At this year's Berkshire Hathaway annual meeting, Warren Buffett, the billionaire CEO and the world's 2nd richest man defended his call for higher taxes: "When Charlie [Munger, billionaire Vice-Chairman of Berkshire Hathaway] and I took this job, we did not decide to put our citizenship in a blind trust." No, indeed. They put their assets in trusts, so they can forever avoid taxes while preserving their own tax preferred status. Paying taxes is for suckers. But all that changed at this year's annual meeting. Buffett insists that even billionaires should pay a minimum tax. If necessary--and in his case it is--the tax should be retroactive.
Buffett and Munger have avoided paying taxes by keeping much of their wealth tied up in unsold Berkshire Hathaway shares that have risen in value and made them wealthy men. Their controlling interest in Berkshire Hathaway has allowed them to accumulate a massive cash pile, while they refuse to pay dividends to shareholders, even though they concede that Berkshire's massive size now hampers its ability to generate more than low single-digit annual growth rates. The reason, of course, is that dividends are taxable, and as shareholders they would receive taxable dividends.
Buffett has further sheltered himself from estate taxes by gifting shares to the Gates Foundation and charitable organizations run by his children.
Retroactive Tax on Billionaires
The multi-billionaire pointed out that he's avoided tax for decades. Meanwhile he's accumulated massive wealth that he kept out of reach of the IRS. Buffett insists that as a matter of fairness he should be made to pay more taxes too.
Buffett feels the only way to achieve this is through a one-time wealth tax on the assets of billionaires, even those assets currently sheltered in charitable trusts and offshore vehicles. Compounding tax-sheltered wealth for decades allowed him to amass around $44 billion, and Buffett notes that the 90% wealth tax will still leave him with more than $4 billion. On an ongoing basis, a tax on increases in wealth, including unrealized capital gains, would solve the problem of tax avoiders like him benefiting at the expense of the country as a whole.
Saving Shareholders from Cash and Gold
In other news, Buffett admonished shareholders that cash is the riskiest asset they can hold over time. That's why he's accumulated more than $20 billion of it, a record amount of cash on Berkshire Hathaway's balance sheet. Rather than pay that cash to shareholders as dividends, he's helping them to avoid both potential taxes and the risk of having this cash in their own hands. Never mind that Berkshire's future potential for return on assets is hampered by its size, his shareholders must be protected from their own incompetence.
Meanwhile, Charlie Munger told CNBC that "civilized people don't buy gold." As supporting evidence Munger highlighted recent gold purchases by Central Bankers.
End Note: In response to this emailed question by a reader: "Wait is the whole piece satire or did Buffett actually call for a 'wealth tax'?" To the best of my knowledge Warren Buffett did not call for a wealth tax, at least not on his own tax sheltered wealth.
Janet Tavakoli's upcoming book is Jon Corzine and the MF Global Banruptcy: President Obama's Money Man.
1. Assuming the continuation fo the income tax and to slow the wealth concentration of people like Warren Buffet, capital gains taxes should be assessed on year over year price increases on shares of stock not traded. Hence, wealthy people couldn't go tax free when their share prices ballooned from $50/share to $100,000/share.
2. End the income tax, and replace it with a 15% revenue tax and all business revenues (including for profit and not for profit businesses, foundations and charities). Hence, those who consume the most would pay the highest taxes.
Annual Wealth Tax.
On those worth say $ 10 million or more, of 3-5%.
They still will be absurdly well off, especially those
worth over $100 M [ a higher tax ?]
These are tough times, any decent person should be
willing to help their society more.
Therefore earnings tax on those making $ 250k may
be mostly or entirely unnecessary.
WHAT A COUNTRY!
No wonder everyone is trying to come here, legally and illegally.
....or we could just move everyone to Cuba.
If we are going to have an income tax then it (at least) has to be defined as: (Net worth this year) minus (Net worth last year). Taxing the pathetic paychecks of workers who are losing ground and then creating social programs to help with the problems that it creates is such BS.
It would help the country if he were to willingly pay the nearly 1 billion dollar in taxes that he disputes with the IRS for nearly 10 years now. Google it.
A billionaire that has become rich by running an honest and profitable business has proven that they are a good custodian of capital because they know how to deploy capital in efficient and ways that are beneficial to the country.
We need to stop demonizing the honest capitalist lest we find ourselves living in a third world country with a government that crushes innovation and free enterprise under it's boot.
The tax issues are between the IRS and Bershire Hathaway.
This man might be the biggest hypocrite in history. He reminds me of a certain president who paid 20% in taxes while screaming that taxes should be raised.
When a significant expense must be paid, like the purchase of a home, the corporation handles the transaction without the beneficiary ever directly touching the money. This was there was never income, and never income tax. The home is technically the property of the corporation.
Consider that no Bush, Rockefeller, Hearst, Mellon, du Pont, or Morgan family members are ever listed on the Forbes List of Wealthiest Americans. And yet they somehow live very well.
You want to seize 90% of someone's net worth on their death? Tell you what, implement this bad boy and my "wealth" will simply be retitled to a foreign holding company or trust, outside the reach of the IRS.
That would be outright theft, pure and simple.
Perhaps people should watch Eat the Rich - google it. IT shows what short sighted thinking does to an economy.
An annual wealth tax on those worth over $ 10 M, esp. over $ 100 Million,
could put many to work fixing bridges, etc.; it's relatively painless
and helps the entire economy [ yes, even the Rich who end up
renting more, selling more, etc. ]
Bridges cost MORE the longer we wait, any conservative should
see it's CHEAPER to fix them NOW !
Or do we want more to fall like that one in Mn ?
See? Problem solved!
http://www.youtube.com/watch?v=661pi6K-8WQ