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Warren Buffett reveals tax bill

Billionaire’s federal tax rate works out to 17.4 per cent


 

In his ongoing campaign to increase taxes on the mega-rich, Warren Buffett revealed he brought in $62,855,038 last year, with $39,814,784 of it qualifying as taxable income. His federal tax bill was $6,938,744, or 17.4 per cent, which Buffett says is too low compared to middle-class earners. His cause was recently taken up by U.S. president Barack Obama, who proposed tax hikes on incomes above $1 million. The tax increase has come to be known as the Buffett tax since Buffett wrote an op-ed for the New York Times this summer in which he argued that, “My friends and I have been coddled long enough by a billionaire-friendly Congress.” Details of Buffett’s income were included in a letter he sent to Kansas Republican Rep. Tim Huelskamp and obtained by the Associated Press.

http://abcnews.go.com/blogs/business/2011/10/warren-buffett-reveals-billionaire-friendly-tax-return/


 
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Warren Buffett reveals tax bill

  1. Warren could, of course, just write Uncle Sam a big cheque and let everyone else just get on with their own lives.

    Most of his income comes from owning his businesses, not from a salary.  His business income comes to him after it has been dinged mightily for corporate taxes, which he knowingly (he didn’t get to be a billionaire being stupid) neglects to bring up.  Yes, “knowingly neglects to bring up” is a euphemism for another more appropriate verb (“lies”).
    Bring corporate taxes to ZERO, and tax all personal income equally, whether salary, dividends, interest or capital gains.  Thousands of lawyers and accountants get released into the marketplace to do something useful for the first time in their lives, business will flock to such an environment, the desire to play stupid corporate shell games with offshore tax havens goes poof.

    • Of course, putting corporate taxes to zero also removes any use of tax incentives to direct corporations into areas such as R&D or charitable causes, etc. 

      Not to mention Canada becomes basically a corporate Cayman Islands, where executives nominally have Canada as the HQ of the corporation, receive the various protections that Canadian law supplies at taxpayer expense, and are careful to make sure that they live and are paid elsewhere. All cost, no benefit.

      If you do the flipside, get rid of all income tax and make it corporate instead, then the corporation can decide if they want to charge higher prices (which the lack of income taxes will help people deal with), offer lower wages (which again would be offset by lack of income tax), or lower shareholder returns (to maximize competitive advantage in the marketplace, if not on Bay Street.  And if executives decide to nominally house their corporations elsewhere, then at least they’re still spending their money here in Canada, and can be taxed through GST or similar means.

      • Government “directing” corporations to R&D or charitable causes (via corporate tax law) is a pretty dumb policy anyways.  Corporations can prosper or fail by making their own decisions on R&D and philanthropy as a branch of its marketing, or, get this, leaving decisions about charity to its individual human shareholders.

        Enticing corporations to set up in Canada because of its favourable business climate: it takes quite the bizarre imagination to call this “all cost, no benefit.”

        At least you admit that your “flipside” would seek to drive business away from Canada.  Which makes your advocacy in favour of it all the more troubling.

        • Just because a business says it operates in Canada means nothing for the people who live here if the factories etc are all set up in India or the US etc. The problem is that you’re conflating the legal entity of a business with the actual workings thereof.

          Sorry, but that’s not how it works anymore, as we can see quite clearly from the case of Tim Hortons.

          • So Canada gets a bunch more head offices for companies with international operations.  And Canada gets a bunch more head offices for companies that will also set up Canadian operations.  And existing Canadian companies already operating in Canada are… still here, more efficiently focusing on their business instead of filtering their corporate decisions through thousands of pages of tax code.

            And you see all this as a Very Bad Thing.

          • I see as a bad thing corporations using our legal system for free. I see as a bad thing the massive opportunities for fraud it opens up as people live as corporations rather than as people to avoid income tax. And I see it as a bad thing when the majority of working people in Canada have their living wages eroded by the increase in taxes that they now have no choice in paying. Your assumption that we’d get head offices for companies that will then set up Canadian operations is strictly that, an assumption, and one that I don’t think is adequately supported when you consider the wider picture — a lack of corporate taxes does nothing to increase the demand of the consumer, in fact, if you have to balance that with increased taxation on the individual, you end up *lowering* your total demand, thus giving less room for corporations to be successful.

            When you increase taxes on corporations, individuals have a choice as to how much tax they pay by their purchasing habits and by their choices in democracy because of the ability of elected representatives to apply selective tax-credits.

            To be against incentives as a whole and place your trust entirely in the marketplace is simply foolish, as evidenced by the bankers themselves calling for legislation to prevent them from giving out 30 year, 0 down mortgages. The market is made up of individuals whose actions are linked — unfortunately, most of these individuals are short-sighted — and the linkages can bring even those who aren’t down.

