Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Warren Buffett: Tax Dodger?

Politics / Taxes Dec 02, 2012 - 03:18 PM GMT

By: Investment_U

Politics

Alexander Green writes: I’m a longtime admirer of Warren Buffett.

He taught me a lot about stock investing, including the most important thing about it I know: Forget about outguessing the market and focus instead on identifying businesses that are selling for less than they are worth.


While Buffett is a genius at equity analysis, he is no expert on government policy issues. And so it was with regret that I read his New York Times Op-Ed piece this week calling for higher taxes on the nation’s top income earners.

I won’t bore you with arguments about fairness or job creation or economic growth. The truth is confiscatory tax rates won’t change the slightest thing about the national debt crisis we face. And every American should understand why.

Imagine that your 18-year-old son goes off to college for the first term of his freshman year. You are happy to pay for his education costs – room, board, tuition, books, etc. – but you also give him a credit card “in case of emergencies.”

When he comes home for Christmas, you discover that he has run up $70,000 on his MasterCard. You hit the roof and demand an explanation.

“Now hold on, Dad,” he says. “Before we start talking about how much less I might spend, let’s talk about how much more money you’re going to give me.”

Consider your response – and whether it would be printable in a family paper. Yet Congress makes our hypothetical spendthrift look like a piker.

Most reasonably well-informed Americans know that our $16.1-trillion federal budget deficit is now larger than the nation’s GDP. But what most don’t realize is this figure doesn’t include the unfunded liabilities for Medicare, Medicaid, Social Security and the Prescription Drug Benefit. That’s another $121.6 trillion. Combine the federal budget deficit with the unfunded liabilities for current entitlement programs (excluding ObamaCare) and it comes to a mindboggling $1.2 million per taxpayer. (To understand how this fiscal mess is already affecting you – even if you don’t realize it – click here).

Some will argue that this is exactly why we need to stick it to the ultra-rich, an approach that has clear populist appeal. But here’s a bit of perspective. Less than a hundred years ago, the nation’s richest man, John D. Rockefeller, could have written a personal check and paid off all the entire national debt, every penny accumulated since 1776. Today the government could confiscate the entire net worth of the nation’s wealthiest man, Bill Gates, and it wouldn’t pay six weeks’ interest on the national debt.

Our elected misrepresentatives have spent so recklessly, promised so promiscuously and behaved so immodestly, that raising the revenue required to meet future outlays isn’t just difficult, it’s impossible.

Writing in The Wall Street Journal this week, former Congressional Committee Chairmen Chris Cox and Bill Archer note that even if the government confiscated the entire adjusted gross income of every individual and corporation in America, it still wouldn’t cover U.S. entitlement obligations. Yet the first order of business according to President Obama, Senator Reid and Mr. Buffett is not to reform entitlements or rein in spending but to raise tax rates? You might as well try bailing out the Pacific Ocean with a teaspoon.

Congress has a world-class spending addiction, but then so do most other Western democracies, including Canada, Britain, Western Europe and Japan. In every case, politicians on both side of the aisle have learned that promising lush government benefits paid for by “someone else” is a big winner at the polls.

As for the current fiscal cliff negotiations, the Congressional Budget Office estimates that raising the top marginal tax rate to 39.6% – as Obama proposes – would generate approximately $70 billion a year. That’s not an inconsequential sum. But it won’t come close to fixing this year’s $1.1 trillion federal budget deficit. Where would we get the other $1.03 trillion?

Finally, it’s also interesting to note that while Warren Buffett feels strongly about raising taxes on “the rich,” he has done a masterful job of avoiding them himself. As he notes in his New York Times piece, past taxes on dividends ranged as high as 91%. But Berkshire Hathaway has never paid a dividend, so Buffett has never paid a dime in dividend taxes on his own multi-billion-dollar holdings. And he has sold few shares, so he has avoided paying capital gains, as well.

He won’t be selling those shares and paying taxes on them down the road, either. He has pledged most of his fortune to the Bill & Melinda Gates Foundation. That’s certainly a worthy thing to do. However, his contribution came with a single string attached. The donation is contingent on charitable contributions remaining tax deductible.

In short, when it comes to taxes, you’d be well advised to do what Buffett does. And pay no attention to what he says.

Good Investing,

Alex

Source : http://www.investmentu.com/2012/November/warren-buffett-tax-dodger.html

by Alexander Green , Oxford Club Investment Director Chairman, Investment

http://www.investmentu.com

Copyright © 1999 - 2012 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in