Jesse Isinger
Appearances
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Why is it so hard to tax billionaires? (Part 2)
It's a religious tenet among tax accountants and lawyers that you cannot tax unrealized gains.
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Why is it so hard to tax billionaires? (Part 2)
In tax circles, this is as spicy as you get.
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Why is it so hard to tax billionaires? (Part 2)
People responded to us by saying, you idiots, we don't tax unrealized gains in this country. And we had to say, you know, I responded to 150 emails from readers saying, yeah, that's the point of the article, is that we have a choice about what to tax, and we're not taxing this, and that's why billionaires are able to live outside of our tax systems.
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Why is it so hard to tax billionaires? (Part 2)
Well, I mean, me, non-tax reporter, non-tax expert, it was all extraordinarily revelatory. But even tax experts didn't understand this fully. So, you know, I think there's a general lay understanding that the wealthy avoid taxes. And that's the kind of eye roll thing that you would hear in a bar if you were talking about these stories with someone.
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Why is it so hard to tax billionaires? (Part 2)
drinking next to you, but they didn't know that Jeff Bezos and Musk and Bloomberg and Carl Icahn and George Soros literally could pay zero in federal income tax in recent years. They didn't know that Jeff Bezos got a child tax credit because his income was so low. Experts understood that in the abstract, and no one understood it in the specific until we
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Why is it so hard to tax billionaires? (Part 2)
It's the longest sentence, I believe, for anyone who did not leak classified information. Yes, he did break the law, and it's up to society to punish people who break the law, but understanding what he did and how that was a public service is very important. We used his information to publish many, many stories in the public interest.
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Why is it so hard to tax billionaires? (Part 2)
So I think what he did was a huge service to the American public to reveal things that would not have been revealed otherwise. He took great risk and now is going to pay an enormous price.
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Why is it so hard to tax billionaires? (Part 2)
proved it because we had the specific numbers and the names.
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Why is it so hard to tax billionaires? (Part 2)
Not when he was arrested, but when it first hit the public as arraignment or something like that. We never knew who it was before that. And had you wondered about who he was? Oh, of course. What had you thought when you wondered? Well, I wondered, am I ever going to know? And if I do, can that circumstance be anything but terrible news?
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Why is it so hard to tax billionaires? (Part 2)
Yeah, it wasn't surprising. Relatively young, someone who had principles, I mean, I'm taking what they've attested to under the threat of perjury as true, and it rings true, what little John and his lawyers have said, which is he didn't profit from it, he didn't sell the information, and he was motivated by the desire to do a public service. And I think he did do a public service.
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Why is it so hard to tax billionaires? (Part 2)
Well, so you talk about these billionaires saying that they're victims of this. And... At the beginning, a couple of them felt like they had to respond to our questions about this and have some justification for how they avoided taxes or what they did, their techniques. And by the end, you know, we did about 50 stories. By the end, we were almost entirely blown off.
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Why is it so hard to tax billionaires? (Part 2)
So we would send our 50 questions to the subject of a story and hear nothing back. No response. And the reason I ended up concluding was that they feel they're untouchable in American society and they're right. we didn't touch them at all. We exposed the greatest injustice about American inequality in decades, and nothing happened.
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Why is it so hard to tax billionaires? (Part 2)
This is a policy. People really want billionaires to pay more taxes. It polls very well with Republicans, even. But billionaires have disproportionate power in this country, and they have a lot more power than the 70% of people who want them to be taxed more. I mean, you know, they wield extraordinary amount of influence and power in society. And so they can bend public policy to their will.
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Why is it so hard to tax billionaires? (Part 2)
A rare, rare emotion for me. You know, we go back to Cordell Hull and 100 years ago, there was extraordinary power from the wealthiest people who'd ever walked the earth. And the government was relatively powerless at the time.
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Why is it so hard to tax billionaires? (Part 2)
And somehow, coalitions cobbled together to reform the system and to start to bring billionaires to heel, not just with taxes, but with the advent of antitrust enforcement and eventually securities regulation. And so there are ways to corral the power and and bring billionaires, if not to heal, then bring them back into the fold where they have some sense of civic and social responsibility.
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Why is it so hard to tax billionaires? (Part 2)
But you also think they should be paid a higher salary. I wouldn't mind if they got paid a salary. Or let's say they can keep their stock options. We just tax their unrealized gains.
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Why is it so hard to tax billionaires? (Part 2)
No. So what happens instead is he gets a small paycheck. You know, a lot of these guys get $1 salaries.
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Why is it so hard to tax billionaires? (Part 2)
And, you know, Steve Jobs sort of popularized that. But the Google guys, Larry Page and Sergey Brin, they get $1. It's very popular. And if you got $1 divided by 52, you're not paying a lot in taxes. And so what's happening with those guys is they're not really getting that kind of weekly paycheck or they're getting very modest amounts of money.
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Why is it so hard to tax billionaires? (Part 2)
There's nothing to tax in terms of wages. They're keeping their wages low. And the reason why you're keeping your wages low is that wages are relatively highly taxed. They're taxed at about 40%. The top marginal tax rate of 37% plus about 3% for payroll taxes. And so you don't want wages. It's stupid if you're a really wealthy person to get wages.
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Why is it so hard to tax billionaires? (Part 2)
So instead what you're doing is you're getting money through gains on your assets.
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Why is it so hard to tax billionaires? (Part 2)
And so what Bezos, it's very easy to think about what Bezos is doing, which is that most of his wealth is tied up in Amazon stock. And so Amazon stock goes up several billion dollars a year, typically, or has for a long time. And then if Bezos needed cash... he could sell some of that stock, and then he would get cash.
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Why is it so hard to tax billionaires? (Part 2)
And then if he sold that stock, then he would have to pay taxes on it. You're not paying 37%. You're only paying 20% on that because that's what capital gains tax is. But why pay 20%? So what you want to do instead is borrow against that money.
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Why is it so hard to tax billionaires? (Part 2)
Yeah, so I don't actually know if Bezos specifically does this, but Larry Ellison, we know, does this. He's the billionaire from Oracle, one of the richest people in the world, and a guy named Elon Musk. We've talked about him on this very podcast. He's literally borrowed against his stock to the tune of tens of,
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Why is it so hard to tax billionaires? (Part 2)
Yeah, Larry Elson bought a Hawaiian island. But then what do you do? You have to pay loans back.
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Why is it so hard to tax billionaires? (Part 2)
No. Wrong. Why? You're so naive. I am. Yeah.
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Why is it so hard to tax billionaires? (Part 2)
Yeah. So you basically borrow at almost no cost. Yeah. Because they know that the stock is there and they can call it at any time. Yeah. And you essentially never really have to pay it back. The estate's going to pay it back when you die.
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Why is it so hard to tax billionaires? (Part 2)
He's got a lot of debt and they were a little worried about it at some point. The reason we know this is that his lawyers forced him to disclose it in the SEC filings. That's why we also know about Larry Ellison. So you can't see everybody's borrowing. So you don't know how much Jeff Bezos is actually borrowing, if he's borrowing at all.
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Why is it so hard to tax billionaires? (Part 2)
But this is an extremely common technique for ultra wealthy people.