Leon Cooperman calls Warren’s wealth tax “stupid,” saying people hide money to avoid it

Billionaire Leon Cooperman told CNBC on Wednesday that he believed rich people would find ways to avoid paying Senator Elizabeth Warren’s wealth tax if it became law. He also argued that there are better mechanisms to increase federal government revenue.

“The idea has no value. It’s stupid. It’s probably not legal,” he said on Squawk Box.

“When the wealth tax expires, go out and buy some gold because people will be rushing to find ways to hide their wealth,” added Cooperman.

Cooperman’s appearance came after the Massachusetts Democrat and other progressives in Congress unveiled their plan for an annual tax of 2%, or 2 cents, on every dollar of human wealth valued at $ 50 billion to $ 1 billion. For those whose wealth is over $ 1 billion, an annual tax of 3%, or 3 cents, is levied on every dollar above that threshold.

Proponents of the property tax proposal said it would generate at least $ 3 trillion in revenue over 10 years, citing an analysis by University of California-Berkeley economists Emmanuel Saez and Gabriel Zucman. In addition, Warren’s proposal includes funds for the Internal Revenue Service to help set up and enforce property tax.

“I believe in the progressive income tax structure. I believe rich people should pay more,” Cooperman said, but the chairman of the Omega Family Office said the focus should be on reforming the existing systems to raise money. For example, he said he was in favor of eliminating the so-called interest income gap that benefits hedge fund and private equity fund managers.

“The question that we need to unite as a nation is what the maximum tax rate for wealthy people should be. Because that defines the return on revenue for the government, and the government should generally map its activities to that return on revenue,” added Cooperman . He long noted his willingness to “work six months a year for the government and six months for myself”. ‘

I believe in the progressive income tax structure. I believe rich people should pay more.

Leon Cooperman

Omega Family Office

Warren said Tuesday on CNBC that she believes the money raised by the wealth tax could be “transformative” for the US, enabling investment in early childhood education and infrastructure. She also said the coronavirus pandemic had widened wealth inequality and made the wealth tax proposal more prominent.

“It is now set up so that we will not levy taxes on assets less than $ 50,000. So this is not intrusive. It is not about getting into people’s homes and evaluating their sub-zeros or find out what their 4-year values ​​are. ” old cars are worth it, “said Warren.

“But they say if you have a fortune over $ 50 million, you pay for it. And if your net worth is less than $ 50 million, you don’t. Good for you, no matter how,” she added. “I think most people would rather be rich and pay 2 cents. That’s not very fancy. It’s really a tax on wealth over $ 50 million.”

Some people have raised questions about the final financial impact of the tax.

CNBC’s Robert Frank released the numbers Wednesday, examining how $ 100,000 in a 3% yield bond would be treated under Warren’s property tax. If that entire investment were counted in an investor’s annual net worth over $ 50 million, the principle would be taxed at 2% or $ 2,000 for an effective tax rate of about 67% based on the $ 3,000 return on that bond.

“For safe investments such as bonds or bank deposits, a property tax of 2% or 3% can confiscate all interest income so that savings do not increase over time,” the tax foundation also reported in January 2020.

Cooperman was a vocal opponent of Warren’s previous pitch for a property tax during her unsuccessful campaign for the 2020 Democratic President nomination.

In October 2019, Cooperman wrote a sharply critical letter to Warren saying that her “defamation of the rich was false”. Warren’s campaign ran an ad fighting for a property tax the next month and blew up billionaires, including Cooperman.

After the advertising campaign was released, Cooperman told CNBC that the property tax was “nearly impossible for the police to do and likely unconstitutional.”

A hedge fund pioneer son of a Bronx plumber, Cooperman signed The Giving Pledge, founded by Bill and Melinda Gates and Warren Buffett. When asked by CNBC’s Andrew Ross Sorkin on Wednesday whether he would support reform of a particular tax policy that focuses on inheritance, Cooperman said, “To be honest, I am not focusing on that because my plan is my whole To give away money when you die. “

Cooperman said he was concerned about the rhetoric that made wealthy people in the United States vicious. “We all have to work together to solve our problems, and it’s that simple. You have to choose whether you are a capitalist or not.” I am a socialist, “he said.

“Let the invisible hand of capitalism work”

In her interview with CNBC on Tuesday, Warren also criticized companies that are buying back shares of their own stocks. Warren, who was a Harvard University law professor prior to his election to the US Senate, described share buybacks as “nothing but paper manipulation” and a poor use of a company’s profits. The senator added that paying dividends is a better way to return capital to shareholders.

According to Cooperman, corporate management should be responsible for how a company’s money is spent. “Buybacks, like any other capital allocation decision, should be assessed as a management decision,” he said. “You go out and buy another company. You go out and spend money on plant and equipment. You pay a dividend. It’s a management decision that needs to be evaluated.”

Cooperman stated that when a shareholder sells his shares, he is subject to taxes on profits. “The government has not proven to be a great capital handler,” he said. “We don’t need artificial decisions. Let the invisible hand of capitalism work.”

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