Leon Cooperman: 3 things wealthy people shouldn’t do and 1 thing they should

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Leon Cooperman

Scott Mlyn | CNBC

If you might have accrued extra wealth than you want, there are a selection of things you may do with the surplus cash, in keeping with billionaire investor Leon Cooperman.

Founder of the Omega Family Office, Cooperman — who has an estimated internet price of $2.5 billion — shared his views on the stock market, tech valuations, taxes and the way to spend accrued wealth in a Friday interview on CNBC’s “Squawk Box.

His feedback are well timed as they come amid a debate on how the wealthiest Americans should be taxed.

On Wednesday, President Joe Biden unveiled the $1.8 trillion American Families Plan, which might be paid for by elevating taxes on the wealthiest residents and closing sure loopholes such because the “step up in foundation,” carried curiosity and particular actual property tax breaks.

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Cooperman himself has been battling Sen. Elizabeth Warren, D-Mass., over a wealth tax, which she sees as a part of a fairer tax system. He just lately declined an invite from Warren to testify at a Senate hearing on taxes.

“I do consider within the progressive earnings tax construction, I do consider wealthy people should pay extra,” mentioned Cooperman, including, “the wealth tax is mindless to me for varied causes.”

He says there are different methods to perform Warren’s targets, equivalent to elevating the marginal tax price or eliminating loopholes like carried curiosity, which permits sure enterprise to defer taxes, and is included in Biden’s newest tax plan.

Here are three things that Cooperman says people shouldn’t do as soon as they’ve accrued wealth — and one which they should.

1. Don’t over-consume

If you might have extra cash, spend it on things you need, mentioned Cooperman.

“Buy planes, artwork, properties – stuff like that.”

However, over the long run, this is not as useful as saving, investing or discovering different makes use of in your cash. Cooperman mentioned he isn’t an enormous collector of things himself and prefers to be extra modest.

“My spouse and I, we occur to have a view that materials possessions convey aggravation,” he mentioned. “We’re ‘much less is extra.'”

2. Don’t give all of it to your children

Many households save and make investments their cash within the hopes of with the ability to move it on to future generations. But, for the ultra-wealthy, giving all their cash to their children won’t be a good suggestion, in keeping with Cooperman.

“If you might have some huge cash, giving all of your cash to your children is a mistake since you deprive them of self-achievement,” mentioned Cooperman.

3. Don’t give an excessive amount of to the federal government

“Only a idiot would give the federal government cash greater than they’re entitled to,” mentioned Cooperman. “You pay your taxes as a very good citizen and the remaining you retain.”

Cooperman added that everybody should pay their taxes however the investor has his personal thought on what constitutes a fair proportion for wealthy Americans.

“I’m keen to work six months of the 12 months for the federal government and six months for myself, that appears cheap to me,” mentioned Cooperman. “Beyond that it turns into confiscatory.”

4. Last and finest: Do donate it

The finest use of accrued wealth is donating it to charity or utilizing it to assist others, Cooperman says.

“Recycle it again into society and attempt to make the world a greater place,” mentioned Cooperman. “And that is sort of my dedication.”

Cooperman and his spouse in 2010 dedicated to provide most of their wealth to philanthropy or charitable causes via the Giving Pledge, an initiative created by Bill and Melinda Gates and Warren Buffett.

“I’m removed from probably the most beneficiant man, I want I had more cash to provide away,” mentioned Cooperman.

He mentioned the present tax system incentivizes the wealthy to provide their cash away — particularly those that can donate appreciated property equivalent to shares that they have not paid taxes on.

“The tax code was designed to encourage philanthropy,” mentioned Cooperman. “To the extent that you just’re gifting away pre-tax {dollars} which can be appreciated, it reduces your value.”

Beyond tax breaks, nevertheless, Cooperman has different causes for donating his wealth: It brings him pleasure, he mentioned.

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