Warren Buffett Helping Burger King Cut Its Tax Bill

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WARREN BUFFETT
Berkshire Hathaway Chairman and CEO Warren Buffett gestures during an interview with Liz Claman on the Fox Business Network in Omaha, Neb., Monday, May 5, 2014. The annual Berkshire Hathaway shareholders meeting concluded over the weekend. (AP Photo/Nati Harnik) | ASSOCIATED PRESS

Warren Buffett has figured out how to anger people on both the right and the left when it comes to taxes.

Buffett, America's most-beloved billionaire capitalist, is currently annoying the left by putting up some of the cash for Burger King's $11 billion deal to buy Canadian coffee-and-doughnut chain Tim Hortons. As part of the deal, the combined company's headquarters will be in Toronto, instead of BK's current home base of Miami, helping it avoid paying some unknown amount in U.S. taxes.

Such deals are known as "inversions," and they have actually annoyed a lot of people on the right and the left, including President Barack Obama. He recently called companies that do these deals "corporate deserters." Buffett, a long-time advisor to and supporter of Obama, is giving one such company a lift across the border, putting himself immediately in the middle of a political gunfight.

"I don't think this is a good deal for the American taxpayer," Rep. Bill Pascrell (D-NJ) said in a CNBC interview after the deal's announcement on Tuesday.

Not long ago, Buffett made himself persona non grata on the right by calling for millionaires to pay a minimum tax. He was such a big fan of this idea that it became known as the Buffett Rule. Companies get a different rule, maybe.

There are a few points in Buffett's defense, however. For one thing, there are good business reasons for Buffett to support the idea of a Burger Hortons (or maybe a Tim King). The market for fast-food burgers is awful, with customers fleeing for higher-quality fast-casual restaurants like Chipotle. Burger King has been in especially bad shape, with U.S. sales falling in four of the past five years, according to industry tracker QSR, dropping from $9.3 billion in 2008 to $8.5 billion in 2013.

Tim Hortons, on the other hand, has been growing sales steadily in the U.S. and Canada for at least the past four years, from nearly $7 billion in 2009 to $9 billion in 2013.

The new company will have about $23 billion in global sales, the companies estimate, immediately making it the world's third-biggest fast-food company. Size and the ability to serve doughnuts and some half-decent breakfast stuff could help Burger King survive the burger wars.

With that in mind, you could argue it makes sense for the new company to be based in Toronto, rather than in Miami, given that the promising, growing, saving-Burger-King's-ass part of it will be the Canadian part.

It's also not clear how much tax money Burger King will actually save in this inversion deal. It's possible the amount is not very much.

And the private equity fund that currently runs Burger King, 3G Capital, is Brazilian. It does not give a cold french fry whether Burger King is based in Miami, Toronto, or Rigel IV. Burger King may be an American brand, but it is only barely an American company.

Of course, we have come to expect more from Warren Buffett -- who lives in Omaha and drinks Coke and is just generally reasonable and sensible and homey as all get-out -- than from some Brazilian private-equity fund.

That was our mistake, and this is our reminder: Buffett is mainly in this business for the money, not patriotism.

Buffett's company, Berkshire Hathaway, did not immediately respond to a request for comment.

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