Photo: CBS News
Life isn’t fair. Some extremely smart people never make much money. Similarly, some rather stupid people seem to fall into it and make fortunes. Go figure. Then, there is Warren Buffett.Warren is fond of playing the role of the “folksy” type who still lives in his modest house in nowhere Omaha and owns an old car he’s had for years. Just plain folk, he’d have you believe. Well, DON’T believe it! This is the same Buffett who constantly travels by private jet; is chauffeured by limousines wherever he goes; regularly stays at 5-star hotels; invests in deals not available to any other investors. Yet, he’d have you believe he’s just like you. Sure!
Lately, Warren has been a shill for Obama. Over and over again, we hear how good ole Warren “wants” to pay more taxes and thinks his wealthy buddies ought to follow suit. “We aren’t taxed enough,” he says. Well, let’s take a closer look at just where Warren stands when it really comes down to paying his taxes. Not at what he says about taxes but what he has actually done regarding the paying of taxes that he legitimately owes.
There are two recent cases where Warren has done everything possible to AVOID paying taxes that he actually owes. The first case involved a 14-year fight over the dividend-received deduction that was finally settled with the IRS in 2005. The second case is still pending after 10 years in which he owes just over $1 BILLION in back taxes. Both of these cases are well-documented and you can satisfy yourself simply by using Google to inquire as to the voracity of these assertions. Also note the timeframes of 14-years and 10+-years; not exactly a haphazard hissy fit. While you’re at it, you might also ask yourself “why” Warren says one thing in public discourse while he practices the exact opposite in his business and personal life. Is not that the definition of hypocrite?
Warren is NOT being chided here for attempting to pay as little in taxes as possible. Any sane person will pursue all legal avenues to pay as little tax as possible. In fact, the Supreme Court of the United States ruled thus: “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” Judge Learned Hand in 1934.
Then there is the recent deal involving the Bank of America “investment.” Warren would have you believe he just stepped-in to help the BofA stave-off a potential financial problem; out of the goodness of his heart, of course. Could you be shocked to learn the truth behind this deal?
Buffett is now at the centre of another tax controversy, according to The Wall Street Journal. His recent decision to invest in Bank of America “represents another tax-avoidance triumph for the Berkshire chief executive,” the Journal wrote in an editorial.
US corporations are subject to a top federal income tax rate of 35 per cent; the second highest in the world. But Berkshire won’t pay anything close to that on their investment in BofA preferred shares. (Note “Preferred” shares to boot! That means preference ahead of common shareholders — translation: you and me).
“Berkshire will hold the [BofA] investment in a property-casualty insurance subsidiary. Such corporations can exclude from taxation 59.5% of the dividends they receive from an investment in another corporation,” the Journal reported. “This exclusion is intended to prevent double- or even triple-taxation as money is earned by one company, paid to another company and then ultimately paid out to shareholders. The policy makes sense; we only wonder why the exclusion isn’t 100%.
“With the exclusion for Mr. Buffett and his fellow shareholders, Berkshire will enjoy an effective tax rate of 14.175% on the $300 million in dividends it will receive each year from Bank of America,” the Journal reported. [Remember, his secretary pays a higher tax rate?].
These new revelations about Buffett’s tax practices have only furthered enraged conservatives at the hypocrisy being shown by the famed “Oracle of Omaha.”
Please note that this article is NOT dissing Warren about using every available option to minimize taxes. That is the only sane approach any business man or individual would take. What is so objectionable is that he simultaneously pretends to be an Altruist “just looking out for the folks” while his personal behaviour represents the exact opposite. Had you not just read this brief description of the BofA deal, would it even have occurred to you to question what might be behind the so-called benevolence of the Oracle of Omaha?
Writing in the conservative website Human Events, John Hayward states: “Warren Buffett is no different from the other liars and frauds orbiting Barack Obama. His hypocrisy just runs billions of dollars deeper. When it comes to ‘shared sacrifice,’ you do the sacrificing, and they do the sharing.”
That sounds like a rather good summary of the Buffett hypocrisy.
for The Daily Reckoning
Warren Buffett: Hypocrite Extraordinaire originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled “What is Fracking?“.
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