U.S. Markets open in 4 hrs 41 mins

Gundlach: My marginal tax rate is 52.6%, and it's 'really weird' that people like Mitt Romney pay 14%

Emily McCormick
Reporter

Famed bond fund manager Jeffrey Gundlach said some high-net-worth individuals should be paying more in taxes. The rate he pays in taxes, however, is high enough as is, he said.

Gundlach, speaking in an interview with Yahoo Finance’s Julia La Roche earlier this week, explained that his marginal tax rate is greater than what many outside individuals perceive.

“My marginal tax rate is presently, combined California and U.S., 52.6%. I am deeply offended when people tell me, ‘No, it’s not,’” Gundlach said. “I actually have people say that to me…’Rich people like you only pay 15%.’”

“California’s 13.3%, and then there’s federal and there’s other things,” said Gundlach, whose investment firm DoubleLine Capital is headquartered in downtown Los Angeles. “If they raise it to 70%, that’d be a 33% increase. I would go to 85.6%.”

“I really think I would stop working,” he added.

This year’s top marginal tax rate of 37% applies to income above $510,300 for unmarried individuals. But the notion of a 70% marginal tax rate on earnings above $10 million, first floated by U.S. Representative Alexandria Ocasio-Cortez, has sparked criticism from a number of individuals decrying its potential to remove economic incentives and contribute to tax dodging.

‘The fourteeners should come up to 52.6%’

While Gundlach did not specifically call out Ocasio-Cortez, his response to a question about a potential 70% marginal tax rate alluded to the New York representative’s credo, aimed at narrowing the gap of income inequality in the U.S. and raising more money for the government from individuals deemed to have more available to give.

Gundlach conceded that “a lot of people” in his financial position do pay low amounts in taxes, but prescribed a different solution to this concern than a 70% marginal tax rate.

“I remember Mitt Romney, I think he had a 14% tax rate on some tax return, that he revealed as part of his run for president. I mean, 14%. It's just amazingly low. I agree. That’s ridiculous,” Gundlach said. “But instead of raising me from 52.6% to 85.6%, I think the fourteeners should come up to 52.6%. That's what should be happening.”

Jeffrey Gundlach, CEO of DoubleLine Capital. REUTERS/Brendan McDermid

Gundlach was referencing reports from 2012 , when Mitt Romney during his presidential campaign disclosed tax returns showing he paid $1.9 million worth of taxes on $13.69 million in income in 2011, coming out to an effective rate of 14.1%. A large chunk of Romney’s disclosed income — as with the income of many wealthy individuals – came not from wages but from capital gains, which were taxed at the time at a flat rate of 15%. His effective rate was also pushed lower by charitable deductions.

“Tax policy is really weird,” he said. “It’s really weird to me that people making exactly the same amount of money pay very, very different tax rates.”

Gundlach, whose net worth Forbes has estimated to be around $2 billion, isn’t the only high net-worth-individual to voice the need for tax reform, but stop short of endorsing a 70% marginal income tax. Bill Gates, the second wealthiest individual in the world, said in an interview with The Verge earlier this month that he believed U.S. tax rates “can be more progressive.”

Bill Gates, Co-Chair of Bill & Melinda Gates Foundation. REUTERS/Arnd Wiegmann

“Now, you finally have some politicians who are so extreme that I’d say, ‘No, that’s even beyond.’ You do start to create tax dodging and disincentives, and an incentive to have the income show up in other countries and things,” Gates told The Verge . “But we can be more progressive, the estate tax and the tax on capital, the way the FICA and Social Security taxes work. We can be more progressive without really threatening income generation — what you have left to decide how to spread around.”

An alternative to the ‘rat hole of administrative waste’

The idea of individual autonomy over wealth allocation is one that has rung strong among business leaders. Michael Dell, founder and CEO of Dell Technologies, said at the World Economic Forum in Davos earlier this year that he preferred to allocate his funds through his private foundation rather than give them to the government.

Gundlach, for his part, feels similarly.

“I’m committed to a couple of charitable enterprises, that basically need a lot of money,” Gundlach said. “It’s a good reason to work, so that it can be funneled, not just to the Internal Revenue Service and the United States Treasury, which I am a very significant contributor to, but also to something that I think matters, rather than just some rat hole of administrative waste.”

“I don’t really resent the fact I pay so many taxes,” Gundlach added. “It’s sort of a privilege in a certain sense, but I also want to be able to see results for the money that I’m giving away.”

[ Full transcript of Jeffrey Gundlach’s extended conversation with Yahoo Finance ]

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

Follow Yahoo Finance on Twitter , Facebook , Instagram , Flipboard , LinkedIn , and reddit .

Read more from Emily:

What Wall Street strategists forecast for the S&P 500 in 2019

Beer sales are lukewarm and pot could be part of the problem

Consumer sentiment plunges to its lowest level since Trump’s election

Netflix revenue disappoints, shares dip