Filed under: Capitalism, Democrat Corruption, Economy, Progressivism, Taxes | Tags: Berkshire Hathaway, Medal of Freedom?, Warren Buffett
Billionaire Warren Buffet has been advocating that we raise taxes in the U.S. And President Obama uses Warren Buffett as a shining example of a rich man who wants his taxes raised in every speech and at every opportunity. You know the litany: “Warren Buffet pays less than 15% on his taxes, and his secretary pays more than that. That’s just not fair.” Uh huh.
Warren Buffet is not advocating a tax hike because of his deep patriotism; it’s pure business, and entirely in his own self interest.
Warren Buffet does not receive a salary. His income comes in the form of capital gains. He pays less than 15% because of all the write-offs against his income. He is not a folksy grandpa, but a cunning, competitive capitalist. He has been so successful that he has the cash and connections to play a different brand of game than anyone else.
Massive tax increases will drop the acquisition costs for businesses. Mr. Buffett does not build and create businesses, he swoops in and buys undervalued businesses and waits, or changes their operations to make them efficient so they throw off streams of cash. This is called “vulture capitalism.”
Buffett is a highly disciplined investor. He is advocating a change in policy because it is the best interest of his company to have that change. If he gets his way, company valuations will drop. Berkshire Hathaway is sitting on a huge pile of cash that in the current environment they find it impossible to employ.
Of course, there is the small matter of the $1 billion that Mr. Buffett owes the IRS in back taxes, which he has been battling for the past decade. Most of us scramble to find another deduction, but $1 billion may be worth an extended battle. Little hypocrisy though.
You will notice that Berkshire doesn’t pay a dividend. Buffett says they will talk about that next year. If tax policy does not change, he will be under incredible pressure to send cash to investors because he can’t earn a high enough rate of return on it. Raising taxes, especially estate and capital gains taxes, would lower the valuations of companies.
Does Obama know that his efforts will just make his billionaire supporter richer? What does that do to all the president’s blather about “fairness?”