Where Donald Trump and Warren Buffett Agree
My recent column on Trump and his tax deductions generated a firestorm of feedback from readers.
It’s not hard to understand why. Trump gets people’s dander up. And so do taxes.
After the second presidential debate, Warren Buffett, an outspoken advocate for Hillary Clinton, stepped into the spotlight and disclosed information from his own tax returns to refute Trump’s claim that he too used the complicated tax code to take “huge deductions.”
The two billionaires differ sharply on taxes. But only in how they talk about them – not so much in what they actually do about them.
Buffett has often called for big tax increases on America’s highest earners, even though – according to the IRS – the top 2.7% of U.S. households pay more income taxes than the other 97.3% of us combined.
But soaking entrepreneurs, business owners and investors does not incentivize business expansion, innovation or job creation.
Trump, on the other hand, wants to reduce personal income taxes for almost everyone. He also wants to cut the corporate tax rate from 35% to 15% and eliminate the estate tax entirely.
Polls show that Trump’s chances of getting elected are growing increasingly dim.
But his tax proposals – while far short of the drastic reform and simplification the tax code needs – are a good starting point for discussion.
I have much more respect for Buffett as an investor and a philanthropist. But, at least in this instance, Trump is actually being more forthright.
How can I say that when Trump hasn’t even released his tax returns? Because Trump doesn’t deny he has used the code to minimize his taxes.
That’s legal. And virtually all taxpayers do it, including Warren Buffett.
Buffett claims that his secretary pays taxes at a higher rate than he does. Yet he generally neglects to note that his annual salary is just $100,000 – and he takes deductions for his generous charitable contributions.
Moreover, let’s not forget that Buffett is one of the world’s wealthiest individuals precisely because his $64.8 billion fortune is almost entirely untaxed.
Like Trump, Buffett has used aggressive money-saving tax strategies, not so much on his personal returns, but most definitely with Berkshire Hathaway, the primary source of his wealth.
In 2014 and 2015, Berkshire did three “cash-rich split-off transactions” that allowed the company to avoid more than $2.5 billion in capital gains taxes.
This was not unusual. Buffett has long made an art of tax avoidance. For instance, Berkshire had money behind the recent Burger King-Tim Hortons inversion, helping a U.S. company avoid taxes by departing to Canada.
Buffett has famously said that the capital gains tax is not a tax on capital gains but a tax on transactions. So he makes very few of them.
He claims his favorite holding period is “forever.” Indeed, he has held companies
like American Express, Coca-Cola, Procter & Gamble, Wells Fargo, Graham Holdings and others not just for years but for decades.
In addition, Berkshire Hathaway has never paid a dividend in the nearly 50 years since Buffett began running it. So, over the last half-century, he has never paid a dime in dividend taxes on his multibillion-dollar Berkshire holdings.
Buffett won’t be selling his own shares of Berkshire and paying capital gains taxes on them down the road either. He has pledged most of his fortune to the Bill & Melinda Gates Foundation.
That’s a worthy thing to do. However, his contribution came with a single string attached. The donation is contingent on charitable contributions remaining tax-deductible.
By doing this, he will also dodge estate taxes on those shares, depriving the government of tens of billions of dollars of tax revenue.
In sum, both men take advantage of personal and corporate tax breaks. Trump admits it. Buffett doesn’t talk about it.
Trump wants to make sure no one pays estate taxes. Buffett is only making sure that he himself avoids estate taxes.
I’m no great fan of Donald Trump. But when it comes to taxes, you’d be well advised to ignore what Buffett says.
And just minimize your taxes – the same way both men do.
Cesare Brai’s photo.
“A wolf pack on the move :
- the first 3 are the old or sick, they give the direction and pace to the entire pack. If it was the other way round, they would be left behind, losing contact with the pack. In case of an ambush they would be sacrificed;
- then come 5 strong ones, the front line;
- In the center are the rest of the pack members;
- then the 5 strongest following.
- Last is alone, the Alpha.
He controls everything from the rear. In that position he can see everything, decide the direction. He sees all of the pack.
The pack moves according to the elders’ pace and help each other, watch each other.
Again I am left speechless by nature … I knew that wolves are different, but didn’t realize how much we could learn from them…
Here’s why I want Trump. Yes, he’s a bit of an ass; yes, he’s an egomaniac; but I don’t care.
This, pretty much, says it all.
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