      • “If you do the flipside, get rid of all income tax and make it corporate instead, then the corporation can decide if they want to charge higher prices”
        Now, this is a bad idea in general, but it is an even worse idea from the lefty point of view you hold. Who do you think gets hit harder by a tax that manifests itself in the form of higher prices:
        A. Rich people who spend < 100% of their income on things
        B. Poor people who spend 100% (or more in some cases) of their income on things

        Corporations are owned by rich people, but that doesn't mean taxing corporations is the best way to get at the rich. Corporate profits don't all go to rich people – some goes to dividends, some to R&D, some to wage increases and some to plant expansions. Plus, as you noted, corporations can pass tax hikes onto consumers (depending upon the elasticity of demand).  

        Then there are some other reasons this is a dumb dumb dumb idea.
        1. Corporate profits fluctuate way more than personal incomes. 
        2. In 2011 corporate profits were only 1.4 trillion, not enough to replace the income tax, even if taxed at 100%. 
        3. It is easier to move capital across international borders than it is to move people. 

         What distinguishes the truly rich from the rest is their ability to live off of investment income. If you wanted to go after the truly rich, the appropriate tool would be an estate tax, a wealth tax, or a capital gains tax. 

        And if you still don't believe me, ponder this –
        US corporate tax rate: 40%
        Swedish corporate tax rate: 26.3%
        (http://www.bullfax.com/imgs/adcc660a5fa2105214753d23b488cb3d93a076a5.jpg)

        • Wow.. and if I’d completely disallowed any sort of tax rebate or equalization system you might even have a point.

          Further, as to your numbered points, you’ll note I point specifically to additional taxes being done “through GST or other means.” Now, I’ll grant it was the last sentence of my post, but come on, it was only three paragraphs, surely that wasn’t too much to deal with? Of course, I do find your third point particularly funny as that’s exactly what I was saying in the last line.

          Your problem seems to be that you’re assuming I want to go after the rich. I don’t really. While I certainly think they have more room to pay taxes without feeling pain going after them specifically isn’t a great goal in my mind. In my mind, a good goal is to give people the ability to control their economic power, not have 17% or more of it sucked away before they ever get it.

          Corporate taxes are better because they give more people more power over how taxes are paid. Ideally, a company would realize that it gains the most by lowering prices, maintaining wages, and paying the tax out of shareholder profits. Companies that lower wages wind up with lower quality workers and will eventually lose business to their competitors who have not. Companies that maintain higher prices will eventually lose business to their competitors who have not. Only the company who reduces payouts to shareholders doesn’t have to worry about losing business on either quality or price fronts. And this handles the investment income problem in a much more organic, and dare I suggest, market-efficient manner.

          • “Wow.. and if I’d completely disallowed any sort of tax rebate or equalization system you might even have a point.”

            Well, you never mentioned a system of rebates, and no country on the planet has corporate tax rebates (because it is difficult to figure out the impact of a corporate tax hike on prices), so forgive me for making a logical leap.

            ” Ideally, a company would realize that it gains the most by lowering prices, maintaining wages, and paying the tax out of shareholder profits.”

            Why would this follow, exactly? If you lower dividends, people aren’t going to want to buy your stock. Less access to capital is a cost to business. Slashing wages is the least costly response for the firm (especially since unemployment is high, and the bargaining power of workers is low), raising prices is probably the second choice. Why on earth would firms lower prices, given that their costs are going up?

            “Companies that maintain higher prices will eventually lose business to their competitors who have not.”
            Not when those price increases are a result of a rising cost of doing business. Companies that keep prices low in that setting will lose money and go out of business.

    • If you bring corporate taxes to zero, I guarantee that executives across the country will have their companies invoiced for their mansions, cars, restaurant dinners, servants, time, oxygen, and electrical nervous system impulses as ‘legitimate’ business expenses.  All while continuing to raid employee pension funds.  We’ll have to bring the GST up to 20% to make up for the lost revenue.

      • Raiding pension funds is theft and-or fraud.  We have a Criminal Code for that.

        Executives invoicing companies for illegitimate expenses can be dealt with via the same Criminal Code for fraud, and can help drive shareholders and bondholders to think of better things to do with their capital.  Bloated corporate expenses for frivolous garbage like that makes your competitiveness suffer in a hurry.  As it should.

        No doubt there are real drawbacks to directing profits entirely to the taxable shareholder.  But they would have to be (a) real and (b) more severe than the benefits of lifting the burden of compliance / avoidance / lobbying / bribing that is saddling our economy now.

