Billionaire investor Carl Icahn defends himself after ProPublica says he paid no federal income taxes on $544 million declared

• Carl Icahn paid no federal income taxes in 2016 and 2017, ProPublica reported.
• The billionaire investor reported $544 million of total income in those years.
• Icahn said his taxable income was zero because his investment expenses exceeded his returns.

Billionaire investor Carl Icahn declared $544 million in total income between 2016 and 2017, but he paid no federal income taxes in either year, ProPublica said in a bombshell investigation report on Tuesday.

The Icahn Enterprises boss explained in a strongly worded statement to the news outlet that he didn't owe those taxes because his taxable income was zero in those years. He also flatly rejected the idea that he was improperly avoiding taxation.

"In no way were any of my activities even remotely questionable or designed for the purpose of tax avoidance," Icahn said.

Icahn added that he carefully follows US tax laws and pays substantial amounts of tax in years when his investment income exceeds his investment costs. However, interest and other expenses outweighed his investment returns in 2016 and 2017, meaning he didn't owe any taxes in those years. "That is the way of Wall Street," he said.

The investor clarified that adjusted gross income - which ProPublica pegged at $544 million for him in 2016 and 2017 - includes gross investment income, but investors can deduct investment expenses from that figure to determine their taxable income. Following that process, his taxable income was zero in those two years, he said.

"Do I think it is appropriate for an individual to pay no income taxes in a year where he had absolutely no income, the answer is emphatically yes," he said. "That is why they are called income taxes."

The hedge-fund manager emphasized that investing puts money at risk and should be rewarded.

"I don't believe that investors, wealthy or otherwise, should be pilloried for risking capital," he said.

ProPublica, citing leaked IRS tax filings, reported that Icahn had more than $1.2 billion of outstanding loans, as well. His borrowing boosts his investment returns and allows him to deduct interest from his taxes, the outlet said. Icahn responded that he borrows money because he loves winning and wants to beat his rivals.

Moreover, Icahn said in his statement that he takes out loans to invest in his businesses and ramp up their productivity. He doesn't use them "to finance an overly extravagant lifestyle, as admittedly is the case with some," he said.

Buffett and Bloomberg

ProPublica also called out Warren Buffett and Michael Bloomberg over their federal income taxes. It reported that the Berkshire Hathaway CEO paid just $24 million in taxes on $125 million of income between 2014 and 2018, while the Bloomberg LP boss paid $71 million in taxes on $1.9 billion of income in 2018.

Buffett minimizes his tax bill by keeping over 99% of his wealth in Berkshire stock, and not paying a dividend to shareholders, ProPublica said. The investor defended himself in a statement, pointing out that he's already given half of his Berkshire stock to philanthropic causes and virtually all of his remaining wealth will go the same route, and his shareholders have overwhelmingly voted against a dividend.

Meanwhile, Bloomberg relied on deductions linked to the Trump administration's tax cuts, almost $970 million of charitable donations, and credits from paying foreign taxes to lower his taxes, ProPublica reported. His office said in a statement that Bloomberg carefully follows tax laws, around 75% of his annual income goes to charity or paying taxes, and he proposed higher taxes on wealthy people when he ran for president in 2020.