy forward, it could also raise questions on transparency and accountability. Because she donates as a private individual, she isn’t subject to the same public reporting requirements as foundations, which many wealthy donors use.

Brian Mittendorf, a professor of nonprofit accounting at Ohio State University, told MarketWatch that while he understands Scott’s concerns about focusing on donor amounts, other issues arise from Scott’s decision not to disclose numbers.

“These gifts presumably come with substantial tax deductions, so each gift she gives is effectively made in concert with the general public,” Mittendorf told MarketWatch. “The question is what obligation she has in bringing the general public, which is supporting these gifts, along for the ride. The attention she will get is inescapable, but the accountability provided by disclosing giving choices to the public is one of the few levers we have to influence billionaire philanthropy.”

Bridgespan Group, a consulting firm that works with Scott on her philanthropic efforts, did not immediately respond to Insider’s request for comment.

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Jeff Bezos and Elon Musk are among the 156 billionaires on the Forbes 400 who have given less than 1% of their wealth to charity

Jeff Bezos and Elon Musk.
Blue Origin CEO Jeff Bezos and SpaceX CEO Elon Musk.

  • Billionaires including Jeff Bezos and Elon Musk reached new record levels of wealth last year.
  • Billionaires are also less generous than ever in terms of share of wealth they’ve given away.
  • Of the Forbes 400, a record 156 – including Bezos and Musk – have given less than 1%.
  • See more stories on Insider’s business page.

While Jeff Bezos and Elon Musk feud over who is wealthier and who is more litigious, the business titans are among a group of billionaires in the running for an even less desirable title: World’s Stingiest Billionaire.

Although the pandemic era’s surging stock market has ballooned the fortunes of billionaires to new heights, the wealthiest people in the world have chosen not to keep pace with their charitable giving, according to the Forbes Philanthropy Score.

The team at Forbes adds up all of the lifetime “out-the-door” giving a person has made, and divides that number by the sum of their total current wealth and the total giving amount. The results are categorized into five tiers: less than 1%; between 1% and 5%; between 5% and 10%; between 10% and 20%; and 20% or more.

Private foundations and donor-advised funds don’t count for the Forbes measure, since those “donations” effectively remain under the control of the donor, and also come with generous benefits that enable wealthy people to avoid paying taxes.

If the median American household gave $1,200 to charity across their entire lives based on a present net worth of about $120,000, Forbes would consider that more generous than Bezos and Musk based on this metric.

Of the 400 billionaires on this year’s list, just 19 have given away 10% or more of their wealth, while a record high 156 have given less than 1%. While Bezos and Musk have yet to crack out of the 1%, MacKenzie Scott has left them in the dust by giving away 13% of her fortune. Even with her pace of giving, Scott is wealthier now than she was last year.

Bezos did make headlines this summer with $400 million gifts to the Smithsonian, Van Jones, and Jose Andres, and has given $865 million from his pledge to fight climate change. But his actual gifts are a tiny fraction of the $22 billion gain he made this year alone, to bring his total net worth to $201 billion.

Warren Buffet continued as the list’s most generous giver, having parted with $4.1 billion of Berkshire Hathaway stock in June to bring his lifetime total to $44 billion. He’s now halfway through his pledge to give away all his Berkshire shares.

The most prolific giver in the Forbes ranking was George Soros, whose $16.8 billion of giving has outsized his $8.6 billion net worth. Former president Donald Trump was not ranked, since he fell $400 million shy of making the top 400 list.

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How Zuckerberg, Bezos, Gates and others in the tech elite see themselves and the world

Mark Zuckerberg
Facebook CEO Mark Zuckerberg’s wealth increased substantially in 2020.

  • From Elon Musk to Jeff Bezos, the tech elite is “a class for itself,” according to a PLoS ONE study.
  • One researcher said they deny their role in influencing democracy with their financial capital.
  • The researchers claimed the tech elite’s view of the world was shaped by a meritocratic ideology.
  • Visit Business Insider’s homepage for more stories.

The tech elite is “a class for itself,” a study published in PLoS ONE journal found.

Researchers Hilke Brockmann, Wiebke Drews, and John Torpey concluded that the tech elite had “a distinct social identity” that made them easily identifiable in “the large pool of Twitter users.”

Looking at the Forbes list of the 100 richest people in tech, the researchers analyzed their use of language and emotions, using machine-learning approaches.

At the top of the list was Amazon’s Jeff Bezos. His net worth skyrocketed in 2020 with an increase of $72.7 billion.

Following closely behind was Microsoft co-founder Bill Gates, and Facebook CEO Mark Zuckerberg – although the latter’s wealth also increased substantially later in the year, taking him to over $100 billion.

Gaps between the tech elite and the rest of the population

The study examined how the language used by the tech elite differed from the rest of the “American Twitter-using population.”

They found that “disruption is consistently at the core of the communications of the tech elite,” who favor words including “can,” “great,” “people,” and “new.”

Words used by tech elite
The study examined how the tech elite’s language differed from the general population.

Their language was also much more achievement-oriented, using words that fell into an “achievement” category a total of 19,431 times.

This figure was twice as much as the general population’s, which came in at 9,439 times.

They also tended to draw more links between merit and employment compared with the general population.

The team hypothesized that the tech elite “saw its endeavors in ‘entrepreneurial technoscience’ as driven by a desire to ‘make the world a better place.'” They found that the language they used also reflected this goal.

Many of the tech elite have also signed the Giving Pledge, a scheme created by Bill Gates and his wife Melinda.

The scheme was set up to encourage billionaires to give away most of their wealth.

A 2020 report by the Institute for Policy Studies found that very little money may be helping people, as many of the billionaires were earning faster than they were giving.

Giving Pledge mission statements tech elite
Many of the tech elite have also signed the Giving Pledge.

The study also analyzed their subjects’ relationship with democracy and how it related to their wealth. “As representatives of an economic elite, they do not see or do not want to communicate a connection between these components of social potency,” the researchers said.

This constituted an active denial of the relationship between wealth and democracy, a view not shared by the general population.

“The tech elite does not take a critical view of the role they play relative to their abundance of power,” said Brockmann in a press release. “They deny their role in setting technical standards and influencing democracy with their financial capital.”

The researchers claimed that the tech elite’s view of the world was shaped by a meritocratic ideology. They believe their wealth is earned through effort, and so they don’t question their financial position.

Highlighting the elite’s “disproportionate influence” over how consumers spent their money, the team outlined the need for future policy research investigating how to “shape social outcomes” in a manner fitting of a democracy.

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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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