        • Tell that to the ex-Dominion employees.  Conrad Black wasn’t even reprimanded, let alone charged, when he allowed the company to raid their pension fund in the 1980’s.

          • Actually, tell that to every single person in the USA.  The federal government has raided its Social Security Fund — every penny of its “accumulated surpluses” has been replaced by “trust us” IOUs.  That’s not a raid.  That’s elimination.

          • Assuming the Republicans defund it.

    • Speaking of shell games, you seem to forget that many corporations (esp. in the US, and this IS an article about a US law) are quite good at making their paper earnings look like zero. If Buffet’s companies are among them, then corporate taxes actually may not have been paid on his earnings.

      Plus, you seem to be conflating corporate and personal earnings – he and the corporation are separate “persons” under law, and therefore individually pay their own taxes. The companies actually get to write off the money they give him as part of their expendatures.

      • are quite good at making their paper earnings look like zero.  And why do you think that is?  Because thousands of people earn their living playing ridiculous accounting tricks to paper their profits down to(wards) nil.

        The companies actually get to write off the money they give him as part of their expendatures.  The companies give out dividends after corporate taxes have eaten into their profits.  If Buffett realizes a capital gain, the company didn’t give him any money at all, the next shareholder did.  The only money “written off” is the salary paid to him.  And — shock of all shocks — his income from salary is extremely modest.  This latter-day Robin Hood structured his business and his compensation specifically to play this stupid tax game to his own benefit.  It’s not as beneficial as he is now lamenting (see the “knowingly neglecting to mention the truth” euphemism above about ignoring the taxes paid by the companies he owns), but it’s more than a bit rich for him to be whimpering about it now as he reaches the end of his bucket list.

  2. Oh Warren, be careful what you wish for.  How can a family expect to get by on $50,000,000 per year when they are used to an income of $55,900,000?  It’s inconceivable!

  3. Warren should just write his own cheque if he feels guilty.  Or….. He could take that cheque and use it to offer interest free loans to deserving small/medium sized businesses.  The govt would just take the money and waste it anyway, better to put it to good use.

  4. This is a guess, but isn’t most of the Oracle of Omaha’s income in the form of capital gains? So wouldn’t Obama’s plan to raise income taxes on the richest whatever % have a fairly small impact on billionaires? It seems to me that a big problem is the fact that the US taxes financial gains in wealth at a much lower rate than incomes (whether personal or corporate). Should it surprise us that finance capitalism (people that move money around) has overtaken equity capitalism (people with non-trivial stakes in a single enterprise, who create jobs and make stuff), given this state of affairs?

    • Interested to read your thoughts about what (if anything) could or should be done…

      Reduce corporate taxes to 0.0% and then tax earnings only when they make it into an individual’s hands?  Tax all personal income (dividends, capital gains, employment, what have you) equally?  And make other tax code simplifications at the same time?  Or move away from income taxes and boost consumption taxes?

      I’d be supportive of almost any combination of those…

  5. Warren Buffet gives huge amounts of money away to charity, ie The Bill and Melinda Gates Foundation. He has no reason to lie or to feel guilty.  He is just saying what many others are saying….1% of the population in America hold a disproportionate amount of the wealth and should be paying more taxes.

    • Yes he has reasons to play along with the Obama administration, otherwise his credit rating company, which has been shown big favor by the current government after his endorsement of “tax the “rich” – from earners of $200,000.00)” would have been next in line to be investigated had he not towed the line. Added to that, one of his companies owes a billion dollar in back taxes, just imagine the pressure.

      Aside from that, Charity is one of the ways on how the rich, who do not trust the government with their money, lessen their tax bills. If Obama’s “tax the rich” comes to pass, it would be the small business owners, job creators and the middle class who will pay the heaviest of burden, as well as the poor by way of increased prices of goods, services, energy, bills, and etc. As for Buffet he will not pay a single dime to that increased tax as most of his realized income are capital gains/dividends kind plus he has more accountants to find ways how to squirrel all those income away from the tax men. Those who believe otherwise are those who are easily hoodwinked. What is going on between Buffet and Obama is but a theater (and a payment for a favor).

      • Bill Gates & Warren Buffet announced their “60 billion dollar alliance” for the Bill and Melinda Gates Foundation in 2006, long before Obama was even in the picture.  You can make all kinds of allegation against Warren Buffet but you cannot deny that this foundation is taking on global healthcare in trying to erradicate TB, Polio and Malaria in Africa.  They are also trying to find a cure for AIDS and in that venture, Canada has provided the foundation with research dollars.  Further, the foundation seeks to solve world famine and ensure all children of color in the US receive a decent education.

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