By Alexander Green I hate to call Berkshire Hathaway (NYSE: BRK-B) Chairman and CEO Warren Buffett a hypocrite.
I truly respect and admire the man, something I can’t say about other uber-wealthy investors I know.
I appreciate his plainspoken ways, his insightful views, his well-informed opinions and his witty annual reports.
I have learned much from him over the last 30-plus years. His investment philosophy even informs much of The Oxford Club’s approach.
Like Buffett, we don’t waste time forecasting the economy or trying to outguess the market.
Like him, we focus on evaluating businesses. We look for solid, well-managed companies that are undervalued based on their earnings prospects.
In many ways, Buffett has been a beacon during my professional life as a researcher, money manager and financial writer.
Yet I can’t help but cringe whenever he talks about taxes… as he did on CNBC recently.
Asked about the tax reform plan that is working its way through Congress, he repeated his mantra: Neither he nor U.S corporations need a tax break.
He’s absolutely right, of course.
For him. Not the rest of us.
Let’s start with his seemingly magnanimous insistence that he doesn’t need an income tax cut.
Buffett has a net worth of $81 billion, give or take a few hundred million, depending on what Berkshire shares are doing today.
Yet he collects an annual salary of just $100,000, as he has for the past 25 years.
Most of us know plenty of folks who earn more than this. A cop married to a teacher has a higher household income.
Cutting taxes for them – as for most Americans – would be enormously beneficial. They could spend more, save more, invest more, send their kids to a better college or pay down their mortgage.
But what effect would an income tax reduction have on Buffett’s financial picture? The answer can be found many digits to the right of the decimal point.
The United States is in the uncompetitive position of having the highest corporate tax rate in the developed world. Yet Buffett doesn’t think we need a corporate tax cut either.
Perhaps that’s because he’s a wizard at tax avoidance.
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Last year, for example, Berkshire Hathaway saved $1 billion in taxes when it offloaded 52 million Procter & Gamble (NYSE: PG) shares for Duracell, worth $4.7 billion.
Using a complicated financial trick, Buffett persuaded the IRS to treat the transaction as a tax-free gain.
Smart move.
When Burger King took over Canada’s Tim Hortons, Buffett arranged an inversion. That means Burger King deserted the U.S. and became a subsidiary of the Canadian company.
Not particularly patriotic, but that maneuver saved many more millions in taxes.
Berkshire shareholders are rightly pleased that Buffett is doing everything in his power to maximize profits and minimize taxes.
But why, exactly, should those of us without an army of accountants and tax attorneys pay more?
Warren Buffett is one of the world’s richest individuals precisely because his fortune – bigger than the GDP of some countries – is almost entirely untaxed.
This is no accident. You don’t get rich by being stupid.
Buffett says his favorite holding period for stocks is “forever.” If you don’t realize your gains, …read more
Source:: Investment You
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